6522 Dogwood View Pkwy Insurance Operations Leased (4) 5,300 Jackson, MS
12150 Tributary Pnt. Dr., Ste. 160 Gold River, CA Mortgage Sales Leased (7) 2,000
Item 2. Properties (Continued) - -------------------- Approximate Owned/ Square Location Function Leased Footage -------- -------- ------ ------- 10850 Richmond Ave., Ste 270 Houston, TX Mortgage Sales Leased (9) 1,600
(1) The Company leases an additional 7,484 square feet of the facility to unrelated third parties for approximately $70,300 per year, under leases expiring at various dates after 2002.
(2) The Company leases an additional 7,265 square feet of the facility to unrelated third parties for approximately $33,000 per year, under leases expiring at various dates after 2002.
(3) The Company leases an additional 13,301 square feet of the facility to unrelated third parties for approximately $232,600 per year, under leases expiring at various dates after 2002.
(5) The Company leases this facility for $47,400 per year. The lease expires in August 2004.
(7) The Company leases this facility for $43,800 per year. The lease expires in July 2004.
(1) The acreage represents estimates of acres that are based upon survey reports, title reports, appraisal reports or the Company's inspection of the cemeteries. (2) Includes spaces sold for cash and installment contract sales. (3) As of December 31, 2002, there were mortgages of approximately $45,000 collateralized by the property and facilities at Memorial Estates Lakeview, Mountain View and Redwood Cemeteries. (4) As of December 31, 2002, there were mortgages of approximately $1,600,000 collateralized by the property and facilities at Deseret Mortuary, Cottonwood Mortuary, Holladay Memorial Park, Lakehills Cemetery and Colonial Mortuary. (5) These cemeteries include two granite mausoleums. (6) As of December 31, 2002, there was a mortgage of approximately $534,000 collateralized by the property.
(1) Reflects the acquisition of SSLIC Holding Company and subsidiaries as of December 17, 1998.
(2) Reflects the asset purchase transaction with Acadian Life Insurance Company on December 23, 2002.
Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------------------
During the years ending December 31, 2002 and 2001, Security National Mortgage Company (SNMC) experienced increases in revenue and expenses due to the increase in loan volume of its operations. SNMC is a mortgage lender incorporated under the laws of the State of Utah. SNMC is approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), to originate mortgage loans that qualify for government insurance in the event of default by the borrower. SNMC obtains loans primarily from independent brokers and correspondents. SNMC funds the loans from internal cash flows and lines of credit from financial institutions. SNMC receives fees from the borrowers and other secondary fees from third party investors who purchase the loans from SNMC. SNMC sells all of its loans to third party investors and does not retain servicing to these loans. SNMC pays the brokers and correspondents a commission for loans that are brokered through SNMC. In 1999, SNMC opened new wholesale branches in Sacramento, California and Valencia, California. In 2000, SNMC opened new wholesale branches in Orlando, Florida; Colorado Springs, Colorado and Provo, Utah. In 2001, SNMC opened wholesale branches in Phoenix, Arizona and Houston, Texas. SNMC originated and sold 11,737 ($1,721,000,000 loan amount), 8,738 ($1,268,000,000 loan amount), and 4,845 ($652,000,000 loan amount) loans in 2002, 2001 and 2000, respectively.
The costs related to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally commissions), defined as deferred policy acquisition costs, are capitalized and amortized into expense. For nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumption used for computing liabilities for future policy benefits and are generally "locked in" at the date the policies are issued. For interest sensitive products, these costs are amortized generally in proportion to expected gross profits from surrender charges and investment, mortality and expense margins. This amortization is adjusted when the Company revises the estimate of current or future gross profits or margins. For example, deferred policy acquisition costs are amortized earlier than originally estimated when policy terminations are higher than originally estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated maturity.
Prearranged funeral and pre-need cemetery customer obtaining costs - costs incurred related to obtaining new pre-need cemetery and prearranged funeral business are accounted for under the guidance of the provisions of Statement
All loans are sold to third party investors and the Company does not retain servicing rights. The amounts sold to investors are shown on the balance sheet as due from sale of loans, and are shown on the basis of the amount of fees due from the investors.
on investments supporting the liabilities, amount of interest or dividends credited to the policies, amount of policy fees and charges, amount of expenses necessary to maintain the policies, and amount of death and surrender benefits and the length of time the policies will stay in force.
