What changed in this filing

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Item 1. Financial Statements

2021-08-17 compared with 2021-05-17 · 1570 added, 1217 removed, 291 unchanged (91% of the section changed)

Financial Statements

Fixed maturity securities, available for sale, at estimated fair value

(amortized cost of $256,894,421 and $265,150,484 for 2021 and 2020)

Fixed maturity

securities, available for sale, at estimated fair value (amortized

cost of $ 233,569,650 and

$ 265,150,484 for

2021 and 2020)

$ 260,957,676

$ 294,656,679

Equity securities at estimated fair value (cost of $8,913,275 and $9,698,490 for 2021 and 2020)

Mortgage loans held for investment (net of allowances for loan losses of $1,897,155 and $2,005,127 for 2021 and 2020)

Real estate held for investment (net of accumulated depreciation of $14,473,417 and $13,800,973 for 2021 and 2020)

Equity securities at

estimated fair value (cost of $ 7,810,399 and $ 9,698,490 for

2021 and 2020)

Mortgage loans held for

investment (net of allowances for loan losses of $ 1,900,935

and $ 2,005,127

for 2021 and 2020)

Real estate held for

investment (net of accumulated depreciation of $ 15,268,717

and $ 13,800,973

for 2021 and 2020)

Real estate held for sale

Other investments and policy loans (net of allowances for doubtful accounts of $1,662,394 and $1,645,475 for 2021 and 2020)

Accrued investment income

Total investments

Other investments and policy

loans (net of allowances for doubtful accounts

of $ 1,676,618 and

$ 1,645,475 for

2021 and 2020)

investment income

Cash and cash equivalents

Loans held for sale at estimated fair value

Receivables (net of allowances for doubtful accounts of $1,698,691

and $1,685,382 for 2021 and 2020)

Restricted assets (including $4,160,721 and $3,989,415 for 2021 and 2020 at estimated fair value)

Cemetery perpetual care trust investments (including $2,947,117 and $2,810,070 for 2021 and 2020 at estimated fair value)

Loans held for sale at estimated

Receivables (net of

allowances for doubtful accounts of $ 1,733,393 and $ 1,685,382

for 2021 and 2020)

Restricted assets (including

$ 4,363,172 and

$ 3,989,415 for

2021 and 2020 at estimated fair

Cemetery perpetual care trust

investments (including $ 3,077,592 and $ 2,810,070

for 2021 and 2020 at estimated fair value)

Receivable from reinsurers

Cemetery land and improvements

Deferred policy and pre-need contract acquisition costs

Mortgage servicing rights, net

Deferred policy and pre-need

contract acquisition costs

Mortgage servicing rights,

Property and equipment, net

2 unchanged sentences

$ 1,548,940,478

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

Liabilities and Stockholders' Equity

Future policy benefits and unpaid claims

accompanying notes to condensed consolidated financial statements (unaudited).

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS (Continued)

and Stockholders' Equity

Future policy

benefits and unpaid claims

$ 852,448,753

2 unchanged sentences

Bank and other loans payable

Deferred pre-need cemetery and mortuary contract revenues

Deferred pre-need cemetery

and mortuary contract revenues

Cemetery perpetual care obligation

Accounts payable

Other liabilities and accrued expenses

Total liabilities

Other liabilities and accrued

1,216,207,474

1,284,953,425

Stockholders' Equity

Preferred Stock - non-voting - $1.00 par value;

5,000,000 shares authorized;

none issued or outstanding

common stock - $2.00 par value;

20,000,000 shares authorized;

issued 16,672,236 shares in 2021 and 16,595,783 shares in 2020

non-voting common stock - $1.00 par value;

Stockholders'

Preferred Stock - non-voting - $ 1.00

shares authorized;

none issued or outstanding

convertible common stock - $2.00 par value;

issued or outstanding

common stock - $ 2.00

shares authorized;

issued 2,631,076 shares in 2021 and 2,679,603 shares in 2020

issued 17,561,521

shares in 2021 and 16,595,783

shares in 2020

non-voting common

stock - $ 1.00

issued or outstanding

convertible common

stock - $ 2.00

issued 2,762,630

shares in 2021 and 2,679,603

shares in 2020

Additional paid-in capital

Accumulated other comprehensive income, net of taxes

Accumulated other comprehensive

income, net of taxes

Retained earnings

Treasury stock at cost - 77,825 Class A shares and 56,276 Class C shares in 2021;

and 227,852 Class A shares and 10,985 Class C shares in 2020

Total stockholders' equity

Total Liabilities and Stockholders' Equity

Treasury stock at cost - 175,153

Class A shares and 95,356

Class C shares in 2021;

Class A shares and 10,985

Class C shares in 2020

( 2,207,608 )

( 1,833,272 )

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended March 31

Mortgage fee income

Insurance premiums and other considerations

Net investment income

Net mortuary and cemetery sales

Gains (losses) on investments and other assets

Total revenues

Benefits and expenses:

stockholders' equity

Liabilities and Stockholders' Equity

$ 1,502,056,187

$ 1,548,940,478

accompanying notes to condensed consolidated financial statements (unaudited).

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

Months Ended June 30

$ 138,156,425

$ 113,650,094

premiums and other considerations

Net investment

and cemetery sales

Gains (losses)

on investments and other assets

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:

Rent and rent related

Depreciation on property and equipment

Costs related to funding mortgage loans

and other policy benefits

future policy benefits

of deferred policy and pre-need acquisition costs and value of business acquired

Selling, general

and administrative expenses:

Rent and rent

on property and equipment

Costs related

to funding mortgage loans

Interest expense

Cost of goods and services sold-mortuaries and cemeteries

Total benefits and expenses

Earnings before income taxes

Income tax expense

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)

of goods and services sold-mortuaries and cemeteries

benefits and expenses

before income taxes

( 3,419,873 )

( 6,636,709 )

( 7,646,213 )

( 6,686,494 )

earnings per Class A Equivalent common share (1)

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)

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.

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 condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31

accompanying notes to condensed consolidated financial statements (unaudited).

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Months Ended June 30

comprehensive income:

gains (losses) on fixed maturity securities available for sale

( 2,071,211 )

gains (losses) on restricted assets

gains (losses) on cemetery perpetual care trust investments

currency translation adjustments

comprehensive income (loss), before income tax

( 2,082,365 )

tax benefit (expense)

( 3,196,946 )

comprehensive income (loss), net of income tax

( 1,644,635 )

Comprehensive

accompanying notes to condensed consolidated financial statements (unaudited).

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Months Ended June 30, 2021

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income

Unrealized gains (losses) on fixed maturity securities available for sale

$ 153,739,167

Unrealized gains (losses) on restricted assets

Unrealized gains (losses) on cemetery perpetual care trust investments

Foreign currency translation adjustments

Other comprehensive income (loss), before income tax

Income tax benefit (expense)

Other comprehensive income (loss), net of income tax

Comprehensive income (loss)

$ ( 1,833,272 )

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2021

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income

Retained Earnings

Treasury Stock

January 1, 2021

$ 263,987,053

comprehensive loss

( 5,388,522 )

Other comprehensive loss

Stock-based compensation expense

compensation expense

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

Conversion Class C to Class A

March 31, 2021

of treasury stock

Class C to Class A

$ 165,867,882

1 unchanged sentence

$ 271,867,841

Three Months Ended March 31, 2020

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income

Retained Earnings

Treasury Stock

January 1, 2020

comprehensive income

Exercise of stock options

of treasury stock

( 2,596,006 )

1 unchanged sentence

( 8,710,354 )

Other comprehensive loss

Stock-based compensation expense

$ 168,415,007

$ ( 2,207,608 )

$ 285,848,713

Months Ended June 30, 2020

A Common Stock

C Common Stock

Paid-in Capital

Other Comprehensive Income

$ 101,256,229

$ ( 1,580,582 )

$ 196,710,605

comprehensive loss

( 8,852,313 )

compensation expense

Exercise of stock options

Sale of treasury stock

Purchase of treasury stock

Stock dividends

Conversion Class C to Class A

March 31, 2020

of treasury stock

Class C to Class A

$ 102,677,084

1 unchanged sentence

$ 189,712,263

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31

Cash flows from operating activities:

Net cash provided by (used in) operating activities

comprehensive income

compensation expense

Exercise of stock options

of treasury stock

( 3,107,607 )

$ 120,126,524

Cash flows from investing activities:

Purchases of fixed maturity securities

Sales, calls and maturities of fixed maturity securities

Purchases of equity securities

Sales of equity securities

Net changes in restricted assets

Net changes in perpetual care trusts

Mortgage loans held for investment, other investments and policy loans made

$ ( 1,542,276 )

$ 222,614,226

Payments received for mortgage loans held for investment, other investments and policy loans

Purchases of property and equipment

Purchases of real estate

Sales of real estate

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Investment contract receipts

Investment contract withdrawals

Proceeds from stock options exercised

Purchases of treasury stock

Repayment of bank loans

Proceeds from bank loans

Net change in warehouse line borrowings for loans held for sale

Net cash provided by (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 period

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Months Ended June 30

flows from operating activities:

cash provided by (used in) operating activities

$ 124,476,144

$ ( 109,561,903 )

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:

Income taxes (net of refunds)

Non Cash Operating, Investing and Financing Activities:

Accrued real estate construction costs and retainage

Benefit plans funded with treasury stock

Right-of-use assets obtained in exchange for operating lease liabilities

Mortgage loans held for investment foreclosed into real estate held for investment

Transfer of loans held for sale to mortgage loans held for investment

Right-of-use assets obtained in exchange for finance lease liabilities

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as shown in the condensed consolidated statements of cash flows is presented in the table below:

Three Months Ended March 31

Cash and cash equivalents

flows from investing activities:

of fixed maturity securities

( 2,758,463 )

( 49,243,362 )

Restricted assets

Cemetery perpetual care trust investments

Total cash, cash equivalents, restricted cash and restricted cash equivalents

calls and maturities of fixed maturity securities

of equity securities

( 13,396,648 )

of equity securities

in restricted assets

( 1,476,279 )

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Articles 8 and 10 of Regulation S-X.

Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.

These financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K (File Number 000-09341).

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to adopt policies and make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

In applying these policies and estimates, the Company makes judgments that frequently require assumptions about matters that are inherently uncertain.

Accordingly, significant estimates used in the preparation of the Company’s financial statements may be subject to significant adjustments in future periods.

in perpetual care trusts

loans held for investment, other investments and policy loans made

( 399,597,382 )

( 313,439,255 )

received for mortgage loans held for investment, other investments and policy loans

of property and equipment

( 3,342,889 )

of real estate

( 49,123,963 )

( 12,217,051 )

of real estate

cash used in investing activities

( 8,837,634 )

( 24,360,799 )

flows from financing activities:

contract receipts

contract withdrawals

( 7,699,546 )

( 8,606,537 )

from stock options exercised

of treasury stock

( 3,506,239 )

of bank loans

( 53,878,750 )

( 48,739,820 )

from bank loans

change in warehouse line borrowings for loans held for sale

( 84,737,685 )

cash provided by (used in) financing activities

( 71,051,359 )

change in cash, cash equivalents, restricted cash and restricted cash equivalents

( 8,746,624 )

cash equivalents, restricted cash and restricted cash equivalents at beginning of period

cash equivalents, restricted cash and restricted cash equivalents at end of period

$ 160,052,237

$ 128,989,049

Disclosure of Cash Flow Information:

paid during the year for:

taxes (net of refunds)

Cash Operating, Investing and Financing Activities:

real estate construction costs and retainage

plans funded with treasury stock

assets obtained in exchange for operating lease liabilities

loans held for investment foreclosed into real estate held for investment

of loans held for sale to mortgage loans held for investment

assets obtained in exchange for finance lease liabilities

NATIONAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Reconciliation

of cash, cash equivalents, restricted cash and restricted cash equivalents as shown in the condensed consolidated statements of cash

flows is presented in the table below:

Months Ended June 30

and cash equivalents

$ 149,209,290

$ 116,961,182

perpetual care trust investments

cash, cash equivalents, restricted cash and restricted cash equivalents

$ 160,052,237

$ 128,989,049

accompanying notes to condensed consolidated financial statements (unaudited).

NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

to Condensed Consolidated Financial Statements

30, 2021 (Unaudited)

of Presentation

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally

accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Articles 8 and

10 of Regulation S-X.

Accordingly, they do not include all of the information and disclosures required by accounting principles generally

accepted in the United States of America for complete financial statements.

These financial statements should be read in conjunction

with the consolidated financial statements of the Company and notes thereto for the year ended December 31, 2020, included in the Company’s

Annual Report on Form 10-K (File Number 000-09341).

In the opinion of management, all adjustments (consisting of normal recurring accruals)

considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June 30, 2021 are

not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

management to adopt policies and make estimates and assumptions that affect the amounts reported in the financial statements and accompanying

In applying these policies and estimates, the Company makes judgments that frequently require assumptions about matters that are

inherently uncertain.

Accordingly, significant estimates used in the preparation of the Company’s financial statements may be subject

to significant adjustments in future periods.

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;

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;

those used in determining the liability for future policy benefits;

those used in estimating other than temporary impairments on available for sale securities;

those used in determining the value of mortgage servicing rights;

those used in determining allowances for loan losses for mortgage loans held for investment;

those used in determining loan loss reserve;

those used in determining

the value of mortgage loans foreclosed to real estate held for investment;

those used in determining the liability for future policy

benefits;those used in estimating other than temporary impairments on available for sale securities;

those used in determining the value

of mortgage servicing rights;those used in determining allowances for loan losses for mortgage loans held for investment;

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.

Although some variability is inherent

in these estimates, management believes the amounts provided are fairly stated in all material respects.

During 2020, the outbreak of COVID-19 had spread worldwide and was declared a global pandemic by the World Health Organization on March

COVID-19 poses a threat to the health and economic well-being of the Company’s employees, customers, and vendors.

The Company is closely monitoring developments relating to the COVID-19 pandemic and assessing its impact on the Company’s business.

The COVID-19 pandemic has had and continues to have a major impact on the global economy and financial markets.

Governments and businesses have taken numerous measures to try to contain the virus, which include the implementation of travel bans, self-imposed quarantine periods, and social distancing.

Company is closely monitoring developments relating to the COVID-19 pandemic and assessing its impact on the Company’s business.

The continued uncertainty surrounding the COVID-19 pandemic has had and continues to have a major impact on the global economy and financial

Governments and businesses have taken numerous measures to try to contain the virus, which include the implementation of travel

bans, self-imposed quarantine periods, and social distancing.

These measures have disrupted and will continue to disrupt businesses globally.

Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize the economic conditions.

Like most businesses, COVID-19 has impacted the Company.

However, the Company cannot, with any certainty predict the severity or duration with which COVID-19 will impact the Company’s business, financial condition, results of operations, and cash flows.

To the extent the COVID-19 pandemic adversely affects the Company’s business, financial condition, and results of operations, it may also have the effect of heightening many of the other risks described in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

These uncertainties have the potential to negatively affect the risk of credit default for the issuers of the Company’s fixed maturity debt securities and individual borrowers with mortgage loans held by the Company.

The Company has implemented risk management, business continuity plans and has taken preventive measures and other precautions, such as business travel restrictions and remote work arrangements.

most businesses, COVID-19 has impacted the Company.

However, the Company cannot, with any certainty predict the severity or duration

with which COVID-19 will impact the Company’s business, financial condition, results of operations, and cash flows.

To the extent

the COVID-19 pandemic adversely affects the Company’s business, financial condition, and results of operations, it may also have

the effect of heightening many of the other risks described in this Management’s Discussion and Analysis of Financial Condition

and Results of Operations.

These uncertainties have the potential to negatively affect the risk of credit default for the issuers of

the Company’s fixed maturity debt securities and individual borrowers with mortgage loans held by the Company.

Company has implemented risk management, business continuity plans and has taken preventive measures and other precautions, such as business

travel restrictions and remote work arrangements.

Such measures and precautions have enabled the Company to continue to conduct business.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

2) Recent Accounting Pronouncements

Accounting Standards Adopted in 2020

Accounting Pronouncements

Standards Adopted in 2020

“Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” – Issued in August 2018, ASU 2018-13 modifies the disclosure requirements of Topic 820 by removing, modifying or adding certain disclosures.

Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

ASU 2018-13 does not change the fair value measurements already required or permitted by existing standards.

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”

– Issued in August 2018, ASU 2018-13 modifies the disclosure requirements of Topic 820 by removing, modifying or adding certain

Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level

1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant

unobservable inputs for Level 3 fair value measurements.

ASU 2018-13 does not change the fair value measurements already required or

permitted by existing standards.

The Company adopted this standard on January 1, 2020.

The adoption of this standard did not materially impact the Company’s financial statements.

The adoption of this standard did not materially

impact the Company’s financial statements.

See Note 8 for the Company’s fair value disclosures.

Accounting Standards Issued But Not Yet Adopted

“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 and held to maturity debt securities) and available for sale debt securities.

For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP 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, credit losses should be measured in a manner similar to current GAAP;

Standards Issued But Not Yet Adopted

“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 and held to maturity debt

securities) and available for sale debt securities.

For assets held at amortized cost basis, Topic 326 eliminates the probable initial

recognition threshold in current GAAP 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, credit losses should be measured in a manner similar

to current GAAP;

however, Topic 326 will require that credit losses be presented as an allowance rather than as a write-down.

In October 2019, the FASB proposed an update to ASU No.

2019, the FASB proposed an update to ASU No.

2016-13 that would make the ASU effective for the Company on January 1, 2023.

The Company is in the process of evaluating the potential impact of this standard, especially as it relates to mortgage loans held for investment.

is in the process of evaluating the potential impact of this standard, especially as it relates to mortgage loans held for investment.

“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 ASU will simplify and improve the accounting for certain market-based options or guarantees associated with deposit or account balance contracts, simplify amortization of deferred acquisition costs while improving and expanding required disclosures.

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 ASU will simplify and improve the accounting for certain market-based options or guarantees

associated with deposit or account balance contracts, simplify 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 made the ASU effective for the Company on January 1, 2025.

2018-12 that made the ASU effective for the Company

on January 1, 2025.

The Company is in the process of evaluating the potential impact of this standard.

The Company has reviewed other recent accounting pronouncements and has determined that they will not significantly impact the Company’s results of operations or financial position.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

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.

3) Investments

The Company’s investments as of March 31, 2021 are summarized as follows:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

March 31, 2021 :

Fixed maturity securities, available for sale, at estimated fair value:

Company’s investments as of June 30, 2021 are summarized as follows:

Available for sale

Unrealized Gains

Unrealized Losses

maturity securities, available for sale, at estimated fair value:

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

Redeemable preferred stock

Total fixed maturity securities available for sale

of states and political subdivisions

securities including public utilities

Mortgage-backed

preferred stock

fixed maturity securities available for sale

$ 233,569,650

$ ( 383,783 )

$ 260,957,676

securities at estimated fair value:

miscellaneous and all other

$ ( 285,824 )

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

$ ( 285,824 )

loans held for investment at amortized cost:

Unamortized deferred loan fees, net

( 1,725,718 )

Allowance for loan losses

( 1,900,935 )

Net discounts

Total mortgage loans held for investment

mortgage loans held for investment

$ 262,160,007

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

estate held for investment - net of accumulated depreciation:

real estate held for investment

$ 178,437,646

estate held for sale:

real estate held for sale

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

Federal Home Loan Bank stock (1)

Other investments

investments and policy loans at amortized cost:

Home Loan Bank stock (1)

Allowance for doubtful accounts

Total policy loans and other investments

Accrued investment income

Total investments

( 1,676,618 )

(1) Includes $905,700 of Membership stock and $1,639,000 of Activity stock due to short-term borrowings.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3) Investments (Continued)

The Company’s investments as of December 31, 2020 are summarized as follows:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

December 31, 2020 :

Fixed maturity securities, available for sale, at estimated fair value:

policy loans and other investments

investment income

$ 785,470,875

$905,700 of Membership stock and $1,639,000 of Activity stock due to short-term borrowings.

Company’s investments as of December 31, 2020 are summarized as follows:

Unrealized Gains

Unrealized Losses

maturity securities, available for sale, at estimated fair value:

Treasury securities and obligations of U.S.

Government agencies

Obligations of states and political subdivisions

Corporate securities including public utilities

Mortgage-backed securities

Redeemable preferred stock

Total fixed maturity securities available for sale

of states and political subdivisions

securities including public utilities

Mortgage-backed

preferred stock

fixed maturity securities available for sale

$ 265,150,484

$ ( 949,845 )

$ 294,656,679

securities at estimated fair value:

miscellaneous and all other

$ ( 750,407 )

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

$ ( 750,407 )

loans held for investment at amortized cost:

Unamortized deferred loan fees, net

( 1,161,132 )

Allowance for loan losses

( 2,005,127 )

Net discounts

Total mortgage loans held for investment

( 1,260,896 )

Real estate held for investment - net of accumulated depreciation:

Total real estate held for investment

mortgage loans held for investment

$ 249,343,936

estate held for investment - net of accumulated depreciation:

real estate held for investment

$ 131,684,453

estate held for sale:

real estate held for sale

Total real estate held for sale

Other investments and policy loans at amortized cost:

Insurance assignments

Federal Home Loan Bank stock (1)

Other investments

investments and policy loans at amortized cost:

Home Loan Bank stock (1)

Allowance for doubtful accounts

Total policy loans and other investments

Accrued investment income

Total investments

( 1,645,475 )

(1) Includes $866,900 of Membership stock and $1,639,700 of Activity stock due to short-term borrowings.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3) Investments (Continued)

Fixed Maturity Securities

The following tables summarize unrealized losses on fixed maturity securities available for sale, which were carried at estimated fair value, at March 31, 2021 and December 31, 2020.

The unrealized losses were primarily related to interest rate fluctuations and uncertainties relating to COVID-19.

policy loans and other investments

investment income

$ 773,945,298

$866,900 of Membership stock and $1,639,700 of Activity stock due to short-term borrowings.

Maturity Securities

following tables summarize unrealized losses on fixed maturity securities available for sale, which were carried at estimated fair value,

at June 30, 2021 and December 31, 2020.

The unrealized losses were primarily related to interest rate fluctuations and uncertainties

relating to COVID-19.

The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:

At March 31, 2021

Obligations of States and Political Subdivisions

Corporate Securities

Mortgage and other asset-backed securities

Total unrealized losses

At December 31, 2020

Obligations of States and Political Subdivisions

Corporate Securities

Mortgage and other asset-backed securities

Total unrealized losses

There were 79 securities with fair value of 97.3% of amortized cost at March 31, 2021.

There were 63 securities with fair value of 94.7% of amortized cost at December 31, 2020.

No credit losses have been recognized for the three months ended March 31, 2021 and 2020.

On a quarterly basis, the Company evaluates its fixed maturity securities available for sale.

This evaluation includes a review of current ratings by the National Association of Insurance Commissions (NAIC).

Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for impairment.

Securities with ratings of 3 to 5 are evaluated for impairment.

Securities with a rating of 6 are automatically determined to be impaired and are written down.

The evaluation involves an analysis of the securities in relation 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.

If it is unlikely that the security will meet contractual obligations, the loss is considered to be other than temporary, the security is written down to the new anticipated market value and an impairment loss is recognized.

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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

Schedule of Unrealized Loss

on Investments

Losses for Less than Twelve Months

Losses for More than Twelve Months

Unrealized Loss

June 30, 2021

of States and Political Subdivisions

and other asset-backed securities

unrealized losses

December 31, 2020

of States and Political Subdivisions

and other asset-backed securities

unrealized losses

were 51 securities with fair value of 97.2 %

of amortized cost at June 30, 2021.

There were 63 securities with fair value of 94.7 %

of amortized cost at December 31, 2020.

No additional credit losses have been recognized for the three and six months ended June 30,

2021 and 2020.

a quarterly basis, the Company evaluates its fixed maturity securities available for sale.

