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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2022-11-14 · 174 added, 246 removed, 106 unchanged (80% of the section changed)

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

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:

4 unchanged sentences

originating mortgage loans.

The Company has adjusted its strategies to respond to the changing economic circumstances resulting from

Company’s life insurance business includes funeral plans and interest-sensitive life insurance, as well as other traditional life,

14 unchanged sentences

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

following table shows the condensed financial results of the insurance operations for three and nine months ended September 30, 2022

following table shows the condensed financial results of the insurance operations for three month periods ended March 31, 2023, and 2022.

See Note 7 to the condensed consolidated financial statements.

months ended September 30

(in thousands of dollars)

months ended September 30

Three months ended March 31

(in thousands of dollars)

% Increase (Decrease)

Increase (Decrease)

from external customers

investment income

on investments and other assets

before income taxes

Revenues from external customers

Insurance premiums

Mortgage fee income

Net investment income

Gains on investments and other assets

Intersegment revenue

Earnings before income taxes

revenues are primarily interest income from the warehouse line for loans held for sale provided to SecurityNational Mortgage Company

(“SecurityNational Mortgage”).

Profitability for the nine months ended September 30, 2022 decreased due to (a) a $5,000,000

decrease in gains on investments and other assets primarily due to a decrease in the fair value of equity securities, (b) a $3,911,000

increase in selling, general and administrative expenses, (c) a $1,620,000 increase in future policy benefits, (d) a $1,578,000 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 $1,268,000 increase in interest expense, and (f) an $2,000 decrease in other revenues, which were

partially offset by (i) a $5,409,000 increase in net investment income, (ii) a $3,737,000 increase in insurance premiums and other considerations,

(iii) a $1,821,000 decrease in death, surrenders and other policy benefits, (iv) a $198,000 decrease in intersegment interest expense

and other expenses, and an (v) $86,000 increase in intersegment revenue.

Profitability for the three month period ended March 31, 2023 increased due to (a) a $2,175,000

increase in net investment income, (b) a $1,626,000 increase in insurance premiums and other considerations, (c) a $739,000 decrease

in selling, general and administrative expenses, (d) a $397,000 decrease in death, surrenders and other policy benefits, (e) a $119,000

increase in other revenues, and (f) a $44,000 increase in mortgage fee income, which were partially offset by (i) a $1,283,000 increase

in future policy benefits, (ii) a $523,000 increase in amortization of deferred policy acquisition costs, (iii) a $186,000 decrease in

intersegment revenue, (iv) a $128,000 increase in interest expense, (v) a $61,000 increase in intersegment interest expense and other

expenses, and (vi) a $51,000 decrease in gains on investments and other assets.

and Mortuary Operations

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

During the third quarter of 2021, the sales force

During the third quarter 2021, the sales force

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

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

following table shows the condensed financial results of the cemetery and mortuary operations for the three and nine months ended September

following table shows the condensed financial results of the cemetery and mortuary operations for the three month periods ended March

31, 2023, and 2022.

See Note 7 to the condensed consolidated financial statements.

months ended September 30

(in thousands of dollars)

months ended September 30

Three months ended March 31

(in thousands of dollars)

% Increase (Decrease)

Increase (Decrease)

from external customers

investment income

(losses) on investments and other assets

before income taxes

Revenues from external customers

Mortuary revenues

Cemetery revenues

Net investment income

Gains (losses) on investments and other assets

Earnings before income taxes

Profitability

in the nine months ended September 30, 2022 decreased due to (a) a $2,528,000 decrease in gains on investments and other assets primarily

attributable to a $579,000 decrease in gains on real estate sales and a $1,949,000 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,

(b) a $2,510,000 increase in selling, general and administrative expenses, (c) a $1,433,000 decrease in cemetery pre-need sales, (d)

a $748,000 increase in costs of goods sold, and (e) a $173,000 increase in intersegment interest expense and other expenses, which were

partially offset by (i) a $3,775,000 increase in mortuary at-need sales, (ii) a $620,000 increase in net investment income, (iii) a $356,000

increase in cemetery at-need sales, (iv) a $143,000 increase in other revenues (v) a $125,000 increase in intersegment revenues, (vi)

a $54,000 decrease in interest expense, and (vii) an $8,000 decrease in amortization of deferred policy acquisition costs.

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.

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 Mortgage.

SecurityNational Mortgage currently retains the mortgage servicing rights on approximately 8% of its loan

origination volume.

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

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

in the three month period ended March 31, 2023 decreased due to (a) a $491,000 decrease in mortuary at-need sales, (b) a $222,000 decrease

in cemetery pre-need sales, (c) a $99,000 decrease in intersegment revenues, and (d) a $21,000 decrease in cemetery at-need sales, which

were partially offset by (i) a $308,000 increase in gains on investments and other assets primarily attributable to an increase in the

fair value of equity securities classified as restricted assets and cemetery perpetual care trust investments, (ii) a $105,000 increase

in net investment income, (iii) an $80,000 decrease in selling, general and administrative expenses, (iv) a $56,000 increase in other

revenues, (v) a $36,000 decrease in amortization of deferred policy acquisition costs, and (vi) a $13,000 decrease in intersegment interest

expense and other expenses.

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 SecurityNational Mortgage are funded through loan purchase agreements with Security National

Life, Kilpatrick Life and unaffiliated financial institutions.

SecurityNational

Mortgage 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.

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 mortgage

servicing rights on approximately 6% of its loan origination volume.

These mortgage loans are serviced by either SecurityNational Mortgage

or an approved third-party sub-servicer.

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

The MSRs related to mortgage loans

previously originated by the Company in aggregate unpaid principal amount of approximately $7.02 billion.

As a result of the sale, the

book value of the Company’s MSRs decreased by $51,185,906.

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

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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.

the nine months ended September 30, 2022 and 2021, SecurityNational Mortgage originated 8,886 loans ($2,837,349,000 total volume) and

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

the three month periods ended March 31, 2023 and 2022, SecurityNational Mortgage originated 1,702 loans ($531,868,000 total volume) and

3,356 loans ($1,039,217,000 total volume), respectively.

For the nine months ended September 30, 2021, EverLEND Mortgage originated

260 loans ($85,368,000 total volume).

response to the COVID-19 pandemic, mortgage operations 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.

following table shows the condensed financial results of the mortgage operations for the three and nine months ended September 30, 2022

response to the COVID-19 pandemic, the Company’s mortgage operations integrated employee work from home accommodations into its

standard operating procedures.

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

in office or work from home functionality.

following table shows the condensed financial results of the mortgage operations for the three month periods ended March 31, 2023, and

See Note 7 to the condensed consolidated financial statements.

months ended September 30

(in thousands of dollars)

months ended September 30

Three months ended September 30

(in thousands of dollars)

% Increase (Decrease)

Increase (Decrease)

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

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

in other revenues is service fee income.

Profitability for the nine months ended September 30, 2022 decreased due to (a) a $76,681,000

decrease in secondary gains from investors, (b) a $6,919,000 decrease in income from loan originations, (c) $2,294,000 decrease in the

fair value of loan commitments, (d) a $911,000 increase in intersegment expenses, (e) a $217,000 decrease in intersegment revenues, and

(e) a $32,000 increase in depreciation on property and equipment, which were partially offset by (i) a $37,978,000 decrease in commissions,

(ii) a $4,918,000 decrease in other expenses, (iii) a $2,652,000 increase in other revenues, (iv) a $1,800,000 decrease in costs related

to funding mortgage loans, (v) a $1,019,000 decrease in personnel expenses, (vi) a $1,154,000 decrease in advertising expenses, (vii)

a $893,000 decrease in intersegment interest expense and other expenses, (viii) a $778,000 decrease in interest expense, (ix) a $347,000

increase in the fair value of loans held for sale, (x) a $282,000 decrease in rent and rent related expenses, (xi) a $192,000 increase

in gains on investments and other assets, and (xii) $175,000 increase in net investment income.

Profitability for the three month period ended March 31, 2023 decreased due to (a) a $21,686,000

decrease in secondary gains from investors, (b) a $4,156,000 decrease in other revenues, (c) a $2,258,000 decrease in income from loan

originations, (d) a $1,997,000 decrease in the fair value of loan commitments, (e) a $319,000 decrease in gains on investments and other

assets, (f) a $137,000 increase in rent and rent related expenses, and (g) a $6,000 increase in depreciation on property and equipment,

which were partially offset by (i) a $10,262,000 decrease in commissions, (ii) a $4,875,000 decrease in personnel expenses, (iii) a $4,019,000

decrease in other expenses, (iv) a $3,542,000 increase in the fair value of loans held for sale, (v) a $997,000 decrease in costs related

to funding mortgage loans, (v) a $401,000 decrease in interest expense, (vi) a $338,000 decrease in advertising expenses, (vii) a $300,000

increase in net investment income, (viii) a $284,000 decrease in intersegment interest expense and other expenses, and (ix) a $47,000

increase in intersegment revenues.

Results of Operations

Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

revenues decreased by $36,032,000, or 30.1%, to $83,477,000 for the three months ended September 30, 2022, from $119,509,000 for the

comparable period in 2021.

Contributing to this decrease in total revenues was a $37,650,000 decrease in mortgage fee income and a $3,156,000

decrease in gains on investments and other assets, a $208,000 decrease in insurance premiums and other considerations, which were partially

offset by a $3,510,000 increase in net investment income, a $503,000 increase in net mortuary and cemetery sales, and a $969,000 increase

in other revenues.

fee income decreased by $37,650,000, or 56.8%, to $28,608,000, for the three months ended September 30, 2022, from $66,258,000 for the

month period ended March 31, 2023, Compared to Three month period ended March 31, 2022

revenues decreased by $22,925,000, or 22.4%, to $79,501,000 for the three month period ended March 31, 2023, from $102,426,000 for the

comparable period in 2022.

This decrease was primarily due to a $26,500,000 decrease in secondary gains from mortgage loans sold to third-party

investors into the secondary market a $3,872,000 decrease in the fair value of loans held for sale, a $2,891,000 decrease in the fair

value of loan commitments, and a $4,387,000 decrease in loan fees and interest income net of a decrease in the provision for loan loss

premiums and other considerations decreased by $208,000, or 0.8%, to $26,238,000 for the three months ended September 30, 2022, from

$26,446,000 for the comparable period in 2021.

This decrease was primarily due to a decrease of $497,000 in renewal premiums which was

partially offset by a $289,000 increase in first year premiums.

investment income increased by $3,510,000, or 23.3%, to $18,603,000 for the three months ended September 30, 2022, from $15,093,000 for

Contributing to this decrease in total revenues was a $22,355,000 decrease in mortgage fee income, a $3,981,000

decrease in other revenues, a $734,000 decrease in net mortuary and cemetery sales, and a $61,000 decrease in gains on investments and

other assets, which were partially offset by a $2,581,000 increase in net investment income and a $1,625,000 increase in insurance premiums

and other considerations.

fee income decreased by $22,355,000, or 46.2%, to $25,989,000, for the three month period ended March 31, 2023, from $48,345,000 for

the comparable period in 2022.

This increase was primarily attributable to a $3,437,000 increase in mortgage loan interest, a $610,000

increase in real estate income, a $521,000 increase in fixed maturity securities income, a $434,000 increase in interest on cash and

cash equivalents, a $146,000 increase in income on other investments, and a $28,000 increase in equity securities income, which were

partially offset by a $1,087,000 increase in investment expenses, a $563,000 decrease in insurance assignment income, and a $16,000 decrease

in policy loan income.

mortuary and cemetery sales increased by $503,000, or 8.4%, to $6,470,000 for the three months ended September 30, 2022, from $5,967,000

This decrease was primarily due to a $21,641,000 decrease in secondary gains from mortgage loans sold

to third-party investors into the secondary market, a $1,997,000 decrease in the fair value of loan commitments, and a $2,258,000 decrease

in loan fees and interest income net of a decrease in the provision for loan loss reserve, which were partially offset by a $3,541,000

increase in the fair value of loans held for sale.

premiums and other considerations increased by $1,625,000, or 6.2%, to $27,967,000 for the three month period ended March 31, 2023, from

$26,342,000 for the comparable period in 2022.

