First Trinity Financial's Q2 Net Income Soars, Cash Dips

TL;DR

**FTFC's Q2 net income surged, but a massive drop in operating cash flow and overall cash position makes this a risky bet.**

AI Summary

First Trinity Financial Corporation (FTFC) reported a significant increase in net income for the three months ended June 30, 2025, reaching $2,495,437, up 79.5% from $1,389,980 in the prior year period. However, net income for the six months ended June 30, 2025, slightly decreased to $3,063,551 from $3,184,133 in the same period of 2024, a 3.8% decline. Total revenues for the three months increased by 23.4% to $22,381,652, driven by a substantial rise in service fees to $2,304,439 from $498,484. For the six-month period, total revenues grew by 14.4% to $41,991,347. The company saw a notable increase in mortgage loans on real estate, growing to $249,291,677 as of June 30, 2025, from $209,364,504 at December 31, 2024. Cash and cash equivalents decreased significantly from $64,344,122 at December 31, 2024, to $37,602,752 at June 30, 2025, primarily due to a substantial decrease in net cash provided by operating activities, which fell from $70,864,800 in the first six months of 2024 to $17,480,974 in the same period of 2025. Total shareholders' equity increased to $75,610,712 as of June 30, 2025, from $69,050,228 at December 31, 2024.

Why It Matters

First Trinity Financial's strong Q2 net income growth, despite a slight dip year-to-date, signals potential operational improvements and increased profitability for investors. The significant increase in service fees suggests successful diversification or expansion of revenue streams, which could enhance competitive positioning against other regional financial services firms. However, the substantial reduction in cash and cash equivalents, coupled with a sharp decline in cash from operations, warrants investor scrutiny regarding liquidity management and future investment capacity. Employees might see this as a mixed signal, with strong quarterly performance but underlying cash flow concerns that could impact long-term stability and growth initiatives.

Risk Assessment

Risk Level: medium — The risk level is medium due to the significant decrease in cash and cash equivalents from $64,344,122 at December 31, 2024, to $37,602,752 at June 30, 2025, representing a 41.5% decline. This is largely driven by a drastic reduction in net cash provided by operating activities, which plummeted from $70,864,800 in the first six months of 2024 to $17,480,974 in the same period of 2025, indicating potential operational inefficiencies or increased working capital needs.

Analyst Insight

Investors should closely monitor First Trinity Financial's cash flow statements in future filings, specifically looking for a rebound in cash provided by operating activities. While Q2 net income was strong, the significant reduction in cash warrants caution; consider holding or reducing exposure until cash generation stabilizes.

Financial Highlights

revenue

$41,991,347

total Assets

$694,185,325

net Income

$3,063,551

cash Position

$37,602,752

revenue Growth

+14.4%

Revenue Breakdown

Key Numbers

• $2,495,437 — Net income for Q2 2025 (Increased 79.5% from Q2 2024)
• $3,063,551 — Net income for six months ended June 30, 2025 (Decreased 3.8% from same period in 2024)
• $22,381,652 — Total revenues for Q2 2025 (Increased 23.4% from Q2 2024)
• $41,991,347 — Total revenues for six months ended June 30, 2025 (Increased 14.4% from same period in 2024)
• $2,304,439 — Service fees for Q2 2025 (Significantly increased from $498,484 in Q2 2024)
• $249,291,677 — Mortgage loans on real estate as of June 30, 2025 (Increased from $209,364,504 at December 31, 2024)
• $37,602,752 — Cash and cash equivalents as of June 30, 2025 (Decreased from $64,344,122 at December 31, 2024)
• $17,480,974 — Net cash provided by operating activities for six months ended June 30, 2025 (Decreased from $70,864,800 in same period of 2024)
• $75,610,712 — Total shareholders' equity as of June 30, 2025 (Increased from $69,050,228 at December 31, 2024)
• 9,384,340 — Class A common stock shares outstanding as of August 11, 2025 (Represents majority of common equity)

Key Players & Entities

• First Trinity Financial Corporation (company) — parent holding company
• Trinity Life Insurance Company (company) — subsidiary of FTFC
• Family Benefit Life Insurance Company (company) — subsidiary of TLIC
• Trinity Mortgage Corporation (company) — subsidiary of FTFC
• Trinity American, Inc. (company) — subsidiary of FTFC
• Oklahoma Insurance Department (regulator) — approved surplus note
• Barbados regulators (regulator) — approved TAI acquisition
• K-TENN Insurance Company (company) — acquired by FTFC in 2020
• Royalty Capital Life Insurance Company (company) — acquired by FTFC in 2022
• Royalty Capital Corporation (company) — seller of RCLIC

FAQ

Risk Factors

• Decreased Operating Cash Flow [high — financial]: Net cash provided by operating activities significantly decreased from $70,864,800 in H1 2024 to $17,480,974 in H1 2025. This substantial drop, a decline of over 75%, warrants close monitoring as it impacts the company's liquidity and ability to fund operations and investments.
• Reduced Cash Reserves [medium — financial]: Cash and cash equivalents saw a sharp decrease from $64,344,122 at year-end 2024 to $37,602,752 as of June 30, 2025. This 41.5% reduction, directly linked to the lower operating cash flow, could limit financial flexibility.
• Mortgage Loan Portfolio Growth [medium — market]: The company experienced a significant increase in mortgage loans on real estate, growing to $249,291,677 from $209,364,504 at year-end 2024. While this indicates expansion, it also exposes the company to increased credit risk and interest rate sensitivity within the real estate market.
• Insurance and Financial Services Regulation [medium — regulatory]: As a parent holding company for life insurance and mortgage subsidiaries, FTFC is subject to extensive state and federal regulations. Changes in regulatory requirements, capital adequacy rules, or compliance burdens could impact operations and profitability.
• Dependence on Independent Agents [low — operational]: The company's life insurance products are sold through independent agents. Reliance on this distribution channel introduces potential risks related to agent recruitment, retention, and sales performance, which can affect revenue generation.

Industry Context

First Trinity Financial Corporation operates within the highly regulated insurance and financial services sector. The industry is characterized by intense competition, evolving customer demands for digital services, and a dynamic interest rate environment. Companies like FTFC must navigate complex regulatory landscapes while managing investment portfolios and underwriting risks.

Regulatory Implications

As an insurance holding company, FTFC is subject to stringent state and federal regulations concerning solvency, capital adequacy, and consumer protection. Changes in accounting standards, capital requirements, or market conduct regulations could necessitate adjustments to business practices and financial reporting.

What Investors Should Do

1. Monitor Operating Cash Flow Trends
2. Analyze Mortgage Loan Portfolio Performance
3. Evaluate Cash Position Management
4. Scrutinize Revenue Drivers

Key Dates

• 2025-06-30: End of Second Quarter Reporting Period — Key financial results for the quarter and first half of 2025 were reported, showing strong Q2 net income growth but a slight H1 decline, alongside significant shifts in cash flow and asset composition.
• 2025-06-30: Mortgage Loans on Real Estate Balance — Reached $249,291,677, an increase from $209,364,504 at year-end 2024, highlighting portfolio expansion in this segment.
• 2025-06-30: Cash and Cash Equivalents Balance — Decreased to $37,602,752 from $64,344,122 at year-end 2024, reflecting reduced operating cash flow.
• 2024-06-30: Prior Year Period Comparison Point — Provided a benchmark for Q2 and H1 2025 performance, showing significant Q2 net income growth but a slight H1 decline, and a substantial difference in operating cash flow.
• 2024-12-31: Year-End 2024 Balance Sheet — Served as the comparative point for asset and liability balances as of June 30, 2025, particularly for cash, mortgage loans, and shareholders' equity.

Glossary

Available-for-sale fixed maturity securities

Investments in bonds and redeemable preferred securities that are not classified as held-to-maturity. They are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income. (A significant portion of FTFC's investment portfolio, their valuation and performance impact the company's overall financial position and comprehensive income.)

Mortgage loans on real estate

Loans provided by the company that are secured by real property. This includes both residential and commercial mortgages. (A key asset class for FTFC, showing substantial growth, indicating an increased focus on mortgage origination and servicing, and associated credit and market risks.)

Policy liabilities

Obligations of the insurance company to policyholders, including account balances, future policy benefits, and policy claims. (The largest liability category for FTFC, representing the company's core insurance business obligations. Changes in these liabilities reflect policy growth and claims activity.)

Deferred policy acquisition costs

Costs incurred in acquiring new insurance policies, such as commissions and underwriting expenses, that are capitalized and amortized over the expected life of the policies. (Represents significant upfront costs associated with writing new business. The balance indicates the volume of new policies being written and the amortization schedule.)

Accumulated other comprehensive loss

A component of shareholders' equity that includes unrealized gains and losses on available-for-sale securities, foreign currency translation adjustments, and other items not included in net income. (Reflects unrealized losses on FTFC's investment portfolio, impacting total equity. A decrease in this loss (moving towards zero or a gain) would improve total equity.)

Net cash provided by operating activities

The net amount of cash generated or used by the company's normal business operations during a period. (A critical indicator of the company's ability to generate cash from its core business. The significant decrease in H1 2025 is a major concern.)

Year-Over-Year Comparison

Compared to the prior year, First Trinity Financial Corporation shows mixed performance. While Q2 2025 net income surged by 79.5% and total revenues grew 23.4%, driven by a significant increase in service fees, the six-month period saw a slight 3.8% decline in net income. A major concern is the substantial 75% drop in operating cash flow for the first six months of 2025 compared to 2024, leading to a significant reduction in the company's cash position. Total assets and shareholders' equity have seen modest increases, indicating some balance sheet strengthening despite cash flow challenges.

Key Financial Figures

• $459,180 — mortgage loans of real estate totaling $459,180 and $563,081 and transferred that prope
• $563,081 — ns of real estate totaling $459,180 and $563,081 and transferred that property to invest

Filing Documents

• ftfc20250630_10q.htm (10-Q) — 3839KB
• ex_850051.htm (EX-31.1) — 8KB
• ex_850052.htm (EX-31.2) — 8KB
• ex_850053.htm (EX-32.1) — 3KB
• ex_850054.htm (EX-32.2) — 3KB
• 0001437749-25-026741.txt ( ) — 15467KB
• ftfc-20250630.xsd (EX-101.SCH) — 72KB
• ftfc-20250630_def.xml (EX-101.DEF) — 521KB
• ftfc-20250630_lab.xml (EX-101.LAB) — 414KB
• ftfc-20250630_pre.xml (EX-101.PRE) — 550KB
• ftfc-20250630_cal.xml (EX-101.CAL) — 62KB
• ftfc20250630_10q_htm.xml (XML) — 4140KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Page Number

Consolidated Financial Statements

Item 1. Consolidated Financial Statements Consolidated Statements of Financial Position as of June 30, 2025 (Unaudited) and December 31, 2024 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited) 4 Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited) 5 Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 2025 and 2024 (Unaudited) 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 (Unaudited) 7

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 9

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 41

Controls and Procedures

Item 4. Controls and Procedures 70

OTHER INFORMATION

Part II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 71

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 71

Defaults upon Senior Securities

Item 3. Defaults upon Senior Securities 71

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 71

Other Information

Item 5. Other Information 71

Exhibits

Item 6. Exhibits 72

Signatures

Signatures 73 Exhibit No. 31.1 Exhibit No. 31.2 Exhibit No. 32.1 Exhibit No. 32.2 Exhibit No. 101.INS Exhibit No. 101.SCH Exhibit No. 101.CAL Exhibit No. 101.DEF Exhibit No. 101.LAB Exhibit No. 101.PRE 2

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Consolidated Financial Statements

Item 1. Consolidated Financial Statements First Trinity Financial Corporation and Subsidiaries Consolidated Statements of Financial Position (Unaudited) June 30, 2025 December 31, 2024 Assets Investments Available-for-sale fixed maturity securities at fair value (amortized cost: $ 222,527,562 and $ 227,703,702 as of June 30, 2025 and December 31, 2024, respectively) $ 213,049,532 $ 213,745,821 Equity securities at fair value (cost: $ 5,449,372 and $ 5,301,191 as of June 30, 2025 and December 31, 2024, respectively) 5,517,371 5,336,062 Mortgage loans on real estate 249,291,677 209,364,504 Investment real estate 2,545,159 2,351,549 Policy loans 4,708,650 4,367,534 Other long-term investments 54,583,080 58,223,514 Total investments 529,695,469 493,388,984 Cash and cash equivalents 37,602,752 64,344,122 Accrued investment income 6,766,776 5,746,167 Recoverable from reinsurers 9,679,675 9,845,838 Assets held in trust under coinsurance agreement Available-for-sale fixed maturity securities at fair value (amortized cost: $ 19,882,007 and $ 22,559,107 as of June 30, 2025 and December 31, 2024, respectively) 15,478,829 17,932,297 Mortgage loans on real estate 10,471,682 12,660,117 Receivable for securities - 674,405 Payable for securities ( 2,096 ) ( 783 ) Cash and cash equivalents 679,920 ( 89,726 ) Total assets held in trust under coinsurance agreement 26,628,335 31,176,310 Agents' balances and due premiums 1,354,254 1,393,277 Deferred policy acquisition costs 67,552,685 66,640,453 Value of insurance business acquired 3,501,657 3,593,440 Other assets 11,403,722 10,320,307 Total assets $ 694,185,325 $ 686,448,898 Liabilities and Shareholders' Equity Policy liabilities Policyholders' account balances $ 432,133,688 $ 431,190,092 Future policy benefits 144,970,399 138,027,832 Policy claims 2,653,269 2,478,465 Other policy liabilities

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements June 30, 2025 (Unaudited) 1. Organization and Significant Accounting Policies Nature of Operations First Trinity Financial Corporation (the "Company" or "FTFC") is the parent holding company of Trinity Life Insurance Company ("TLIC"), Family Benefit Life Insurance Company ("FBLIC"), Trinity Mortgage Corporation ("TMC") and Trinity American, Inc. ("TAI"). The Company was incorporated in Oklahoma on April 19, 2004, for the primary purpose of organizing a life insurance subsidiary. The Company owns 100 % of TLIC. TLIC owns 100 % of FBLIC. TLIC and FBLIC are primarily engaged in the business of marketing, underwriting and distributing a broad range of individual life insurance and annuity products to individuals. TLIC's and FBLIC's current product portfolio consists of a modified premium whole life insurance policy with a flexible premium deferred annuity rider, whole life, term, final expense, accidental death and dismemberment and annuity products. The term products are both renewable and convertible and issued for 10 , 15 , 20 and 30 years. They can be issued with premiums fully guaranteed for the entire term period or with a limited premium guarantee. The final expense product is issued as either a simplified issue or as a graded benefit, determined by underwriting. The TLIC and FBLIC products are sold through independent agents. TLIC is licensed in the states of Alabama, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah and West Virginia. FBLIC is licensed in the states of Alabama, Arizona, Arkansas, Colorado, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia and West Virginia. The Company owns 100 % of TMC that was inco

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements June 30, 2025 (Unaudited) 1. Organization and Significant Accounting Policies (continued) Acquisition of Other Companies On December 23, 2008, FTFC acquired 100 % of the outstanding common stock of First Life America Corporation ("FLAC") from an unaffiliated company. The acquisition of FLAC was accounted for as a purchase. The aggregate purchase price for FLAC was $ 2,695,234 including direct costs associated with the acquisition of $ 195,234 . The acquisition of FLAC was financed with the working capital of FTFC. On December 31, 2008, FTFC made FLAC a 15 year loan in the form of a surplus note in the amount of $ 250,000 with an interest rate of 6 % payable monthly, that was approved by the Oklahoma Insurance Department ("OID"). This surplus note is eliminated in consolidation. On August 31, 2009, two of the Company's subsidiaries, Trinity Life Insurance Company ("Old TLIC") and FLAC, were merged, with FLAC being the surviving company. Immediately following the merger, FLAC changed its name to TLIC. On December 28, 2011, TLIC acquired 100 % of the outstanding common stock of FBLIC from FBLIC's shareholders. The acquisition of FBLIC was accounted for as a purchase. The aggregate purchase price for the acquisition of FBLIC was $ 13,855,129 . The acquisition of FBLIC was financed with the working capital of TLIC. On April 28, 2015, the Company acquired a block of life insurance policies and annuity contracts according to the terms of an assumption reinsurance agreement. The Company acquired assets of $ 3,644,839 , assumed liabilities of $ 3,055,916 and recorded a gain on reinsurance assumption of $ 588,923 . On April 3, 2018, FTFC acquired 100 % of the outstanding stock of TAI domiciled in Barbados, West Indies. The Barbados regulators approved the acquisition and supplied certifications during 2019. The aggregate purchase price for the acquisition of TAI was $ 250,000 . The acquisition of TAI was financed with the

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements June 30, 2025 (Unaudited) 1. Organization and Significant Accounting Policies (continued) Fixed maturity securities comprised of bonds and redeemable preferred securities are classified as available-for-sale and are carried at fair value with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income. The amortized cost of fixed maturity securities available-for-sale is adjusted for amortization of premium and accretion of discount to maturity. Interest income on fixed maturity securities, as well as the related amortization of premium and accretion of discount, is included in net investment income under the effective yield method. Dividend income on redeemable preferred securities are recognized in net investment income when declared. The amortized cost of fixed maturity securities available-for-sale are written down to fair value when a decline in value is considered to be other-than-temporary. The Company evaluates the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline in value is the result of a credit loss or other factors. An allowance for credit losses is recorded against available-for-sale securities to reflect the amount of an unrealized loss attributed to credit. This impairment is limited by the amount that the fair value is less than the amortized cost basis. Any remaining unrealized loss is recognized in other comprehensive income (loss) with no change to the cost basis of the security. This determination involves a degree of uncertainty. Changes in the allowance for credit losses are recognized in earnings. The assessment and determination of whether or not a credit loss exists is based on consideration of the cash flows expected to be collected from the fixed maturity security. The Company develops those expectations after considering various factors such as agency

View Full Filing

View this 10-Q filing on SEC EDGAR