EDGAR 10-K Filing

Company CIK: 318673
Filing Year: 2025
Filename: 318673_10-K_2025_0001641172-25-001508.json

---

ITEM 1. BUSINESS
Item 1. Business
Security National Financial Corporation (the “Company”) operates in three reportable business segments: life insurance, cemetery and mortuary, and mortgages. The life insurance segment is engaged in the business of selling and servicing selected lines of life insurance, annuity products, and accident and health insurance. These products are marketed in 42 states through a commissioned sales force of independent licensed insurance agents who may also sell insurance products of other companies. The cemetery and mortuary segment consists of eleven mortuaries and five cemeteries in the state of Utah, one cemetery in the state of California, and one cemetery and four mortuaries in the state of New Mexico. The Company also engages in pre-need selling of funeral, cemetery, mortuary, and cremation services through its cemetery and mortuary locations. The mortgage segment originates and underwrites or otherwise purchases residential and commercial loans for new construction, existing homes, and other real estate projects. The mortgage segment operates through 97 retail offices in 26 states and is an approved mortgage lender in several other states.
The Company’s design and structure are that each business segment is related to the other business segments and contributes to the profitability of the other segments. The Company’s cemetery and mortuary segment provides a level of public awareness that assists in the sales and marketing of insurance and pre-need cemetery and funeral products. The Company’s insurance segment invests its assets (including, in part, pre-need funeral products and services) in investments authorized by the respective insurance departments of their states of domicile. The Company also pursues growth through acquisitions. The Company’s mortgage segment provides mortgage loans and other real estate investment opportunities.
The Company was organized as a holding company in 1979 when Security National Life Insurance Company (“Security National Life”) became a wholly owned subsidiary of the Company, and the former stockholders of Security National Life became stockholders of the Company. Security National Life was formed in 1965 and has acquired or purchased significant blocks of business which include Capital Investors Life Insurance Company (1994), Civil Service Employees Life Insurance Company (1995), Southern Security Life Insurance Company (1998), Menlo Life Insurance Company (1999), Acadian Life Insurance Company (2002), Paramount Security Life Insurance Company (2004), Memorial Insurance Company of America (2005 and subsequently sold in 2021 to FOXO Life Insurance Company), Capital Reserve Life Insurance Company (2007), Southern Security Life Insurance Company, Inc. (2008), North America Life Insurance Company (2011, 2015), Trans-Western Life Insurance Company (2012), Mothe Life Insurance Company (2012), DLE Life Insurance Company (2012), American Republic Insurance Company (2015), First Guaranty Insurance Company (2016), Kilpatrick Life Insurance Company (2019), and merger with FOXO Life Insurance Company (2023).
The cemetery and mortuary operations have also grown through the acquisition of other cemetery and mortuary companies. The cemetery and mortuary companies that the Company has acquired are Holladay Memorial Park, Inc. (1991), Cottonwood Mortuary, Inc. (1991), Deseret Memorial, Inc. (1991), Probst Family Funerals and Cremations L.L.C. (2019), Heber Valley Funeral Home, Inc. (2019), Rivera Funerals, Cremations and Memorial Gardens (2021), and Holbrook Mortuary (2021).
In 1993, the Company formed SecurityNational Mortgage Company (“SecurityNational Mortgage”) to originate and refinance residential mortgage loans.
See Note 15 of the Notes to Consolidated Financial Statements for additional information regarding the business segments of the Company.
Life Insurance
Products
The Company, through Security National Life, First Guaranty Insurance Company (“First Guaranty”), and Kilpatrick Life Insurance Company (“Kilpatrick”), issues and administers selected lines of life insurance and annuities. The Company’s life insurance business includes funeral plans and interest-sensitive life insurance, as well as other traditional life, accident, and limited health insurance products. The Company places specific marketing emphasis on funeral plans through pre-need planning. The Company’s insurance subsidiaries, Kilpatrick, Southern Security Life Insurance Company, Inc. (“Southern Security”) and Trans-Western Life Insurance Company (“Trans-Western”), do not actively write policies, but service and maintain policies that were issued prior to their acquisition by Security National Life.
A funeral plan is a small face value life insurance policy that generally has face coverage of up to $30,000. The Company believes that funeral plans represent a marketing niche that has less competition because most insurance companies do not offer similar coverage. The purpose of the funeral plan policy is to pay the costs and expenses incurred at the time of a person’s death. On a per thousand-dollar cost of insurance basis, these policies can be more expensive to the policyholder than many types of non-burial insurance due to their low face amount, requiring the fixed cost of the policy administration to be distributed over a smaller policy size, and the simplified underwriting practices that result in higher mortality costs.
Markets and Distribution
The Company is licensed to sell insurance in 42 states. In marketing its life insurance products, the Company seeks to locate, develop and service specific niche markets. The Company’s funeral plan policies are sold primarily to people who range in age from 45 to 85 and have low to moderate income. Most of the Company’s funeral plan premiums come from the states of Arkansas, California, Florida, Georgia, Louisiana, Mississippi, Texas, and Utah.
The Company sells its life insurance products through direct agents, brokers, and independent licensed agents who may also sell insurance products of other companies. The commissions on life insurance products range from approximately 50% to 150% of first year premiums. In those cases where the Company utilizes its direct agents in selling such policies, those agents customarily receive advances against future commissions.
In some instances, funeral plan insurance is marketed in conjunction with the Company’s cemetery and mortuary sales force. When it is marketed by that group, the beneficiary is usually the Company’s cemeteries and mortuaries. Thus, death benefits that become payable under the policy are paid to the Company’s cemetery and mortuary subsidiaries to the extent of services performed and products purchased.
In marketing funeral plan insurance, the Company also seeks and obtains third-party endorsements from other cemeteries and mortuaries within its marketing areas. Typically, these cemeteries and mortuaries will provide letters of endorsement and may share in mailing and other lead-generating costs since these businesses are usually made the beneficiary of the policy. The following table summarizes the life insurance business for the five years ended December 31, 2024:
2021
Life Insurance
Policy/Certificate Count as of December 31 635,791 640,970 646,296 653,450 659,237
Insurance in force as of December 31 (in thousands) $ 3,947,671 $ 3,552,554 $ 3,446,836 (1) $ 3,415,368 (1) $ 3,379,921 (1)
Premiums Collected (in thousands) $ 118,151 $ 113,584 $ 103,304 $ 99,006 $ 92,058
(1) Prior years have been adjusted to include accidental death benefit insurance in force that was inadvertently excluded.
Underwriting
The factors considered in evaluating an application for ordinary life insurance coverage can include the applicant’s age, occupation, general health condition, and medical history. Upon receipt of a satisfactory (non-funeral plan insurance) application, which contains pertinent medical questions, the Company issues insurance based upon its medical limits and requirements subject to the following general non-medical limits:
Non-Medical
Age Nearest
Limits
Birthday
0-50
$100,000
51-up
Medical information
required (APS or exam)
When underwriting life insurance, the Company will sometimes issue policies with higher premium rates for substandard risks.
The Company’s funeral plan insurance is written on a simplified medical application with underwriting requirements being a completed application, a phone interview of the applicant, and an intelliscript prescription history inquiry. There are several underwriting classes in which an applicant can be placed.
Annuities
Products
The Company’s annuity business includes single premium deferred annuities, flexible premium deferred annuities, and immediate annuities. A single premium deferred annuity is a contract where the individual remits a sum of money to the Company, which is retained on deposit until such time as the individual may wish to annuitize or surrender the contract for cash. A flexible premium deferred annuity gives the contract holder the right to make premium payments of varying amounts or to make no further premium payments after his initial payment. These single and flexible premium deferred annuities can have initial surrender charges. The surrender charges act as a deterrent to individuals who may wish to prematurely surrender their annuity contracts. An immediate annuity is a contract in which the individual remits a sum of money to the Company in return for the Company’s obligation to pay a series of payments on a periodic basis over a designated period, such as an individual’s life, or for such other period as may be designated.
Annuities have guaranteed interest rates that range from 1% to 6.5% per annum. Rates above the guaranteed interest rate credited are periodically modified by the Company’s Board of Directors at its discretion. For the Company to make a profit on an annuity product, the Company must maintain an interest rate spread between its investment income and the interest rates credited to the annuities. Commissions, issuance expenses, and general and administrative expenses are deducted from this interest rate spread.
Markets and Distribution
The general market for the Company’s annuities is middle to older age individuals. A major source of annuity sales comes from direct agents and are sold in conjunction with other insurance sales. If an individual does not qualify for a funeral plan, the agent will often sell that individual an annuity to fund final expenses.
The following table summarizes the annuity business for the five years ended December 31, 2024:
2021
Annuities Policy/Certificate Count as of December 31 24,296 24,924 24,225 24,901 25,476
Deposits Collected (in thousands) $ 11,740 $ 10,946 $ 9,972 $ 9,719 $ 9,637
Accident and Health
Products
Through its various acquisitions, the Company occasionally acquires small blocks of accident and health insurance policies, which it continues to service. The Company offered a low-cost comprehensive diver’s accident insurance policy that provided worldwide coverage for medical expense reimbursement in the event of a diving accident. This product was discontinued in March 2024.
Markets and Distribution
The Company marketed its diver’s accident insurance policies through the internet.
The following table summarizes the accident and health insurance business for the five years ended December 31, 2024:
2021
Accident and Health Policy/Certificate Count as of December 31 7,592 9,379 11,132 12,494 13,735
Premiums Collected (in thousands) $ 188 $ 216 $ 543 $ 353 $ 296
Reinsurance
The primary purpose of reinsurance is to enable an insurance company to issue an insurance policy in an amount larger than the risk the insurance company is willing to assume for itself. The insurance company remains obligated for the amounts reinsured (ceded) in the event the reinsurers do not meet their obligations.
The Company currently cedes and assumes certain risks with various authorized unaffiliated reinsurers pursuant to reinsurance treaties, which are generally renewed annually. The premiums paid by the Company are based on a number of factors, primarily including the age of the insured and the risk ceded to the reinsurer.
It is the Company’s policy to retain no more than $100,000 of ordinary insurance per life insured, with the excess risk being reinsured. The total policy amount of life insurance reinsured by other companies as of December 31, 2024 and 2023, was $325,189,000 and $333,211,000, which represented approximately 9.4% and 9.3% of the Company’s total life insurance policy amount in force on that date, respectively.
See “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Notes to Consolidated Financial Statements” for additional disclosure and discussion regarding reinsurance.
Investments
The investments that support the Company’s life insurance and annuity obligations are determined by the investment committees of the Company’s subsidiaries and ratified by the full boards of directors of the respective subsidiaries. A significant portion of the Company’s investments must meet statutory requirements governing the nature and quality of permitted investments by its insurance subsidiaries. The Company maintains a diversified investment portfolio consisting of common stocks, preferred stocks, municipal bonds, corporate bonds, mortgage loans, real estate, and other securities and investments.
See “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Notes to Consolidated Financial Statements” for additional disclosure and discussion regarding investments.
Cemetery and Mortuary
Products
Through its cemetery and mortuary segment, the Company markets a variety of products and services both on a pre-need basis (prior to death) and an at-need basis (at the time of death). The products include plots, interment vaults, mausoleum crypts, markers, caskets, urns, and other death care related products. These services include professional services of funeral directors, opening and closing of graves, use of chapels and viewing rooms, and use of automobiles and clothing. The Company has a mortuary at each of its cemeteries, other than Holladay Memorial Park and Singing Hills Memorial Park, and has ten separate stand-alone mortuary facilities.
Markets and Distribution
The Company’s pre-need cemetery and mortuary sales are marketed to persons of all ages but are generally purchased by persons 45 years of age and older. The Company is limited in its geographic distribution of these products to areas lying within an approximate 20-mile radius of its mortuaries and cemeteries. The Company’s at-need sales are similarly limited in the geographic area.
The Company actively seeks to sell its cemetery and funeral products to customers on a pre-need basis. The Company employs cemetery sales representatives on a commission basis to sell these products. Many of these pre-need cemetery and mortuary sales representatives are also licensed insurance salesmen and sell funeral plan insurance. In some instances, the Company’s cemetery and mortuary facilities are the named beneficiaries of the funeral plan policies.
Potential customers are located via telephone sales prospecting, responses to letters mailed by the pre-planning consultants, billboards and other outside advertising, referrals, and door-to-door canvassing. The Company trains its sales representatives and helps generate leads for them.
Mortgage Loans
Products
The Company, through SecurityNational Mortgage, is active in the residential real estate market. SecurityNational Mortgage is approved by the U.S. Department of Housing and Urban Development (HUD), the Federal National Mortgage Association (Fannie Mae), and other secondary market investors, to originate a variety of residential mortgage loan products, which are subsequently sold to investors. The Company uses internal and external funding sources to fund mortgage loans.
Security National Life originates and funds commercial real estate loans, residential construction loans, and land development loans for internal investment.
Markets and Distribution
The Company’s residential mortgage lending services are marketed primarily to real estate brokers, builders and directly to consumers. The Company has a strong retail origination presence in the Utah, Florida, Texas, Nevada and Arizona markets and many other states across the country. See “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Notes to Consolidated Financial Statements” for additional disclosure and discussion regarding mortgage loans.
Recent Acquisitions and Other Business Activities
Real Estate Development
The Company is capitalizing on the opportunity to develop commercial and residential assets on its existing and recently acquired properties. The cost to acquire existing for-sale assets currently exceeds the replacement costs, thus creating the opportunity for development and redevelopment of the land that the Company currently owns. The Company has developed, or is in the process of developing, assets that have an initial development cost exceeding $100,000,000, primarily relating to the Center53 Development and multiple single family residential development projects. The Company plans to continue its development endeavors based upon its assessment of the market demand.
Center53 Development
Center53 Development is an office development project comprising nearly 20 acres of land that is currently owned by the Company in the central valley of Salt Lake City. At final completion, the multi-year phased development is expected to create a campus atmosphere and include nearly one million square-feet of office space in five buildings, ranging from four to eleven stories, and will be serviced by three parking structures with approximately 4,000 stalls. In 2015, the Company broke ground and commenced development on the first phase which included a six-story building of nearly 200,000 square feet and a parking garage with 748 parking stalls. The first phase of the project was completed in July 2017 and is currently 88% leased. The second phase of the project began in March 2020 and includes a second six-story building of nearly 221,000 square feet and a parking garage with approximately 870 stalls. The Company began its occupancy of a portion of the building in October 2021 and the remainder of the building is currently 100% leased. The Company plans to initiate future phases of the Center53 Development for additional Class A office space in the central valley of Salt Lake City.
Regulation
The Company’s insurance subsidiaries are subject to comprehensive regulations in the jurisdictions in which they do business under statutes and regulations administered by state insurance commissioners. Such regulation relates to, among other things, prior approval of the acquisition of a controlling interest in an insurance company; standards of solvency which must be met and maintained; licensing of insurers and their agents; nature of and limitations on investments; deposits of securities for the benefit of policyholders; approval of policy forms and premium rates; periodic examinations of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of insurers or for other purposes; and requirements regarding aggregate reserves for life policies and annuity contracts, policy claims, unearned premiums, and other matters. The Company’s insurance subsidiaries are subject to this type of regulation in any state in which they conduct relevant business. Such regulations may cause unforeseen costs and operational restrictions, and delay implementation of the Company’s business plans.
The Company’s life insurance subsidiaries are currently subject to regulations in Utah, Louisiana, Mississippi and Texas under insurance holding company legislation, and other states where applicable. Generally, intercompany transfers of assets and dividend payments from insurance subsidiaries are subject to prior notice of approval from the relevant state insurance department when they are deemed “extraordinary” under relevant state law. The insurance subsidiaries are required, under state insurance laws, to file detailed annual reports with the supervisory agencies in each of the states in which they do business. Their business and accounts are also subject to examination by these agencies every three to five years. The Company’s life insurance subsidiaries completed their last examinations in 2021 and 2022 for the period ending December 31, 2020 and the resulting final examination reports were approved by the insurance departments and are public records. Security National Life, First Guaranty, Kilpatrick, and Southern Security have received notice of a regularly scheduled multi-year examination for the years 2021-2024 that will commence in the second quarter of 2025.
The Texas Department of Banking also audits pre-need insurance policies that are issued in the state of Texas. Pre-need policies include the life and annuity products sold as the funding mechanism for funeral plans through funeral homes by Security National agents. The Company is required to send the Texas Department of Banking an annual report that summarizes the number of policies in force and the face amount or death benefit for each policy. This annual report is also required to indicate the number of new policies issued for that year, all death claims paid that year, and all premiums received.
The Company’s cemetery and mortuary subsidiaries are subject to the Federal Trade Commission’s comprehensive funeral industry rules and to state regulations in the various states where such operations are domiciled. The morticians must be licensed by the respective state in which they provide their services. Similarly, the mortuaries and cemeteries are governed and licensed by state statutes and city ordinances in Utah, California, and New Mexico. The subsidiaries are required to keep annual reports on file including financial information concerning the number of spaces sold and, where applicable, funds provided to the Endowment Care Trust Fund. Licenses are issued annually based on such reports. The cemeteries maintain city or county licenses where they conduct business.
The Company’s mortgage subsidiaries are subject to the rules and regulations of the U.S. Department of Housing and Urban Development (HUD), and to various state licensing acts and regulations and the Consumer Financial Protection Bureau (CFPB). These regulations, among other things, specify minimum capital requirements; procedures for loan origination and underwriting, licensing of brokers and loan officers and quality review audits and specify the fees that can be charged to borrowers. Each year, the Company is required to have an audit completed for its mortgage subsidiary by an independent registered public accounting firm to verify compliance with the relevant regulations. In addition to the government regulations, the Company must meet loan requirements, and underwriting guidelines of various investors who purchase the loans.
Income Taxes
The Company’s insurance subsidiaries, Security National Life, First Guaranty and Kilpatrick are taxed under the Life Insurance Company Tax Act of 1984. Under the act, life insurance companies are taxed at standard corporate rates on life insurance company taxable income. Life insurance company taxable income is gross income less general business deductions and reserves for future policyholder benefits (with modifications). Under The Tax Cuts and Jobs Act (the “Tax Act”), December 31, 2017 policyholder surplus account balances result in taxable income over a period of eight years.
Security National Life, First Guaranty and Kilpatrick calculate their life insurance taxable income after establishing a provision representing a portion of the costs of acquisition of such life insurance business. The effect of the provision is that a certain percentage of the Company’s premium income is characterized as deferred expenses and recognized over a five or ten-year period. The Tax Act changed this recognition period for amounts deferred after December 31, 2017 to a five or fifteen-year period.
The Company’s non-life insurance company subsidiaries are taxed in general under the regular corporate tax provisions. The Company’s subsidiaries Southern Security and Trans-Western are regulated as life insurance companies but do not meet the Internal Revenue Code definition of a life insurance company, so they are taxed as insurance companies other than life insurance companies.
Competition
The life insurance industry is highly competitive. There are approximately 700 legal reserve life insurance companies in business in the United States. These insurance companies differentiate themselves through marketing techniques, product features, pricing, and customer service. The Company’s insurance subsidiaries compete with many insurance companies, many of which have greater financial resources, longer business histories, and more diversified lines of insurance products than the Company. In addition, such companies generally have larger sales forces. Further, the Company competes with mutual insurance companies which may have a competitive advantage because all profits accrue to policyholders. Because the Company is smaller by industry standards and lacks broad diversification of risk, it may be more vulnerable to losses than larger, better-established companies. The Company believes that its policies and rates for the markets it serves are generally competitive.
The cemetery and mortuary industry are highly competitive. In the Utah, California, and New Mexico markets where the Company competes, there are several cemeteries and mortuaries which have longer business histories, more established positions in the community, and stronger financial positions than the Company. In addition, some of the cemeteries with which the Company must compete for sales are owned by municipalities and, as a result, can offer lower prices than can the Company. The Company bears the cost of a pre-need sales program that is not incurred by those competitors which do not have a pre-need sales force. The Company believes that its products and prices are generally competitive with those in the industry.
The mortgage industry is highly competitive with many mortgage companies and banks in the same geographic area in which the Company is operating. The mortgage industry in general is sensitive to changes in interest rates and the refinancing market is particularly vulnerable to changes in interest rates.
Seasonality
The Company’s business is generally not subject to seasonal fluctuations.
Human Capital Management
As of December 31, 2024, the Company employed 1,186 full-time and 235 part-time employees. Of the full-time employees, 678 were employed by the mortgage segment, 388 by the life insurance segment, and 120 by the cemetery and mortuary segment. The Company requires monthly acknowledgement of its anti-discrimination and anti-harassment policies and communicates to its employees how to report concerns that relate to their employment experience.
Employee Benefits
All eligible employees may elect coverage under the Company’s group health (including health savings and flexible spending), retirement, supplemental life and voluntary benefit programs. As of December 31, 2024, 757 employees had elected to participate in the Company’s group health insurance plans.
The Company sponsors a 401(k) retirement plan for each business segment. These retirement plans qualify under section 401(k) of the Internal Revenue Code and, if approved by the Company’s Board of Directors, the Company makes a matching contribution in Company stock based on the employee’s contribution amount.
The Company provides other time off benefits such as paid sick time and paid vacation time. The Company provides discounts on certain services provided by the Company to its employees. Additionally, the Company offers an employee assistance program that provides 24/7 counseling services for employees who may be facing challenges outside of the workplace.
Available Information
The Company’s internet address is www.securitynational.com. The Company’s investor relations website is www.investor.securitynational.com and the Company promptly makes available on this website, free of charge, the reports that it files or furnishes with the Securities and Exchange Commission.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None. As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

---

ITEM 2. PROPERTIES
Item 2. Properties
The tables below set forth the location of the Company’s office facilities and certain other information relating to these properties.
Street City State Function Owned / Leased Approximate Square Footage Lease
Amount Expiration
433 W. Ascension Way, Floors 4, 5 and 6 Salt Lake City UT Corporate Headquarters, Insurance Operations, Cemetery and Mortuary Operations, Mortgage Operations and Sales Owned 221,000 N/A
N/A
1818 Marshall St. Shreveport LA Insurance Operations Owned 12,274 N/A
N/A
812 Sheppard St. Minden LA Insurance Sales Owned 1,560 N/A
N/A
4901 S. Memory Lane Holladay UT Funeral Service Sales Owned 1,200 N/A
N/A
1080 River Oaks Drive Suite #B204 Flowood MS Insurance Sales Leased 2,685 $ 3,916 / mo 8/31/2028
1 Sanctuary Blvd #302 Manderville LA Insurance Sales Leased 1,335 $ 2,146 / mo 6/30/2025
79 E. Main Street Midway UT Funeral Service Sales Leased 4,476 $ 6,233 / mo 10/31/2025
4387 S. 500 W. Salt Lake City UT Funeral Service Sales Leased 2,168 $ 1,895 / mo 7/31/2025
1627A Central Ave. Los Alamos NM Funeral Service Sales Leased 1,400 $ 1,600 / mo month to month
200 Market Way Rainbow City AL Fast Funding Operations Leased 12,850 $ 10,910 / mo 1/31/2027
500 W Main St. #106 Russellville AR Fast Funding Operations Leased $ 1,000 / mo month to month
5100 N. 99th Ave., Suite 101/103 Phoenix AZ Mortgage Sales Sub-Leased 3,940 $ 3,586 / mo month to month
1490 S. Price Road, Suite 318 Chandler AZ Mortgage Sales Leased 1,600 $ 3,840 / mo 6/30/2025
1951 West Camelback Rd, Ste 200 Phoenix AZ Mortgage Sales Leased 2,446 $ 4,077 / mo 1/31/2026
2220 S. Country Club Drive Suite 101 Mesa AZ Mortgage Sales Leased 3,274 $ 5,500 / mo 2/14/2028
6751 N Sunset Blvd. #E260 Glendale AZ Mortgage Sales Leased 1,496 $ 5,319 / mo 04/30/25
7014 E Camelback Rd. #B100A Scottsdale AZ Mortgage Sales Leased $ 1,538 / mo month to month
1360 N Bullard Ave. #I-207 & #J-208 Goodyear AZ Mortgage Sales Leased $ 3,610 / mo 8/31/2025
40977 Oak Dr. Forest Falls CA Mortgage Sales Leased $ - / mo month to month
2934 E. Garvey Ave. South, Suite 250 West Covina CA Mortgage Sales Leased $ 1,100 / mo month to month
7398 Fox Trail Unit B Yucca Valley CA Mortgage Sales Leased $ 550 / mo month to month
155 S. Highway 101 Suite 7 Solana Beach CA Mortgage Sales Leased 2,000 $ 7,649 / mo 7/31/2026
2455 Bennett Valley Rd. #C107 Santa Rosa CA Mortgage Sales Leased $ 1,729 / mo 7/31/2025
78-065 Main St. #205C La Quinta CA Mortgage Sales Leased $ 550 / mo month to month
27 Main St., Suite C-104B Edwards CO Mortgage Sales Leased $ 1,950 / mo month to month
4501 Mohawk Dr. Larkspur CO Mortgage Sales Leased $ 50 / mo month to month
7800 E. Union Ave., Suite 550 Denver CO Mortgage Sales Sub-Leased 4,656 $ 11,834 / mo 2/28/2026
5982 s Zeno Ct Aurora CO Mortgage Sales Leased $ - / mo month to month
5475 Tech Center Drive #201-A Colorado Springs CO Mortgage Sales Leased $ 1,185 / mo 12/31/2027
447 Naubuc Ave. #110 Glasonbury CT Mortgage Sales Leased / mo 3/31/2027
84 Broad St. 2nd Fl #6 Milford CT Mortgage Sales Leased $ 600 / mo 5/31/2025
8191 College Parkway, Suite 201 Ft Myers FL Mortgage Sales Leased 4,676 $ 4,871 / mo 8/21/2025
2350 Fruitville Rd Ste, Ste 101 Sarasota FL Mortgage Sales Leased 2,455 $ 5,424 / mo 3/14/2026
970 Island Grove Drive Deland FL Mortgage Sales Leased $ - / mo month to month
10293 61st Ct N Pinellas Park FL Mortgage Sales Leased $ - / mo month to month
250 International Pkwy #118 Lake Mary FL Mortgage Sales Leased 3,068 $ 3,630 / mo 3/31/2027
5666 Seminole Blvd. #128 Seminole FL Mortgage Sales Leased 785.00 / mo 6/30/2025
900 Cricle 75 Parkway, Ste 175 Atlanta GA Mortgage Sales Leased 3,020 $ 6,531 / mo 6/30/2026
6600 Peachtree Dunwoody Rd, Ste 135 Atlanta GA Mortgage Sales Leased 2,129 $ 5,138 / mo 3/31/2026
2570 Stonevalley Ln Cumming Atlanta GA Mortgage Sales Leased $ - / mo month to month
3330 Cumberland Blvd. Suite 500 #62 Atlanta GA Mortgage Sales Leased $ 1,190 / mo month to month
3330 Cumberland Blvd. Suite 500 #63 Atlanta GA Mortgage Sales Leased $ 860 / mo month to month
3330 Cumberland Blvd. Suite 500 #65 Atlanta GA Mortgage Sales Leased $ 1,190 / mo month to month
4370 Kukui Grove St., Suite 201 Lihue HI Mortgage Sales Leased $ 1,589 / mo 2/28/2025
1001 Kamokila Blvd. Kapolei HI Mortgage Sales Leased $ 1,865 / mo 12/31/2025
677 Ala Moana Blvd. Suite 609 Honolulu HI Mortgage Sales Leased $ 2,270 / mo 1/31/2025
802 West Bartlett Road Bartlett IL Mortgage Sales Leased 2,300 $ 6,000 / mo 12/31/2025
81 Boulder Drive Elizabethtown KY Mortgage Sales Leased $ - / mo month to month
8684 Veterans Hwy, Ste 101 Millersville MD Mortgage Sales Leased 4,018 $ 7,135 / mo 7/31/2026
860 Blue Gentian Road Suite 205 Eagan MN Mortgage Sales Leased $ 383 / mo month to month
4987 Fall Creek Rd. Suite 1 Branson MO Mortgage Sales Leased $ 1,400 / mo month to month
960 S 24th St. West Suite I Billings MT Mortgage Sales Leased $ 750 / mo month to month
739 11th Avenue Blvd. SE Hickory NC Mortgage Sales Leased 1,000 $ 900 / mo 5/31/2025
1980 Festival Plaza Dr., Suite 850 Las Vegas NV Mortgage Sales Leased 12,866 $ 47,862 / mo 3/31/2027
840 Pinnacle Ct., Suite 3 Mesquite NV Mortgage Sales Leased $ 720 / mo month to month
2635 St. Rose Pkwy, Suites D 100, 110, 120 Hendeson NV Mortgage Sales Leased 5,788 $ 13,029 / mo 9/30/2025
2546 Findlater Henderson NV Mortgage Sales Leased $ - / mo month to month
1180 N Town Center Dr. #265 Las Vegas NV Mortgage Sales Leased 2,638 $ 7,650 / mo 9/30/2027
Item 2. Properties (Continued)
Street City State Function Owned / Leased Approximate Square Footage Lease
Amount Expiration
630 S 4th St. #100C Las Vegas NV Mortgage Sales Leased 1,100 $ 2,195 / mo month to month
401 S Frontage Rd. #1 Pahrump NV Mortgage Sales Leased 2,200 $ 3,000 / mo 8/31/2025
670 Meridian Way, Suite 146 Westerville OH Mortgage Sales Leased $ 644 / mo month to month
1000 W Wilshire Blvd. #220 Oklahoma City OK Mortgage Sales Leased $ 550 / mo month to month
11592 SW Roundup Place Terrebonne OR Mortgage Sales Leased $ - / mo month to month
709 Pacific Ave Tillamook OR Mortgage Sales Leased $ - / mo month to month
323 NW 13th Ave. #403 Portland OR Mortgage Sales Leased $ 1,160 / mo 9/30/2027
3970 Post Rd. #2PH Warwick RI Mortgage Sales Leased $ 850 / mo 3/31/2025
144 Alf Taylor Rd. Johnson City TN Mortgage Sales Sub-Leased 1,521 $ 1,000 / mo 1/31/2025
1607 Solitude Ct. Spring Hill TN Mortgage Sales Leased $ - / mo month to month
3292 Winbrook Dr. Memphis TN Mortgage Sales Leased $ 200 / mo month to month
1213 East Alton Gloor Blvd., Suite H Brownsville TX Mortgage Sales Leased 2,000 $ 2,400 / mo 2/28/2025
722 Kiowa Dr. West Lake Kiowa TX Mortgage Sales Leased $ - / mo month to month
23227 Red River Drive Katy TX Mortgage Sales Leased $ 750 / mo month to month
4500 1-40 West, Suite B Amarillo TX Mortgage Sales Leased 1,238 $ 1,700 / mo 12/31/2025
30417 Fifth Street Suite B Fulshear TX Mortgage Sales Leased 1,000 $ 1,311 / mo month to month
4908 North Midkiff Road Midland TX Mortgage Sales Leased 1,550 $ 2,500 / mo month to month
462 Mid Cities Boulevard Hurst TX Mortgage Sales Leased 1,640 $ 2,500 / mo month to month
2600 South Shore Boulevard, Suite 300 League City TX Mortgage Sales Leased $ 823 / mo 4/30/2025
1600 Lee Travino, Suite A-1 El Paso TX Mortgage Sales Leased 1,535 $ 2,110 / mo month to month
1777 NE Loop 410, Suite 600 San Antonio TX Mortgage Sales Leased $ 1,140 / mo month to month
299 South Columbia, Stephenville TX Mortgage Sales Leased 3,417 $ 6,500 / mo month to month
10000 Central Expressway Ste 428 Dallas TX Mortgage Sales Leased $ 1,400 / mo 12/31/2025
5757 Flewellen Oaks Ln #104 Fulshear TX Mortgage Sales Leased $ 800 / mo month to month
2100 Kramer Ln. #900 Austin TX Mortgage Sales Leased 5,634 $ 10,329 / mo 7/31/2029
10024 County Rd. 1016 Burleson TX Mortgage Sales Leased $ - / mo month to month
2001 Timberloch Pl. #500-31 The Woodlands TX Mortgage Sales Leased $ 1,000 / mo 7/1/2025
1526 Katy Gap Rd. #802 Katy TX Mortgage Sales Leased 1,237 $ 3,500 / mo month to month
14090 SW Freeway Suite 300 #374 Sugar Land TX Mortgage Sales Leased $ 1,077 / mo month to month
800 Town & Country Blvd., Suite 500 #369 Austin TX Mortgage Sales Leased $ 793 / mo month to month
800 Town & Country Blvd., Suite 500 #370 Austin TX Mortgage Sales Leased $ 793 / mo month to month
801 Town & Country Blvd., Suite 500 #371 Austin TX Mortgage Sales Leased $ 793 / mo month to month
126 W. Sego Lily Dr., Suite 126 Sandy UT Mortgage Sales Leased 2,794 $ 7,090 / mo 1/31/2027
497 S. Main Ephraim UT Mortgage Sales Leased 1,884 $ 1,600 / mo 4/30/2025
11240 S. River Heights Dr. South Jordan UT Mortgage Sales Leased 3,403 $ 8,468 / mo 11/30/2026
1350 E. 300 S. 3rd Floor Lehi UT Mortgage Sales Leased 15,446 $ 39,542 / mo 12/22/2026
2455 E. Parleys Way, Suites 120 & 150 Salt Lake City UT Mortgage Sales Leased 5,256 $ 9,186 / mo 7/31/2030
859 W South Jordan Pkwy, Suite 101, South Jordan UT Mortgage Sales Leased 3,376 $ 6,360 / mo 5/30/2025
768 S. 1600 W., Suite B Mapleton UT Mortgage Sales Leased 1,500 $ 4,240 / mo month to month
998 N 1200 W, Suite 104 Orem Orem UT Mortgage Sales Leased 2,162 $ 5,648 / mo month to month
162 N 400 E #C205 St. George UT Mortgage Sales Leased 1,177 $ 2,297 / mo 4/30/2026
500 E Village Blvd. #108 Stansbury Park UT Mortgage Sales Leased $ 600 / mo 4/30/2025
15650 NE Fourth Blvd Ste 101 Vancouver WA Mortgage Sales Leased $ 485 / mo month to month
1508 24th Ave., Suite 23 Kenosha WI Mortgage Sales Leased $ 150 / mo month to month
27903 99th St. Trevor WI Mortgage Sales Leased $ 150 / mo month to month
645 3rd St. #7 Beloit WI Mortgage Sales Leased $ 567 / mo month to month
2527 S Business Dr. Sheboygan WI Mortgage Sales Leased $ 1,200 / mo month to month
14775 W National Ave. New Berlin WI Mortgage Sales Leased 2,390 $ 2,000 / mo 9/1/2026
255 E 2nd St. #1 Powell WY Mortgage Sales Leased $ 300 / mo month to month
288 Scrub Oak Dr. Star Valley Ranch WY Mortgage Sales Leased $ - / mo month to month
The Company believes the office facilities it occupies are in good operating condition and adequate for current operations. The Company will generally enter into additional leases, modify existing leases or extend current leases based on its assessments of current market demand for its services. Those leases are expected to be month to month where possible.