This evaluation includes a review of current

ratings by the National Association of Insurance Commissions (NAIC).

Securities with a rating of 1 or 2 are considered investment grade.

Securities with ratings of 3 to 5 are considered non-investment grade and are evaluated for impairment.

Securities with a rating of 6

are automatically determined to be impaired and are written down.

The evaluation involves an analysis of the securities in relation 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.

If it is unlikely that the security will

meet contractual obligations, the loss is considered to be other than temporary, the security is written down to the new anticipated

market value and an impairment loss is recognized.

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.

Investments (Continued)

The following table presents a rollforward of the Company's cumulative other than temporary credit impairments (“OTTI”) recognized in earnings on fixed maturity securities available for sale for the three months ended March 31:

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

Balance of credit-related OTTI at March 31

The amortized cost and estimated fair value of fixed maturity securities available for sale at March 31, 2021, by contractual maturity, are shown below.

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.

Estimated Fair

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

following table presents a rollforward of the Company's cumulative other than temporary credit impairments (“OTTI”) recognized

in earnings on fixed maturity securities available for sale for the six months ended June 30:

Schedule of earnings on fixed

maturity securities

of credit-related OTTI at January 1

for credit impairments recognized on:

not previously impaired

previously impaired

for credit impairments previously recognized on:

that matured or were sold during the period (realized)

due to an increase in expected cash flows

of credit-related OTTI at June 30

amortized cost and estimated fair value of fixed maturity securities available for sale at June 30, 2021, by contractual maturity, are

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.

Investments Classified by

Contractual Maturity Date

in 5-10 years

in more than 10 years

Mortgage-backed

preferred stock

$ 233,569,650

$ 260,957,676

The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”).

The Company pledged a total of $40,000,000, par value, of United States Treasury fixed maturity securities with the FHLB at March 31, 2021.

These securities are used as collateral on any cash borrowings from the FHLB.

As of March 31, 2021, the Company did not have any amounts outstanding with the FHLB and its estimated remaining maximum borrowing capacity was $38,559,265.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”).

The Company pledged a total of $20,000,000,

par value, of United States Treasury fixed maturity securities with the FHLB at June 30, 2021.

These securities are used as collateral

on any cash borrowings from the FHLB.

As of June 30, 2021, the Company did not have any amounts outstanding with the FHLB and its estimated

remaining maximum borrowing capacity was $19,152,949.

Investments (Continued)

Investment Related Earnings

The Company’s net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities, and other than temporary impairments are summarized as follows:

Three Months Ended March 31

Fixed maturity securities:

Gross realized gains

Gross realized losses

Equity securities:

Gains (losses) on securities sold

Unrealized gains and (losses) on securities held at the end of the period

Other assets:

Gross realized gains

Gross realized losses

Related Earnings

Company’s net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities, and

other than temporary impairments are summarized as follows:

(Loss) on Investments

Months Ended June 30

maturity securities:

realized gains

realized losses

(losses) on securities sold

gains and (losses) on securities held at the end of the period

( 1,023,797 )

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.

Information regarding sales of fixed maturity securities available for sale is summarized as follows:

Three Months Ended March 31

Proceeds from sales

Gross realized gains

Gross realized losses

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3) Investments (Continued)

Major categories of net investment income are as follows:

Three Months Ended March 31

Fixed maturity securities

Equity securities

Mortgage loans held for investment

Insurance assignments

Other investments

Cash and cash equivalents

Gross investment income

Investment expenses

Net investment income

Net investment income includes income earned by the restricted assets cemeteries and mortuaries of $161,211 and $110,639 for the three months ended March 31, 2021 and 2020, 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.

Securities on deposit with regulatory authorities as required by law amounted to $9,864,903 at March 31, 2021 and $9,684,409 at December 31, 2020.

realized gains

realized losses

$ ( 973,968 )

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.

regarding sales of fixed maturity securities available for sale is summarized as follows:

of Major categories of net investment income

Months Ended June 30

realized gains

realized losses

categories of net investment income are as follows:

Months Ended June 30

maturity securities

loans held for investment

and cash equivalents

investment income

( 3,008,632 )

( 3,325,190 )

( 6,425,714 )

( 6,604,920 )

investment income

investment income includes income earned by the restricted assets cemeteries and mortuaries of $ 190,668

and $ 140,093

for the three months

ended June 30, 2021 and 2020, respectively, and $ 351,879

and $ 250,732

for the six months ended

June 30, 2021 and 2020, respectively.

investment income on real estate consists primarily of rental revenue.

expenses consist primarily of depreciation, property taxes, operating expenses of real estate and an estimated portion of administrative

expenses relating to investment activities.

on deposit with regulatory authorities as required by law amounted to $ 10,263,529

at June 30,2021 and $ 9,684,409

at December 31, 2020.

These restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on equity securities and fixed maturity securities) at March 31, 2021, other than investments issued or guaranteed by the United States Government.

were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on

equity securities and fixed maturity securities) at June 30, 2021, other than investments issued or guaranteed by the United States Government.

Estate Held for Investment and Held for Sale

Company strategically deploys resources into real estate to match the income and yield durations of its primary obligations.

for these real estate assets come through its various business units in the form of acquisition, development and mortgage foreclosures.

Real Estate Held for Investment and Held for Sale

The Company strategically deploys resources into real estate to match the income and yield durations of its primary obligations.

The sources for these real estate assets come through its various business units in the form of acquisition, development and mortgage foreclosures.

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 reports.

Geographic locations and asset classes of the investment activity is determined by senior management under the direction of the Board of Directors.

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 when the geographic boundary does not warrant full-time staff or through strategic lease-up periods.

The Company generally looks to acquire assets in regions that are high growth regions for employment and population and in assets that provide operational efficiencies.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3) Investments (Continued)

The Company currently owns and operates 11 commercial properties in 5 states.

These properties include office buildings, a funeral home, flex office space, and includes the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah.

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 reports.

Geographic locations and asset classes of the investment activity is determined by senior management under the direction

of the Board of Directors.

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 when the geographic boundary does not warrant full-time staff

or through strategic lease-up periods.

The Company generally looks to acquire assets in regions that are high growth regions for employment

and population and in assets that provide operational efficiencies.

Company currently owns and operates 11 commercial properties in 5 states.

These properties include office buildings, a funeral home,

flex office space,and includes the redevelopment and expansion of its corporate campus (“Center 53”) in Salt Lake City, Utah.

The Company also holds undeveloped land that may be used for future commercial developments.

The Company uses bank debt in strategic cases to leverage established yields or to acquire a higher quality or different class of asset.

The aggregated net ending balance of commercial real estate that serves as collateral for bank loans was $99,547,615 and $71,517,902 as of March 31, 2021 and December 31, 2020, respectively.

The associated bank loan carrying values totaled $55,831,600 and $46,153,283 as of March 31, 2021 and December 31, 2020, respectively.

During the three months ended March 31, 2021 and 2020, the Company recorded impairment losses on commercial real estate held for sale of $-0- and $31,429, respectively.

These impairment losses relate to an office building held by the life insurance segment.

Impairment losses are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

The following is a summary of the Company’s commercial real estate held for investment for the periods presented:

The Company uses bank debt in strategic

cases to leverage established yields or to acquire a higher quality or different class of asset.

aggregated net ending balance of commercial real estate that serves as collateral for bank loans was $ 110,763,510

and $ 71,517,902

as of June 30, 2021 and

December 31, 2020, respectively.

The associated bank loan carrying values totaled $ 66,163,722

and $ 46,153,283

as of June 30, 2021 and

December 31, 2020, respectively.

the three months ended June 30, 2021 and 2020, the Company recorded impairment losses on commercial real estate held for sale of $ 28,378

and $ 15,551 ,

respectively.

During the six months ended June 30, 2021 and 2020, the Company recorded impairment losses on commercial real estate held

for sale of $ 28,378

and $ 46,980 ,

respectively.

These impairment losses relate to an office building and a funeral home held by the life insurance segment.

losses are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

following is a summary of the Company’s commercial real estate held for investment for the periods presented:

Commercial Real Estate Investment

Net Ending Balance

Total Square Footage

$ 122,439,551

2 unchanged sentences

$ 106,840,710

(1) Includes Center53 phase 1 and phase 2 which is under construction.

The following is a summary of the Company’s commercial real estate held for sale for the periods presented:

(1) Includes Center53 phase 1 and phase

2, which is under construction.

The following

is a summary of the Company’s commercial real estate held for sale for the periods presented:

Net Ending Balance

Total Square Footage

(1) Improved commercial pad

These properties are all actively being marketed with the assistance of commercial real estate brokers in the markets where the properties are located.

commercial pad

properties are all actively being marketed with the assistance of commercial real estate brokers in the markets where the properties

The Company expects these properties to sell within the coming 12 months.

Residential Real Estate Held for Investment and Held for Sale

The Company owns a small portfolio of residential homes primarily as a result of loan foreclosures.

The Company has the option to sell them or to continue to hold them for cash flow and acceptable returns.

Real Estate Held for Investment and Held for Sale

Company owns a small portfolio of residential homes primarily as a result of loan foreclosures.

The Company has the option to sell them

or to continue to hold them for cash flow and acceptable returns.

The Company also invests in residential subdivision land developments.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

Company established Security National Real Estate Services (“SNRE”) to manage the residential portfolio.

SNRE cultivates

and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the portfolio of homes across

net ending balance of foreclosed residential real estate included in residential real estate held for investment and sale is $ 1,828,936

and $ 4,327,079

as of June 30, 2021 and

December 31, 2020, respectively.

the three and six months ended June 30, 2021 and 2020 the Company did no t

record any impairment losses on residential real estate held for investment or held for sale.

Impairment losses, if any, are included

in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

Investments (Continued)

The Company established Security National Real Estate Services (“SNRE”) to manage the residential portfolio.

SNRE cultivates and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the portfolio of homes across the country.

As of March 31, 2021, SNRE manages 5 residential properties in 4 states across the United States.

The net ending balance of foreclosed residential real estate included in residential real estate held for investment and sale is $1,657,285 and $4,327,079 as of March 31, 2021 and December 31, 2020, respectively.

During the three months ended March 31, 2021 and 2020 the Company did not record any impairment losses on residential real estate held for investment or held for sale.

Impairment losses, if any, are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

The following is a summary of the Company’s residential real estate held for investment for the periods presented:

following is a summary of the Company’s residential real estate held for investment for the periods presented:

Real Estate Investment

Net Ending Balance

December 31 2020

Washington (2)

(1) Includes subdivision land developments

(2) Improved residential lots

Additional information regarding the Company’s subdivision land developments in Utah is summarized as follows:

December 31 2020

Lots available for sale

Lots to be developed

subdivision land developments

residential lots

information regarding the Company’s subdivision land developments in Utah is summarized as follows:

available for sale

to be developed

Ending Balance (1)

(1) The estimated remaining cost to complete the undeveloped lots is $15,613,000 and $17,354,000 as of March 31, 2021 and December 31, 2020, respectively.

The following is a summary of the Company’s residential real estate held for sale for the periods presented:

estimated remaining cost to complete the undeveloped lots is $ 42,965,000

and $ 17,354,000

as of June 30, 2021 and December 31, 2020,

respectively.

Investments (Continued)

following is a summary of the Company’s residential real estate held for sale for the periods presented:

Net Ending Balance

December 31 2020

These properties are all actively being marketed with the assistance of residential real estate brokers in the markets where the properties are located.

properties are all actively being marketed with the assistance of residential real estate brokers in the markets where the properties

The Company expects these properties to sell within the coming 12 months.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3) Investments (Continued)

Real Estate Owned and Occupied by the Company

The primary business units of the Company occupy a portion of the real estate owned by the Company.

As of March 31, 2021, real estate owned and occupied by the Company is summarized as follows:

Estate Owned and Occupied by the Company

primary business units of the Company occupy a portion of the real estate owned by the Company.

As of June 30, 2021, real estate owned

and occupied by the Company is summarized as follows:

Real Estate Owned and Occupied

by the Company

Business Segment

Approximate Square Footage

Square Footage Occupied by the Company

Square Footage

Footage Occupied by the Company

Election Rd., Draper, UT

Corporate Offices, Life Insurance and

Offices, Life Insurance and

Cemetery/Mortuary Operations

Green Street, Salt Lake City, UT (1)

Life Insurance and Mortgage Operations

Insurance and Mortgage Operations

River Oaks Dr., Flowood, MS

Life Insurance Operations

Insurance Operations

Marshall Street, Shreveport, LA (1)

Life Insurance Operations

909 Foisy Street, Alexandria, LA (1)

Life Insurance Sales

812 Sheppard Street, Minden, LA (1)

Life Insurance Sales

Insurance Operations

Street, Alexandria, LA (1)

Insurance Sales

Street, Minden, LA (1)

Insurance Sales

N 3rd Street, Jena, LA (1)

Life Insurance Sales

(1) Included in property and equipment on the condensed consolidated balance sheets

Insurance Sales

(1) Included in property and equipment

on the condensed consolidated balance sheets

Mortgage Loans Held for Investment

Mortgage loans held for investment consist of first and second mortgages.

The mortgage loans bear interest at rates ranging from 2.0% to 10.5%, maturity dates range from nine months to 30 years and are secured by real estate.

Concentrations of credit risk arise when a number of mortgage loan debtors have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions.

Although the Company has a diversified mortgage loan portfolio consisting of residential mortgages, commercial loans and residential construction loans and requires collateral on all real estate exposures, a substantial portion of its debtors’ ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors do business.

At March 31, 2021, the Company had 54%, 14%, 9%, 3%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada, and Arizona, respectively.

At December 31, 2020, the Company had 57%, 13%, 9%, 4%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada and Arizona, respectively.

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 loan losses.

Interest income is included in net investment income on the condensed 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.

loans held for investment consist of first and second mortgages.

The mortgage loans bear interest at rates ranging from 2.0% to 10.5%,

maturity dates range from nine months to 30 years and are secured by real estate.

Concentrations of credit risk arise when a number of

mortgage loan debtors have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly

affected by changes in economic conditions.

Although the Company has a diversified mortgage loan portfolio consisting of residential

mortgages, commercial loans and residential construction loans and requires collateral on all real estate exposures, a substantial portion

of its debtors’ ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors

At June 30,2021, the Company had 60%, 13%, 8%, 4%, 3%,2%, 2% and 2% of its mortgage loans from borrowers located in the

states of Utah, Florida, Texas,Nevada, Arizona, Colorado, Hawaii, and Louisiana, respectively.

At December 31, 2020, the Company had

57%, 13%, 9%, 4%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada and

Arizona, respectively.

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 loan losses.

income is included in net investment income on the condensed consolidated statements of earnings and is recognized when earned.

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 condensed 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 will fund a loan not to exceed 80% of the loan’s collateral fair market value.

Amounts over 80% will require additional collateral or mortgage insurance by an approved third-party insurer.

The Company provides for losses on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account).

loans are secured by the underlying property and require an appraisal at the time of underwriting and funding.

Generally, the Company

will fund a loan not to exceed 80% of the loan’s collateral fair market value.

Amounts over 80% will require additional collateral

or mortgage insurance by an approved third-party insurer.

Company provides for losses on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account).

The allowance is comprised of two components.

The first component is an allowance for collectively evaluated impairment that is based upon the Company’s historical experience in collecting similar receivables.

The second component is based upon individual evaluation of loans that are determined to be impaired.

Upon determining impairment, the Company establishes an individual impairment allowance based upon an

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3) Investments (Continued)

assessment of the fair value of the underlying collateral.

In addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income.

When a loan becomes delinquent, the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred.

Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment or held for sale.

The allowance for losses on mortgage loans held for investment could change based on changes in the value of the underlying collateral, the performance status of the loans, or the Company’s actual collection experience.

The actual losses could change, in the near term, from the established allowance, based upon the occurrence or non-occurrence of these events.

For purposes of determining the allowance for 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.

The first component is an allowance for collectively evaluated impairment that is based

upon the Company’s historical experience in collecting similar receivables.

The second component is based upon individual evaluation

of loans that are determined to be impaired.

Upon determining impairment, the Company establishes an individual impairment allowance

based upon an assessment of the fair value of the underlying collateral.

addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income.

When a loan becomes delinquent,

the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred.

Once foreclosed, an adjustment

for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment or held for

allowance for losses on mortgage loans held for investment could change based on changes in the value of the underlying collateral, the

performance status of the loans, or the Company’s actual collection experience.

The actual losses could change, in the near term,

from the established allowance, based upon the occurrence or non-occurrence of these events.

purposes of determining the allowance for losses, the Company has segmented its mortgage loans held for investment by loan type.

Company’s loan types are commercial, residential, and residential construction.

The inherent risks within the portfolio vary depending

upon the loan type as follows:

- Underwritten in accordance with the Company’s policies to determine the borrower’s ability to repay the obligation

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 secondary on the borrower’s (or guarantors) ability to repay.

Residential – Secured by family dwelling units.

These loans are secured by first mortgages on the unit, which are generally the primary residence of the borrower, generally at a loan-to-value ratio (“LTV”) of 80% or less.

Residential construction (including land acquisition and development) – 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.

Accordingly, the repayment of

a commercial loan depends primarily on the collateral and its ability to generate income and secondary on the borrower’s (or guarantors)

ability to repay.

– Secured by family dwelling units.

These loans are secured by first mortgages on the unit, which are generally the primary

residence of the borrower, generally at a loan-to-value ratio (“LTV”) of 80% or less.

construction (including land acquisition and development) – 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

These loans will rely on the value associated with the project upon completion.

These cost and valuation estimates may be inaccurate.

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 is underwritten according to the Company’s policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots.

These cost and valuation estimates may be

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 is underwritten according to the Company’s policies, which include independent appraisal valuations as well as the estimated

value associated with the land upon completion of development into finished lots.

These cost and valuation estimates may be inaccurate.

These loans are considered to be of a higher risk than other mortgage loans due to their ultimate repayment being sensitive to general economic conditions, availability of long-term or construction financing, and interest rate sensitivity.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3) Investments (Continued)

The Company establishes a valuation allowance for credit losses in its mortgage loans held for investment portfolio.

The following is a summary of the allowance for loan losses as a contra-asset account for the periods presented:

Residential Construction

March 31, 2021

Allowance for credit losses:

Beginning balance - January 1, 2021

Ending balance - March 31, 2021

Ending balance:

These loans are considered to be 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.

Company establishes a valuation allowance for credit losses in its mortgage loans held for investment portfolio.

The following is a summary

of the allowance for loan losses as a contra-asset account for the periods presented:

Schedule of Allowance for

loan losses as a contra-asset account

for credit losses:

Beginning balance

- January 1, 2021

balance - June 30, 2021

individually evaluated for impairment

Ending balance:

collectively evaluated for impairment

Mortgage loans:

Ending balance

$ 135,728,280

$ 266,363,862

Ending balance:

individually evaluated for impairment

Ending balance:

collectively evaluated for impairment

1 unchanged sentence

$ 261,638,153

December 31, 2020

Allowance for credit losses:

Beginning balance

Ending balance

Ending balance:

for credit losses:

Beginning balance - January

individually evaluated for impairment

Ending balance:

collectively evaluated for impairment

Mortgage loans:

Ending balance

balance - December 31, 2020

$ 111,111,777

$ 253,771,091

Ending balance:

individually evaluated for impairment

Ending balance:

collectively evaluated for impairment

1 unchanged sentence

$ 243,488,621

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

Investments (Continued)

The following is a summary of the aging of mortgage loans held for investment for the periods presented:

March 31, 2021

following is a summary of the aging of mortgage loans held for investment for the periods presented:

Schedule of aging of mortgage

Days Past Due

Greater Than 90 Days (1)

In Process of Foreclosure (1)

Total Past Due

Total Mortgage Loans

Allowance for Loan Losses

Unamortized deferred loan fees, net

Unamortized discounts, net

Net Mortgage Loans

Than 90 Days (1)

Process of Foreclosure (1)

Mortgage Loans

for Loan Losses

( 1,670,604 )

( 1,900,935 )

December 31, 2020

deferred loan fees, net

( 1,160,086 )

( 1,725,718 )

discounts, net

Mortgage Loans

$ 135,202,855

$ 262,160,007

Days Past Due

Greater Than 90 Days (1)

In Process of Foreclosure (1)

Total Past Due

Total Mortgage Loans

Allowance for Loan Losses

Unamortized deferred loan fees, net

Unamortized discounts, net

Net Mortgage Loans

Than 90 Days (1)

Process of Foreclosure (1)

Mortgage Loans

for Loan Losses

( 1,774,796 )

( 2,005,127 )

(1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

deferred loan fees, net

( 1,161,132 )

discounts, net

( 1,260,896 )

Mortgage Loans

$ 110,849,864

$ 249,343,936

income is not recognized on loans past due greater than 90 days or in foreclosure.

Investments (Continued)

Impaired Mortgage Loans Held for Investment

Impaired mortgage loans held for investment include loans with a related specific valuation allowance or loans whose carrying amount has been reduced to the expected collectible amount because the impairment has been considered other than temporary.

The recorded investment in and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, for each reporting period and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:

Mortgage Loans Held for Investment

mortgage loans held for investment include loans with a related specific valuation allowance or loans whose carrying amount has been

reduced to the expected collectible amount because the impairment has been considered other than temporary.

The recorded investment in

and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, for each reporting

period and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:

Schedule of Impaired Mortgage

Principal Balance

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Interest Income Recognized

March 31, 2021

With no related allowance recorded:

Residential construction

With an allowance recorded:

Residential construction

December 31, 2020

With no related allowance recorded:

Residential construction

With an allowance recorded:

Residential construction

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

Income Recognized

no related allowance recorded:

an allowance recorded:

no related allowance recorded:

an allowance recorded:

Investments (Continued)

Credit Risk Profile Based on Performance Status

The Company’s mortgage loan held for investment portfolio is monitored based on performance of the loans.

Monitoring a mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.

The Company defines non-performing mortgage loans as loans 90 days or greater delinquent or on non-accrual status.

The Company’s performing and non-performing mortgage loans held for investment were as follows:

Residential Construction

Risk Profile Based on Performance Status

Company’s mortgage loan held for investment portfolio is monitored based on performance of the loans.

Monitoring a mortgage loan

increases when the loan is delinquent or earlier if there is an indication of impairment.

The Company defines non-performing mortgage

loans as loans 90 days or greater delinquent or on non-accrual status.

Company’s performing and non-performing mortgage loans held for investment were as follows:

Schedule Of Credit

Risk Of Mortgage Loans Based On Performance Status:

$ 135,527,317

7 unchanged sentences

$ 253,771,091

Non-Accrual Mortgage Loans Held for Investment

Once a loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and write off any interest income that had been accrued.

Mortgage Loans Held for Investment

a loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and write off any interest

income that had been accrued.

Payments received for loans on a non-accrual status are recognized on a cash basis.

Interest income recognized from any payments received for loans on a non-accrual status was immaterial.

Interest income recognized

from any payments received for loans on a non-accrual status was immaterial.

Accrual of interest resumes if a loan is brought current.

Interest not accrued on these loans totals approximately $321,000 and $491,000 as of March 31, 2021 and December 31, 2020, respectively.

The following is a summary of mortgage loans held for investment on a non-accrual status for the periods presented.

As of March 31

As of December 31

Residential construction

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

4) Loans Held for Sale

The Company has elected the fair value option for loans held for sale.

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 mortgage loans held for investment and is included in mortgage fee income on the condensed consolidated statement of earnings.

See Note 8 to the condensed consolidated financial statements for additional disclosures regarding loans held for sale.

The following is a summary of the aggregate fair value and the aggregate unpaid principal balance of loans held for sale for the periods presented:

As of March 31

As of December 31

Aggregate fair value

Interest not accrued on these loans totals approximately $ 316,000

and $ 491,000

as of June 30, 2021 and December 31, 2020, respectively.

following is a summary of mortgage loans held for investment on a non-accrual status for the periods presented.

Schedule of Mortgage loans

on a nonaccrual status

of December 31

Held for Sale

Company has elected the fair value option for loans held for sale.

Changes in the fair value of the loans are included in mortgage fee

Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on mortgage

loans held for investment and is included in mortgage fee income on the condensed consolidated statement of earnings.

See Note 8 to the

condensed consolidated financial statements for additional disclosures regarding loans held for sale.

following is a summary of the aggregate fair value and the aggregate unpaid principal balance of loans held for sale for the periods

Aggregate fair value - Loans

Held for Sale

of December 31 2020

Aggregate fair

$ 296,728,086

$ 422,772,418

Unpaid principal balance

Unrealized gain

Mortgage Fee Income

Mortgage fee income consists of origination fees, processing fees, interest income and certain 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 as follows:

Three Months Ended March 31

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

Loan Loss Reserve

When a repurchase demand corresponding to a mortgage loan previously held for sale and sold to a third-party investor is received from a third-party investor, the relevant data is reviewed and captured so that an estimated future loss can be calculated.

The key factors that are used in the estimated 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.

principal balance

fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale

of mortgage loans held for sale.

categories of mortgage fee income for loans held for sale are as follows:

of Mortgage Fee Income for Loans Held for Sale

Months Ended June 30

in fair value of loan commitments

in fair value of loans held for sale

( 1,114,632 )

( 8,060,513 )

for loan loss reserve

( 1,524,435 )

( 1,269,232 )

( 2,137,544 )

$ 138,156,425

$ 113,650,094

a repurchase demand corresponding to a mortgage loan previously held for sale and sold to a third-party investor is received from a third-party

investor, the relevant data is reviewed and captured so that an estimated future loss can be calculated.

The key factors that are used

in the estimated 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 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 is able to resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

4) Loans Held for Sale (Continued)

The following is a summary of the loan loss reserve that is included in other liabilities and accrued expenses:

As of March 31

As of December 31

Balance, beginning of period

Provision on current loan originations (1)

Additional provision for loan loss reserve

Charge-offs, net of recaptured amounts

Balance, end of period

(1) Included in mortgage fee income

The Company maintains reserves for estimated losses on current production volumes.

For the three months ended March 31, 2021, $660,663 in reserves were added at a rate of 4.5 basis points per loan, the equivalent of $450 per $1,000,000 in loans originated.

This is an increase over the three months ended March 31, 2020, when reserves were added at a rate of 2.5 basis points per loan originated, the equivalent of $250 per $1,000,000 in loans originated.

The Company also increased its loan loss reserve for the year ended December 31, 2020 by an additional $16,506,030 to account for changes in estimates specific to settlements of loan losses.

See Note 11 for additional information regarding mortgage loan loss settlements.

The economic impact of COVID-19 and subsequent government action has increased the potential for losses due to early payoff penalties and potential for losses due to increased delinquency.

The unique nature of these current events creates significant difficulty for forecasting potential future losses.

The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves on current production.

Thus, the Company believes that the final loan loss reserve as of March 31, 2021, represents its best estimate for adequate loss reserves on loans sold.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

5) Stock Compensation Plans

The Company has two fixed option plans (the “2013 Plan” and the “2014 Director Plan”).

Compensation expense for options issued of $39,153 and $65,877 has been recognized for these plans for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, the total unrecognized compensation expense related to the options issued was $-0-.

The fair value of each 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.

A summary of the status of the Company’s stock compensation plans as of March 31, 2021, and the changes during the three months ended March 31, 2021, are presented below:

In many instances,

the Company is able to resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments

to the investor.

Held for Sale (Continued)

following is a summary of the loan loss reserve that is included in other liabilities and accrued expenses:

Schedule of loan loss reserve

which is included in other liabilities and accrued expenses

of December 31

Balance, beginning

on current loan originations (1)

provision for loan loss reserve

net of recaptured amounts

( 19,440,198 )

( 4,906,914 )

end of period

in mortgage fee income

Company maintains reserves for estimated losses on current production volumes.

For the six months ended June 30, 2021, $1,269,232 in

reserves were added at a rate of 4.5 basis points per loan, the equivalent of $450 per $1,000,000 in loans originated.

This is an increase

over the six months ended June 30, 2020, when reserves were added at a rate of 2.5 basis points per loan originated, the equivalent of

$250 per $1,000,000 in loans originated.

The Company also increased its loan loss reserve for the year ended December 31, 2020 by an

additional $16,506,030 to account for changes in estimates specific to settlements of loan losses.

Note 11 for additional information regarding mortgage loan loss settlements and charge-offs .

economic impact of COVID-19 and subsequent government action has increased the potential for losses due to early payoff penalties and

potential for losses due to increased delinquency.

The unique nature of these current events creates significant difficulty for forecasting

potential future losses.

The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves

on current production.

Thus, the Company believes that the final loan loss reserve as of June 30, 2021, represents its best estimate

for adequate loss reserves on loans sold.

Compensation Plans

Company has two fixed option plans (the “2013 Plan” and the “2014 Director Plan”).

Compensation expense for options

issued of $ 0

and $ 101,520

has been recognized for

these plans for the three months ended June 30, 2021 and 2020, respectively, and $ 39,153

and $ 167,397

has been recognized for

these plans for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, the total unrecognized compensation expense

related to the options issued was $ 0 .

fair value of each 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.

summary of the status of the Company’s stock compensation plans as of June 30, 2021, and the changes during the six months ended

June 30, 2021, are presented below:

Schedule of stock inventive

Class A Shares

Weighted Average Exercise Price

Average Exercise Price

Class C Shares

Weighted Average Exercise Price

Outstanding at January 1, 2021

Adjustment for effect of stock dividends

Outstanding at March 31, 2021

As of March 31, 2021:

Options exercisable

As of March 31, 2021:

Available options for future grant

Weighted average contractual term of options

outstanding at March 31, 2021

Weighted average contractual term of options

exercisable at March 31, 2021

Aggregated intrinsic value of options

outstanding at March 31, 2021 (1)

Aggregated intrinsic value of options

exercisable at March 31, 2021 (1)

(1) The Company used a stock price of $9.35 as of March 31, 2021 to derive intrinsic value.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

Average Exercise Price

at January 1, 2021

for effect of stock dividends

at June 30, 2021

As of June 30, 2021:

options for future grant

Weighted average contractual

term of options

at June 30, 2021

Weighted average contractual

term of options

at June 30, 2021

Aggregated intrinsic value

at June 30, 2021 (1)

Aggregated intrinsic value

at June 30, 2021 (1)

Company used a stock price of $8.33 as of June 30, 2021 to derive intrinsic value.

Stock Compensation Plans (Continued)

A summary of the status of the Company’s stock compensation plans as of March 31, 2020, and the changes during the three months ended March 31, 2020, are presented below:

summary of the status of the Company’s stock compensation plans as of June 30, 2020, and the changes during the six months ended

June 30, 2020, are presented below:

Class A Shares

Weighted Average Exercise Price

Average Exercise Price

Class C Shares

Weighted Average Exercise Price

Outstanding at January 1, 2020

Adjustment for effect of stock dividends

Outstanding at March 31, 2020

As of March 31, 2020:

Options exercisable

As of March 31, 2020:

Available options for future grant

Weighted average contractual term of options

outstanding at March 31, 2020

Weighted average contractual term of options

exercisable at March 31, 2020

Aggregated intrinsic value of options

outstanding at March 31, 2020 (1)

Aggregated intrinsic value of options

exercisable at March 31, 2020 (1)

(1) The Company used a stock price of $4.27 as of March 31, 2020 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 the three months March 31, 2021 and 2020 was $139,035 and $73,072, respectively.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

6) Earnings Per Share

The basic and diluted earnings per share amounts were calculated as follows:

Three Months Ended

Basic weighted-average shares outstanding

Effect of dilutive securities:

Employee stock options

Diluted weighted-average shares outstanding

Basic net earnings per share

Diluted net earnings per share

Net earnings per share amounts have been retroactively adjusted for the effect of annual stock dividends.

For the three months March 31, 2021 and 2020, there were -0- and 1,316,506 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.

Average Exercise Price

at January 1, 2020

for effect of stock dividends

at June 30, 2020

As of June 30, 2020:

options for future grant

Weighted average contractual

term of options

at June 30, 2020

Weighted average contractual

term of options

at June 30, 2020

Aggregated intrinsic value

at June 30, 2020 (1)

Aggregated intrinsic value

at June 30, 2020 (1)

Company used a stock price of $6.58 as of June 30, 2020 to derive intrinsic value.

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 the six months June 30, 2021 and 2020 was $434,318 and $191,656, respectively.

basic and diluted earnings per share amounts were calculated as follows:

of Earnings Per Share, Basic and Diluted

weighted-average shares outstanding

dilutive securities:

Employee stock

weighted-average shares outstanding

net earnings per share

earnings per share amounts have been retroactively adjusted for the effect of annual stock dividends.

For the six months June 30, 2021

and 2020,there were 0

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.

The following table summarizes the activity in shares of capital stock for the periods presented:

Outstanding shares at December 31, 2019

Exercise of stock options

Stock dividends

Conversion of Class C to Class A

Outstanding shares at March 31, 2020

following table summarizes the activity in shares of capital stock for the periods presented:

Schedule of Activity of Stock

shares at December 31, 2019

of stock options

of Class C to Class A

shares at June 30, 2020

Outstanding shares at December

Exercise of stock options

Stock dividends

Conversion of Class C to Class A

Outstanding shares at March 31, 2021

7) Business Segment Information

Description of Products and Services by Segment

The Company has three reportable business segments:

of stock options

of Class C to Class A

shares at June 30, 2021

Segment Information

of Products and Services by Segment

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 loans held for sale.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

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 loans held for sale.

of Segment Profit or Loss and Segment Assets

accounting policies of the reportable segments are the same as those described in the Significant Accounting Principles of the Form 10-K

for the year ended December 31, 2020.

Intersegment revenues are recorded at cost plus an agreed upon intercompany profit, and are eliminated

upon consolidation.

Management Used to Identify the Enterprise’s Reportable Segments

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.

Business Segment Information (Continued)

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 of the Form 10-K for the year ended December 31, 2020.

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.

Life Insurance

Schedule of Revenues and

Expenses by Reportable Segment

For the Three Months Ended

March 31, 2021

Revenues from external customers

from external customers

$ 116,750,315

Intersegment revenues

Segment profit before income taxes

Identifiable Assets

( 1,985,247 )

profit before income taxes

For the Three Months Ended

from external customers

$ 118,661,742

( 2,096,685 )

profit before income taxes

For the Six Months Ended

from external customers

$ 146,000,507

For the Three Months Ended

March 31, 2020

Revenues from external customers

Intersegment revenues

Segment profit before income taxes

Identifiable Assets

$ 239,408,921

( 4,125,822 )

profit before income taxes

1,193,893,855

2 unchanged sentences

1,196,659,425

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) 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:

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.

( 72,923,887 )

1,502,056,187

For the Six Months Ended

from external customers

$ 117,956,335

$ 198,270,691

( 3,308,699 )

profit before income taxes

1,206,815,231

( 110,608,108 )

1,517,542,154

1,209,580,801

( 110,608,108 )

1,521,061,742

Value of Financial Instruments

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.

value measurements are classified under the following hierarchy:

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.

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;

c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

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 the 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 investments), 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 :

Quoted prices for similar assets or liabilities in active markets;

prices for identical or similar assets or liabilities in non-active markets;

Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

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 the financial assets and financial liabilities.

Company utilizes a combination of third-party valuation service providers, brokers, and internal valuation models to determine fair value.

following methods and assumptions were used by the Company in estimating the fair value disclosures related to significant financial

items shown under Level 1 and Level 2 are valued as follows:

Maturity Securities Available for Sale :

The fair values of fixed maturity securities are based on quoted market prices, when

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 investments), 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 fair values for equity securities are based on quoted market prices.

Restricted Assets :

A portion of these assets include mutual funds and equity securities and fixed maturity securities that have quoted market prices that are used to determine fair value.

A portion of these assets include mutual funds and equity securities and fixed maturity securities 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 condensed 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 that have quoted market prices that are used to determine fair value.

amounts reported in the accompanying condensed consolidated balance sheets for these financial instruments approximate their fair values

due to their short-term nature.

Perpetual Care Trust Investments :

A portion of these assets include equity securities and fixed maturity securities 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 condensed consolidated balance sheets for these financial instruments approximate their fair values due to their short-term nature.

Call and Put Option Derivatives :

The carrying amounts reported

in the accompanying condensed consolidated balance sheets for these financial instruments approximate their fair values due to their

short-term nature.

and Put Option Derivatives :

The fair values for call and put options are based on quoted market prices.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

The items shown under Level 3 are valued as follows:

Loans Held for Sale :

Value of Financial Instruments (Continued)

items shown under Level 3 are valued as follows:

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.

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 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

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 of time, 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 comparables 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.

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 uses 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 comparables 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 Mortgage Servicing Rights (“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.

A loan commitment binds the Company to lend funds to a qualified borrower at a specified interest rate and within a specified period

of time, 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.

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.

Mortgage Loans Held for Investment :

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 comparables 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.

Real Estate Held for Investment :

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.

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 uses 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 comparables and property condition when determining fair value.

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.

Servicing Rights :

The Company initially recognizes Mortgage Servicing Rights (“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.

See Note 12 for more information regarding MSRs.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

The following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by their classification in the condensed consolidated balance sheet at March 31, 2021.

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by

their classification in the condensed consolidated balance sheet at June 30, 2021.

Schedule of fair value assets

and liabilities measured on a recurring basis

Prices in Active Markets for Identical Assets

Observable Inputs

Unobservable Inputs

accounted for at fair value on a

recurring basis

maturity securities available for sale

$ 260,957,676

$ 258,776,848

held for sale

perpetual care trust investments (1)

perpetual care trust investments (2)

- loan commitments (3)

assets accounted for at fair value on a recurring basis

Fixed maturity securities available for sale

$ 586,153,393

$ 260,935,673

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

$ 309,613,325

accounted for at fair value on a

recurring basis

- call options (4)

- loan commitments (4)

liabilities accounted for at fair value

on a recurring basis

$ ( 756,993 )

$ ( 744,198 )

Liabilities accounted for at fair value on a recurring basis

Derivatives - call options (4)

Derivatives - loan commitments (4)

Total liabilities accounted for at fair value on a recurring basis

(1) Fixed maturity securities available for sale

Fixed maturity securities available

Equity securities

(3) Included in other assets on the consolidated balance sheets

(4) Included in other liabilities and accrued expenses on the consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a recurring basis

Fixed maturity securities available for sale

in other assets on the consolidated balance sheets

Included in other liabilities

and accrued expenses on the consolidated balance sheets

following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by

their classification in the condensed consolidated balance sheet at December 31, 2020.

Prices in Active Markets for Identical Assets

Observable Inputs

Unobservable Inputs

accounted for at fair value on a

recurring basis

maturity securities available for sale

$ 294,656,679

$ 292,455,504

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

held for sale

perpetual care trust investments (1)

perpetual care trust investments (2)

- loan commitments (3)

assets accounted for at fair value on a

recurring basis

$ 748,145,493

1 unchanged sentence

$ 437,566,265

Liabilities accounted for at fair value on a recurring basis

Derivatives - call options (4)

Derivatives - loan commitments (4)

Total liabilities accounted for at fair value on a recurring basis

accounted for at fair value on a

recurring basis

- call options (4)

- loan commitments (4)

( 2,464,062 )

(1) Fixed maturity securities available for sale

liabilities accounted for at fair value

on a recurring basis

$ ( 2,507,159 )

$ ( 2,464,062 )

Fixed maturity securities available

Equity securities

(3) Included in other assets on the consolidated balance sheets

(4) Included in other liabilities and accrued expenses on the consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

For Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

Range of Inputs

Included in other assets on

the consolidated balance sheets

Included in other liabilities

and accrued expenses on the consolidated balance sheets

Level 3 assets and liabilities measured at fair value on a recurring basis as of June 30, 2021, the significant unobservable inputs used

in the fair value measurements were as follows:

Assets and liabilities measured

at fair value on a recurring basis

Fair Value at

Loans held for sale

held for sale

$ 296,728,086

Market approach

Investor contract pricing as a percentage of unpaid principal balance

Derivatives - loan commitments (net)

Market approach

Pull-through rate

contract pricing as a percentage of unpaid principal balance

- loan commitments (net)

Initial-Value

Fixed maturity securities available for sale

Broker quotes

Pricing quotes

For Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

Range of Inputs

maturity securities available for sale

Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2020, the significant unobservable inputs

used in the fair value measurements were as follows:

Fair Value at

Loans held for sale

held for sale

$ 422,772,418

Market approach

Investor contract pricing as a percentage of unpaid principal balance

Derivatives - loan commitments (net)

Market approach

Pull-through rate

contract pricing as a percentage of unpaid principal balance

- loan commitments (net)

Initial-Value

Fixed maturity securities available for sale

Broker quotes

Pricing quotes

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

Following is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs:

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

maturity securities available for sale

is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the periods presented:

Schedule of Changes in the

consolidated balance sheet line items measured using level 3 inputs

Loan Commitments

Held for Sale

Maturity Securities Available for Sale

Balance - December

$ 422,772,418

Originations and purchases

and purchases

2,810,230,507

Sales, maturities and paydowns

maturities and paydowns

( 3,025,027,077 )

Transfer to mortgage loans held for investment

Total gains (losses):

Included in earnings

Included in other comprehensive income

Balance - March 31, 2021

to mortgage loans held for investment

gains (losses):

( 168,397 )(1)

(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component of Net investment income on the condensed consolidated statements of earnings

Following is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs:

Net Loan Commitments

Loans Held for Sale

Fixed Maturity Securities Available for Sale

88,954,189 (1)

in other comprehensive income

- June 30, 2021

$ 296,728,086

a component of Mortgage fee income on the condensed consolidated statements of earnings

a component of Net investment income on the condensed consolidated statements of earnings

is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the periods presented:

Loan Commitments

Held for Sale

Maturity Securities Available for Sale

Balance - December

$ 213,457,632

Originations and purchases

Sales, maturities and paydowns

and purchases

2,105,048,030

Transfer to mortgage loans held for investment

Total gains (losses):

Included in earnings

Included in other comprehensive income

maturities and paydowns

( 2,017,976,791 )

( 1,020,800 )

to mortgage loans held for investment

( 8,933,676 )

gains (losses):

8,553,132 (1)

65,354,763 (1)

in other comprehensive income

- June 30, 2020

$ 356,949,958

a component of Mortgage fee income on the condensed consolidated statements of earnings

a component of Net investment income on the condensed consolidated statements of earnings

is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the periods presented:

Loan Commitments

Held for Sale

Maturity Securities Available for Sale

Balance - March

$ 304,030,372

(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component of Net investment income on the condensed consolidated statements of earnings

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

The following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a nonrecurring basis by their classification in the condensed consolidated balance sheet at March 31, 2021.

Quoted Prices in Active Markets for Identical Assets

Significant Observable Inputs

Significant Unobservable Inputs

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

Significant Observable Inputs

Significant Unobservable Inputs

Assets accounted for at fair value on a nonrecurring basis

Impaired mortgage loans held for investment

Impaired real estate held for sale

Total assets accounted for at fair value on a nonrecurring basis

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) 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.

Management 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 at March 31, 2021 and December 31, 2020.

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 March 31, 2021:

Carrying Value

Total Estimated Fair Value

Mortgage loans held for investment

Residential construction

Mortgage loans held for investment, net

and purchases

1,360,389,498

maturities and paydowns

( 1,410,147,019 )

to mortgage loans held for investment

gains (losses):

( 482,863 ) (1)

Insurance assignments, net (1)

Restricted assets (2)

Cemetery perpetual care trust investments (2)

Mortgage servicing rights, net

Bank and other loans payable

42,455,235 (1)

in other comprehensive income

- June 30, 2021

$ 296,728,086

a component of Mortgage fee income on the condensed consolidated statements of earnings

a component of Net investment income on the condensed consolidated statements of earnings

Following is a summary

of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the periods presented:

Loan Commitments

Held for Sale

Maturity Securities Available for Sale

Balance - March

$ 281,052,576

Policyholder account balances (3)

Future policy benefits - annuities (3)

and purchases

1,312,854,438

maturities and paydowns

( 1,278,846,335 )

( 1,010,500 )

(1) Included in other investments and policy loans on the condensed consolidated balance sheets

to mortgage loans held for investment

gains (losses):

5,278,100 (1)

41,889,279 (1)

in other comprehensive income

- June 30, 2020

$ 356,949,958

a component of Mortgage fee income on the condensed consolidated statements of earnings

a component of Net investment income on the condensed consolidated statements of earnings

following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a nonrecurring basis

by their classification in the condensed consolidated balance sheet at June 30, 2021.

Fair Value Assets Measured

on a Nonrecurring Basis

Prices in Active Markets for Identical Assets

Observable Inputs

Unobservable Inputs

accounted for at fair value on a nonrecurring basis

mortgage loans held for investment

(3) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) 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, 2020:

Carrying Value

Total Estimated Fair Value

real estate held for sale

assets accounted for at fair value on a nonrecurring basis

following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a nonrecurring basis

by their classification in the condensed consolidated balance sheet at December 31, 2020.

Prices in Active Markets for Identical Assets

Observable Inputs

Unobservable Inputs

accounted for at fair value on a nonrecurring basis

mortgage loans held for investment

real estate held for sale

assets accounted for at fair value on a nonrecurring basis

Value of Financial Instruments Carried at Other Than Fair Value

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.

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 at June 30, 2021 and December 31, 2020.

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 June 30, 2021:

Schedule of Financial Instruments

Carried at Other Than Fair Value

Estimated Fair Value

loans held for investment

loans held for investment, net

$ 262,160,007

$ 266,833,300

Residential construction

Mortgage loans held for investment, net

$ 266,833,300

assignments, net (1)

perpetual care trust investments (2)

servicing rights, net

and other loans payable

$ ( 231,972,771 )

Insurance assignments, net (1)

Restricted assets (2)

Cemetery perpetual care trust investments (2)

Mortgage servicing rights, net

Bank and other loans payable

$ ( 231,972,771 )

account balances (3)

( 43,288,791 )

( 42,203,722 )

Policyholder account balances (3)

Future policy benefits - annuities (3)

( 42,203,722 )

policy benefits - annuities (3)

( 108,765,849 )

( 112,155,627 )

(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 these 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.

( 112,155,627 )

in other investments and policy loans

loans held for investment

in future policy benefits and unpaid claims

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, 2020:

Estimated Fair Value

loans held for investment

$ 100,384,283

loans held for investment, net

$ 249,343,936

$ 256,493,572

assignments, net (1)

perpetual care trust investments (2)

servicing rights, net

and other loans payable

$ ( 297,824,368 )

account balances (3)

( 44,026,809 )

( 42,220,725 )

policy benefits - annuities (3)

( 106,522,113 )

( 112,354,186 )

in other investments and policy loans on the condensed consolidated balance sheets

loans held for investment

in future policy benefits and unpaid claims on the condensed consolidated balance sheets

methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of these financial instruments are

summarized as follows:

Loans Held for Investment :

The estimated fair value of the Company’s mortgage loans held for investment is determined using

various methods.

The Company’s mortgage loans are grouped into three categories:

Residential, Residential Construction and Commercial.

When estimating the expected future cash flows, it is assumed that all loans will be held to maturity, and any loans that are non-performing are evaluated individually for impairment.

Residential – The estimated fair value is determined 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 condensed 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 primarily short in maturity, accordingly, the carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

Bank and Other Loans Payable :

The carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values due to their relatively short-term maturities and variable interest 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 in excess of related policy account balances.

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.

– The estimated fair value 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.

Construction – These loans are primarily short in maturity.Accordingly, the estimated fair value is determined to be the carrying

– The estimated fair value is determined by estimating expected future cash flows of payments and discounting them using current

interest rates for commercial mortgages.

The carrying amounts reported in the accompanying condensed 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.

Assignments, Net :

These investments are primarily short in maturity, accordingly, the carrying amounts reported in the accompanying

condensed consolidated balance sheet for these financial instruments approximate their fair values.

and Other Loans Payable :

The carrying amounts reported in the accompanying condensed consolidated

balance sheet for these financial instruments approximate their fair values due to their relatively short-term maturities and variable

interest rates.

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 in

excess of related policy account balances.

Interest crediting 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.

9) Allowance for Doubtful Accounts

The Company records an allowance and recognizes an expense for potential losses from other investments and receivables in accordance with generally accepted accounting principles.

Receivables are the result of cemetery and mortuary operations, mortgage loan operations and life insurance operations.

The allowance is based upon the Company’s historical experience for collectively evaluated impairment.

Other allowances are based upon receivables individually evaluated for impairment.

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.

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.

for Doubtful Accounts

Company records an allowance and recognizes an expense for potential losses from other investments and receivables in accordance with

generally accepted accounting principles.

are the result of cemetery and mortuary operations, mortgage loan operations and life insurance operations.

The allowance is based upon

the Company’s historical experience for collectively evaluated impairment.

Other allowances are based upon receivables individually

evaluated for impairment.

Collectability of the cemetery and mortuary receivables is significantly influenced by current economic conditions.

The critical issues that impact recovery of mortgage loan operations are interest rate risk, loan underwriting, new regulations and the overall economy

10) 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 a number of 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 take into account all of 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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

10) Derivative Instruments (Continued)

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.

Forward Sale Commitments

The Company utilizes forward commitments to economically hedge the price risk associated with its outstanding mortgage loan commitments.

The critical issues that impact recovery of mortgage loan operations are interest rate risk, loan underwriting, new regulations and the

overall economy

10) Derivative

Banking Derivatives

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 a number of factors, particularly the change, if any, in mortgage rates following the

issuance of the loan commitment.

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 take into account all of 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.

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.

Sale Commitments

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 condensed consolidated balance sheets.

Call and Put Options

The Company uses a strategy of selling “out of the money” call options on its equity securities as a source of revenue.

The options give the purchaser the right to buy from the Company specified equity securities at a set price up to a pre-determined date in the future.

The Company uses the strategy of selling put options as a means of generating cash or purchasing equity securities at lower than current market prices.

The Company receives an immediate payment of cash for the value of the option and establishes a liability for the fair value of the option.

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.

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 condensed consolidated balance sheets.

and Put Options

Company uses a strategy of selling “out of the money” call options on its equity securities as a source of revenue.

give the purchaser the right to buy from the Company specified equity securities at a set price up to a pre-determined date in the future.

The Company uses the strategy of selling put options as a means of generating cash or purchasing equity securities at lower than current

market prices.

The Company receives an immediate payment of cash for the value of the option and establishes a liability for the fair

value of the option.

The liability for options is adjusted to fair value at each reporting date.

In the event a call option is exercised, the Company sells the equity security at a favorable price enhanced by the value of the option that was sold.

If the option expires unexercised, the Company recognizes a gain from the expired option.

In the event a put option is exercised, the Company acquires an equity security at the strike price of the option reduced by the value received from the sale of the put option.

The equity security is then treated as a normal equity security in the Company’s portfolio.

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.

The following table shows the notional amount and fair value of derivatives as of March 31, 2021 and December 31, 2020.

Fair Values and Notional Values of Derivative Instruments

March 31, 2021

December 31, 2020

Balance Sheet Location

Notional Amount

Asset Fair Value

Liability Fair Value

Notional Amount

Asset Fair Value

Liability Fair Value

In the event a call option is exercised,

the Company sells the equity security at a favorable price enhanced by the value of the option that was sold.

If the option expires unexercised,

the Company recognizes a gain from the expired option.

In the event a put option is exercised, the Company acquires an equity security

at the strike price of the option reduced by the value received from the sale of the put option.

The equity security is then treated

as a normal equity security in the Company’s portfolio.

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.

following table shows the notional amount and fair value of derivatives as of June 30, 2021 and December 31, 2020.

Schedule of Derivative Assets

at Fair Value

Values and Notional Values of Derivative Instruments

Sheet Location

Derivatives not designated as hedging instruments:

Loan commitments

Other assets and Other liabilities

assets and Other liabilities

$ 923,793,977

$ 659,245,038

Other liabilities

$ 924,507,977

$ 661,118,238

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

10) Derivative Instruments (Continued)

The following table shows the gains and losses on derivatives for the periods presented.

Net Amount Gain (Loss)

Three Months Ended March 31

following table shows the gains and losses on derivatives for the periods presented.

of Gains and Losses on Derivatives

Net Amount Gain

Months Ended June 30

Classification

Loan commitments

Mortgage fee income

Call and put options

Gains on investments and other assets

$ ( 482,863 )

$ ( 168,397 )

and put options

on investments and other assets

Reinsurance, Commitments and Contingencies

The Company follows the procedure of reinsuring risks in excess of a specified limit, which ranges from $25,000 to $100,000.

The Company is liable for these amounts in the event such reinsurers are unable to pay their portion of the claims.

The Company has also assumed insurance from other companies.

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 its potential losses on loans sold.

The estimated liability for indemnification losses is included in other liabilities and accrued expenses and, as of March 31, 2021 and December 31, 2020, the balances were $2,204,983 and $20,583,618, respectively.

The Company believes that the final loan loss reserve as of March 31, 2021, represents its best estimate for adequate loss reserves on loans sold.

Mortgage Loan Loss Litigation

Settlement Agreement and Mutual Release with Lehman Brothers Holdings Inc.

From 2004 to early 2008, SecurityNational Mortgage Company (“SecurityNational Mortgage”), a wholly owned subsidiary of the Company, originated “limited documentation” or “reduced documentation” loans which were sold to certain affiliates of Lehman Brothers Holdings Inc.

Company follows the procedure of reinsuring risks in excess of a specified limit, which ranges from $25,000 to $100,000.

is liable for these amounts in the event such reinsurers are unable to pay their portion of the claims.

The Company has also assumed

insurance from other companies.

Loan Loss Settlements

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 its potential losses on loans sold.

The estimated liability for indemnification

losses is included in other liabilities and accrued expenses and, as of June 30, 2021 and December 31, 2020, the balances were $ 2,412,652

and $ 20,583,618 ,

respectively.

The Company believes that the final loan loss reserve as of June 30, 2021, represents its best estimate for adequate loss

reserves on loans sold.

Loan Loss Litigation

Agreement and Mutual Release with Lehman Brothers Holdings Inc.

2004 to early 2008, Security National Mortgage Company (“Security National Mortgage”), a wholly owned subsidiary of the Company,

originated “limited documentation” or “reduced documentation” loans which were sold to certain affiliates of

Lehman Brothers Holdings Inc.

(“Lehman Holdings”).

Certain of these loans became the subject of disputes between SecurityNational Mortgage and Lehman Holdings and certain Lehman Holdings affiliates.

Lehman Holdings filed a Petition for Relief under Chapter 11 of the United States Bankruptcy Code in 2008.

In May of 2011, SecurityNational Mortgage filed a complaint in U.S.

District Court against certain Lehman Holdings affiliates.

In June of 2011, Lehman Holdings filed a complaint in Federal District Court against SecurityNational Mortgage, both of which were later resolved.

In 2016, certain other pending loan disputes between SecurityNational Mortgage and Lehman Holdings became the subject of an unsuccessful, non-binding alternate dispute resolution mediation proceeding.

Thereafter, in 2016, Lehman Holdings filed an adversary proceeding complaint against approximately 150 mortgage loan originators, including SecurityNational Mortgage, in the U.S.

Bankruptcy Court of the Southern District of New York, which included seeking damages relating to the alleged obligations of the defendants under indemnification provisions of alleged agreements, in amounts to be determined at trial, including interest, attorneys’ fees and costs incurred by Lehman Holdings in enforcing the obligations of the defendants.

The complaint was later amended with the latest amended complaint filed against SecurityNational Mortgage on December 27, 2016, seeking damages to be determined at trial, including interest, attorneys’ fees and costs.

This complaint involved approximately 135 mortgage loans, there being millions of dollars allegedly in dispute.

These claims against SecurityNational Mortgage were asserted as a result of Lehman Holdings’ earlier settlements with the FederalNational Mortgage Association (“Fannie Mae”) and the Federal Home Loan Corporation (“Freddie Mac”).

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

11) Reinsurance, Commitments and Contingencies (Continued)

In 2018, Lehman Holdings filed a separate adversary proceeding complaint against SecurityNational Mortgage.

This adversary proceeding allegedly involved approximately 577 mortgage loans relative to private securitization trusts (“RMBS Loans”) and millions of dollars in damages.

Certain of these loans became the subject of disputes between Security

National Mortgage and Lehman Holdings and certain Lehman Holdings affiliates.

Lehman Holdings filed a Petition for Relief under Chapter

11 of the United States Bankruptcy Code in 2008.

In May of 2011, Security National Mortgage filed a complaint in U.S.

District Court

against certain Lehman Holdings affiliates.

In June of 2011, Lehman Holdings filed a complaint in Federal District Court against

Security National Mortgage, both of which were later resolved.

In 2016, certain other pending loan disputes between Security National

Mortgage and Lehman Holdings became the subject of an unsuccessful, non-binding alternate dispute resolution mediation proceeding.

in 2016, Lehman Holdings filed an adversary proceeding complaint against approximately 150 mortgage loan originators, including Security

National Mortgage, in the U.S.

Bankruptcy Court of the Southern District of New York, which included seeking damages relating to the

alleged obligations of the defendants under indemnification provisions of alleged agreements, in amounts to be determined at trial, including

interest, attorneys’ fees and costs incurred by Lehman Holdings in enforcing the obligations of the defendants.

The complaint was

later amended with the latest amended complaint filed against Security National Mortgage on December 27, 2016, seeking damages to be

determined at trial, including interest, attorneys’ fees and costs.

This complaint involved approximately 135 mortgage loans, there

being millions of dollars allegedly in dispute.

These claims against Security National Mortgage were asserted as a result of Lehman Holdings’

earlier settlements with the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Corporation (“Freddie

2018, Lehman Holdings filed a separate adversary proceeding complaint against Security National Mortgage.

This adversary proceeding

allegedly involved approximately 577 mortgage loans relative to private securitization trusts (“RMBS Loans”) and

millions of dollars in damages.

Thereafter, Lehman Holdings made a filing that effectively reduced the number of RMBS Loans to 248.

This proceeding was in addition to the above-referenced proceeding involving the Fannie Mae and Freddie Mac mortgage loans.

As with the above-referenced proceeding, damages were sought including interest, costs, and attorneys’ fees.

SecurityNational Mortgage, as well as other defendants, have been involved in written discovery, and production of documents relative to the cases, and the filing of motions.

the above-referenced proceeding, damages were sought including interest, costs, and attorneys’ fees.

National Mortgage, as well as other defendants, have been involved in written discovery, and production of documents relative to the

cases, and the filing of motions.

The deposition phase of the cases was yet to begin, as well as the later expert witness phase.

Those phases would require substantial expenditures of legal fees and costs.

On February 1, 2021, SecurityNational Mortgage executed a settlement agreement with Lehman Holdings in relation to these two adversary proceedings wherein all mortgage loan related claims were resolved, thereby ending all liabilities asserted by Lehman Holdings and conclusively ending all proceedings between SecurityNational Mortgage and Lehman Holdings.

In accordance with GAAP, the full amount of SecurityNational Mortgage’s settlement payment was accounted for in the Company’s loan loss reserve as of December 31, 2020 and was paid during the first quarter 2021.

Debt Covenants for Mortgage Warehouse Lines of Credit

The Company, through its subsidiary SecurityNational Mortgage, has a $150,000,000 line of credit with Wells Fargo Bank N.A.

phases would require substantial expenditures of legal fees and costs.

February 1, 2021, Security National Mortgage executed a settlement agreement with Lehman Holdings in relation to these two adversary

proceedings wherein all mortgage loan related claims were resolved, thereby ending all liabilities asserted by Lehman Holdings and conclusively

ending all proceedings between Security National Mortgage and Lehman Holdings.

The full amount of Security National Mortgage’s

settlement payment was accounted for in the Company’s loan loss reserve as of December 31, 2020 and was paid during the first quarter

Covenants for Mortgage Warehouse Lines of Credit

Company, through its subsidiary Security National Mortgage, has a $100,000,000 line of credit with Wells Fargo Bank N.A.

The agreement

charges interest at the 1-Month LIBOR rate plus 2.1% and matures on June 9, 2022.

Security National Mortgage is required to comply with

covenants for adjusted tangible net worth, unrestricted cash balance, the ratio of indebtedness to adjusted tangible net worth, and the

liquidity overhead coverage ratio, and a quarterly gross profit of at least $1.00.

Company, through its subsidiary Security National Mortgage, has a line of credit with Texas Capital Bank N.A.

This agreement with the

bank allows Security National Mortgage to borrow up to $100,000,000 for the sole purpose of funding mortgage loans.

The agreement charges

interest at the 1-Month LIBOR rate plus 2% and matures on November 15, 2021.

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.

Company through its subsidiary Security National Mortgage, has a line of credit with Comerica Bank.

This agreement with the bank allows

Security National Mortgage to borrow up to $75,000,000 for the sole purpose of funding mortgage loans.

The agreement charges interest

at the 1-Month LIBOR rate plus 2.5% and matures on May 27, 2022.

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.

Company through its subsidiary Security National Mortgage, has a line of credit with U.S Bank.

This agreement with the bank allows

Security National Mortgage to borrow up to $ 100,000,000 for

the sole purpose of funding mortgage loans.

The agreement charges interest at the 1-Month LIBOR rate plus 2.0% and matures on June

SecurityNational Mortgage is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, the ratio of indebtedness to adjusted tangible net worth, and the liquidity overhead coverage ratio, and a quarterly gross profit of at least $1.00.

The Company, through its subsidiary SecurityNational Mortgage, has a line of credit with Texas Capital Bank N.A.

This agreement with the bank allows SecurityNational Mortgage to borrow up to $175,000,000 for the sole purpose of funding mortgage loans.

The agreement charges interest at the 1-Month LIBOR rate plus 2% and matures on November 15, 2021.

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 Comerica Bank.

This agreement with the bank allows SecurityNational Mortgage to borrow up to $90,000,000 for the sole purpose of funding mortgage loans.

The agreement charges interest at the 1-Month LIBOR rate plus 2.5% and matures on May 27, 2021.

The Company, through its subsidiary EverLEND Mortgage, has a line of credit with Texas Capital Bank N.A.

This agreement with the bank allows EverLEND Mortgage to borrow up to $5,000,000 for the sole purpose of funding mortgage loans.

The agreement charges interest at the 1-Month LIBOR rate plus 2.5% and matures on August 1, 2021.

The agreements for warehouse lines include cross default provisions in that a covenant violation under one agreement constitutes a covenant violation under the other agreement.

As of March 31, 2021, the Company believes that it was in compliance with all debt covenants.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

11) Reinsurance, Commitments and Contingencies (Continued)

Other Contingencies and Commitments

The Company has entered into commitments to fund construction and land development loans and has also provided financing for land acquisition and development.

As of March 31, 2021, the Company’s commitments were approximately $194,792,000 for these loans, of which $109,977,951 had been funded.

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.

Company, through its subsidiary EverLEND Mortgage, has a line of credit with Texas Capital Bank N.A.

This agreement with the bank allows

EverLEND Mortgage to borrow up to $5,000,000 for the sole purpose of funding mortgage loans.

The agreement charges interest at the 1-Month

LIBOR rate plus 2.5% and matures on August 26, 2021.

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.

agreements for warehouse lines include cross default provisions in that a covenant violation under one agreement constitutes a covenant

violation under the other agreement.

As of June 30, 2021, the Company believes that it was in compliance with all debt covenants.

Contingencies and Commitments

Company has entered into commitments to fund construction and land development loans and has also provided financing for land acquisition

and development.

As of June 30, 2021, the Company’s commitments were approximately $ 249,815,000

for these loans, of which

$ 139,207,610 had

The Company will advance funds 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 5.50% to 8.00% per annum.

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 5.25% to 8.00% per annum.

Maturities range between six and eighteen months.

The Company belongs to a captive insurance group for certain casualty insurance, worker compensation and liability programs.

Insurance reserves are maintained 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 insurance management considers a number of 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.

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.

Management believes that none of the actions will have a material effect on the Company’s financial position or results of operations.

Based on management’s assessment and legal counsel’s representations concerning the likelihood of unfavorable outcomes, no amounts have been accrued for the above claims in the consolidated financial statements.

The Company is not a party to any other material legal proceedings outside the ordinary course of business or to any other legal proceedings, which, if adversely determined, would have a material adverse effect on its financial condition or results of operations.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

12) Mortgage Servicing Rights

The Company initially records these MSRs at fair value as discussed in Note 8.

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.

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.

Management periodically reviews the various loan strata to determine whether the value of the MSRs in a given 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.

The following is a summary of the MSR activity for the periods presented.

As of March 31

As of December 31

Amortized cost:

Balance before valuation allowance at beginning of year

MSR additions resulting from loan sales

Amortization (1)

Application of valuation allowance to write down MSRs with other than temporary impairment

Balance before valuation allowance at end of period

Valuation allowance for impairment of MSRs:

Balance at beginning of year

Application of valuation allowance to write down MSRs with other than temporary impairment

Balance at end of period

Mortgage servicing rights, net

Estimated fair value of MSRs at end of period

(1) Included in other expenses on the condensed consolidated statements of earnings

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

12) Mortgage Servicing Rights (Continued)

The following table summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost:

Estimated MSR Amortization

The Company collected the following contractual servicing fee income and late fee income as reported in other revenues on the condensed consolidated statement of earnings:

Three Months Ended

Contractual servicing fees

The following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio for the periods presented:

As of March 31

As of December 31 2020

Servicing UPB

Company belongs to a captive insurance group for certain casualty insurance, worker compensation and liability programs.

reserves are maintained 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 insurance management

considers a number of 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.

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.

Company is a defendant in various other legal actions arising from the normal conduct of business.

Management believes that none of

the actions, if adversely determined, will have a material effect on the Company’s financial position or results of

Based on management’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.

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.

Servicing Rights

Company initially records these MSRs at fair value as discussed in Note 8.

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

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).

impaired, the impairment is recognized in current-period earnings and the carrying value of the MSRs is adjusted through a valuation

periodically reviews the various loan strata to determine whether the value of the MSRs in a given stratum is impaired and likely to

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.

following is a summary of the MSR activity for the periods presented.

Schedule of Mortgage Servicing

of December 31

before valuation allowance at beginning of year

MSR additions

resulting from loan sales

( 6,772,539 )

( 11,841,478 )

The following key assumptions were used in determining MSR value:

March 31, 2021

December 31, 2020

13) Income Taxes

The Company’s overall effective tax rate for the three months ended March 31, 2021 and 2020 was 25.8% and 3.4%, respectively, which resulted in a provision for income taxes of $4,226,340 and $49,785, respectively.

of valuation allowance to write down MSRs

with other than temporary impairment

before valuation allowance at end of period

allowance for impairment of MSRs:

at beginning of year

of valuation allowance to write down MSRs

with other than temporary impairment

at end of period

servicing rights, net

fair value of MSRs at end of period

in other expenses on the condensed consolidated statements of earnings

following table summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost:

of Finite-Lived Intangible Assets, Future Amortization Expense, Mortgage Servicing Rights

MSR Amortization

Company collected the following contractual servicing fee income and late fee income as reported in other revenues on the condensed

consolidated statement of earnings:

Schedule of Other Revenues

servicing fees

following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio for the periods presented:

Summary of Unpaid Principal

Balances of the Servicing Portfolio

of December 31 2020

$ 6,280,506,543

$ 5,070,287,864

following key assumptions were used in determining MSR value:

Assumptions used

in determining MSR value

Company’s overall effective tax rate for the three months ended June 30, 2021 and 2020 was 23.3 %

respectively, which resulted in a provision for income taxes of $ 3,419,873

and $ 6,636,709 ,

respectively.

The Company’s overall effective tax rate for the six months ended June 30, 2021 and 2020 was 24.6 %

respectively, which resulted in a provision for income taxes of $ 7,646,213

and $ 6,686,494 ,

respectively.

The Company's effective tax rates differ from the U.S.

federal statutory rate of 21% partially due to its provision for state income taxes.

The effective tax rate in the current period increased when compared to the prior year period partly due the Coronavirus Aid Relief and Economic Security (“CARES”) Act.

Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur.

Although the Company believes its tax estimates are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2020 (Unaudited)

federal statutory rate of 21% partially due to its provision for

state income taxes.

The effective tax rate in the current period decreased when compared to the prior year period partly due to

the Company's provision for state income taxes.

income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete

tax items in the period in which they occur.

Although the Company believes its tax estimates are reasonable, the Company can make no

assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income

tax provisions and accruals.

Revenues from Contracts with Customers

The Company reports revenues from contracts with customers pursuant to ASC No.

606, Revenue from 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.

Company reports revenues from contracts with customers pursuant to ASC No.

606, Revenue from Contracts with

about Performance Obligations and Contract Balances

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 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.

At-need Specialty Merchandise Revenue :

At-need specialty merchandise revenue consists of customizable merchandise ordered from a manufacturer such as markers and bases.

Company’s three types of future obligations are as follows:

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.

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.

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.

deferred until the at-need merchandise is received.

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.

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 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.

payment of the contract does not constitute fulfillment of the performance obligation.

Goods or services are deferred until such 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

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.

The opening and closing balances of the Company’s receivables, contract assets and contract liabilities are as follows:

Contract Balances

Receivables (1)

Contract Asset

Contract Liability

A transfer of goods and services

does not fulfill an obligation and revenue remains deferred.

opening and closing balances of the Company’s receivables, contract assets and contract liabilities are as follows:

Schedule of Opening and Closing

Balances of Receivables, Contract Assets and Contract Liabilities

Opening (1/1/2021)

Closing (3/31/2021)

Increase/(decrease)

Contract Balances

Receivables(1)

Contract Asset

Contract Liability

Opening (1/1/2020)

Closing (12/31/2020)

Increase/(decrease)

(1) Included in Receivables, net on the condensed consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

14) Revenues from Contracts with Customers (Continued)

The amount of revenue recognized and included in the opening contract liability balance for the three months ended March 31, 2021 and 2020 was $1,135,001 and $950,772, 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 for the periods presented:

Three Months Ended

Major goods/service lines

Timing of Revenue Recognition

Goods transferred at a point in time

Services transferred at a point in time

The following table reconciles revenues from cemetery and mortuary contracts to Note 7 – Business Segment Information for the Cemetery/Mortuary Segment for the periods presented:

Three Months Ended

Net mortuary and cemetery sales

Gains (losses) on investments and other assets

Net investment income

Other revenues

Revenues from external customers

in Receivables, net on the condensed consolidated balance sheets

amount of revenue recognized and included in the opening contract liability balance for the three months ended June 30, 2021 and 2020

was $ 1,309,936

and $ 880,663 ,

respectively, and for the six months ended June 30, 2021 and 2020 was $ 2,444,937

and $ 1,831,406 ,

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

following table disaggregates revenue for the Company’s cemetery and mortuary contracts for the periods presented:

Revenues of the Cemetery

and Mortuary Contracts

Ended June 30

goods/service lines

of Revenue Recognition

transferred at a point in time

following table reconciles revenues from cemetery and mortuary contracts to Note 7 – Business Segment Information for the Cemetery/Mortuary

Segment for the periods presented:

Reconciliation of Revenues

from Cemetery and mortuary contracts to Business Segment Information

mortuary and cemetery sales

(losses) on investments and other assets

Net investment

from external customers

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements