What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-29 compared with 2023-03-31 · 264 added, 280 removed, 383 unchanged (59% of the section changed)

4 unchanged sentences

(ii) increased emphasis on cemetery and mortuary business;

and (iii) capitalizing on the housing market by originating

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 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.

following table shows the condensed financial results for the Company’s insurance operations for 2023 and 2022.

See Note 15 of

the Notes to Consolidated Financial Statements.

ended December 31

1 unchanged sentence

vs 2022 % Increase (Decrease)

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.

Revenues from external customers:

Insurance premiums

Net investment income

Mortgage fee income

Gains (losses) on investments and other assets

Intersegment revenue

Earnings before income

Profitability

for 2023 increased due to (a) a $9,656,000 increase in insurance premiums and other considerations, (b) a $5,247,000 increase in net

investment income, (c) a $1,602,000 increase in intersegment revenue, (d) a $1,422,000 increase in gains on investments and other assets

primarily due to an increase in the fair value of equity securities, and (e) a $987,000 decrease in selling, general and administrative

expenses, which were partially offset by (i) a $5,150,000 increase in future policy benefits, (ii) a $1,936,000 increase in death, surrenders

and other policy benefits, (iii) a $266,000 decrease in other revenues, (iv) a $176,000 increase in intersegment interest expense and

other expenses, (v) a $133,000 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, (vi) a $111,000 increase in interest expense, and (vii) a $66,000

decrease in mortgage fee income.

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.

following table shows the condensed financial results for the Company’s cemetery and mortuary operations for 2023 and 2022.

Note 15 of the Notes to Consolidated Financial Statements.

ended December 31

1 unchanged sentence

vs 2022 % Increase (Decrease)

from external customers:

investment income

(losses) on investments and other assets

before income taxes

Revenues from external customers:

Cemetery revenues

Mortuary revenues

Net investment income

Gains (losses) on investments and other assets

Earnings before income

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.

in 2023 increased due to (a) a $2,196,000 increase in cemetery pre-need sales, (b) a $1,513,000 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), (c) a $507,000 increase in net investment income, (d) a $99,000 increase in other revenues, (e) a

$59,000 decrease in amortization of deferred policy acquisition costs, and (f) a $44,000 decrease in intersegment interest expense and

other expenses, which were partially offset by (i) a $878,000 decrease in cemetery at-need sales, (ii) a $546,000 increase in selling,

general and administrative expenses, (iii) a $447,000 decrease in mortuary at-need sales, (iv) a $111,000 decrease in intersegment revenues,

and (v) a $85,000 increase in costs of goods sold.

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

1 unchanged sentence

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.

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

addition to various conventional mortgage loan products.

SecurityNational Mortgage originates and refinances mortgage loans on a retail

Mortgage loans originated or refinanced by SecurityNational Mortgage are funded through loan purchase agreements with Security

National Life, Kilpatrick Life and unaffiliated financial institutions.

SecurityNational

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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.

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).

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

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

aggregate unpaid principal amount of approximately $7.02 billion.

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

decreased $51,185,906.

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

3 unchanged sentences

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.

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

2023 and 2022, SecurityNational Mortgage originated 7,185 loans ($2,173,081,000 total volume) and 10,663 loans ($3,373,554,000 total

volume), respectively.

following table shows the condensed financial results for the Company’s mortgage operations for 2023 and 2022.

See Note 15 of the

Notes to Consolidated Financial Statements.

ended December 31

1 unchanged sentence

vs 2022 % 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 (loss) before

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.

Profitability in 2023 decreased due to (a) an $85,300,000 decrease in secondary gains from investors,

(b) a $15,004,000 decrease in other revenues due to the sale of certain MSRs in October 2022, (c) a $1,535,000 increase in intersegment

interest expense and other expenses, (d) a $1,527,000 decrease in income from loan originations, and (e) a $241,000 decrease in gains

on investments and other assets, which were partially offset by (i) a $23,662,000 decrease in commissions, (ii) a $17,871,000 decrease

in personnel expenses, (iii) a $13,180,000 decrease in other expenses, (iv) an $8,356,000 increase in the fair value of loans held for

sale, (v) a $3,185,000 increase in the fair value of loan commitments, (vi) a $3,077,000 decrease in interest expense, (vii) a $1,100,000

decrease in costs related to funding mortgage loans, (viii) a $1,011,000 decrease in advertising expenses, (ix) a $392,000 increase in

net investment income, (x) a $175,000 increase in intersegment revenues, (xi) a $42,000 decrease in depreciation on property and equipment,

and (xii) a $52,000 decrease in rent and rent related expenses.

Accounting Policies and Estimates

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

accounting estimates.

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

See Note 1 of the Notes to Consolidated Financial Statements.

7 unchanged sentences

policyholders in the form of interest credited.

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

Interest credited to policyholder account balances and benefit claims more than policyholder

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

3 unchanged sentences

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.

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

For nonparticipating traditional

13 unchanged sentences

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.

The Company can mitigate adverse experiences 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

25 unchanged sentences

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

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

under certain events, which include the following:

5 unchanged sentences

declines purchase, and

● Discontinued

product and expired commitment.

1 unchanged sentence

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

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

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

7 unchanged sentences

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

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

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

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

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

1 unchanged sentence

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.

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.

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

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

1 unchanged sentence

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.

Most loans originated are sold to third-party investors.

The amounts expected to be sold

to investors are shown on the consolidated balance sheets as loans held for sale.

of Significant Accounting Estimates

12 unchanged sentences

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.

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

Acquisition Costs

12 unchanged sentences

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

similar to deferred acquisition costs.

like deferred acquisition costs.

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

68 unchanged sentences

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.

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.

Allowance for Credit Losses and Loan Loss Reserve

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

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

mortgage allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the Company’s mortgage

loans held for investment to present the net amount expected to be collected.

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.

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

15 unchanged sentences

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

11 unchanged sentences

Compared to 2022

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.

revenues decreased by $71,155,000, or 18.3%, to $318,497,000 for 2023 from $389,652,000 for 2022.

Contributing to this decrease in total

revenues was primarily a $75,352,000 decrease in mortgage fee income and a $15,171,000 decrease in other revenues.

This decrease in total

revenues was offset by a $9,657,000 increase in insurance premiums and other considerations, a $6,145,000 increase in net investment

income, a $2,695,000 increase in gains on investments and other assets, and an $871,000 increase in net cemetery and mortuary sales.

fee income decreased by $75,352,000, or 43.4%, to $98,148,000 for 2023, from $173,500,000 for 2022.

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.

This decrease was primarily due to

an $85,366,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market, and a $2,579,000

decrease in loan fees and interest income.

This decrease in mortgage fee income was partially offset by a $11,541,000 increase in the

fair value of loans held for sale and loan commitments and a $1,052,000 decrease in the provision for loan loss reserve.

premiums and other considerations increased by $9,657,000, or 9.2%, to $114,658,000 for 2023, from $105,002,000 for 2022.

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.

was due to an increase of $9,238,000 in first year premiums because of increased preneed insurance sales and an increase of $419,000

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.

investment income increased by $6,145,000, or 9.3%, to $72,343,000 for 2023, from $66,198,000 for 2022.

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 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.

to a $4,476,000 increase in fixed maturity securities income, a $2,583,000 increase in interest on cash and cash equivalents, a $477,000

decrease in investment expenses, a $223,000 increase in rental income from real estate held for investment, a $106,000 increase in equity

securities income, a $99,000 increase in income in other investments, and a $5,000 increase in insurance assignment income.

This increase

was partially offset by a $1,708,000 decrease in mortgage loan interest and a $116,000 decrease in policy loan income.

mortuary and cemetery sales increased by $871,000, or 3.2%, to $27,865,000 for 2023, from $26,994,000 for 2022.

This increase was primarily

due to a $2,196,000 increase in cemetery pre-need sales.

This increase was partially offset by a $878,000 decrease in cemetery at-need

sales and a $447,000 decrease in mortuary at-need sales.

on investments and other assets increased by $2,695,000, or 314.3%, to $1,837,000 in gains for 2023, from $858,000 in losses for 2022.

This increase in gains on investments and other assets was primarily due to a $4,157,000 increase in gains on equity securities mostly

attributable to increases in the fair value of these equity securities.

This increase was partially offset by a $527,000 decrease in

gains on fixed maturity securities, a $485,000 decrease in gains on other assets, and a $450,000 decrease in gains on real estate held

for investment.

revenues decreased by $15,171,000, or 80.6%, to $3,646,000 for 2023 from $18,817,000 for 2022.

This decrease was primarily attributable

to a decrease in servicing fee revenue because of the sale of certain mortgage servicing rights in October 2022.

benefits and expenses were $302,197,000, or 94.9% of total revenues for 2023, as compared to $355,275,000, or 91.2% 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

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $7,086,000, or 7.6%, to $100,012,000

for 2023, from $92,926,000 for 2022.

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.

This increase was primarily the result of a $5,150,000 increase in future policy benefits and a

$2,012,000 increase in death benefits.

This increase was partially offset by a $76,000 decrease in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $74,000, or 0.4%, to $18,024,000 for 2023,

from $17,950,000 for 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 $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.

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 an aggregate of $57,358,000, or 24.7%, to $174,490,000 for 2023, from $231,848,000 for

This decrease was primarily the result of a $23,391,000 decrease in commissions, a $16,970,000 decrease in personnel expenses,

a $13,739,000 decrease in other expenses, a $1,987,000 decrease in advertising expenses, a $1,100,000 decrease in costs related to funding

mortgage loans, a $145,000 decrease in depreciation on property and equipment, and a $26,000 decrease in rent and rent related expenses.

expense decreased by $2,965,000, or 37.9%, to $4,865,000 for 2023, from $7,830,000 for 2022.

This decrease was primarily due to a decrease

of $3,077,000 in interest expense on mortgage warehouse lines of credit for loans held for sale, which was partially offset by a $112,000

increase in interest expense on bank loans.

of goods and services sold of the cemeteries and mortuaries increased by $85,000, or 1.8%, to $4,806,000 for 2023, from $4,721,000 for

This increase was primarily due to a $218,000 increase in cemetery at-need sales and a $40,000 increase in cemetery pre-need sales,

which was partially offset by a $173,000 decrease in mortuary at-need sales.

tax expense decreased by $6,881,000, or 79.2%, to $1,805,000 for 2023, from $8,687,000 for 2022.

1 unchanged sentence

a decrease in earnings before income taxes for 2023 compared to 2022.

The Company’s overall effective tax rate decreased from

25.3% for 2022 to 11.1% in 2023, a 14.2% decrease in the effective tax rate or a 56.1% change.

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

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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,

2023 and 2022 the Company decreased its loan loss reserve by $1,178,000 and increased its loan loss reserve by $1,079,000, respectively,

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

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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, 2022 and 2021

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

During 2023 and 2022, the Company increased its allowance for credit losses by $1,184,000 and by $270,000, respectively,

which was charged to bad debt expense and included in selling, general and administrative expenses for the period.

The Company also increased

its allowance for credit losses by $665,000 at the beginning of 2023 due to the adoption of the new accounting standard (Refer to Note

1 of the Notes to the Consolidated Financial Statements).

The allowances for credit losses on the Company’s mortgage loans held

for investment portfolio as of December 31, 2023 and 2022 were $3,819,000 and $1,970,000, respectively.

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

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

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.

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.

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.

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 estimated future costs for pre-need sales;

used in determining the value of mortgage loans foreclosed to real estate held for investment or sale;

those used in determining the

value of mortgage servicing rights;

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

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.

liability for future policy benefits and unearned revenue;

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

those used in determining the value of mortgage servicing rights;

those used in determining the value of loans held for sale;

used in determining allowances for credit losses;

those used in determining loan loss reserve;

and those used in determining

deferred tax assets and liabilities.

Although some variability is inherent in these estimates, management believes the amounts

provided are fairly stated in all material respects.

and Capital Resources

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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.

be noted that current conditions in the financial markets and economy may affect the realization of these expected cash flows.

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.

of December 31, 2023, the Company’s subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under

its warehouse lines of credit and its operating cash flow covenant for its standby letter of credit with its primary bank.

SecurityNational

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

In the unlikely event SecurityNational Mortgage

is required to repay the outstanding advances of approximately $7,732,000 on the warehouse line of credit that has not provided a covenant

waiver, SecurityNational Mortgage has sufficient cash and borrowing capacity on the warehouse lines of credit that have provided covenant

waivers to fund its origination activities.

The Company has done an internal analysis of the funding capacities of both internal and

external sources and has determined that there are sufficient funds to continue its business model.

The Company continues to negotiate

other warehouse lines of credit with other lenders.

2023 and 2022, the Company’s operations provided cash of $54,008,000 and of $130,450,000, respectively.

The decrease in cash provided

by operations was due primarily to decreased proceeds from the sale of loans held for sale.

Company expects to pay out liabilities under its funeral plans over the long term given the nature of those plans.

Funeral plans are

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

policyholders generally

keep these policies in force until, and do not surrender prior to, death.

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

can hold to maturity or for the targeted investment period its corresponding bond, real estate, and mortgage loan investments, thus reducing

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

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

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The Company purchases short-term

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

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

The Company’s

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

and mortuary liabilities regardless of future interest rate movements.

investment philosophy is intended to provide a rate of return for the expected duration of its cemetery and mortuary policies that will

exceed the accruing of liabilities under those policies regardless of future interest rate movements.

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.

of mortgage loans held for sale.

The warehoused mortgage loans are typically held for sale on a short-term basis before selling the loans

to investors in accordance with the requirements and laws governing the Company’s life insurance subsidiaries.

Bonds owned by the

insurance subsidiaries amounted to $362,663,000 (at estimated fair value) and $345,598,000 (at estimated fair value) as of December 31,

2023 and 2022, respectively.

This represented 38.7% and 36.4% of the total investments of the Company as of December 31, 2023, and 2022,

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.

As of December 31, 2023, 1.8% (or $6,954,000) and as of December

31, 2022, 2.2% (or $7,833,000) of the insurance subsidiaries’ 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

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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 life insurance subsidiaries are subject to risk-based capital guidelines established by statutory regulators requiring

minimum capital levels based on the perceived risk of assets, liabilities, disintermediation, and business risk.

As of December 31, 2023

and 2022, 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 $418,450,000 as of December

31, 2023, as compared to $454,499,000 as of December 31, 2022.

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

This decrease was primarily due to a decrease of $56,158,000 in bank loans

and other loans payable which was partially offset by a $20,108,000 increase in stockholders’ equity.

Stockholders’ equity

as a percent of total capitalization was 74.8% and 64.4% as of December 31, 2023 and 2022, respectively.

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

The Company’s lapse rate for life insurance was 4.4%

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

for 2023 as compared to a rate of 4.3% for 2022.

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $107,385,000 and $94,254,000 as of December

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Annual Report on Form 10-K contains forward-looking statements, together with related data and projections, about the Company’s

projected financial results and its future plans and strategies.

However, actual results and needs of the Company may vary materially

from forward-looking statements and projections made from time to time by the Company on the basis of management’s then-current

expectations.

The business in which the Company is engaged involves changing and competitive markets, which may involve a high degree

of risk, and there can be no assurance that forward-looking statements and projections will prove accurate.

projected financial results and its plans and strategies.

However, the actual results and needs of the Company may vary materially from

forward-looking statements and projections made from time to time by the Company based on management’s then-current expectations.

The business in which the Company is engaged involves changing and competitive markets, which may involve a high degree of risk, and

there can be no assurance that forward-looking statements and projections will prove accurate.

that may cause the Company’s actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted

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Sheet Agreements

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

and development.

As of December 31, 2022, the Company’s commitments were approximately $231,250,000 for these loans, of which $175,754,000

had been funded.

The Company advances funds once the work has been completed and an inspection is made.

The maximum loan commitment ranges

between 50% and 80% of appraised value.

The Company receives fees and interest for these loans and the interest rate is generally fixed

5.25% to 8.50% per annum.

Maturities generally range between six and eighteen months.

Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements.

As of December

31, 2023, the Company’s commitments were approximately $146,953,000 for these loans, of which $104,977,000 had been funded.

Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made.

The maximum loan commitment ranges between 50% and 80% of appraised value.

The Company receives fees and interest for these loans and

the interest rate is generally fixed at 5.25% to 8.50% per annum.

Maturities range between six and eighteen months.

the ordinary course of the Company’s operations, the Company enters into certain contractual obligations.

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to Consolidated Financial Statements for more information about these obligations.

Insurance Program

conjunction with the Company’s casualty insurance program, limited equity interests are held in a captive insurance entity.

program permits the Company to self-insure a portion of losses, to gain access to a wide array of safety-related services, to pool insurance

risks and resources in order to obtain more competitive pricing for administration and reinsurance and to limit its risk of loss in any

particular year.

The maximum exposure to loss related to the Company’s involvement with this entity is limited to approximately

Insurance Participation

Company has a limited equity interest in a captive insurance entity (the “Captive’) that provides workers compensation, general

liability and automobile insurance .

This program permits the Company to pool insurance risks and resources with like-minded companies

in order to obtain more competitive pricing for claims administration, stop loss insurance premiums and to limit its risk of loss in

any particular year.

The Captive also provides access to a wide array of safety-related services and regular safety training to help

the Company control claims.

The maximum exposure to a loss related to the Company’s involvement in the Captive is limited to approximately

$443,758, which is collateralized under a standby letter of credit issued on the insurance entity’s behalf.

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Commitments and Contingencies,” for additional discussion of commitments associated with the insurance program.

The Company does

not expect any material losses to result from the issuance of the standby letter of credit because claims are not expected to exceed

premiums paid.

The Company has

been a member of the Captive since 2006 and does not expect any material losses to result from the issuance of the standby letter of

credit given the Company’s past performance.

Quantitative and Qualitative Disclosures about Market Risk

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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