Item 2. Properties (Continued)
The following table summarizes the location and acreage of the seven Company owned cemeteries, each of which includes one or more mausoleums. The acreage represents estimates of acres that are based upon survey reports, title reports, appraisal reports, or the Company’s inspection of the cemeteries. The Company estimates that there are approximately 1,200 spaces per developed acre.
Net Saleable Acreage
Name of Cemetery Location Date Acquired Developed Acreage Total Acreage Acres Sold as Cemetery Spaces (1) Total Available Acreage
Memorial Estates, Inc.
Lakeview Cemetery 1640 East Lakeview Drive
Bountiful, Utah 8
Memorial Estates, Inc.
Mountain View Cemetery 3115 East 7800 South
Salt Lake City, Utah 20
Memorial Estates, Inc.
Redwood Cemetery 6500 South Redwood Road
West Jordan, Utah 35
Deseret Memorial Inc.
Lake Hills Cemetery 10055 South State Street
Sandy, Utah 6
Holladay Memorial Park, Inc.
Holladay Memorial Park 4900 South Memory Lane
Holladay, Utah 8
California Memorial Estates, Inc.
Singing Hills Memorial Park 2800 Dehesa Road
El Cajon, California 6 91 (2)
SNR-SF Cemetery LLC Santa Fe Memorial Gardens 417 Rodeo Rd
Santa Fe, New Mexico 5 (3)
(1) Includes both reserved and occupied spaces.
(2) Includes an open easement with a total acreage of approximately 62 acres.
(3) Includes five main columbariums that can hold approximately 6,000 inurnments.
Item 2. Properties (Continued)
The following table summarizes the location, square footage and the number of viewing rooms and chapels of the twelve Company owned mortuaries:
Date Viewing
Square
Name of Mortuary Location Acquired Room(s) Chapel(s) Footage
Memorial Mortuary, Inc.
Memorial Mortuary 5850 South 900 East, Murray, Utah 20,000
Affordable Funerals and
Cremations, St. George 157 East Riverside Dr., No. 3A, St. George, Utah 2,360
Memorial Estates, Inc.
Redwood Mortuary (1) 6500 South Redwood Rd., West Jordan, Utah 10,000
Memorial Estates, Inc.
Mountain View Mortuary (1) 3115 East 7800 South, Salt Lake City, Utah 16,000
Memorial Estates, Inc.
Lakeview Mortuary (1) 1640 East Lakeview Dr., Bountiful, Utah 5,500
Deseret Memorial Inc.
Lakehills Mortuary (1) 10055 South State St., Sandy, Utah 18,000
Cottonwood Mortuary, Inc.
Cottonwood Mortuary 4670 South Highland Dr., Holladay, Utah 14,500
SN Probst LLC
Heber Valley Funeral Home 288 North Main St., Heber City, Utah 5,900
SN Holbrook LLC
Milcreek Funeral Home 3251 S 2300 E, Millcreek, Utah 6,300
SNR-SF Mortuary LLC
Rivera Family Funeral Home Santa Fe (1) 417 Rodeo RD, Santa Fe, New Mexico 7,700
SNR-Espanola LLC
Rivera Family Funeral Home Española 305 Calle Salazar, Española, New Mexico 10,400
SNR-Taos LLC
Rivera Family Funeral Home Taos 818 Paseo Del Pueblo Sur, Taos, New Mexico 9,600
(1) These funeral homes also provide burial niches at their respective locations.

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
The Company is not a party to any material legal proceedings outside the ordinary course of business or to any other legal proceedings, which if adversely determined, would be expected to have a material adverse effect on its financial condition or results of operation.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters, and Issuer Purchases of Equity Securities
The Company’s Class A Common Stock trades on The Nasdaq Global Select Market under the symbol “SNFCA.” As of March 27, 2025, the closing stock price of the Class A Common Stock was $12.61 per share. As of March 27, 2025, there were 1,605 registered stockholders of record of the Company’s Class A Common Stock and 45 registered stockholders of record of the Company’s Class C Common Stock. Because many of the Company’s shares of Class A Common Stock are held by brokers and other institutions on behalf of the stockholders, the Company is unable to estimate the total number of stockholders represented by these record holders.
The following were the high and low market closing stock prices for the Class A Common Stock by quarter as reported by NASDAQ since January 1, 2023:
Price Range (1)
High Low
Period (Calendar Year)
First Quarter $ 6.85 $ 5.44
Second Quarter $ 8.05 $ 5.74
Third Quarter $ 8.41 $ 7.22
Fourth Quarter $ 9.14 $ 6.56
First Quarter $ 9.04 $ 7.26
Second Quarter $ 8.00 $ 6.19
Third Quarter $ 9.20 $ 7.45
Fourth Quarter $ 13.42 $ 9.12
First Quarter (through March 27, 2025) $ 13.46 $ 11.31
(1) Stock prices have been adjusted retroactively for the effect of annual stock dividends.
The Class C Common Stock is not registered or traded on a national exchange. See Note 12 of the Notes to Consolidated Financial Statements.
The Company has never paid a cash dividend on its Class A or Class C Common Stock. The Company currently anticipates that all its earnings will be retained for use in the operation and expansion of its business and does not intend to pay any cash dividends on its Class A or Class C Common Stock in the foreseeable future. Any future determination as to cash dividends will depend upon the earnings and financial position of the Company and such other factors as its Board of Directors may deem appropriate. The Company paid a 5% stock dividend on Class A and Class C Common Stock each year from 1990 through 2019, a 7.5% stock dividend for the year 2020, and a 5.0% stock dividend for the years 2021 through 2024.
On April 15, 2024, the Company executed a 10b5-1 agreement with a broker to repurchase shares of the Company’s Class A Common Stock. Under the terms of the agreement, the broker is permitted to repurchase up to $1,000,000 of the Company’s Class A Common Stock. Purchases commenced May 15, 2024. The agreement is subject to the daily time, price and volume conditions of Rule 10b-18. The agreement expired on December 31, 2024.
The following table shows the Company’s repurchase activity of its common stock during the three-month period ended December 31, 2024, under the 10b5-1 agreement.
Period (a) Total Number of Class A Shares Purchased (b) Average Price Paid per Class A Share (1) (c) Total Number of Class A Shares Purchased as Part of Publicly Announced Plan or Program (d) Maximum Number of Class A Shares that May Yet Be Purchased Under the Plan or Program (2)
10/1/2024-10/31/2024 - $ - - 194,612
11/1/2024-11/30/2024 - - - 194,612
12/1/2024-12/31/2024 - - - 194,612
Total - $ - - 194,612
(1) Includes fees and commissions paid on stock repurchases.
(2) In September 2018, the Board of Directors of the Company approved a Stock Repurchase Plan that authorized the repurchase of 300,000 shares of the Company’s Class A Common Stock in the open market. The Company amended the Stock Repurchase Plan on December 4, 2020. The amendment authorized the repurchase of a total of 1,000,000 shares of the Company’s Class A Common Stock in the open market. Any repurchased shares of Class A Common Stock are to be held as treasury shares to be used as the Company’s employer matching contribution to the Employee 401(k) Retirement Savings Plan and for shares held in the Deferred Compensation Plan.
The graph below compares the cumulative total stockholder return of the Company’s Class A Common Stock with the cumulative total return on the Standard & Poor’s 500 Stock Index and the Standard & Poor’s Insurance Index for the period from December 31, 2020 through December 31, 2024. The graph assumes that the value of the investment in the Company’s Class A Common Stock and in each of the indexes was $100 as of December 31, 2020 and that all dividends were reinvested.
The comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of the Company’s Class A Common Stock.
12/31/20 12/31/21 12/31/22 12/31/23 12/31/24
SNFC 125
S & P 500 128
S & P Insurance 145
The stock performance graph set forth above is required by the Securities and Exchange Commission and shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Form 10-K into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed soliciting material or filed under such acts.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved]
As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company’s operations over the last several years generally reflect three strategies which the Company expects to continue: (i) increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products; (ii) increased emphasis on cemetery and mortuary business; and (iii) capitalizing on the housing market by originating mortgage loans.
Insurance Operations
The following table shows the condensed financial results for the Company’s insurance operations for 2024 and 2023. See Note 15 of the Notes to Consolidated Financial Statements.
Years ended December 31
(in thousands of dollars)
2024 vs 2023 % Increase (Decrease)
Revenues from external customers:
Insurance premiums $ 119,656 $ 114,658 4 %
Net investment income 68,255 67,812 1 %
Mortgage fee income (100 %)
Gains on investments and other assets 2,055 113 %
Other revenues 1,564 1,666 (6 %)
Intersegment revenues
7,272
8,203
(11
%)
Total segment revenues $ 198,802 $ 193,379 3 %
Segment net earnings $ 24,851 $ 21,617 15 %
Profitability for 2024 increased due to (a) a $4,998,000 increase in insurance premiums and other considerations, (b) a $3,301,000 decrease in death, surrenders and other policy benefits, (c) a $2,323,000 decrease in amortization of deferred policy acquisition costs, (d) a $1,092,000 increase in gains on investments and other assets, (e) a $443,000 increase in net investment income, and (f) a $354,000 decrease in interest expense, which were partially offset by (i) a $2,949,000 increase in income tax expense, (ii) a $2,929,000 increase in selling, general and administrative expenses, (iii) a $2,245,000 increase in future policy benefits, (iv) a $931,000 decrease in intersegment revenue, (v) a $102,000 decrease in other revenues, (vi) a $77,000 decrease in mortgage fee income, and (vii) a $42,000 increase in intersegment interest expense and other expenses.
Cemetery and Mortuary Operations
The following table shows the condensed financial results for the Company’s cemetery and mortuary operations for 2024 and 2023. See Note 15 of the Notes to Consolidated Financial Statements.
Years ended December 31
(in thousands of dollars)
2024 vs 2023 % Increase (Decrease)
Revenues from external customers:
Cemetery revenues $ 16,101 $ 15,189 6 %
Mortuary revenues 12,936 12,676 2 %
Net investment income 2,569 2,952 (13 %)
Gains on investments and other assets 22 %
Other revenues 34 %
Intersegment revenues 0 %
Total segment revenues $ 33,363 $ 32,278 3 %
Segment net earnings $ 6,634 $ 6,313 5 %
Profitability in 2024 increased due to (a) a $1,140,000 increase in cemetery pre-need sales, (b) a $260,000 increase in mortuary at-need sales, (c) a $156,000 increase in gains on investments and other assets, (d) a $139,000 increase in other revenues, and (e) a $26,000 decrease in intersegment interest expense and other expenses, which were partially offset by (i) a $458,000 increase in selling, general and administrative expenses, (ii) a $383,000 decrease in net investment income, (iii) a $239,000 increase in amortization of deferred policy acquisition costs, (iv) a $228,000 decrease in cemetery at-need sales, and (v) a $96,000 increase in income tax expense.
Mortgage Operations
The Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), which originates mortgage loans that qualify for government insurance in the event of default by the borrower, in addition to various conventional mortgage loan products. SecurityNational Mortgage originates and refinances mortgage loans on a retail basis. Mortgage loans originated or refinanced by SecurityNational Mortgage are funded through loan purchase agreements with the Company, Security National Life, Kilpatrick Life, and unaffiliated financial institutions.
SecurityNational Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from third party investors that purchase the mortgage loans. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”) released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the MSRs on approximately 0.44% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.
US Treasury rates continue to remain elevated despite the downward trend in inflation data and the Federal Reserve’s action to reduce rates. This has resulted in higher-than-expected mortgage rates, which in turn has further decreased the demand for loan originations classified as refinance. The higher-than-expected mortgage rates have also continued to have a negative effect on loan originations classified as purchases.
For 2024 and 2023, SecurityNational Mortgage originated 7,269 loans ($2,295,830,000 total volume) and 7,185 loans ($2,173,081,000 total volume), respectively.
The following table shows the condensed financial results for the Company’s mortgage operations for 2024 and 2023. See Note 15 of the Notes to Consolidated Financial Statements.
Years ended December 31
(in thousands of dollars)
2024 vs 2023 % Increase (Decrease)
Revenues from external customers:
Secondary gains from investors $ 70,355 $ 68,428 3 %
Income from loan originations 33,604 31,245 8 %
Change in fair value of loans held for sale 2,870 (478 ) 700 %
Change in fair value of loan commitments (1,124 ) 165 %
Net investment income 1,580 (43 %)
Gains on investments and other assets (986 ) (728 %)
Other revenues 2,497 1,576 58 %
Intersegment revenues 8 %
Total segment revenues $ 110,545 $ 101,915 8 %
Segment net loss $ (4,949 ) $ (13,435 ) 63 %
Losses in 2024 compared to 2023 decreased due to (a) a $4,251,000 decrease in other expenses, (b) a $3,348,000 increase in the fair value of loans held for sale, (c) a $2,359,000 increase in income from loan originations, (d) a $2,177,000 decrease in personnel expenses, (e) a $1,927,000 increase in secondary gains from investors, (f) a $1,854,000 increase in the fair value of loan commitments, (g) a $1,729,000 decrease in rent and rent related expenses, (h) a $921,000 increase in other revenues, (i) a $904,000 decrease in intersegment interest expense and other expenses, (j) a $330,000 decrease in advertising expenses, (k) a $306,000 decrease in costs related to funding mortgage loans, (l) a $257,000 decrease in interest expense, (m) a $42,000 increase in intersegment revenues, and (n) a $29,000 decrease in depreciation on property and equipment, which were partially offset by (i) a $7,410,000 increase in commissions, (ii) a $2,717,000 increase in income tax expense, (iii) a $1,143,000 decrease in gains on investments and other assets, and (iv) a $678,000 decrease in net investment income.
Critical Accounting Policies and Estimates
The Company’s significant accounting policies are fundamental to understanding its results of operations and financial condition as they require that the Company use estimates and assumptions that may affect the value of its assets or liabilities and financial results. See Note 1 - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information.
Five of these policies, discussed below, relate to critical estimates because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Actual results could differ from those estimates.
The Company’s Management and the Audit Committee of the Board of Directors have reviewed and approved the accounting policies associated with these critical estimates.
Future Policy Benefits
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.
These assumptions are made based upon historical experience, industry standards and a best estimate of future results and, for traditional life products, include a provision for adverse deviation. For traditional life insurance, once established for a particular series of products, these assumptions are generally held constant.
Deferred Acquisition Costs and Value of Business Acquired
Amortization of deferred policy acquisition costs (“DAC”) for interest sensitive products is dependent upon estimates of current and future gross profits or margins on this business. Key assumptions used include the following: yield 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, amount of death and surrender benefits, and the length of time the policies will stay in force.
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.
Value of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized like deferred acquisition costs. The critical issues explained for deferred acquisition costs would also apply for value of business acquired.
Premium Deficiency and Loss Recognition Testing
At least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA) recorded for life insurance and annuity products. The Company tests for recoverability by using the Company’s current best-estimate assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns. These tests evaluate whether the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets. These cash flows consist primarily of premium income, less benefits, and expenses. If the current contract liabilities plus the present value of future premiums is greater than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium reserve balances, then the capitalized assets are deemed recoverable. The present values are calculated using the best estimate of the after-tax net investment earned rate.
Loan Loss Reserve
The Company provides for losses on its mortgage loans held for sale through the mortgage loan loss reserve (a liability account).
The mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on mortgage loans sold to third-party investors. The Company may be required to reimburse third-party investors for costs associated with early payoff of loans within six months of origination of such loans and to repurchase loans where there is a default in any of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.
Upon completion of a transfer that satisfies the conditions to be accounted for as a sale, the Company initially measures at fair value liabilities incurred in a sale relating to any guarantee or recourse provisions in the event of defects in the representations and warranties made at loan sale. The Company accrues a monthly allowance for indemnification losses to investors based on total production. This estimate is based on the Company’s historical experience and is included as a component of mortgage fee income. Subsequent updates to the recorded liability from changes in assumptions are recorded in selling, general and administrative expenses. The estimated liability for indemnification losses is included in other liabilities and accrued expenses.
Loan Commitments
The Company estimates the fair value of a mortgage loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted mortgage-backed security (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense. The change in fair value of the underlying mortgage loan is measured from the date the mortgage loan commitment is issued and is shown net of related expenses. Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of the underlying mortgage loans. Fallout rates and other factors from the Company’s recent historical data are used to estimate the quantity and value of mortgage loans that will be funded within the terms of the commitments.
Results of Consolidated Operations
Compared to 2023
Total revenues increased by $16,025,000, or 5.0%, to $334,522,000 for 2024 from $318,497,000 for 2023. Contributing to this increase in total revenues was primarily a $9,411,000 increase in mortgage fee income, a $4,997,000 increase in insurance premiums and other considerations, a $1,172,000 increase in net cemetery and mortuary sales, a $958,000 increase in other revenues, and a $105,000 increase in gains on investments and other assets. This increase in total revenues was offset by a $618,000 decrease in net investment income.
Mortgage fee income increased by $9,411,000, or 9.6%, to $107,559,000 for 2024, from $98,148,000 for 2023. This increase was primarily due to a $5,202,000 increase in the fair value of loans held for sale and loan commitments, a $3,264,000 increase in loan fees and interest income, a $1,850,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market. This increase in mortgage fee income was partially offset by a $905,000 increase in the provision for loan loss reserve.
Insurance premiums and other considerations increased by $4,997,000, or 4.4%, to $119,656,000 for 2024, from $114,659,000 for 2023. This increase was due to an increase of $2,555,000 in first year premiums because of increased preneed insurance sales and an increase of $2,442,000 in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying policies in force.
Net investment income decreased by $618,000, or 0.9%, to $71,725,000 for 2024, from $72,343,000 for 2023. This decrease was primarily attributable to a $3,416,000 decrease in rental income from real estate held for investment and a $3,290,000 decrease in mortgage loan interest. This decrease was partially offset by a $2,427,000 increase in interest on cash and cash equivalents, a $1,853,000 increase in insurance assignment income, a $941,000 decrease in investment expenses, a $461,000 increase in fixed maturity securities income, a $189,000 increase in income in other investments, a $137,000 increase in policy loan income, and an $82,000 increase in equity securities income.
Net mortuary and cemetery sales increased by $1,172,000, or 4.2%, to $29,037,000 for 2024, from $27,865,000 for 2023. This increase was primarily due to a $1,140,000 increase in cemetery pre-need sales and a $260,000 increase in mortuary at-need sales. This increase was partially offset by a $228,000 decrease in cemetery at-need sales.
Gains on investments and other assets increased by $105,000, or 5.7%, to $1,942,000 for 2024, from $1,837,000 for 2023. This increase in gains on investments and other assets was primarily due to a $614,000 increase in gains on real estate held for investment, a $234,000 increase in gains on other assets, a $210,000 increase in gains on equity securities mostly attributable to increases in the fair value of these equity securities, and a $208,000 increase in gains on fixed maturity securities. This increase was partially offset by a $1,161,000 decrease in gains on mortgage loans held for investment.
Other revenues increased by $958,000, or 26.3%, to $4,604,000 for 2024 from $3,646,000 for 2023. This increase was primarily attributable to a $1,350,000 legal settlement, which was partially offset by a decrease of $392,000 in other miscellaneous revenues.
Total benefits and expenses were $300,419,000, or 89.8% of total revenues for 2024, as compared to $302,197,000, or 94.9% of total revenues for 2023.
Death benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $1,056,000, or 1.1%, to $98,956,000 for 2024, from $100,012,000 for 2023. This decrease was primarily the result of a $3,274,000 decrease in death benefits and a $27,000 decrease in surrender and other policy benefits. This decrease was partially offset by a $2,245,000 increase in future policy benefits.
Amortization of deferred policy and pre-need acquisition costs and value of business acquired decreased by $2,084,000, or 11.6%, to $15,940,000 for 2024, from $18,024,000 for 2023. This decrease was primarily due to increased payment consistency from premium-paying products along with a decrease in new business.
Selling, general and administrative expenses increased by an aggregate of $1,975,000, or 1.1%, to $176,465,000 for 2024, from $174,490,000 for 2023. This increase was primarily the result of a $7,043,000 increase in commissions, a $1,943,000 increase in personnel expenses, and a $32,000 increase in depreciation on property and equipment. This increase was partially offset by a $4,432,000 decrease in other expenses, a $1,710,000 decrease in rent and rent related expenses, a $595,000 decrease in advertising expenses, and a $306,000 decrease in costs related to funding mortgage loans.
Interest expense decreased by $611,000, or 12.6%, to $4,254,000 for 2024, from $4,865,000 for 2023. This decrease was primarily due to a decrease of $354,000 in interest expense on bank loans and a decrease of $257,000 in interest expense on mortgage warehouse lines of credit for loans held for sale.
Income tax expense increased by $5,763,000, or 319.2%, to $7,568,000 for 2024, from $1,805,000 for 2023. This increase was primarily due to an increase in earnings before income taxes for 2024 compared to 2023. The Company’s overall effective tax rate increased from 11.1% for 2023 to 22.2% in 2024, a 11.1% increase in the effective tax rate or a 100.6% change. This increase was partially due to the prior period reducing the valuation allowance to zero and no valuation allowance adjustment in the current period.
Risks
The following is a description of the material risks facing the Company and how it mitigates those risks:
Legal and Regulatory Risks. Changes in the legal or regulatory environment in which the Company operates may create additional expenses and risks not anticipated by the Company in developing and pricing its products. Regulatory initiatives designed to reduce insurer profits, new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those recorded in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other public policy or legislative changes may affect the Company’s mortgage sales. Also, the Company may be subject to further regulations in the cemetery and mortuary business. The Company aims to mitigate these risks by offering a wide range of products and by diversifying its operations, thus reducing its exposure to any single product or jurisdiction, and by employing underwriting practices that identify and minimize the adverse impact of such risks.
Mortgage Industry Risks. Developments in the mortgage industry and credit markets can adversely affect the Company’s ability to sell its mortgage loans to investors, which can impact the Company’s financial results by requiring it to assume the risk of holding and servicing any unsold loans.
The mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company could realize in the future on mortgage loans sold to third-party investors. The Company’s mortgage subsidiary may be required to reimburse third-party investors for costs associated with early payoff of loans within the first six months of such loans and to repurchase loans where there is a default in any of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.
During 2024 and 2023 the Company increased its loan loss reserve by $150,000 and decreased its loan loss reserve by $1,178,000, respectively, for loan originations, and the charges have been included in mortgage fee income. The estimated liability for indemnification losses is included in other liabilities and accrued expenses and, as of December 31, 2024 and 2023, the balances were $697,000 and $547,000, respectively. The Company believes the loan loss reserve represents probable loan losses incurred as of December 31, 2024. There is a risk, however, that future loan losses may exceed the loan loss reserve.
As of December 31, 2024, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal amount of $11,400,000 with delinquencies exceeding 90 days. Of this amount, loans with an aggregate principal amount of $4,134,000 were in foreclosure proceedings. The Company has not received or recognized any interest income on the $11,400,000 in mortgage loans with delinquencies exceeding 90 days. During 2024 and 2023, the Company decreased its allowance for credit losses by $1,934,000 and increased it by $1,184,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses for the period. The main reasons for the decrease in 2024 when compared to 2023 were due to a decrease in the commercial loan held for investment portfolio, further refinement of the Company’s quantitative loss analysis and general market improvements related to the residential mortgage loan held for investment single family portfolio. The allowances for credit losses on the Company’s mortgage loans held for investment portfolio as of December 31, 2024 and 2023 were $1,885,000 and $3,819,000, respectively.
Interest Rate Risk. Fluctuations in interest rates may cause a decrease in the value of the Company’s investments or impair the ability of the Company to market its mortgage and cemetery and mortuary products. This change in rates may cause certain interest-sensitive products to become uncompetitive or may cause disintermediation. The Company aims to mitigate this risk by charging fees for non-conformance with certain policy provisions, by offering products that transfer this risk to the purchaser, and by attempting to match the maturity schedule of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, the Company might have to borrow funds or sell assets prior to maturity and potentially recognize a loss on the sale.
Mortality and Morbidity Risks. The Company’s actuarial assumptions differing from actual mortality and morbidity experienced may mean that the Company’s relevant products sold were underpriced, may require the Company to liquidate insurance or make other claims earlier than planned, and have other potentially adverse consequences to the business. The Company aims to minimize this risk through sound underwriting practices, asset and liability duration matching, and sound actuarial practices.
Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining the liability for future policy benefits; those used in determining the value of loans held for sale; and those used in determining loan loss reserve. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.
Liquidity and Capital Resources
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 sale or maturity of investments. The mortgage subsidiaries realize cash flow from fees generated by originating and refinancing mortgage loans and fees on mortgage loans held for sale that are sold to investors into the secondary market. It should be noted that current conditions in the financial markets and economy may affect the realization of these expected cash flows. 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 related to the issuance of new policies, the maintenance of existing policies, debt service, and to meet current operating expenses.
As of December 31, 2024, the Company’s subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under its warehouse lines of credit and its operating cash flow covenant for its standby letter of credit with its primary bank. SecurityNational Mortgage has received or is in the process of receiving waivers from the warehouse banks. In the unlikely event SecurityNational Mortgage is required to repay the outstanding advances of approximately $10,587,449 on the warehouse line of credit that has not provided a covenant waiver, SecurityNational Mortgage has sufficient cash and borrowing capacity on the warehouse lines of credit that have provided covenant waivers to fund its origination activities. The Company has done an internal analysis of the funding capacities of both internal and external sources and has determined that there are sufficient funds to continue its business model. The Company continues to negotiate other warehouse lines of credit with other lenders.
During 2024 and 2023, the Company’s operations provided cash of $57,320,000 and of $53,875,000, respectively. The increase in cash provided by operations was due primarily to the increase in net earnings.
The Company expects to pay out liabilities under its funeral plans over the long term given the nature of those plans. Funeral plans are small face value life insurance policies that payout upon a person’s death to cover funeral burial costs; policyholders generally keep these policies in force until, and do not surrender prior to, death. Because of the long-term nature of these liabilities, the Company can hold to maturity or for the targeted investment period its corresponding bond, real estate, and mortgage loan investments, thus reducing the risk of liquidating these long-term investments because of any sudden changes in their fair values.
The Company attempts to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities. The Company may sell investments other than those held to maturity in the portfolio to help in this timing matching. The Company purchases short-term investments on a temporary basis to meet the expected short-term requirements of the Company’s insurance products. The Company’s investment philosophy is intended to provide a rate of return for the expected duration of its cemetery and mortuary policies that will exceed the accruing of liabilities under those policies regardless of future interest rate movements.
The Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage loans held for sale. The warehoused mortgage loans are typically held for sale on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing the Company’s life insurance subsidiaries. Bonds owned by the insurance subsidiaries amounted to $348,774,000 (at estimated fair value) and $362,663,000 (at estimated fair value) as of December 31, 2024 and 2023, respectively. This represented 38.0% and 38.7% of the total investments of the Company as of December 31, 2024, and 2023, respectively. Generally, all bonds owned by the life insurance subsidiaries are rated by the National Association of Insurance Commissioners. Under this rating system, there are six categories used for rating bonds. As of December 31, 2024, 2.4% (or $8,431,000) and as of December 31, 2023, 1.8% (or $6,954,000) of the insurance subsidiaries’ total bond investments were invested in bonds in rating categories three through six, which are considered non-investment grade.
See Note 2 of the Notes to Consolidated Financial Statements for the schedule of the maturity of fixed maturity securities available for sale and for the schedule of principal payments for mortgage loans held for investment.
See Note 7 of the Notes to Consolidated Financial Statements for a description of the Company’s sources of liquidity.
If market conditions were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately $668,293,000), which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based on the respective basis point swing (the change in the fair values were calculated using a modeling technique):
-200 bps -100 bps +100 bps +200 bps
Change in Fair Value $ 46,923 $ 21,650 $ (22,661 ) $ (45,101 )
(in thousands)
The Company’s life insurance subsidiaries are subject to risk-based capital guidelines established by statutory regulators requiring minimum capital levels based on the perceived risk of assets, liabilities, disintermediation, and business risk. As of December 31, 2024 and 2023, the life insurance subsidiaries were in compliance with the regulatory criteria.
The Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable was $445,758,000 as of December 31, 2024, as compared to $418,450,000 as of December 31, 2023. This increase was primarily due to a $26,122,000 increase in stockholders’ equity and an increase of $1,185,000 in bank loans and other loans payable. Stockholders’ equity as a percentage of total capitalization was 76.1% and 74.8% as of December 31, 2024 and 2023, respectively.
Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance was 7.0% for 2024 as compared to a rate of 4.4% for 2023.
The combined statutory capital and surplus of the Company’s life insurance subsidiaries was $120,216,000 and $107,385,000 as of December 31, 2024 and 2023, respectively. The life insurance subsidiaries cannot pay dividends to their parent company without the approval of state insurance regulatory authorities.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about their businesses without fear of litigation so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in such statements. The Company desires to take advantage of the “safe harbor” provisions of the act.
This Annual Report on Form 10-K contains forward-looking statements, together with related data and projections, about the Company’s projected financial results and its plans and strategies. However, the actual results and needs of the Company may vary materially from forward-looking statements and projections made from time to time by the Company based on management’s then-current expectations. The business in which the Company is engaged involves changing and competitive markets, which may involve a high degree of risk, and there can be no assurance that forward-looking statements and projections will prove accurate.
Factors that may cause the Company’s actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted in such forward looking statements include among others, the following possibilities: (i) heightened competition, including the intensification of price competition, the entry of new competitors, and the introduction of new products by new and existing competitors; (ii) adverse state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital and reserve requirements, benefit mandates and tax treatment of insurance products; (iii) fluctuations in interest rates causing a reduction of investment income or increase in interest expense and in the market value of interest rate sensitive investment; (iv) failure to obtain new customers, retain existing customers or reductions in policies in force by existing customers; (v) higher service, administrative, or general expenses due to the need for additional advertising, marketing, administrative or management information systems expenditures; (vi) loss or retirement of key executives or employees; (vii) increases in medical costs; (viii) changes in the Company’s liquidity due to changes in asset and liability matching; (ix) restrictions on insurance underwriting based on genetic testing and other criteria; (x) adverse changes in the ratings obtained by independent rating agencies; (xi) failure to maintain adequate reinsurance; (xii) possible claims relating to sales practices for insurance products and claim denials; (xiii) adverse trends in mortality and morbidity; (xiv) deterioration of real estate markets; and (xv) lawsuits in the ordinary course of business.
Off-Balance Sheet Agreements
The Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements. As of December 31, 2024, the Company’s commitments were approximately $216,368,000 for these loans, of which $152,361,000 had been funded. The Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made. The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed at 5.25% to 8.50% per annum. Maturities range between six and eighteen months.
Contractual Obligations
In the ordinary course of the Company’s operations, the Company enters certain contractual obligations. Such obligations include operating leases for office space, agreements with respect to borrowed funds and future policy benefits. See Notes 7, 22, 24 of the Notes to Consolidated Financial Statements for more information about these obligations.
Captive Insurance Participation
The Company has a limited equity interest in a captive insurance entity (the “Captive’) that provides workers compensation, general liability and automobile insurance . This program permits the Company to pool insurance risks and resources with like-minded companies in order to obtain more competitive pricing for claims administration, stop loss insurance premiums and to limit its risk of loss in any particular year. The Captive also provides access to a wide array of safety-related services and regular safety training to help the Company control claims. The maximum exposure to a loss related to the Company’s involvement in the Captive is limited to approximately $443,758, which is collateralized under a standby letter of credit issued on the insurance entity’s behalf. See Note 10, “Reinsurance, Commitments and Contingencies,” for additional discussion of commitments associated with the insurance program. The Company has been a member of the Captive since 2006 and does not expect any material losses to result from the issuance of the standby letter of credit given the Company’s past performance.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Balance Sheets, December 31, 2024 and 2023
Consolidated Statements of Earnings for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024 and 2023
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Security National Financial Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Security National Financial Corporation and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Future Policy Benefits for Life Insurance Contracts and Amortization of Deferred Policy Acquisition Costs for Insurance Contracts and Value of Business Acquired - Refer to Notes 1 and 21 to the financial statements
Critical Audit Matter Description
The Company’s management sets assumptions in (1) estimating a liability for life insurance policy benefit payments that will be made in the future (future policy benefits for life insurance contracts), (2) determining amortization of deferred policy acquisition costs for insurance contracts and value of business acquired and (3) performing premium deficiency tests. The most significant assumptions include mortality, lapse, and projected investment yield. Assumptions are determined based upon analysis of company specific experience, industry standards, adjusted for changes in exposure and other relevant factors. Given the inherent uncertainty of these significant assumptions, auditing the development of such assumptions involved especially subjective judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s judgments regarding the mortality, lapse and projected investment yield assumptions used in the development of future policy benefits for life insurance contracts and the amortization of deferred policy acquisition costs for insurance contracts and value of business acquired, included the following, among others:
● With the assistance of our actuarial specialists, we:
● evaluated these actuarial assumptions, including testing the accuracy and completeness of the supporting experience studies,
● evaluated management’s judgments regarding these assumptions used in the development of future policy benefits for life insurance contracts and the amortization of deferred policy acquisition costs and value of business acquired,
● evaluated the results of the Company’s annual premium deficiency tests.
/s/ Deloitte & Touche LLP
Salt Lake City, UT
March 31, 2025
We have served as the Company’s auditor since 2017.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
Assets
Investments:
Fixed maturity securities, available for sale, at estimated fair value
(amortized cost of $376,012,071 and $390,884,441 for 2024 and 2023,
respectively; net of allowance for credit losses of $420,993 and
$314,549 for 2024 and 2023, respectively) $ 366,546,129 $ 381,535,986
Equity securities at estimated fair value (cost of $11,386,454 and
$10,571,505 for 2024 and 2023, respectively) 15,771,681 13,636,071
Mortgage loans held for investment (net of allowance for credit losses
of $1,885,390 and $3,818,653 for 2024 and 2023, respectively) 301,747,358 275,616,837
Real estate held for investment (net of accumulated depreciation
of $31,419,539 and $29,307,791 for 2024 and 2023, respectively) 197,693,338 183,419,292
Real estate held for sale 1,278,033 3,028,973
Other investments and policy loans (net of allowances for credit losses
of $1,536,926 and $1,553,836 for 2024 and 2023, respectively) 74,855,041 69,404,617
Accrued investment income 8,499,168 10,170,790
Total investments 966,390,748 936,812,566
Cash and cash equivalents 140,546,421 126,941,658
Loans held for sale at estimated fair value 131,181,148 126,549,190
Receivables (net of allowance for credit losses of $1,678,531 and
$1,897,887 for 2024 and 2023, respectively) 15,858,743 15,335,315
Restricted assets (including $12,323,535 and $9,239,063 for 2024 and
2023, respectively, at estimated fair value) 23,806,836 20,028,976
Cemetery perpetual care trust investments (including $5,689,706 and
$4,969,005 for 2024 and 2023, respectively, at estimated fair value) 8,836,503 8,082,917
Receivable from reinsurers 13,831,093 14,857,059
Cemetery land and improvements 10,594,632 9,163,691
Deferred policy and pre-need contract acquisition costs 122,661,298 116,351,067
Mortgage servicing rights, net 2,939,878 3,461,146
Property and equipment, net 19,047,688 19,175,099
Value of business acquired 7,491,600 8,467,613
Goodwill 5,253,783 5,253,783
Other 21,366,843 20,072,195
Total Assets $ 1,489,807,214 $ 1,430,552,275
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
December 31,
Liabilities and Stockholders’ Equity
Liabilities
Future policy benefits and unpaid claims $ 944,811,843 $ 916,038,616
Unearned premium reserve 2,011,679 2,543,822
Bank and other loans payable 106,740,104 105,555,137
Deferred pre-need cemetery and mortuary contract revenues 20,168,405 18,237,246
Cemetery perpetual care obligation 5,642,693 5,326,196
Accounts payable 2,937,293 2,936,968
Other liabilities and accrued expenses 55,633,661 53,266,090
Income taxes 13,079,257 13,752,981
Total liabilities 1,151,024,935 1,117,657,056
Stockholders’ Equity
Preferred Stock:
Preferred stock - non-voting-$1.00 par value; 5,000,000 shares authorized;
none issued or outstanding - -
Common Stock:
Class A: common stock - $2.00 par value; 40,000,000 shares authorized;
21,255,006 shares issued and outstanding as of December 31, 2024 and
21,052,883 (1) shares issued and outstanding as of December 31, 2023 42,510,012 40,096,004
Class B: non-voting common stock - $1.00 par value; 5,000,000
shares authorized; none issued or outstanding - -
Class C: convertible common stock - $2.00 par value; 6,000,000 shares
authorized; 3,321,833 shares issued and outstanding as of December 31, 2024 and 3,120,432 (1) shares issued and outstanding as of December 31, 2023 6,643,666 5,943,708
Common stock value
6,643,666 5,943,708
Additional paid-in capital 79,698,367 72,424,429
Accumulated other comprehensive loss, net of taxes (6,951,266 ) (6,885,558 )
Retained earnings 225,359,186 206,978,373
Treasury stock, at cost - 1,025,784 Class A shares and 99,623 Class C shares
as of December 31, 2024; and 852,338 (1) Class A shares and 35,503 (1) Class C
shares as of December 31, 2023 (8,477,686 ) (5,661,737 )
Total stockholders’ equity 338,782,279 312,895,219
Total Liabilities and Stockholders’ Equity $ 1,489,807,214 $ 1,430,552,275
(1) Issued and outstanding shares have been adjusted retroactively for the effect of annual stock dividends.
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years Ended December 31,
Revenues:
Insurance premiums and other considerations $ 119,655,745 $ 114,658,436
Mortgage fee income 107,558,640 98,147,972
Net investment income 71,725,249 72,343,047
Net mortuary and cemetery sales 29,037,173 27,864,811
Gains on investments and other assets 1,941,898 1,837,342
Other 4,603,963 3,645,882
Total revenues 334,522,668 318,497,490
Benefits and expenses:
Death benefits 58,116,837 61,390,517
Surrenders and other policy benefits 4,584,763 4,612,346
Increase in future policy benefits 36,253,859 34,008,997
Amortization of deferred policy and pre-need acquisition costs and value of business acquired 15,940,371 18,024,338
Selling, general and administrative expenses:
Commissions 46,972,909 39,929,556
Personnel 85,084,802 83,141,759
Advertising 3,115,120 3,710,445
Rent and rent related 5,147,069 6,857,137
Depreciation on property and equipment 2,383,621 2,351,661
Costs related to funding mortgage loans 6,134,709 6,440,439
Other 27,627,210 32,058,856
Interest expense 4,254,100 4,865,327
Cost of goods and services sold - cemeteries and mortuaries 4,803,528 4,805,700
Total benefits and expenses 300,418,898 302,197,078
Earnings before income taxes 34,103,770 16,300,412
Income tax expense (7,568,002 ) (1,805,354 )
Net earnings $ 26,535,768 $ 14,495,058
Net earnings per Class A equivalent common share (1) $ 1.14 $ 0.63
Net earnings per Class A equivalent common share -
assuming dilution (1) $ 1.11 $ 0.61
Weighted average Class A equivalent common shares
outstanding (1) 23,314,643 23,189,418
Weighted average Class A equivalent common shares outstanding-assuming dilution (1) 23,975,508 23,813,324
(1) Net earnings per share amounts have been adjusted retroactively for the effect of annual stock dividends. The weighted-average shares outstanding includes the weighted-average Class A common shares and the weighted-average Class C common shares determined on an equivalent Class A Common Stock basis. Net earnings per common share represent net earnings per equivalent Class A common share.
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of comprehensive income
Years Ended December 31,
Net earnings $ 26,535,768 $ 14,495,058
Other comprehensive income:
Unrealized gains (losses) on fixed maturity securities available for sale (79,228 ) 7,814,324
Unrealized gains on restricted assets 11,175
Unrealized gains (losses) on cemetery perpetual care trust investments (1,403 ) 2,917
Other comprehensive income (loss), before income tax (79,790 ) 7,828,416
Income tax benefit (expense) 14,082 (1,643,697 )
Other comprehensive income (loss), net of income tax (65,708 ) 6,184,719
Comprehensive income $ 26,470,060 $ 20,679,777
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Class A Common Stock Class C Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total
Balance at December 31, 2022 $ 37,516,062 $ 5,779,718 $ 64,767,769 $ (13,070,277 ) $ 202,160,306 $ (4,366,651 ) $ 292,786,927
Adoption of ASU 2016-13 - - - - (671,506 ) - (671,506 )
Net earnings - - - - 14,495,058 - 14,495,058
Other comprehensive income - - - 6,184,719 - - 6,184,719
Stock based compensation expense - - 601,362 - - - 601,362
Exercise of stock options 558,354 - (423,967 ) - - - 134,387
Vesting of restricted stock units 2,430 - (2,430 ) - - - -
Sale of treasury stock - - 76,202 - - 2,134,517 2,210,719
Purchase of treasury stock - - 583,156 - - (3,429,603 ) (2,846,447 )
Stock dividends 1,899,960 283,188 6,822,337 - (9,005,485 ) - -
Conversion Class C to Class A 119,198 (119,198 ) - - - - -
Balance at December 31, 2023 40,096,004 5,943,708 72,424,429 (6,885,558 ) 206,978,373 (5,661,737 ) 312,895,219
Balance 40,096,004 5,943,708 72,424,429 (6,885,558 ) 206,978,373 (5,661,737 ) 312,895,219
Net earnings - - - - 26,535,768 - 26,535,768
Other comprehensive income - - - (65,708 ) - - (65,708 )
Stock based compensation expense - - 800,820 - - - 800,820
Exercise of stock options 400,144 403,334 413,835 - - (768,191 ) 449,122
Vesting of restricted stock units 3,570 - (3,570 ) - - - -
Sale of treasury stock - - 214,816 - - 1,005,748 1,220,564
Purchase of treasury stock - - - - - (3,053,506 ) (3,053,506 )
Stock dividends 2,009,762 297,156 5,848,037 - (8,154,955 ) - -
Conversion Class C to Class A (532 ) - - - - -
Balance at December 31, 2024 $ 42,510,012 $ 6,643,666 $ 79,698,367 $ (6,951,266 ) $ 225,359,186 $ (8,477,686 ) $ 338,782,279
Balance $ 42,510,012 $ 6,643,666 $ 79,698,367 $ (6,951,266 ) $ 225,359,186 $ (8,477,686 ) $ 338,782,279
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31,
Cash flows from operating activities:
Net earnings $ 26,535,768 $ 14,495,058
Adjustments to reconcile net earnings to net cash used in operating activities:
Gains on investments and other assets (1,941,898 ) (1,837,342 )
Depreciation 8,172,446 8,641,080
Provision for credit losses 55,750 1,959,707
Net amortization of deferred fees and costs, premiums and discounts (1,992,153 ) (2,140,548 )
Provision for deferred income taxes 311,971 (2,495,489 )
Policy and pre-need acquisition costs deferred (21,343,031 ) (24,432,809 )
Policy and pre-need acquisition costs amortized 15,032,413 16,724,336
Value of business acquired amortized 907,958 1,300,002
Mortgage servicing rights, additions (90,370 ) (1,009,312 )
Amortization of mortgage servicing rights 611,638 587,931
Stock based compensation expense 800,820 601,362
Benefit plans funded with treasury stock 1,220,564 2,210,719
Net change in fair value of loans held for sale (2,869,729 ) 478,460
Originations of loans held for sale (2,295,830,408 ) (2,173,080,584 )
Proceeds from sales of loans held for sale 2,338,209,587 2,224,454,040
Net gains on sales of loans held for sale (45,383,321 ) (40,239,112 )
Change in assets and liabilities:
Land and improvements held for sale (1,430,941 ) (62,217 )
Future policy benefits and unpaid claims 31,595,619 29,745,349
Other operating assets and liabilities 4,747,167 (2,025,510 )
Net cash provided by operating activities 57,319,850 53,875,121
Cash flows from investing activities:
Purchases of fixed maturity securities (85,235,694 ) (70,315,501 )
Sales, calls and maturities of fixed maturity securities 101,038,735 42,966,901
Purchase of equity securities (3,098,448 ) (6,993,289 )
Sales of equity securities 2,321,623 6,346,625
Purchases of restricted assets (6,039,118 ) (3,065,758 )
Sales, calls and maturities of restricted assets 1,579,178 840,080
Purchases of cemetery perpetual care trust investments (4,615,717 ) (1,083,550 )
Sales, calls and maturities of cemetery perpetual care trust investments 2,607,608 458,046
Mortgage loans held for investment, other investments and policy loans made (740,739,575 ) (645,581,141 )
Payments received for mortgage loans held for investment, other investments and policy loans 707,194,046 682,267,677
Purchases of property and equipment (2,470,032 ) (1,109,937 )
Sales of property and equipment 365,697 -
Purchases of real estate (52,348,798 ) (22,894,604 )
Sales of real estate 36,306,431 32,772,520
Net cash provided by (used in) investing activities (43,134,064 ) 14,608,069
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31,
Cash flows from financing activities:
Investment contract receipts 13,302,949 12,572,508
Investment contract withdrawals (15,631,260 ) (15,654,593 )
Proceeds from stock options exercised 449,122 134,387
Purchase of treasury stock (3,053,506 ) (2,846,447 )
Repayment of bank loans (1,929,346 ) (69,602,737 )
Proceeds from bank loans - 68,500,000
Net change in warehouse line borrowings for loans held for sale 2,855,476 (55,146,726 )
Net cash used in financing activities (4,006,565 ) (62,043,608 )
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents 10,179,221 6,439,582
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year 139,923,399 133,483,817
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year $ 150,102,620 $ 139,923,399
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 4,196,139 $ 5,136,747
Income taxes 8,227,642 20,406,598
Non Cash Investing and Financing Activities:
Right-of-use assets obtained in exchange for operating lease liabilities $ 1,770,873 $ 160,348
Loans held for sale foreclosed into real estate held for sale 858,977 -
Mortgage loans held for investment foreclosed into real estate held for sale 671,480 -
Loans held for sale foreclosed into receivables 382,936 -
Right-of-use assets obtained in exchange for finance lease liabilities 176,040 12,332
Transfer of loans held for sale to mortgage loans held for investment - 3,017,626
Transfer from mortgage loans held for investment to restricted assets - 1,625,961
Transfer from mortgage loans held for investment to cemetery perpetual care trust investments - 1,611,550
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as shown in the consolidated statements of cash flows is presented in the table below:
Years Ended December 31,
Cash and cash equivalents $ 140,546,421 $ 126,941,658
Restricted assets 8,553,803 10,114,694
Cemetery perpetual care trust investments 1,002,396 2,867,047
Total cash, cash equivalents, restricted cash and restricted cash equivalents $ 150,102,620 $ 139,923,399
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year $ 150,102,620 $ 139,923,399
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies
General Overview of Business
Security National Financial Corporation and its wholly owned subsidiaries (the “Company”) operate in three reportable business segments: life insurance, cemetery and mortuary, and mortgages. The life insurance segment is engaged in the business of selling and servicing selected lines of life insurance, annuity products and accident and health insurance marketed primarily in the states located in western, mid-western and southern regions of the United States. The cemetery and mortuary segment of the Company consists of eight mortuaries and five cemeteries in Utah, one cemetery in California, and four mortuaries and one cemetery in New Mexico. The mortgage segment is an approved government and conventional lender that originates and underwrites residential and commercial loans for new construction, existing homes, and real estate projects primarily in Florida, Nevada, Texas, and Utah.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Principles of Consolidation
These consolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.
Use of Estimates
Management of the Company has made several estimates and assumptions related to the reported amounts of assets and liabilities, reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with GAAP. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining the liability for future policy benefits; those used in determining the value of loans held for sale; and those used in determining loan loss reserve. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.
Investments
The Company’s management determines the appropriate classifications of investments in fixed maturity securities and equity securities at the acquisition date and re-evaluates the classifications at each balance sheet date.
Fixed maturity securities available for sale are carried at estimated fair value. Changes in fair values are reported as unrealized gains or losses and are recorded in accumulated other comprehensive income (loss).
Equity securities are carried at estimated fair value. Changes in fair values are reported as unrealized gains or losses and are recorded through net earnings as a component of gains (losses) on investments and other assets.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Mortgage loans held for investment are carried at their unpaid principal balances adjusted for net deferred fees, charge-offs, premiums, discounts, and the related allowance for credit losses. Interest income is included in net investment income on the consolidated statements of earnings and is recognized when earned. The Company defers related material loan origination fees, net of related direct loan origination costs, and amortizes the net fees over the term of the loans. Origination fees are included in net investment income on the consolidated statements of earnings. Mortgage loans are secured by the underlying property and require an appraisal at the time of underwriting and funding. Generally, the Company requires that loans not exceed 80% of the fair market value of the respective loan collateral. For loans of more than 80% of the fair market value of the respective loan collateral, additional collateral or mortgage insurance by an approved third-party insurer is required.
Real estate held for investment is carried at cost, less accumulated depreciation provided on a straight-line basis over the estimated useful lives of the properties or is adjusted to a new basis for impairment in value, if any. Included, if any, are foreclosed properties. These properties are recorded at the lower of cost or fair value upon foreclosure. Also, included is residential subdivision land development which is carried at cost.
Real estate held for sale is carried at lower of cost or fair value, less estimated costs to sell. Depreciation is not recognized on real estate classified as held for sale.
Other investments and policy loans are carried at the aggregate unpaid balances, less allowances for credit losses.
Accrued investment income refers to the income earned from investments that has not yet been received by the Company.
Gains (losses) on investments (except for equity securities carried at fair value through net earnings) arise when investments are sold and are recorded on the trade date and the cost of the securities sold is determined using the specific identification method. The provision (release) for credit losses for fixed maturity securities held for sale are also included in gains (losses) on investments. See Note 2 for more information regarding the Company’s evaluation of credit losses.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains its cash in bank deposit accounts, which at times exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Loans Held for Sale
Accounting Standards Codification (“ASC”) No. 825, “Financial Instruments”, allows for the option to report certain financial assets and liabilities at fair value initially and at subsequent measurement dates with changes in fair value included in earnings. The option may be applied instrument by instrument, but it is irrevocable. The Company elected the fair value option for loans held for sale. The Company believes the fair value option most closely aligns the timing of the recognition of gains and costs. These loans are intended for sale and the Company believes that fair value is the best indicator of the resolution of these loans. Electing fair value also reduces certain timing differences and better matches changes in the fair value of these assets with changes in the fair value of the related derivatives used for these assets. See Note 3 and Note 17 to Consolidated Financial Statements for additional disclosures regarding loans held for sale.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
The Company, through its mortgage subsidiaries, sells mortgage loans to third-party investors without recourse unless defects are identified in the representations and warranties made at loan sale. It may be required, however, to repurchase a loan or pay a fee instead of repurchasing under certain events, which include the following:
● Failure to deliver original documents specified by the investor,
● The existence of misrepresentation or fraud in the origination of the loan,
● The loan becomes delinquent due to nonpayment during the first several months after it is sold,
● Early pay-off of a loan, as defined by the agreements,
● Excessive time to settle a loan,
● Investor declines purchase, and
● Discontinued product and expired commitment.
Loan purchase commitments generally specify a date 30 to 45 days after delivery upon which the underlying loans should be settled. Depending on market conditions, these commitment settlement dates can be extended at a cost to the Company.
It is the Company’s policy to cure any documentation problems regarding such loans at a minimal cost for up to a six-month period and to pursue efforts to enforce loan purchase commitments from third-party investors concerning the loans. The Company believes that six months allows adequate time to remedy any documentation issues, to enforce purchase commitments, and to exhaust other alternatives. Remedial methods include the following:
● Research reasons for rejection,
● Provide additional documents,
● Request investor exceptions,
● Appeal rejection decision to purchase committee, and
● Commit to secondary investors.
Once purchase commitments have expired and other alternatives to remedy are exhausted, which could be earlier than the six-month period, the loans are repurchased and transferred to mortgage loans held for investment at the lower of cost or fair value and previously recorded mortgage fee income that was to be received from a third-party investor is written off against the loan loss reserve. Any loan that later becomes delinquent is evaluated by the Company at that time and any impairment is adjusted accordingly.
Determining Fair Value
The cost for loans held for sale is equal to the amount paid to the warehouse bank and the amount originally funded by the Company. Fair value is often difficult to determine and may contain significant unobservable inputs, but is based on the following guidelines:
● For loans that are committed, the Company uses the commitment price.
● For loans that are non-committed that have an active market, the Company uses the market price.
● For loans that are non-committed where there is no market but there is a similar product, the Company uses the fair value for the similar product.
● For loans that are non-committed where no active market exists, the Company determines that the unpaid principal balance best approximates the fair value, after considering the fair value of the underlying real estate collateral, estimated future cash flows, and the loan interest rate.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
The appraised value of the real estate underlying the original mortgage loan adds support to the Company’s determination of fair value because if the loan becomes delinquent the Company has sufficient value to collect the unpaid principal balance or the carrying value of the loan, thus minimizing credit losses. Most loans originated are sold to third-party investors. The amounts expected to be sold to investors are shown on the consolidated balance sheets as loans held for sale.
Mortgage Fee Income
Mortgage fee income consists of origination fees, processing fees, interest income and other income related to the origination and sale of mortgage loans held for sale. All revenues and costs are recognized when the mortgage loan is funded and any changes in fair value are shown as a component of mortgage fee income. See Note 3 and Note 17 to Consolidated Financial Statements for additional disclosures regarding loans held for sale and mortgage fee income.
Loan Loss Reserve
The loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on loans sold to third-party investors classified as loans held for sale on the consolidated balance sheets. The Company may be required to reimburse third-party investors for costs associated with early payoff of loans within six months of origination of such loans and to repurchase loans where there is a default, in any, of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.
Upon completion of a transfer that satisfies the conditions to be accounted for as a sale, the Company initially measures at fair value liabilities incurred in a sale relating to any guarantee or recourse provisions in the event of defects in the representation and warranties made at loan sale. The Company accrues a monthly allowance for indemnification losses to investors based on total production. This estimate is based on the Company’s historical experience and is included as a component of mortgage fee income. Subsequent updates to the recorded liability from changes in assumptions are recorded in selling, general and administrative expenses as a component of provision for loan loss reserve. The estimated liability for indemnification losses is included in other liabilities and accrued expenses.
The loan loss reserve analysis involves mortgage loans that have been sold to third-party investors, which were believed to have met investor underwriting guidelines at the time of sale, where the Company has received a demand from the investor. There are generally three types of demands: make whole, repurchase, or indemnification. These types of demands are further described as follows:
Make whole demand - A make whole demand occurs when an investor forecloses on a property and then sells the property. The make whole amount is calculated as the difference between the original unpaid principal balance, payments received, accrued interest and fees, less the sale proceeds.
Repurchase demand - A repurchase demand usually occurs when there is a significant payment default, error in underwriting or detected loan fraud.
Indemnification demand - On certain loans the Company has negotiated a set fee that is to be paid in lieu of repurchase. The fee varies by investor and by loan product type.
The Company believes the loan loss reserve represents probable loan losses incurred as of the balance sheet date.
Additional information related to the Loan Loss Reserve is included in Note 3.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Restricted Assets
Restricted assets are assets held in a trust account for future mortuary services and merchandise. Restricted assets also include escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds held by warehouse banks in accordance with loan purchase agreements and funds held in escrow for certain real estate construction development projects. Additionally, the Company funded its medical benefit safe-harbor limit based on the qualified direct costs and has included this amount as a component of restricted cash. Additional information related to restricted assets is included in Notes 2 and 8 to Consolidated Financial Statements.
Cemetery Perpetual Care Trust Investments
Cemetery endowment care trusts have been set up for five of the seven cemeteries owned by the Company. Under endowment care arrangements a portion of the price for each lot sold is withheld and invested in a portfolio of investments like those described in the prior paragraph. The earnings stream from the investments is designed to fund future maintenance and upkeep of the cemetery. Additional information related to cemetery perpetual care trust investments is included in Notes 2 and 8 to Consolidated Financial Statements.
Cemetery Land and Improvements
The development of a cemetery involves not only the initial acquisition of raw land but also the installation of roads, water lines, landscaping, and other costs to establish a marketable cemetery lot. The costs of developing the cemetery are shown as an asset on the balance sheet. The amount on the balance sheet is reduced by the total cost assigned to the development of a particular lot when the criterion for recognizing a sale of that lot is met.
Deferred Policy Acquisition Costs
Commissions and other costs, net of commission and expense allowances for reinsurance ceded, that vary with and are primarily related to the production of new insurance business have been deferred. Deferred policy acquisition costs (“DAC”) for traditional life insurance are amortized over the premium paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves. For interest-sensitive insurance products, deferred policy acquisition costs are amortized generally in proportion to the present value of expected gross profits from surrender charges, investment, mortality, and expense margins. This amortization is adjusted when estimates of current or future gross profits to be realized from a group of products are reevaluated. Deferred acquisition costs are written off when policies lapse or are surrendered.
When accounting for DAC, the Company considers internal replacements of insurance and investment contracts. An internal replacement is a modification in product benefits, features, rights, or coverage that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to contract, or by the election of a feature or coverage within a contract. Modifications that result in a replacement contract that is substantially changed from the replaced contract are accounted for as an extinguishment of the replaced contract. Unamortized DAC, unearned revenue liabilities and deferred sales inducements from the replaced contract are written off. Modifications that result in a contract that is substantially unchanged from the replaced contract are accounted for as a continuation of the replaced contract.
Value of Business Acquired
Value of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized like deferred policy acquisition costs. The critical issues explained for deferred acquisition costs would also apply for the value of business acquired.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Premium Deficiency and Loss Recognition Testing
At least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA) recorded for life insurance and annuity products. The Company tests for recoverability by using the Company’s current best-estimate assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns. These tests evaluate whether the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets. These cash flows consist primarily of premium income, less benefits, and expenses. If the current contract liabilities plus the present value of future premiums is greater than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium reserve balances, then the capitalized assets are deemed recoverable. The present values are calculated using the best estimate of the after-tax net investment earned rate.
Mortgage Servicing Rights
Mortgage Servicing Rights (“MSR”) arise from contractual agreements between the Company and third-party investors (or their agents) when mortgage loans are sold. Under these contracts, the Company retains and provides loan servicing functions on loans sold, in exchange for fees and other remuneration. The servicing functions typically performed include, among other responsibilities, collecting and remitting loan payments; responding to borrower inquiries; accounting for principal and interest, holding custodial (impound) funds for payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising the acquisition of real estate owned and property dispositions.
The total residential mortgage loans serviced for others consist primarily of agency conforming fixed-rate mortgage loans. The value of MSRs is derived from the net cash flows associated with the servicing contracts. The Company receives a servicing fee of generally about 0.25% annually on the remaining outstanding principal balances of the loans. Based on the result of the cash flow analysis, an asset or liability is recorded for mortgage servicing rights. The servicing fees are collected from the monthly payments made by the mortgagors. The Company generally receives other remuneration including rights to various mortgagor-contracted fees such as late charges, and collateral reconveyance charges and the Company is generally entitled to retain the interest earned on funds held pending remittance of mortgagor principal, interest, tax, and insurance payments. Contractual servicing fees and late fees are included in other revenues on the consolidated statements of earnings.
The Company’s subsequent accounting for MSRs is based on the class of MSRs. The Company has identified two classes of MSRs: MSRs backed by mortgage loans with an initial term of 30 years and MSRs backed by mortgage loans with an initial term of 15 years. The Company distinguishes between these classes of MSRs due to their differing sensitivities to change in value as the result of changes in the market. After being initially recorded at fair value, MSRs backed by mortgage loans are accounted for using the amortization method. Amortization expense is included in other expenses on the consolidated statements of earnings. MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of the estimated future net servicing income of the underlying financial assets.
Interest rate risk, prepayment risk, and default risk are inherent risks in MSR valuation. Interest rate changes largely drive prepayment rates. Refinance activity generally increases as rates decline. A significant decrease in rates beyond expectation could cause a decline in the value of the MSR. On the contrary, if rates increase borrowers are less likely to refinance or prepay their mortgage, which extends the duration of the loan and MSR values are likely to rise. Because of these risks, discount rates and prepayment speeds are used to estimate the fair value.
The Company periodically assesses MSRs for impairment. Impairment occurs when the current fair value of the MSR falls below the asset’s carrying value (carrying value is the amortized cost reduced by any related valuation allowance). If MSRs are impaired, the impairment is recognized in current period earnings and the carrying value of the MSRs is adjusted through a valuation allowance.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
The Company periodically reviews the various loan strata to determine whether the value of the MSRs in each stratum is impaired and likely to recover. When management deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated principally on the straight-line method over the estimated useful lives of the assets which range from three to forty years. Leasehold improvements paid for by the Company as a lessee are amortized over the lesser of the useful life or remaining lease terms.
Long-lived Assets
Long-lived assets to be held and used, including property and equipment and real estate held for investment, are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset, and long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
Derivative Instruments
Mortgage Banking Derivatives
Loan Commitments
The Company is exposed to price risk due to the potential impact of changes in interest rates on the values of loan commitments from the time a loan commitment is made to an applicant to the time the loan that would result from the exercise of that loan commitment is funded. Managing price risk is complicated by the fact that the ultimate percentage of loan commitments that will be exercised (i.e., the number of loans that will be funded) fluctuates. The probability that a loan will not be funded, or the loan application is denied or withdrawn within the terms of the commitment is driven by several factors, particularly the change, if any, in mortgage rates following the issuance of the loan commitment.
In general, the probability of funding increases if mortgage rates rise and decreases if mortgage rates fall. This is due primarily to the relative attractiveness of current mortgage rates compared to the applicant’s committed rate. The probability that a loan will not be funded within the terms of the mortgage loan commitment also is influenced by the source of the applications (retail, broker, or correspondent channels), proximity to rate lock expiration, purpose for the loan (purchase or refinance), product type and the application approval status. The Company has developed fallout estimates using historical data that consider all the variables, as well as renegotiations of rate and point commitments that tend to occur when mortgage rates fall. These fallout estimates are used to estimate the number of loans that the Company expects to be funded within the terms of the loan commitments and are updated periodically to reflect the most current data.
The Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted mortgage-backed securities (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense. The change in fair value of the underlying mortgage loan is measured from the date the loan commitment is issued and is shown net of related expenses. Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of the underlying mortgage loans. Fallout rates and other factors from the Company’s recent historical data are used to estimate the quantity and value of mortgage loans that will fund within the terms of the commitments.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Forward Sale Commitments
The Company utilizes forward commitments to economically hedge the price risk associated with its outstanding mortgage loan commitments. A forward commitment protects the Company from losses on sales of the loans arising from exercise of the loan commitments. Management expects these types of commitments will experience changes in fair value in contrast to changes in fair value of the loan commitments, thereby reducing earnings volatility related to the recognition in earnings of changes in the values of the commitments.
The net changes in fair value of loan commitments and forward sale commitments are shown in current earnings as a component of mortgage fee income on the consolidated statements of earnings. Mortgage banking derivatives are shown in other assets and other liabilities and accrued expenses on the consolidated balance sheets.
Call and Put Option Derivatives
The Company discontinued its use of selling “out of the money” call options on its equity securities and the use of selling put options as a source of revenue in the first quarter of 2023. The net changes in the fair value of call and put options are shown in current earnings as a component of realized gains (losses) on investments and other assets. Call and put options were shown in other liabilities and accrued expenses on the consolidated balance sheets.
Allowances for Credit Losses
The Company records allowances for current expected credit losses from fixed maturity securities available for sale, mortgage loans held for investment, other investments, and receivables in accordance with GAAP. The allowances for credit losses are valuation accounts that are reported as a reduction of the financial asset’s cost basis and are measured on a pool basis when similar risk characteristics exist. The Company estimates allowances for credit losses using relevant available information from both internal and external sources. The Company considers its historical loss experience, analyzes current market conditions and forecasts and uses third-party assistance to arrive at current expected credit losses. Amounts are written off against the allowance for credit losses when determined to be uncollectible. See below under Recent Accounting Pronouncements regarding the adoption of ASU 2016-13. See Notes 2 and 4 to Consolidated Financial Statements regarding the Company’s evaluation of allowances for credit losses.
Future Policy Benefits and Unpaid Claims
Future policy benefit reserves for traditional life insurance are computed using a net level method, including assumptions as to investment yields, lapse rates, surrender rates, dividend crediting rates, mortality, morbidity, and other assumptions based on the life insurance subsidiaries’ historical experience, industry standards, and best estimate of future results, modified as necessary to give effect to anticipated trends and to include provisions for possible unfavorable deviations. Such liabilities are, for some plans, graded to equal statutory values or cash values at or prior to maturity, which are deemed a reasonable equivalent for GAAP. The range of assumed interest rates for all traditional life insurance policy reserves was 4% to 10%. Benefit reserves for traditional limited-payment life insurance policies include the deferred portion of the premiums received during the premium-paying period. Deferred premiums are recognized as income over the life of the policies. Policy benefit claims are charged to expense in the period the claims are incurred. Increases in future policy benefits are charged to expense.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Future policy benefit reserves for interest-sensitive insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims incurred in the period more than related policy account balances. Interest credit rates for interest-sensitive insurance products ranged from 3% to 6.5%.
The Company records an unpaid claims liability for claims in the course of settlement equal to the death benefit amount less any reinsurance recoverable amount for claims reported. There is also an unpaid claims liability for claims incurred but not reported. This liability is based on the historical experience of the net amount of claims that were reported in reporting periods subsequent to the reporting period when claims were incurred.
Unearned Premium Reserve
The universal life products the Company services have significant policy initiation fees (front-end load) that are deferred and amortized into revenues over the estimated expected gross profits from surrender charges and investment, mortality, and expense margins. The same issues that impact deferred acquisition costs apply to unearned revenue.
Participating Insurance
Participating business constituted 2% of insurance in force for the years ended 2024 and 2023. The provision for policyholders’ dividends included in policyholder obligations is based on dividend scales anticipated by management. The amounts to be paid are determined by the Company’s Board of Directors. The expense recognized for policyholder dividends is included in surrenders and other policy benefits on the consolidated statements of earnings.
Recognition of Insurance Premiums and Other Considerations
Premiums and other considerations for traditional life insurance products (which include those products with fixed and guaranteed premiums and benefits and consist principally of whole life insurance policies, limited payment life insurance policies, and certain annuities with life contingencies) are recognized as revenues when due from policyholders. Premiums and other consideration for interest-sensitive insurance policies (which include universal life policies, interest-sensitive life policies, deferred annuities, and annuities without life contingencies) are reflected as increases in liabilities for policyholder account balances and not as revenues. Revenues reported for these products consist of policy charges for the cost of insurance, administration charges, amortization of policy initiation fees and surrender charges assessed against policyholder account balances. Surrender benefits paid relating to these products are reflected as decreases in liabilities for policyholder account balances and not as expenses. The Company receives investment income earned from the funds deposited into account balances, a portion of which is passed through to the policyholders in the form of interest credited. Interest credited to policyholder account balances and benefit claims more than policyholder account balances are reported as expenses, included in death benefits, in the consolidated financial statements.
Reinsurance
The Company follows the procedure of reinsuring risks of more than $100,000 to provide for greater diversification of business to 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.
The Company entered into coinsurance agreements with unaffiliated insurance companies under which the Company assumed 100% of the risk for certain life insurance policies and certain other policy-related liabilities of the insurance company.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
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.
Pre-need Sales and Costs
Pre-need contract sales of funeral services and caskets - revenue and costs associated with the sales of pre-need funeral services and caskets are deferred until the performance obligations are fulfilled (services are performed or the caskets are delivered).
Sales of cemetery interment rights (cemetery burial property) - revenue and costs associated with the sale of cemetery interment rights are deferred until 10% of the sales price has been collected.
Pre-need contract sales of cemetery merchandise (primarily markers and vaults) - revenue and costs associated with the sale of pre-need cemetery merchandise is deferred until the merchandise is delivered to the Company.
Pre-need contract sales of cemetery services (primarily merchandise delivery, installation fees and burial opening and closing fees) - revenue and costs associated with the sales of pre-need cemetery services are deferred until the services are performed.
Prearranged funeral and pre-need cemetery customer acquisition costs - costs incurred related to obtaining new pre-need contract cemetery and prearranged funeral services, which include only costs that vary with and are primarily related to the acquisition of new pre-need cemetery and prearranged funeral services, are deferred until the merchandise is delivered or services are performed.
Revenues and costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured and there are no significant performance obligations remaining.
The Company, through its cemetery and mortuary operations, provides guaranteed funeral arrangements 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.
Goodwill
Previous acquisitions have been accounted for as purchases under which assets acquired, and liabilities assumed were recorded at their fair values with the excess purchase price recognized as goodwill. The Company evaluates annually or when changes in circumstances warrant the recoverability of goodwill and if there is a decrease in value, the related impairment is recognized as a charge against income.
Other Intangibles
Other intangibles are recognized apart from goodwill whenever an acquired intangible asset arises from contractual or other legal rights, or whenever it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged, either individually or in combination with a related contract, asset, or liability. The Company engages a third-party valuation firm to analyze the value of the intangible assets that result from significant acquisitions. The value of the intangible assets that result from these acquisitions are included in Other Assets and are determined using the income approach, relying on a relief from the royalty method.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Income Taxes
Income taxes include taxes currently payable plus deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the temporary differences in the financial reporting basis and tax basis of assets and liabilities and operating loss carry-forwards. Deferred tax assets are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. Liabilities are established for uncertain tax positions expected to be taken in income tax returns when such positions are judged to meet the “more-likely-than-not” threshold based on the technical merits of the positions. Deferred tax assets and liabilities require various estimates and judgments and may be affected favorably or unfavorably by various internal and external factors. Factors affecting the deferred tax assets and liabilities include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and changes to overall levels of pre-tax earnings. Changes in these estimates, judgments or factors may result in an increase or decrease to the Company’s deferred tax assets and liabilities with a related increase or decrease in the Company’s provision for income taxes. Estimated interest and penalties related to uncertain tax penalties are included as a component of income tax expense.
Earnings Per Common Share
The Company computes earnings per share, which requires a presentation of basic and diluted earnings per share. Basic earnings per equivalent Class A common share are computed by dividing net earnings by the weighted-average number of Class A common shares outstanding during each year presented, after the effect of the assumed conversion of Class C Common Stock to Class A Common Stock. Diluted earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding during the year used to compute basic earnings per share plus dilutive potential incremental shares by application of the treasury stock method. Basic and diluted earnings per share amounts have been adjusted retroactively for the effect of annual stock dividends.
Stock Based Compensation
The cost of employee services received in exchange for an award of equity instruments is recognized in the financial statements and is measured based on the fair value on the grant date of the award. The fair value of stock options is calculated using the Black Scholes Option Pricing Model. Stock option compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award and is included in personnel expenses on the consolidated statements of earnings.
Concentration of Credit Risk
For a description of the concentration risk regarding available for sale debt securities, mortgage loans held for investment and real estate held for investment, refer to Note 2, and for receivables from reinsurers, refer to Note 10 of the Notes to Consolidated Financial Statements.
Advertising
The Company expenses advertising costs as incurred.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
Accounting Standards Adopted in 2024
ASU No. 2023-07: “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” - Issued in November 2023, ASU 2023-07 requires enhanced disclosures about significant segment expenses. The key amendments include: (i) disclosures on significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss on an annual and interim basis; (ii) disclosures on an amount for other segment items by reportable segment and a description of its composition on an annual and interim basis. The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss; (iii) providing all annual disclosures on a reportable segment’s profit or loss and assets currently required by FASB ASC Topic 280, Segment Reporting in interim periods; and (iv) specifying the title and position of the CODM. The Company adopted ASU 2023-07 retrospectively for the annual period beginning January 1, 2024, and for the interim periods beginning January 1, 2025. The adoption of ASU 2023-07 did not affect the Company’s financial position or results of operations. Refer to Note 15 for the disclosures regarding the Company’s business segments.
Accounting Standards Adopted in 2023
ASU No. 2016-13: “Financial Instruments - Credit Losses (Topic 326)” - Issued in September 2016, ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis (such as mortgage loans held for investment and held to maturity debt securities) and available for sale debt securities. For assets held at an amortized cost basis, Topic 326 eliminates the probable initial recognition threshold and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities Topic 326 requires that credit losses be presented as an allowance rather than as a write-down. The Company adopted this standard on January 1, 2023, and after a review of the affected assets, decreased the opening balance of retained earnings in stockholders’ equity by $671,506 on January 1, 2023. The allowances for credit losses increased (decreased) by the following amounts.
Schedule of Increased (Decrease) in Allowances for Credit Losses Upon ASU
Amount
Mortgage loans held for investment:
Residential $ (192,607 )
Residential construction 301,830
Commercial 555,807
Total 665,030
Restricted assets - mortgage loans held for investment:
Residential construction 3,463
Cemetery perpetual care trust investments - mortgage loans held for investment:
Residential construction 3,013
Grand Total 671,506
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
1) Significant Accounting Policies (Continued)
Accounting Standards Issued But Not Yet Adopted
ASU No. 2018-12: “Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts” - Issued in August 2018, ASU 2018-12 is intended to improve the timeliness of recognizing changes in the liability for future policy benefits on traditional long-duration contracts by requiring that assumptions be updated after contract inception and by modifying the rate used to discount future cash flows. The standard is aimed at improving the accounting for certain market-based options or guarantees associated with deposit or account balance contracts, simplifying amortization of deferred acquisition costs while improving and expanding required disclosures. In November 2020, ASU No. 2020-11: “Financial Services - Insurance (Topic 944): Effective Date and Early Application,” was issued. This ASU was issued to provide additional time for the implementation of ASU No. 2018-12 by deferring the effective date by one year. For smaller reporting companies, this update is effective for annual reporting periods beginning after December 15, 2024, and interim reporting periods beginning after December 15, 2025. The Company will adopt the standard commencing with its annual reporting period ending December 31, 2025. The Company is nearing completion of its analysis and implementation of the new standard, including the identification of cohorts, system updates, and design. The Company has engaged its team of actuaries, accountants, and systems specialists and consulted external system providers as part of the implementation. The adoption of this guidance is expected to have an impact on its financial position, results of operations, and disclosures, as well as systems, processes and controls. The Company continues to evaluate the impact of the new guidance on its consolidated financial statements.
ASU No. 2023-09: “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” - Issued in December 2023, ASU 2023-09 requires that public business entities, on an annual basis: (i) disclose specific categories in the rate reconciliation and (ii) provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments in this update require that all entities disclose on an annual basis the following information about income taxes paid: (i) the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and (ii) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). ASU 2023-09 is effective for the Company for the annual reporting periods beginning January 1, 2025. The Company will adopt the standard commencing with its annual reporting period ending December 31, 2025. The Company does not anticipate that the adoption of ASU 2023-09 will have a material impact on the consolidated financial statements.
ASU No. 2024-03: “Income Statement-Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” - Issued in November 2024, ASU 2024-03 requires public business entities to disclose, in the notes to the consolidated financial statements, specified information about certain expenses at each interim and annual reporting period. ASU 2024-03 requires disclosures about specific types of expenses (i.e., (a) purchases of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization) included in the expense captions presented on the face of the statement of earnings as well as disclosures about selling expenses. ASU 2024-03 does not change the requirements for the presentation of expenses on the statement of earnings. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Accordingly, the Company will adopt the standard commencing with its annual reporting period ending December 31, 2027. The Company is in the process of estimating the potential impact of the new guidance on the consolidated financial statements.
The Company has reviewed other recent accounting pronouncements and has determined that they will not significantly impact the Company’s results of operations or financial position.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments
The Company’s investments as of December 31, 2024 are summarized as follows:
Schedule of Investments
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Allowance for Credit Losses Estimated Fair Value
December 31, 2024:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies $ 74,680,606 $ 327,618 $ (486,976 ) $ - $ 74,521,248
Obligations of states and political subdivisions 6,416,751 1,762 (290,448 ) - 6,128,065
Corporate securities including public utilities 262,954,278 2,444,842 (6,922,871 ) (408,944 ) 258,067,305
Mortgage-backed securities 31,710,436 125,764 (4,244,640 ) (12,049 ) 27,579,511
Redeemable preferred stock 250,000 - - - 250,000
Total fixed maturity securities available for sale $ 376,012,071 $ 2,899,986 $ (11,944,935 ) $ (420,993 ) $ 366,546,129
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other $ 11,386,454 $ 4,976,567 $ (591,340 )
$ 15,771,681
Total equity securities at estimated fair value $ 11,386,454 $ 4,976,567 $ (591,340 )
$ 15,771,681
Mortgage loans held for investment at amortized cost:
Residential $ 92,061,787
Residential construction 151,172,733
Commercial 62,753,085
Less: Unamortized deferred loan fees, net (2,082,241 )
Less: Allowance for credit losses (1,885,390 )
Less: Net discounts (272,616 )
Total mortgage loans held for investment $ 301,747,358
Real estate held for investment - net of accumulated depreciation:
Residential $ 71,618,410
Commercial 126,074,928
Total real estate held for investment $ 197,693,338
Real estate held for sale:
Residential $ 1,126,480
Commercial 151,553
Total real estate held for sale $ 1,278,033
Other investments and policy loans at amortized cost:
Policy loans $ 14,019,248
Insurance assignments 48,493,858
Federal Home Loan Bank stock (2) 2,404,900
Other investments 11,473,961
Less: Allowance for credit losses for insurance assignments (1,536,926 )
Total policy loans and other investments $ 74,855,041
Accrued investment income $ 8,499,168
Total investments $ 966,390,748
(1) Gross unrealized losses are net of allowance for credit losses
(2) Includes $553,900 of Membership stock and $1,851,000 of Activity stock due to short-term advances and letters of credit.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
The Company’s investments as of December 31, 2023 are summarized as follows:
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) Allowance for Credit Losses Estimated Fair Value
December 31, 2023:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies $ 111,450,753 $ 344,425 $ (1,416,448 ) $ - $ 110,378,730
Obligations of states and political subdivisions 6,524,083 (319,260 ) - 6,205,323
Corporate securities including public utilities 232,299,727 3,688,642 (7,145,507 ) (308,500 ) 228,534,362
Mortgage-backed securities 40,359,878 506,647 (4,702,905 ) (6,049 ) 36,157,571
Redeemable preferred stock 250,000 10,000 - - 260,000
Total fixed maturity securities available for sale $ 390,884,441 $ 4,550,214 $ (13,584,120 ) $ (314,549 ) $ 381,535,986
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other $ 10,571,505 $ 3,504,141 $ (439,575 )
$ 13,636,071
Total equity securities at estimated fair value $ 10,571,505 $ 3,504,141 $ (439,575 )
$ 13,636,071
Mortgage loans held for investment at amortized cost:
Residential $ 103,153,587
Residential construction 104,052,748
Commercial 74,176,538
Less: Unamortized deferred loan fees, net (1,623,226 )
Less: Allowance for credit losses (3,818,653 )
Less: Net discounts (324,157 )
Total mortgage loans held for investment $ 275,616,837
Real estate held for investment - net of accumulated depreciation:
Residential $ 40,924,865
Commercial 142,494,427
Total real estate held for investment $ 183,419,292
Real estate held for sale:
Residential $ -
Commercial 3,028,973
Total real estate held for sale $ 3,028,973
Other investments and policy loans at amortized cost:
Policy loans $ 13,264,183
Insurance assignments 45,605,322
Federal Home Loan Bank stock (2) 2,279,800
Other investments 9,809,148
Less: Allowance for credit losses for insurance assignments (1,553,836 )
Total policy loans and other investments $ 69,404,617
Accrued investment income $ 10,170,790
Total investments $ 936,812,566
(1) Gross unrealized losses are net of allowance for credit losses
(2) Includes $530,900 of Membership stock and $1,748,900 of Activity stock due to short-term advances and letters of credit.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
There were no investments, aggregated by issuer, of more than 10% of shareholders’ equity (before net unrealized gains and losses on equity securities and fixed maturity securities) as of December 31, 2024, other than investments issued or guaranteed by the United States Government.
Fixed Maturity Securities
The table below summarizes unrealized losses on fixed maturities securities available for sale that were carried at estimated fair value as of December 31, 2024 and 2023. The fair values of fixed maturity securities are based on quoted market prices, when available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements, are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit, and maturity of the investments. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities.
Schedule of Fair Value of Fixed Maturity Securities
Unrealized Losses for Less than Twelve Months Fair Value Unrealized Losses for More than Twelve Months Fair Value Total Unrealized Loss Fair Value
At December 31,
U.S. Treasury securities and obligations of U.S. Government agencies $ 8,737 $ 986,365 $ 478,239 $ 22,110,495 $ 486,976 $ 23,096,860
Obligations of states and political subdivisions 15,003 2,167,918 275,445 3,008,385 290,448 5,176,303
Corporate securities including public utilities 1,888,022 93,562,219 5,034,849 77,975,776 6,922,871 171,537,995
Mortgage-backed securities 32,150 2,915,192 4,212,490 19,041,442 4,244,640 21,956,634
Totals $ 1,943,912 $ 99,631,694 $ 10,001,023 $ 122,136,098 $ 11,944,935 $ 221,767,792
At December 31,
U.S. Treasury securities and obligations of U.S. Government agencies $ 29,394 $ 9,436,090 $ 1,387,054 $ 70,885,403 $ 1,416,448 $ 80,321,493
Obligations of states and political subdivisions 11,105 470,325 308,155 5,284,498 319,260 5,754,823
Corporate securities including public utilities 529,660 32,507,773 6,615,847 107,556,216 7,145,507 140,063,989
Mortgage-backed securities 29,799 2,260,445 4,673,106 22,184,174 4,702,905 24,444,619
Totals $ 599,958 $ 44,674,633 $ 12,984,162 $ 205,910,291 $ 13,584,120 $ 250,584,924
Relevant holdings were comprised of 706 securities with fair values aggregating 94.9% of the aggregated amortized cost as of December 31, 2024. Relevant holdings were comprised of 606 securities with fair values aggregating 94.9% of the aggregated amortized cost as of December 31, 2023. Credit loss provision of $106,444 and $325,314 have been recognized for 2024 and 2023, respectively. Credit losses are included in gains (losses) on investments and other assets on the consolidated statements of earnings. Other unrealized losses for which no credit loss was recognized are primarily the result of increases in interest rates.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Evaluation of Allowance for Credit Losses
See Note 1 regarding the adoption of ASU 2016-13.
On a quarterly basis, the Company evaluates its fixed maturity securities classified as available for sale to identify any potential credit losses. This evaluation includes a review of current ratings by the National Association of Insurance Commissions (“NAIC”) and other industry rating agencies. Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for credit loss unless current market data or recent company news could lead to a credit downgrade. Securities with ratings of 3 to 5 are evaluated for credit loss. The evaluation involves assessing all facts and circumstances surrounding each security including, but not limited to, historical values, interest payment history, projected earnings, and revenue growth rates as well as a review of the reason for a downgrade in the NAIC rating. Based on the analysis of a security that is rated 3 to 5, a determination is made whether the security will likely make interest and principal payments in accordance with the terms of the financial instrument. Securities with a rating of 6 are automatically determined to be impaired and a credit loss is recognized in earnings.
Where the decline in fair value of fixed maturity securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and the Company anticipates recovery of all contractual or expected cash flows, the Company does not consider these securities to have credit loss because the Company does not intend to sell these securities and it is not more likely than not the Company will be required to sell these securities before a recovery of amortized cost, which may be at maturity.
If the Company intends to sell a fixed maturity security or if it is more likely than not that the Company will be required to sell a security before recovery of its amortized cost basis, a credit loss has occurred and the difference between the amortized cost and the fair value that relates to the expected credit loss is recognized as a loss in earnings, included in gains (losses) on investments and other assets on the consolidated statements of earnings.
If the Company does not intend to sell a debt security and it is less likely than not that the Company will be required to sell the debt security but the Company also does not expect to recover the entire amortized cost basis of the security, a credit loss is recognized in earnings for the amount of the expected credit loss with a corresponding allowance for credit losses as a contra-asset account. The credit loss is included in gains (losses) on investments and other assets on the consolidated statements of earnings. The recognized credit loss is limited to the total unrealized loss on the security due to a change in credit.
Amounts on available for sale fixed maturities that are deemed to be uncollectible are written off and removed from the allowance for credit loss. A write-off may also occur if the Company intends to sell a security or when it is more likely than not that the Company will be required to sell the security before the recovery of its amortized cost.