This increase was primarily due to a $835,000 increase in mortuary at-need sales, which were partially

offset by a $207,000 decrease in cemetery pre-need sales and a $125,000 decrease in cemetery at-need sales.

on investments and other assets decreased by $3,156,000, or 323.0%, to $2,179,000 in losses for the three months ended September 30,

2022, from $977,000 in gains for the comparable period in 2021.

This decrease in gains on investments and other assets was primarily

due to a $1,512,000 decrease in gains on equity securities mostly attributable to decreases in the fair value of these equity securities,

a $1,420,000 decrease in gains on other assets, and a $224,000 decrease in gains on fixed maturity securities.

revenues increased by $969,000, or 20.3%, to $5,737,000 for the three months ended September 30, 2022, from $4,768,000 for the comparable

period in 2021.

This increase was primarily attributable to an increase in servicing fee revenue.

benefits and expenses were $86,780,000, or 104.0% of total revenues, for the three months ended September 30, 2022, as compared to $105,366,000,

or 88.2% of total revenues, for the comparable period in 2021.

benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $1,213,000 or 5.1%, to $22,724,000

for the three months ended September 30, 2022, from $23,937,000 for the comparable period in 2021.

This decrease was primarily the result

of a $1,478,000 decrease in death benefits ($1,023,000 for COVID-19 related deaths), a $96,000 decrease in future policy benefits, which

were partially offset by a $361,000 increase in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $352,000, or 7.5%, to $5,062,000 for the

three months ended September 30, 2022, from $4,710,000 for the comparable period in 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 $18,346,000, or 24.8%, to $55,657,000 for the three months ended September 30, 2022,

from $74,003,000 for the comparable period in 2021.

This decrease was primarily the result of a $13,765,000 decrease in commissions,

a $2,597,000 decrease in other expenses, a $1,008,000 decrease in costs related to funding mortgage loans, a $729,000 decrease in personnel

expenses, and $318,000 decrease in advertising expense, and a $153,000 decrease in rent and rent related expenses, which were partially

offset by a $224,000 increase in depreciation on property and equipment.

expense increased by $329,000, or 18.2%, to $2,137,000 for the three months ended September 30, 2022, from $1,807,000 for the comparable

period in 2021.

This increase was primarily due to an increase of $423,000 in interest expense on bank loans, which was partially offset

by a decrease of $94,000 in interest expense on mortgage warehouse lines for loans held for sale.

of goods and services sold-mortuaries and cemeteries increased by $292,000, or 32.2%, to $1,200,000 for the three months ended September

30, 2022, from $908,000 for the comparable period in 2021.

This increase was primarily due to a $346,000 increase in mortuary at-need

sales, which were partially offset by a $30,000 decrease in cemetery pre-need sales and a $24,000 decrease in cemetery at-need sales.

Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

revenues decreased by $77,448,000, or 21.6%, to $281,470,000 for the nine months ended September 30, 2022, from $358,918,000 for the

comparable period in 2021.

Contributing to this decrease in total revenues was a $85,431,000 decrease in mortgage fee income and a $7,335,000

decrease in gains on investments and other assets, which were partially offset by a $3,736,000 increase in insurance premiums and other

considerations, a $6,205,000 increase in net investment income, a $2,698,000 increase in net mortuary and cemetery sales, and a $2,679,000

increase in other revenues.

fee income decreased by $85,431,000, or 41.8%, to $118,983,000, for the nine months ended September 30, 2022, from $204,414,000 for the

comparable period in 2021.

This decrease was primarily due to a $76,565,000 decrease in secondary gains from mortgage loans sold to third-party

investors into the secondary market and a $6,919,000 decrease in loan fees and interest income net of a decrease in the provision for

loan loss reserve, and a $2,294,000 decrease in the fair value of loan commitments, which were partially offset by a $347,000 increase

in the fair value of loans held for sale.

premiums and other considerations increased by $3,736,000, or 5.0%, to $78,491,000 for the nine months ended September 30, 2022, from

This increase was primarily due to an increase of $1,188,000 in first year premiums and

an increase of $437,000 in renewal premiums.

investment income increased by $2,581,000, or 17.0%, to $17,775,000 for the three month period ended March 31, 2023, from $15,194,000

for the comparable period in 2022.

This increase was due to an increase of $1,996,000 in renewal premiums due to the growth

of the Company’s outstanding policies in recent years, particularly in whole life products, which resulted in more premium paying

business in force and an increase of $1,740,000 in first year premiums as a result of increased insurance sales.

investment income increased by $6,205,000, or 14.2%, to $49,769,000 for the nine months ended September 30, 2022, from $43,564,000 for

the comparable period in 2021.

This increase was primarily attributable to a $7,655,000 increase in mortgage loan interest, a $1,617,000

increase in income on real estate, a $544,000 increase in interest on cash and cash equivalents, a $446,000 increase in fixed maturity

securities income, a $262,000 increase in income on other investments, a $37,000 increase in equity securities income, and a $33,000

increase in policy loan income, which were partially offset by a $3,800,000 increase in investment expenses and a $589,000 decrease in

insurance assignment income.

mortuary and cemetery sales increased by $2,698,000, or 14.8%, to $20,926,000 for the nine months ended September 30, 2022, from $18,228,000

This increase was primarily attributable to a $1,377,000 increase in fixed maturity securities income,

a $713,000 increase in interest on cash and cash equivalents, a $528,000 increase in mortgage loan interest, a $325,000 increase in real

estate income, and a $298,000 decrease in investment expenses, which were partially offset by a $629,000 decrease in insurance assignment

income and a $106,000 decrease in policy loan income.

mortuary and cemetery sales decreased by $734,000, or 10.2%, to $6,471,000 for the three month period ended March 31, 2023, from $7,205,000

for the comparable period in 2022.

This increase was primarily due to a $3,775,000 increase in mortuary at-need sales and a $356,000

increase in cemetery at-need sales, which were partially offset by a $1,433,000 decrease in cemetery pre-need sales.

on investments and other assets decreased by $7,335,000, or 166.2%, to $2,921,000 in losses for the nine months ended September 30, 2022,

from $4,414,000 in gains for the comparable period in 2021.

This decrease in gains on investments and other assets was primarily due

to a $5,849,000 decrease in gains on equity securities mostly attributable to decreases in the fair value of these equity securities,

a $1,169,000 decrease in gains on other assets, and a $317,000 decrease in gains on fixed maturity securities.

revenues increased by $2,679,000, or 19.8%, to $16,221,000 for the nine months ended September 30, 2022, from $13,542,000 for the comparable

This decrease was primarily due to a $491,000 decrease in mortuary at-need sales and a $222,000 decrease

in cemetery at-need sales.

on investments and other assets decreased by $61,000, or 35.4%, to $111,000 for the three month period ended March 31, 2023, from $172,000

for the comparable period in 2022.

This decrease in gains on investments and other assets was primarily due to a $402,000 decrease in

gains on other assets, a $291,000 decrease in gains on real estate, and a $264,000 decrease in gains on fixed maturity securities, which

were partially offset by a $896,000 increase in gains on equity securities mostly attributable to increases in the fair value of these

equity securities.

revenues decreased by $3,981,000, or 77.0%, to $1,187,000 for the three month period ended March 31, 2023, from $5,168,000 for the comparable

period in 2022.

This increase was primarily attributable to an increase in servicing fee revenue.

benefits and expenses were $275,599,000, or 97.9% of total revenues, for the nine months ended September 30, 2022, as compared to $313,742,000,

This decrease was primarily attributable to a decrease in servicing fee revenue as a result of the sale of certain mortgage

servicing rights in October 2022.

benefits and expenses were $77,916,000, or 98.0% of total revenues, for the three month period ended March 31, 2023, as compared to $97,982,000,

or 95.7% of total revenues, for the comparable period in 2022.

benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $201,000 or 0.3%, to $70,296,000

for the nine months ended September 30, 2022, from $70,497,000 for the comparable period in 2021.

This decrease was primarily the result

of a $2,910,000 decrease in death benefits ($2,339,000 for COVID-19 related deaths), which were partially offset by $1,620,000 increase

in future policy benefits and a $1,089,000 increase in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $1,570,000, or 13.2%, to $13,511,000 for

the nine months ended September 30, 2022, from $11,941,000 for the comparable period in 2021.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $887,000 or 3.6%, to $25,866,000

for the three month period ended March 31, 2023, from $24,979,000 for the comparable period in 2022.

This increase was primarily the

result of a $1,283,000 increase in future policy benefits, which was partially offset by a $206,000 decrease in death benefits and a

$190,000 decrease in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $487,000, or 11.1%, to $4,883,000 for the

three month period ended March 31, 2023, from $4,396,000 for the comparable period in 2022.

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 $40,698,000, or 18.2%, to $182,398,000 for the nine months ended September 30, 2022,

general and administrative expenses decreased by $21,168,000, or 32.2%, to $44,527,000 for the three month period ended March 31, 2023,

from $65,695,000 for the comparable period in 2022.

This decrease was primarily the result of a $10,229,000 decrease in commissions,

a $3,311,000 decrease in other expenses, a $1,800,000 decrease in costs related to funding mortgage loans, a $532,000 decrease in rent

and rent related expenses, and a $409,000 decrease in advertising expenses, which were partially offset by a $2,950,000 increase in personnel

expenses and a $493,000 increase in depreciation on property and equipment.

expense increased by $437,000, or 8.2%, to $5,764,000 for the nine months ended September 30, 2022, from $5,327,000 for the comparable

a $4,912,000 decrease in personnel expenses, a $4,311,000 decrease in other expenses, a $997,000 decrease in costs related to funding

mortgage loans, a $809,000 decrease in advertising expense, and a $27,000 decrease in depreciation on property and equipment, which were

partially offset by a $117,000 increase in rent and rent related expenses.

expense decreased by $274,000, or 15.9%, to $1,453,000 for the three month period ended March 31, 2023, from $1,727,000 for the comparable

period in 2022.

This increase was primarily due to a $1,215,000 increase in interest expense on bank loans, which was partially offset

by decrease of $778,000 in interest expense on mortgage warehouse lines for loans held for sale.

of goods and services sold-mortuaries and cemeteries increased by $747,000, or 26.0%, to $3,628,000 for the nine months ended September

30, 2022, from $2,881,000 for the comparable period in 2021.

This increase was primarily due to a $942,000 increase in mortuary at-need

sales and a $42,000 increase in cemetery at-need sales, which were partially offset by and a $237,000 decrease in cemetery pre-need sales.

This decrease was primarily due to a decrease of $401,000 in interest expense on mortgage warehouse lines for loans held

for sale, which was partially offset by an increase of $127,000 in interest expense on bank loans.

and Capital Resources

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 from 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.

As of September 30, 2022, SecurityNational

Mortgage was not in compliance with its warehouse line debt covenants, but received waivers or amendments from the warehouse banks.

the unlikely event the Company is required to repay the warehouse lines, the Company has sufficient cash and borrowing capacity to do

so and to continue to fund its origination activities through other internal funding sources.

the nine months ended September 30, 2022 and 2021, the Company’s operations provided cash of $109,318,000 and $128,891,000, respectively.

The decrease in cash provided by operations from the nine months ended September 30, 2021 to those ended September 30, 2022 was due primarily

to decreased proceeds from the sale of mortgage loans held for sale.

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 from mortgage loans held for sale that are sold to investors into the secondary

It should be noted that current conditions in the financial markets and economy 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.

March 31, 2023, the Company was not in compliance with the net income covenant on its warehouse line with U.S.

Bank and has received

or is in the process of receiving waivers from the warehouse banks.

In the unlikely event the Company is required to repay the

outstanding advances of approximately $8,900,000 on the Texas Capital Bank N.A.

warehouse line that has not provided a covenant

waiver, the Company has sufficient cash and borrowing capacity on the warehouse lines that have provided covenant waivers to fund

its origination activities.

the three month periods ended March 31, 2023 and 2022, the Company’s operations used cash of $16,074,000 and provided cash of $72,509,000,

respectively.

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

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

17 unchanged sentences

Bonds owned by the insurance subsidiaries amounted to $357,311,000 (at estimated fair value)

and $259,005,000 (at estimated fair value) as of September 30, 2022 and December 31, 2021, respectively.

and $345,598,000 (at estimated fair value) as of March 31, 2023 and December 31, 2022, respectively.

This represented 38.4% and 36.4%

of the total investments as of September 30, 2022, and December 31, 2021, respectively.

of the total investments as of March 31, 2023, and December 31, 2022, respectively.

Generally, all bonds owned by the life insurance

2 unchanged sentences

for rating bonds.

At September 30, 2022, 2.2% (or $7,311,000) and at December 31, 2021, 3.9% (or $9,991,000) of the Company’s total

At March 31, 2023, 1.9% (or $6,679,000) and at December 31, 2022, 2.2% (or $7,833,000) of the Company’s total

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

1 unchanged sentence

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

At September 30, 2022 and December 31, 2021, the life insurance

At March 31, 2023 and December 31, 2022, the life insurance

subsidiaries were in compliance with the regulatory criteria.

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $470,342,000 as of September 30,

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $435,425,000 as of March 31, 2023,

as compared to $454,499,000 as of December 31, 2022.

Stockholders’ equity as a percent of total capitalization was 57.2%

and 54.4% as of September 30, 2022 and December 31, 2021, respectively.

Stockholders’ equity as a percent of total capitalization was 68.2% and 64.4%

as of March 31, 2023, and December 31, 2022, respectively.

Bank loans and other loans payable decreased by $23,321,000 as of March 31,

2023, as compared to December 31, 2022, which was partially offset by an increase in stockholders’ equity of $4,247,000 as of March

31, 2023 as compared to December 31, 2022, thus causing the increase in the stockholders’ equity percentage.

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

2 unchanged sentences

The 2023 lapse rate to date has been approximately the same as 2022.

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $90,667,000 and $82,823,000 as of September

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $94,133,000 and $94,254,000 as of March

31, 2023, and December 31, 2022, respectively.

The life insurance subsidiaries cannot pay a dividend to their parent company without the

approval of state insurance regulatory authorities.

2020, the outbreak of COVID-19 had spread worldwide and was declared a global pandemic by the World Health Organization on March 11,

COVID-19, and its variants, pose a threat to the health and economic well-being of the Company’s employees, customers, and

The Company continues to closely monitor developments relating to COVID-19 and assessing its impact on the Company’s business.

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

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.

Most monetary and fiscal interventions have been significantly curtailed.

most businesses, COVID-19 has impacted the Company, including the temporary 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 and 2022, the Company continued to adapt to the impact of COVID-19 and its related economic effects.

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 COVID-19 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.

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.

Quantitative and Qualitative Disclosures About Market Risk.

The life insurance subsidiaries cannot pay a dividend to their parent company without

the approval of state insurance regulatory authorities.

7.01 Regulation FD Disclosure.

March 10, 2023 and March 12, 2023, Silicon Valley Bank and Signature Bank were placed in receivership with the Federal Deposit Insurance

Corporation (“FDIC”).

Normal banking activities resumed shortly thereafter.

On May 1, 2023, First Republic bank was placed

in receivership with the FDIC and was immediately purchased by a national bank.

Company does not maintain any deposit or other accounts or credit facilities with Silicon Valley Bank, Signature Bank or First Republic

The Company may periodically transfer funds to these banks to pay for services rendered by third party vendors that continue to

maintain banking relationships with these banks.

The Company continues to monitor the banking industry and its relationships with regional

and community banks.

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.

and Qualitative Disclosures About Market Risk.

a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis