2023
ANNUAL
REP ORT
S E C U R I T Y N AT I O N A L
FINANCIAL CORPORATION
Who We Are...
The roots of our company were planted deep in 1965 with the founding of Security
National Life Insurance Company. Starting with only $543,000 in assets, in a small rented
house in Salt Lake City, Utah, Security National has grown into a strong industry leader in
several fields of service.
Over the past five decades we have grown consistently through new sales and investment
opportunities, and through the acquisition of life insurance companies, funeral homes and
cemeteries, as well as the formation and growth of our mortgage operations.
Profile
Our company operates three main business segments: life insurance, funeral service and
mortgage lending. Our company is designed and structured so each segment relates to
the others, and contributes to the profitability of the whole. For example, our cemetery
and mortuary operations enjoy a high level of public awareness, assisting in the sales and
marketing of our insurance and preneed cemetery and funeral products. Our life insurance
company in turn invests its assets in high quality mortgage loans. Thus, while each segment
is a stand-alone profit center, this horizontal integration is strategically planned to improve
profitability. Additionally, our company actively pursues growth through acquisitions of life
insurance companies and mortuaries, and through expanding our mortgage operations.
net result being that our Mor tgage Segment lost
$17,500,000. Despite that loss, I thought our team
battled the market conditions extraordinarily well
and positioned ourselves to take advantage of a
very distraught mor tgage market. I think it worthy
to remember that in the three years 2020 to 2022
our Mor tgage Segment produced $98,000,000 of
profit, so we think the goal is wor thy of our current
effor ts.
We remain committed to the task of growth
and improved profitability. We view this current
economic uncer tainty as a time to improve and
expand in all our segments. In this tough mor tgage
loan environment we have necessarily greatly
slimmed down our office staffs, both pruned and
increased our number of producing loan officers,
while emphasizing cost efficiencies and metrics. In
our Insurance Segment we have increased premium
initiated better measurement
rates and have
metrics for mor tality, persistency, and acquisition
costs. In our Memorial Segment we have added
key personnel who we believe will drive growth
and improve operations. To be sure, growth in this
environment is expensive, but is never theless our
goal.
I thank you for your continued suppor t and I hope
to see you at our Annual Meeting.
Very truly yours,
Scott M. Quist
Chairman, Chief Executive Officer, and President
Scott M. Quist
Chairman of the Board
Chief Executive Officer
President
My Fellow Shareholders:
I am pleased to report on the affairs of our Company
for the year ended December 31, 2023, and invite
you to attend the annual Stockholders Meeting to
be held Friday June 21, 2024, in Salt Lake City, Utah
at the Company’s offices.
2023 was a year where the financial balance of our
company demonstrated itself. With the increasing
interest rates and improving premium margins our
Insurance Segment had its best operational year
ever earning $25,000,000. As death rates stabilized
throughout 2023, and as we implemented renewed
emphasis on operational efficiencies, our Cemetery
and Mor tuary Segment had its best year ever
earning nearly $8,500,000. Needless to say, we are
very pleased with those results.
However, the increased interest rates continued to
have a devastating effect on our mor tgage business
with volumes falling roughly an additional 35%
below 2022’s already decreased markets with the
SNFC Board of Directors and Officers
Scott M. Quist
Chairman of the Board
President
Chief Executive Officer
Director
Executive Committee
H. Craig Moody
President, Moody & Associates
Director
Executive Committee
Audit Committee
Compensation Committee
Nominating and Corporate
Governance Committee
Robert G. Hunter M.D.
Past Medical Staff President
Department Head-Otolaryngology,
Head and Neck Surgery
Intermountain Medical Center
Director
Compensation Committee
Nominating and Corporate
Governance Committee
Gilbert A. Fuller
Former Executive Vice President,
Chief Financial Officer and Secretary,
USANA Health Sciences, Inc.
Director
Executive Committee
Audit Committee
Compensation Committee
Nominating and Corporate
Governance Committee
John L. Cook
Co-Owner & Operator
Cook Brothers Painting, Inc.
Director
Audit Committee
Compensation Committee
Nominating and Corporate
Governance Committee
S. Andrew Quist
Director
President of Mortgage Operations
General Counsel
Executive Committee
Jason G. Overbaugh
Director
Vice President
National Marketing Director
of Life Insurance
Mia B. Love
Former Member - U.S. House of Representatives
Former Mayor of Saratoga Springs, UT
Former Member - Saratoga Springs City Council
Senior Fellow - U.S. Study Center for Politics (Sydney, AU)
Regular Political Commentator - CNN
Director
Audit Committee
Compensation Committee
Nominating and Corporate
Governance Committee
Alexandra Mysoor
Founder and Chairwoman of Mysoor Industries
Founder and Chief Executive Officer of Alix
Director
Audit Committee
Compensation Committee
Nominating and Corporate
Governance Committee
Adam G. Quist
Director
President of Memorial Services
President of Life Insurance
Assistant Secretary
General Counsel
Jeffrey R. Stephens
Secretary
Senior General Counsel
Garrett S. Sill
Chief Financial Officer
Treasurer
Diana C. Olson
Vice President
Finance
Thayne D. Atkinson
Vice President
Chief Information Officer
Richard R. Dahl
Vice President
Tax
Jeffrey P. Adams
Controller
Matthew G. Bagley
General Counsel
A History of Growth
1996 - The dedication of Singing Hills Memorial Park
1997 - The acquisition of Crystal Rose Funeral Home and
the formation of Adobe Funeral Home
1998 - The acquisition of Southern Security Life (FL)
1999 - The acquisition of Menlo Life policy block
2000
2000 - The organization of Southern Security Mortgage
Company
2002 - The acquisition of Gulf National Life policy block
and Acadian Life policy block
2004 - The acquisition of Paramount Security Life
2005 - The acquisition of Memorial Insurance Company of
America
2007 - The acquisition of C&J Financial and Capital Reserve
Life Insurance Company
2008 - The acquisition of Southern Security Life (MS)
2010
2011 - The acquisition of North America Life policy block
2012 - The acquisition of Trans-Western Life and the
formation of EverLEND Mortgage Company
2014 - The acquisition of American Funeral Financial
2016 - The acquisition of First Guaranty Insurance
Company
2018 - The acquisition of Beta Capital Corporation
2019 - The acquisition of Probst Family Funeral Homes
2019 - The acquisition of Kilpatrick Life Insurance Company
2020
2021 - The merger of EverLEND Mortgage Company with
SecurityNational Mortgage Company
2021 - The acquisition of Rivera Family Funeral Homes
and Santa Fe Memorial Gardens
2021 - The acquisition of Holbrook Mortuary
2021 - The sale of Memorial Insurance Company
of America
2023 - Aquisition and merger of Foxo Life Insurance
Company
1965
1965 - The founding of Security National Life Insurance
Company
1966 - The acquisition of Grand Canyon Life
1967 - The acquisition of Bankers Trust Life
1969 - The acquisition of American Alliance Life
1970
1970 - The acquisition of Charter Oak Life & Washington
Life Assurance
1972 - The acquisition of Columbia Life
1973 - The acquisition of National Capital Life and
Memorial Estates Companies
1979 - The organization of Security National Financial
Corporation
1980
1981 -The acquisition of American Home Security Life
1984 - The acquisition of Western Investors policy block
1985 - The acquisition of Del Pueblo Life policy block and
Cibola Life policy block
1986 - The acquisition of Investors Equity Life
1987 - IPO of Security National Financial Corporation and
the acquisition of Southwest American policy block
1989 - The acquisition of Paradise Chapel Funeral Home
1990
1991 - The sale of Investors Equity Life and the acquisition
of Deseret Memorial Group
1993 - The formation of SecurityNational Mortgage
Company
1994 - The acquisition of Camelback Sunset Funeral Home
and Capital Investors Life
1995 - The acquisition of Greer Wilson Funeral Home,
Tolleson Funeral Home and Civil Service
Employees Life
LEADERSHIP TEAM
Scott Quist
Chief Executive Officer
Adam Quist
President
Jason Overbaugh
Vice President
National Marketing Director
We specialize in affordable and
convenient products that “make
sense” for you and your family.
Let SNL show you a better way.
Many of life's big moments are curated events with careful
planning and preparation such as birthdays, graduations,
or weddings. Yet, there is one major life event, the loss of
a loved one, where the date or time cannot be predicted.
While time and place are uncertain, we can still make
preparations for this inevitable event.
Funerals and memorial services can seem like extravagant ceremonies
with little benefit. In truth, they are important for those left behind as
they give a chance for closure, a chance to start the grieving process,
and a way to find understanding and meaning during difficult times.
Making arrangements for yourself or a loved one is a gift that alleviates
both financial and emotional burdens on those you love most.
Guy Winstead
Vice President of Sales
Preneed, Final Expense, and Loyalty Sales Divisions
What is Preneed?
A celebration of life. A tribute to family. A treasured memory for
loved ones. Your funeral is an expression of your life and a gift to the
friends and family you leave behind. By pre-funding this tribute with
life insurance from Security National Life you are assured your wishes
will be honored. Preneed is the pre-planning and funding of a funeral
before one's passing.
What is Final Expense?
It is an act of caring, and of preparation; ultimately it is an expression
of compassion and responsibility for those you leave behind. New
responsibilities arise when a life ends. Final Expense insurance provides
an affordable and convenient solution to ease your family's stress.
The passing of a loved one can be a traumatic event for those left
Todd Clendennen
Regional Vice President of Sales
Preneed Division
Jason Richardson
Vice President of Sales
Home Service Division
LEADERSHIP TEAM
Marty Rich
Vice President
Marketing & Sales Support
Jon Meredith
Director
Policy Administration
Wendi Beauchaine
Chief Underwriter
Sara McCulley
Director
Marketing and Lead Development
Jo Clark
Director
Kilpatrick Life Policy Administration
behind. Final Expense insurance provides a way to manage the financial
burdens associated with the end of life. Even if you have fully prepared,
Final Expense Insurance can provide the safety net to take care of
those unexpected items that will allow you to tell your loved ones “It
is all taken care of.”
What is Home Service?
Home Service is a family-oriented organization that cares for and is
committed to serving our clients with integrity and respect. We offer a
combination of sales and on-going service within the home, including
insurance review and premium collections, to provide peace of mind
to individuals and families through an affordable funeral plan. The
Home Service Division partners with almost 1,000 agents and funeral
homes—together serving over 320,000 policyholders. With coverage
amounts starting at $1,000 in most states and going up to $30,000,
our plans assure that our customers will have the dignity to bury their
loved ones without worrying about the costs.
Kilpatrick Life Insurance Company
Security National Life acquired Kilpatrick Life Insurance Company
in 2019. Kilpatrick is based in Shreveport, LA with roots dating back
to 1932. Through three generations, the Kilpatrick family oversaw
tremendous company growth and expansion. The addition of Kilpatrick
Life Insurance to Security National Life was an easy fit with its priority
and focus on family. With award winning service, we are proud to join
in one mission to serve families across the nation.
LEADERSHIP TEAM
Scott Quist
Chief Executive Officer
Andrew Quist
President
Joel Harward
Senior Vice President, Mortgage Production
Jacob Banks
Chief Financial Officer
Mike Brumble
Vice President, Risk Management
Jeff Orme
Chief Compliance Officer
We’re Turning Houses into Homes®
We’re SecurityNational Mortgage
A mortgage company with a rock-solid reputation
2023 presented an extremely difficult environment for the mortgage loan
industry. There is no other way of stating it. Interest rates were elevated
throughout 2023, but peaked in October at highs not seen since 2000.
Furthermore, at the end of the third quarter, over 78% of existing residential
mortgage loans had an interest rate below 5%, well below prevailing lending
rates. This resulted in a “lock-in” effect which led to the fewest number of
existing homes being sold in at least 28 years. Given this backdrop, total
industry loan originations decreased 29% in 2023 from 2022 volumes. This
was on the heels of a 48% decrease in total industry loan originations from
2021 to 2022, making a 63% decrease over that two-year period. During
that same period SecurityNational’s total loan originations decreased 61%,
slightly less than the industry-wide decline. SecurityNational funded $2.2
billion in residential mortgage loan originations in 2023, which was our lowest
origination volume since 2014. That origination low resulted in only our
second annual loss in the past 12 years for the Company. As disappointing as
this loss was, much of it can be attributed to investments made to strengthen
our position in the industry.
We believe that SecurityNational’s foundation of financial stability, market
transparency, and expertise in and focus on purchase transactions, provides
a perfect platform to expand our presence in the industry in such unsettled
and difficult environments. With many competitors retreating from the
market or exiting entirely, SecurityNational’s strengths shine more brightly
and provide opportunities that few other companies can. Mortgage loan sales
professionals are looking for the security and stability that SecurityNational
provides and our results attest to this. The Company has more loan officers
now than when the Federal Reserve began its recent cycle of interest rate
hikes. This increase is in the face of approximately 90,000 loan officers exiting
the mortgage loan profession entirely during that same time period. In this
time of market contraction SecurityNational has maintained strong recruiting
results and we are growing.
In 2023 we celebrated SecurityNational’s 30-year anniversary. It is a milestone
we are proud of. Three decades in the industry highlights SecurityNational’s
ability to thrive in both favorable and difficult economic and interest rate
environments. The Company’s longevity demonstrates our dedication to the
mortgage loan industry and allows our team of exceptional loan officers to
focus on providing a better experience for our borrowers.
We’re Turning Houses into Homes®
LEADERSHIP TEAM
Michael Muirbrook
Vice President, Servicing & Audits
Karie Wakefield
Vice President, Mortgage Fulfillment
Tim Yates
Vice President, Capital Markets
Austin Jacks
Chief Marketing Officer
Rob Coke
Vice President, Appraisal
Mark Pasternak
Vice President, Operations
LOAN VOLUME IN 2023
In 2023 SecurityNational also continued its trend of adding significant talent
to its leadership team. The Company hired a new Chief Marketing Officer, a
new Director of Strategic Growth (national recruiting) and new leadership
for the Company’s technology team which oversees our origination platform.
These individuals chose to join SecurityNational from established competitors
because of the strength of the SecurityNational brand, adding veteran industry
experience with fresh, new perspectives to a long-tenured existing leadership
team with a deep understanding of what makes SecurityNational special. This
strategic balance allows the Company to combine world-class technology
with production processes in crafting an exceptional customer experience
from first point-of-contact through loan closing. Strong relationships with
Fannie Mae, Freddie Mac, FHA, VA, USDA, and many other secondary market
investors, and tailored portfolio products provided by its affiliated companies,
ensure that SecurityNational can provide a full complement of mortgage loan
products at competitive prices. These products include unique loan offerings
to home builders - a specialty of SecurityNational. The Company’s unparalleled
marketing and business support group helps keep our sales team front-and-
center in a very competitive marketplace. These qualities are just a few of the
reasons why mortgage loan professionals are joining SecurityNational each
month, sustaining our growth into the future.
Although the Company’s reach is nationwide, each branch office is a part of
its local community. SecurityNational’s suite of available loan products covers
most every residential mortgage loan need, but our employees take extra
satisfaction in helping our customers purchase a home, especially their first
home. Home ownership is one of the most important financial decisions
most people will make during their lifetimes. The process of financing a home
purchase is unfamiliar and complicated for many people. SecurityNational is
expert in originating mortgage loans for low-to-moderate-income buyers
and can match qualifications with a mortgage loan program and resources
specifically designed for each applicant’s specific needs. Beyond originating
loans, many of the Company’s employees are actively engaged in their cities,
towns and neighborhoods feeding the hungry, sheltering the needy or adding
a splash of color along with a kind word while cleaning up after a disaster.
SecurityNational has industry leading products, processes and financial
strength, all of which contribute to the
most important result for us - Turning
Houses Into Homes.
REGIONAL MANAGERS
2023 STATISTICS
Svetlana Marinkovic
Executive Regional Manager,
Summit Region
Lisa Newman
Executive Regional Manager,
East Coast Region
Cristie North
Executive Regional Manager,
Midvale Region
398 Loan Officers
SNMC Funding Comparison Year-Over-Year
$3.0B
$2.5B
$2.0B
$1.5B
$1.0B
$500M
$0
Purchase
Refinance
2022 2023
694M1.963B211.5M2.662B REGIONAL MANAGERS
Troy Mannella
Executive Regional Manager,
Texas Region
Dave Pettit
Regional Area Manager,
Salt Lake Region
Jon Reed
Executive Regional Manager,
Midwest Region
LOANS FUNDED
85 Branches
48 States
Turning Houses
into Homes®
LEADERSHIP TEAM
Scott Quist
Chief Executive Officer
Adam Quist
President
Steven Kehl
Chief Operating Officer
Jordan Buckner
Executive Vice President
Josh Atkinson
General Sales Director
Utah Cemeteries
Scott Prine
General Sales Director
California and New Mexico Cemeteries
Providing hope, honor, healing, and
happiness to the families we serve.
5
Security National Funeral Home
& Cemetery Division
KEYS
Our Mission
Our mission is to provide customers with
peace of mind and comfort both while
planning for and while experiencing end of
life events. We strive to create a workplace
culture that inspires our employees to
provide incredible customer service. Our
driving focus is on our common purpose
of providing hope, honor, healing, and
happiness. We have identified five keys
that guide our customer service culture:
Safety, Experience, Efficiency, Empathy, and
Everyone. We are committed to treating
each family we serve as if it were our
own and holding ourselves accountable
to the highest standards of conduct. We
excel at providing unique and customized
experiences for each of the families we
have the privilege to care for.
Our Goal
Our goal is growth. Growth is the natural result of providing excellent
service to the families we serve in California, New Mexico, and Utah.
Growth also provides our employees with an opportunity to improve
their livelihood through career advancement.
Since 2014, Security National Funeral Homes and Cemeteries has
realized double digit operational net income growth every year,
averaging a compound annual growth rate of over 20%. Security
National is Utah’s largest funeral and cemetery provider and Rivera is Northern New Mexico’s largest provider of
funeral services, with a market share in excess of 40%.
We operate the business with a dedicated focus on striving to achieve excellence by becoming brilliant at the
basics. We continue to strive to build relationships of trust, clearly define expectations, and implement consistent
accountability measures that facilitate a culture of excellence. We continue to focus on attracting great people,
developing great people, and keeping great people.
Winner: Best of State Six Years in a Row
Memorial Mortuaries and Cemeteries is a six time, consecutive “Best
of State” award winner for Utah. Affordable Funerals and Cremations
is also a two time “Best of State - Budget Funeral Service” winner.
Criteria for the awards are based on overall excellence, superiority and
quality of a nominee’s products, services or performance, differentiating
themselves from their competitors and improving the quality of life for
their neighbors. The Best of State Awards were created to recognize
outstanding individuals, organizations, and businesses in Utah. By
recognizing excellence in the community and sharing examples of
success for many worthy endeavors the awards motivate and reward
those who strive for excellence in their respective fields.
Looking Forward
During the year, we made strategic decisions on the following development projects:
• We broke ground on a new 190 crypt/297 niche outdoor mausoleum at our Memorial Redwood Cemetery
in Utah, with a completion time of May 2024.
• We completed a new 120 niche wall addition to the Serenity Mausoleum at our Singing Hills Memorial Park
in California.
• We are engaged in the due diligence processes for a new outdoor mausoleum at our Singing Hills Memorial
Park in California.
• We broke ground on a burial garden expansion project at our Santa Fe Memorial Gardens in New Mexico.
LEADERSHIP TEAM
Brandon Federico
Manager of Corporate Real Estate
Commercial real estate –
a wise investment strategy.
Cambry Brady
Property Manager
Adam Perry
Facilities Manager
Center 53 Building 1
Security National Real Estate provides property management and leasing
services for all companies in the Security National family. Investing in
commercial real estate provides predictable returns, steady cashflows, and
is a significant investment category for the company.
An investment in commercial real estate acts as a hedge against the long-
term impact of inflation. Security National seeks long-term, national credit
tenants for its Class A office space and includes annual rate increases as a
part of all leases. Over time, commercial real estate is likely to appreciate,
and due to its fixed nature, Security National is able to carry bank debt,
which allows it to leverage its investment dollar.
Center 53 Campus
Security National is developing approximately 1,000,000 square feet of
commercial real estate at the center of the Wasatch Front. The project,
Center 53, encompasses over 20 acres in the central valley of Salt Lake
City which is only 30 minutes from anywhere along the Wasatch Front.
The first building was completed in 2018 and includes an on-site fitness
center with cardio and weight stations. Building 1 is fully leased and its
current full floor tenants include: R1, SoFi, and MasterCard.
Each of the buildings in the campus will have the
following features:
• Large floor plates with great views of the Salt
Lake Valley
• Exterior features include natural stone, glass
curtain walls and terraneo finish
• Large modern lobby with wood walls and large
format tile feature walls
• Structured parking
• Easy access to freeway
Center 53 Building 2
Security National
Corporate Headquarters
Security National completed the second, 6-story Class A office
building within its 20-acre office campus in the Fall of 2021. This latest
addition serves as Security National’s corporate headquarters. Building
2 is approximately 217,000 square feet and includes numerous energy
efficient enhancements, employee amenities, spectacular Salt Lake
Valley views, and is fully leased. Security National occupies floors 4,
5, and 6 and R1 – who also occupies the 6th floor of Building 1 –
occupies floors 1, 2, and 3.
Security National relocated many of its Utah-based operational
functions to this new building, which includes Security National Life,
Memorial Mortuaries and Cemeteries, and SecurityNational Mortgage,
thereby improving efficiency by consolidating several retail mortgage
and other subsidiary offices.
Wasatch 16
• Purchased in 2012
• 78,000 square feet class A building located in Draper, Utah
• Key tenants include Marcore, Aspire Counseling Network,
Credit Corp Services, and Journey Team – Microsoft Partner
Cabela’s
• Purchased in 2018
• 70,000 square feet of retail
• Located in Farmington, Utah at Station Park
• 25 year lease with Cabela’s
Our passion is commercial and residential real estate finance.
We are your commercial and residential loan source.
Security National Commercial Capital originates
interim/bridge loans to enhance the mor tgage
banker’s traditional long-term lender relationships
with a faster closing, flexible, interim loan product
intended to provide a bridge until a proper ty stabilizes
and conventional long-term financing can be obtained.
These loans are designed to facilitate the purchase,
refinance, leveraging or ownership change of good
quality, performing commercial real estate. We lend
on investor or owner/occupied real estate, including
single or multi-tenant office, retail, office, warehouse,
and multifamily proper ties. We also provide
construction and land development financing that
compliments SecurityNational Mor tgage on approved
new residential construction and on select commercial
construction projects throughout the United States.
3 years (12-month term preferred). We also provide
interim bridge financing for SBA-504 loans waiting for
debenture funding.
We offer flexible fast funding commercial real estate
loans while maintaining our fiduciary responsibility
to our affiliated life insurance company's insureds
by providing secure, higher yielding investments.
We provide competitive products and service to
borrowers and the desired return to our shareholders.
Our target loan size is between
$1,000,000 and $4,500,000...
Our loans are generated
using relationships...
Commercial Bridge Lending
Our loans are generated using relationships with
mor tgage bankers, other life insurance companies,
commercial banks, website requests, referrals from
past business relationships, commercial lending
institutions, Real Estate professionals, Wall Street
investors, and
through publication adver tising.
Our target loan size for bridge loans is between
$1,000,000 and $4,500,000, with a maximum term of
Residential Construction Lending
and Land Development
Security National also provides construction and
land development
that compliments
financing
SecurityNational Mor tgage on approved new
residential construction and on select commercial
construction projects throughout the United States.
In addition to providing financing for single family
homes and development projects, Security National
also acquires land for its own development. Improved
lots are sold to strategic builder par tners and fur ther
compliments SecurityNational Mor tgage in its long
term mor tgage originations.
To learn more, visit www.sncloans.com for a
presentation of commercial loan products offered.
Some of our land development and construction loan projects:
LEADERSHIP TEAM
Shane Wilson
Vice President
Jeffrey Degraffenried
Construction Loan Manager
Brian Nelsen
Commercial Loan Manager
$19.8M Land
$8.1M
Acquisition &
Development
$1.4M
Residential Bridge
$0.6M Interim SBA/
504 Bridge
$38.06M
Commercial Bridge
/Construction
$103.6 M
Residential Construction
2023 Commercial and Construction
Lending Originations
LEADERSHIP TEAM
Jamie Meredith
Executive Vice President
Kathryn Kilgore
Vice President of Operations
Chuck Gallagher
Vice President of Sales
Jennifer Oliver
Senior Director
of Customer Loyalty
C&J Financial provides insurance
assignment funding to funeral homes
and cemeteries across the nation. When
firms need dependability, certainty, and
transparency, they choose Fast Funding ®.
Since 1996, C&J Financial has helped funeral homes and cemeteries
eliminate the challenges and cash flow delays in processing insurance
death claims. As North America’s #1 provider of assignment funding,
we are honored to have assisted more than 800,000 families in
providing a dignified funeral for their loved ones and funded $4.8+
Billion to thousands of firms across America.
Why Assignment Funding?
When a family walks into the funeral home to make arrangements,
most funeral directors would prefer the family pay with cash, check,
or credit card vs. using their loved one’s life insurance policy. It’s
certainly understandable because some life insurance companies can
be a hassle to deal with, sometimes taking hours or days to verify
benefits, then it’s another 30, 60, 90 days or longer before payment
is received.
While 56% of Americans have $5000 or less in savings, 6 out of 10
families own some type of life insurance. When asked, most would
prefer to use their loved one’s life insurance to cover the funeral
expenses. It makes it a cashless event for the family while bridging the
gap between what they want and what they can afford.
Families that use life insurance spend 31% more, on average, than
those that pay with cash, check, or credit card. Insurance relieves the
financial burden, allowing them to honor their loved ones how they
see fit. This creates a better experience for the family. Despite these
advantages, only 16% of families actually pay with life insurance. Why?
Many funeral directors don’t want to deal with the challenges and
cash flow delays they create.
This is where C&J Financial can help. Our purpose is to help families provide a dignified and meaningful service
for their loved ones. We accomplish this by eliminating the hassle, headache, and cash flow delays that firms have
in processing insurance death claims. With C&J’s Quick Claim process it takes less than 2 minutes to submit
assignment information, then our team will contact the insurance company and verify the benefits of the policy.
Once the benefits are confirmed and the beneficiary has signed C&J’s assignment, payment is made to the firm.
Instead of waiting weeks or months, funds are typically available in just 24-48 hours. It really is that simple.
Innovation Funeral Homes Trust
Utilizing cutting-edge technology with a simple and easy-to-use experience, C&J's Assignment Funding Management
System platform creates better efficiencies for firms, saving them time and money. Our Assignment Funding
Management System allows firms to track the processing and status of their claims in real-time, communicate
with their Customer Loyalty Representative, and upload documents directly to an assignment. They can also
see which claims have been funded, what is needed on their open claims, and when C&J has been paid by the
insurance company.
Introduced in 2021, our Quick Claim Assignment™ provides the fastest claim submission process in the industry.
Insurance-specific paperwork is automatically generated for the beneficiary to sign, taking the guesswork out
of what is needed. In most cases, C&J can handle any claimant statements or other documents on behalf of the
beneficiary, reducing the amount of paperwork required by the firm.
C&J also offers full integration with DocuSign, the most trusted and widely used eSign platform in the world,
allowing firms to send the assignment to be signed electronically at no cost. When this option is used, the
completed documents are automatically uploaded to the system and firms can track the process in real-time.
Innovations like Quick Claim Assignment™ and DocuSign integration can greatly reduce the amount of time
funeral homes and cemeteries spend filing their claims.
Where We Are
Indiana
Sales Office
License Held
d
n
e
g
e
L
Corporate
Headquarters
Operations
First Guaranty
Memorial Mortuaries
& Cemeteries
Security National Life
SecurityNational Mortgage
No License Held
Kilpatrick Life
C&J Financial, LLC
Where We Are
SNFC Corporate Offices
Security National Financial Corporation
433 Ascension Way, 6th Floor
Salt Lake City, UT 84123
P.O. Box 57250
Salt Lake City, UT 84157-0250
Telephone: (801) 264-1060
Toll Free: (800) 574-7117
Form 10-K Offer
If you are a holder or beneficial owner of the
company’s stock, the company will send you, upon
request and at no charge, a copy of the company’s
Annual Report on Form 10-K filed with the Securities
& Exchange Commission for the year 2023 (including
a list of exhibits). All requests must be made in writing
to the Corporate Secretary.
Security National Financial Corporation
P.O. Box 57250
Salt Lake City, Utah 84157-0250
Stock Transfer Agents
Zions First National Bank
P.O. Box 30880
Salt Lake City, UT 84130
Former Holders of Preferred Stock and/or
Promissory Notes
Security National Financial Corporation
Attn: Stock Department
P.O. Box 57250
Salt Lake City, UT 84157-0250
Certified Public Accountants
Deloitte & Touche LLP
Salt Lake City, Utah
Company E-mail Address:
contact@securitynational.com
Company Internet Address:
www.securitynational.com
Life Insurance Offices
Security National Life Insurance Company
433 Ascension Way, 6th Floor
Salt Lake City, UT 84123
Telephone: (800) 574-7117
Security National Life Insurance Company
Home Service Division
1080 River Oaks Drive
Suite #B204
Flowood, MS 39232
Telephone: (800) 826-6803
Security National Life Insurance Company
Preneed Sales Division
1 Sanctuary Blvd Suite 302
Mandeville, LA 70471
Telephone: (800) 574-7117
Kilpatrick Life Insurance Company
Affordable Funerals & Cremations
1818 Marshall St.
Shreveport, LA 71101
Telephone: (800) 235-0555
Fast Funding Offices
C&J Financial, LLC
200 Market Way
Rainbow City, AL 35906
Telephone: (800) 785-0003
Mortuaries & Cemeteries
Security National Funeral Homes
and Cemeteries Operations
433 Ascension Way, 6th Floor
Salt Lake City, UT 84123
Telephone: (801) 268-8771
Memorial Holladay-Cottonwood Mortuary
4670 S. Highland Drive
Salt Lake City, UT 84117
Telephone: (801) 278-2801
Memorial Lake Hills Mortuary &
Cemetery
10055 S. State Street
Sandy, UT 84070
Telephone: (801) 566-1249
Memorial Lake View Mortuary & Cemetery
1640 E. Lakeview Drive
Bountiful, UT 84010
Telephone: (801) 298-1564
Memorial Murray Mortuary
5850 S. 900 E.
Murray, UT 84121
Telephone: (801) 262-4631
Memorial Mountain View Mortuary &
Cemetery
3115 E. 7800 S.
Cottonwood Heights, UT 84121
Telephone: (801) 943-0831
Memorial Redwood Mortuary & Cemetery
6500 S. Redwood Road
West Jordan, UT 84123
Telephone: (801) 969-3456
Memorial Holladay Cemetery
4900 S. Memory Lane
Holladay, UT 84117
Telephone: (801) 278-2803
Singing Hills Memorial Park
2800 Dehesa Road
El Cajon, CA 92019
Telephone: (619) 444-3000
4387 South 500 West
Murray, UT 84123
Telephone: (801) 287-8233
Affordable Funerals & Cremations
St. George Location
157 E. Riverside Drive #3A
St. George, UT 84790
Telephone: (435) 680-7035
Heber Valley Funeral Home
288 N. Main Street
Heber City, UT 84032
Telephone: (435) 654-5458
Probst Family Funeral Home
79 E. Main Street
Midway, UT 84049
Telephone: (435) 654-5959
Holbrook Mortuary
3251 S 2300 E
Millcreek, UT 84109
Telephone: (801) 484-2045
Rivera Family Funeral Home
818 Paseo del Pueblo Sur
Taos, NM 87571
Telephone: (575) 758-3841
Rivera Family Funeral Home & Crematory
305 Calle Salazar
Espanola, NM 87532
Telephone: (505) 753-2288
Rivera Family Funeral Home
& Santa Fe Memorial Gardens
417 East Rodeo Rd.
Santa Fe, NM 87505
Telephone: (505) 989-7032
Rivera Family Funeral Home
1627 A Central Avenue
Los Alamos, NM 87544
Telephone: (505) 663-6880
Mortgage Offices
SecurityNational Mortgage
Company–Operations
433 Ascension Way, 5th Floor
Salt Lake City, UT 84123
Telephone: (801) 264-8111
SecurityNational Mortgage
Company–Sales Offices
ARIZONA
Bullhead City
2636 Hwy 95, Suite 2
Bullhead City, AZ 86442
Telephone: (844) 820-8699
Where We Are
Chandler
1490 S. Price Road, Suite 318
Chandler, AZ 85286
Telephone: (844) 820-8699
Mesa
2220 S. Country Club Drive
Suite 101
Mesa, AZ 85210
Telephone: (602) 732-3993
Phoenix
5100 N. 99th Ave, Unit 101 & 103
Phoenix, AZ 85037
Telephone: (602) 273-9610
1951 West Camelback Road, Ste 200
Phoenix, AZ 85015
Telephone: (602) 354-7461
10265 West Camelback Road #100
Phoenix, AZ 84037
Telephone: (844) 820-8699
Scottsdale
15169 N Scottsdale Rd
Ste 205, Off 3012 & 3013
Scottsdale, AZ 85254
Telephone: (480) 426-0400
10609 N. Hayden Rd., Suite 100
Scottsdale, AZ 85260
Telephone: (480) 237-4670
Yuma
350 West 16th Street, Suite 209
Yuma, AZ 85364
Telephone: (844) 820-8699
CALIFORNIA
Orange
625 The City Drive South, Suite 450
Orange, CA 92868
Telephone: (844) 323-4640
West Covina
2934 E. Garvey Ave., South
Ste #250-N
West Covina, CA 91791
Telephone: (626) 209-2126
Yucca Valley
7398 Fox Trail, Unit B
Yucca Valley, CA 92284
Telephone: (760) 853-2600
COLORADO
Aurora
5982 S. Zeno Ct.
Aurora, CO 80016
Telephone: (844) 820-8699
Colorado Springs
5475 Tech Center Drive, Suite 215
Colorado Springs, CO 80919
Telephone: (844) 323-4640
Denver
7800 East Union Avenue, Suite 550
Denver, CO 80237
Telephone: (844) 323-4640
Edwards
27 Main Street, Suite C-104B
Edwards, CO 81632
Telephone: (970) 331-2919
Larkspur
4501 Mohawk Drive
Larkspur, CO 80118
Telephone: (844) 820-8699
CONNECTICUT
Vernon
15 Lakeview Dr.
Vernon, CT 06066
Telephone: (860) 604-1688
FLORIDA
DeLand
970 Island Grove Drive
DeLand, FL 32724
Ft. Myers
8191 College Parkway #302
Ft. Myers, FL 33919
Telephone: (888) 550-9221
Lake Mary
250 International Pkwy, Ste 118 & 120
Lake Mary, FL 32746
Telephone: (407) 302-8384
Palm Beach Gardens
9123 N. Military Trail, #104B
Palm Beach Gardens, FL 33410
Telephone: (866) 827-9558
Pinellas Park
10293 61st Ct
Pinellas Park, FL 33782
Punta Gorda
265 E Marion Avenue
Punta Gorda, FL 33950
Telephone: (479) 925-5350
Seminole
5666 Seminole Blvd, Suite 106 & 111
Seminole, FL 33772
Telephone: (727) 498-3570
GEORGIA
Atlanta
900 Circle 75 Parkway, Suite 175
Atlanta, GA 30339
Telephone: (404) 924-6148
HAWAII
Hilo
32 Kinoole Street, Suite 101
Hilo, HI 96720
Telephone: (808) 796-5626
Honolulu
677 Ala Moana Boulevard, Suite 609
Honolulu, HI 96813
Telephone: (808) 809-7990
Kailua
970 North Kalaheo Avenue
Suite A-307
Kailua, HI 96734
Telephone: (844) 820-8699
Kapolei
1001 Kamokila Boulevard, Suite 319
Kapolei, HI 96707
Telephone: (808) 427-9960
Lihue
4370 Kukui Grove Street
Suite #201
Lihue, HI 96766
Telephone: (808) 823-8050
Wailuku
1885 Main St., Ste 108
Wailuku, HI 96793
Telephone: (808) 736-4424
70 Kanoa St., Suite 104
Wailuku, HI 96793
Telephone: (844) 820-8699
ILLINOIS
Bartlett
802 West Bartlett Road
Bartlett, IL 60103
Telephone: (844) 820-8699
KENTUCKY
Elizabethtown
81 Boulder Drive
Elizabethtown, KY 42701
Telephone: (877) 518-9450
LOUISIANA
Covington
568 Greenluster Drive
Covington, LA 70433
Telephone: (985) 400-5787
MINNESOTA
Eagan
860 Blue Gentian Rd
Ste 200, Off 205
Eagan, MN 55121
Telephone: (844) 820-8699
MISSOURI
Branson
4987 Fall Creek Rd #1
Branson, MO 65616
Telephone: (417) 616-3341
NORTH CAROLINA
Charlotte
2015 Ayrsley Town Blvd.
Ste 247, Off 247
Charlotte, NC 28273
Telephone: (844) 323-4640
NEVADA
Henderson
2546 Findlater St.
Henderson, NV 89044
Telephone: (866) 827-9558
2635 St. Rose Parkway, Suite 100
Henderson, NV 89052
Telephone: (702) 487-5626
Las Vegas
1980 Festival Plaza Drive, Suite 850
Las Vegas, NV 89135
Telephone: (702) 562-8733
Mesquite
840 Pinnacle Court, #3, Suite B
Mesquite, NV 89027
Telephone: (866) 607-3863
Pahrump
2250 E Postal Dr, Suite 1
Pahrump, NV 89048
Telephone: (844) 820-8699
OHIO
Westerville
670 Meridian Way, Suite 146
Westerville, OH 43082
Telephone: (614) 441-9978
OREGON
Clackamas
10365 S.E. Sunnyside Road #310
Clackamas, OR 97015
Telephone: (971) 544-7192
Terrebonne
11592 S.W. Roundup Place
Terrebonne, OR 97760
Telephone: (541) 615-7804
Tillamook
709 Pacific Ave.
Tillamook, OR 97141
Telephone: (503) 880-4018
TENNESSEE
Johnson City
144 Alf Taylor Rd
Johnson City, TN 37601
Telephone: (423) 741-0008
Kingsport
115 W New Street
Kinsgsport, TN 37660
Telephone: (866) 827-9558
Memphis
4646 Poplar Avenue, Office 317
Memphis, TN 38117
Telephone: (407) 302-8384
TEXAS
Amarillo
4500 I-40 West, Ste B
Amarillo, TX 79106
Telephone: (855) 203-1300
Austin
9737 Great Hills Trail, #200 & 220
Austin, TX 78759
Telephone: (512) 795-5596
Brownsville
1213 E. Alton Gloor Blvd
Suite H & I
Brownsville, TX 78526
Telephone: (956) 554-0792
Dallas
10000 N. Central Expy, Ste. 400
Off. 453
Dallas, TX 75231
Telephone: (469) 374-9700
El Paso
1600 Lee Trevino, Suite A-1
El Paso, TX 79936
Telephone: (844) 820-8699
Fort Worth
5020 Collinwood Ave, Suite100
Fort Worth, TX 76107
Telephone: (817) 945-2551
Fulshear
5757 Flewellen Oaks Ln, Unit 104
Fulshear, TX 77441
Telephone: (855) 203-1300
30417 Fifth Street, Suite B
Fulshear, TX 77441
Telephone: (855) 203-1300
Where We Are
Houston
17347 Village Green Dr., Ste. 102
Houston, TX 77040
Telephone: (832) 615-5400
11550 Fuqua, Suite 200
Houston, TX 77034
Telephone: (832) 786-6697
Hurst
462 Mid Cities Boulevard
Hurst, TX 76054
Telephone: (214) 444-9250
Irving
106 Decker Court, Suite 310
Irving, TX 75062
Telephone: (855) 203-1300
Katy
23227 Red River Drive
Katy, TX 77494
Telephone: (832) 786-6699
Lake Kiowa
722 Kiowa Drive West
Lake Kiowa, TX 76240
Telephone: (940) 249-9944
League City
2600 South Shore Blvd
Ste 300, Off 324
League City, TX 77573
Telephone: (281) 549-7194
Midland
4908 North Midkiff Road
Midland, TX 79705
Telephone: (432) 897-2299
San Antonio
1777 NE Loop 410
Ste 600, Off 622
San Antonio, TX 78217
Telephone: (855) 203-1300
18756 Stone Oak Pkwy
Ste 200, Off 238
San Antonio, TX 78258
Telephone: (844) 820-8699
23702 IH-10 West, Suite 105-D
San Antonio, TX 78257
Telephone: (855) 203-1300
Stephenville
299 S Columbia
Stephenville, TX 76401
Telephone: (844) 820-8699
Where We Are
Weatherford
602 S. Main St. # 200
Weatherford, TX 76086
Telephone: (855) 203-1300
UTAH
Ephraim
497 S. Main, Suite E
Ephraim, UT 84627
Telephone: (435) 283-3000
Mapleton
768 S. 1600 W. Suite B
Mapleton, UT 84664
Telephone: (385) 484-7200
Orem
998 N. 1200 W., Suite 104
Orem, UT 84057
Telephone: (801) 901-6200
Sandy
126 West Sego Lily Drive #260
Sandy, UT 84070
Telephone: (801) 571-1313
South Jordan
11240 So. River Heights Drive
Suite 100
South Jordan, UT 84095
Telephone: (801) 508-6300
859 W. South Jordan Pkwy
Bldg A, Ste 1
South Jordan, UT 84095
Telephone: (877) 518-9450
Stansbury Park
500 East Village Blvd., Unit #110
Stansbury Park, UT 84074
Telephone: (435) 843-5340
WISCONSIN
Beloit
645 3rd Street
Beloit, WI 53511
Telephone: (844) 820-8699
Kenosha
1508 24th Avenue #23
Kenosha, WI 53140
Telephone: (844) 820-8699
Trevor
27903 99th Street
Trevor, WI 53179
Telephone: (262) 997-9444
Waukesha
N19W24400 Riverwood Drive
Ste 350, Off 315
Waukesha, WI 53188
Telephone: (844) 820-8699
Salt Lake City
2455 East Parleys Way, Suite 150
Sale Lake City, UT 84109
Telephone: (801) 713-4800
WASHINGTON
Vancouver
15650 N.E. Fourth Plain Blvd #101
Vancouver, WA 98682
Telephone: (360) 869-7265
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, 2023 and 2022, the related consolidated statements of earnings,
comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related
notes and the schedules listed in the Index at Item 15 (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, 2023 and 2022, 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.
1
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.
Salt Lake City, UT
March 29, 2024
We have served as the Company's auditor since 2017.
2
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2023
2022
Assets
Investments:
Fixed maturity securities, available for sale, at estimated fair value
(amortized cost of $390,884,441 and $362,750,511 for 2023 and 2022,
respectively; net of allowance for credit losses of $314,549 and nil for
2023 and 2022, respectively)
Equity securities at estimated fair value (cost of $10,571,505 and
$9,942,265 for 2023 and 2022, respectively)
Mortgage loans held for investment (net of allowance for credit losses
of $3,818,653 and $1,970,311 for 2023 and 2022, respectively)
Real estate held for investment (net of accumulated depreciation
of $29,307,791 and $23,793,204 for 2023 and 2022, respectively)
Real estate held for sale
Other investments and policy loans (net of allowances for credit losses
of $1,553,836 and $1,609,951 for 2023 and 2022, respectively)
Accrued investment income
Total investments
Cash and cash equivalents
Loans held for sale at estimated fair value
Receivables (net of allowance for credit losses of $1,897,887 and
$2,229,791 for 2023 and 2022, respectively)
Restricted assets (including $9,239,063 and $6,565,552 for 2023 and
2022, respectively, at estimated fair value)
Cemetery perpetual care trust investments (including $4,969,005 and $3,859,893 for 2023
and 2022 at estimated fair value)
Receivable from reinsurers
Cemetery land and improvements
Deferred policy and pre-need contract acquisition costs
Mortgage servicing rights, net
Property and equipment, net
Value of business acquired
Goodwill
Other
Total Assets
$
381,535,986
$
345,858,492
13,636,071
11,682,526
275,616,837
308,123,927
183,419,292
3,028,973
69,404,617
10,170,790
936,812,566
126,941,658
126,549,190
15,335,315
20,028,976
8,082,917
14,857,059
9,163,691
116,351,067
3,461,146
19,175,099
8,467,613
5,253,783
20,072,195
1,430,552,275
$
191,328,616
11,161,582
70,508,156
10,299,826
948,963,125
120,919,805
141,179,620
28,573,092
18,935,055
7,276,210
15,033,938
9,101,474
108,655,128
3,039,765
20,579,649
9,803,736
5,253,783
23,798,512
1,461,112,892
$
See accompanying notes to consolidated financial statements.
3
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
Liabilities and Stockholders’ Equity
Liabilities
Future policy benefits and unpaid claims
Unearned premium reserve
Bank and other loans payable
Deferred pre-need cemetery and mortuary contract revenues
Cemetery perpetual care obligation
Accounts payable
Other liabilities and accrued expenses
Income taxes
Total liabilities
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;
20,048,002 shares issued and outstanding as of December 31, 2023 and
18,758,031 shares issued and outstanding as of December 31, 2022
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; 2,971,854 shares issued and outstanding as of December 31, 2023 and 2,889,859
shares issued and outstanding as of December 31, 2022
Additional paid-in capital
Accumulated other comprehensive loss, net of taxes
Retained earnings
Treasury stock, at cost - 806,311 Class A shares and 35,717 Class C shares
as of December 31, 2023; and 525,870 Class A shares and 34,016 Class C
shares as of December 31, 2022
Total stockholders’ equity
Total Liabilities and Stockholders’ Equity
$
$
December 31,
2023
2022
$
916,038,616
2,543,822
105,555,137
18,237,246
5,326,196
2,936,968
53,266,090
13,752,981
1,117,657,056
889,327,303
2,773,616
161,712,804
16,226,836
5,099,542
5,361,449
57,113,888
30,710,527
1,168,325,965
-
-
40,096,004
37,516,062
-
-
5,943,708
72,424,429
(6,885,558)
206,978,373
5,779,718
64,767,769
(13,070,277)
202,160,306
(5,661,737)
312,895,219
1,430,552,275
$
(4,366,651)
292,786,927
1,461,112,892
See accompanying notes to consolidated financial statements.
4
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended December 31,
2023
2022
Revenues:
Mortgage fee income
Insurance premiums and other considerations
Net investment income
Net mortuary and cemetery sales
Gains (losses) on investments and other assets
Other
Total revenues
Benefits and expenses:
Death benefits
Surrenders and other policy benefits
Increase in future policy benefits
Amortization of deferred policy and pre-need acquisition costs and value of business
acquired
Selling, general and administrative expenses:
Commissions
Personnel
Advertising
Rent and rent related
Depreciation on property and equipment
Costs related to funding mortgage loans
Other
Interest expense
Cost of goods and services sold – cemeteries and mortuaries
Total benefits and expenses
Earnings before income taxes
Income tax expense
Net earnings
Net earnings per Class A equivalent common share (1)
Net earnings per Class A equivalent common share -
assuming dilution (1)
Weighted average Class A equivalent common shares
outstanding (1)
Weighted average Class A equivalent common shares
outstanding-assuming dilution (1)
$
$
$
$
98,147,972
114,658,436
72,343,047
27,864,811
1,837,342
3,645,882
318,497,490
61,390,517
4,612,346
34,008,997
18,024,338
39,929,556
83,141,759
3,710,445
6,857,137
2,351,661
6,440,439
32,058,856
4,865,327
4,805,700
302,197,078
16,300,412
(1,805,354)
14,495,058
0.66
0.64
$
$
$
$
173,499,681
105,001,640
66,197,592
26,993,855
(857,460)
18,817,020
389,652,328
59,377,962
4,688,470
28,858,969
17,950,202
63,321,092
100,111,523
5,697,998
6,883,013
2,496,906
7,540,041
45,797,753
7,830,443
4,721,094
355,275,466
34,376,862
(8,686,560)
25,690,302
1.16
1.12
22,083,772
22,187,410
22,677,968
23,036,128
(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.
5
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net earnings
Other comprehensive income:
Unrealized gains (losses) on fixed maturity securities available for sale
Unrealized gains (losses) on restricted assets
Unrealized gains (losses) on cemetery perpetual care trust investments
Other comprehensive income (loss), before income tax
Income tax benefit (expense)
Other comprehensive income (loss), net of income tax
Comprehensive income (loss)
Years Ended December 31,
2023
2022
14,495,058 $
25,690,302
7,814,324
11,175
2,917
7,828,416
(1,643,697)
6,184,719
20,679,777
$
(39,331,688)
(71,035)
(20,446)
(39,423,169)
8,282,444
(31,140,725)
(5,450,423)
$
$
See accompanying notes to consolidated financial statements.
6
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Class A
Common
Stock
$ 35,285,444
Class C
Common
Stock
$ 5,733,130
Additional
Paid-in
Capital
$ 57,985,947
Accumulated
Other
Comprehensive
Income (Loss)
$
18,070,448
Retained
Earnings
$ 184,537,489
Treasury
Stock
Total
$ (1,845,624) $ 299,766,834
-
-
-
219,174
-
-
1,779,108
232,336
37,516,062
-
-
-
-
-
-
278,924
(232,336)
5,779,718
-
-
929,692
(75,742)
(187,757)
106,176
6,009,453
-
64,767,769
-
(31,140,725)
-
-
-
-
-
-
(13,070,277)
25,690,302
-
-
-
-
-
(8,067,485)
-
202,160,306
-
-
-
-
5,249,054
(7,770,081)
-
-
(4,366,651)
25,690,302
(31,140,725)
929,692
143,432
5,061,297
(7,663,905)
-
-
292,786,927
-
-
-
-
558,354
2,430
-
-
1,899,960
119,198
$ 40,096,004
-
-
-
-
-
-
-
-
283,188
(119,198)
$ 5,943,708
-
-
-
601,362
(423,967)
(2,430)
76,202
583,156
6,822,337
-
$ 72,424,429
$
-
-
6,184,719
-
-
-
-
-
-
-
(671,506)
14,495,058
-
-
-
-
-
-
-
-
-
-
-
-
2,134,517
(3,429,603)
(671,506)
14,495,058
6,184,719
601,362
134,387
-
2,210,719
(2,846,447)
-
-
$ (5,661,737) $ 312,895,219
-
-
(9,005,485)
-
(6,885,558) $ 206,978,373
Balance at December 31, 2021
Net earnings
Other comprehensive loss
Stock based compensation expense
Exercise of stock options
Sale of treasury stock
Purchase of treasury stock
Stock dividends
Conversion Class C to Class A
Balance at December 31, 2022
Adoption of
ASU 2016-13
Net earnings
Other comprehensive income
Stock based compensation expense
Exercise of stock options
Vesting of restricted stock units
Sale of treasury stock
Purchase of treasury stock
Stock dividends
Conversion Class C to Class A
Balance at December 31, 2023
See accompanying notes to consolidated financial statements.
7
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash used in operating activities:
Losses (gains) on investments and other assets
Depreciation
Provision for credit losses
Net amortization of deferred fees and costs, premiums and discounts
Provision for deferred income taxes
Policy and pre-need acquisition costs deferred
Policy and pre-need acquisition costs amortized
Value of business acquired amortized
Mortgage servicing rights, additions
Amortization of mortgage servicing rights
Net gains on the sale of mortgage servicing rights
Stock based compensation expense
Benefit plans funded with treasury stock
Net change in fair value of loans held for sale
Originations of loans held for sale
Proceeds from sales of loans held for sale
Net gains on sales of loans held for sale
Change in assets and liabilities:
Land and improvements held for sale
Future policy benefits and unpaid claims
Other operating assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of fixed maturity securities
Sales, calls and maturities of fixed maturity securities
Purchase of equity securities
Sales of equity securities
Purchases of restricted assets
Sales, calls and maturities of restricted assets
Purchases of cemetery perpetual care trust investments
Sales, calls and maturities of cemetery perpetual care trust investments
Mortgage loans held for investment, other investments and policy loans made
Payments received for mortgage loans held for investment, other investments and policy
loans
Proceeds from the sale of mortgage servicing rights
Purchases of property and equipment
Sales of property and equipment
Purchases of real estate
Sales of real estate
Net cash provided by (used in) investing activities
Years Ended December 31,
2023
2022
$
14,495,058
$
25,690,302
(1,837,342)
8,641,080
1,959,707
(2,140,548)
(2,495,489)
(24,432,809)
16,724,336
1,300,002
(1,009,312)
587,931
-
601,362
2,210,719
478,460
(2,173,080,584)
2,224,454,040
(40,239,112)
(62,217)
29,745,349
(2,025,510)
53,875,121
(70,315,501)
42,966,901
(6,993,289)
6,346,625
(3,065,758)
840,080
(1,083,550)
458,046
(645,581,141)
682,267,677
-
(1,109,937)
-
(22,894,604)
32,772,520
14,608,069
857,460
8,598,072
1,331,887
(1,018,200)
(9,954,005)
(20,233,669)
16,685,871
1,264,331
(10,243,922)
9,078,706
(34,051,938)
929,692
5,061,297
8,834,797
(3,373,554,484)
3,549,405,402
(74,779,721)
(123,597)
27,487,657
(815,484)
130,450,454
(151,581,252)
25,163,141
(4,193,460)
2,804,274
(862,654)
-
-
1,205,208
(752,301,471)
759,243,828
79,981,150
(1,600,195)
69,248
(20,458,983)
25,369,430
(37,161,736)
8
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Cash flows from financing activities:
Investment contract receipts
Investment contract withdrawals
Proceeds from stock options exercised
Purchase of treasury stock
Repayment of bank loans
Proceeds from bank loans
Net change in warehouse line borrowings for loans held for sale
Net cash used in financing activities
Net change in cash, cash equivalents, restricted cash and restricted
cash equivalents
Cash, cash equivalents, restricted cash and restricted cash equivalents at
beginning of year
Cash, cash equivalents, restricted cash and restricted cash equivalents
at end of year
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest
Income taxes
Non Cash Investing and Financing Activities:
Transfer of loans held for sale to mortgage loans held for investment
Transfer from mortgage loans held for investment to restricted assets
Transfer from mortgage loans held for investment to cemetery perpetual care trust
investments
Accrued real estate construction costs and retainage
Mortgage loans held for investment foreclosed into real estate held for investment
Right-of-use assets obtained in exchange for operating lease liabilities
Right-of-use assets obtained in exchange for finance lease liabilities
Years Ended December 31,
2023
2022
12,572,508
(15,654,593)
134,387
(2,846,447)
(69,602,737)
68,500,000
(55,146,726)
(62,043,608)
6,439,582
11,730,820
(15,795,677)
143,432
(7,663,905)
(50,308,296)
59,618,050
(98,943,607)
(101,219,183)
(7,930,465)
133,483,817
141,414,282
139,923,399
$
133,483,817
$
$
5,136,747
20,406,598
3,017,626
1,625,961
1,611,550
-
-
160,348
12,332
7,697,921
729,687
51,691,213
-
-
1,025,397
10,998,485
2,054,534
-
$
$
$
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:
Cash and cash equivalents
Restricted assets
Cemetery perpetual care trust investments
Total cash, cash equivalents, restricted cash and restricted cash equivalents
Years Ended December 31,
2023
2022
126,941,658 $
10,114,694
2,867,047
139,923,399 $
120,919,805
10,638,034
1,925,978
133,483,817
$
$
See accompanying notes to consolidated financial statements.
9
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 value of mortgage loans
foreclosed to real estate held for investment or sale; those used in determining the liability for future policy benefits and unearned revenue; those used in
determining the estimated future costs for pre-need sales; those used in determining the value of mortgage servicing rights; those used in determining the
value of loans held for sale; those used in determining allowances for credit losses; those used in determining loan loss reserve; and those used in
determining deferred tax assets and liabilities. 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.
10
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 earned income 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.
11
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
1) Significant Accounting Policies (Continued)
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.
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 the long-term investment portfolio 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.
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:
● 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 market value for the
similar product.
12
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
1) Significant Accounting Policies (Continued)
● For loans that are non-committed where no active market exists, the Company determines that the unpaid principal balance best
approximates the market value, after considering the fair value of the underlying real estate collateral, estimated future cash flows, and
the loan interest rate.
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.
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. 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. 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 allowance for loan losses and the loan loss reserve represent probable loan losses incurred as of the balance sheet date.
Additional information related to the Loan Loss Reserve is included in Note 3.
13
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 and Value of Business Acquired
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 (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized like deferred policy
acquisition costs.
14
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 is obligated to retain and provide 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.
15
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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. 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 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.
16
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 opposite 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 are shown in other liabilities and accrued expenses on the condensed 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, mortality,
morbidity, withdrawals, and other assumptions based on the life insurance subsidiaries’ experience, 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.
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.
17
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
1) Significant Accounting Policies (Continued)
Participating Insurance
Participating business constituted 2% of insurance in force for the years ended 2023 and 2022. 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 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 consideration 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 recognized when earned and consist of amounts
assessed against policyholder account balances during the period for policy administration charges and surrender charges.
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.
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.
18
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
1) Significant Accounting Policies (Continued)
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.
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. Estimated interest and penalties related to uncertain tax penalties
are included as a component of income tax expense.
19
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
1) Significant Accounting Policies (Continued)
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.
20
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
1) Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
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.
Mortgage loans held for investment:
Residential
Residential construction
Commercial
Total
Restricted assets - mortgage loans held for investment:
Residential construction
Cemetery perpetual care trust investments - mortgage loans held for investment:
Residential construction
Grand Total
Accounting Standards Issued But Not Yet Adopted
$
Amount
(192,607)
301,830
555,807
665,030
3,463
3,013
671,506
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, the FASB issued an update
to ASU No. 2018-12 that requires the standard to be adopted by the Company commencing on January 1, 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 Company is in the process of
estimating the impact of the new guidance on the 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 beginning on January 1,
2025. The Company is in the process of estimating the impact of the new guidance on the consolidated financial statements.
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. ASU 2023-07 is effective for the Company for annual
periods beginning January 1, 2024 and interim periods beginning January 1, 2025. The Company is in the process of estimating the 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.
21
21
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments
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)
$
Obligations of states and political subdivisions
6,524,083
500
(319,260)
-
-
$ 110,378,730
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
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized cost:
Residential
Residential construction
Commercial
Less: Unamortized deferred loan fees, net
Less: Allowance for credit losses
Less: Net discounts
Total mortgage loans held for investment
Real estate held for investment - net of accumulated
depreciation:
Residential
Commercial
Total real estate held for investment
Real estate held for sale:
Residential
Commercial
Total real estate held for sale
Other investments and policy loans at amortized cost:
Policy loans
Insurance assignments
Federal Home Loan Bank stock (2)
Other investments
Less: Allowance for credit losses
Total policy loans and other investments
Accrued investment income
$
$
10,571,505
10,571,505
$
$
3,504,141
3,504,141
$
$
(439,575)
(439,575)
$
$
13,636,071
13,636,071
$ 103,153,587
104,052,748
74,176,538
(1,623,226)
(3,818,653)
(324,157)
$ 275,616,837
$
40,924,865
142,494,427
$ 183,419,292
$
$
$
$
$
-
3,028,973
3,028,973
13,264,183
45,605,322
2,279,800
9,809,148
(1,553,836)
69,404,617
10,170,790
22
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments
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:
estimated fair value:
Fixed maturity securities, available for sale, at
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
500
(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
Industrial, miscellaneous and all other
10,571,505
3,504,141
(439,575)
Total equity securities at estimated fair value
10,571,505
3,504,141
(439,575)
$
$
$
$
$
$
$
$
13,636,071
13,636,071
Equity securities at estimated fair value:
Common stock:
Mortgage loans held for investment at amortized cost:
Residential
Residential construction
Commercial
Less: Unamortized deferred loan fees, net
Less: Allowance for credit losses
Less: Net discounts
Total mortgage loans held for investment
Real estate held for investment - net of accumulated
$ 103,153,587
104,052,748
74,176,538
(1,623,226)
(3,818,653)
(324,157)
$ 275,616,837
$
40,924,865
142,494,427
$ 183,419,292
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
-
3,028,973
$
depreciation:
Residential
Commercial
Total real estate held for investment
Real estate held for sale:
Residential
Commercial
Total real estate held for sale
2) Investments (Continued)
$
3,028,973
The Company’s investments as of December 31, 2022 are summarized as follows:
Other investments and policy loans at amortized cost:
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
Policy loans
Insurance assignments
Federal Home Loan Bank stock (2)
Other investments
Less: Allowance for credit losses
$
13,264,183
45,605,322
2,279,800
9,809,148
(1,553,836)
December 31, 2022:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government
agencies
Total policy loans and other investments
$
69,404,617
$
93,182,210
$
180,643
$
(2,685,277)
$
90,677,576
Accrued investment income
Obligations of states and political subdivisions
$
10,170,790
6,675,071
13,869
(458,137)
6,230,803
Corporate securities including public utilities
Total investments
$ 936,812,566
229,141,544
1,909,630
(11,930,773)
219,120,401
Mortgage-backed securities
33,501,686
168,700
(4,100,674)
29,569,712
(1) Gross unrealized losses are net of allowance for credit losses
Redeemable preferred stock
(2) Includes $530,900 of Membership stock and $1,748,900 of Activity stock due to short-term advances and letters of credit.
250,000
10,000
-
260,000
Total fixed maturity securities available for sale
$
362,750,511
$
2,282,842
$
(19,174,861)
$
345,858,492
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized cost:
Residential
Residential construction
Commercial
Less: Unamortized deferred loan fees, net
Less: Allowance for loan losses
Less: Net discounts
Total mortgage loans held for investment
Real estate held for investment - net of accumulated depreciation:
Residential
Commercial
Total real estate held for investment
Real estate held for sale:
Residential
Commercial
Total real estate held for sale
Other investments and policy loans at amortized cost:
Policy loans
Insurance assignments
Federal Home Loan Bank stock (1)
Other investments
Less: Allowance for doubtful accounts
Total policy loans and other investments
Accrued investment income
Total investments
$
$
$
$
$
$
$
$
$
$
$
$
9,942,265
9,942,265
$
$
2,688,375
2,688,375
$
$
(948,114)
(948,114)
$
$
11,682,526
11,682,526
93,355,623
172,516,125
46,311,955
(1,746,605)
(1,970,311)
(342,860)
308,123,927
38,437,960
152,890,656
191,328,616
11,010,029
151,553
11,161,582
13,095,473
46,942,536
2,600,300
9,479,798
(1,609,951)
70,508,156
23
10,299,826
948,963,125
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
The Company’s investments as of December 31, 2022 are summarized as follows:
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
December 31, 2022:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government
agencies
$
93,182,210
$
180,643
$
(2,685,277)
$
90,677,576
Obligations of states and political subdivisions
6,675,071
13,869
(458,137)
6,230,803
Corporate securities including public utilities
229,141,544
1,909,630
(11,930,773)
219,120,401
Mortgage-backed securities
Redeemable preferred stock
33,501,686
168,700
(4,100,674)
29,569,712
250,000
10,000
-
260,000
Total fixed maturity securities available for sale
$
362,750,511
$
2,282,842
$
(19,174,861)
$
345,858,492
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized cost:
Residential
Residential construction
Commercial
Less: Unamortized deferred loan fees, net
Less: Allowance for loan losses
Less: Net discounts
Total mortgage loans held for investment
Real estate held for investment - net of accumulated depreciation:
Residential
Commercial
Total real estate held for investment
Real estate held for sale:
Residential
Commercial
Total real estate held for sale
Other investments and policy loans at amortized cost:
Policy loans
Insurance assignments
Federal Home Loan Bank stock (1)
Other investments
Less: Allowance for doubtful accounts
Total policy loans and other investments
Accrued investment income
Total investments
$
$
$
$
$
$
$
$
$
$
$
$
9,942,265
9,942,265
$
$
2,688,375
2,688,375
$
$
(948,114)
(948,114)
$
$
11,682,526
11,682,526
93,355,623
172,516,125
46,311,955
(1,746,605)
(1,970,311)
(342,860)
308,123,927
38,437,960
152,890,656
191,328,616
11,010,029
151,553
11,161,582
13,095,473
46,942,536
2,600,300
9,479,798
(1,609,951)
70,508,156
24
10,299,826
948,963,125
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
The Company’s investments as of December 31, 2022 are summarized as follows:
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
December 31, 2022:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government
agencies
$
93,182,210
$
180,643
$
(2,685,277)
$
90,677,576
Obligations of states and political subdivisions
6,675,071
13,869
(458,137)
6,230,803
Corporate securities including public utilities
229,141,544
1,909,630
(11,930,773)
219,120,401
Mortgage-backed securities
Redeemable preferred stock
33,501,686
168,700
(4,100,674)
29,569,712
250,000
10,000
-
260,000
Total fixed maturity securities available for sale
$
362,750,511
$
2,282,842
$
(19,174,861)
$
345,858,492
Industrial, miscellaneous and all other
9,942,265
2,688,375
(948,114)
11,682,526
Total equity securities at estimated fair value
9,942,265
2,688,375
(948,114)
11,682,526
$
$
$
$
$
$
Equity securities at estimated fair value:
Common stock:
Mortgage loans held for investment at amortized cost:
Residential
Residential construction
Commercial
Less: Unamortized deferred loan fees, net
Less: Allowance for loan losses
Less: Net discounts
Total mortgage loans held for investment
Real estate held for investment - net of accumulated depreciation:
Residential
Commercial
Total real estate held for investment
Real estate held for sale:
Residential
Commercial
Total real estate held for sale
$
$
$
$
$
$
$
$
93,355,623
172,516,125
46,311,955
(1,746,605)
(1,970,311)
(342,860)
308,123,927
38,437,960
152,890,656
191,328,616
11,010,029
151,553
11,161,582
Other investments and policy loans at amortized cost:
Policy loans
Insurance assignments
Federal Home Loan Bank stock (1)
Other investments
Less: Allowance for doubtful accounts
2) Investments (Continued)
$
SECURITY NATIONAL FINANCIAL CORPORATION
13,095,473
AND SUBSIDIARIES
46,942,536
Notes to Consolidated Financial Statements
2,600,300
Years Ended December 31, 2023 and 2022
9,479,798
(1,609,951)
Total policy loans and other investments
The Company’s investments as of December 31, 2022 are summarized as follows:
70,508,156
$
Accrued investment income
Total investments
December 31, 2022:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government
agencies
$
10,299,826
Amortized Cost
948,963,125
$
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
(1) Includes $938,500 of Membership stock and $1,661,800 of Activity stock due to short-term advances and letters of credit.
$
93,182,210
$
180,643
$
(2,685,277)
$
90,677,576
Obligations of states and political subdivisions
6,675,071
13,869
(458,137)
6,230,803
Corporate securities including public utilities
229,141,544
1,909,630
(11,930,773)
219,120,401
Mortgage-backed securities
Redeemable preferred stock
33,501,686
168,700
(4,100,674)
29,569,712
250,000
10,000
-
260,000
Total fixed maturity securities available for sale
$
362,750,511
$
2,282,842
$
(19,174,861)
$
345,858,492
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized cost:
Residential
Residential construction
Commercial
Less: Unamortized deferred loan fees, net
Less: Allowance for loan losses
Less: Net discounts
Total mortgage loans held for investment
Real estate held for investment - net of accumulated depreciation:
Residential
Commercial
Total real estate held for investment
Real estate held for sale:
Residential
Commercial
Total real estate held for sale
Other investments and policy loans at amortized cost:
Policy loans
Insurance assignments
Federal Home Loan Bank stock (1)
Other investments
Less: Allowance for doubtful accounts
Total policy loans and other investments
Accrued investment income
Total investments
$
$
$
$
$
$
$
$
$
$
$
$
9,942,265
9,942,265
$
$
2,688,375
2,688,375
$
$
(948,114)
(948,114)
$
$
11,682,526
11,682,526
93,355,623
172,516,125
46,311,955
(1,746,605)
(1,970,311)
(342,860)
308,123,927
38,437,960
152,890,656
191,328,616
11,010,029
151,553
11,161,582
13,095,473
46,942,536
2,600,300
9,479,798
(1,609,951)
70,508,156
25
10,299,826
948,963,125
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023, 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,
2023 and 2022. 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.
At 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 and other asset-backed securities
Total unrealized losses
At December 31, 2022
U.S. Treasury securities and obligations of U.S.
Government agencies
Obligations of states and political subdivisions
Corporate securities including public utilities
Mortgage and other asset-backed securities
Total unrealized losses
Unrealized
Losses for
Less than
Twelve
Months
Fair Value
Unrealized
Losses for
More than
Twelve
Months
Total
Unrealized
Loss
Fair Value
Fair Value
$
$
29,394
11,105
529,660
29,799
599,958
$
9,436,090
470,325
32,507,773
2,260,445
$ 44,674,633
$ 1,387,054
308,155
6,615,847
4,673,106
$ 12,984,162
$ 70,885,403
5,284,498
107,556,216
22,184,174
$ 205,910,291
$ 1,416,448
319,260
7,145,507
4,702,905
$ 13,584,120
$ 80,321,493
5,754,823
140,063,989
24,444,619
$ 250,584,924
$ 2,685,277
378,067
10,935,114
2,884,731
$ 16,883,189
$ 79,400,753
5,467,910
162,995,969
19,909,907
$ 267,774,539
$
-
80,070
995,659
1,215,943
$ 2,291,672
$
-
429,020
5,781,822
6,978,745
$ 13,189,587
$ 2,685,277
458,137
11,930,773
4,100,674
$ 19,174,861
$ 79,400,753
5,896,930
168,777,791
26,888,652
$ 280,964,126
Relevant holdings were comprised of 606 securities with fair values aggregating 94.9% of the aggregated amortized cost as of December 31, 2023.
Relevant holdings were comprised of 713 securities with fair values aggregating 93.6% of the aggregated amortized cost as of December 31, 2022. Credit
loss provision (release) of $325,314 and nil have been recognized for 2023 and 2022, respectively. Credit losses are included in gains (losses) on
investments and other assets on the condensed consolidated statements of earnings. Other unrealized losses for which no credit loss was recognized are
primarily the result of increases in interest rates.
26
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 condensed 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 condensed 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 condensed
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.
27
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 98.2% and 97.7% of its fixed
maturity securities rated investment grade as of December 31, 2023 and 2022, 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.
NAIC Designation
1
2
3
4
5
6
Total
December 31, 2023
December 31, 2022
Amortized
Cost
221,933,425 $
161,062,016
6,418,829
982,290
236,648
1,233
390,634,441 $
$
$
Estimated Fair
Value
216,975,288
157,346,803
5,953,542
948,478
51,875
-
381,275,986
$
$
Amortized
Cost
197,753,818 $
156,261,804
7,080,305
1,377,541
25,736
1,307
362,500,511 $
Estimated Fair
Value
189,691,540
148,073,873
6,635,786
1,157,454
39,155
684
345,598,492
The following tables presents a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for sale:
U.S.
Treasury
Securities
And
Obligations
of U.S.
Government
Agencies
Year Ended December 31, 2023
Obligations
of states
and
political
subdivisions
Corporate
securities
including
public
utilities
Mortgage-
backed
securities
Total
Beginning balance - December 31, 2022
$
-
$
Additions for credit losses not previously recorded
Change in allowance on securities with previous allowance
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
Ending Balance - December 31, 2023
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
$
-
$
-
$
-
261,500
57,764
(10,764)
-
-
-
6,049
-
-
-
-
-
267,549
57,764
(10,764)
-
-
-
$ 308,500
$
6,049
$ 314,549
28
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
The following table presents a roll forward of the Company’s cumulative other than temporary credit impairments (“OTTI”) recognized in earnings on
fixed maturity securities available for sale which was required to be presented prior to the adoption of ASU 2016-13:
Balance of credit-related OTTI at January 1
Additions for credit impairments recognized on:
Securities not previously impaired
Securities previously impaired
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period (realized)
Securities due to an increase in expected cash flows
2022
$
264,977
-
-
(39,502)
-
Balance of credit-related OTTI at December 31
$
225,475
The following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at December 31, 2023, 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.
Due in 1 year
Due in 2-5 years
Due in 5-10 years
Due in more than 10 years
Mortgage-backed securities
Redeemable preferred stock
Total
Amortized
Cost
Estimated Fair
Value
- $
168,831,608
95,804,878
85,638,077
40,359,878
250,000
390,884,441 $
-
166,186,132
95,031,727
83,900,556
36,157,571
260,000
381,535,986
$
$
Information regarding sales of fixed maturity securities available for sale is presented as follows.
Proceeds from sales
Gross realized gains
Gross realized losses
Years Ended December 31,
2022
2023
$
2,557,074 $
11,508
(57,861)
3,091,105
24,281
(32,976)
29
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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:
Fixed maturity securities available for sale
at estimated fair value
Other investments
Cash and cash equivalents
Total assets on deposit
Years Ended December 31,
2022
2023
$
$
6,206,650 $
400,000
1,909,215
8,515,865 $
8,817,959
-
2,214,206
11,032,165
Assets held in trust related to third-party reinsurance agreements were as follows:
Fixed maturity securities available for sale
at estimated fair value
Cash and cash equivalents
Total assets on deposit
Years Ended December 31,
2022
2023
$
$
27,903,952 $
2,101,052
30,005,004 $
27,955,297
1,866,453
29,821,750
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.
Fixed maturity securities available for sale
at estimated fair value
Total assets pledged as collateral
Real Estate Held for Investment and Held for Sale
Years Ended December 31,
2022
2023
$
$
93,903,089 $
93,903,089 $
93,034,880
93,034,880
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 generating investment income. 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 Board of Directors.
30
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 generally looks to acquire assets that are in regions expected to have high growth in employment and population and that provide
operational efficiencies.
The Company currently owns and operates nine 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 $124,381,467 and $129,330,119 as of December 31, 2023
and 2022, respectively. The associated bank loan carrying values totaled $97,807,614 and $97,112,131 as of December 31, 2023 and 2022, respectively.
During 2023 and 2022, 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 2023 and 2022, the Company recorded depreciation expense on commercial real estate held for investment of $6,278,828 and $6,090,575,
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:
Net Book Value
December 31,
Total Square Footage
December 31,
2023
2022
$142,475,177 $147,627,946
2,380,847
2,881,863
19,250
-
2023
625,920
1,622
-
2022
625,920
31,778
19,694
$142,494,427 $152,890,656
627,542
677,392
Utah (1)
Louisiana
Mississippi (2)
(1) Includes Center53
(2) This property was moved to held for sale
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.
31
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease payments expected to be received.
2024
2025
2026
2027
2028
Thereafter
Total
$
$
11,816,339
11,843,124
10,695,017
9,198,450
9,009,534
46,371,762
98,934,226
The Company’s commercial real estate held for sale is summarized as follows:
Mississippi (1)
Net Book Value
December 31,
Total Square Footage
December 31,
2023
3,028,973
3,028,973
$
$
$
$
2022
2023
2022
151,553
151,553
19,694
19,694
-
-
(1) Consists of approximately 93 acres of undeveloped land for $151,553 for 2023 and 2022. The remaining property for $2,877,420 was sold in February
2024 for a gain of approximately $250,000.
These properties are being marketed with the assistance of commercial real estate brokers in Mississippi.
Residential Real Estate Held for Investment and Held for Sale
The Company occasionally acquires a small portfolio of residential homes primarily because of loan foreclosures. The Company has the option to sell these
properties or to continue to hold them for expected cash flow and price appreciation.
The Company also invests in residential subdivision development.
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 2023 and 2022, the Company recorded impairment losses on residential real estate held for sale of nil and $94,000, respectively. Impairment losses,
if any, are included in gains (losses) on investments and other assets on the consolidated statements of earnings.
During 2023 and 2022, the Company recorded depreciation expense on residential real estate held for investment of $10,592 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.
32
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
The Company’s residential real estate held for investment is summarized as follows:
Utah (1)
Net Book Value
December 31,
2023
2022
$ 40,924,865 $ 38,437,960
$ 40,924,865 $ 38,437,960
(1) Includes multiple residential subdivision development projects
The following table presents additional information regarding the Company’s residential subdivision development in Utah.
Lots available for sale
Lots to be developed
Ending Balance
December 31,
2023
42
1,145
40,739,201 $
2022
80
1,131
38,241,705
$
The Company’s residential real estate held for sale is summarized as follows:
Net Book Value
December 31,
2023
2022
- $ 11,010,029(1)
- $ 11,010,029
$
$
Utah
(1) All sold in 2023
The net book value of foreclosed residential real estate included in residential real estate held for investment or sale was nil and $11,010,029 as of
December 31, 2023 and 2022, respectively.
33
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023, real estate
owned and occupied by the Company is summarized as follows:
Approximate Square
Footage
Square Footage
Occupied by the
Company
221,000
19,694
12,274
8,059
1,560
1,737
50%
28%
100%
100%
100%
100%
Location
433 Ascension Way, Floors 4, 5 and 6, Salt
Lake City, UT - Center53 Building 2 (1)
1044 River Oaks Dr., Flowood, MS (1) (3)
1818 Marshall Street, Shreveport, LA (2)
909 Foisy Street, Alexandria, LA (2) (4)
812 Sheppard Street, Minden, LA (2) (5)
1550 N 3rd Street, Jena, LA (2) (3)
Business Segment
Corporate Offices, Life Insurance,
Cemetery/Mortuary Operations, and Mortgage
Operations and Sales
Life Insurance Operations
Life Insurance Operations
Life Insurance Sales
Life Insurance Sales
Life Insurance Sales
(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 and sold during the first quarter of 2024
(4) Listed for sale and currently under contract
(5) 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, 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. As of December 31, 2022, the Company had 64%, 10%, 5% and 5% of its mortgage
loans from borrowers located in the states of Utah, Florida, California, and Texas, 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 condensed consolidated statements of earnings.
34
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
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 condensed 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 $237,000 and $226,000 as of December 31,
2023 and 2022, respectively.
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 for 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 the 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.
35
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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:
December 31, 2023
Allowance for credit losses:
Beginning balance - January 1, 2023
Adoption of ASU 2016-13 (1)
Change in provision for credit losses (2)
Charge-offs
Ending balance - December 31, 2023
December 31, 2022
Allowance for credit losses:
Beginning balance - January 1, 2022
Change in provision for credit losses (2)
Charge-offs
Ending balance - December 31, 2022
Commercial
Residential
Residential
Construction
Total
$
$
$
$
187,129
555,807
476,717
-
1,219,653
187,129
-
-
187,129
$
$
$
$
1,739,980
(192,607)
843,521
-
2,390,894
1,469,571
270,409
-
1,739,980
$
$
$
$
43,202
301,830
(136,926)
-
208,106
43,202
-
-
43,202
$
$
$
$
1,970,311
665,030
1,183,312
-
3,818,653
1,699,902
270,409
-
1,970,311
(1) See Note 1 of the notes to the consolidated financial statements
(2) Included in other expenses on the consolidated statements of earnings
36
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
The following table presents the aging of mortgage loans held for investment by loan type.
December 31, 2023
30-59 days past due
60-89 days past due
Over 90 days past due (1)
In process of foreclosure (1)
Total past due
Current
Total mortgage loans
Allowance for credit losses
Unamortized deferred loan fees, net
Unamortized discounts, net
Net mortgage loans held for investment
December 31, 2022
30-59 days past due
60-89 days past due
Over 90 days past due (1)
In process of foreclosure (1)
Total past due
Current
Total mortgage loans
Allowance for credit losses
Unamortized deferred loan fees, net
Unamortized discounts, net
Net mortgage loans held for investment
Commercial
Residential
Residential
Construction
$
$
$
$
-
-
405,000
1,241,508
1,646,508
72,530,030
74,176,538
(1,219,653)
(172,989)
(216,705)
72,567,191
1,000,000
-
-
405,000
1,405,000
44,906,955
46,311,955
(187,129)
(199,765)
(230,987)
45,694,074
$
$
$
$
3,387,673
3,472,760
3,480,931
1,021,790
11,363,154
91,790,433
103,153,587
(2,390,894)
(1,135,491)
(107,452)
99,519,750
3,553,390
814,184
1,286,211
876,174
6,529,959
86,825,664
93,355,623
(1,739,980)
(1,212,994)
(111,873)
90,290,776
$
$
$
$
-
-
-
-
-
104,052,748
104,052,748
(208,106)
(314,746)
-
103,529,896
-
-
-
-
-
172,516,125
172,516,125
(43,202)
(333,846)
-
172,139,077
$
$
$
$
Total
3,387,673
3,472,760
3,885,931
2,263,298
13,009,662
268,373,211
281,382,873
(3,818,653)
(1,623,226)
(324,157)
275,616,837
4,553,390
814,184
1,286,211
1,281,174
7,934,959
304,248,744
312,183,703
(1,970,311)
(1,746,605)
(342,860)
308,123,927
(1) Interest income is not recognized on loans which are more than 90 days past due or in foreclosure.
37
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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,
2023:
Credit Quality Indicator
2023
2022
2021
2020
2019
Prior
Total
% of
Total
LTV:
Less than 65%
65% to 80%
Greater than 80%
Total
DSCR
>1.20x
1.00x - 1.20x
<1.00x
Total
$ 34,304,954
1,523,926
-
$ 13,555,737
5,115,231
-
$ 3,778,248
1,050,000
405,000
$
-
4,913,313
-
$ 2,964,740
-
-
$ 6,565,389
-
-
$ 61,169,068
12,602,470
405,000
82.46%
16.99%
0.55%
$ 35,828,880
$ 18,670,968
$ 5,233,248
$ 4,913,313
$ 2,964,740
$ 6,565,389
$ 74,176,538
100.00%
$ 20,990,000
8,338,880
6,500,000
$ 1,000,000
8,496,127
9,174,841(1)
$ 700,000
3,483,248
1,050,000
$ 4,913,313
-
-
$ 2,964,740
-
-
$ 2,612,625
3,952,764
-
$ 33,180,678
24,271,019
16,724,841
44.73%
32.72%
22.55%
$ 35,828,880
$ 18,670,968
$ 5,233,248
$ 4,913,313
$ 2,964,740
$ 6,565,389
$ 74,176,538
100.00%
(1) Commercial construction loan
38
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
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,
2023:
Credit Quality Indicator
2023
2022
2021
2020
2019
Prior
Total
% of
Total
Performance Indicators:
Performing
Non-performing (1)
$ 15,337,828
-
$ 53,875,389
2,202,114
$ 7,156,934
365,061
$ 7,453,796
613,101
$ 2,786,562
-
$ 12,040,357
1,322,445
$ 98,650,866
4,502,721
95.63%
4.37%
Total
$ 15,337,828
$ 56,077,503
$ 7,521,995
$ 8,066,897
$ 2,786,562
$ 13,362,802
$ 103,153,587
100.00%
(1) Includes residential mortgage loans in the process of foreclosure of $1,021,790
LTV:
Less than 65%
65% to 80%
Greater than 80%
$ 3,280,144
10,962,770
1,094,914
$ 7,049,522
44,371,320
4,656,661
$ 1,843,286
4,269,894
1,408,815
$ 1,746,970
4,222,170
2,097,757
$ 446,675
2,339,887
-
$ 5,206,095
5,711,440
2,445,267
$ 19,572,692
71,877,481
11,703,414
18.97%
69.68%
11.35%
Total
$ 15,337,828
$ 56,077,503
$ 7,521,995
$ 8,066,897
$ 2,786,562
$ 13,362,802
$ 103,153,587
100.00%
39
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023:
Credit Quality Indicator
2023
2022
2021
Total
% of Total
Performance Indicators:
Performing
Non-performing
Total
LTV:
Less than 65%
65% to 80%
Greater than 80%
Total
Principal Amounts Due
$
$
$
60,311,679
-
60,311,679
40,215,360
20,096,319
-
$
$
$
16,624,182
-
16,624,182
8,732,500
7,891,682
-
$
$
$
27,116,887
-
$ 104,052,748
-
27,116,887
$ 104,052,748
20,442,302
6,674,585
-
$
69,390,162
34,662,586
-
100.00%
0.00%
100.00%
66.69%
33.31%
0.00%
$
60,311,679
$
16,624,182
$
27,116,887
$ 104,052,748
100.00%
The following table presents the amortized cost and contractual payments on mortgage loans held for investment by category as of December 31, 2023.
Expected principal payments may differ from contractual obligations because certain borrowers may elect to pay off mortgage obligations with or without
early payment penalties.
Residential
Residential Construction
Commercial
Total
Total
103,153,587
104,052,748
74,176,538
281,382,873
$
$
$
$
Principal
Amounts
Due in
1 Year
Principal
Amounts
Due in
2-5 Years
Principal
Amounts
Due
Thereafter
2,554,380
88,880,893
39,562,489
130,997,762
$
$
9,231,545
15,171,855
19,457,975
43,861,375
$
$
91,367,662
-
15,156,074
106,523,736
40
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
Insurance Assignments
The following table presents the aging of insurance assignments, included in other investments and policy loans on the condensed consolidated balance
sheets:
30-59 days past due
60-89 days past due
Over 90 days past due
Total past due
Current
Total insurance assignments
Allowance for credit losses
Net insurance assignments
Years Ended December 31,
2022
2023
10,621,443
10,829,629 $
3,997,484
3,709,754
5,813,013
4,329,468
20,431,941
18,868,851
26,510,594
26,736,471
46,942,536
45,605,322
(1,609,951)
(1,553,836)
45,332,585
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:
Beginning balance - January 1, 2023
Change in provision for credit losses (1)
Charge-offs
Ending balance - December 31, 2023
Beginning balance - January 1, 2022
Change in provision for credit losses (1)
Charge-offs
Ending balance - December 31, 2022
(1) Included in other expenses on the consolidated statements of earnings
Allowance
1,609,951
891,959
(948,074)
1,553,836
1,686,218
889,480
(965,747)
1,609,951
$
$
$
$
41
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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.
Fixed maturity securities available for sale:
Gross realized gains
Gross realized losses
Net credit loss (provision) release
Equity securities:
Gains (losses) on securities sold
Unrealized gains (losses) on securities held at the
end of the period
Real estate held for investment and sale:
Gross realized gains
Gross realized losses
Other assets, including call and put option derivatives:
Gross realized gains
Gross realized losses
Total
Years Ended December 31
2023
2022
$
67,686
(106,760)
(325,314)
205,949
(43,776)
-
254,917
(10,519)
1,782,219
(2,109,556)
197,194
(71,792)
1,239,332
(825,593)
214,349
(175,157)
1,837,342
$
686,703
-
(857,460)
$
$
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 $730,000 in net gains and $817,000 in net losses for 2023 and 2022, respectively.
42
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
2) Investments (Continued)
Major categories of net investment income were as follows:
Fixed maturity securities available for sale
Equity securities
Mortgage loans held for investment
Real estate held for investment and sale
Policy loans
Insurance assignments
Other investments
Cash and cash equivalents
Gross investment income
Investment expenses
Net investment income
Years Ended December 31
2023
2022
$
$
16,871,558 $
616,989
33,242,094
14,786,017
816,711
18,118,391
617,420
4,250,029
89,319,209
(16,976,162)
72,343,047 $
12,395,764
511,118
34,949,763
14,563,269
932,362
18,112,840
518,865
1,666,945
83,650,926
(17,453,334)
66,197,592
Net investment income includes income earned by the restricted assets and cemetery perpetual care trust investments of the cemeteries and mortuaries of
$2,365,378 and $2,404,277 for 2023 and 2022, 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:
Fixed maturity securities available for sale
Equity securities
Mortgage loans held for investment
Real estate held for investment
Policy Loans
Cash and cash equivalents
Total accrued investment income
3) Loans Held for Sale
Years Ended December 31,
2023
2022
3,984,695 $
20,451
2,661,092
3,486,115
-
18,437
10,170,790 $
3,563,767
14,496
3,220,709
3,455,305
37,951
7,598
10,299,826
$
$
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 $1,636,090 and nil as of December 31, 2023 and 2022, respectively. See Note 17 of
the Notes to Consolidated Financial Statements for additional disclosures regarding loans held for sale.
43
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
3) Loans Held for Sale (Continued)
The following table presents the aggregate fair value and the aggregate unpaid principal balance of loans held for sale.
Aggregate fair value
Unpaid principal balance
Unrealized loss
Mortgage Fee Income
December 31,
$
2023
126,549,190
127,185,867
(636,677)
$
2022
141,179,620
141,337,811
(158,191)
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:
Loan fees
Interest income
Secondary gains
Change in fair value of loan commitments
Change in fair value of loans held for sale
Provision for loan loss reserve
Mortgage fee income
Years Ended December 31
2023
2022
21,724,456 $
9,547,741
68,505,014
(1,123,615)
(478,460)
(27,164)
98,147,972 $
24,184,972
9,666,149
153,870,807(1)
(4,308,638)
(8,834,797)
(1,078,812)
173,499,681
$
$
(1) Includes a net gain of $34,051,938 for the sale of mortgage servicing rights
44
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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:
Beginning Balance
Provision for current loan originations (1)
Charge-offs, net of recaptured amounts
Ending Balance
(1) Included in Mortgage fee income
December 31,
2023
2022
1,725,667
27,164
(1,205,598)
547,233
$
$
2,447,139
1,078,812
(1,800,284)
1,725,667
$
$
The Company maintains reserves for estimated losses on current production volumes. For 2023, $27,164 in reserves were added at a rate of 4.3 basis points
per loan, the equivalent of $430 per $1,000,000 in loans originated. This is a decrease over 2022, when $1,078,812 in reserves were added at a rate of 3.19
basis points per loan originated, the equivalent of $319 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.
45
4) Receivables
Receivables consist of the following:
Contracts with customers
Receivables from sales agents
Other
Total receivables
Allowance for credit losses
Net receivables
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
December 31,
2023
2022
$
$
6,321,573
3,252,840
7,658,789
17,233,202
(1,897,887)
15,335,315
$
$
5,392,779
2,209,185
23,200,919
30,802,883
(2,229,791)
28,573,092
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:
Beginning balance - January 1, 2023
Change in provision for credit losses (1)
Charge-offs
Ending balance - December 31, 2023
Beginning balance - January 1, 2022
Change in provision for credit losses (1)
Charge-offs
Ending balance - December 31, 2022
(1) Included in other expenses on the condensed consolidated statements of earnings
Allowance
2,229,791
(110,935)
(220,969)
1,897,887
1,800,725
799,888
(370,822)
2,229,791
$
$
$
$
46
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
5) Value of Business Acquired, Goodwill and Other Intangible Assets
Information regarding value of business acquired was as follows:
Balance at beginning of year
Value of business acquired
Imputed interest at 7% included in earnings
Amortization included in earnings
Shadow amortization included in other
comprehensive income
Net amortization
Balance at end of year
December 31,
2023
2022
9,803,736
-
626,666(1)
(1,926,668)(1)
(36,121)
(1,336,123)
8,467,613
$
$
8,421,432
2,136,085
642,919(1)
(1,907,250)(1)
510,550
(753,781)
9,803,736
$
$
(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:
2024
2025
2026
2027
2028
Thereafter
Total
$
$
1,219,496
1,112,965
1,030,635
957,074
833,216
3,314,227
8,467,613
Actual amortization may vary based on changes in assumptions or experience. As of December 31, 2023, value of business acquired is being amortized
over a weighted average life of 5.1 years.
47
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
5) Value of Business Acquired, Goodwill and Other Intangible Assets (Continued)
Information regarding goodwill by segment was as follows:
Balance at January 1, 2022:
Goodwill
Accumulated impairment
Total goodwill, net
Acquisition
Balance at December 31, 2022:
Goodwill
Accumulated impairment
Total goodwill, net
Acquisition
Balance at December 31, 2023:
Goodwill
Accumulated impairment
Total goodwill, net
Life Insurance
Cemetery/
Mortuary
Total
$
2,765,570
-
2,765,570
$
2,488,213
-
2,488,213
5,253,783
-
5,253,783
-
-
-
2,765,570
-
2,765,570
2,488,213
-
2,488,213
5,253,783
-
5,253,783
-
-
-
2,765,570
-
2,765,570
$
2,488,213
-
2,488,213
$
5,253,783
-
5,253,783
$
$
Goodwill is not amortized but is tested annually for impairment. The annual impairment tests resulted in no impairment of goodwill for 2023 and 2022.
48
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 is included in other assets:
Useful Life
15 years
15 years
15 years
15 years
December 31,
2023
2022
$
$
2,100,000
210,000
610,000
890,000
(807,333)
3,002,667
$
$
2,100,000
210,000
610,000
890,000
(553,333)
3,256,667
Intangible asset - trade name (1)
Intangible assets - other (1)
Intangible asset - trade name (2)
Intangible asset - customer lists (3)
Less accumulated amortization
Balance at end of year
(1) Rivera Funerals, Cremations and Memorial Gardens
(2) Kilpatrick Life
(3) Beta Capital Corp
Amortization expense for 2023 and 2022 was $254,000 and $256,000, respectively, and 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:
2024
2025
2026
2027
2028
Thereafter
Total
$
$
254,000
254,000
254,000
254,000
254,000
1,732,667
3,002,667
49
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
6) Property and Equipment
Property and equipment is summarized below:
Land and buildings
Furniture and equipment
Less accumulated depreciation
Total
December 31,
2023
16,567,819 $
16,315,061
32,882,880
(13,707,781)
19,175,099 $
2022
16,545,799
17,567,906
34,113,705
(13,534,056)
20,579,649
$
$
Depreciation expense for 2023 and 2022 was $2,351,661 and $2,496,906, 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 is listed for sale and currently under contract. Impairment losses are included in gains (losses) on the consolidated
statements of earnings.
50
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
7) Bank and Other Loans Payable
Bank and other loans payable are summarized as follows:
Prime rate note payable in monthly installments of $75,108 including principal and
interest, collateralized by shares of Security National Life Insurance Company
stock, paid in full in
June 2023.
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
$62,977,000, due June 2032.
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
$44,811,000, due April 2031.
December 31,
2023
2022
$
-
$
1,690,892
50,129,255
48,613,833
38,478,359
39,298,298
4.7865% fixed interest only note payable in monthly installments, collateralized by
real property with a book value of approximately $16,594,000, due June 2028.
9,200,000
9,200,000
1 month SOFR rate plus 2.1% loan purchase agreement with a warehouse line
availability of $100,000,000, expired December 2023 due to the lender exiting the
market place.
1 month SOFR rate plus 2% loan purchase agreement with a warehouse line
availability of $100,000,000, matures November 2024.
1 month SOFR rate plus 2.5% loan purchase agreement with a warehouse line
availability of $75,000,000, expired December 2023 due to the lender exiting the
market place.
1 month SOFR rate plus 2.1% loan purchase agreement with a warehouse line
availability of $15,000,000, matures May 2024.
Finance lease liabilities
Total bank and other loans
-
17,978,527
114,518
29,768,762
-
15,131,410
7,617,455
15,550
-
31,082
105,555,137
161,712,804
Less current installments
Bank and other loans, excluding current installments
$
(9,543,052)
96,012,085
$
(65,560,608)
96,152,196
51
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023, the amount available for borrowings from the FHLB of Des Moines was approximately $77,324,238, compared with
$80,312,445 as of December 31, 2022. United States Treasury fixed maturity securities with an estimated fair value of $88,400,026 as of December 31,
2023 have been pledged at the FHLB of Des Moines as collateral for current and potential borrowings compared with $86,338,880 at December 31, 2022.
As of December 31, 2023 and 2022, the Company had no outstanding FHLB borrowings. As of December 31, 2023, the Company’s total investment in
FHLB stock was $453,600 compared with $856,800 as of December 31, 2022. As of December 31, 2023, the Company was contingently liable under
standby letters of credit aggregating $5,823,496. 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 $5,379,738.
Federal Home Loan Bank of Dallas
As of December 31, 2023, the amount available for borrowings from the FHLB of Dallas was approximately $5,104,610, compared with $5,719,671 as of
December 31, 2022. Mortgage-Backed fixed maturity securities with an estimated fair value of $5,503,063 as of December 31, 2023 have been pledged at
the FHLB of Dallas as collateral for current and potential borrowings compared with $6,696,100 at December 31, 2022. As of December 31, 2023 and
2022, the Company had no outstanding FHLB borrowings. As of December 31, 2023, the Company’s total investment in FHLB stock was $1,826,200
compared with $1,743,500 as of December 31, 2022.
Revolving Lines of Credit
The Company has a $2,000,000 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 March 31, 2024, renewable annually. As of December 31, 2023, the Company was contingently
liable under standby letters of credit aggregating $38,290, to be used as collateral for residential subdivision land development. 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, 2023, there were no amounts outstanding under the revolving line-of-credit.
The Company also has a $2,500,000 revolving line-of-credit with a bank with interest payable at the daily simple SOFR plus 2.35%, which includes a
mandatory .10% credit spread adjustment, maturing March 31, 2024. As of December 31, 2023, the Company was contingently liable under standby letters
of credit aggregating $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,
2023, there were no amounts outstanding under the revolving line-of-credit.
52
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
7) Bank and Other Loans Payable (Continued)
Debt Covenants for Mortgage Warehouse Lines of Credit
The Company, through its subsidiary SecurityNational Mortgage, has a line of credit with Texas Capital Bank N.A. This agreement allows
SecurityNational Mortgage to borrow up to $100,000,000 for the sole purpose of funding mortgage loans (the “Texas Capital Bank Warehouse Line of
Credit”). The agreement charges interest at the 1-Month SOFR rate plus 2.0% and matures on November 30, 2024. 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 four-quarter basis.
The Company through its subsidiary SecurityNational Mortgage, has a line of credit with U.S Bank. This agreement allows SecurityNational Mortgage to
borrow up to $15,000,000 for the sole purpose of funding mortgage loans (the “U.S. Bank Warehouse Line of Credit” and, together with the Texas Capital
Bank Warehouse Line of Credit, the “Warehouse Lines of Credit”). 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 May 26, 2024. 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.
The agreements for the 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, 2023, the Company was not in compliance
with the net income covenant of the 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 under the warehouse lines of credit from the warehouse banks. In the
unlikely event the Company is required to repay the outstanding advances of approximately $7,732,000 on the warehouse line of credit that has not
provided a covenant waiver, the Company 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 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 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 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, 2023, the Company was in compliance with
all these debt covenants.
53
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
7) Bank and Other Loans Payable (Continued)
The following tabulation shows the combined maturities of bank and other loans payable:
2024
2025
2026
2027
2028
Thereafter
Total
$
$
9,543,052
1,881,631
1,952,430
2,026,547
11,296,737
78,854,740
105,555,137
Interest expense in 2023 and 2022 was $4,865,327 and $7,830,443, respectively.
54
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 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
Obligations of states and political subdivisions
Corporate securities including public utilities
Total fixed maturity securities available for
sale
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized
cost:
Residential construction
Less: Allowance for credit losses
Total mortgage loans held for investment
Cash and cash equivalents
Total cemetery perpetual care trust investments
Cemetery perpetual care obligation
Trust investments in excess of trust obligations
$
$
$
$
$
$
$
$
$
$
$
477,797
115,792
53,672
$
302
-
-
$
(574)
(5,114)
(171)
477,525
110,678
53,501
647,261
$
302
$
(5,859) $
641,704
3,614,392
3,614,392
$
$
859,680
859,680
$
$
(146,771) $
(146,771) $
4,327,301
4,327,301
247,360
(495)
246,865
2,867,047
8,082,917
(5,326,196)
2,756,721
55
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2022 are as follows:
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
December 31, 2022:
Fixed maturity securities, available for sale, at
estimated fair value:
U.S. Treasury securities and obligations of U.S.
Government agencies
Obligations of states and political subdivisions
Total fixed maturity securities available for
sale
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized
cost:
Residential construction
Real estate held for investment: Residential
Cash and cash equivalents
Total cemetery perpetual care trust investments
Cemetery perpetual care obligation
Trust investments in excess of trust obligations
Fixed Maturity Securities
$
$
$
$
$
$
$
$
$
$
89,004
174,201
263,205
3,195,942
3,195,942
$
$
$
$
42
-
42
584,383
584,383
$
$
$
$
(38)
(8,478)
$
89,008
165,723
(8,516) $
254,731
(175,163) $
(175,163) $
3,605,162
3,605,162
1,506,517
(16,178)
1,925,978
7,276,210
(5,099,542)
2,176,668
The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of December 31,
2023 and 2022. 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:
At 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
Total unrealized losses
At December 31, 2022
U.S. Treasury securities and obligations of U.S.
Government agencies
Obligations of states and political subdivisions
Total unrealized losses
Unrealized
Losses for
Less than
Twelve
Months
Fair
Value
Unrealized
Losses for
More than
Twelve
Months
Fair
Value
Total
Unrealized
Loss
Fair
Value
$
$
$
$
574
-
-
574
$143,448
-
-
$143,448
38
1,845
1,883
$ 59,392
94,612
$154,004
$
$
$
$
-
5,114
171
5,285
$
-
110,678
53,501
$164,179
-
6,633
6,633
$
-
71,112
$ 71,112
$
$
$
$
574
5,114
171
5,859
$143,448
110,678
53,501
$307,627
38
8,478
8,516
$ 59,392
165,724
$ 225,116
Relevant holdings were comprised of four securities with fair values aggregating 98.1% of aggregate amortized cost as of December 31, 2023. There were
56
five securities with fair values aggregating 96.4% of aggregate amortized cost as of December 31, 2022. No credit losses have been recognized for 2023
and 2022, 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.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2022 are as follows:
Amortized Cost
Gains
Losses
Value
Gross Unrealized
Gross Unrealized
Estimated Fair
(38)
$
(8,478)
89,008
165,723
(8,516) $
254,731
89,004
174,201
263,205
$
$
$
$
42
-
42
$
$
$
$
3,195,942
3,195,942
584,383
584,383
(175,163) $
(175,163) $
3,605,162
3,605,162
December 31, 2022:
estimated fair value:
Fixed maturity securities, available for sale, at
U.S. Treasury securities and obligations of U.S.
Government agencies
Obligations of states and political subdivisions
Total fixed maturity securities available for
sale
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized
cost:
Residential construction
Real estate held for investment: Residential
Cash and cash equivalents
Total cemetery perpetual care trust investments
Cemetery perpetual care obligation
Trust investments in excess of trust obligations
Fixed Maturity Securities
$
$
$
$
$
$
$
$
$
$
1,506,517
(16,178)
1,925,978
7,276,210
(5,099,542)
2,176,668
The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of December 31,
2023 and 2022. 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:
At December 31, 2023
Government agencies
U.S. Treasury securities and obligations of U.S.
Obligations of states and political subdivisions
Corporate securities including public utilities
Total unrealized losses
Unrealized
Losses for
Less than
Twelve
Months
Fair
Value
Unrealized
Losses for
More than
Twelve
Months
Fair
Value
Unrealized
Total
Loss
Fair
Value
$
$
574
-
-
574
$143,448
-
-
$143,448
$
$
-
$
-
$
5,114
171
5,285
110,678
53,501
$164,179
$
574
5,114
171
5,859
$143,448
110,678
53,501
$307,627
At December 31, 2022
U.S. Treasury securities and obligations of U.S.
-
Government agencies
6,633
Obligations of states and political subdivisions
Total unrealized losses
6,633
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
$ 59,392
Years Ended December 31, 2023 and 2022
94,612
$154,004
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Relevant holdings were comprised of four securities with fair values aggregating 98.1% of aggregate amortized cost as of December 31, 2023. There were
Notes to Consolidated Financial Statements
The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of December 31, 2023, by contractual
five securities with fair values aggregating 96.4% of aggregate amortized cost as of December 31, 2022. No credit losses have been recognized for 2023
Years Ended December 31, 2023 and 2022
maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or
and 2022, since the increase in unrealized losses is primarily a result of increases in interest rates. See Note 2 for additional information regarding the
without call or prepayment penalties.
Company’s evaluation of the allowance for credit losses for fixed maturity securities available for sale.
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
-
71,112
$ 71,112
$ 59,392
165,724
$ 225,116
38
1,845
1,883
38
8,478
8,516
$
$
$
$
$
$
$
Amortized
The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of December 31, 2023, by contractual
Cost
maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or
Due in 1 year
without call or prepayment penalties.
Due in 2-5 years
Due in 5-10 years
Due in more than 10 years
Estimated Fair
Value
$
Total
Due in 1 year
Due in 2-5 years
Restricted Assets
Due in 5-10 years
Due in more than 10 years
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.
Total
$
Amortized
Cost
Estimated Fair
Value
$
$
333,775 $
259,814
-
53,672
647,261 $
333,775 $
259,814
-
53,672
647,261 $
334,077
254,126
-
53,501
641,704
334,077
254,126
-
53,501
641,704
Restricted Assets
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.
The Company has also established certain restricted assets to provide for future merchandise and service obligations incurred in connection with its pre-
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
need sales for its cemetery and mortuary segment.
restricted cash. These restricted cash items are for the Company’s life insurance and mortgage segments.
Restricted cash also represents escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds held by
Restricted assets as of December 31, 2023 are summarized as follows:
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.
December 31, 2023:
Restricted assets as of December 31, 2023 are summarized as follows:
Fixed maturity securities, available for sale, at
estimated fair value:
Gross Unrealized
Losses
Gross Unrealized
Gains
Estimated Fair
Value
Amortized Cost
December 31, 2023:
Fixed maturity securities, available for sale, at
estimated fair value:
U.S. Treasury securities and obligations of U.S.
Government agencies
Obligations of states and political subdivisions
Corporate securities including public utilities
Total fixed maturity securities available for
U.S. Treasury securities and obligations of U.S.
sale
Government agencies
Obligations of states and political subdivisions
Corporate securities including public utilities
Total fixed maturity securities available for
sale
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Equity securities at estimated fair value:
Mortgage loans held for investment at amortized
Common stock:
cost:
Industrial, miscellaneous and all other
Residential construction
Total equity securities at estimated fair value
Less: Allowance for credit losses
Total mortgage loans held for investment
Mortgage loans held for investment at amortized
cost:
Cash and cash equivalents (1)
Residential construction
Less: Allowance for credit losses
Total restricted assets
Total mortgage loans held for investment
Amortized Cost
$
932,737
652,770
274,688
Gross Unrealized
Gains
$
1,433
305
209
Gross Unrealized
Losses
$
(1,000) $
(4,542)
(2,740)
Estimated Fair
Value
933,170
648,533
272,157
1,947
1,433
305
209
1,117,155
1,947
1,117,155
1,117,155
1,117,155
$
$
$
$
$
$
$
(8,282) $
(1,000) $
(4,542)
(2,740)
(247,996) $
(8,282) $
(247,996) $
1,853,860
933,170
648,533
272,157
7,385,203
1,853,860
7,385,203
(247,996) $
(247,996) $
7,385,203
7,385,203
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,860,195
932,737
652,770
274,688
6,516,044
1,860,195
6,516,044
6,516,044
676,572
6,516,044
(1,353)
675,219
10,114,694
676,572
(1,353)
20,028,976
675,219
(1) Including cash and cash equivalents of $6,930,933 for the life insurance and mortgage segments.
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.
57
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
Restricted assets as of December 31, 2022 are summarized as follows:
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
December 31, 2022:
Fixed maturity securities, available for sale, at
estimated fair value:
Obligations of states and political subdivisions $
Corporate securities including public utilities
Total fixed maturity securities available for
sale
$
1,033,047
201,771
1,234,818
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other
Total equity securities at estimated fair value
Mortgage loans held for investment at amortized
cost:
Residential construction
Cash and cash equivalents (1)
Total restricted assets
$
$
$
$
$
4,955,360
4,955,360
1,731,469
10,638,034
18,935,055
$
$
$
$
866
-
866
703,049
703,049
$
$
$
$
(15,360) $
(3,016)
1,018,553
198,755
(18,376) $
1,217,308
(310,165) $
(310,165) $
5,348,244
5,348,244
(1) Including cash and cash equivalents of $8,527,620 for the life insurance and mortgage segments.
A surplus note receivable in the amount of $4,000,000 at December 31, 2023 and 2022, 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,
2023 and 2022. 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.
At 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
Total unrealized losses
At December 31, 2022
Obligations of states and political subdivisions
Corporate securities including public utilities
Total unrealized losses
Unrealized
Losses for
Less than
Twelve
Months
Unrealized
Losses for
More than
Twelve
Months
Fair Value
Total
Unrealized
Loss
Fair Value
Fair Value
$
$
$
$
1,000
-
-
1,000
$ 249,877
-
-
$ 249,877
11,891
3,016
14,907
$ 760,255
198,755
$ 959,010
$
$
$
$
-
4,542
2,740
7,282
$
-
451,985
221,334
$ 673,319
3,469
-
3,469
$
$
58,072
-
58,072
$
$
$
$
1,000
4,542
2,740
8,282
$ 249,877
451,985
221,334
$ 923,196
15,360
3,016
18,376
$ 818,327
198,755
$ 1,017,082
58
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
8) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)
Relevant holdings were comprised of 12 securities with fair values aggregating 99.1% of aggregate amortized cost as of December 31, 2023. Relevant
holdings were comprised of 17 securities with fair values aggregating of 98.2% of aggregate amortized cost at December 31, 2022. No credit losses have
been recognized for 2023 and 2022, 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, 2023, 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.
Due in 1 year
Due in 2-5 years
Due in 5-10 years
Due in more than 10 years
Total
Amortized
Cost
Estimated Fair
Value
681,860 $
462,189
147,422
568,724
1,860,195 $
683,293
457,618
147,121
565,828
1,853,860
$
$
See Notes 1, 2 and 17 for additional information regarding restricted assets and cemetery perpetual care trust investments.
59
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
9) Income Taxes
The Company’s income tax liability is summarized as follows:
Current
Deferred
Total
December 31,
2023
246,437
13,506,544
13,752,981
$
$
2022
16,352,190
14,358,337
30,710,527
$
$
Significant components of the Company’s deferred tax assets and liabilities are approximately as follows:
Assets
Future policy benefits
Loan loss reserve
Unearned premium
Net operating loss
Deferred compensation
Tax on unrealized appreciation
Other
Less: Valuation allowance
Total deferred tax assets
Liabilities
Deferred policy acquisition costs
Basis difference in property, equipment and real estate
Value of business acquired
Deferred gains
Trusts
Total deferred tax liabilities
Net deferred tax liability
December 31,
2023
2022
$
$
14,902,816
142,281
534,203
1,050,770
2,138,385
491,271
917,335
-
20,177,061
18,478,562
11,054,092
1,778,199
1,308,365
1,064,387
33,683,605
13,506,544
$
$
14,605,453
448,673
582,459
237,855
2,166,593
2,590,726
601,335
(1,506,144)
19,726,950
17,511,778
11,959,391
2,058,785
1,490,946
1,064,387
34,085,287
14,358,337
The valuation allowance relates to differences between recorded deferred tax assets and liabilities and ultimate anticipated realization.
60
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
9) Income Taxes (Continued)
The Company’s income tax expense is summarized as follows:
Current
Federal
State
Deferred
Federal
State
Total
December 31,
2023
2022
$
$
4,091,306
209,537
4,300,843
(2,139,124)
(356,365)
(2,495,489)
1,805,354
$
$
15,346,331
3,294,234
18,640,565
(7,400,620)
(2,553,385)
(9,954,005)
8,686,560
The reconciliation of income tax expense at the U.S. federal statutory rates is as follows:
Computed expense at statutory rate
State tax expense (benefit), net of federal tax benefit
Change in valuation allowance
Other, net
Income tax expense
December 31,
2023
2022
$
$
3,423,086
(115,994)
(1,506,144)
4,406
1,805,354
$
$
7,219,141
585,269
623,609
258,541
8,686,560
The Company’s overall effective tax rate for 2023 and 2022 was 11.1% and 25.3% 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 and a decrease to the valuation allowance related to Kilpatrick Life
Insurance Company. The decrease in the effective tax rate when compared to the prior year is partially due to a decrease to the valuation allowance in the
current period when compared to the prior period year.
As of December 31, 2023, the Company had no significant unrecognized tax benefits. As of December 31, 2023, 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 2020 through
2023 are subject to examination by taxing authorities.
Net Operating Losses and Tax Credit Carryforwards:
Year of Expiration
2024
2025
2026
2027
2028
Thereafter up through 2038
Indefinite carryforwards
$
$
-
-
-
-
-
903,042
2,396,389
3,299,431
61
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 94.0% and 93.7% of ceded life insurance in force as of December 31, 2023 and 2022, respectively. This represented
approximately 8.8% and 11.3% of the Company’s total life insurance in force as of December 31, 2023 and 2022, respectively. See Financial Statement
Schedule IV for information regarding life insurance in force and premiums for reinsurance.
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.
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,
2023, the Company’s commitments were approximately $146,953,000 for these loans, of which $104,977,000 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.
62
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 $22,500 and $20,500 for the
years 2023 and 2022, 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 2023 and 2022 was
$1,819,275 and $2,573,956, 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 2023 and
2022.
Effective December 2, 2022, the Board members approved a motion to extend the Chief Executive Officer’s employment agreement, dated December 4,
2012, for an additional two-year term ending December 2024. 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 expensed nil and nil during 2023 and 2022, respectively, to cover the present value of anticipated retirement benefits
under the employment agreement. The liability accrued was $7,556,363 and $7,556,363 as of December 31, 2023 and 2022, respectively.
The Company, through its wholly owned subsidiary, SecurityNational Mortgage, 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. Such retirement payments are paid
monthly during the ten-year period. 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 paid $133,843 and $133,843 in retirement compensation to this individual during 2023 and 2022,
respectively. The liability accrued was $267,686 and $401,529 as of December 31, 2023 and 2022, respectively and is included in other liabilities and
accrued expenses on the consolidated balance sheets.
63
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 2023, 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.
Outstanding shares at December 31, 2021
Exercise of stock options
Stock dividends
Conversion of Class C to Class A
Class A
17,642,722
Class C
2,866,565
109,587
889,554
116,168
-
139,462
(116,168)
Outstanding shares at December 31, 2022
18,758,031
2,889,859
Exercise of stock options
Vesting of restricted stock units
Stock dividends
Conversion of Class C to Class A
279,177
1,215
949,980
59,599
-
-
141,594
(59,599)
Outstanding shares at December 31, 2023
20,048,002
2,971,854
64
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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:
Numerator:
Net earnings
Denominator:
Years Ended December 31,
2022
2023
$
14,495,058 $
25,690,302
Denominator for basic earnings per share-weighted-average
shares
22,083,772
22,187,410
Effect of dilutive securities
Employee stock options
Unvested restricted stock units
Dilutive potential common shares
594,196
-
594,196
848,323
395
848,718
Denominator for diluted earnings per share-adjusted weighted-
average shares and assumed conversions
22,677,968
23,036,128
Basic earnings per share
Diluted earnings per share
$
$
0.66 $
0.64 $
1.16
1.12
For 2023 and 2022, there were nil and 339,150 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.
65
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 $601,058 and $929,321 has been recognized under these plans for 2023 and 2022,
respectively, and is included in personnel expenses on the consolidated statements of earnings. As of December 31, 2023, the total unrecognized
compensation expense related to the stock options issued was $677,948, 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.
Weighted-
Average
Fair
Value of
Each
Option
$
$
$
$
1.88
1.65
1.70
1.48
Plan
All Plans
All Plans
All Plans
All Plans
Assumptions
Expected
Dividend
Yield (1)
Underlying
stock
FMV
Weighted-
Average
Volatility
Weighted-
Average
Risk-Free
Interest
Rate
5% $
7.99
36.76%
4.14%
Weighted-
Average
Expected
Life
(years)
4.9
5% $
7.10
36.73%
3.64%
5.31
5% $
7.37
36.79%
3.40%
5.31
5% $
6.48
37.03%
3.69%
4.88
Grant Date
December 1, 2023
January 30, 2023
January 18, 2023
December 2, 2022
(1) Stock dividend
66
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
13) Stock Compensation Plans (Continued)
Activity of the stock option plans is summarized as follows:
Outstanding at January 1, 2022
Adjustment for the effect of stock
dividends
Granted
Exercised
Cancelled
Number of
Class A Shares
1,024,351
Weighted
Average
Exercise Price
$
4.38
Number of
Class C Shares
821,146
Weighted
Average
Exercise Price
$
5.26
47,780
82,500
(176,435)
(1,591)
41,057
295,000
-
-
Outstanding at December 31, 2022
976,605
$
4.56
1,157,203
$
5.31
Adjustment for the effect of stock
dividends
Granted
Exercised
Cancelled
Outstanding at December 31, 2023
Exercisable at end of year
Available options for future grant
38,266
106,500
(286,965)
(836)
833,570
739,070
$
$
92,820
57,859
305,000
-
-
1,520,062
1,215,062
$
$
529,750
5.22
4.87
5.86
5.31
Weighted average contractual term of
options outstanding at December 31, 2023
Weighted average contractual term of
options exercisable at December 31, 2023
Aggregated intrinsic value of options
outstanding at December 31, 2023 (1)
Aggregated intrinsic value of options
exercisable at December 31, 2023 (1)
$
$
5.25 years
4.66 years
3,149,704
3,049,987
6.50 years
5.90 years
4,765,559
4,483,509
$
$
(1) The Company used a stock price of $9.00 as of December 31, 2023 to derive intrinsic value.
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 2023 and 2022 was $657,354 and $619,064, respectively.
67
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
13) Stock Compensation Plans (Continued)
Restricted Stock Units (“RSUs”)
Stock based compensation expense for RSUs issued of $304 and $371 has been recognized under these plans for the 2023 and 2022, respectively, and is
included in personnel expenses on the consolidated statements of earnings. As of December 31, 2023, the total unrecognized compensation expense related
to the RSUs issued was $3,263, which is expected to be recognized over the remaining vesting period.
Activity of the RSUs is summarized as follows:
Non-vested at December 31, 2022
Granted
Vested
Number of
Class A Shares
Weighted Average
Grant Date Fair
Value
1,620 $
1,840
(1,215)
6.48
Non-vested at December 31, 2023
2,245 $
7.72
Available RSUs for future grant
16,540
68
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
14) Statutory Financial Information and Dividend Limitations
The Company’s insurance subsidiaries prepare their statutory-basis financial statements in conformity with accounting practices prescribed or permitted by
the insurance department of the applicable state of domicile. Prescribed statutory accounting practices include a variety of publications of the NAIC, as
well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so
prescribed.
The states in which the Company’s life insurance subsidiaries are domiciled require the preparation of statutory-basis financial statements in conformity
with the NAIC Accounting Practices and Procedures Manual, subject to any deviations prescribed or permitted by the applicable insurance commissioner
and/or director. Statutory accounting practices differ from GAAP primarily since they require charging policy acquisition and certain sales inducement
costs to expense as incurred, establishing life insurance reserves based on different actuarial assumptions, and valuing certain investments and establishing
deferred taxes on a different basis.
Statutory net income and capital and surplus of the Company’s insurance subsidiaries, determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities are as follows:
Amounts by insurance subsidiary:
Security National Life Insurance Company
Kilpatrick Life Insurance Company
First Guaranty Insurance Company
Southern Security Life Insurance Company, Inc.
Trans-Western Life Insurance Company
Total
Statutory Net Income
Years Ended December 31,
2023
2022
Statutory Capital and Surplus
December 31,
2023
2022
$
$
7,419,511
2,967,779
958,497
35
15
11,345,837
$
$
9,126,955
2,373,682
1,007,026
(2,691)
4,008
12,508,980
$
$
76,330,794
20,535,591
8,427,355
1,578,322
512,570
107,384,632
$
$
66,753,938
17,300,717
8,107,405
1,579,971
512,555
94,254,586
The Utah, Louisiana, Mississippi, and Texas 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, 2023. 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.
69
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023, 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 $7,357,000.
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, 2023, 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 $1,973,000 for Kilpatrick Life Insurance Company.
70
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
15) Business Segment Information
Description of Products and Services by Segment
The Company has three reportable business segments: life insurance, cemetery and mortuary, and mortgage. The Company’s life insurance segment
consists of life insurance premiums and operating expenses from the sale of insurance products sold by the Company’s independent agency force and net
investment income derived from investing policyholder and segment surplus funds. The Company’s cemetery and mortuary segment consists of revenues
and operating expenses from the sale of at-need cemetery and mortuary merchandise and 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 segment surplus funds. The
Company’s mortgage segment consists of fee income and expenses from the originations of residential mortgage loans and interest earned and interest
expenses from warehousing pre-sold loans before the funds are received from financial institutional investors.
Measurement of Segment Profit or Loss and Segment Assets
The accounting policies of the 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.
Factors Management Used to Identify the Enterprise’s Reportable Segments
The Company’s 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. The Company regularly reviews the quantitative thresholds and other criteria to determine when other business
segments may need to be reported.
71
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
15) Business Segment Information (Continued)
Revenues:
From external sources:
Revenue from customers
Net investment income
Gains (losses) on investments and other assets
Other revenues
Intersegment revenues:
Net investment income
Total revenues
Expenses:
Death, surrenders and other policy benefits
Increase in future policy benefits
Amortization of deferred policy and pre-need
acquisition costs and value of business acquired
Selling, general and administrative expenses:
Commissions
Personnel
Advertising
Rent and rent related
Depreciation on property and equipment
Provision for loan loss reserve
Cost related to funding mortgage loans
Intersegment
Other
Interest expense:
Intersegment
Other
Costs of goods and services sold-mortuaries and
cemeteries
Total benefits and expenses
Earnings (loss) before income taxes
Income tax benefit (expense)
Net earnings (loss)
Identifiable assets
Goodwill
Year Ended December 31, 2023
Life
Insurance
Cemetery/
Mortuary
Mortgage
Intercompany
Eliminations
Consolidated
$
114,735,304
67,811,926
962,824
1,666,020
$
27,864,811
2,951,577
717,312
404,256
$
98,071,104
1,579,544
157,206
1,575,606
-
-
-
-
$ 240,671,219
72,343,047
1,837,342
3,645,882
8,203,306
193,379,380
340,001
32,277,957
531,406
101,914,866
(9,074,713)
(9,074,713)
-
318,497,490
66,002,863
34,008,997
-
-
17,485,699
538,639
3,963,185
26,769,211
638,071
414,564
880,116
-
-
310,689
12,991,888
560,718
4,081,348
-
168,107,349
25,272,031
(3,655,148)
21,616,883
$
$
$ 1,325,287,933
$
2,765,570
$
$
$
$
1,777,071
9,722,659
663,113
159,877
812,641
-
-
143,652
4,961,320
247,664
955
4,805,700
23,833,291
8,444,666
(2,131,289)
6,313,377
95,059,724
2,488,213
-
-
-
34,189,300
46,649,889
2,409,261
6,282,696
658,904
-
6,440,439
1,930,370
14,105,648
5,881,620
783,024
-
119,331,151
$ (17,416,285)
3,981,083
$ (13,435,202)
$
$
-
-
-
-
-
-
-
-
-
-
(2,384,711)
-
(6,690,002)
-
-
(9,074,713)
-
-
-
66,002,863
34,008,997
18,024,338
39,929,556
83,141,759
3,710,445
6,857,137
2,351,661
-
6,440,439
-
32,058,856
-
4,865,327
4,805,700
302,197,078
16,300,412
(1,805,354)
14,495,058
$
$
$
$
97,018,754
$ (93,063,440)
$ 1,424,302,971
-
$
-
$
5,253,783
72
15) Business Segment Information (Continued)
Revenues:
From external sources:
Revenue from customers
Net investment income
Gains (losses) on investments and other assets
Other revenues
Intersegment revenues:
Net investment income
Total revenues
Expenses:
Death, surrenders and other policy benefits
Increase in future policy benefits
Amortization of deferred policy and pre-need
acquisition costs and value of business acquired
Selling, general and administrative expenses:
Commissions
Personnel
Advertising
Rent and rent related
Depreciation on property and equipment
Provision for loan loss reserve
Cost related to funding mortgage loans
Intersegment
Other
Interest expense:
Intersegment
Other
Costs of goods and services sold-mortuaries and
cemeteries
Total benefits and expenses
Earnings before income taxes
Income tax expense
Net earnings
Identifiable assets
Goodwill
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
Year Ended December 31, 2022
Life
Insurance
Cemetery/
Mortuary
Mortgage
Intercompany
Eliminations
Consolidated
$
105,144,646
62,565,021
(459,462)
1,932,402
$
26,993,855
2,444,599
(796,096)
305,073
$ 173,356,675
1,187,972
398,098
16,579,545
-
-
-
-
$ 305,495,176
66,197,592
(857,460)
18,817,020
6,601,132
175,783,739
451,139
29,398,570
356,574
191,878,864
(7,408,845)
(7,408,845)
-
389,652,328
64,066,432
28,858,969
-
-
17,352,803
597,399
4,097,680
26,285,207
1,649,273
384,908
1,036,521
-
-
232,915
13,190,827
462,753
3,969,905
1,372,200
9,305,429
628,114
163,182
759,415
-
-
160,690
5,321,730
274,911
710
-
-
-
57,851,212
64,520,887
3,420,611
6,334,923
700,970
-
7,540,041
1,795,507
27,285,196
4,482,069
3,859,828
4,721,094
23,304,874
6,093,696
(1,523,954)
4,569,742
-
177,791,244
14,087,620
(3,127,627)
10,959,993
$
$
$
$
-
-
-
-
-
-
-
-
-
-
(2,189,112)
-
(5,219,733)
-
-
(7,408,845)
-
-
-
64,066,432
28,858,969
17,950,202
63,321,092
100,111,523
5,697,998
6,883,013
2,496,906
-
7,540,041
-
45,797,753
-
7,830,443
4,721,094
355,275,466
34,376,862
(8,686,560)
25,690,302
$
$
82,320,929
$ 219,872,163
$ (93,174,569)
$ 1,455,859,109
2,488,213
$
-
$
-
$
5,253,783
-
161,588,193
14,195,546
(4,034,979)
10,160,567
$
$
$ 1,246,840,586
$
2,765,570
$
$
$
$
73
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023.
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.
74
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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
Call and Put Options: The Company uses quoted market prices to value its call and put options.
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: The Company believes that in an orderly market, fair value will approximate the replacement cost of a home and
the rental income provides a cash flow stream for investment analysis. The Company believes the highest and best use of the properties are as income
producing assets since it is the Company’s intent to hold the properties as rental properties, matching the income from the investment in rental properties
with the funds required for future estimated policy claims.
75
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023.
Assets accounted for at fair value on a
recurring basis
Fixed maturity securities available for sale
Equity securities
Loans held for sale
Restricted assets (1)
Restricted assets (2)
Cemetery perpetual care trust investments (1)
Cemetery perpetual care trust investments (2)
Derivatives - loan commitments (3)
Total assets accounted for at fair value on a
recurring basis
Liabilities accounted for at fair value on a
recurring basis
Derivatives - loan commitments (4)
Total liabilities accounted for at fair value
on a recurring basis
$
$
$
$
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
$
-
13,636,071
-
-
7,385,203
-
4,327,301
-
$
380,297,330
-
-
1,853,860
-
641,704
-
-
1,238,656
-
126,549,190
-
-
-
-
4,995,486
Total
381,535,986
13,636,071
126,549,190
1,853,860
7,385,203
641,704
4,327,301
4,995,486
540,924,801
$
25,348,575
$
382,792,894
$
132,783,332
(3,412,224)
(3,412,224)
$
$
-
-
$
$
-
-
$
$
(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
76
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2022.
Assets accounted for at fair value on a
recurring basis
Fixed maturity securities available for sale
Equity securities
Loans held for sale
Restricted assets (1)
Restricted assets (2)
Cemetery perpetual care trust investments (1)
Cemetery perpetual care trust investments (2)
Derivatives - loan commitments (3)
Total assets accounted for at fair value on a
recurring basis
Liabilities accounted for at fair value on a
recurring basis
Derivatives - call options (4)
Derivatives - put options (4)
Derivatives - loan commitments (4)
Total liabilities accounted for at fair value
on a recurring basis
$
$
$
$
Total
345,858,492
11,682,526
141,179,620
1,217,308
5,348,244
254,731
3,605,162
4,089,856
513,235,939
(29,715)
(13,888)
(1,382,979)
$
$
$
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$
-
11,682,526
-
-
5,348,244
-
3,605,162
-
$
344,422,973
-
-
1,217,308
-
254,731
-
-
1,435,519
-
141,179,620
-
-
-
-
4,089,856
20,635,932
$
345,895,012
$
146,704,995
$
(29,715)
(13,888)
-
-
-
-
-
$
$
-
-
(1,382,979)
(1,382,979)
(1,426,582)
$
(43,603)
$
(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, 2023, the significant unobservable inputs used in the fair
value measurements were as follows:
Fair Value at
12/31/2023
Valuation
Technique
Loans held for sale
$ 126,549,190 Market approach
Derivatives - loan
commitments (net)
1,583,262 Market approach
Significant
Unobservable
Input(s)
Investor contract pricing
as a percentage of
unpaid principal balance
Range of Inputs
Minimum
Maximum
Value
Value
Weighted
Average
70.0%
121.0%
100.0%
Pull-through rate
Initial-Value
Servicing
70.0%
N/A
0 bps
99.0%
N/A
119 bps
86.0%
N/A
49 bps
Fixed maturity securities
available for sale
1,238,656
Broker quotes
Pricing quotes
$
98.40
$
102.46
$
99.86
77
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2022, the significant unobservable inputs used in the fair
value measurements were as follows:
Fair Value at
12/31/2022
Valuation
Technique
Loans held for sale
$ 141,179,620 Market approach
Derivatives - loan
commitments (net)
2,706,877 Market approach
Significant
Unobservable
Input(s)
Investor contract pricing
as a percentage of
unpaid principal balance
Range of Inputs
Minimum
Maximum
Value
Value
Weighted
Average
69.9%
106.1%
99.8%
Pull-through rate
Initial-Value
Servicing
65.0%
N/A
0 bps
95.0%
N/A
153 bps
82.2%
N/A
73 bps
Fixed maturity securities
available for sale
1,435,519
Broker quotes
Pricing quotes
$
100.00
$
111.11
$
104.97
The following table is a summary of changes in the consolidated balance sheet line items measured using level 3 inputs:
Balance - December 31, 2022
Originations/purchases
Sales, maturities and paydowns
Transfer to mortgage loans held for investment
Total gains (losses):
Included in earnings
Included in other comprehensive income
Balance - December 31, 2023
Net Derivatives Loan
Commitments
Loans Held for Sale
Fixed Maturity
Securities Available
for Sale
$
$
$
2,706,877
-
-
-
$
141,179,620
2,173,080,584
(2,224,454,040)
(3,017,626)
)
(1,123,615
(1)
-
39,760,652(1)
-
1,435,519
-
(129,521)
-
)
(2)
(108
(67,234)
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
The following table is a summary of changes in the consolidated balance sheet line items measured using level 3 inputs:
Balance - December 31, 2021
Originations/purchases
Sales, maturities and paydowns
Transfer to mortgage loans held for investment
Total gains (losses):
Included in earnings
Included in other comprehensive income
Balance - December 31, 2022
Net Derivatives Loan
Commitments
Loans Held for Sale
Fixed Maturity
Securities Available
for Sale
$
$
$
7,015,515
-
-
-
$
302,776,827
3,373,554,484
(3,549,405,402)
(51,691,213)
)
(1)
(4,308,638
-
65,944,924 (1)
-
2,023,348
-
(528,980)
-
1,957 (2)
(60,806)
2,706,877
$
141,179,620
$
1,435,519
(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
78
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023.
The following table summarizes Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a nonrecurring basis by their
classification in the consolidated balance sheet as of December 31, 2022.
Assets accounted for at fair value on a
nonrecurring basis
Impaired mortgage loans held for investment
Total assets accounted for at fair value on
a nonrecurring basis
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
794,224
794,224
$
$
-
-
$
$
-
-
$
$
794,224
794,224
79
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
17) Fair Value of Financial Instruments (Continued)
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, 2023 and 2022.
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:
Assets
Mortgage loans held for investment
Residential
Residential construction
Commercial
Mortgage loans held for investment, net
Policy loans
Insurance assignments, net (1)
Restricted assets (2)
Cemetery perpetual care trust investments (2)
Mortgage servicing rights, net
Liabilities
Bank and other loans payable
Policyholder account balances (3)
Future policy benefits - annuities (3)
Carrying Value
Level 1
Level 2
Level 3
Total
Estimated Fair
Value
$
99,519,750
103,529,896
72,567,191
$ 275,616,837
13,264,183
44,051,486
675,219
246,865
3,461,146
$ (105,555,137)
(39,245,123)
(106,285,010)
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
96,998,106
103,529,896
72,149,530
$ 272,677,532
13,264,183
44,051,486
675,219
246,865
4,543,657
$
96,998,106
103,529,896
72,149,530
$ 272,677,532
13,264,183
44,051,486
675,219
246,865
4,543,657
$ (105,555,137)
(48,920,691)
(102,177,585)
$ (105,555,137)
(48,920,691)
(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
80
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2022:
Assets
Mortgage loans held for investment
Residential
Residential construction
Commercial
Mortgage loans held for investment, net
Policy loans
Insurance assignments, net (1)
Restricted assets (2)
Cemetery perpetual care trust investments (2)
Mortgage servicing rights, net
Liabilities
Bank and other loans payable
Policyholder account balances (3)
Future policy benefits - annuities (3)
Carrying Value
Level 1
Level 2
Level 3
Total
Estimated Fair
Value
$
90,290,776
172,139,077
45,694,074
$ 308,123,927
13,095,473
45,332,585
1,731,469
1,506,517
3,039,765
$ (161,712,804)
(41,146,171)
(106,637,094)
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
88,575,293
172,139,077
44,079,537
$ 304,793,907
13,095,473
45,332,585
1,731,469
1,506,517
3,927,877
$
88,575,293
172,139,077
44,079,537
$ 304,793,907
13,095,473
45,332,585
1,731,469
1,506,517
3,927,877
$ (161,712,804)
(42,181,089)
(126,078,031)
$ (161,712,804)
(42,181,089)
(126,078,031)
(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 of mortgage loans is determined through a combination of discounted cash flows (estimating expected
future cash flows of payments and discounting them using current interest rates from 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.
81
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
17) Fair Value of Financial Instruments (Continued)
Bank and Other Loans Payable: The carrying amounts reported in the accompanying consolidated balance sheet for the warehouse lines of credit
approximate their fair values due to their relatively short-term maturities and variable interest rates. The carrying amounts reported in the accompanying
consolidated balance sheet for the bank loans collateralized by real estate approximate their fair values due to the non-assumable fixed 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 contracts are estimated based on the present value of liability cash
flows. The fair values for the Company’s insurance contracts other than investment-type contracts are not required to be disclosed. However, the fair values
of liabilities under all insurance contracts 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 contracts.
18) Accumulated Other Comprehensive Income (loss)
The following summarizes the changes in accumulated other comprehensive income (loss):
Unrealized gains (losses) on fixed maturity securities available for sale
Amounts reclassified into net earnings
Net unrealized gains (losses) before taxes
Tax benefit (expense)
Net
Unrealized gains (losses) on restricted assets (1)
Tax benefit (expense)
Net
Unrealized gains (losses) on cemetery perpetual care trust investments (1)
Tax benefit (expense)
Net
Other comprehensive income (loss) changes
$
$
(1) Fixed maturity securities available for sale
December 31
2023
2022
7,853,398
(39,074)
7,814,324
(1,640,186)
6,174,138
11,175
(2,784)
8,391
2,917
(727)
2,190
6,184,719
$
$
(39,493,861)
162,173
(39,331,688)
8,259,656
(31,072,032)
(71,035)
17,695
(53,340)
(20,446)
5,093
(15,353)
(31,140,725)
82
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
18) Accumulated Other Comprehensive Income (loss) (Continued)
The following is the accumulated balances of other comprehensive income (loss) as of December 31, 2023:
Unrealized gains (losses) on fixed maturity securities
available for sale
Unrealized gains (losses) on restricted assets (1)
Unrealized gains (losses) on cemetery perpetual
care trust investments (1)
Other comprehensive income (loss)
(1) Fixed maturity securities available for sale
Beginning Balance
December 31, 2022
Change for the period
$
$
(13,050,767)
(13,148)
(6,362)
(13,070,277)
$
$
6,174,138
8,391
2,190
6,184,719
The following is the accumulated balances of other comprehensive income (loss) as of December 31, 2022:
Unrealized gains (losses) on fixed maturity securities
available for sale
Unrealized gains (losses) on restricted assets (1)
Unrealized gains (losses) on cemetery perpetual
care trust investments (1)
Other comprehensive income (loss)
(1) Fixed maturity securities available for sale
Beginning Balance
December 31, 2021
Change for the period
$
$
18,021,265
40,192
8,991
18,070,448
$
$
(31,072,032)
(53,340)
(15,353)
(31,140,725)
Ending Balance
December 31,
2023
(6,876,629)
(4,757)
(4,172)
(6,885,558)
Ending Balance
December 31,
2022
(13,050,767)
(13,148)
(6,362)
(13,070,277)
$
$
$
$
83
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
19) Derivative Instruments
The Company reports derivative instruments pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.
The following table shows the fair value and notional amounts of derivative instruments.
Balance Sheet
Location
Notional
Amount
December 31, 2023
Asset Fair
Value
Liability Fair
Value
Notional
Amount
December 31, 2022
Asset Fair
Value
Liability Fair
Value
Derivatives not
designated as
hedging
instruments:
Loan
commitments
Call options
Put options
Total
Other assets and
Other liabilities
Other liabilities
Other liabilities
$ 161,832,250
-
-
$ 161,832,250
$
$
4,995,486
—
—
4,995,486
$
$
3,412,224
-
-
3,412,224
$ 453,371,808
868,600
654,500
$ 454,894,908
$
$
4,089,856
—
—
4,089,856
$
$
1,382,979
29,715
13,888
1,426,582
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 in income on derivatives ineffective portion or any amounts excluded from effective testing.
Loan commitments
Mortgage fee income
Derivative
Classification
Call and put options
Gains on investments and other assets
Years ended December 31,
2023
2022
(1,123,615) $
(4,308,638)
49,963
$
202,886
$
$
84
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
20) Mortgage Servicing Rights
The Company reports MSRs pursuant to the accounting policy discussed in Note 1 of the Notes to Consolidated Financial Statements.
The following table presents the MSR activity.
Amortized cost:
Balance before valuation allowance at beginning of year
MSR additions resulting from loan sales
Amortization (1)
Sale of MSRs
Application of valuation allowance to write down MSRs with other than
temporary impairment
Balance before valuation allowance at year end
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
Estimated fair value of MSRs at year end
(1) Included in other expenses on the consolidated statements of earnings
December 31,
2023
2022
3,039,765
1,009,312
(587,931)
-
-
3,461,146
-
-
-
-
3,461,146
4,543,657
$
$
$
$
$
$
53,060,455
10,243,922
(9,078,706)
(51,185,906)
-
3,039,765
-
-
-
-
3,039,765
3,927,877
$
$
$
$
$
$
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, 2023 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.
2024
2025
2026
2027
2028
Thereafter
Total
Estimated
MSR
Amortization
$
$
390,131
342,170
306,597
271,773
242,596
1,907,879
3,461,146
85
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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.
Contractual servicing fees
Late fees
Total
Years Ended December 31,
2022
2023
15,792,105
398,754
16,190,859
1,144,540 $
97,300
1,241,840 $
$
$
The following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio.
Servicing UPB
December 31,
2023
2022
$ 414,147,436 $ 360,023,384
The following key assumptions were used in determining MSR value.
December 31, 2023
December 31, 2022
Prepayment
Speeds
Average
Life(Years)
Discount
Rate
9.70
8.12
7.79
8.49
11.85
11.95
On October 31, 2022, the Company sold certain of its MSRs. The MSRs related to mortgage loans previously originated by the Company in aggregate
unpaid principal amount of approximately $7.02 billion. As a result of the sale, the book value of the Company’s MSRs decreased $51,185,906 and
generated a gain of $34,051,938 included in mortgage fee income on the consolidated statements of earnings. Substantially all the consideration was
received by the Company with the remainder subject to certain holdbacks during transfer of the MSRs. The Company completed the physical transfer of
files prior to its deadline. The holdbacks were received in 2023.
86
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 of the Notes to Consolidated Financial
Statements.
The following table provides information regarding future policy benefits and unpaid claims and the related receivable from reinsurers.
Life
Annuities
Policyholder account balances
Accident and health
Other policyholder funds
Reported but unpaid claims
Incurred but not reported claims
$
December 31,
$
2023
756,936,902
106,285,010
39,245,123
572,689
4,411,108
3,525,774
5,062,010
2022
726,462,594
106,637,094
41,146,171
603,526
4,279,218
5,651,030
4,547,670
Gross future policy benefits and unpaid claims
$
916,038,616
$
889,327,303
Receivable from reinsurers
Life
Annuities
Accident and health
Reported but unpaid claims
Incurred but not reported claims
Total receivable from reinsurers
10,478,863
4,238,934
77,917
48,345
13,000
10,600,613
4,225,873
79,467
110,985
17,000
14,857,059
15,033,938
Net future policy benefits and unpaid claims
Net unpaid claims
$
$
901,181,557
8,526,439
$
$
874,293,365
10,070,715
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.
Balance at 12/31/2021
Incurred
Settled
Balance at 12/31/2022
Incurred
Settled
Balance at 12/31/2023
Life
8,015,101
59,377,962(1)
(57,988,800)
9,404,263
61,390,517(1)
(62,665,619)
8,129,161
$
$
Annuities
678,378
13,987,576(2)
(14,016,502)
649,452
12,669,463(2)
(12,939,637)
379,278
$
$
$
$
Accident and
Health
104,504
40,744(3)
(128,248)
17,000
30,408(3)
(29,408)
18,000
$
$
Total
8,797,983
73,406,282
(72,133,550)
10,070,715
74,090,388
(75,634,664)
8,526,439
(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
87
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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, 2023 and 2022, the balances
were $18,237,246 and $16,226,836, 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, 2023 and 2022, the balances were $17,424,764 and $15,289,901, 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, 2023 and 2022, the balances were $812,482 and $936,935, 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, 2023 and 2022, 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.
88
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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:
Opening (1/1/2023)
Closing (12/31/2023)
Increase/(decrease)
Opening (1/1/2022)
Increase/(decrease)
Closing (12/31/2022)
$
$
Receivables (1)
Contract Balances
Contract Asset
$
5,392,779
6,321,573
928,794
Receivables (1)
Contract Balances
Contract Asset
$
5,298,636
5,392,779
94,143
Contract Liability
16,226,836
18,237,246
2,010,410
Contract Liability
14,508,022
16,226,836
1,718,814
$
$
-
-
-
-
-
-
(1) Included in Receivables, net on the consolidated balance sheets
89
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
22) Revenues from Contracts with Customers (Continued)
The following table disaggregates the opening and closing balances of the Company’s contract balances.
Pre-need merchandise and services
At-need specialty merchandise
Pre-need land sales
Opening (1/1/2023)
Pre-need merchandise and services
At-need specialty merchandise
Pre-need land sales
Closing (12/31/2023)
Pre-need merchandise and services
At-need specialty merchandise
Pre-need land sales
Opening (1/1/2022)
Pre-need merchandise and services
At-need specialty merchandise
Pre-need land sales
Closing (12/31/2022)
Contract Balances
Contract Asset
Contract Liability
-
-
-
-
-
-
-
-
$
$
$
$
15,289,901
936,935
-
16,226,836
17,424,764
812,482
-
18,237,246
Contract Balances
Contract Asset
Contract Liability
-
-
-
-
-
-
-
-
$
$
$
$
13,722,348
785,674
-
14,508,022
15,289,901
936,935
-
16,226,836
$
$
$
$
$
$
$
$
90
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
22) Revenues from Contracts with Customers (Continued)
The amount of revenue recognized for 2023 and 2022 that was included in the opening contract liability balance was $4,539,540 and $4,588,290,
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.
Major goods/service lines
At-need
Pre-need
Timing of Revenue Recognition
Goods transferred at a point in time
Services transferred at a point in time
Significant Judgments and Estimates
Years Ended December 31
2022
2023
$
$
$
$
19,957,735
7,907,076
27,864,811
17,560,899
10,303,912
27,864,811
$
$
$
$
21,283,237
5,710,618
26,993,855
16,412,963
10,580,892
26,993,855
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 under ASC 606.
Contract Costs
The Company’s cemetery and mortuary segment defers 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.
91
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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% 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.
Pre-need merchandise and services
At-need specialty merchandise
Pre-need land sales
23) Leases
Years Ended December 31
2022
2023
3,951,267 $
23,090
-
3,974,357 $
3,780,173
35,371
-
3,815,544
$
$
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, 2023.
92
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
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 nonlease 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.
Lease Cost
Finance lease cost:
Amortization of right-of-use assets (1)
Interest on lease liabilities (2)
Operating lease cost (3)
Short-term lease cost (3)(4)
Sublease income (3)
Total lease cost
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases
Finance leases
Weighted-average remaining lease term (in years)
Finance leases
Operating leases
Weighted-average discount rate
Finance leases
Operating leases
$
$
$
$
Years Ended December 31
2023
2022
25,573
1,713
3,914,954
1,874,556
(323,272)
5,493,524
4,007,919
1,713
27,868
160,348
12,332
$
$
$
$
3.29
2.88
6.81%
4.54%
30,163
2,773
4,498,894
1,135,003
(209,455)
5,457,378
4,250,630
2,773
31,685
2,054,534
-
1.25
3.46
5.78%
4.50%
(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
93
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2023 and 2022
23) Leases (Continued)
The following table presents the maturity analysis of the Company’s lease liabilities.
Lease payments due in:
2024
2025
2026
2027
2028
Thereafter
Total undiscounted lease payments
Less: Discount on cash flows
Present value of lease liabilities
Finance Leases
Operating Leases
$
$
7,187
3,525
2,833
2,833
1,181
-
17,559
(2,009)
15,550
$
$
3,187,826
2,073,045
1,443,598
340,112
128,854
195,695
7,369,130
(480,588)
6,888,542
The following table presents the Company’s right-of-use assets and lease liabilities.
Balance Sheet Location
2023
2022
Year Ended December 31,
Operating Leases
Right-of-use assets
Lease liabilities
Finance Leases
Right-of-use assets
Accumulated amortization
Right-of-use assets, net
Other assets
Other liabilities and accrued expenses
Property and equipment, net
Lease liabilities
Bank and other loans payable
$
$
$
$
$
6,374,336
6,888,542
130,367
(115,565)
14,802
15,550
$
$
$
$
$
9,987,699
10,596,471
228,221
(200,178)
28,043
31,082
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.
94
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
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 26, 2024, the closing stock
price of the Class A common stock was $7.62 per share. As of March 26, 2024, there were 1,747 registered stockholders of record of the Company’s Class
A common stock and 42 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, 2022:
Period (Calendar Year)
2022
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2023
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2024
First Quarter (through March 26, 2024)
Price Range (1)
High
Low
$
$
$
$
$
$
$
$
$
9.39 $
9.40 $
8.20 $
7.21 $
7.19 $
8.45 $
8.83 $
9.60 $
9.04 $
8.13
7.46
5.93
5.81
5.71
6.03
7.58
6.89
7.62
(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 the 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 2023.
On December 27, 2022, 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 shares of the Company’s Class A Common Stock. The agreement is
subject to the daily time, price, and volume conditions of Rule 10b-18. The agreement expired December 31, 2023.
The following table shows the Company’s repurchase activity of its common stock during the three-month period ended December 31, 2023 under the
10b5-1 agreement.
Period
10/1/2023-10/31/2023
11/1/2023-11/30/2023
12/1/2023-12/31/2023
Total
(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)
318,043
318,043
318,043
-
318,043
-
-
-
-
(a) Total Number
of Class A
Shares
Purchased
(b) Average
Price Paid per
Class A Share
(1)
-
-
-
-
$
$
$
$
95
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Market for the Registrant’s Common Stock, Related Stockholder Matters, and Issuer Purchases of Equity Securities
(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, 2019 through December 31, 2023.
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, 2019
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.
SNFC
S & P 500
S & P Insurance
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
100
100
100
153
116
126
177
148
158
148
119
171
191
148
183
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.
96
Security National Financial Corporation
433 Ascension Way, 6th Floor
Salt Lake City, UT 84123
www.SecurityNational.com