What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-31 · 527 added, 623 removed, 136 unchanged (89% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations

The Company’s

operations over the last several years generally reflect three strategies which the Company expects to continue:

(i) increased attention

to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products;

increased emphasis on cemetery and mortuary business;

and (iii) capitalizing on an improving housing market by originating mortgage loans.

The Company has adjusted its strategies to respond to the changing economic circumstances resulting from the COVID-19 pandemic.

The following table shows the condensed financial

results for the Company’s insurance operations for the years ended December 31, 2021 and 2020.

See Note 15 of the Notes to Consolidated

Financial Statements.

Years ended December 31

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

Company’s operations over the last several years generally reflect three strategies which the Company expects to continue:

increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole

life products;

(ii) increased emphasis on cemetery and mortuary business;

and (iii) capitalizing on the housing market by originating

mortgage loans.

The Company has adjusted its strategies to respond to the changing economic circumstances resulting from COVID-19.

following table shows the condensed financial results for the Company’s insurance operations for the years ended December 31, 2022

See Note 15 of the Notes to Consolidated Financial Statements.

ended December 31

(in thousands of dollars)

vs 2021 % Increase (Decrease)

Revenues from external customers:

Insurance premiums

Net investment income

Gains (losses) on investments and other assets

Other than temporary impairments

Intersegment revenue

Earnings before income taxes

Intersegment revenues for the Company’s insurance

operations were comprised primarily of interest income from the warehouse lines provided to the Company’s mortgage lending affiliates

to fund loans held for sale.

Profitability in 2021 increased due to a $7,234,000 increase in insurance premiums, a $2,466,000 increase

in gains on investments and other assets, a $1,280,000 increase in net investment income, a $661,000 increase in other revenues, a $550,000

decrease in selling, general and administrative expenses, a $331,000 decrease in other than temporary impairments, and a $44,000 decrease

in interest expense.

This increase was partially offset by a $4,377,000 increase in death, surrenders and other policy benefits ($2,305,000

of which was related to COVID-19 related deaths), a $2,695,000 increase in future policy benefits, a $1,993,000 increase in amortization

of deferred policy acquisition costs, and a $453,000 decrease in intersegment revenue.

In response to

the COVID-19 pandemic, the Company’s life insurance sales force began using virtual and tele sales processes to market products.

During the third quarter 2021, the life insurance sales force returned to in person sales, however, it continues to use virtual and tele

sales where needed.

As of December 31, 2021, approximately 75% of insurance operations office staff were working in the office with the

flexibility for hybrid-remote or completely remote working arrangements as needed.

Cemetery and Mortuary Operations

The following table shows the condensed financial

results for the Company’s cemetery and mortuary operations for the years ended December 31, 2021 and 2020.

See Note 15 of the Notes

to Consolidated Financial Statements.

Years ended December 31

from external customers:

investment income

(losses) on investments and other assets

than temporary impairments

before income taxes

revenues for the Company’s insurance operations were comprised primarily of interest income from the warehouse lines provided to

the Company’s mortgage lending affiliates to fund loans held for sale.

Profitability for 2022 decreased due to (a) a $4,974,000

decrease in gains on investments and other assets primarily due to a decrease in the fair value of equity securities, (b) a $3,345,000

increase in selling, general and administrative expenses, (c) a $2,596,000 increase in future policy benefits, (d) a $1,741,000 increase

in amortization of deferred policy acquisition costs primarily due to an increase in the average outstanding balance of deferred policy

and pre-need acquisition costs, (e) a $1,641,000 increase in interest expense, (f) a $968,000 decrease in intersegment revenue, and (g)

a $220,000 decrease in other revenues, which were partially offset by (i) a $6,473,000 increase in net investment income, (ii) a $4,890,000

increase in insurance premiums and other considerations, (iii) a $3,152,000 decrease in death, surrenders and other policy benefits,

and (iv) a $193,000 decrease in intersegment interest expense and other expenses.

response to the COVID-19 pandemic, the Company’s life insurance sales force began using virtual and tele sales processes to market

During the third quarter 2021, the life insurance sales force returned to in person sales, however, it continues to use virtual

and tele sales where needed.

Currently, approximately 75% of insurance operations office staff work in the office with the flexibility

for hybrid-remote or completely remote working arrangements as needed.

and Mortuary Operations

following table shows the condensed financial results for the Company’s cemetery and mortuary operations for the years ended December

31, 2022 and 2021.

See Note 15 of the Notes to Consolidated Financial Statements.

ended December 31

(in thousands of dollars)

vs 2021 % Increase (Decrease)

Revenues from external customers:

Cemetery revenues

Mortuary revenues

Net investment income

Gains on investments and other assets

Earnings before income taxes

Profitability in 2021 increased due to a $2,682,000

increase in cemetery pre-need sales, a $1,675,000 increase in gains on investments and other assets (which, in turn, was primarily attributable

to a $1,092,000 increase in gains on real estate sales) and a $582,000 increase in the fair value of equity securities classified as restricted

assets and cemetery perpetual care trust investments, an $846,000 increase in net investment income, a $518,000 increase in mortuary at-need

sales, and a $490,000 increase in cemetery at-need sales.

This increase was partially offset by a $2,559,000 increase in selling, general

and administrative expenses, and a $451,000 increase in costs of goods sold.

In response to the COVID-19 pandemic, the cemetery

and mortuary’s pre-need sales force began using virtual selling processes to market its products and services including some in

home sales as local regulations permitted.

During the third quarter 2021, the sales force returned mostly to in home sales, however, it

continues to use virtual selling where needed.

Currently, the cemetery and mortuary operations office staff works in the office with the

flexibility for hybrid-remote or completely remote working arrangements as needed.

Mortgage Operations

The Company’s

wholly owned subsidiaries, SecurityNational Mortgage and EverLEND Mortgage Company, are mortgage lenders incorporated under the laws of

the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S.

Department of Housing

and Urban Development (HUD), which originate mortgage loans that qualify for government insurance in the event of default by the borrower,

in addition to various conventional mortgage loan products.

SecurityNational Mortgage and EverLEND Mortgage originate and refinance mortgage

loans on a retail basis.

Mortgage loans originated or refinanced by the Company’s mortgage subsidiaries are funded through loan

purchase agreements with Security National Life, Kilpatrick Life and unaffiliated financial institutions.

The Company’s

mortgage subsidiaries receive fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees

earned from third party investors that purchase the mortgage loans originated by the mortgage subsidiaries.

Mortgage loans originated

by the mortgage subsidiaries are generally sold with mortgage servicing rights released to third-party investors or retained by SecurityNational

SecurityNational Mortgage currently retains the mortgage servicing rights on approximately 54% of its loan origination volume.

from external customers:

investment income

(losses) on investments and other assets

before income taxes

Profitability

in 2022 decreased due to (a) a $2,398,000 increase in selling, general and administrative expenses, (b) a $2,308,000 decrease in gains

on investments and other assets primarily attributable to a $579,000 decrease in gains on real estate sales and a $1,729,000 decrease

in gains on equity securities classified as restricted assets and cemetery perpetual care trust investments primarily due to a decrease

in the fair value of equity securities, (c) a $2,066,000 decrease in cemetery pre-need sales, (d) a $1,017,000 increase in costs of goods

sold, (e) a $225,000 increase in intersegment interest expense and other expenses, and (f) a $66,000 increase in amortization of deferred

policy acquisition costs, which were partially offset by (i) a $4,751,000 increase in mortuary at-need sales, (ii) a $791,000 increase

in net investment income, (iii) a $311,000 increase in cemetery at-need sales, (iv) a $205,000 increase in other revenues (v) a $137,000

increase in intersegment revenues, and (vi) a $54,000 decrease in interest expense.

response to the COVID-19 pandemic, the cemetery and mortuary’s pre-need sales force began using virtual selling processes to market

its products and services including some in home sales as local regulations permitted.

During the third quarter 2021, the sales force

returned mostly to in home sales, however, it continues to use virtual selling where needed.

Currently, the cemetery and mortuary operations

office staff works in the office with the flexibility for hybrid-remote or completely remote working arrangements as needed.

Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of

Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S.

Department of Housing and Urban

Development (HUD), which originate mortgage loans that qualify for government insurance in the event of default by the borrower, in addition

to various conventional mortgage loan products.

SecurityNational Mortgage originates and refinances mortgage loans on a retail basis.

Mortgage loans originated or refinanced by the Company’s mortgage subsidiaries are funded through loan purchase agreements with

Security National Life, Kilpatrick Life and unaffiliated financial institutions.

SecurityNational

Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from

third party investors that purchase the mortgage loans.

Mortgage loans are generally sold with mortgage servicing rights (“MSRs”)

released to third-party investors or retained by SecurityNational Mortgage.

SecurityNational Mortgage currently retains the MSRs on approximately

7% of its loan origination volume.

These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.

In December 2021,

the Company ceased operations in EverLEND Mortgage and merged its operations into SecurityNational Mortgage.

For the twelve

months ended December 31, 2021 and 2020, SecurityNational Mortgage originated 19,342 loans ($5,502,894,000 total volume) and 21,206 loans

($5,472,503,000 total volume), respectively.

For the twelve months ended December 31, 2021 and 2020, EverLEND Mortgage originated 323

loans ($108,295,000 total volume) and 511 loans ($154,511,000 total volume), respectively.

Record low mortgage

interest rates that prevailed during the third quarter of 2020 and into the first quarter of 2021 trended higher through the second, third

and fourth quarters of 2021.

Production volumes remained strong in the second, third and fourth quarters of 2021, particularly for purchase

mortgage transactions but were below those experienced during the earlier low interest rate period.

The following table shows the condensed financial

results for the Company’s mortgage operations for the years ended December 31, 2021 and 2020.

See Note 15 of the Notes to Consolidated

Financial Statements.

Years ended December 31

In December 2021, the Company ceased operations in EverLEND Mortgage and merged its operations into SecurityNational Mortgage.

31, 2022, the Company sold certain of its MSRs.

The MSRs related to mortgage loans previously originated by the Company in aggregate

unpaid principal amount of approximately $7.02 billion.

As a result of the sale, the book value of the Company’s MSRs decreased

$51,185,906 and generated a gain of $34,051,938 included in mortgage fee income on the consolidated statements of earnings.

the twelve months ended December 31, 2022 and 2021, SecurityNational Mortgage originated 10,663 loans ($3,373,554,000 total volume) and

19,342 loans ($5,502,894,000 total volume), respectively.

For the twelve months ended December 31, 2021, EverLEND Mortgage originated

323 loans ($108,295,000 total volume).

rates have followed the US Treasury yields up in response to the higher than expected inflation and the expectation that the Federal

Reserve will continue to raise rates in the near term.

As expected, the rapid increase in mortgage rates has resulted in a decrease in

loan originations classified as ‘refinance’.

Higher mortgage rates have also had a negative effect on loan originations classified

as ‘purchase’, although not as significant as those in the refinance classification.

following table shows the condensed financial results for the Company’s mortgage operations for the years ended December 31, 2022

See Note 15 of the Notes to Consolidated Financial Statements.

ended December 31

(in thousands of dollars)

vs 2021 % Increase (Decrease)

Revenues from external customers:

Secondary gains from investors

Income from loan originations

Change in fair value of loans held for sale

Change in fair value of loan commitments

Net investment income

Gains on investments and other assets

Earnings before income taxes

Included in other revenues is service fee income.

Profitability in 2021 has decreased due to a $19,197,000 decrease in the fair value of loans held

for sale, a $15,009,000 increase in personnel expenses, a $10,750,000 decrease in the fair value of loan commitments, a $4,662,000 increase

in other expenses, a $4,225,000 decrease in income from loan originations, a $1,342,000 decrease in secondary gains from investors, a

$664,000 increase in costs related to funding mortgage loans, a $520,000 increase in advertising expenses, a $477,000 increase in rent

and rent related expenses, a $192,000 decrease in net investment income, a $117,000 decrease in intersegment revenues, and a $90,000 increase

in other intersegment expenses.

These decreases were partially offset by a $16,506,000 decrease in the provision for loan loss reserve,

a $6,551,000 increase in other revenues, a $5,917,000 decrease in commissions, a $1,281,000 decrease in interest expense, a $470,000 decrease

in intersegment interest expense, a $199,000 increase in gains on investments and other assets, and a $97,000 decrease in depreciation

on property and equipment.

In response to

the COVID-19 pandemic, the mortgage operations has integrated employee work from home accommodations into its standard operating procedures.

A large percentage of fulfillment employees are in office in 2021 compared to 2020, however the flexibility remains to accommodate in

office or work from home functionality.

Mortgage Loan Loss Settlements

Future loan losses can be extremely difficult to estimate.

However, management believes that the Company’s reserve methodology and its current practice of property preservation allow it to

make reasonable estimates of potential losses on mortgage loans sold.

The estimated liability for indemnification losses is included in

other liabilities and accrued expenses and, as of December 31, 2021 and 2020, the balances were $2,447,000 and $20,584,000, respectively.

Mortgage Loan Loss Litigation

For a description of the litigation involving SecurityNational

Mortgage and Lehman Brothers Holdings, see Part I, Item 3.

Legal Proceedings.

from external customers:

gains from investors

from loan originations

in fair value of loans held for sale

in fair value of loan commitments

investment income

on investments and other assets

before income taxes

in other revenues is service fee income.

Profitability in 2022 has decreased due to (a) a $76,689,000 decrease in secondary gains from

investors, (b) a $12,125,000 decrease in income from loan originations, (c) $1,196,000 decrease in the fair value of loan commitments,

(d) a $1,124,000 increase in intersegment expenses, (e) a $242,000 decrease in intersegment revenues, (e) a $51,000 increase in depreciation

on property and equipment, and (f) a $51,000 decrease in the fair value of loans held for sale, which were partially offset by (i) a

$55,003,000 decrease in commissions, (ii) an $8,481,000 decrease in other expenses, (iii) a $4,360,000 decrease in personnel expenses,

(iv) a $3,002,000 decrease in costs related to funding mortgage loans, (v) a $2,230,000 decrease in intersegment interest expense, (vi)

a $1,474,000 decrease in advertising expenses, (vii) a $884,000 decrease in interest expense, (viii) $669,000 increase in net investment

income, (ix) a $297,000 increase in other revenues, (x) a $199,000 increase in gains on investments and other assets, (xi) and a $64,000

decrease in rent and rent related expenses.

response to the COVID-19 pandemic, the mortgage operations has integrated employee work from home accommodations into its standard operating

A large percentage of fulfillment employees are in office however the flexibility remains to accommodate in office or work

from home functionality.

Accounting Policies and Estimates

The following

is a brief summary of the Company’s significant accounting policies and a review of the Company’s most critical accounting

following is a brief summary of the Company’s significant accounting policies and a review of the Company’s most critical

accounting estimates.

See Note 1 of the Notes to Consolidated Financial Statements.

In accordance

with generally accepted accounting principles in the United States of America (“GAAP”), premiums and other considerations

accordance with generally accepted accounting principles in the United States of America (“GAAP”), premiums and other considerations

received for interest sensitive products are reflected as increases in liabilities for policyholder account balances and not as revenues.

3 unchanged sentences

are reflected as decreases in liabilities for policyholder account balances and not as expenses.

The Company receives

investment income earned from the funds deposited into account balances, a portion of which is passed through to the policyholders in

the form of interest credited.

Interest credited to policyholder account balances and benefit claims in excess of policyholder account

balances are reported as expenses in the consolidated financial statements.

other considerations received for traditional life insurance products are recognized as revenues when due.

Future policy benefits are

recognized as expenses over the life of the policy by means of the provision for future policy benefits.

The costs related

to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally commissions),

defined as deferred policy acquisition costs, are capitalized and amortized into expense.

For nonparticipating traditional life products,

these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual premium revenues

to total anticipated premium revenues.

Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities

for future policy benefits and are generally “locked in” at the date the policies are issued.

For interest sensitive products,

these costs are amortized generally in proportion to expected gross profits from surrender charges and investment, mortality and expense

This amortization is adjusted when the Company revises the estimate of current or future gross profits or margins.

deferred policy acquisition costs are amortized earlier than originally estimated when policy terminations are higher than originally

estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated maturity.

Death and other

policyholder benefits reflect exposure to mortality risk and fluctuate from year to year on the level of claims incurred under insurance

retention limits.

The profitability of the Company is primarily affected by fluctuations in mortality, other policyholder benefits, expense

levels, interest spreads (i.e., the difference between interest earned on investments and interest credited to policyholders) and persistency.

The Company has the ability to mitigate adverse experience through sound underwriting, asset and liability duration matching, sound actuarial

practices, adjustments to credited interest rates, policyholder dividends and cost of insurance charges.

Company receives investment income earned from the funds deposited into account balances, a portion of which is passed through to the

policyholders in the form of interest credited.

Interest credited to policyholder account balances and benefit claims in excess of policyholder

account balances are reported as expenses in the consolidated financial statements.

and other considerations received for traditional life insurance products are recognized as revenues when due.

Future policy benefits

are recognized as expenses over the life of the policy by means of the provision for future policy benefits.

costs related to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally

commissions), defined as deferred policy acquisition costs, are capitalized and amortized into expense.

For nonparticipating traditional

life products, these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual

premium revenues to total anticipated premium revenues.

Such anticipated premium revenues are estimated using the same assumptions used

for computing liabilities for future policy benefits and are generally “locked in” at the date the policies are issued.

interest sensitive products, these costs are amortized generally in proportion to expected gross profits from surrender charges and investment,

mortality and expense margins.

This amortization is adjusted when the Company revises the estimate of current or future gross profits

For example, deferred policy acquisition costs are amortized earlier than originally estimated when policy terminations are

higher than originally estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated

and other policyholder benefits reflect exposure to mortality risk and fluctuate from year to year on the level of claims incurred under

insurance retention limits.

The profitability of the Company is primarily affected by fluctuations in mortality, other policyholder benefits,

expense levels, interest spreads (i.e., the difference between interest earned on investments and interest credited to policyholders)

and persistency.

The Company has the ability to mitigate adverse experience through sound underwriting, asset and liability duration

matching, sound actuarial practices, adjustments to credited interest rates, policyholder dividends and cost of insurance charges.

and Mortuary Operations

Pre-need sales

of funeral services and caskets, including revenue and costs associated with the sales of pre-need funeral services and caskets, are deferred

until the services are performed or the caskets are delivered.

Pre-need sales

of cemetery interment rights (cemetery burial property), including revenue and costs associated with the sales of pre-need cemetery interment

rights, are recognized in accordance with the retail land sales provisions of GAAP.

Under GAAP, recognition of revenue and associated

costs from constructed cemetery property must be deferred until a minimum percentage of the sales price has been collected.

Revenues related

to the pre-need sale of unconstructed cemetery property will be deferred until such property is constructed and meets the criteria of

GAAP, described above.

Pre-need sales

of cemetery merchandise (primarily markers and vaults), including revenue and costs associated with the sales of pre-need cemetery merchandise,

are deferred until the merchandise is delivered, fulfilling the performance obligation.

Pre-need sales

of cemetery services (primarily merchandise delivery and installation fees and burial opening and closing fees), including revenue and

costs associated with the sales of pre-need cemetery services, are deferred until the services are performed.

Prearranged funeral

and pre-need cemetery customer obtaining costs, including costs incurred related to obtaining new pre-need cemetery and prearranged funeral

business are accounted for under the guidance of the provisions of GAAP.

Obtaining costs, which include only costs that vary with and

are primarily related to the acquisition of new pre-need cemetery and prearranged funeral business, are deferred until the merchandise

sales of funeral services and caskets, including revenue and costs associated with the sales of pre-need funeral services and caskets,

are deferred until the services are performed or the caskets are delivered.

sales of cemetery interment rights (cemetery burial property), including revenue and costs associated with the sales of pre-need cemetery

interment rights, are recognized in accordance with the retail land sales provisions of GAAP.

Under GAAP, recognition of revenue and

associated costs from constructed cemetery property must be deferred until a minimum percentage of the sales price has been collected.

Revenues related to the pre-need sale of unconstructed cemetery property will be deferred until such property is constructed and meets

the criteria of GAAP, described above.

sales of cemetery merchandise (primarily markers and vaults), including revenue and costs associated with the sales of pre-need cemetery

merchandise, are deferred until the merchandise is delivered, fulfilling the performance obligation.

sales of cemetery services (primarily merchandise delivery and installation fees and burial opening and closing fees), including revenue

and costs associated with the sales of pre-need cemetery services, are deferred until the services are performed.

funeral and pre-need cemetery customer obtaining costs, including costs incurred related to obtaining new pre-need cemetery and prearranged

funeral business are accounted for under the guidance of the provisions of GAAP.

Obtaining costs, which include only costs that vary

with and are primarily related to the acquisition of new pre-need cemetery and prearranged funeral business, are deferred until the merchandise

is delivered or services are performed.

costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured, and there

are no significant company obligations remaining.

Mortgage Operations

f e e income c onsists of origin a tion

f ees, proc e ssing fe e s,

interest income and ce r tain other income rel a ted

to the o r i g in a t ion

a n d s a l e

o f mo r t gag e

The Company has elected to use fair value

accounting for all mortgage loans that are held for sale.

Accordingly, all revenues and costs are now recognized when the mortgage loan

is funded and any changes in fair value are shown as a component of mortgage fee income.

The Company, through its mortgage subsidiaries, sells

mortgage loans to third-party investors without recourse, unless defects are identified in the representations and warranties made at

It may be required, however, to repurchase a loan or pay a fee instead of repurchase under certain events, which include the

Failure to deliver original documents specified by the investor,

The existence of misrepresentation or fraud in the origination of the loan,

The loan becomes delinquent due to nonpayment during the first several months after it is sold,

Early pay-off of a loan, as defined by the agreements,

Excessive time to settle a loan,

Investor declines purchase, and

Discontinued product and expired commitment.

Loan purchase commitments generally specify a date

30 to 45 days after delivery upon which the underlying loans should be settled.

Depending on market conditions, these commitment settlement

dates can be extended at a cost to the Company.

It is the Company’s policy to cure any documentation

problems regarding such loans at a minimal cost for up to a six-month time period and to pursue efforts to enforce loan purchase commitments

from third-party investors concerning the loans.

The Company believes that six months allows adequate time to remedy any documentation

issues, to enforce purchase commitments, and to exhaust other alternatives.

and costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured,

and there are no significant company obligations remaining.

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

of mortgage loans.

The Company has elected to use fair value accounting for all mortgage loans that are held for sale.

Accordingly, all

revenues and costs are now recognized when the mortgage loan is funded and any changes in fair value are shown as a component of mortgage

Company, through its mortgage subsidiaries, sells mortgage loans to third-party investors without recourse, unless defects are identified

in the representations and warranties made at loan sale.

It may be required, however, to repurchase a loan or pay a fee instead of repurchase

under certain events, which include the following:

to deliver original documents specified by the investor,

existence of misrepresentation or fraud in the origination of the loan,

loan becomes delinquent due to nonpayment during the first several months after it is sold,

pay-off of a loan, as defined by the agreements,

time to settle a loan,

declines purchase, and

product and expired commitment.

purchase commitments generally specify a date 30 to 45 days after delivery upon which the underlying loans should be settled.

on market conditions, these commitment settlement dates can be extended at a cost to the Company.

is the Company’s policy to cure any documentation problems regarding such loans at a minimal cost for up to a six-month time period

and to pursue efforts to enforce loan purchase commitments from third-party investors concerning the loans.

The Company believes that

six months allows adequate time to remedy any documentation issues, to enforce purchase commitments, and to exhaust other alternatives.

Remedial methods include the following:

Research reasons for rejection,

Provide additional documents,

Request investor exceptions,

Appeal rejection decision to purchase committee, and

Commit to secondary investors.

Once purchase commitments have expired and other alternatives

to remedy are exhausted, which could be earlier than the six-month time period, the loans are repurchased and transferred to mortgage

loans held for investment at the lower of cost or fair value and the previously recorded sales revenue that was to be received from a

third-party investor is written off against the loan loss reserve.

Any loan that later becomes delinquent is evaluated by the Company

at that time and any impairment is adjusted accordingly.

Determining fair value .

Cost for loans held

for sale is equal to the amount paid to the warehouse bank and the amount originally funded by the Company.

Market value, while often

difficult to determine and may contain significant unobservable inputs, is based on the following guidelines:

For loans that are committed, the Company uses the commitment price.

For loans that are non-committed that have an active market, the Company uses the market price.

For loans that are non-committed where there is no market but there is a similar product, the Company uses the market value for the similar product.

For loans that are non-committed where no active market exists, the Company determines that the unpaid principal balance best approximates the market value, after considering the fair value of the underlying real estate collateral, estimated future cash flows, and loan interest rate.

The appraised value of the real estate underlying

the original mortgage loan adds significance to the Company’s determination of fair value because, if the loan becomes delinquent,

the Company has sufficient value to collect the unpaid principal balance or the carrying value of the loan, thus minimizing credit risk.

of loans originated are sold to third-party investors.

The amounts expected to be sold to investors are shown on the consolidated balance

sheets as loans held for sale.

Use of Significant Accounting

The preparation

of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and

It is reasonably possible that actual experience could differ from the estimates and assumptions utilized which could have

a material impact on the financial statements.

The following is a summary of our significant accounting estimates, and critical issues

that impact them:

Loan Commitments

reasons for rejection,

additional documents,

investor exceptions,

rejection decision to purchase committee, and

to secondary investors.

purchase commitments have expired and other alternatives to remedy are exhausted, which could be earlier than the six-month time period,

the loans are repurchased and transferred to mortgage loans held for investment at the lower of cost or fair value and the previously

recorded sales revenue that was to be received from a third-party investor is written off against the loan loss reserve.

Any loan that

later becomes delinquent is evaluated by the Company at that time and any impairment is adjusted accordingly.

Cost for loans held for sale is equal to the amount paid to the warehouse bank and the amount originally funded by the

Market value, while often difficult to determine and may contain significant unobservable inputs, is based on the following

loans that are committed, the Company uses the commitment price.

loans that are non-committed that have an active market, the Company uses the market price.

loans that are non-committed where there is no market but there is a similar product, the Company uses the market value for the similar

loans that are non-committed where no active market exists, the Company determines that the unpaid principal balance best approximates

the market value, after considering the fair value of the underlying real estate collateral, estimated future cash flows, and loan

interest rate.

appraised value of the real estate underlying the original mortgage loan adds significance to the Company’s determination of fair

value because, if the loan becomes delinquent, the Company has sufficient value to collect the unpaid principal balance or the carrying

value of the loan, thus minimizing credit risk.

majority of loans originated are sold to third-party investors.

The amounts expected to be sold to investors are shown on the consolidated

balance sheets as loans held for sale.

of Significant Accounting Estimates

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported

amounts and disclosures.

It is reasonably possible that actual experience could differ from the estimates and assumptions utilized which

could have a material impact on the financial statements.

The following is a summary of our significant accounting estimates, and critical

issues that impact them:

Company estimates the fair value of a mortgage loan commitment based on the change in estimated fair value of the underlying mortgage

loan , quoted mortgage-backed security (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and

an estimate of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense.

The change in fair value of the underlying mortgage loan is measured from the date the mortgage loan

commitment is issued and is shown net of related expenses.

Following issuance, the value of a loan commitment can be either positive or

negative depending upon the change in value of the underlying mortgage loans.

Fallout rates and other factors from the Company’s

recent historical data are used to estimate the quantity and value of mortgage loans that will fund within the terms of the commitments.

Deferred Acquisition Costs

of deferred policy acquisition costs (“DAC”) for interest sensitive products is dependent upon estimates of current

and future gross profits or margins on this business.

loan, quoted mortgage-backed security (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate

of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense.

in fair value of the underlying mortgage loan is measured from the date the mortgage loan commitment is issued and is shown net of related

Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of

the underlying mortgage loans.

Fallout rates and other factors from the Company’s recent historical data are used to estimate the

quantity and value of mortgage loans that will fund within the terms of the commitments.

Acquisition Costs

of deferred policy acquisition costs (“DAC”) for interest sensitive products is dependent upon estimates of current and future

gross profits or margins on this business.

Key assumptions used include the following:

yield on investments supporting the

liabilities, amount of interest or dividends credited to the policies, amount of policy fees and charges, amount of expenses necessary

to maintain the policies, amount of death and surrender benefits, and the length of time the policies will stay in force.

For nonparticipating

traditional life products, these costs are amortized over the premium paying period of the related policies in proportion to the ratio

of annual premium revenues to total anticipated premium revenues.

Such anticipated premium revenues are estimated using the same assumption

used for computing liabilities for future policy benefits and are generally “locked in” at the date the policies are issued.

Value of Business Acquired

yield on investments supporting the liabilities,

amount of interest or dividends credited to the policies, amount of policy fees and charges, amount of expenses necessary to maintain

the policies, amount of death and surrender benefits, and the length of time the policies will stay in force.

nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies in proportion

to the ratio of annual premium revenues to total anticipated premium revenues.

Such anticipated premium revenues are estimated using

the same assumption used for computing liabilities for future policy benefits and are generally “locked in” at the date the

policies are issued.

of Business Acquired

of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized

1 unchanged sentence

The critical issues explained for deferred acquisition costs would also apply for value of business

Mortgage Loans Foreclosed to Real

Estate Held for Investment or Sale

These properties

are recorded at the lower of cost or fair value upon foreclosure.

The Company believes that in an orderly market, fair value approximates

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 estimated future policy benefits.

Loans Foreclosed to Real Estate Held for Investment or Sale

properties are recorded at the lower of cost or fair value upon foreclosure.

The Company believes that in an orderly market, fair value

approximates 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 estimated future policy

Accordingly, the fair value determination is generally weighted more heavily toward the rental analysis.

The fair value is also estimated

by obtaining an independent appraisal, which typically considers area comparable properties and property condition.

The fair value is

also estimated by obtaining an independent appraisal, which typically considers area comparable properties and property condition.

Policy Benefits

future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the policies,

mortality experience, expenses, investment yield, lapse rates, surrender rates, and dividend crediting rates.

These assumptions

are made based upon historical experience, industry standards and a best estimate of future results and, for traditional life products,

include a provision for adverse deviation.

For traditional life insurance, once established for a particular series of products, these

assumptions are generally held constant.

Unearned Premium Reserve

The universal

life products the Company sells have significant policy initiation fees (front-end load) that are deferred and amortized into revenues

over the estimated expected gross profits from surrender charges and investment, mortality and expense margins.

The same issues that impact

deferred acquisition costs would apply to unearned revenue.

for future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the

policies, mortality experience, expenses, investment yield, lapse rates, surrender rates, and dividend crediting rates.

assumptions are made based upon historical experience, industry standards and a best estimate of future results and, for traditional

life products, include a provision for adverse deviation.

For traditional life insurance, once established for a particular series of

products, these assumptions are generally held constant.

Premium Reserve

universal life products the Company sells have significant policy initiation fees (front-end load) that are deferred and amortized into

revenues over the estimated expected gross profits from surrender charges and investment, mortality and expense margins.

The same issues

that impact deferred acquisition costs apply to unearned revenue.

Deficiency and Loss Recognition Testing

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after tax net investment earned rate.

Deferred Pre-need Cemetery and Funeral

Contracts Revenues and Estimated Future Cost of Pre-need Sales

The revenue and cost associated

with the sales of pre-need cemetery merchandise and funeral services are deferred until the merchandise is delivered or the service is

The Company, through its cemetery

and mortuary operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive future goods and services

at guaranteed prices.

To accomplish this, the Company, through its life insurance operations, sells to the customer an increasing benefit

life insurance policy that is assigned to the mortuaries.

If, at the time of need, the policyholder or potential mortuary customer utilizes

one of the Company’s facilities, the guaranteed funeral arrangement contract that has been assigned will provide the funeral goods

and services at the contracted price.

The increasing life insurance policy will cover the difference between the original contract prices

and current prices.

Risks may arise if the difference cannot be fully met by the life insurance policy.

Mortgage Servicing Rights

Mortgage Service

Rights (“MSR”) arise from contractual agreements between the Company and third-party investors (or their agents) when mortgage

loans are sold.

Under these contracts, the Company is obligated to retain and provide loan servicing functions on the loans sold, in exchange

for fees and other remuneration.

The servicing functions typically performed include, among other responsibilities, collecting and remitting

loan payments;

Pre-need Cemetery and Funeral Contracts Revenues and Estimated Future Cost of Pre-need Sales

revenue and cost associated with the sales of pre-need cemetery merchandise and funeral services are deferred until the merchandise is

delivered or the service is performed.

Company, through its cemetery and mortuary operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive

future goods and services at guaranteed prices.

To accomplish this, the Company, through its life insurance operations, sells to the

customer an increasing benefit life insurance policy that is assigned to the mortuaries.

If, at the time of need, the policyholder or

potential mortuary customer utilizes one of the Company’s facilities, the guaranteed funeral arrangement contract that has been

assigned will provide the funeral goods and services at the contracted price.

The increasing life insurance policy will cover the difference

between the original contract prices and current prices.

Risks may arise if the difference cannot be fully met by the life insurance

Servicing Rights

Service Rights (“MSR”) arise from contractual agreements between the Company and third-party investors (or their agents)

when mortgage loans are sold.

Under these contracts, the Company is obligated to retain and provide loan servicing functions on the loans

sold, in exchange for fees and other remuneration.

The servicing functions typically performed include, among other responsibilities,

collecting and remitting loan payments;

responding to borrower inquiries;

accounting for principal and interest;

holding custodial (impound) funds for payment

of property taxes and insurance premiums;

holding custodial (impound)

funds for payment of property taxes and insurance premiums;

counseling delinquent mortgagors;

and supervising the acquisition of real estate owned and property

dispositions.

The Company initially accounts for MSRs at fair value and subsequently accounts for them using the amortization method.

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 accounted for using the amortization method for impairment.

Mortgage Allowance for

Loan Losses and Loan Loss Reserve

The Company provides for losses

on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account) and through the mortgage loan

loss reserve (a liability account).

The allowance for loan losses is an allowance for losses on the Company’s mortgage loans held

for investment.

and supervising the acquisition of real

estate owned and property dispositions.

The Company initially accounts for MSRs at fair value and subsequently accounts for them using

the amortization method.

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 accounted for using the amortization

method for impairment.

Allowance for Loan Losses and Loan Loss Reserve

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

through the mortgage loan loss reserve (a liability account).

The allowance for loan losses is an allowance for losses on the Company’s

mortgage loans held for investment.

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 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.

will rent the properties until it is deemed desirable to sell them.

The mortgage loan loss reserve is an estimate of probable

losses at the balance sheet date that the Company will realize in the future on mortgage loans sold to third-party investors.

may be required to reimburse third-party investors for costs associated with early payoff of loans within six months of origination of

such loans and to repurchase loans where there is a default in any of the first four monthly payments to the investors or, in lieu of

repurchase, to pay a negotiated fee to the investors.

The Company’s estimates are based upon historical loss experience and the

best estimate of the probable loan loss liabilities.

Upon completion of a transfer that satisfies the conditions

to be accounted for as a sale, the Company initially measures at fair value liabilities incurred in a sale relating to any guarantee or

recourse provisions in the event of defects in the representations and warranties made at loan sale.

The Company accrues a monthly allowance

for indemnification losses to investors based on total production.

This estimate is based on the Company’s historical experience

and is included as a component of mortgage fee income.

Subsequent updates to the recorded liability from changes in assumptions are recorded

in selling, general and administrative expenses.

The estimated liability for indemnification losses is included in other liabilities and

accrued expenses.

The Company believes the allowance for loan losses

and the loan loss reserve represent probable loan losses incurred as of the balance sheet date.

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities require various

estimates and judgments and may be affected favorably or unfavorably by various internal and external factors.

These estimates and judgments

occur in the calculation of certain deferred tax assets and liabilities that arise from temporary differences in the recognition of revenues

and expenses for tax and financial reporting purposes and in estimating the ultimate amount of deferred tax assets recoverable in future

Factors affecting the deferred tax assets and liabilities include, but are not limited to, changes in tax laws, regulations and/or

rates, changing interpretations of existing tax laws or regulations, and changes to overall levels of pre-tax earnings.

Changes in these

estimates, judgments or factors may result in an increase or decrease to the Company’s deferred tax assets and liabilities with

a related increase or decrease in the Company’s provision for income taxes.

Results of Consolidated

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.

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

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.

The Company will rent the properties until it is deemed desirable to sell them.

mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on

mortgage loans sold to third-party investors.

The Company may be required to reimburse third-party investors for costs associated with

early payoff of loans within six months of origination of such loans and to repurchase loans where there is a default in any of the first

four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors.

The Company’s estimates

are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

completion of a transfer that satisfies the conditions to be accounted for as a sale, the Company initially measures at fair value liabilities

incurred in a sale relating to any guarantee or recourse provisions in the event of defects in the representations and warranties made

at loan sale.

The Company accrues a monthly allowance for indemnification losses to investors based on total production.

This estimate

is based on the Company’s historical experience and is included as a component of mortgage fee income.

Subsequent updates to the

recorded liability from changes in assumptions are recorded in selling, general and administrative expenses.

The estimated liability

for indemnification losses is included in other liabilities and accrued expenses.

Company believes the allowance for loan losses and the loan loss reserve represent probable loan losses incurred as of the balance sheet

Tax Assets and Liabilities

tax assets and liabilities require various estimates and judgments and may be affected favorably or unfavorably by various internal and

external factors.

These estimates and judgments occur in the calculation of certain deferred tax assets and liabilities that arise from

temporary differences in the recognition of revenues and expenses for tax and financial reporting purposes and in estimating the ultimate

amount of deferred tax assets recoverable in future periods.

Factors affecting the deferred tax assets and liabilities include, but are

not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and changes

to overall levels of pre-tax earnings.

Changes in these estimates, judgments or factors may result in an increase or decrease to the

Company’s deferred tax assets and liabilities with a related increase or decrease in the Company’s provision for income taxes.

of Consolidated Operations

Compared to 2021

Total revenues

decreased by $10,768,000, or 2.2%, to $470,695,000 for

2021 from $481,463,000 for the fiscal year 2020.

Contributing to this decrease in total revenues was a $35,515,000

decrease in mortgage fee income.

This decrease in total revenues was offset by a $7,234,000

in crease in insurance premiums and other considerations, a

$7,218,000 increase in other revenues , a $4,339,000 increase in gains on investments and other

assets, a $3,690,000 increase in net cemetery and mortuary sales, a $1,935,000

increase in net investment income, and a $331,000

decrease in other than temporary impairments .

income decreased by $35,515,000 , or 11.9%, to $263,418,000 for

2021, from $298,933,000 for 2020.

This decrease was primarily due to a $29,947,000 decrease in the fair value of loans held for

sale and loan commitments, a $6,951,000 decrease in loan fees and interest income, and a $1,342,000 decrease in secondary gains from mortgage

loans sold to third-party investors into the secondary market.

This decrease in mortgage fee income was partially offset by a $2,727,000

decrease in the provision for loan loss reserve.

Insurance premiums

and other considerations increased by $7,234,000 , or 7.8%, to $100,255,000 for

2021, from $93,021,000 for 2020.

This increase was due to an increase of $1,859,000 in renewal premiums due to the growth of the

Company in recent years, particularly in whole life products, which resulted in more premium paying policies in force and an increase

of $5,375,000 in first year premiums as a result of increased preneed insurance sales.

Net investment

income increased by $1,935,000 , or 3.4%, to $58,265,000 for 2021, from $56,330,000 for 2020.

This increase was primarily attributable to a $3,086,000 increase in mortgage loan interest, a $1,224,000 increase in insurance

assignment income, and a $389,000 increase in rental income from real estate held for investment.

This increase was partially offset by

a $1,463,000 decrease in fixed maturity securities income, a $835,000 increase in investment expenses, a $196,000 decrease in equity securities

income, a $191,000 decrease in interest on cash and cash equivalents, and an $84,000 decrease in policy loan income.

and cemetery sales increased by $3,690,000 , or 18.2%, to $23,997,000 for

2021, from $20,307,000 for 2020.

This increase was primarily due to a $2,682,000 increase in cemetery pre-need sales, a $518,000

increase in mortuary at-need sales, and a $490,000 increase in cemetery at-need sales.

Gains on investments

and other assets increased by $4,339,000, or 225.3%, to $6,265,000 for

2021, from $1,926,000 for 2020.

This increase in gains on investments and other assets was primarily due to a $1,940,000 increase

in gains on other assets mostly attributable to gains recognized on the sale of mortgage loans held for investment, a $1,922,000 increase

in gains on equity securities mostly attributable to increases in the fair value of these equity

securities, and a $477,000 increase in gains on fixed maturity securities.

Other revenues

increased by $7,218,000 , or 63.8%, to $18,535,000 f or

2021 from $11,317,000 for 2020.

This increase was primarily attributable to an increase

in servicing fee revenue.

Total benefits

and expenses were $418,895,000 , or 89.0% of total revenues for 2021, as compared to $410,013,000,

or 85.2% of total revenues for 2020.

Death benefits,

surrenders and other policy benefits, and future policy benefits increased by an aggregate of $7,072 ,000,

or 8.2%, to $93,482,000 for 2021, from $86,410,000 for

This increase was primarily the result of a $4,207,000 increase in death benefits ($2,305,000 for COVID-19 related deaths),

a $2,695,000 increase in future policy benefits, and a $170,000 increase in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $1,836,000, or 12.8%, to $16,143,000

for 2021, from $14,307,000 for 2020.

revenues decreased by $81,043,000, or 17.2%, to $389,652,000 for 2022 from $470,695,000 for the fiscal year 2021.

Contributing to this

decrease in total revenues was a $89,918,000 decrease in mortgage fee income and a $7,123,000 decrease in gains on investments and other

assets and other than temporary impairments.

This decrease in total revenues was offset by a $7,933,000 increase in net investment income,

a $4,747,000 increase in insurance premiums and other considerations, a $2,997,000 increase in net cemetery and mortuary sales, a $281,000

increase in other revenues, and a $40,000 decrease in other than temporary impairments.

fee income decreased by $89,918,000, or 34.1%, to $173,500,000 for 2022, from $263,418,000 for 2021.

This decrease was primarily due

to a $76,546,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market, a $13,258,000

decrease in loan fees and interest income, a $1,247,000 decrease in the fair value of loans held for sale and loan commitments.

decrease in mortgage fee income was partially offset by a $1,133,000 decrease in the provision for loan loss reserve.

premiums and other considerations increased by $4,747,000, or 4.7%, to $105,002,000 for 2022, from $100,255,000 for 2021.

This increase

was due to an increase of $2,253,000 in renewal premiums due to the growth of the Company in recent years, particularly in whole life

products, which resulted in more premium paying policies in force and an increase of $2,494,000 in first year premiums as a result of

increased final expense insurance sales.

investment income increased by $7,933,000, or 13.6%, to $66,198,000 for 2022, from $58,265,000 for 2021.

This increase was primarily

attributable to a $6,191,000 increase in mortgage loan interest, a $2,228,000 increase in rental income from real estate held for investment,

a $1,626,000 increase in fixed maturity securities income, a $1,431,000 increase in interest on cash and cash equivalents, a $388,000

increase in income in other investments, and a $65,000 increase in equity securities income.

This increase was partially offset by a

$3,039,000 increase in investment expenses, a $949,000 decrease in insurance assignment income, and an $8,000 decrease in policy loan

mortuary and cemetery sales increased by $2,997,000, or 12.5%, to $26,994,000 for 2022, from $23,997,000 for 2021.

This increase was

primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs.

Selling, general

and administrative expenses increased by $974,000 , or 0.3%, to $298,438,000 for

2021, from $297,464,000 for 2020.

This increase was primarily the result of a $15,750,000 increase in personnel expenses, a $5,735,000

increase in other expenses, a $1,245,000 increase in advertising expenses, a $664,000 increase in costs related to funding mortgage loans,

and a $369,000 increase in rent and rent related expenses.

This increase was partially offset by a $16,506,000 decrease in the provision

for loan loss reserve, a $6,140,000 decrease in commissions, and a $143,000 decrease in depreciation on property and equipment.

Interest expense

decreased by $1,451,000, or 16.9%, to $7,128,000 for 2021, from $8,579,000 for 2020.

This decrease was primarily due to a decrease

of $1,281,000 in interest expense on mortgage warehouse lines for loans held for sale.

Cost of goods

and services sold of the cemeteries and mortuaries increased by $451,000 , or 13.9%, to $3,704,000

primarily due to a $4,751,000 increase in mortuary at-need sales and a $311,000 increase in cemetery at-need sales.

This increase was

partially offset by a $2,065,000 decrease in cemetery pre-need sales

on investments and other assets decreased by $7,123,000, or 113.7%, to $858,000 in losses for 2022, from $6,265,000 in gains for 2021.

This decrease in gains on investments and other assets was primarily due to a $5,243,000 decrease in gains on equity securities mostly

attributable to decreases in the fair value of these equity securities, a $1,197,000 decrease in gains on other assets mostly attributable

to a decrease in gains recognized on the sale of mortgage loans held for investment, and a $683,000 decrease in gains on fixed maturity

revenues increased by $282,000, or 1.5%, to $18,817,000 for 2022 from $18,535,000 for 2021.

This increase was primarily attributable

to an increase in servicing fee revenue.

benefits and expenses were $355,275,000, or 91.2% of total revenues for 2022, as compared to $418,895,000, or 89.0% of total revenues

benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $556,000, or 0.6%, to $92,926,000

for 2022, from $93,482,000 for 2021.

This increase was primarily due to a $232,000 increase

in cemetery at-need sales, a $151,000 increase in cemetery pre-need sales, and a $68,000 increase in mortuary at-need sales.

Income tax expense

decreased by $3,572,000, or 22.5%, to $12,282,000 for 2021, from $15,854,000 for 2020.

This decrease was primarily due to a decrease in

earnings before income taxes for 2021 compared to 2020.

The following

is a description of the material risks facing the Company and how it mitigates those risks:

Regulatory Risks .

Changes in the legal or regulatory environment in which the Company operates may create additional expenses and

risks not anticipated by the Company in developing and pricing its products.

This decrease was primarily the result of a $3,870,000 decrease in death benefits ($4,296,000 for

COVID-19 related deaths).

This decrease was partially offset by a $2,596,000 increase in future policy benefits and a $718,000 increase

in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $1,807,000, or 11.2%, to $17,950,000 for

2022, from $16,143,000 for 2021.

This increase was primarily due to an increase in the average outstanding balance of deferred policy

and pre-need acquisition costs.

general and administrative expenses decreased by $66,590,000, or 22.3%, to $231,848,000 for 2022, from $298,438,000 for 2021.

This decrease

was primarily the result of a $54,965,000 decrease in commissions, a $7,268,000 decrease in other expenses, a $3,002,000 decrease in

costs related to funding mortgage loans, a $928,000 decrease in advertising expenses, a $629,000 decrease in personnel expenses, and

a $359,000 decrease in rent and rent related expenses.

This decrease was partially offset by a $561,000 increase in depreciation on property

and equipment.

expense increased by $703,000, or 9.9%, to $7,830,000 for 2022, from $7,127,000 for 2021.

This increase was primarily due to a $1,587,000

increase in interest expense on bank loans, which was partially offset by a decrease of $884,000 in interest expense on mortgage warehouse

lines for loans held for sale.

of goods and services sold of the cemeteries and mortuaries increased by $1,017,000, or 27.5%, to $4,721,000 for 2022, from $3,704,000

This increase was primarily due to a $1,196,000 increase in mortuary at-need sales and a $77,000 increase in cemetery at-need

sales, which was partially offset by a $256,000 decrease in cemetery pre-need sales.

tax expense decreased by $3,595,000, or 29.3%, to $8,687,000 for 2022, from $12,282,000 for 2021.

This decrease was primarily due to

a decrease in earnings before income taxes for 2022 compared to 2021.

following is a description of the material risks facing the Company and how it mitigates those risks:

and Regulatory Risks .

Changes in the legal or regulatory environment in which the Company operates may create additional expenses

and risks not anticipated by the Company in developing and pricing its products.

Regulatory initiatives designed to reduce insurer profits,

new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those recorded

in the consolidated financial statements.

In addition, changes in tax law with respect to mortgage interest deductions or other public

policy or legislative changes may affect the Company’s mortgage sales.

Also, the Company may be subject to further regulations in

the cemetery and mortuary business.

new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those

recorded in the consolidated financial statements.

In addition, changes in tax law with respect to mortgage interest deductions or other

public policy or legislative changes may affect the Company’s mortgage sales.

Also, the Company may be subject to further regulations

in the cemetery and mortuary business.

The Company aims to mitigate these risks by offering a wide range of products and by diversifying

1 unchanged sentence

and minimize the adverse impact of such risks.

Mortgage Industry Risks .

Developments in the

mortgage industry and credit markets can adversely affect the Company’s ability to sell its mortgage loans to investors, which can

impact the Company’s financial results by requiring it to assume the risk of holding and servicing any unsold loans.

The mortgage loan loss reserve is an estimate of probable

losses at the balance sheet date that the Company could realize in the future on mortgage loans sold to third-party investors.

Industry Risks .

Developments in the mortgage industry and credit markets can adversely affect the Company’s ability to sell

its mortgage loans to investors, which can impact the Company’s financial results by requiring it to assume the risk of holding

and servicing any unsold loans.

mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company could realize in the future on

mortgage loans sold to third-party investors.

The Company’s mortgage subsidiary may be required to reimburse third-party investors

for costs associated with early payoff of loans within the first six months of such loans and to repurchase loans where there is a default

in any of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors.

The Company’s

mortgage subsidiaries may be required to reimburse third-party investors for costs associated with early payoff of loans within the first

six months of such loans and to repurchase loans where there is a default in any of the first four monthly payments to the investors or,

in lieu of repurchase, to pay a negotiated fee to the investors.

The Company’s estimates are based upon historical loss experience

and the best estimate of the probable loan loss liabilities.

During the twelve months ended December 31, 2021 and

2020 the Company increased its loan loss reserve by $2,211,000 and $4,938,000, respectively, for loan originations, and the charges have

been included in mortgage fee income.

During the twelve months ended December 31, 2021 and 2020 the Company increased its loan loss reserve

by an additional $-0- and $16,506,000, respectively, to account for changes in estimates specific to settlements of loan losses.

The estimated

liability for indemnification losses is included in other liabilities and accrued expenses and, as of December 31, 2021 and 2020, the

balances were $2,447,000 and $20,584,000, respectively.

The Company believes the loan loss reserve represent probable loan losses incurred

as of December 31, 2021.

There is a risk, however, that future loan losses may exceed the loan loss reserve.

As of December

31, 2021, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal amount

of $4,272,000 with delinquencies exceeding 90 days.

Of this amount, loans with an aggregate principal amount of $497,000 were in foreclosure

The Company has not received or recognized any interest income on the $4,272,000 in mortgage loans with delinquencies exceeding

During the twelve months ended December 31, 2021 and 2020, the Company decreased and increased its allowance for loan losses

by $305,000 and by $552,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses

estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

the twelve months ended December 31, 2022 and 2021 the Company increased its loan loss reserve by $1,079,000 and $2,211,000, respectively,

for loan originations, and the charges have been included in mortgage fee income.

The estimated liability for indemnification losses

is included in other liabilities and accrued expenses and, as of December 31, 2022 and 2021, the balances were $1,726,000 and $2,447,000,

respectively.

The Company believes the loan loss reserve represents probable loan losses incurred as of December 31, 2022.

risk, however, that future loan losses may exceed the loan loss reserve.

of December 31, 2022, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal

amount of $2,567,000 with delinquencies exceeding 90 days.

Of this amount, loans with an aggregate principal amount of $1,281,000 were

in foreclosure proceedings.

The Company has not received or recognized any interest income on the $2,567,000 in mortgage loans with delinquencies

exceeding 90 days.

During the twelve months ended December 31, 2022 and 2021, the Company increased its allowance for loan losses by

$270,000 and by $305,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses

for the period.

The allowances for loan losses on the Company’s held for investment portfolio as of December 31, 2021 and 2020 were

$1,700,000 and $2,005,000, respectively.

Interest Rate

Fluctuations in interest rates may cause a decrease in the value of the Company’s investments or impair the ability of

the Company to market its mortgage and cemetery and mortuary products.

The allowances for loan losses on the Company’s held for investment portfolio as of December 31, 2022 and 2021

were $1,970,000 and $1,700,000, respectively.

Fluctuations in interest rates may cause a decrease in the value of the Company’s investments or impair the ability

of the Company to market its mortgage and cemetery and mortuary products.

This change in rates may cause certain interest-sensitive products

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of its assets with the expected payouts of its liabilities.

To the extent that liabilities come due more quickly than assets mature, the

Company might have to borrow funds or sell assets prior to maturity and potentially recognize a loss on the sale.

To the extent that liabilities come due more quickly than assets mature,

the Company might have to borrow funds or sell assets prior to maturity and potentially recognize a loss on the sale.

and Morbidity Risks .

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practices, asset and liability duration matching, and sound actuarial practices.

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, and its variants, pose a threat to the health and economic well-being of the Company’s employees, customers,

The Company continues to closely monitor developments relating to the ongoing 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 significant

impact on the global economy and financial markets.

Governments and businesses have taken numerous measures to try to contain the virus

and its variants, which include the implementation of travel bans, self-imposed quarantine periods, social distancing, and various mask

and vaccine mandates.

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, including the adoption of work from home arrangements and a restructuring of selling techniques for

its products and services.

The Company also experienced increased expenses for cleaning services of its offices.

Throughout 2021 the Company

continued to adapt to the impact of COVID-19.

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 Company risks.

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, including some remote

work arrangements.

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

Like most businesses, COVID-19 has impacted the Company, including the temporary adoption of work-from-home arrangements for employees

and a restructuring of selling techniques for its products and services.

Throughout 2021 and 2022, the Company continued to adapt to

the impact of COVID-19 and its related economic effects.

The Company experienced, like all life insurance companies, higher than expected

death rates during the pandemic.

Death rates in 2022 declined over 2021 and 2020, but remain higher than pre-COVID-19 levels.

Environment .

Item 7.01 Regulation FD Disclosure.

Valley Bank was placed in receivership with the Federal Deposit Insurance Corporation (“ FDIC “).

On March 12, 2023, the

FDIC announced that depositors of Silicon Valley Bank will have access to all of their funds starting Monday, March 13, 2023.

12, 2023, Signature Bank was placed in receivership with the FDIC.

On March 12, 2023, the FDIC announced that banking activities will

resume on Monday, March 13, 2023.

Company does not maintain any deposit or other accounts or credit facilities with Silicon Valley Bank or Signature Bank, or their successors.

The Company holds one bond with a par value of $250,000 in the Company’s debt portfolio and is junior in priority to a debt investment

of Silicon Valley Bank or its successors.

The Company continues to monitor the banking industry.

information furnished in this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange

Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended,

except as shall be expressly set forth by specific reference in such filing.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the

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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

and unearned revenue;

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 and unearned revenue;

those used in determining the estimated future costs for pre-need sales;

those used in determining the value of

mortgage servicing rights;

those used in determining the

value of mortgage servicing rights;

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

those used in

determining loan loss reserve;

used in determining loan loss reserve;

and those used in determining deferred tax assets and liabilities.

Although some variability is inherent

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

Although some variability is

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

and Capital Resources

The Company’s

life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments and sales on personal

services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from the proceeds from the sale

or maturity of investments.

The mortgage subsidiaries realize cash flow from fees generated by originating and refinancing mortgage loans

and fees on mortgage loans held for sale that are sold to investors.

It should be noted that current conditions in the financial

markets and economy caused by the COVID-19 pandemic may affect the realization of these expected cash flows.

Company considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities, which generally

are long-term, and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of new policies, the

maintenance of existing policies, debt service, and to meet current operating expenses.

During the twelve months ended December 31, 2021 and

2020, the Company’s operations provided cash of $144,638,000 and used cash of $129,627,000, respectively.

This change from cash

used in operations to cash from operations was primarily due to the decreased originations of mortgage loans held for sale.

The Company’s liability for future policy benefits

is expected to be paid out over the long-term due to the Company’s market niche of selling funeral plans.

Funeral plans are small

face value life insurance policies that payout upon a person’s death to cover funeral burial costs.

Policyholders generally keep

these policies in force and do not surrender them prior to death.

Because of the long-term nature of these liabilities, the Company is

able to hold to maturity its bonds, real estate, and mortgage loans thus reducing the risk of liquidating these long-term investments

as a result of any sudden changes in their fair values.

The Company attempts

to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities.

The Company may sell investments

other than those held to maturity in the portfolio to help in this timing matching.

The Company purchases short-term investments on a

temporary basis to meet the expectations of short-term requirements of the Company’s products.

The Company’s investment philosophy

is intended to provide a rate of return, which will persist during the expected duration of policyholder and cemetery and mortuary liabilities

regardless of future interest rate movements.

The Company’s

investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage

loans held for sale on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing

the life insurance subsidiaries.

Bonds owned by the insurance subsidiaries amounted to $259,005,000 (at estimated fair value) and

$294,384,000 (at estimated fair value) as of December 31, 2021 and 2020, respectively.

This represented

31.5% and 38.0% of the total investments as of December 31, 2021, and 2020, respectively.

Generally, all bonds owned by the life insurance

subsidiaries are rated by the National Association of Insurance Commissioners.

Under this rating system, there are six categories used

for rating bonds.

At December 31, 2021, 3.9% (or $9,991,000 ) and at December 31, 2020, 4.2%

(or $12,418,000) of the Company’s total bond investments were invested in bonds in rating categories three through six, which are

considered non-investment grade.

See Note 2 of the Notes to Consolidated Financial

Statements for the schedule of the maturity of fixed maturity securities available for sale and for the schedule of principal payments

for mortgage loans held for investment.

See Note 7 of the Notes to Consolidated Financial

Statements for a description of the Company’s sources of liquidity.

If market conditions

were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately $536,594,000),

which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based on the respective

basis point swing (the change in the fair values were calculated using a modeling technique):

Change in Fair Value (in thousands)

The Company is

subject to risk-based capital guidelines established by statutory regulators requiring minimum capital levels based on the perceived risk

of assets, liabilities, disintermediation, and business risk.

At December 31, 2021 and 2020, the life insurance subsidiaries were in compliance

with the regulatory criteria.

Company’s life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments

and sales on personal services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from

the proceeds from the sale or maturity of investments.

The mortgage subsidiaries realize cash flow from fees generated by originating

and refinancing mortgage loans and fees on mortgage loans held for sale that are sold to investors into the secondary market.

be noted that current conditions in the financial markets and economy caused by COVID-19 may affect the realization of these expected

The Company considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities,

which generally are long-term, and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of

new policies, the maintenance of existing policies, debt service, and to meet current operating expenses.

the twelve months ended December 31, 2022 and 2021, the Company’s operations provided cash of $130,450,000 and of $144,638,000,

respectively.

The decrease in cash provided by operations was due primarily to decreased proceeds from the sale of loans held for sale.

Company’s liability for future policy benefits is expected to be paid out over the long-term due to the Company’s market

niche of selling funeral plans.

Funeral plans are small face value life insurance policies that payout upon a person’s death to

cover funeral burial costs.

Policyholders generally keep these policies in force and do not surrender them prior to death.

the long-term nature of these liabilities, the Company is able to hold to maturity its bonds, real estate, and mortgage loans thus reducing

the risk of liquidating these long-term investments as a result of any sudden changes in their fair values.

Company attempts to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities.

The Company may

sell investments other than those held to maturity in the portfolio to help in this timing matching.

The Company purchases short-term

investments on a temporary basis to meet the expectations of short-term requirements of the Company’s products.

The Company’s

total capitalization of stockholders’ equity, and bank loans and other loans payable was $551,054,000 as

of December 31, 2021, as compared to $561 ,811,000 as of December 31, 2020.

Stockholders’

equity as a percent of total capitalization was 54.4% and 47.0% as of December 31, 2021 and December 31, 2020, respectively.

and other loans payable decreased by $46,537,000 for the twelve months ended December 31,

2021 as compared to December 31, 2020, and stockholders’ equity increased by $35,780,000 for the twelve months ended December 31,

2021 as compared to December 31, 2020, thus causing the increase in the stockholders’ equity percentage.

Lapse rates measure

the amount of insurance terminated during a particular period.

The Company’s lapse rate for life insurance was 4.8% in 2021 as compared

to a rate of 5.9% for 2020.

statutory capital and surplus of the Company’s life insurance subsidiaries was $82,823,000 and $78,493,000 as of December

investment philosophy is intended to provide a rate of return, which will persist during the expected duration of policyholder and cemetery

and mortuary liabilities regardless of future interest rate movements.

Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing

of mortgage loans held for sale on a short-term basis before selling the loans to investors in accordance with the requirements and laws

governing the life insurance subsidiaries.

Bonds owned by the insurance subsidiaries amounted to $345,598,000 (at estimated fair value)

and $259,005,000 (at estimated fair value) as of December 31, 2022 and 2021, respectively.

This represented 36.4% and 31.5% of the total

investments as of December 31, 2022, and 2021, respectively.

Generally, all bonds owned by the life insurance subsidiaries are rated

by the National Association of Insurance Commissioners.

Under this rating system, there are six categories used for rating bonds.

December 31, 2022, 2.2% (or $7,833,000) and at December 31, 2021, 3.9% (or $9,991,000) of the Company’s total bond investments

were invested in bonds in rating categories three through six, which are considered non-investment grade.

Note 2 of the Notes to Consolidated Financial Statements for the schedule of the maturity of fixed maturity securities available for

sale and for the schedule of principal payments for mortgage loans held for investment.

Note 7 of the Notes to Consolidated Financial Statements for a description of the Company’s sources of liquidity.

market conditions were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately

$653,982,000), which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based

on the respective basis point swing (the change in the fair values were calculated using a modeling technique):

in Fair Value

(in thousands)

Company is subject to risk-based capital guidelines established by statutory regulators requiring minimum capital levels based on the

perceived risk of assets, liabilities, disintermediation, and business risk.

At December 31, 2022 and 2021, the life insurance subsidiaries

were in compliance with the regulatory criteria.

Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable was $454,499,000 as of December

31, 2022, as compared to $551,054,000 as of December 31, 2021.

Stockholders’ equity as a percent of total capitalization was 64.4%

and 54.4% as of December 31, 2022 and December 31, 2021, respectively.

Bank loans and other loans payable decreased by $89,574,000 for

the twelve months ended December 31, 2022 as compared to December 31, 2021, and stockholders’ equity decreased by $6,981,000 for

the twelve months ended December 31, 2022 as compared to December 31, 2021, thus causing the increase in the stockholders’ equity

rates measure the amount of insurance terminated during a particular period.

The Company’s lapse rate for life insurance was 4.3%

in 2022 as compared to a rate of 4.8% for 2021.

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $94,254,000 and $82,823,000 as of December

31, 2022 and 2021, respectively.

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state insurance regulatory authorities.

Forward-Looking Statements

The Private Securities

Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements to encourage companies to provide prospective information

about their businesses without fear of litigation so long as those statements are identified as forward-looking and are accompanied by

meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected

in such statements.

Forward-Looking

Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements to encourage companies to provide

prospective information about their businesses without fear of litigation so long as those statements are identified as forward-looking

and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially

from those projected in such statements.

The Company desires to take advantage of the “safe harbor” provisions of the act.

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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-K

Item 7. Management’s Discussion and Analysis