The Company accrues an estimate of potential losses for the collection of receivables. The significant receivables are the result of the Company's cemetery and mortuary operations and mortgage loan operations. The allowance is based upon the Company's experience. The critical issues that would impact the cemetery and mortuary operations is the overall economy. The critical issues for the mortgage loan operations would be interest rate risk and loan underwriting.
Reserves for future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the policies, mortality experience, expenses, investment yield, lapse rates, surrender rates, and dividend crediting rates.
Deferred Pre-need Cemetery and Funeral Contracts Revenues and Estimated Future Cost of Pre-need Sales - -------------------------------------------------------------------------------
The Company, through its mortuary and cemetery operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive future goods and services at guaranteed prices. To accomplish this, the Company, through its life insurance operations, sells to the customer an increasing benefit life insurance policy that is assigned to the mortuaries. If, at the time of need, the policyholder/potential mortuary customer utilizes one of the Company's facilities, the guaranteed funeral arrangement contract that has been assigned will provide the funeral goods and services at the contracted price. The increasing life insurance policy will cover the difference between the original contract prices and current prices. Risks may arise if the difference cannot be fully met by the life insurance policy.
Net mortuary and cemetery sales increased by $653,000, from $10,603,000 in 2001 to $11,256,000 in 2002. This increase was primarily due to additional at-need cemetery and mortuary sales.
Total benefits and expenses were $90,842,000 for 2002, which constituted 94.3% of the Company's total revenues, as compared to $73,177,000, or 95.1% of the Company's total revenues for 2001.
During 2002, there was a net increase of $902,000 in death benefits, surrenders and other policy benefits, and an increase of $1,079,000 in future policy benefits from $11,775,000 in 2001 to $13,756,000 in 2002. This net increase was primarily the result of an increase in traditional life reserves.
Amortization of deferred policy and pre-need acquisition costs and cost of insurance acquired increased by $124,000, from $3,870,000 in 2001 to $3,994,000 in 2002. This increase was reasonable based on the underlying nature of assumptions.
Interest expense decreased by $821,000, from $2,791,000 in 2001 to $1,970,000 in 2002. This decrease was due to more loan originations from the Company's mortgage subsidiary being funded from internal sources of funds and lower interest rates from borrowings from third parties.
Net investment income increased by $810,000, from $12,136,000 in 2000 to $12,946,000 in 2001. This increase was primarily attributable to additional interest earned as a result of a greater number of loan originations during 2001.
Mortgage fee income increased by $17,165,000, from $22,921,000 in 2000 to $40,086,000 in 2001. This increase was primarily attributable to a greater number of loan originations during 2001 due to lower interest rates, resulting in more borrowers refinancing their mortgage loans.
General and administrative expenses increased by $16,288,000, from $35,959,000 in 2000 to $52,247,000 in 2001. Contributing to this increase was an $11,458,000 increase in commission expenses, from $18,401,000 in 2000 to $29,859,000 in 2001. Salaries increased $1,360,000, from $7,667,000 in 2000 to $9,028,000 in 2001. Other expenses increased $3,470,000, from $9,890,000 in 2000 to $13,360,000 in 2001. These increases were primarily the result of additional expenses due to increased numbers of loan originations made by the Company's mortgage subsidiary in 2001.
The Company's life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments and sales on personal services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from the proceeds from the maturity of held-to-maturity investments or sale of other investments. The mortgage subsidiary realizes cash flow from fees generated by originating and refinancing
mortgage loans and interest earned on mortgages sold to investors. The Company considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities, which generally are long-term, and adequate to pay current policyholder claims, annuity payments, expenses on the issuance of new policies, the maintenance of existing policies, debt service, and to meet operating expenses.
If market conditions were to cause interest rates to change, the market value of the fixed income portfolio (approximately $73,458,000) could change by the following amounts based on the respective basis point swing (the change in the market values were calculated using a modeling technique):
In connection with the acquisition of Consolidare, the Company entered into an Administrative Services Agreement dated December 17, 1998 with SSLIC. Under the terms of the agreement, the Company has agreed to provide SSLIC with certain defined administrative and financial services, including accounting services, financial reports and statements, actuarial, policyholder services, underwriting, data processing, legal, building management, marketing advisory services and investment services. In consideration for the services to be provided by the Company, SSLIC shall pay the Company an administrative services fee of $250,000 per month, provided, however, that such fee shall be reduced to zero for so long as the capital and surplus of SSLIC is less than or equal to $6,000,000, unless SSLIC and the Company otherwise agree in writing and such agreement is approved by the Florida Department of Insurance.