The Company does not measure a credit loss allowance on accrued interest receivable, included in accrued investment income on the consolidated balance sheets, as the Company writes off any accrued interest receivable balance to net investment income in a timely manner (after 90 days) when the Company has concerns regarding collectability.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Credit Quality Indicators
The NAIC assigns designations to fixed maturity securities. These designations range from Class 1 (highest quality) to Class 6 (lowest quality). The NAIC designations are utilized by insurers in preparing their annual statutory statements. NAIC Class 1 and 2 are considered investment grade while the NAIC Class 3 through 6 designations are considered non-investment grade. Based on the NAIC designations, the Company had 97.7% and 98.2% of its fixed maturity securities rated investment grade as of December 31, 2024 and 2023, respectively. The following table summarizes the credit quality, by NAIC designation, of the Company’s fixed maturity securities available for sale, excluding redeemable preferred stock.
Schedule of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation
December 31, 2024 December 31, 2023
NAIC Designation Amortized
Cost Estimated Fair
Value Amortized
Cost Estimated Fair
Value
$ 188,386,980 $ 183,460,027 $ 221,933,425 $ 216,975,288
178,060,265 174,405,442 161,062,016 157,346,803
7,961,422 7,342,220 6,418,829 5,953,542
649,592 600,459 982,290 948,478
702,643 487,981 236,648 51,875
1,169 - 1,233 -
Total $ 375,762,071 $ 366,296,129 $ 390,634,441 $ 381,275,986
The following tables present a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for sale:
Schedule of Allowance for Credit Losses on Fixed Maturity Securities Available for Sale
Year Ended December 31, 2024
U.S. Treasury securities and obligations of U.S. Government agencies Obligations of states and political subdivisions Corporate securities including public utilities Mortgage-backed securities Total
Beginning balance - December 31, $ - $ - $ 308,500 $ 6,049 $ 314,549
Additions for credit losses not previously recorded - - 55,000 - 55,000
Change in allowance on securities with previous allowance - - 60,000 6,000 66,000
Reductions for securities sold during the period - - - - -
Reductions for securities with credit losses due to intent to sell - - - - -
Write-offs charged against the allowance - - - - -
Recoveries of amounts previously written off - - (14,556 ) - (14,556 )
Ending Balance - December 31, 2024 $ - $ - $ 408,944 $ 12,049 $ 420,993
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Year Ended December 31, 2023
U.S. Treasury securities and obligations of U.S. Government agencies Obligations of states and political subdivisions Corporate securities including public utilities Mortgage-backed securities Total
Beginning balance - December 31, 2022 $ - $ - $ - $ - $ -
Balance $ - $ - $ - $ - $ -
Additions for credit losses not previously recorded - - 261,500 6,049 267,549
Change in allowance on securities with previous allowance - - 57,764 - 57,764
Reductions for securities sold during the period - - (10,764 ) - (10,764 )
Reductions for securities with credit losses due to intent to sell - - - - -
Write-offs charged against the allowance - - - - -
Recoveries of amounts previously written off - - - - -
Ending Balance - December 31, 2023 $ - $ - $ 308,500 $ 6,049 $ 314,549
Balance $ - $ - $ 308,500 $ 6,049 $ 314,549
The following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at December 31, 2024, by contractual maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Schedule of Investments Classified by Contractual Maturity Date
Amortized Estimated Fair
Cost Value
Due in 1 year $ 44,055,016 $ 43,765,347
Due in 2-5 years 126,512,253 125,295,048
Due in 5-10 years 107,397,297 106,707,517
Due in more than 10 years 66,087,069 62,948,706
Mortgage-backed securities 31,710,436 27,579,511
Redeemable preferred stock 250,000 250,000
Total $ 376,012,071 $ 366,546,129
Information regarding sales of fixed maturity securities available for sale is presented as follows.
Schedule of Major Categories of Net Investment Income
Years Ended December 31,
Proceeds from sales $ 2,629,493 $ 2,557,074
Gross realized gains 11,508
Gross realized losses (1,407 ) (57,861 )
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Assets on Deposit, Held in Trust, and Pledged as Collateral
Assets on deposit with life insurance regulatory authorities as required by law were as follows:
Schedule of Assets on Deposit With Life Insurance
Years Ended December 31,
Fixed maturity securities available for sale at estimated fair value $ 6,126,589 $ 6,206,650
Other investments 400,000 400,000
Cash and cash equivalents 1,444,654 1,909,215
Total assets on deposit $ 7,971,243 $ 8,515,865
Assets held in trust related to third-party reinsurance agreements were as follows:
Years Ended December 31,
Fixed maturity securities available for sale at estimated fair value $ 25,309,270 $ 27,903,952
Cash and cash equivalents 4,417,683 2,101,052
Total assets on deposit $ 29,726,953 $ 30,005,004
The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”). Assets pledged as collateral with the FHLB are presented below. These pledged securities are used as collateral for any FHLB cash advances. See Note 7 of the Notes to the Consolidated Financial Statements for more information about the FHLB.
Years Ended December 31,
Fixed maturity securities available for sale at estimated fair value $ 63,800,454 $ 93,903,089
Total assets pledged as collateral $ 63,800,454 $ 93,903,089
Real Estate Held for Investment and Held for Sale
The Company strategically deploys resources into real estate assets to match the income and yield durations of its primary obligations. The sources for these real estate assets come through its various business segments in the form of acquisition, development, and mortgage foreclosures. The Company reports real estate held for investment and held for sale pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.
Commercial Real Estate Held for Investment and Held for Sale
The Company owns and manages commercial real estate assets as a means of both generating investment income and providing workspace for its employees. These assets are acquired in accordance with the Company’s goals and objectives for risk-adjusted returns. Due diligence is conducted on each asset using internal and third-party resources. The geographic locations and asset classes of investments are determined by senior management under the direction of the Company’s Board of Directors.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
The Company employs full-time employees to attend to the day-to-day operations of those assets within the greater Salt Lake area and close surrounding markets. The Company utilizes third party property managers where the geographic location does not warrant full-time staff or through strategic lease-up periods. The Company will generally acquire assets as a result of company acquisitions or that are in regions expected to have high growth in employment and population and that provide operational efficiencies.
The Company currently owns and operates six commercial properties in three states. These properties include office buildings, flex office space, and the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah. The Company uses bank debt in strategic cases, primarily where it is anticipated to improve yields, or facilitate the acquisition of higher quality assets or asset class diversification.
The aggregated net book value of commercial real estate serving as collateral for bank loans was $119,889,846 and $124,381,467 as of December 31, 2024 and 2023, respectively. The associated bank loan carrying values totaled $96,007,488 and $97,807,614 as of December 31, 2024 and 2023, respectively.
During 2024 and 2023, the Company did not record any impairment losses on commercial real estate held for investment or held for sale. Impairment losses, if any, are included in gains (losses) on investments and other assets on the consolidated statements of earnings.
During 2024 and 2023, the Company recorded depreciation expense on commercial real estate held for investment of $5,778,214 and $6,278,828, respectively. Commercial real estate held for investment is stated at cost and is depreciated over the estimated useful life, primarily using the straight-line method. Depreciation is included in net investment income on the consolidated statements of earnings.
The Company’s commercial real estate held for investment is summarized as follows:
Schedule of Commercial Real Estate Investment
Net Book Value Total Square Footage
December 31, December 31,
2023
Utah (1) $ 126,056,342 $ 142,475,177 546,941 625,920
Louisiana 18,586 19,250 1,622 1,622
$ 126,074,928 $ 142,494,427 548,563 627,542
(1) Includes Center53
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Operating leases arise from the leasing of the Company’s commercial real estate held for investment. Initial lease terms generally range from three to ten years.
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease payments expected to be received.
Schedule of Annual Undiscounted Cash Flows of Operating Lease Payments
$ 10,947,238
9,938,966
8,833,459
8,700,328
8,085,786
Thereafter 38,741,022
Total $ 85,246,799
The Company’s commercial real estate held for sale is summarized as follows:
Net Book Value Total Square Footage
December 31, December 31,
2023
Mississippi (1) $ 151,553 $ 3,028,973 - 19,694
$ 151,553 $ 3,028,973 - 19,694
(1) Consists of approximately 93 acres of undeveloped land for $151,553 for 2024 and 2023. The remaining property for $2,877,420 was sold in February 2024 for a gain of approximately $250,000.
Residential Real Estate Held for Investment and Held for Sale
The Company occasionally acquires residential homes through the mortgage loan foreclosure process. The Company has the option to sell these properties or to continue to hold them for expected cash flow and price appreciation.
The Company established Security National Real Estate Services (“SNRE”) to manage its residential property portfolio. SNRE cultivates and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the Company’s entire residential property portfolio.
During 2024 and 2023, the Company did not record any impairment losses on residential real estate held for investment or held for sale. Impairment losses, if any, are included in gains (losses) on investments and other assets on the consolidated statements of earnings.
During 2024 and 2023, the Company recorded depreciation expense on residential real estate held for investment of $10,611 and $10,592, respectively. Residential real estate held for investment is stated at cost and is depreciated over the estimated useful life, primarily using the straight-line method. Depreciation is included in net investment income on the consolidated statements of earnings.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
The Company’s residential real estate held for investment is summarized as follows:
Schedule of Residential Real Estate Investment
Net Book Value
December 31,
Utah (1) $ 71,618,410 $ 40,924,865
$ 71,618,410 $ 40,924,865
(1) Includes multiple residential subdivision development projects, refer to the following table.
The following table presents additional information regarding the Company’s residential subdivision development in Utah.
December 31,
Lots available for sale
Lots to be developed 1,046 1,145
Ending Balance $ 71,443,356 $ 40,739,201
The Company’s residential real estate held for sale is summarized as follows:
Net Book Value
December 31,
Florida $ 276,580 $ -
Utah 849,900 -
$ 1,126,480 $ -
The net book value of foreclosed residential real estate included in residential real estate held for investment or sale was $1,126,480 and nil as of December 31, 2024 and 2023, respectively.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Real Estate Owned and Occupied by the Company
The primary business units of the Company occupy a portion of the commercial real estate owned by the Company. As of December 31, 2024, real estate owned and occupied by the Company is summarized as follows:
Schedule of Real Estate Owned and Occupied by the Company
Location Business Segment Approximate
Square Footage
Square Footage Occupied by the Company
433 Ascension Way, Floors 4, 5 and 6, Salt Lake City, UT - Center53 Building 2 (1) Corporate Offices, Life Insurance, Cemetery/Mortuary Operations, and Mortgage Operations and Sales 221,000 50 %
1818 Marshall Street, Shreveport, LA (2) Life Insurance Operations 12,274 100 %
812 Sheppard Street, Minden, LA (2) (3) Life Insurance Sales 1,560 100 %
(1) Included in real estate held for investment on the consolidated balance sheets
(2) Included in property and equipment on the consolidated balance sheets
(3) Listed for sale
Mortgage Loans Held for Investment
The Company reports mortgage loans held for investment pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.
Concentrations of credit risk arise when several 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 mortgages, commercial loans and residential construction loans and requires collateral on all real estate exposures, a substantial portion of the relevant debtors’ ability to honor obligations is dependent upon the economic stability of the geographic region in which the debtors do business or are employed. As of December 31, 2024, the Company had 56%, 8%, 9% and 6% of its mortgage loans from borrowers located in the states of Utah, Florida, Arizona, and Texas, respectively. As of December 31, 2023, the Company had 44%, 11%, 10%, 7% and 6% of its mortgage loans from borrowers located in the states of Utah, Florida, California, Texas, and Arizona, respectively.
Evaluation of Allowance for Credit Losses
See Note 1 regarding the adoption of ASU 2016-13.
The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the Company’s mortgage loans held for investment to present the net amount expected to be collected. The Company reports in net earnings, as a credit loss expense, the amount necessary to adjust the allowance for credit losses for the Company’s current estimate of expected credit losses on mortgage loans held for investment. This credit loss expense is included in other expenses on the consolidated statements of earnings.
Once a mortgage loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and reverse any interest income that had been accrued. Given this policy, the Company does not measure a credit loss allowance on accrued interest receivable. Accrued interest receivable is included in accrued investment income on the consolidated balance sheets. Payments received for mortgage loans on a non-accrual status are recognized when received. The interest income recognized from payments received for mortgage loans on a non-accrual status was immaterial. Accrual of interest resumes if a mortgage loan is brought current. Interest not accrued on these loans totaled approximately $244,000 and $237,000 as of December 31, 2024 and 2023, respectively.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
The Company measures expected credit losses based on the fair value of the collateral when the Company determines that foreclosure is probable. When a mortgage loan becomes delinquent, the Company proceeds to foreclose, and all expenses of foreclosure are expensed as incurred. Once foreclosed, the property is classified as real estate held for investment or held for sale.
To determine the allowance for credit losses, the Company has segmented its mortgage loans held for investment by loan type. The Company’s loan types are commercial, residential, and residential construction. The inherent risks within the portfolio vary depending upon the loan type as follows:
Commercial - Underwritten in accordance with the Company’s policies to determine the borrower’s ability to repay the obligation as agreed. Commercial loans are made primarily based on the underlying collateral supporting the loan. Accordingly, the repayment of a commercial loan depends primarily on the collateral and its ability to generate income and secondarily on the borrower’s (or guarantor’s) ability to repay.
Commercial loans are evaluated for credit loss by analyzing common metrics that are predictors for future credit losses such as debt service coverage ratio (“DSCR”), loan to value (“LTV”), local market conditions, borrower quality, and underlying collateral. The fair value of the underlying collateral is based on a third-party appraisal of the property at origination of the loan. The fair value is assessed if the loan becomes 90 days delinquent. The Company uses these metrics to pool similar loans. The allowance for credit losses is based on estimates, historical experience, probability of loss, value of the underlying collateral, and other factors that affect the collectability of the loan. The Company applies a future loss factor to the outstanding balance of each group to arrive at the allowance for credit losses.
Residential - These loans are secured by first and second mortgages on single-family dwellings. The borrower’s ability to repay is sensitive to life events and the general economic condition of the region. Where loan to value exceeds 80%, the loan is generally guaranteed by private mortgage insurance, the FHA, or VA.
Residential loans are evaluated for credit loss by using relevant available information from both internal and external sources. Among other things, the Company uses its historical delinquency information and considers current and forecasted economic conditions. External sources include a monthly analysis of its residential portfolio by a third party. The third party uses the Company’s current loan data and runs it through various models to project cash flows and provide a projected life of loan loss. The models consider loan features such as loan type, loan to value, payment status, age, and current property values. Analyzing the information from the various sources allows the Company to arrive at the allowance for credit losses.
Residential construction (including land acquisition and development) - These loans are underwritten in accordance with the Company’s underwriting policies, which include a financial analysis of the builders, borrowers (guarantors), construction cost estimates, and independent appraisal valuations, and factor in estimates of the value of construction projects upon completion. Construction loans generally involve the disbursement of substantial funds over a short period of time with repayment substantially dependent upon the success of the completed project and the ability of the borrower to secure long-term financing.
Additionally, land acquisition and development loans are underwritten in accordance with the Company’s underwriting policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots. These loans are of a higher risk than other mortgage loans due to their ultimate repayment being sensitive to general economic conditions, availability of long-term or construction financing, and interest rate sensitivity.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Residential construction mortgage loans are evaluated for credit loss by considering historical activity and current housing market trends to arrive at a per loan basis point allowance that is recognized at loan origination and for subsequent draws. The per loan basis point is reviewed at least annually or as loan losses or market trends require.
The following table presents a roll forward of the allowance for credit losses as of the dates indicated:
Schedule of Allowance for Loan Losses
Commercial Residential Residential Construction Total
December 31, 2024
Allowance for credit losses:
Beginning balance - January 1, 2023 $ 1,219,653 $ 2,390,894 $ 208,106 $ 3,818,653
Adoption of ASU 2016-13 (1) 555,807 (192,607 ) 301,830 665,030
Change in provision for credit losses (2) (487,159 ) (444,859 ) 94,240 (837,778 )
Charge-offs - (1,095,485 ) - (1,095,485 )
Ending balance - December 31, 2024 $ 732,494 $ 850,550 $ 302,346 $ 1,885,390
December 31, 2023
Allowance for credit losses:
Beginning balance - January 1, 2023 $ 187,129 $ 1,739,980 $ 43,202 $ 1,970,311
Adoption of ASU 2016-13 (1) 555,807 (192,607 ) 301,830 665,030
Change in provision for credit losses (2) 476,717 843,521 (136,926 ) 1,183,312
Charge-offs - - - -
Ending balance - December 31, 2023 $ 1,219,653 $ 2,390,894 $ 208,106 $ 3,818,653
(1) See Note 1 of the notes to the consolidated financial statements
(2) Included in other expenses on the consolidated statements of earnings
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
The following table presents the aging of mortgage loans held for investment by loan type.
Schedule of Aging of Mortgage Loans
Commercial Residential Residential
Construction Total
December 31, 2024
30-59 days past due $ 2,100,000 $ 5,818,334 $ - $ 7,918,334
60-89 days past due - 845,980 - 845,980
Over 90 days past due (1) 4,205,000 3,061,450 - 7,266,450
In process of foreclosure (1) 191,508 3,942,392 - 4,133,900
Total past due 6,496,508 13,668,156 - 20,164,664
Current 56,256,577 78,393,631 151,172,733 285,822,941
Total mortgage loans 62,753,085 92,061,787 151,172,733 305,987,605
Allowance for credit losses (732,494 ) (850,550 ) (302,346 ) (1,885,390 )
Unamortized deferred loan fees, net (115,555 ) (1,307,539 ) (659,147 ) (2,082,241 )
Unamortized discounts, net (149,268 ) (123,348 ) - (272,616 )
Net mortgage loans held for investment $ 61,755,768 $ 89,780,350 $ 150,211,240 $ 301,747,358
December 31, 2023
30-59 days past due $ - $ 3,387,673 $ - $ 3,387,673
60-89 days past due - 3,472,760 - 3,472,760
Over 90 days past due (1) 405,000 3,480,931 - 3,885,931
In process of foreclosure (1) 1,241,508 1,021,790 - 2,263,298
Total past due 1,646,508 11,363,154 - 13,009,662
Current 72,530,030 91,790,433 104,052,748 268,373,211
Total mortgage loans 74,176,538 103,153,587 104,052,748 281,382,873
Allowance for credit losses (1,219,653 ) (2,390,894 ) (208,106 ) (3,818,653 )
Unamortized deferred loan fees, net (172,989 ) (1,135,491 ) (314,746 ) (1,623,226 )
Unamortized discounts, net (216,705 ) (107,452 ) - (324,157 )
Net mortgage loans held for investment $ 72,567,191 $ 99,519,750 $ 103,529,896 $ 275,616,837
(1) Interest income is not recognized on loans which are more than 90 days past due or in foreclosure.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Credit Quality Indicators
The Company evaluates and monitors the credit quality of its commercial loans by analyzing LTV and DSCR. Monitoring a commercial mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.
The aggregate unpaid principal balance of commercial mortgage loans by credit quality indicator and origination year was as follows as of December 31, 2024:
Schedule of Commercial Mortgage Loans By Credit Quality Indicator
Credit Quality Indicator 2021 Prior Total % of Total
LTV:
Less than 65% $ 7,653,600 $ 24,600,000 $ 2,352,150 $ 864,128 $ - $ 8,867,779 $ 44,337,657 70.65 %
65% to 80% 10,432,942 1,840,776 823,397 - 4,913,313 - 18,010,428 28.70 %
Greater than 80% - - - 405,000 - - 405,000 0.65 %
Total $ 18,086,542 $ 26,440,776 $ 3,175,547 $ 1,269,128 $ 4,913,313 $ 8,867,779 $ 62,753,085 100.00 %
DSCR
>1.20x $ 16,300,000 $ 20,990,000 $ 1,000,000 $ - $ 4,913,313 $ 5,414,274 $ 48,617,587 77.47 %
1.00x - 1.20x 432,942 5,450,776 2,175,547 1,269,128 - 3,453,505 12,781,898 20.37 %
<1.00x 1,353,600 - - - - - 1,353,600 2.16 %
Total $ 18,086,542 $ 26,440,776 $ 3,175,547 $ 1,269,128 $ 4,913,313 $ 8,867,779 $ 62,753,085 100.00 %
The Company evaluates and monitors the credit quality of its residential mortgage loans by analyzing LTV and loan performance. The Company defines non-performing mortgage loans as loans more than 90 days past due and on a non-accrual status. Monitoring a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.
The aggregate unpaid principal balance of residential mortgage loans by credit quality indicator and origination year was as follows as of December 31, 2024:
Credit Quality Indicator 2021 Prior Total % of Total
Performance Indicators:
Performing $ 14,861,098 $ 10,030,848 $ 42,634,670 $ 3,076,901 $ 5,513,462 $ 8,940,966 $ 85,057,945 92.39 %
Non-performing (1) - 3,442,992 1,451,039 291,359 311,116 1,507,336 7,003,842 7.61 %
Total $ 14,861,098 $ 13,473,840 $ 44,085,709 $ 3,368,260 $ 5,824,578 $ 10,448,302 $ 92,061,787 100.00 %
(1) Includes residential mortgage loans in the process of foreclosure of $3,942,392
LTV:
Less than 65% $ 6,241,730 $ 4,931,376 $ 5,488,954 $ 1,790,036 $ 2,440,002 $ 5,273,672 $ 26,165,770 28.42 %
65% to 80% 7,802,984 7,662,200 37,509,634 1,578,224 2,701,008 5,107,289 62,361,339 67.74 %
Greater than 80% 816,384 880,264 1,087,121 - 683,568 67,341 3,534,678 3.84 %
Total $ 14,861,098 $ 13,473,840 $ 44,085,709 $ 3,368,260 $ 5,824,578 $ 10,448,302 $ 92,061,787 100.00 %
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
The company evaluates and monitors the credit quality of its residential construction loans (including land acquisition and development loans) by analyzing LTV and loan performance. Monitoring a residential construction mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.
The aggregate unpaid principal balance of residential construction mortgage loans by credit quality indicator and origination year was as follows as of December 31, 2024:
Schedule of Residential Construction Mortgage Loans
Credit Quality Indicator 2021 Total % of Total
Performance Indicators:
Performing $ 118,863,944 $ 21,375,552 $ 972,468 $ 9,960,769 $ 151,172,733 100.00 %
Non-performing - - - - - 0.00 %
Total $ 118,863,944 $ 21,375,552 $ 972,468 $ 9,960,769 $ 151,172,733 100.00 %
LTV:
Less than 65% $ 48,065,177 $ 21,375,552 $ 518,590 $ 9,960,769 $ 79,920,088 52.87 %
65% to 80% 70,798,767 - 453,878 - 71,252,645 47.13 %
Greater than 80%
- - - - 0.00 %
Total $ 118,863,944 $ 21,375,552 $ 972,468 $ 9,960,769 $ 151,172,733 100.00 %
Principal Amounts Due
The following table presents the amortized cost and contractual payments on mortgage loans held for investment by category as of December 31, 2024. Expected principal payments may differ from contractual obligations because certain borrowers may elect to pay off mortgage obligations with or without early payment penalties.
Schedule of Mortgage loans Held for Investment
Principal Principal Principal
Amounts Amounts Amounts
Due in Due in Due
Total Year 2-5 Years Thereafter
Residential $ 92,061,787 $ 1,433,574 $ 5,749,140 $ 84,879,073
Residential Construction 151,172,733 108,067,038 43,105,695 -
Commercial 62,753,085 30,839,972 26,023,731 5,889,382
Total $ 305,987,605 $ 140,340,584 $ 74,878,566 $ 90,768,455
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Insurance Assignments
The following table presents the aging of insurance assignments, included in other investments and policy loans on the consolidated balance sheets:
Schedule of Aging of Insurance Assignments
Years Ended December 31,
30-59 days past due $ 8,785,184 $ 10,829,629
60-89 days past due 4,046,731 3,709,754
Over 90 days past due 5,320,216 4,329,468
Total past due 18,152,131 18,868,851
Current 30,341,727 26,736,471
Total insurance assignments 48,493,858 45,605,322
Allowance for credit losses (1,536,926 ) (1,553,836 )
Net insurance assignments $ 46,956,932 $ 44,051,486
The Company records an allowance for credit losses when the insurance assignment is funded. Once an insurance assignment moves to 90 days or legal proceedings, it is monitored for write-off and collectability, and any adjustments to the allowance are recorded at that time. See Note 1 regarding the adoption of ASU 2016-13.
The following table presents a roll forward of the allowance for credit losses for insurance assignments:
Schedule of Allowance for Credit Losses
Allowance
Beginning balance - January 1, 2024 $ 1,553,836
Change in provision for credit losses (1) 1,033,277
Charge-offs (1,050,187 )
Ending balance - December 31, 2024 $ 1,536,926
Beginning balance - January 1, 2023 $ 1,609,951
Change in provision for credit losses (1) 891,959
Charge-offs (948,074 )
Ending balance - December 31, 2023 $ 1,553,836
(1) Included in other expenses on the consolidated statements of earnings
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Investment Related Earnings
The following table presents the net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities from investments and other assets.
Schedule of Gain (Loss) on Investments
Years Ended December 31
Fixed maturity securities available for sale:
Gross realized gains $ 12,906 $ 67,686
Gross realized losses (63,024 ) (106,760 )
Net credit loss (provision) release (106,444 ) (325,314 )
Equity securities:
Gains (losses) on securities sold (42,680 ) 254,917
Unrealized gains (losses) on securities held at the end of the period 2,290,252 1,782,219
Mortgage loans held for investment:
Gross realized gains - -
Gross realized losses (1,161,363 ) -
Real estate held for investment and sale:
Gross realized gains 739,107 197,194
Gross realized losses - (71,792 )
Other assets, including call and put option derivatives:
Gross realized gains 293,657 214,349
Gross realized losses (20,513 ) (175,157 )
Total $ 1,941,898 $ 1,837,342
The net realized gains and losses on the sale of securities are recorded on the trade date, and the cost of the securities sold is determined using the specific identification method.
Net realized gains and losses includes gains and losses by the restricted assets and cemetery perpetual care trust investments of the cemeteries and mortuaries of $888,788 in net gains and $730,259 in net losses for 2024 and 2023, respectively.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
2) Investments (Continued)
Major categories of net investment income were as follows:
Years Ended December 31
Fixed maturity securities available for sale $ 17,332,753 $ 16,871,558
Equity securities 698,484 616,989
Mortgage loans held for investment 29,952,242 33,242,094
Real estate held for investment and sale 11,369,546 14,786,017
Policy loans 953,489 816,711
Insurance assignments 19,971,108 18,118,391
Other investments 806,032 617,420
Cash and cash equivalents 6,676,563 4,250,029
Gross investment income 87,760,217 89,319,209
Investment expenses (16,034,968 ) (16,976,162 )
Net investment income $ 71,725,249 $ 72,343,047
Net investment income includes income earned by the restricted assets and cemetery perpetual care trust investments of the cemeteries and mortuaries of $2,009,719 and $2,365,378 for 2024 and 2023, respectively.
Net investment income on real estate consists primarily of rental revenue. Investment expenses consist primarily of depreciation, property taxes, operating expenses of real estate and an estimated portion of administrative expenses relating to investment activities.
Accrued Investment Income
Accrued investment income consists of the following:
Schedule of Accrued Investment Income
Years Ended December 31,
Fixed maturity securities available for sale $ 3,795,581 $ 3,984,695
Equity securities 11,049 20,451
Mortgage loans held for investment 1,049,489 2,661,092
Real estate held for investment 3,559,463 3,486,115
Cash and cash equivalents 83,586 18,437
Total accrued investment income $ 8,499,168 $ 10,170,790
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
3) Loans Held for Sale
The Company’s loans held for sale portfolio is valued using the fair value option. Changes in the fair value of the loans are included in mortgage fee income. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on recognition of mortgage loan interest income and is included in mortgage fee income on the consolidated statement of earnings. Included in loans held for sale are loans in the process of foreclosure with an aggregate unpaid principal balance of nil and $1,636,090 as of December 31, 2024 and 2023, respectively. See Note 17 of the Notes to Consolidated Financial Statements for additional disclosures regarding loans held for sale.
The following table presents the aggregate fair value and the aggregate unpaid principal balance of loans held for sale.
Schedule of Aggregate Fair Value Loans Held for Sale
December 31,
Aggregate fair value $ 131,181,148 $ 126,549,190
Unpaid principal balance 128,948,072 127,185,867
Unrealized gain (loss) 2,233,076 (636,677 )
Mortgage Fee Income
Mortgage fee income consists of origination fees, processing fees, interest income and other income related to the origination and sale of mortgage loans held for sale.
Major categories of mortgage fee income for loans held for sale are summarized as follows:
Schedule of Mortgage Fee Income for Loans Held for Sale
Years Ended December 31
Loan fees $ 26,343,919 $ 21,724,456
Interest income 8,192,353 9,547,741
Secondary gains 70,354,845 68,505,014
Change in fair value of loan commitments 729,948 (1,123,615 )
Change in fair value of loans held for sale 2,869,729 (478,460 )
Provision for loan loss reserve (932,154 ) (27,164 )
Mortgage fee income $ 107,558,640 $ 98,147,972
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
3) Loans Held for Sale (Continued)
Loan Loss Reserve
Repurchase demands from third party investors that correspond to mortgage loans previously held for sale and sold are reviewed and relevant data is captured so that an estimated future loss can be calculated. The key factors that are used in the estimated future loss calculation are as follows: (i) lien position, (ii) payment status, (iii) claim type, (iv) unpaid principal balance, (v) interest rate, and (vi) validity of the demand. Other data is captured and is useful for management purposes; the actual estimated loss is generally based on these key factors. The Company conducts its own review upon the receipt of a repurchase demand. In many instances, the Company can resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor.
The loan loss reserve, which is included in other liabilities and accrued expenses, is summarized as follows:
Summary of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses
December 31,
Beginning Balance $ 547,233 $ 1,725,667
Provision for current loan originations (1) 932,154 27,164
Charge-offs, net of recaptured amounts (782,761 ) (1,205,598 )
Ending Balance $ 696,626 $ 547,233
(1) Included in Mortgage fee income on the consolidated statements of earnings
The Company maintains reserves for estimated losses on current production volumes. For 2024, $932,154 in reserves were added at a rate of 4.1 basis points per loan, the equivalent of $410 per $1,000,000 in loans originated. This is a decrease over 2023, when $27,164 in reserves were added at a rate of 4.3 basis points per loan originated, the equivalent of $430 per $1,000,000 in loans originated. The Company monitors market data and trends, economic conditions (including forecasts) and its own experience to maintain adequate loss reserves on current production.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
4) Receivables
Receivables consist of the following:
Schedule of Receivable
December 31,
Contracts with customers $ 7,095,589 $ 6,321,573
Receivables from sales agents 4,028,881 3,252,840
Other 6,412,804 7,658,789
Total receivables 17,537,274 17,233,202
Allowance for credit losses (1,678,531 ) (1,897,887 )
Net receivables $ 15,858,743 $ 15,335,315
The Company records an allowance for credit losses for its receivables in accordance with GAAP. See Note 1 regarding the adoption of ASU 2016-13.
The following table presents a roll forward of the allowance for credit losses:
Schedule of Allowance Credit Losses
Allowance
Beginning balance - January 1, 2024 $ 1,897,887
Change in provision for credit losses (1) (140,277 )
Charge-offs (79,079 )
Ending balance - December 31, 2024 $ 1,678,531
Beginning balance - January 1, 2023 $ 2,229,791
Change in provision for credit losses (1) (110,935 )
Charge-offs (220,969 )
Ending balance - December 31, 2023 $ 1,897,887
(1) Included in other expenses on the consolidated statements of earnings
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
5) Value of Business Acquired, Goodwill and Other Intangible Assets
Information regarding the value of business acquired was as follows:
Schedule of Value of Business Acquired
December 31,
Balance at beginning of year $ 8,467,613 $ 9,803,736
Value of business acquired - -
Imputed interest at 7% included in earnings 558,569 (1) 626,666 (1)
Amortization included in earnings (1,466,527 )(1) (1,926,668 )(1)
Shadow amortization included in other
comprehensive income (68,055 ) (36,121 )
Net amortization (976,013 ) (1,336,123 )
Balance at end of year $ 7,491,600 $ 8,467,613
(1) Included in Amortization of deferred policy and pre-need acquisition costs and value of business acquired on the consolidated statements of earnings
Presuming no additional acquisitions, net amortization charged to income is expected to approximate the following:
Schedule of Acquisitions Net Amortization Charged to Income
$ 867,499
827,016
774,850
713,969
647,332
Thereafter 3,660,934
Total $ 7,491,600
Actual amortization may vary based on changes in assumptions or experience. As of December 31, 2024, value of business acquired is being amortized over a weighted average life of 6.1 years.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
5) Value of Business Acquired, Goodwill and Other Intangible Assets (Continued)
Information regarding goodwill by segment was as follows:
Schedule of Goodwill by Segment
Life Insurance Cemetery/
Mortuary Total
Balance at January 1, 2023:
Goodwill $ 2,765,570 $ 2,488,213 $ 5,253,783
Accumulated impairment - - -
Total goodwill, net 2,765,570 2,488,213 5,253,783
Acquisition - - -
Balance at December 31, 2023:
Goodwill 2,765,570 2,488,213 5,253,783
Accumulated impairment - - -
Total goodwill, net 2,765,570 2,488,213 5,253,783
Acquisition - - -
Balance at December 31, 2024:
Goodwill 2,765,570 2,488,213 5,253,783
Accumulated impairment - - -
Total goodwill, net $ 2,765,570 $ 2,488,213 $ 5,253,783
Goodwill is not amortized but is tested annually for impairment. The annual impairment tests resulted in no impairment of goodwill for 2024 and 2023.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
5) Value of Business Acquired, Goodwill and Other Intangible Assets (Continued)
The carrying value of the Company’s other intangible assets were as follows, which are included in other assets on the consolidated balance sheets:
Schedule of Carrying Value of Intangible Asset
December 31,
Useful Life
Intangible asset - trade name (1) 15 years $ 2,100,000 $ 2,100,000
Intangible assets - other (1) 15 years 210,000 210,000
Intangible asset - trade name (2) 15 years 610,000 610,000
Intangible asset - customer lists (2) 15 years 2,290,000 890,000
Less accumulated amortization
(1,131,333 ) (807,333 )
Balance at end of year
$ 4,078,667 $ 3,002,667
(1) Cemetery/Mortuary Segment
(2) Life Insurance Segment
Amortization expense for 2024 and 2023 was $324,000 and $254,000, respectively, and is amortized over the estimated useful life using the straight-line method. Amortization expense is included in other expenses on the consolidated statements of earnings.
The following table summarizes the Company’s estimate of future amortization for the other intangible assets:
Schedule of Estimate of Future Amortization for Other Intangible Assets
$ 347,333
347,333
347,333
347,333
347,333
Thereafter 2,342,002
Total $ 4,078,667
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
6) Property and Equipment
Property and equipment is summarized below:
Schedule of Property and Equipment
December 31,
Land and buildings $ 17,194,972 $ 16,567,819
Furniture and equipment 15,998,717 16,315,061
Property and equipment, gross 33,193,689 32,882,880
Less accumulated depreciation (14,146,001 ) (13,707,781 )
Total $ 19,047,688 $ 19,175,099
Depreciation expense for 2024 and 2023 was $2,383,621 and $2,351,661, respectively. Property and equipment are stated at cost and are depreciated over their estimated useful lives, primarily using the straight-line method. The Company recognized an impairment loss of $122,229 in 2023 on a property held by the life segment. This property was sold in 2024. Impairment losses are included in gains (losses) on the consolidated statements of earnings.
7) Bank and Other Loans Payable
Bank and other loans payable are summarized as follows:
Summary of Bank Loans Payable
December 31,
Total bank and other loans $ 49,174,545 $ 50,129,255
3.85% fixed note payable in monthly installments of $243,781 including principal and interest, collateralized by real property with a book value of approximately $60,420,000, due June 2032. $ 49,174,545 $ 50,129,255
3.30% fixed note payable in monthly installments of $179,562 including principal and interest, collateralized by real property with a book value of approximately $42,230,000, due April 2031. 37,632,943 38,478,359
4.7865% fixed interest only note payable in monthly installments, collateralized by real property with a book value of approximately $16,240,000, due June 2028. 9,200,000 9,200,000
1 month SOFR rate plus 2% loan purchase agreement with a warehouse line availability of $100,000,000, expired November 2024 and is no longer needed by the Company. - 114,518
1 month SOFR rate plus 2.0% loan purchase agreement with a warehouse line availability of $25,000,000, matures August 2025. 2,668,519 -
1 month SOFR rate plus 2.1% loan purchase agreement with a warehouse line availability of $15,000,000, matures June 2025. 7,918,930 7,617,455
Finance lease liabilities 145,167 15,550
Total bank and other loans 106,740,104 105,555,137
Less current installments (12,559,420 ) (9,543,052 )
Bank and other loans, excluding current installments $ 94,180,684 $ 96,012,085
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
7) Bank and Other Loans Payable (Continued)
Sources of Liquidity
Federal Home Loan Bank Membership
The Federal Home Loan Banks (“the FHLBs”) are a group of cooperatives that lending institutions use to finance housing and economic development in local communities. The Company is a member of the FHLB based in Des Moines, Iowa and based in Dallas, Texas. As a member of the FHLB, the Company is required to maintain a minimum investment in capital stock of the FHLB and may pledge collateral to the bank for advances of funds to be used in its operations.
Federal Home Loan Bank of Des Moines
As of December 31, 2024, the amount available for borrowings from the FHLB of Des Moines was approximately $41,235,894, compared with $77,324,238 as of December 31, 2023. United States Treasury fixed maturity securities with an estimated fair value of $54,487,812 as of December 31, 2024 have been pledged at the FHLB of Des Moines as collateral for current and potential borrowings compared with $88,400,026 at December 31, 2023. As of December 31, 2024 and 2023, the Company had no outstanding FHLB borrowings. As of December 31, 2024, the Company’s total investment in FHLB stock was $479,100 compared with $453,600 as of December 31, 2023. As of December 31, 2024, the Company was contingently liable under standby letters of credit aggregating $9,670,307. These letters of credit are to be used to cover any contingency related to additional risk assessments pertaining to the Company’s captive insurance program for $443,758 and for bonding of residential land development for $9,226,549.
Federal Home Loan Bank of Dallas
As of December 31, 2024, the amount available for borrowings from the FHLB of Dallas was approximately $8,342,442, compared with $5,104,610 as of December 31, 2023. Mortgage-Backed fixed maturity securities with an estimated fair value of $9,312,642 as of December 31, 2024 have been pledged at the FHLB of Dallas as collateral for current and potential borrowings compared with $5,503,063 at December 31, 2023. As of December 31, 2024 and 2023, the Company had no outstanding FHLB borrowings. As of December 31, 2024, the Company’s total investment in FHLB stock was $1,925,800 compared with $1,826,200 as of December 31, 2023.
Revolving Lines of Credit
The Company has a $5,000,000 revolving line-of-credit with a bank with interest payable at the Prime rate plus 0.75% with a 3% prime floor, secured by the capital stock of Security National Life and maturing May 15, 2025, renewable annually. As of December 31, 2024, the Company was contingently liable under standby letters of credit aggregating $622,293, to be used as collateral for residential subdivision land development and $1,250,000, to be used as collateral for SecurityNational Mortgage’s state licensing. The standby letters of credit will draw on the line of credit if necessary. The Company does not expect any material losses to result from the issuance of the standby letters of credit. As of December 31, 2024, there were no amounts outstanding under the revolving line-of-credit.
Debt Covenants for Mortgage Warehouse Lines of Credit
The Company, through its subsidiary SecurityNational Mortgage, has two lines of credit for the purpose of funding mortgage loans.
The Company’s agreement with U.S. Bank allows SecurityNational Mortgage to borrow up to $15,000,000. The agreement charges interest at 2.10% plus the greater of (i) 0%, and (ii) the one-month forward-looking term rate based on SOFR and matures on June 20, 2025. The Company is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax income (excluding any changes in the fair value of mortgage servicing rights) of at least $1.00 on a rolling twelve months.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
7) Bank and Other Loans Payable (Continued)
The Company’s agreement with Western Alliance Bank allows SecurityNational Mortgage to borrow up to $25,000,000. The agreement charges interest at the 1-Month SOFR rate plus 2.0% and matures on August 27, 2025. The Company is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax income of at least $1.00 on a quarterly basis.
The agreements for both warehouse lines of credit include cross default provisions where certain events of default under other of SecurityNational Mortgage’s obligations constitute events of default under the warehouse lines of credit. As of December 31, 2024, SecurityNational Mortgage was not in compliance with the net income covenants under its warehouse lines of credit and its operating cash flow covenant for its standby letter of credit with its primary bank. SecurityNational Mortgage has received or is in the process of receiving waivers from the warehouse banks. In the unlikely event SecurityNational Mortgage is required to repay the outstanding advances of approximately $10,587,449 on the warehouse line of credit that has not provided a covenant waiver, SecurityNational Mortgage has sufficient cash and borrowing capacity on the warehouse lines of credit that have provided covenant waivers to fund its origination activities. The Company has done an internal analysis of the funding capacities of both internal and external sources and has determined that there are sufficient funds to continue its business model. The Company continues to negotiate other warehouse lines of credit with other lenders. The Company has performed an internal analysis of its funding capacities of both internal and external sources and has determined that there are sufficient funds to continue its current business model. The Company continues to negotiate other warehouse lines of credit with other lenders.
Debt Covenants for Revolving Lines of Credit and Bank Loans
The Company also has debt covenants on its revolving lines of credit and is required to comply with minimum operating cash flow ratios and minimum net worth for each of its business segments. The Company also has debt covenants for one of its loans on real estate for a minimum consolidated operating cash flow ratio, minimum liquidity, and consolidated net worth. In addition to these financial debt covenants, the Company is required to provide segment specific financial statements and building specific financial statements on all bank loans. As of December 31, 2024, the Company was in compliance with all these debt covenants.
The following tabulation shows the combined maturities of bank and other loans payable:
Schedule of Combined Maturities of Bank Loans Payable Lines of Credit and Notes and Contracts Payable
$ 12,559,420
2,013,541
2,026,749
2,096,945
11,380,242
Thereafter 76,663,207
Total $ 106,740,104
Interest expense in 2024 and 2023 was $4,254,100 and $4,865,327, respectively.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets
Cemetery Perpetual Care Trust Investments and Obligation
State law requires the Company to pay into endowment care trusts a portion of the proceeds from the sale of certain cemetery property interment rights for cemeteries that have established an endowment care trust. These endowment care trusts are defined as Variable Interest Entities pursuant to GAAP. The Company is the primary beneficiary of these trusts, as it absorbs both the losses and any expenses associated with the trusts. The Company has consolidated cemetery endowment care trust investments with a corresponding amount recorded as Cemetery Perpetual Care Obligation in the accompanying consolidated balance sheets.
The components of the cemetery perpetual care investments and obligation as of December 31, 2024 are as follows:
Schedule of Investments and Obligation
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
December 31, 2024:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies $ 651,428 $ - $ (2,010 ) $ 649,418
Obligations of states and political subdivisions 125,194 - (4,950 ) 120,244
Total fixed maturity securities available for sale $ 776,622 $ - $ (6,960 ) $ 769,662
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other $ 3,874,522 $ 1,271,529 $ (226,007 ) $ 4,920,044
Total equity securities at estimated fair value $ 3,874,522 $ 1,271,529 $ (226,007 ) $ 4,920,044
Mortgage loans held for investment at amortized cost:
Residential construction $ 202,600
Less: Allowance for credit losses (405 )
Commercial 1,939,269
Less: Allowance for credit losses -
Total mortgage loans held for investment $ 2,141,464
Cash and cash equivalents $ 1,002,396
Accrued investment income $ 2,937
Total cemetery perpetual care trust investments $ 8,836,503
Cemetery perpetual care obligation $ (5,642,693 )
Trust investments in excess of trust obligations $ 3,193,810
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
The components of the cemetery perpetual care investments and obligation as of December 31, 2023 are as follows:
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
December 31, 2023:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies $ 477,797 $ 302 $ (574 ) $ 477,525
Obligations of states and political subdivisions 115,792 - (5,114 ) 110,678
Corporate securities including public utilities 53,672 - (171 ) 53,501
Total fixed maturity securities available for sale $ 647,261 $ 302 $ (5,859 ) $ 641,704
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other $ 3,614,392 $ 859,680 $ (146,771 ) $ 4,327,301
Total equity securities at estimated fair value $ 3,614,392 $ 859,680 $ (146,771 ) $ 4,327,301
Mortgage loans held for investment at amortized cost:
Residential construction $ 247,360
Less: Allowance for credit losses (495 )
Total mortgage loans held for investment $ 246,865
Cash and cash equivalents $ 2,867,047
Total cemetery perpetual care trust investments $ 8,082,917
Cemetery perpetual care obligation $ (5,326,196 )
Trust investments in excess of trust obligations $ 2,756,721
Fixed Maturity Securities
The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of December 31, 2024 and 2023. The unrealized losses were primarily related to interest rate fluctuations. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:
Schedule of Fair Value of Fixed Maturity Securities
Unrealized Losses for Less than Twelve Months Fair Value Unrealized Losses for More than Twelve Months Fair Value Total Unrealized Loss Fair Value
At December 31, 2024
U.S. Treasury securities and obligations of U.S. Government agencies $ 2,010 $ 649,419 $ - $ - $ 2,010 $ 649,419
Obligations of states and political subdivisions 4,950 120,243 - - 4,950 120,243
Total unrealized losses $ 6,960 $ 769,662 $ - $ - $ 6,960 $ 769,662
At December 31, 2023
U.S. Treasury securities and obligations of U.S. Government agencies $ 574 $ 143,448 $ - $ - $ 574 $ 143,448
Obligations of states and political subdivisions - - 5,114 110,678 5,114 110,678
Corporate securities including public utilities - - 53,501 53,501
Total unrealized losses $ 574 $ 143,448 $ 5,285 $ 164,179 $ 5,859 $ 307,627
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
Relevant holdings were comprised of four securities with fair values aggregating 99.1% of aggregate amortized cost as of December 31, 2024. There were four securities with fair values aggregating 98.1% of aggregate amortized cost as of December 31, 2023. No credit losses have been recognized for 2024 and 2023, since the increase in unrealized losses is primarily a result of increases in interest rates. See Note 2 for additional information regarding the Company’s evaluation of the allowance for credit losses for fixed maturity securities available for sale.
The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of December 31, 2024, by contractual maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Schedule of Investments Classified by Contractual Maturity Date
Amortized Estimated Fair
Cost Value
Due in 1 year $ 503,125 $ 501,375
Due in 2-5 years 221,021 216,687
Due in 5-10 years 52,476 51,600
Due in more than 10 years - -
Total $ 776,622 $ 769,662
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
Restricted Assets
The Company has also established certain restricted assets to provide for future merchandise and service obligations incurred in connection with its pre-need sales for its cemetery and mortuary segment.
Restricted cash also represents escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds held by warehouse banks in accordance with loan purchase agreements and funds held in escrow for certain real estate construction development projects. Additionally, the Company elected to maintain its medical benefit fund without change from the prior year and has included this amount as a component of restricted cash. These restricted cash items are for the Company’s life insurance and mortgage segments.
Restricted assets as of December 31, 2024 are summarized as follows:
Schedule of Restricted Assets in Cemetery and Mortuary Endowment Care and Pre need Merchandise Funds
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
December 31, 2024:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies $ 1,741,029 $ 2,256 $ (1,511 ) $ 1,741,774
Obligations of states and political subdivisions 471,217 (4,223 ) 467,174
Corporate securities including public utilities 144,616 (2,227 ) 142,421
Total fixed maturity securities available for sale $ 2,356,862 $ 2,468 $ (7,961 ) $ 2,351,369
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other $ 8,547,709 $ 1,914,309 $ (489,852 ) $ 9,972,166
Total equity securities at estimated fair value $ 8,547,709 $ 1,914,309 $ (489,852 ) $ 9,972,166
Mortgage loans held for investment at amortized cost:
Residential construction $ 985,806
Less: Allowance for credit losses (1,972 )
Total mortgage loans held for investment $ 983,834
Other investments $ 1,939,269
Cash and cash equivalents (1) $ 8,553,803
Accrued investment income $ 6,395
Total restricted assets $ 23,806,836
(1) Including cash and cash equivalents of $7,657,958 for the life insurance and mortgage segments.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
Restricted assets as of December 31, 2023 are summarized as follows:
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
December 31, 2023:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies $ 932,737 $ 1,433 $ (1,000 ) $ 933,170
Obligations of states and political subdivisions 652,770 (4,542 ) 648,533
Corporate securities including public utilities 274,688 (2,740 ) 272,157
Total fixed maturity securities available for sale $ 1,860,195 $ 1,947 $ (8,282 ) $ 1,853,860
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other $ 6,516,044 $ 1,117,155 $ (247,996 ) $ 7,385,203
Total equity securities at estimated fair value $ 6,516,044 $ 1,117,155 $ (247,996 ) $ 7,385,203
Mortgage loans held for investment at amortized cost:
Residential construction $ 676,572
Less: Allowance for credit losses (1,353 )
Total mortgage loans held for investment $ 675,219
Cash and cash equivalents (1) $ 10,114,694
Total restricted assets $ 20,028,976
(1) Including cash and cash equivalents of $6,930,933 for the life insurance and mortgage segments.
A surplus note receivable in the amount of $4,000,000 at December 31, 2024 and 2023, from Security National Life, was eliminated in consolidation.
Fixed Maturity Securities
The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of December 31, 2024 and 2023. The unrealized losses were primarily related to interest rate fluctuations. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities.
Schedule of Fair Value of Fixed Maturity Securities
Unrealized Losses for Less than Twelve Months Fair Value Unrealized Losses for More than Twelve Months Fair Value Total Unrealized Loss Fair Value
At December 31, 2024
U.S. Treasury securities and obligations of U.S. Government agencies $ 1,511 $ 558,707 $ - $ - $ 1,511 $ 558,707
Obligations of states and political subdivisions 2,004 237,636 2,219 129,358 4,223 366,994
Corporate securities including public utilities 1,316 51,685 65,704 2,227 117,389
Total unrealized losses $ 4,831 $ 848,028 $ 3,130 $ 195,062 $ 7,961 $ 1,043,090
At December 31, 2023
U.S. Treasury securities and obligations of U.S. Government agencies $ 1,000 $ 249,877 $ - $ - $ 1,000 $ 249,877
Obligations of states and political subdivisions - - 4,542 451,985 4,542 451,985
Corporate securities including public utilities - - 2,740 221,334 2,740 221,334
Total unrealized losses $ 1,000 $ 249,877 $ 7,282 $ 673,319 $ 8,282 $ 923,196
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
Relevant holdings were comprised of 15 securities with fair values aggregating 99.2% of aggregate amortized cost as of December 31, 2024. Relevant holdings were comprised of 12 securities with fair values aggregating of 99.1% of aggregate amortized cost at December 31, 2023. No credit losses have been recognized for 2024 and 2023, since the increase in unrealized losses is primarily a result of increases in interest rates. See Note 3 for additional information regarding the Company’s evaluation of the allowance for credit losses for fixed maturity securities available for sale.
The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of December 31, 2024, by contractual maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Schedule of Investments Classified by Contractual Maturity Date
Amortized Estimated Fair
Cost Value
Due in 1 year $ 1,539,890 $ 1,539,487
Due in 2-5 years 308,335 307,820
Due in 5-10 years 100,606 100,648
Due in more than 10 years 408,031 403,414
Total $ 2,356,862 $ 2,351,369
See Notes 1, 2 and 17 for additional information regarding restricted assets and cemetery perpetual care trust investments.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
9) Income Taxes
The Company’s income tax liability is summarized as follows:
Summary of Income Tax Liability
December 31,
Current $ (725,175 ) $ 246,437
Deferred 13,804,432 13,506,544
Total $ 13,079,257 $ 13,752,981
The significant components of the Company’s deferred tax assets and liabilities are approximately as follows:
Schedule of Deferred Tax Assets and Liabilities
December 31,
Assets
Future policy benefits $ 15,144,640 $ 14,902,816
Loan loss reserve and allowances 1,395,203 1,908,243
Unearned premium 422,453 534,203
Net operating loss 1,245,888 1,050,770
Deferred compensation 2,033,686 2,138,385
Tax on unrealized appreciation - 491,271
Total deferred tax assets 20,241,870 21,025,688
Liabilities
Deferred policy acquisition costs 19,104,454 18,478,562
Basis difference in property, equipment and real estate 8,973,198 11,054,092
Value of business acquired 1,573,236 1,778,199
Deferred gains 1,365,803 1,308,365
Trusts 1,064,387 1,064,387
Intangibles 717,336 516,210
Other 534,311 332,417
Tax on unrealized appreciaton 713,577 -
Total deferred tax liabilities 34,046,302 34,532,232
Net deferred tax liability $ 13,804,432 $ 13,506,544
Prior period amounts have been adjusted to conform to the current period presentation.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
9) Income Taxes (Continued)
The Company’s income tax expense is summarized as follows:
Schedule of Components of Income Tax Expense (Benefit)
December 31,
Current
Federal $ 7,182,377 $ 4,091,306
State 73,654 209,537
Total Current Income Tax Expense (Benefit) 7,256,031 4,300,843
Deferred
Federal 189,698 (2,139,124 )
State 122,273 (356,365 )
Total Deferred Income Tax Expense (Benefit) 311,971 (2,495,489 )
Total $ 7,568,002 $ 1,805,354
The reconciliation of income tax expense at the U.S. federal statutory rates is as follows:
Schedule of Effective Income Tax Rate Reconciliation
December 31,
Computed expense at statutory rate $ 7,161,792 $ 3,423,086
State tax expense (benefit), net of federal tax benefit 154,782 (115,994 )
Change in valuation allowance - (1,506,144 )
Other, net 251,428 4,406
Income tax expense $ 7,568,002 $ 1,805,354
The Company’s overall effective tax rate for 2024 and 2023 was 22.2% and 11.1% respectively. The Company’s effective tax rates differ from the U.S. federal statutory rate of 21% partially due to its provision for state income taxes. The increase in the effective tax rate when compared to the prior year is partially due to the prior period reducing the valuation allowance related to Kilpatrick Life Insurance Company to zero and no valuation allowance adjustment in the current period.
As of December 31, 2024, the Company had no significant unrecognized tax benefits. As of December 31, 2024, the Company does not expect any material changes to the estimated amount of unrecognized tax benefits in the next twelve months. Federal and state income tax returns for 2021 through 2024 are subject to examination by taxing authorities.
Summary of Operating Loss Carryforwards
Net Operating Losses and Tax Credit Carryforwards:
Year of Expiration
$ -
-
-
-
-
Thereafter up through 2037 735,671
Indefinite carryforwards 2,436,242
$ 3,171,913
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
10) Reinsurance, Commitments and Contingencies
Reinsurance
The Company follows the procedure of reinsuring risks of more than a specified limit, which ranges from $25,000 to $100,000 on newly issued policies. The Company has also assumed various reinsurance agreements through acquisition of various life companies and has assets held in trust related to certain agreements. The Company is ultimately liable for these reinsured amounts in the event such reinsurers are unable to pay their portion of the claims. The Company evaluates the financial condition of reinsurers and monitors the concentration of credit risk. The Company had a significant concentration of credit risk with a single reinsurer of 94.4% and 94.0% of ceded life insurance in force as of December 31, 2024 and 2023, respectively. This represented approximately 7.8% and 8.8% of the Company’s total life insurance in force as of December 31, 2024 and 2023, respectively.
The Company’s life insurance in force and premiums for reinsurance are summarized as follows:
Schedule of Life Insurance in Force and Premiums for Reinsurance
Percentage
Ceded to Assumed
of Amount
Direct Other from Other Net Assumed
Amount Companies Companies Amount to Net
Life Insurance in force ($000) $ 3,914,583 $ 325,189 $ 33,088 $ 3,622,482 0.9 %
Premiums:
Life Insurance $ 121,392,765 $ 2,142,678 $ 217,701 $ 119,467,788 0.2 %
Accident and Health Insurance 187,949 - 187,957 0.0 %
Total premiums $ 121,580,714 $ 2,142,678 $ 217,709 $ 119,655,745 0.2 %
Life Insurance in force ($000) $ 3,517,812 $ 333,211 $ 34,742 $ 3,219,343 1.1 %
Premiums:
Life Insurance $ 116,141,852 $ 1,938,610 $ 239,744 $ 114,442,986 0.2 %
Accident and Health Insurance 215,442 - 215,450 0.0 %
Total premiums $ 116,357,294 $ 1,938,610 $ 239,752 $ 114,658,436 0.2 %
Mortgage Loan Loss Settlements
Future loan losses can be extremely difficult to estimate. However, the Company believes that the Company’s reserve methodology and its current practice of property preservation allow it to estimate potential losses on loans sold. See Note 3 for additional information about the Company’s loan loss reserve.
Non-Cancelable Leases
The Company leases office space and equipment under various non-cancelable agreements. See Note 23 regarding leases.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
10) Reinsurance, Commitments and Contingencies (Continued)
Other Contingencies and Commitments
The Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements. As of December 31, 2024, the Company’s commitments were approximately $216,368,000 for these loans, of which $152,361,000 had been funded. The Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made. The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed at 5.25% to 8.50% per annum. Maturities range between six and eighteen months.
The Company belongs to a captive insurance group (“the captive group”) for certain casualty insurance, worker compensation and general liability programs. The captive group maintains insurance reserves relative to these programs. The level of exposure from catastrophic events is limited by the purchase of stop-loss and aggregate liability reinsurance coverage. When estimating the insurance liabilities and related reserves, the captive group considers several factors, which include historical claims experience, demographic factors, severity factors and valuations provided by independent third-party actuaries. If actual claims or adverse development of loss reserves occurs and exceed these estimates, additional reserves may be required from the Company and its members. The estimation process contains uncertainty since captive insurance management must use judgment to estimate the ultimate cost that will be incurred to settle reported claims and unreported claims for incidents incurred but not reported as of the balance sheet date.
The Company is a defendant in various other legal actions arising from the normal conduct of business. The Company believes that none of the actions, if adversely determined, will have a material effect on the Company’s financial position or results of operations. Based on the Company’s assessment and legal counsel’s representations concerning the likelihood of unfavorable outcomes, no amounts have been accrued for the above claims in the consolidated financial statements. The Company is not a party to any other material legal proceedings outside the ordinary course of business or to any other legal proceedings, which, if adversely determined, would have a material adverse effect on its financial condition or results of operations.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
11) Retirement Plans
The Company has three 401(k) savings plans covering all eligible employees which include employer participation in accordance with the provisions of Section 401(k) of the Internal Revenue Code. The plans allow participants to make pretax contributions up to a maximum of $23,000 and $22,500 for the years 2024 and 2023, respectively or the statutory limits. The Company matched 100% of up to 3% of an employee’s total annual compensation and matched 50% of 4% to 5% of an employee’s annual compensation. The match was in Company stock. The Company’s contribution for 2024 and 2023 was $768,288 and $1,819,275, respectively under the plan.
The Company has a Non-Qualified Deferred Compensation Plan. Under the terms of the Plan, the Company will provide deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended. The Board has appointed a Committee of the Company to be the Plan Administrator and to determine the employees who are eligible to participate in the plan. The employees who participate may elect to defer a portion of their compensation into the plan. The Company may contribute into the plan at the discretion of the Company’s Board of Directors. The Company did not make any contributions for 2024 and 2023.
In June 2024, the Board members approved a motion to extend the Chief Executive Officer’s employment agreement, dated December 4, 2012, for an additional six-year term ending December 31, 2030. In the event of disability, the Chief Executive Officer’s salary would be continued for up to five years at 75% of its current level of compensation. In the event of a sale or merger of the Company and the Chief Executive Officer is not retained in his current position, the Company would be obligated to continue paying the Chief Executive Officer’s current compensation and benefits for seven years following the merger or sale. The agreement further provides that the Chief Executive Officer is entitled to receive annual retirement benefits beginning (i) one month from the date of his retirement (to commence no sooner than age 65), (ii) five years following complete disability, or (iii) upon termination of his employment without cause. These retirement benefits are to be paid for a period of twenty years in annual installments in the amount equal to 75% of his then current level of compensation. If the Chief Executive Officer dies prior to receiving all retirement benefits thereunder, the remaining benefits are to be paid to his heirs. The Company adjusted the accrual by $340,557 and nil during 2024 and 2023, respectively, to cover the present value of anticipated retirement benefits under the employment agreement. The liability accrued was $7,215,806 and $7,556,363 as of December 31, 2024 and 2023, respectively.
The Company also has an employment agreement with its former Vice President of Mortgage Operations and President of SecurityNational Mortgage, who retired from the Company on December 31, 2015. Under the terms of the employment agreement, this individual is entitled to receive retirement benefits from the Company for a period of ten years in an amount equal to 50% of his rate of compensation at the time of his retirement, which was $267,685 for the year ended December 31, 2015. If this individual dies prior to receiving all his retirement benefits under his employment agreement, the remaining benefits will be made to his heirs. The company has paid monthly installments that equal an annual payment of $133,843 to this individual each year since 2016. The liability accrued was $133,843 and $267,686 as of December 31, 2024 and 2023, respectively and is included in other liabilities and accrued expenses on the consolidated balance sheets.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
12) Capital Stock
The Company has one class of preferred stock of $1.00 par value, 5,000,000 shares authorized, of which none are issued. The preferred stock is non-voting.
The Company has two classes of common stock with shares outstanding, Class A common shares and Class C common shares. Class C shares have 10 votes per share on all matters except for the election of one third of the directors who are elected solely by the Class A shares. Class C shares are convertible into Class A shares at any time on a one-to-one ratio.
Stockholders of both Class A and Class C Common Stock have received 5% stock dividends in the years 1990 through 2019, a 7.5% stock dividend in the year 2020, and a 5% stock dividend in the years 2021 through 2024, as authorized by the Company’s Board of Directors.
The Company has Class B common stock of $1.00 par value, 5,000,000 shares authorized, of which none are issued. Class B shares are non-voting stock except to any proposed amendment to the Articles of Incorporation which would affect Class B common stock.
The following table summarizes the activity in shares of capital stock.
Summary of Activities in Shares of Capital Stock
Class A Class C
Outstanding shares at December 31, 2022 (1) 20,712,892 3,180,031
Exercise of stock options 279,177 -
Vesting of restricted stock units 1,215 -
Conversion of Class C to Class A 59,599 (59,599 )
Outstanding shares at December 31, 2023 (1) 21,052,883 3,120,432
Common stock, shares, outstanding, beginning 21,052,883 3,120,432
Exercise of stock options 200,072 201,667
Vesting of restricted stock units 1,785 -
Conversion of Class C to Class A (266 )
Outstanding shares at December 31, 2024 21,255,006 3,321,833
Common stock, shares, outstanding, ending 21,255,006 3,321,833
(1) Adjusted retroactively for the effect of annual stock dividends
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
12) Capital Stock (Continued)
Earnings per share amounts have been retroactively adjusted for the effect of annual stock dividends. In accordance with GAAP, the basic and diluted earnings per share amounts were calculated as follows:
Schedule of Earnings Per Share, Basic and Diluted
Years Ended December 31,
Numerator:
Net earnings $ 26,535,768 $ 14,495,058
Denominator:
Denominator for basic earnings per share-weighted-average shares 23,314,643 23,189,418
Effect of dilutive securities
Employee stock options 660,835 623,906
Unvested restricted stock units -
Dilutive potential common shares 660,865 623,906
Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions 23,975,508 23,813,324
Basic earnings per share $ 1.14 $ 0.63
Diluted earnings per share $ 1.11 $ 0.61
For 2024 and 2023, there were 363,700 and nil of anti-dilutive employee stock option shares, respectively, that were not included in the computation of diluted net earnings per common share as their effect would be anti-dilutive. Basic and diluted earnings per share amounts are the same for each class of common stock.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
13) Stock Compensation Plans
The Company has equity incentive plans (the “2013 Plan”, the “2014 Director Plan” and the “2022 Plan”).
Stock Options
Stock based compensation expense for stock options issued of $794,654 and $601,058 has been recognized under these plans for 2024 and 2023, respectively, and is included in personnel expenses on the consolidated statements of earnings. As of December 31, 2024, the total unrecognized compensation expense related to the stock options issued was $1,096,891, which is expected to be recognized over the remaining vesting period.
The fair value of each stock option granted is estimated on the date of grant using the Black Scholes Option Pricing Model. The Company estimates the expected life of the options using the simplified method. Future volatility is estimated based upon the weighted historical volatility of the Company’s Class A Common Stock over a period equal to the expected life of the options. The risk-free interest rate for the expected life of the options is based upon the Federal Reserve Board’s daily interest rates in effect at the time of the grant.
The following table summarizes the assumptions used in estimating the fair value of each stock option granted along with the weighted-average fair value of the stock options granted.
Schedule of Assumptions Used
Assumptions
Grant Date Plan Weighted-
Average Fair Value
of Each Option Expected Dividend Yield (1) Underlying stock FMV Weighted-
Average Volatility Weighted-
Average Risk-Free Interest Rate Weighted-
Average Expected Life (years)
December 26, 2024 All Plans $ 3.01 5 % $ 11.87 38.41 % 4.38 % 5.31
December 6, 2024 All Plans $ 3.17 5 % $ 13.08 38.17 % 4.00 % 5.12
January 12, 2024 All Plans $ 2.01 5 % $ 8.35 37.51 % 3.81 % 5.31
January 8, 2024 All Plans $ 2.16 5 % $ 8.93 37.50 % 3.93 % 5.31
December 1, 2023 All Plans $ 1.88 5 % $ 7.99 36.76 % 4.14 % 4.90
January 30, 2023 All Plans $ 1.65 5 % $ 7.10 36.73 % 3.64 % 5.31
January 18, 2023 All Plans $ 1.70 5 % $ 7.37 36.79 % 3.40 % 5.31
(1) Stock dividend
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
13) Stock Compensation Plans (Continued)
The activity of the stock option plans is summarized as follows:
Schedule of Activity of Stock Option Plans
Number of
Class A Shares Weighted Average Exercise Price (2) Number of
Class C Shares Weighted Average Exercise Price (2)
Outstanding at January 1, 976,605 $ 4.33 1,157,203 $ 5.04
Adjustment for the effect of stock dividends 38,266
57,859
Granted 106,500
305,000
Exercised (286,965 )
-
Cancelled (836 )
-
Outstanding at December 31, 2023 833,570 $ 4.91 1,520,062 $ 5.57
Adjustment for the effect of stock dividends 38,724
76,005
Granted 59,200
330,000
Exercised (267,491 )
(201,667 )
Cancelled (17,409 )
-
Outstanding at December 31, 2024 646,594 $ 5.93 1,724,400 $ 7.23
Exercisable at end of year 599,769 $ 5.42 1,394,400 $ 5.82
Available options for future grant 79,281
146,238
Weighted average contractual term of options outstanding at December 31, 2024 5.55 years
6.71 years
Weighted average contractual term of options exercisable at December 31, 2024 5.36 years
6.05 years
Aggregated intrinsic value of options outstanding at December 31, 2024 (1) $ 3,944,715
$ 8,269,398
Aggregated intrinsic value of options exercisable at December 31, 2024 (1) $ 3,962,435
$ 8,652,316
(1) The Company used a stock price of $12.03 as of December 31, 2024 to derive intrinsic value.
(2) Adjusted for the effect of annual stock dividends.
The total intrinsic value (which is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on the exercise date) of stock options exercised during 2024 and 2023 was $3,104,163 and $657,354, respectively.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
13) Stock Compensation Plans (Continued)
Restricted Stock Units (“RSUs”)
Stock based compensation expense for RSUs issued of $6,166 and $304 has been recognized under these plans for the 2024 and 2023, respectively, and is included in personnel expenses on the consolidated statements of earnings. As of December 31, 2024, the total unrecognized compensation expense related to the RSUs issued was $37,299, which is expected to be recognized over the remaining vesting period.
The activity of the RSUs is summarized as follows:
Schedule of Activity Restricted Stock Units
Number of
Class A Shares Weighted Average Grant Date Fair Value
Non-vested at January 1, 2023 1,620 $ 6.48
Granted 1,840
Vested (1,215 )
Non-vested at December 31, 2023 2,245 $ 7.72
Granted 12,353
Vested (1,785 )
Non-vested at December 31, 2024 12,813 $ 12.90
Available RSUs for future grant 4,187
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
14) Statutory Financial Information and Dividend Limitations
The Company’s insurance subsidiaries are also required to prepare statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the insurance department of the applicable state of domicile. The prescribed statutory accounting practices include the Accounting Practices and Procedures Manual of the NAIC, a variety of publications of the NAIC, as well as state laws, regulations, and general administrative rules. Statutory accounting practices differ from GAAP primarily since they require expensing policy acquisition and certain sales inducement costs as incurred, establishing life insurance reserves based on different actuarial assumptions, applying different valuing methods for certain investments and accounting for deferred taxes on a different basis.
The statutory net income and capital and surplus of the Company’s insurance subsidiaries, determined in accordance with statutory accounting practices prescribed by insurance regulatory authorities are as follows:
Schedule of Statutory Accounting Practices
Statutory Net Income Statutory Capital and Surplus
Years Ended December 31, December 31,
2023
Amounts by insurance subsidiary:
Security National Life Insurance Company $ 9,618,883 $ 7,419,511 $ 87,559,495 $ 76,330,794
Kilpatrick Life Insurance Company 2,749,370 2,967,779 21,419,520 20,535,591
First Guaranty Insurance Company 1,336,977 958,497 9,140,283 8,427,355
Southern Security Life Insurance Company, Inc. 1,584,583 1,578,322
Trans-Western Life Insurance Company 512,612 512,570
Total $ 13,705,295 $ 11,345,837 $ 120,216,493 $ 107,384,632
State Insurance Departments impose minimum risk-based capital (“RBC”) requirements that were developed by the NAIC on insurance enterprises. The formulas for determining the RBC specify various factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio (the Ratio) of the enterprise’s regulatory total adjusted capital, as defined by the NAIC, to its authorized control level, as defined by the NAIC. Enterprises below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. The life insurance subsidiaries each have a ratio that is greater than the first level of regulatory action as of December 31, 2024. The Company does not have any guarantees to maintain the capital and surplus of any affiliates except for the Company’s agreement to provide additional capital to Security National Life Insurance Company in the event risk-based capital drops below 350% of the authorized control level.
Generally, the net assets of the life insurance subsidiaries available for transfer to the Company are limited to the amounts of the life insurance subsidiaries net assets, as determined in accordance with statutory accounting practices, that exceed minimum statutory capital requirements. Additional requirements must be met depending on the state, and payments of such amounts as dividends are subject to approval by regulatory authorities.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
14. Statutory Financial Information and Dividend Limitations (Continued)
Under the Utah Insurance Code, Security National Life Insurance Company is permitted to pay stockholder dividends, or otherwise make distributions, to the Company subject to certain limitations. Security National Life Insurance Company must ensure that its surplus held for policyholders is reasonable in relation to its outstanding liabilities and adequate to its financial needs after payment of any such dividend or distribution. Furthermore, where any dividend or distribution, together with all other dividends and distributions made within the preceding 12 months, exceeds the lesser of (i) 10% of its surplus held for policyholders as of the next preceding December 31; or (ii) its net gain from operations, not including realized capital gains, for the 12-month period ending the next preceding December 31, such dividend or distribution constitutes “extraordinary” under Utah law and Security National Life Insurance Company would be required to file notice of its intention to declare such a dividend or make such a distribution with the Utah Commissioner and the Utah Commissioner must either approve the distribution or dividend or not disapprove the dividend or distribution within 30 days’ of the notice filing. Based on Security National Life Insurance Company’s surplus held for policyholders and net gain from operations as of December 31, 2024, the maximum aggregate amount of dividends and distributions that it could pay or make in 2024 and which would not constitute an “extraordinary” dividend or distribution under Utah law and would therefore not require notice and approval or lack of disproval from the Utah Commissioner, would be approximately $7,358,000.
Under the Louisiana Insurance Code, First Guaranty Insurance Company and Kilpatrick Life Insurance Company are permitted to pay stockholder dividends, or otherwise make distributions, to the Company subject to certain limitations. First Guaranty Insurance Company and Kilpatrick Life Insurance Company must ensure that its surplus held for policyholders is reasonable in relation to its outstanding liabilities and adequate to its financial needs after payment of any such dividend or distribution. Furthermore, where any dividend or distribution, together with all other dividends and distributions made within the preceding 12 months, exceeds the lesser of (i) 10% of its surplus held for policyholders as of the next preceding December 31; or (ii) its net gain from operations, not including realized capital gains, for the 12-month period ending the next preceding December 31, such dividend or distribution constitutes “extraordinary” under Louisiana law and First Guaranty Insurance Company and Kilpatrick Life Insurance Company would be required to file notice of its intention to declare such a dividend or make such a distribution with the Louisiana Commissioner and the Louisiana Commissioner must either approve the distribution or dividend or not disapprove the dividend or distribution within 30 days’ of the notice filing. Based on First Guaranty Insurance Company’s and Kilpatrick Life Insurance Company’s surplus held for policyholders and net gain from operations as of December 31, 2024, the maximum aggregate amount of dividends and distributions that it could pay or make in 2024 and which would not constitute an “extraordinary” dividend or distribution under Louisiana law and would therefore not require notice and approval or lack of disproval from the Louisiana Commissioner, would be approximately $742,000 for First Guaranty Insurance Company and $1,974,000 for Kilpatrick Life Insurance Company.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
15) Business Segment Information
See Note 1 regarding the adoption of ASU 2023-07.
Description of Products and Services by Segment
The Company has three operating and reportable business segments: life insurance, cemetery and mortuary, and mortgage. The Company’s life insurance segment’s revenue consists of life insurance premiums, fees earned on factored life insurance policies and net investment income derived from investing policyholder and surplus funds. Its expenses include operating expenses to collect insurance premiums and insurance policy receivables, administer claims, and commissions related to the sale of insurance products sold by the Company’s independent agency force. The Company’s cemetery and mortuary segment’s revenue consists of fees from the sale of at-need cemetery and mortuary merchandise, services at its mortuaries and cemeteries, pre-need sales of cemetery spaces after collection of 10% or more of the purchase price and the net investment income from investing surplus cash. Its expenses include operating expenses to maintain mortuary and cemetery operations and commissions related to the sale of insurance products sold by the Company’s agents. The Company’s mortgage segment’s revenue consists of residential mortgage origination fee income and mortgage interest income. Its expenses include normal operating expenses related to the origination and sale of residential mortgage loans, loan servicing and warehouse interest and fee expenses.
Services and Cost Sharing Policies
The accounting policies of the Company’s operating and reportable segments are the same as those described in the Significant Accounting Principles. Intersegment revenues are recorded at cost plus an agreed upon intercompany profit and are eliminated upon consolidation. In addition to revenues, the reportable segments share in business services and costs including personnel expenses, rent, information technology, software, interest expense, and other similar operating costs. These shared services and costs are allocated between the segments using prevailing market rates and other agreed upon allocation methods.
Factors Management Used to Identify the Company’s Operating and Reportable Segments
The Company’s operating and reportable segments are business units that are managed separately due to the different products provided and the need to report separately to the various regulatory jurisdictions.
Chief Operating Decision Maker (“CODM”)
The Company’s CODM is the Chief Executive Officer. The following table summarizes significant segment expenses. The significant expenses are based on the information that the CODM is regularly provided to assess segment performance. The CODM reviews the regularly provided information for each segment monthly and gives added emphasis on month over month and year over year comparative results. The CODM considers these comparative results when making decisions about the allocation of the Company’s resources to each segment. The measure of segment profit or loss for the Company’s three operating and reportable business segments is net earnings.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
15) Business Segment Information (Continued)
Schedule of Revenues and Expenses by Reportable Segment
Insurance Mortuary Mortgage Total
Year Ended December 31, 2024
Life Cemetery/
Insurance Mortuary Mortgage Total
Revenues:
From external sources:
Revenue from external customers $ 119,655,745 $ 29,037,173 $ 107,558,640 $ 256,251,558
Net investment income 68,254,989 2,568,511 901,749 71,725,249
Gains (losses) on investments and other assets 2,054,994 873,166 (986,262 ) 1,941,898
Other revenues 1,563,812 543,354 2,496,797 4,603,963
Intersegment revenues 7,272,110 340,933 573,449 8,186,492
Total segment revenues 198,801,650 33,363,137 110,544,373 342,709,160
Elimination of intersegment revenues
(8,186,492 )
Total consolidated revenues
334,522,668
Less:
Death benefits 58,116,837 - -
Surrenders and other policy benefits 4,584,763 - -
Increase in future policy benefits 36,253,859 - -
Amortization of deferred policy and pre-need acquisition costs and value of business acquired
15,162,995 777,376 -
Selling, general and administrative expenses:
Commissions 3,809,118 1,564,426 41,599,365
Personnel 30,396,560 10,215,565 44,472,677
Advertising 466,821 568,597 2,079,702
Rent and rent related 434,604 158,950 4,553,515
Depreciation on property and equipment 923,365 830,855 629,401
Cost related to funding mortgage loans - - 6,134,709
Data processing and IT related (1) 847,845 240,946 3,453,741
Premium taxes on insurance premiums and other considerations (1) 3,067,467 - -
Other segment items (1)(2) 8,640,857 4,975,269 6,401,085
Intersegment expenses (3) 913,279 365,635 6,907,578
Interest expense 3,727,514 525,759
Costs of goods and services sold-mortuaries and cemeteries - 4,803,528 -
Income tax expense (benefit) 6,604,520 2,227,353 (1,263,871 )
Segment net earnings (loss) 24,851,246 6,633,810 (4,949,288 ) 26,535,768
Net earnings
$ 26,535,768
Segment assets $ 1,396,093,195 $ 101,524,343 $ 85,174,812 $ 1,582,792,350
Elimination of intersegment assets
(92,985,136 )
Total consolidated assets
$ 1,489,807,214
Expenditures for long-lived assets $ 52,414,507 $ 2,185,269 $ 219,054 $ 54,818,830
(1) Included in other expenses on the consolidated statements of earnings. Data processing and IT related expenses includes various software subscriptions, maintenance, consulting, support and storage fees.
(2) For each reportable segment, other segment items includes:
Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses.
Cemetery/Mortuary - bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible assets, and certain overhead expenses.
Mortgage - bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization expense of mortgage servicing rights, and certain overhead expenses.
(3)
For each reportable segment, intersegment expenses includes:
Life Insurance - mortgage servicing fees and interest expense.
Cemetery/Mortuary - rent expense, data processing and IT related expenses, and interest expense.
Mortgage - rent expense and interest expense.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
15) Business Segment Information (Continued)
Insurance Mortuary Mortgage Total
Year Ended December 31, 2023
Life Cemetery/
Insurance Mortuary Mortgage Total
Revenues:
From external sources:
Revenue from external customers $ 114,735,304 $ 27,864,811 $ 98,071,104 $ 240,671,219
Net investment income 67,811,926 2,951,577 1,579,544 72,343,047
Gains (losses) on investments and other assets 962,824 717,312 157,206 1,837,342
Other revenues 1,666,020 404,256 1,575,606 3,645,882
Intersegment revenues 8,203,306 340,001 531,406 9,074,713
Total segment revenues 193,379,380 32,277,957 101,914,866 327,572,203
Elimination of intersegment revenues
(9,074,713 )
Total consolidated revenues
318,497,490
Less:
Death benefits 61,390,517 - -
Surrenders and other policy benefits 4,612,346 - -
Increase in future policy benefits 34,008,997 - -
Amortization of deferred policy and pre-need acquisition costs and value of business acquired
17,485,699 538,639 -
Selling, general and administrative expenses:
Commissions 3,963,185 1,777,071 34,189,300
Personnel 26,769,211 9,722,659 46,649,889
Advertising 638,071 663,113 2,409,261
Rent and rent related 414,564 159,877 6,282,696
Depreciation on property and equipment 880,116 812,641 658,904
Cost related to funding mortgage loans - - 6,440,439
Data processing and IT related (1) 1,007,023 227,599 4,107,542
Premium taxes on insurance premiums and other considerations (1) 2,939,828 - -
Other segment items (1)(2) 9,045,037 4,733,721 9,998,106
Intersegment expenses (3) 871,407 391,316 7,811,990
Interest expense 4,081,348 783,024
Costs of goods and services sold-mortuaries and cemeteries - 4,805,700 -
Income tax expense (benefit) 3,655,148 2,131,289 (3,981,083 )
Segment net earnings (loss) 21,616,883 6,313,377 (13,435,202 ) 14,495,058
Net earnings
$ 14,495,058
Segment assets $ 1,329,049,024 $ 97,547,937 $ 97,018,754 $ 1,523,615,715
Elimination of intersegment assets
(93,063,440 )
Total consolidated assets
$ 1,430,552,275
Expenditures for long-lived assets $ 23,010,579 $ 856,716 $ 137,246 $ 24,004,541
(1) Included in other expenses on the consolidated statements of earnings. Data processing and IT related expenses includes various software subscriptions, maintenance, consulting, support and storage fees.
(2) For each reportable segment, other segment items includes:
Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses.
Cemetery/Mortuary - bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible assets, and certain overhead expenses.
Mortgage - bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization expense of mortgage servicing rights, and certain overhead expenses.
(3)
For each reportable segment, intersegment expenses includes:
Life Insurance - mortgage servicing fees and interest expense.
Cemetery/Mortuary - rent expense, data processing and IT related expenses, and interest expense.
Mortgage - rent expense and interest expense.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
16) Related Party Transactions
The Company’s Board of Directors has a written procedure, which requires disclosure to the Board of any material interest or any affiliation on the part of any of its officers, directors or employees that is in conflict or may conflict with the interests of the Company. The Company and its Board of Directors are unaware of any related party transactions that require disclosure as of December 31, 2024.
17) Fair Value of Financial Instruments
GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. GAAP also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. Fair value measurements are classified under the following hierarchy:
Level 1: Financial assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.
Level 2: Financial assets and financial liabilities whose values are based on the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets; or
c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.
Level 3: Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs may reflect the Company’s estimates of the assumptions that market participants would use in valuing financial assets and financial liabilities.
The Company utilizes a combination of third-party valuation service providers, brokers, and internal valuation models to determine fair value.
The following methods and assumptions were used by the Company in estimating the fair value disclosures related to significant financial instruments:
The items shown under Level 1 and Level 2 are valued as follows:
Fixed Maturity Securities Available for Sale: The fair values of fixed maturity securities are based on quoted market prices, when available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements (considered Level 3 financial assets), are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit, and maturity of the investments.
Equity Securities: The fair values for equity securities are based on quoted market prices.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
17) Fair Value of Financial Instruments (Continued)
Restricted Assets: A portion of these assets include equity securities and fixed maturity securities available for sale that have quoted market prices that are used to determine fair value. Also included are cash and cash equivalents and participations in mortgage loans. The carrying amounts reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair values due to their short-term nature.
Cemetery Perpetual Care Trust Investments: A portion of these assets include equity securities and fixed maturity securities available for sale that have quoted market prices that are used to determine fair value. Also included are cash and cash equivalents. The carrying amounts reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair values due to their short-term nature
Additionally, there were no transfers between Level 1 and Level 2 in the fair value hierarchy.
The items shown under Level 3 are valued as follows:
Loans Held for Sale: The Company elected the fair value option for loans held for sale. The fair value is based on quoted market prices, when available. When a quoted market price is not readily available, the Company uses the market price from its last sale of similar assets. Fair value is often difficult to determine and may contain significant unobservable inputs.
Loan Commitments and Forward Sale Commitments: The Company’s mortgage segment enters into loan commitments with potential borrowers and forward sale commitments to sell loans to third-party investors. The Company also uses a hedging strategy for these transactions. A loan commitment binds the Company to lend funds to a qualified borrower at a specified interest rate and within a specified period, generally up to 30 days after issuance of the loan commitment. Loan commitments are defined to be derivatives under GAAP and are recognized at fair value on the consolidated balance sheets with changes in their fair values recorded in current earnings.
The Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted MBS prices, estimates of the fair value of mortgage servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the commitment. The change in fair value of the underlying mortgage loan is measured from the date the loan commitment is issued. Following issuance, the value of a mortgage loan commitment can be either positive or negative depending upon the change in value of the underlying mortgage loans. Fallout rates and other factors from the Company’s recent historical data are used to estimate the quantity and value of mortgage loans that will fund within the terms of the commitments.
Impaired Mortgage Loans Held for Investment: The Company believes that the fair value of these nonperforming loans will approximate the unpaid principal balance expected to be recovered based on the fair value of the underlying collateral. For residential and commercial properties, the collateral value is estimated by obtaining an independent appraisal. The appraisal typically considers area comparable properties and property condition as well as potential rental income that could be generated (particularly for commercial properties). For residential construction loans, the collateral is typically incomplete, so fair value is estimated as the replacement cost using data from a provider of building cost information to the real estate construction.
Impaired Real Estate Held for Investment: Fair value is generally determined by obtaining an independent appraisal, which typically considers area comparable properties and property condition. The Company believes that in an orderly market, fair value approximates the replacement cost of a home and will list for sale any foreclosed properties. In a disorderly market, the Company believes the highest and best use of the properties is as income producing assets and will hold the properties as rental properties, matching the income from the investment in rental properties with the funds required for estimated future policy benefits. Accordingly, in addition to an appraisal, the fair value determination will generally be weighed more heavily toward the rental analysis.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
17) Fair Value of Financial Instruments (Continued)
It should be noted that for replacement cost, when determining the fair value of real estate held for investment, the Company uses a provider of building cost information to the real estate construction industry. For the investment analysis, the Company used market data based upon its real estate operation experience and projected the present value of the net rental income over seven years. The Company also considers area comparable properties and property condition when determining fair value.
In addition to this analysis performed by the Company, the Company depreciates Real Estate Held for Investment. This depreciation reduces the book value of these properties and lessens the exposure to the Company from further deterioration in real estate values.
Mortgage Servicing Rights: The Company initially recognizes MSRs at their estimated fair values derived from the net cash flows associated with the servicing contracts, where the Company assumes the obligation to service the loan in the sale transaction.
The following table summarizes Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by their classification in the consolidated balance sheet as of December 31, 2024.
Schedule of Fair Value Assets and Liabilities Measured on a Recurring Basis
Total Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
Assets accounted for at fair value on a
recurring basis
Fixed maturity securities available for sale $ 366,546,129 $ - $ 365,396,203 $ 1,149,926
Equity securities 15,771,681 15,771,681 - -
Loans held for sale 131,181,148 - - 131,181,148
Restricted assets (1) 2,351,369 - 2,351,369 -
Restricted assets (2) 9,972,166 9,972,166 - -
Cemetery perpetual care trust investments (1) 769,662 - 769,662 -
Cemetery perpetual care trust investments (2) 4,920,044 4,920,044 - -
Derivatives - loan commitments (3) 5,348,089 - - 5,348,089
Total assets accounted for at fair value on a
recurring basis $ 536,860,288 $ 30,663,891 $ 368,517,234 $ 137,679,163
Liabilities accounted for at fair value on a
recurring basis
Derivatives - loan commitments (4) $ (3,034,879 ) $ - $ - $ (3,034,879 )
Total liabilities accounted for at fair value on a recurring basis $ (3,034,879 ) $ - $ - $ (3,034,879 )
(1) Fixed maturity securities available for sale
(2) Equity securities
(3) Included in other assets on the consolidated balance sheets
(4) Included in other liabilities and accrued expenses on the consolidated balance sheets
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
17) Fair Value of Financial Instruments (Continued)
The following table summarizes Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by their classification in the consolidated balance sheet as of December 31, 2023.
Total Quoted Prices in Active Markets for Identical Assets
(Level 1) Significant Observable Inputs
(Level 2) Significant Unobservable Inputs
(Level 3)
Assets accounted for at fair value on a
recurring basis
Fixed maturity securities available for sale $ 381,535,986 $ - $ 380,297,330 $ 1,238,656
Equity securities 13,636,071 13,636,071 - -
Loans held for sale 126,549,190 - - 126,549,190
Restricted assets (1) 1,853,860 - 1,853,860 -
Restricted assets (2) 7,385,203 7,385,203 - -
Cemetery perpetual care trust investments (1) 641,704 - 641,704 -
Cemetery perpetual care trust investments (2) 4,327,301 4,327,301 - -
Derivatives - loan commitments (3) 4,995,486 - - 4,995,486
Total assets accounted for at fair value on a
recurring basis $ 540,924,801 $ 25,348,575 $ 382,792,894 $ 132,783,332
Liabilities accounted for at fair value on a
recurring basis
Derivatives - loan commitments (4) $ (3,412,224 ) $ - $ - $ (3,412,224 )
Total liabilities accounted for at fair value
on a recurring basis $ (3,412,224 ) $ - $ - $ (3,412,224 )
(1) Fixed maturity securities available for sale
(2) Equity securities
(3) Included in other assets on the consolidated balance sheets
(4) Included in other liabilities and accrued expenses on the consolidated balance sheets
For Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2024, the significant unobservable inputs used in the fair value measurements were as follows:
Schedule of Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis
Significant Range of Inputs
Fair Value at Valuation Unobservable Minimum Maximum Weighted
12/31/2024 Technique Input(s) Value Value Average
Loans held for sale $ 131,181,148 Market approach Investor contract pricing as a percentage of unpaid principal balance 84.0 % 109.0 % 102.0 %
Derivatives - loan commitments (net) 2,313,210 Market approach Pull-through rate 63.0 % 100.0 % 83.0 %
Initial-Value N/A N/A N/A
Servicing 0 bps 242 bps 47 bps
Fixed maturity securities available for sale 1,149,926 Broker quotes Pricing quotes $ 100.00 $ 101.20 $ 100.16
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
17) Fair Value of Financial Instruments (Continued)
For Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2023, the significant unobservable inputs used in the fair value measurements were as follows:
Significant Range of Inputs
Fair Value at Valuation Unobservable Minimum Maximum Weighted
12/31/2023 Technique Input(s) Value Value Average
Loans held for sale $ 126,549,190 Market approach Investor contract pricing as a percentage of unpaid principal balance 70.0 % 121.0 % 100.0 %
Derivatives - loan commitments (net) 1,583,262 Market approach Pull-through rate 70.0 % 99.0 % 86.0 %
Initial-Value N/A N/A N/A
Servicing 0 bps 119 bps 49 bps
Fixed maturity securities available for sale 1,238,656 Broker quotes Pricing quotes $ 98.40 $ 102.46 $ 99.86
The following table is a summary of changes in the consolidated balance sheet line items measured using level 3 inputs:
Schedule of Changes in the Consolidated Balance Sheet Line Items Measured Using Level 3 Inputs
Net Derivatives Loan Commitments Loans Held for Sale Fixed Maturity Securities Available for Sale
Balance - December 31, 2023 $ 1,583,262 $ 126,549,190 $ 1,238,656
Originations/purchases - 2,295,830,408 -
Sales, maturities and paydowns - (2,338,209,587 ) (92,593 )
Foreclosed into real estate held for sale - (858,977 ) -
Foreclosed into receivables - (382,936 ) -
Total gains (losses):
Included in earnings 729,948 (1) 48,253,050 (1) - (2)
Included in other comprehensive income - - 3,863
Balance - December 31, 2024 $ 2,313,210 $ 131,181,148 $ 1,149,926
(1) As a component of mortgage fee income on the consolidated statements of earnings
(2) As a component of net investment income on the consolidated statements of earnings
The following table is a summary of changes in the consolidated balance sheet line items measured using level 3 inputs:
Net Derivatives Loan Commitments Loans Held for Sale Fixed Maturity Securities Available for Sale
Balance - December 31, 2022 $ 2,706,877 $ 141,179,620 $ 1,435,519
Originations/purchases - 2,173,080,584 -
Sales, maturities and paydowns - (2,224,454,040 ) (129,521 )
Transfer to mortgage loans held for investment - (3,017,626 ) -
Total gains (losses):
Included in earnings (1,123,615 ) (1) 39,760,652 (1) (108 ) (2)
Included in other comprehensive income - - (67,234 )
Balance - December 31, 2023 $ 1,583,262 $ 126,549,190 $ 1,238,656
(1) As a component of mortgage fee income on the consolidated statements of earnings
(2) As a component of net investment income on the consolidated statements of earnings
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
17) Fair Value of Financial Instruments (Continued)
The Company did not have any financial assets and financial liabilities measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023, respectively.
Fair Value of Financial Instruments Carried at Other Than Fair Value
ASC 825, Financial Instruments, requires disclosure of fair value information about financial instruments whether or not recognized in the balance sheet, for which it is practicable to estimate that value.
The Company uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction as of December 31, 2024 and 2023.
The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows as of December 31, 2024:
Schedule of Financial Instruments Carried at Other Than Fair Value
Carrying Value Level 1 Level 2 Level 3 Total Estimated Fair Value
Assets
Mortgage loans held for investment
Residential $ 89,780,350 $ - $ - $ 90,168,328 $ 90,168,328
Residential construction 150,211,240 - - 150,211,240 150,211,240
Commercial 61,755,768 - - 60,864,775 60,864,775
Mortgage loans held for investment, net $ 301,747,358 $ - $ - $ 301,244,343 $ 301,244,343
Policy loans 14,019,248 - - 14,019,248 14,019,248
Insurance assignments, net (1) 46,956,932 - - 46,956,932 46,956,932
Restricted assets (2) 983,834 - - 983,834 983,834
Cemetery perpetual care trust investments (2) 2,141,464 - - 2,141,464 2,141,464
Mortgage servicing rights, net 2,939,878 - - 4,552,316 4,552,316
Liabilities
Bank and other loans payable $ (106,740,104 ) $ - $ - $ (90,455,678 ) $ (90,455,678 )
Policyholder account balances (3) (37,066,043 ) - - (37,626,593 ) (37,626,593 )
Future policy benefits - annuities (3) (105,716,087 ) - - (104,611,544 ) (104,611,544 )
(1) Included in other investments and policy loans on the consolidated balance sheets
(2) Mortgage loans held for investment
(3) Included in future policy benefits and unpaid claims on the consolidated balance sheets
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
17) Fair Value of Financial Instruments (Continued)
The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows as of December 31, 2023:
Carrying Value Level 1 Level 2 Level 3 Total Estimated Fair Value
Assets
Mortgage loans held for investment
Residential $ 99,519,750 $ - $ - $ 96,998,106 $ 96,998,106
Residential construction 103,529,896 - - 103,529,896 103,529,896
Commercial 72,567,191 - - 72,149,530 72,149,530
Mortgage loans held for investment, net $ 275,616,837 $ - $ - $ 272,677,532 $ 272,677,532
Policy loans 13,264,183 - - 13,264,183 13,264,183
Insurance assignments, net (1) 44,051,486 - - 44,051,486 44,051,486
Restricted assets (2) 675,219 - - 675,219 675,219
Cemetery perpetual care trust investments (2) 246,865 - - 246,865 246,865
Mortgage servicing rights, net 3,461,146 - - 4,543,657 4,543,657
Liabilities
Bank and other loans payable $ (105,555,137 ) $ - $ - $ (105,555,137 ) $ (105,555,137 )
Policyholder account balances (3) (39,245,123 ) - - (48,920,691 ) (48,920,691 )
Future policy benefits - annuities (3) (106,285,010 ) - - (102,177,585 ) (102,177,585 )
(1) Included in other investments and policy loans on the consolidated balance sheets
(2) Mortgage loans held for investment
(3) Included in future policy benefits and unpaid claims on the consolidated balance sheets
The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows:
Mortgage Loans Held for Investment: The estimated fair value of the Company’s mortgage loans held for investment is determined using various methods. The Company’s mortgage loans are grouped into three categories: Residential, Residential Construction and Commercial. When estimating the expected future cash flows, it is assumed that all loans will be held to maturity, and any loans that are non-performing are evaluated individually for impairment.
Residential - The estimated fair value is determined by estimating expected future cash flows of payments and discounting them using current interest rates for single family mortgages and considering pricing of similar loans that were sold recently.
Residential Construction - These loans are primarily short in maturity. Accordingly, the estimated fair value is determined to be the carrying value.
Commercial - The estimated fair value is determined by estimating expected future cash flows of payments and discounting them using current interest rates for commercial mortgages.
Policy Loans: The carrying amounts reported in the accompanying consolidated balance sheet for these financial instruments approximate their fair values because they are fully collateralized by the cash surrender value of the underlying insurance policies.
Insurance Assignments, Net: These investments are short in maturity. Accordingly, the carrying amounts reported in the accompanying consolidated balance sheet for these financial instruments approximate their fair values.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
17) Fair Value of Financial Instruments (Continued)
Bank and Other Loans Payable: The carrying amounts reported in the accompanying consolidated balance sheet for warehouse lines of credit approximate their fair values due to their relatively short-term maturities and variable interest rates. The estimated fair value for bank loans collateralized by real estate is determined by estimating future cash flows of payments and discounting them using current market rates.
Policyholder Account Balances and Future Policy Benefits-Annuities: Future policy benefit reserves for interest-sensitive insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims incurred in the period more than related policy account balances. Interest credit rates for interest-sensitive insurance products ranged from 1.5% to 6.5%. The fair values for these investment-type insurance policies are estimated based on the present value of liability cash flows. The fair values for the Company’s insurance policies other than investment-type policies are not required to be disclosed. However, the fair values of liabilities under all insurance policies are taken into consideration in the Company’s overall management of interest rate risk, such that the Company’s exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance policies.
18) Accumulated Other Comprehensive Income (loss)
The following summarizes the changes in accumulated other comprehensive income (loss):
Schedule of Changes in Accumulated Other Comprehensive Income
December 31
Unrealized gains on fixed maturity securities available for sale $ 77,334 $ 7,853,398
Amounts reclassified into net earnings (156,562 ) (39,074 )
Net unrealized gains (losses) before taxes (79,228 ) 7,814,324
Tax benefit (expense) 13,942 (1,640,186 )
Net (65,286 ) 6,174,138
Unrealized gains on restricted assets (1) 11,175
Tax expense (210 ) (2,784 )
Tax benefit (expense) (210 ) (2,784 )
Net 8,391
Unrealized gains (losses) on cemetery perpetual care trust investments (1) (1,403 ) 2,917
Tax benefit (expense) (727 )
Net (1,053 ) 2,190
Other comprehensive income (loss) changes $ (65,708 ) $ 6,184,719
(1) Fixed maturity securities available for sale
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
18) Accumulated Other Comprehensive Income (loss) (Continued)
The following is the accumulated balances of other comprehensive income (loss) as of December 31, 2024:
Schedule of Accumulated Balances of Other Comprehensive Income
Beginning Balance December 31, 2023 Change for the period Ending Balance December 31,
Unrealized gains on fixed maturity securities
available for sale $ (6,876,629 ) $ (65,286 ) $ (6,941,915 )
Unrealized gains (losses) on restricted assets (1) (4,757 ) (4,126 )
Unrealized losses on cemetery perpetual
care trust investments (1) (4,172 ) (1,053 ) (5,225 )
Other comprehensive loss $ (6,885,558 ) $ (65,708 ) $ (6,951,266 )
(1) Fixed maturity securities available for sale
The following is the accumulated balances of other comprehensive income (loss) as of December 31, 2023:
Beginning Balance December 31, 2022 Change for the period Ending Balance December 31,
Unrealized gains (losses) on fixed maturity securities
available for sale $ (13,050,767 ) $ 6,174,138 $ (6,876,629 )
Unrealized gains (losses) on restricted assets (1) (13,148 ) 8,391 (4,757 )
Unrealized gains (losses) on cemetery perpetual
care trust investments (1) (6,362 ) 2,190 (4,172 )
Other comprehensive income (loss) $ (13,070,277 ) $ 6,184,719 $ (6,885,558 )
(1) Fixed maturity securities available for sale
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
19) Derivative Instruments
The Company reports derivative instruments pursuant to the accounting policy discussed in Note 1.
The following table shows the fair value and notional amounts of derivative instruments.
Schedule of Derivative Assets at Fair Value
December 31, 2024 December 31, 2023
Balance Sheet Location Notional Amount Asset Fair Value Liability Fair Value Notional Amount Asset Fair Value Liability Fair Value
Derivatives not designated as hedging instruments:
Loan commitments Other assets and Other liabilities $ 210,597,657 $ 5,348,089 $ 3,034,879 $ 161,832,250 $ 4,995,486 $ 3,412,224
Total
$ 210,597,657 $ 5,348,089 $ 3,034,879 $ 161,832,250 $ 4,995,486 $ 3,412,224
The following table presents the gains (losses) on derivatives. There were no gains or losses reclassified from accumulated other comprehensive income into income, or gains or losses recognized into income on the ineffective portion of the derivatives or any amounts excluded from effective testing.
Schedule of Gains and Losses on Derivatives
Years ended December 31,
Derivative Classification
Loan commitments Mortgage fee income $ 729,948 $ (1,123,615 )
Call and put options Gains on investments and other assets $ - $ 49,963
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
20) Mortgage Servicing Rights
The Company reports MSRs pursuant to the accounting policy discussed in Note 1.
The following table presents the MSR activity.
Schedule of Mortgage Servicing Rights
December 31,
Amortized cost:
Balance before valuation allowance at beginning of year $ 3,461,146 $ 3,039,765
MSR additions resulting from loan sales 90,370 1,009,312
Amortization (1) (611,638 ) (587,931 )
Sale of MSRs - -
Application of valuation allowance to write down MSRs
with other than temporary impairment - -
Balance before valuation allowance at year end $ 2,939,878 $ 3,461,146
Valuation allowance for impairment of MSRs:
Balance at beginning of year $ - $ -
Additions - -
Application of valuation allowance to write down MSRs
with other than temporary impairment - -
Balance at year end $ - $ -
Mortgage servicing rights, net $ 2,939,878 $ 3,461,146
Estimated fair value of MSRs at year end $ 4,552,316 $ 4,543,657
(1) Included in other expenses on the consolidated statements of earnings
The table below summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost. This projection was developed using the Company’s assumptions in its December 31, 2024, valuation of MSRs. The assumptions used in the following table are likely to change as market conditions, portfolio composition and borrower behavior change, causing both actual and projected amortization levels to change over time.
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense, Mortgage Servicing Rights
Estimated MSR Amortization
$ 305,312
272,903
249,515
224,804
202,811
Thereafter 1,684,533
Total $ 2,939,878
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
20) Mortgage Servicing Rights (Continued)
The Company collected the following contractual servicing fee income and late fee income as reported in other revenues on the consolidated statements of earnings.
Schedule of Other Revenues
Years Ended December 31,
Contractual servicing fees $ 968,814 $ 1,144,540
Late fees 77,123 97,300
Total $ 1,045,937 $ 1,241,840
The following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio.
Summary of Unpaid Principal Balances of the Servicing Portfolio
December 31,
Servicing UPB $ 385,134,774 $ 414,147,436
The following key assumptions were used in determining MSR value.
Schedule of Assumptions Used in Determining MSR Value
Prepayment
Speeds Average
Life(Years) Discount
Rate
December 31, 2024 8.79 8.28 12.14
December 31, 2023 9.70 7.79 11.85
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
21) Future Policy Benefits and Unpaid Claims
The Company reports future policy benefits and unpaid claims pursuant to the accounting policy discussed in Note 1.
The following table provides information regarding future policy benefits and unpaid claims and the related receivable from reinsurers.
Schedule of Liability for Future Policy Benefits, by Product Segment
December 31,
Life $ 790,212,538 $ 756,936,902
Annuities 105,815,690 106,285,010
Policyholder account balances 37,066,043 39,245,123
Accident and health 543,792 572,689
Other policyholder funds 4,482,462 4,411,108
Reported but unpaid claims 2,463,220 3,525,774
Incurred but not reported claims 4,228,098 5,062,010
Gross future policy benefits and unpaid claims $ 944,811,843 $ 916,038,616
Receivable from reinsurers
Life 10,285,092 10,478,863
Annuities 3,415,644 4,238,934
Accident and health 74,762 77,917
Reported but unpaid claims 45,595 48,345
Incurred but not reported claims 10,000 13,000
Total receivable from reinsurers 13,831,093 14,857,059
Net future policy benefits and unpaid claims $ 930,980,750 $ 901,181,557
Net unpaid claims $ 6,635,723 $ 8,526,439
The following table provides a roll forward of the Company’s liability for reported but unpaid claims and incurred but not reported claims, net of the related receivable from reinsurers.
Summary of Liability for Reported but Unpaid Claims and Incurred but not Reported Claims
Life Annuities Accident and Health Total
Balance at 12/31/2022 $ 9,404,263 $ 649,452 $ 17,000 $ 10,070,715
Incurred 61,390,517 (1) 12,669,463 (2) 30,408 (3) 74,090,388
Settled (62,665,619 ) (12,939,637 ) (29,408 ) (75,634,664 )
Balance at 12/31/2023 8,129,161 379,278 18,000 8,526,439
Incurred 58,116,837 (1) 12,416,335 (2) 2,767 (3) 70,535,939
Settled (59,882,755 ) (12,540,133 ) (3,767 ) (72,426,655 )
Balance at 12/31/2024 $ 6,363,243 $ 255,480 $ 17,000 $ 6,635,723
(1) See death benefits on the consolidated statements of earnings
(2) Included in increase in future benefits on the consolidated statements of earnings
(3) Included in surrender and other policy benefits on the consolidated statements of earnings
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
22) Revenues from Contracts with Customers
The Company reports revenues from contracts with customers pursuant to ASC No. 606, Revenue from Contracts with Customers.
Contracts with Customers
Information about Performance Obligations and Contract Balances
The Company’s cemetery and mortuary segment sells a variety of goods and services to customers in both at-need and pre-need situations. Due to the timing of the fulfillment of the obligation, revenue is deferred until that obligation is fulfilled. The total contract liability for future obligations is included in deferred pre-need cemetery and mortuary contract revenues on the consolidated balance sheets and, as of December 31, 2024 and 2023, the balances were $20,168,405 and $18,237,246, respectively.
The Company’s three types of future obligations are as follows:
Pre-need Merchandise and Service Revenue: All pre-need merchandise and service revenue is deferred, and the funds are placed in trust until the need arises, the merchandise is received, or the service is performed. The trust is then relieved, and the revenue and commissions are recognized. As of December 31, 2024 and 2023, the balances were $19,511,868 and $17,424,764, respectively.
At-need Specialty Merchandise Revenue: At-need specialty merchandise revenue consists of customizable merchandise ordered from a manufacturer such as markers and bases. When specialty merchandise is ordered, it can take time to manufacture and deliver the product. Revenue is deferred until the at-need merchandise is received. As of December 31, 2024 and 2023, the balances were $656,537 and $812,482, respectively. Deferred revenue for at-need specialty revenue is not placed in trust.
Deferred Pre-need Land Revenue: Deferred pre-need revenue and corresponding commissions are deferred until 10% of the funds are received from the customer through regular monthly payments. As of December 31, 2024 and 2023, the balances were nil and nil, respectively. Deferred pre-need land revenue is not placed in trust.
Complete payment of the contract does not constitute fulfillment of the performance obligation. Goods or services are deferred until such a time the service is performed, or merchandise is received. Pre-need contracts are required to be paid in full prior to a customer using a good or service from a pre-need contract. Goods and services from pre-need contracts can be transferred when paid in full from one owner to another. In such cases, the Company will act as an agent in transferring the requested goods and services. A transfer of goods and services does not fulfill an obligation and revenue remains deferred.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
22) Revenues from Contracts with Customers (Continued)
The opening and closing balances of the Company’s receivables, contract assets and contract liabilities are as follows:
Schedule of Opening and Closing Balances of Receivables, Contract Assets and Contract Liabilities
Contract Balances
Receivables (1) Contract Asset Contract Liability
Opening (1/1/2024) $ 6,321,573 $ - $ 18,237,246
Closing (12/31/2024) 7,095,589 - 20,168,405
Increase/(decrease) 774,016 - 1,931,159
Contract Balances
Receivables (1) Contract Asset Contract Liability
Opening (1/1/2023) $ 5,392,779 $ - $ 16,226,836
Closing (12/31/2023) 6,321,573 - 18,237,246
Increase/(decrease) 928,794 - 2,010,410
(1) Included in Receivables, net on the consolidated balance sheets
The following table disaggregates the opening and closing balances of the Company’s contract balances.
Schedule of Opening and Closing Balances of the Assets and Liabilities
Contract Balances
Contract Asset Contract Liability
Pre-need merchandise and services $ - $ 17,424,764
At-need specialty merchandise - 812,482
Pre-need land sales - -
Opening (1/1/2024) $ - $ 18,237,246
Pre-need merchandise and services $ - $ 19,511,868
At-need specialty merchandise - 656,537
Pre-need land sales - -
Closing (12/31/2024) $ - $ 20,168,405
Contract Balances
Contract Asset Contract Liability
Pre-need merchandise and services $ - $ 15,289,901
At-need specialty merchandise - 936,935
Pre-need land sales - -
Opening (1/1/2023) $ - $ 16,226,836
Pre-need merchandise and services $ - $ 17,424,764
At-need specialty merchandise - 812,482
Pre-need land sales - -
Closing (12/31/2023) $ - $ 18,237,246
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
22) Revenues from Contracts with Customers (Continued)
The amount of revenue recognized for 2024 and 2023 that was included in the opening contract liability balance was $5,324,668 and $4,539,540, respectively.
The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment.
Disaggregation of Revenue
The following table disaggregates revenue for the Company’s cemetery and mortuary contracts.
Schedule of Revenues of the Cemetery and Mortuary Contracts
Years Ended
December
Major goods/service lines
At-need $ 19,989,995 $ 19,957,735
Pre-need 9,047,178 7,907,076
Net mortuary and cemetery sales $ 29,037,173 $ 27,864,811
Timing of Revenue Recognition
Goods transferred at a point in time $ 18,147,136 $ 17,560,899
Services transferred at a point in time 10,890,037 10,303,912
Net mortuary and cemetery sales $ 29,037,173 $ 27,864,811
Significant Judgments and Estimates
The Company’s cemetery and mortuary segment recognizes revenue on future performance obligations when goods are delivered and when services are performed and is not determined by the terms or payments of the contract as long as any good or service is paid in full prior to delivery. Prices are determined based on the market at the time a contract is created. Goods or services are not partially completed. There are no significant judgements, estimations, or allocation methods for when revenue should be recognized.
Practical Expedients
The Company has not elected to use any of the practical expedients.
Contract Costs
The Company’s cemetery and mortuary segment defer certain costs associated with obtaining a contract on future obligations.
Pre-need Merchandise and Service Revenue: Pre-need merchandise and service revenues are deferred until the goods or services are delivered. Recognition can be years until the obligations are satisfied. Commissions and other costs are capitalized and deferred until the obligation is satisfied. Other costs include rent on pre-need offices and training rooms, and call center costs. Costs that are allocated based on a percentage include family service advisor compensation, bonuses, utilities, and supplies that are all used to procure a pre-need sale.
At-need Specialty Merchandise Revenue: At-need specialty merchandise is ordered from a third-party manufacturer. Generally, at-need specialty merchandise is ordered and received within 90 days of order. These orders are also short-term in nature and are deferred until the product is received from the manufacturer and the obligation is satisfied.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
22) Revenues from Contracts with Customers (Continued)
Deferred Pre-need Land Revenue: Revenue is recognized on pre-need land sales when the customer has paid at least 10% toward the land price. In cases where customers pay less than 10% of the revenue and associated commissions are deferred until such a time when 10% of the contract price is received.
The following table disaggregates contract costs that are included in the deferred policy and pre-need contract acquisition costs on the consolidated balances sheets.
Schedule of Reconciliation of Revenues from Cemetery and mortuary contracts to Business Segment Information
Years Ended
December 31
Pre-need merchandise and services $ 4,113,793 $ 3,951,267
At-need specialty merchandise 11,268 23,090
Pre-need land sales - -
Deferred policy and pre-need contract acquisition costs $ 4,125,061 $ 3,974,357
23) Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period in exchange for consideration. The Company determines if a contract is a lease at the inception of the contract. At the commencement date of a lease, the Company measures the lease liability at the present value of the lease payments over the lease term, discounted using the discount rate for the lease. The Company uses the rate implicit in the lease, if available, otherwise the Company uses its incremental borrowing rate. Also, at the commencement date of a lease, the Company measures the cost of the related right-of-use asset which consists of the amount of the initial measurement of the lease liability, any lease payments made to the lessor at or before the commencement date, minus any lease incentives received and any initial direct costs incurred by the Company.
Information about the Nature of Leases and Subleases
The Company leases office space and equipment from third parties under various non-cancelable agreements. The Company has operating leases for office space for its segments in areas where it conducts business. The Company subleases some of this office space. The Company also has finance leases for certain equipment, such as copy machines and postage machines. The Company does not have any lease agreements with variable lease payments. The Company has not included any options to extend or terminate leases in the recognition of the right-of-use assets or lease liabilities because of the uncertainty that they will be exercised. No residual value guarantees have been provided to the Company. The Company does not have any restrictions or covenants imposed by leases.
Leases that have not Commenced
The Company does not have any leases that have not commenced that create significant rights or obligations for the Company.
Related Party Lease Transactions
The Company does not have any related party lease transactions that require disclosure as of December 31, 2024.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
23) Leases (Continued)
Short-term Leases
The Company made an accounting policy election not to apply the recognition requirements of ASC 842 to short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying assets that the lessee is reasonably certain to exercise.
Significant Judgments and Assumptions
The Company does not use any significant judgments or assumptions regarding the determination of whether a contract contains a lease; the allocation of the consideration in a contract between lease and non-lease components; or the determination of the discount rates for the leases. The following table presents the Company’s total lease cost recognized in earnings, amounts capitalized as right-of-use assets and cash flows from lease transactions.
Schedule of Lease Cost Recognized in Earnings
Years Ended December 31
Lease Cost
Finance lease cost:
Amortization of right-of-use assets (1) $ 48,687 $ 25,573
Interest on lease liabilities (2) 6,553 1,713
Operating lease cost (3) 3,102,662 3,914,954
Short-term lease cost (3)(4) 1,419,524 1,874,556
Sublease income (3) (562,675 ) (323,272 )
Total lease cost $ 4,014,751 $ 5,493,524
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 3,622,607 $ 4,007,919
Operating cash flows from finance leases 6,553 1,713
Financing cash flows from finance leases 46,425 27,868
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases $ 1,770,873 $ 160,348
Finance leases 176,040 12,332
Weighted-average remaining lease term (in years)
Finance leases 1.80 3.29
Operating leases 2.66 2.88
Weighted-average discount rate
Finance leases 7.89 % 6.81 %
Operating leases 5.37 % 4.54 %
(1) Included in Depreciation on property and equipment on the consolidated statements of earnings
(2) Included in Interest expense on the consolidated statements of earnings
(3) Included in Rent and rent related expenses on the consolidated statements of earnings
(4) Includes leases with a term of 12 months or less
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2024 and 2023
23) Leases (Continued)
The following table presents the maturity analysis of the Company’s lease liabilities.
Schedule of Future Minimum Rental Payments for Finance Leases and Operating Leases
Finance Leases Operating Leases
Lease payments due in:
$ 88,504 $ 2,532,116
63,751 1,956,436
2,833 643,208
1,181 304,099
- 207,649
Thereafter - 72,751
Total undiscounted lease payments 156,269 5,716,259
Less: Discount on cash flows (11,102 ) (430,819 )
Present value of lease liabilities $ 145,167 $ 5,285,440
The following table presents the Company’s right-of-use assets and lease liabilities.
Schedule of Right-of-Use Assets and Lease Liabilities
Year Ended December 31,
Balance Sheet Location
Operating Leases
Right-of-use assets Other assets $ 4,837,045 $ 6,374,336
Right-of-use assets Other assets $ 4,837,045 $ 6,374,336
Lease liabilities Other liabilities and accrued expenses $ 5,285,440 $ 6,888,542
Lease liabilities Other liabilities and accrued expenses $ 5,285,440 $ 6,888,542
Finance Leases
Right-of-use assets
$ 207,127 $ 130,367
Accumulated amortization
(64,971 ) (115,565 )
Right-of-use assets, net Property and equipment, net $ 142,156 $ 14,802
Right-of-use assets, net Property and equipment, net $ 142,156 $ 14,802
Lease liabilities Bank and other loans payable $ 145,167 $ 15,550
Lease liabilities Bank and other loans payable $ 145,167 $ 15,550
The Company is also a lessor and has operating lease agreements with various tenants that lease its commercial properties. See Note 2 for information about the Company’s real estate held for investment.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
(a) Management’s annual report on internal control over financial reporting.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and includes those policies and procedures that:
● Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company,
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the Company’s Board of Directors, and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 based on the framework in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether the Company’s internal control over financial reporting was effective as of December 31, 2024. Based on that assessment management believes that as of December 31, 2024, the Company’s internal control over financial reporting was effective.
This annual report on internal control over financial reporting does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
(b) Changes in internal control over financial reporting.
There was no change in the Company’s internal control over financial reporting that occurred in the fourth quarter 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
A portion of the Company’s directors’ and officers’ compensation is in the form of equity awards and, from time to time, they may engage in open-market transactions with respect to their Company securities for diversification or other personal reasons. All such transactions in Company securities by directors and officers must comply with the Company’s Insider Trading Policy, which requires that transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables directors and officers to prearrange transactions in the Company’s securities in a manner that avoids concerns about initiating transactions while in possession of material nonpublic information. During the three months ended December 31, 2024, no directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408(a) of Regulation S-K.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

---

ITEM 11. EXECUTIVE COMPENSATION

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
See “Index to Consolidated Financial Statements” under Item 8 above.
(a)(2) Financial Statement Schedules
All schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.
(a)(3) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of Regulation S-K or are incorporated by reference to previous filings.
3.1
Amended and Restated Articles of Incorporation (3)
3.2
Amended and Restated Bylaws (5)
4.1
Specimen Class A Stock Certificate (1)
4.2
Specimen Class C Stock Certificate (1)
4.3
Specimen Preferred Stock Certificate and Certificate of Designation of Preferred Stock (1)
10.1
Employee Stock Ownership Plan, as amended and restated (ESOP) and Trust Agreement (1)
10.2
Amended and Restated 2013 Stock Option and Other Equity Incentive Awards Plan (2)
10.3
Amended and Restated 2014 Director Stock Option Plan (6)
10.4
Employment Agreement and Extension with Scott M. Quist
10.5
Stock Repurchase Plan (4)
10.6
2022 Equity Incentive Plan (7)
Code of Business Conduct and Ethics (5)
Insider Trading Policy (7)
Clawback Policy (7)
Subsidiaries of the Registrant
31.1
Certification pursuant to 18 U.S.C. Section 1350, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification pursuant to 18 U.S.C. Section 1350, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
(1) Incorporated by reference from Registration Statement on Form S-1, as filed on June 29, 1987
(2) Incorporated by reference from Report on Form 10-Q, as filed on August 15, 2016
(3) Incorporated by reference from Report on Form 10-K, as filed on March 31, 2017
(4) Incorporated by reference from Report on Form 10-Q, as filed on November 13, 2018
(5) Incorporated by reference from Report on Form 10-Q, as filed on May 15, 2019
(6) Incorporated by reference from Report on Form 10-Q, as filed on August 14, 2020
(7) Incorporated by reference from Report on Form 10-K, as filed on March 29, 2024