The administrative services fee may be increased, beginning on January 1, 2002, to reflect increases in the Consumer Price Index, over the index amount as of January 1, 2001. The Administrative Services Agreement shall remain in effect for an initial term expiring on December 16, 2003. The term of the agreement may be automatically extended for additional one-year terms unless either the Company or SSLIC shall deliver a written notice on or before September 30 of any year stating to the other its desire not to extend the term of the agreement. However, in no event can the agreement be terminated prior to December 16, 2003.
On June 30, 1999, the Company entered into a Coinsurance and Assumption Agreement (the "Agreement") with Menlo Life Insurance Company ("Menlo Life"), wherein the Company has assumed 100% of the policies in force of Menlo Life. The Agreement was not in effect until it was approved by Menlo Life's domiciled state of Arizona and the state of California. These approvals were obtained on September 9, 1999 for the Arizona Insurance Department, and on December 9, 1999 for the California Insurance Department. Menlo Life paid consideration to the Company in the form of statutory admitted assets to equal the liabilities assumed. On September 25, 2001, Menlo Life paid to the Company $308,978 in policy loans and $2,269,403 in cash.
The Assumption Agreement also requires Security National Life to issue a certificate of assumption for each policy in force included in the Reinsured Business, reinsuring such policies according to the terms thereof, provided that Security National Life may be subrogated to and substituted for all rights, privileges and interests accruing under such policies, and provided further that all obligations and liabilities assumed by Security National Life are assumed subject to the terms, limitations and conditions of the insurance policies included in the Reinsured Business and all defenses, counterclaims and off-sets that are or might thereafter become available to Security National Life.
At December 31, 2002, $22,964,225 of the Company's consolidated stockholders' equity represents the statutory stockholders' equity of the Company's insurance subsidiaries. The life insurance subsidiaries cannot pay a dividend to its parent company without the approval of insurance regulatory authorities.
Consolidated Statement of Cash Flows, Years Ended December 31, 2002, 2001 and 2000 ............................................................39
I. Summary of Investments -- Other than Investments in Related Parties....................................75
To The Board of Directors and Stockholders of Security National Financial Corporation
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Years Ended December 31, 2002, 2001, and 2000
Mortality/Morbidity Risk - the risk that the Company's actuarial assumptions may differ from actual mortality/morbidity experience may cause the Company's products to be underpriced, may cause the Company to liquidate insurance or other claims earlier than anticipated and other potentially adverse consequences to the business. The Company minimizes this risk through sound underwriting practices, asset/liability duration matching, and sound actuarial practices.
The accompanying consolidated financial statements include the accounts and operations of the Company. The Company's subsidiaries at December 31, 2002, are as follows:
Total revenues $109,678 $90,518 Net earnings 5,397 3,543 Earnings per share 1.12 .77
Cost of insurance acquired is the present value of estimated future profits of the acquired business and is amortized similar to deferred policy acquisition costs.
The Company follows the procedure of reinsuring risks in excess of $75,000 to provide for greater diversification of business, allow management to control exposure to potential losses arising from large risks, and provide additional capacity for growth. The Company remains liable for amounts ceded in the event the reinsurers are unable to meet their obligations.
Reinsurance premiums, commissions, expense reimbursements, and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Expense allowances received in connection with reinsurance ceded are accounted for as a reduction of the related policy acquisition costs and are deferred and amortized accordingly.
The Company, through its mortuary and cemetery operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive future goods and services at guaranteed prices. To accomplish this, the Company, through its life insurance operations, sells to the customer an increasing benefit life insurance policy that is assigned
to the mortuaries. If, at the time of need, the policyholder/potential mortuary customer utilizes one of the Company's facilities, the guaranteed funeral arrangement contract that has been assigned will provide the funeral goods and services at the contracted price. The increasing life insurance policy will cover the difference between the original contract prices and current prices. Risks may arise if the difference cannot be fully met by the life insurance policy. However, management believes that given current inflation rates and related price increases of goods and services, the risk of exposure is minimal.
The weighted average fair value of options granted in 2001 under the 1993 Plan and the 2000 Plan is estimated at $1.25 as of the grant date using the Black Scholes Option Pricing Model with the following assumptions: dividend yield of 5%, volatility of 31.8%, risk-free interest rate of 5.14%, and an expected life of five to ten years.
The Company also has one variable option plan (the "1987 Plan"). In accordance with APB Opinion No. 25, compensation cost related to options granted and outstanding under these plans is estimated and recognized over the period of the award based on changes in the current market price of the Company's stock over the vesting period. Options granted under the 1987 Plan are exercisable for a period of ten years from the date of grant.
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 142, amortization of goodwill is precluded, however, its recoverability must be periodically (at least annually) reviewed and tested for
impairment. Goodwill must be tested at the reporting unit level for impairment in the year of adoption, including an initial test performed within six months of adoption. If the initial test indicates a potential impairment, then a more detailed analysis to determine the extent of impairment must be completed within twelve months of adoption. SFAS No. 142 also requires that useful lives for intangibles other than goodwill be reassessed and remaining amortization periods be adjusted accordingly. The adoption of SFAS No. 142 did not have a material impact on the Company's financial condition or results of operations. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 establishes an accounting model for long-lived assets to be disposed of by sale that applies to all long-lived assets, including discontinued operations. SFAS No. 144 requires that those long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001. Adoption of SFAS No. 144 did not have a material impact on the Company's financial condition or results of operations. In April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". Under historical guidance, all gains and losses resulting from the extinguishment of debt were required to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. SFAS No. 145 rescinds that guidance and requires that gains and losses from extinguishments of debt be classified as extraordinary items only if they are both unusual and infrequent in occurrence. SFAS No. 145 also amends SFAS No. 13, "Accounting for Leases" for the required accounting treatment of certain lease modifications that have economic effects similar to sale-leaseback transactions. SFAS No. 145 requires that those lease modifications be accounted for in the same manner as sale-leaseback transactions. The provisions of SFAS No. 145 related to SFAS No. 13 are effective for transactions occurring after May 15, 2002. Adoption of the provisions of SFAS No. 145 related to SFAS No. 13 did not have a material impact on the Company's financial condition or results of operations. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Action (including Certain Costs Incurred in a Restructuring)" ("Issue 94-3"). The principal difference between SFAS No. 146 and Issue 94-3 is that SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, rather than at the date of an entity's commitment to an exit plan. SFAS No. 146 is effective for exit or disposal activities after December 31, 2002. Based upon a preliminary review, adoption of SFAS No. 146 would not have a material impact on the Company's financial condition or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure and Amendment to FASB No. 123", which provides three optional transition methods for entities that decide to voluntarily adopt the fair value recognition principles of SFAS No. 123, "Accounting for Stock Issued to Employees", and modifies the disclosure requirements of that Statement. Under the prospective method stock-based compensation expense is recognized for awards granted after the beginning of the fiscal year in which the change is made. The modified prospective method recognizes stock-based compensation expense related to new and unvested awards in the year of change equal to that which would have been recognized had SFAS No. 123 been adopted as of its effective date, fiscal years beginning after December 15, 1994. The retrospective restatement method recognizes stock compensation costs for the year of change and restates financial statements for all prior periods presented as though the fair value recognition provisions of SFAS No. 123 had been adopted as of its effective date. Since the Company does not intend to voluntarily adopt the fair value presentation for FASB 123, adoption of SFAS 148 would not have a material effect on the financial condition or results of operations of the Company. However, pro forma disclosures by SFAS 148 will be included in the Company's future interim financial statements when necessary.
The Company's investments in fixed maturity securities held to maturity and equity securities available for sale are summarized as follows:
Due in 2003 $8,026,827 $8,166,873 Due in 2004 through 2007 8,077,359 8,578,724 Due in 2008 through 2012 ` 7,048,229 7,150,450 Due after 2012 977,959 1,019,243 Mortgage-backed securities 8,856,718 8,982,028 Redeemable preferred stock 28,005 29,733 ----------- ----------- $33,015,097 $33,927,051 =========== ===========
Due in 2003 $3,852,677 $3,969,924 Due in 2004 through 2007 9,973,676 10,829,215 Due in 2008 through 2012 3,229,099 3,598,364 Due after 2012 97,771 117,440 Mortgage-backed securities -- -- ----------- ----------- $17,153,223 $18,514,943 =========== ===========
2002 2001 2000 ---- ---- ---- Fixed maturity securities held to maturity: Gross realized gains $37,172 $20,228 $3,125 Gross realized losses (557) (565) (53)
Mortgage loans consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 7% to 15%, maturity dates range from one to 29 years and are secured by real estate. Concentrations of credit risk arise when a number of mortgage loan debtors have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Although the Company has a diversified mortgage loan portfolio consisting of residential and commercial loans and requires collateral on all real estate exposures, a substantial portion of its debtors' ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors do business. The Company has 68% of its mortgage loans in the state of Utah.
Investments, aggregated by issuer, in excess of 10% of shareholders' equity (before net unrealized gains and losses on available for sale securities) at December 31, 2002, other than investments issued or guaranteed by the United States Government, are as follows:
Securities on deposit for regulatory authorities as required by law amounted to $7,819,262 at December 31, 2002 and $8,829,559 at December 31, 2001.
2002 2001 2000 ---- ---- ---- Balance at beginning of year $7,615,348 $8,729,264 $9,597,306 Cost of insurance acquired 9,106,309 (289,754) --
Presuming no additional acquisitions, net amortization charged to income is expected to approximate $1,281,286, $1,177,041, $1,081,769, $983,719, and $915,240 for the years 2003 through 2007. Actual amortization may vary based on changes in assumptions or experience.
December 31, ------------ 2002 2001 ---- ---- Land and Buildings $11,098,907 $10,930,790 Furniture and equipment 8,725,925 7,557,210 ------------ ------------ 19,824,832 18,488,000 Less accumulated depreciation (8,903,197) (7,685,613) ------------ ------------ Total $10,921,635 $10,802,387 ============ ============
The Company has established and maintains certain restricted asset accounts to provide for future merchandise obligations incurred in connection with its pre-need sales. Such amounts are reported as restricted assets of cemeteries and mortuaries in the accompanying consolidated balance sheet.
2002 2001 ---- ---- Assets Future policy benefits $(1,849,395) $(1,727,742) Unearned premium (1,717,492) (1,829,505) Difference between book and tax basis of bonds (34,178) (43,176) Net operating loss carryforwards expiring in the years 2003 through 2011 (1,132,874) (84,350) Other (575,788) (631,375) ------------ ------------ Total deferred tax assets (5,309,727) (4,316,148) ------------ ------------
Liabilities Deferred policy acquisition costs 5,235,909 5,140,228 Cost of insurance acquired 2,643,596 1,553,301 Installment sales 1,997,256 1,838,465 Depreciation 883,667 643,243 Trusts 1,184,382 1,162,077 Tax on unrealized appreciation 644,148 583,213 Other 778,949 356,789 ------------ ------------ Total deferred tax liabilities 13,367,907 11,277,316 ------------ ------------ Net deferred tax liability $8,058,180 $6,961,166 ============ ============
A portion of the life insurance income earned prior to 1984 was not subject to current taxation but was accumulated for tax purposes, in a "policyholders' surplus account." Under provisions of the Internal Revenue Code, the policyholders' surplus account was frozen at its December 31, 1983 balance and will be taxed generally only when distributed. As of December 31, 2002, the policyholders' surplus accounts approximated $4,500,000. Management does not intend to take actions nor does management expect any events to occur that would cause federal income taxes to become payable on that amount. However, if such taxes were accrued, the amount of taxes payable would be approximately $1,500,000.
is $60,000 per year with cost of living adjustments each anniversary. The Compensation Agreements also provides that any remaining balance will be payable to their heirs in the event of their death. In addition the Agreement provides that the Company will pay the Group Health coverages for these individuals and/or their spouses. In 2002 the Company increased its liability for these future obligations by $31,000. The current balance as of December 31, 2002 is $702,000.
Class A Class C ---------- ---------- Balance at January 1, 2000 4,863,731 5,555,350
Stock Dividends 243,393 277,515 Conversion of Class C to Class A 507 (5,060) ---------- ----------
Exercise of stock options 132,371 -- Stock Dividends 276,012 294,419 Conversion of Class C to Class A 22,518 (225,180) ---------- ----------
Denominator: Denominator for basic earnings per share-weighted-average shares 4,823,914 4,506,476 4,317,779
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions 4,995,285 4,506,858 4,335,044 ========== ========== ========== Basic earnings per share $.83 $.63 $.21 ========== ========== ========== Diluted earnings per share $.80 $.63 $.21 ========== ========== ==========
Number Option of Shares Price Outstanding at January 1, 2000 171,329 $3.89 - $4.28
The 1993 Plan allows the Company to grant options and issue shares as a means of providing equity incentives to key personnel, giving them a proprietary interest in the Company and its success and progress.
Outstanding at December 31, 2000 573,311 $2.12 - $3.77 Dividend 36,765 Granted 172,500 Expired (10,513) ---------
Outstanding at December 31, 2001 772,063 $2.02 - $3.59 Dividend 21,077 Granted 185,250 Expired (190,018) Exercised (283,703) --------
Exercisable at end of year 358,588 $2.02 - $4.46 ========= Available options for future grant 1993 Stock Incentive Plan 388,361 =========
Number Option of Shares Price Outstanding at December 31, 1999 0 Dividend 200 Granted 4,000 -------
Statutory net income and statutory stockholder's equity for the life subsidiaries as reported to state regulatory authorities, is presented below:
Statutory Stockholders' Equity December 31, 2002 2001 2000 ---- ---- ----
On December 19, 2001, the Company entered into an option agreement with Monument Title, LLC, a Utah limited liability company ("Monument Title") in which the Company made available a $100,000 line of credit to Monument Title at an interest rate of 8% per annum. The line of credit is secured by the assets of Monument Title. From December 28, 2001 to June 14, 2002, the Company advanced Monument Title a total of $77,953 under the line of credit. The amount advanced under the line of credit plus accrued interest are payable upon demand. The owners of Monument Title are brother-in-laws of the President and Chief Operating Officer of the Company. The Company has the right under the option agreement for a period of five years from the date thereof to acquire 100% of the outstanding common shares of Monument Title for the sum of $10. The Company believes that it is currently prohibited from directly owning shares of stock representing control of a title company. The purpose of the transaction, which was approved by the Company's board of directors, is to insure that the title and escrow work performed for Security National Mortgage Company in connection with its mortgage loans are completed as accurately as possible by Monument Title to avoid any economic losses to the Company.
The Company has a non-interest bearing note receivable from the Chairman of the Board and Chief Executive Officer. No installment payments are required under the terms of the note, but the note must be paid in full as of December 31, 2007. The outstanding balance of the note was approximately $70,000 and $102,000 at December 31, 2002 and 2001, respectively.
2002 2001 2000 ---- ---- ---- Unrealized gains (losses) on available for-sale securities $84,263 $769,684 $736,803 Less: reclassification adjustment for net realized gains in net income (35,544) (10,428) (420,739) --------- --------- --------- Net unrealized gains (losses) 48,719 759,256 316,064 Tax expense on net unrealized gain (losses) (80,786) (372,077) (145,004) --------- --------- --------- Other comprehensive income (loss) $(32,067) $387,179 $171,060 ========= ========= =========
Receivables: Receivable from affiliates 10,662,465 1,664,955 Other (74,653) (42,743) ------------ ------------ Total receivables 10,587,812 1,622,212 ------------ ------------
Other assets 66,915 21,366 ------------ ------------ Total assets $61,135,999 $48,200,852 ============ ============
Notes and contracts payable: Current installments 961 152,818 Long-term -- --
Income taxes 2,141,738 1,095,947 ------------ ------------ Total liabilities 26,622,588 18,231,534 ------------ ------------
Expenses: General and administrative Expenses 3,287,683 4,082,438 1,873,323 Interest expense 351,599 373,815 593,228 ----------- ----------- ----------- Total expenses 3,639,282 4,456,253 2,466,551 ----------- ----------- -----------
Non-interest bearing advances from affiliates: Cemetery and Mortuary subsidiary $ 1,366,930 $ 1,366,930 Life Insurance subsidiary 8,655,038 9,054,301 Mortgage subsidiary 10,000 10,000 ----------- ------------ $10,031,968 $10,431,231 =========== ===========