What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-14 compared with 2023-11-14 · 135 added, 229 removed, 107 unchanged (77% of the section changed)

17 unchanged sentences

underwriting practices that result in higher mortality costs.

following table shows the condensed financial results of the insurance operations for the three and nine month periods ended September

30, 2023, and 2022.

following table shows the condensed financial results of the insurance operations for the three month periods ended March 31, 2024 and

See Note 7 to the condensed consolidated financial statements.

Three months ended September 30,

(in thousands of dollars)

Nine months ended September 30,

months ended March 31,

(in thousands of dollars)

Increase (Decrease)

% Increase (Decrease)

Revenues from external customers

Insurance premiums

Mortgage fee income

Net investment income

Losses on investments and other assets

Intersegment revenue

Earnings before income taxes

revenues are primarily interest income from the warehouse lines of credit for loans held for sale provided to SecurityNational Mortgage

Company (“SecurityNational Mortgage”).

Profitability for the nine month period ended September 30, 2023 increased due to

(a) a $7,081,000 increase in insurance premiums and other considerations, (b) a $6,340,000 increase in net investment income, (c) a $2,049,000

decrease in selling, general and administrative expenses, (d) a $1,696,000 increase in gains on investments and other assets, (e) a $862,000

increase in intersegment revenue, and (f) a $76,000 increase in mortgage fee income, which were partially offset by (i) a $5,270,000

increase in future policy benefits, (ii) a $827,000 increase in death, surrenders and other policy benefits, (iii) a $408,000 increase

in interest expense, (iv) a $294,000 decrease in other revenues, (v) a $158,000 increase in intersegment interest expense and other expenses,

and (vi) a $112,000 increase in amortization of deferred policy acquisition costs.

from external customers

investment income

on investments and other assets

before income taxes

Profitability

for the three month period ended March 31, 2024 increased due to (a) a $1,884,000 increase in insurance premiums and other considerations,

(b) a $1,857,000 increase in net investment income, (c) a $1,031,000 increase in gains on investments and other assets, (d) a $882,000

decrease in death, surrenders and other policy benefits, (e) a $481,000 decrease in selling, general and administrative expenses, (f)

a $254,000 decrease in amortization of deferred policy acquisition costs, and (g) a $119,000 decrease in interest expense, which were

partially offset by (i) a $1,291,000 increase in future policy benefits, (ii) a $173,000 decrease in other revenues, (iii) a $130,000

decrease in intersegment revenue, (iv) a $44,000 decrease in mortgage fee income, and (v) a $24,000 increase in intersegment interest

expense and other expenses.

and Mortuary Operations

8 unchanged sentences

revenue for cemetery land sales occurs when 10% of the purchase price is received.

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

September 30, 2023, and 2022.

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

31, 2024 and 2023.

See Note 7 to the condensed consolidated financial statements.

Three months ended September 30,

(in thousands of dollars)

Nine months ended September 30,

months ended March 31,

(in thousands of dollars)

Increase (Decrease)

% Increase (Decrease)

Revenues from external customers

Mortuary revenues

Cemetery revenues

Net investment income

Losses on investments and other assets

Earnings before income taxes

from external customers

investment income

on investments and other assets

before income taxes

Profitability

in the nine month period ended September 30, 2023 increased due to (a) a $1,415,000 increase in gains on investments and other assets,

(b) a $1,266,000 increase in cemetery pre-need sales, (c) a $544,000 increase in net investment income, (d) a $75,000 increase in other

revenues, (e) a $33,000 decrease in intersegment interest expense and other expenses, (f) a $14,000 decrease in cost of goods and services

sold, and (g) an $8,000 decrease in amortization of deferred policy acquisition costs, which were partially offset by (i) a $729,000

decrease in cemetery at-need sales, (ii) a $589,000 decrease in mortuary at-need sales, (iii) a $256,000 increase in selling, general

and administrative expenses, and (iv) a $105,000 decrease in intersegment revenues.

in the three month period ended March 31, 2024 increased due to (a) a $528,000 increase in gains on investments and other assets, (b)

a $483,000 increase in net investment income, (c) a $221,000 increase in cemetery pre-need sales, (d) a $139,000 increase in mortuary

at-need sales, (e) a $117,000 increase in cemetery at-need sales, and (f) a $101,000 increase in other revenues, a (g) a $5,000 decrease

in intersegment interest expense and other expenses, and (h) a $1,000 increase in intersegment revenues, which were partially offset

by (i) a $124,000 increase in selling, general and administrative expenses, (ii) a $114,000 increase in amortization of deferred policy

acquisition costs, and (iii) an $88,000 increase in cost of goods and services 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 SecurityNational Mortgage are funded through loan purchase agreements with Security National

Life, Kilpatrick Life and unaffiliated financial institutions.

Development (HUD), which originate mortgages 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 the SecurityNational Mortgage are funded through loan purchase agreements with Security

National Life, Kilpatrick Life and unaffiliated financial institutions.

SecurityNational

5 unchanged sentences

servicing rights on approximately 0.19% 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

Reserve will continue to raise rates in the near term.

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

loan originations classified as ‘refinance.’ Higher mortgage rates have also had a negative effect on loan originations classified

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

the nine month periods ended September 30, 2023 and 2022, SecurityNational Mortgage originated 5,680 loans ($1,708,831,000 total volume)

and 8,886 loans ($2,837,349,000 total volume), respectively.

following table shows the condensed financial results of the mortgage operations for the three and nine month periods ended September

30, 2023, and 2022.

These mortgage loans are serviced by either SecurityNational

Mortgage or an approved third-party sub-servicer.

rates have followed the US Treasury yields up in response to the increase inflation and the expectation that the Federal Reserve will

continue to raise rates in the near term.

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

classified as ‘refinance.’ Higher mortgage rates have also had a negative effect on loan originations classified as ‘purchases,’

although not as significant as those in the refinance classification.

the three month periods ended March 31, 2024 and 2023, SecurityNational Mortgage originated 1,486 loans ($465,605,000 total volume) and

1,702 loans ($531,868,000 total volume), respectively.

following table shows the condensed financial results of the mortgage operations for the three month periods ended March 31, 2024 and

See Note 7 to the condensed consolidated financial statements.

Three months ended September 30,

(in thousands of dollars)

Nine months ended September 30,

months ended March 31,

(in thousands of dollars)

Increase (Decrease)

% Increase (Decrease)

Revenues from external customers

Secondary gains from investors

Income from loan originations

Change in fair value of loans held for sale

Change in fair value of loan commitments

Net investment income

Gains on investments and other assets

Earnings (loss) before income taxes

in other revenues is service fee income.

Profitability for the nine month period ended September 30, 2023 decreased due to (a) a $48,411,000

decrease in secondary gains from investors, (b) a $13,170,000 decrease in other revenues, (c) a $2,651,000 decrease in income from loan

originations, (d) a $772,000 increase in intersegment interest expense and other expenses, (e) a $226,000 increase in rent and rent related

expenses, and (f) a $194,000 decrease in gains on investments and other assets, which were partially offset by (i) a $22,475,000 decrease

in commissions, (ii) a $14,426,000 decrease in personnel expenses, (iii) a $10,985,000 decrease in other expenses, (iv) a $7,257,000

increase in the fair value of loans held for sale, (v) a $2,152,000 decrease in interest expense, (vi) a $1,865,000 increase in the fair

value of loan commitments, (vii) a $1,009,000 decrease in costs related to funding mortgage loans, (viii) an $867,000 decrease in advertising

expenses, (ix) a $542,000 increase in net investment income, (x) a $140,000 increase in intersegment revenues, and (xi) an $18,000

decrease in depreciation on property and equipment.

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

Profitability

for the three month period ended March 31, 2024 increased due to (a) a $2,755,000 decrease in personnel expenses, (b) a $1,303,000 decrease

in other expenses, (c) a $896,000 decrease in commissions, (d) a $393,000 decrease in costs related to funding mortgage loans, (e) a

$382,000 decrease in rent and rent related expenses, (f) a $307,000 decrease in interest expense, (g) a $285,000 increase in income from

loan originations, (h) a $176,000 decrease in advertising expenses, (i) a $125,000 decrease in intersegment interest expense and other

expenses, (j) a $23,000 increase in intersegment revenues, and (k) a $17,000 decrease in depreciation on property and equipment, which

were partially offset by (i) a $3,186,000 decrease in secondary gains from investors, (ii) a $1,096,000 decrease in the fair value of

loans held for sale, (iii) a $175,000 decrease in other revenues, (iv) a $168,000 decrease in net investment income, and (v) a $116,000

decrease in the fair value of loan commitments.

Results of Operations

month period ended September 30, 2023, Compared to Three month period ended September 30, 2022

revenues decreased by $3,235,000, or 3.9%, to $80,242,000 for the three month period ended September 30, 2023, from $83,477,000 for the

month period ended March 31, 2024, Compared to Three month period ended March 31, 2023

revenues increased by $1,687,000, or 2.1%, to $81,188,000 for the three month period ended March 31, 2024, from $79,501,000 for the comparable

period in 2023.

Contributing to this increase in total revenues was a $2,172,000 increase in net investment income, a $1,885,000 increase

in insurance premiums and other considerations, a $1,558,000 increase in gains on investments and other assets, and a $477,000 increase

in net mortuary and cemetery sales, which were partially offset by a $247,000 decrease in other revenues and a $4,157,000 decrease in

mortgage fee income.

fee income decreased by $4,157,000, or 16.0%, to $21,832,000, for the three month period ended March 31, 2024, from $25,989,000 for the

comparable period in 2023.

Contributing to this decrease in total revenues was a $4,888,000 decrease in other revenues and a $3,672,000

decrease in mortgage fee income, which were partially offset by a $2,669,000 increase in insurance premiums and other considerations,

a $1,247,000 increase in gains on investments and other assets, a $764,000 increase in net mortuary and cemetery sales, and a $645,000

increase in net investment income.

fee income decreased by $3,672,000, or 12.8%, to $24,936,000, for the three month period ended September 30, 2023, from $28,608,000 for

the comparable period in 2022.

This decrease was primarily due to a $11,316,000 decrease in secondary gains from mortgage loans sold

to third-party investors into the secondary market due to the decline in origination activity because of increasing interest rates, which

was partially offset by a $4,023,000 increase in the fair value of loans held for sale, a $1,854,000 increase in loan fees and interest

income net of an increase in the provision for loan loss reserve and a $1,767,000 increase in the fair value of loan commitments.

premiums and other considerations increased by $2,669,000, or 10.2%, to $28,907,000 for the three month period ended September 30, 2023,

from $26,238,000 for the comparable period in 2022.

This increase was primarily due to an increase of $2,737,000 in first year premiums,

which was partially offset by a decrease of $68,000 in renewal premiums.

investment income increased by $645,000, or 3.5%, to $19,248,000 for the three month period ended September 30, 2023, from $18,603,000

This decrease was primarily due to a $3,230,000 decrease in secondary gains from mortgage loans sold to third-party

investors into the secondary market due to the decline in origination activity because of increasing interest rates, a $1,096,000 decrease

in the fair value of loans held for sale, and a $116,000 decrease in the fair value of loan commitments, which was partially offset by

a $285,000 increase in loan fees and interest income net of a decrease in the provision for loan loss reserve.

premiums and other considerations increased by $1,885,000, or 6.7%, to $29,852,000 for the three month period ended March 31, 2024, from

$27,967,000 for the comparable period in 2023.

This increase was primarily attributable to a $1,054,000 increase in fixed maturity securities income,

a $568,000 increase in interest on cash and cash equivalents, a $125,000 decrease in investment expenses, a $122,000 increase in insurance

assignment income, a $32,000 increase in other investment income, and a $28,000 increase in equity securities income, which were partially

offset by a $635,000 decrease in mortgage loan interest, a $627,000 decrease in real estate income, and a $22,000 decrease in policy

loan interest.

mortuary and cemetery sales increased by $764,000, or 11.8%, to $7,234,000 for the three month period ended September 30, 2023, from

This increase was primarily due to an increase of $1,645,000 in first year premiums and

an increase of $240,000 in renewal premiums.

investment income increased by $2,172,000, or 12.2%, to $19,947,000 for the three month period ended March 31, 2024, from $17,775,000

for the comparable period in 2023.

This increase was primarily due to a $771,000 increase in cemetery pre-need sales and a

$110,000 increase in cemetery at-need sales, which were partially offset by a $117,000 decrease in mortuary at-need sales.

on investments and other assets decreased by $1,247,000, or 57.2%, to $932,000 for the three month period ended September 30, 2023, from

This increase was primarily attributable to a $903,000 increase in interest on cash and cash equivalents,

$391,000 increase in fixed maturity securities income, a $326,000 increase in mortgage loan interest, a $308,000 increase in insurance

assignment income, a $150,000 increase in real estate income, a $101,000 increase in policy loan interest, a $70,000 increase in other

investment income, and a $28,000 increase in equity securities income, which were partially offset by a $105,000 increase in investment

mortuary and cemetery sales increased by $477,000, or 7.4%, to $6,948,000 for the three month period ended March 31, 2024, from $6,471,000

for the comparable period in 2023.

This decrease in losses on investments and other assets was primarily due to a $764,000

increase in gains on real estate, a $518,000 increase in gains on equity securities mostly attributable to increases in the fair value

of these equity securities, and a $25,000 increase in gains on fixed maturity securities, which were partially offset by a $60,000 decrease

This increase was primarily due to a $221,000 increase in cemetery pre-need sales, a $139,000 increase

in mortuary at-need sales, and a $117,000 increase in cemetery at-need sales.

on investments and other assets increased by $1,558,000, or 1401.9%, to $1,669,000 for the three month period ended March 31, 2024, from

$111,000 for the comparable period in 2023.

This increase in gains on investments and other assets was primarily due to a $1,203,000

increase in gains on equity securities mostly attributable to increases in the fair value of these equity securities, a $250,000 increase

in gains on real estate, and a $122,000 increase in gains on fixed maturity securities, which were partially offset by a $17,000 decrease

in gains on other assets mostly attributable to the Company discontinuing its use of call and put option derivatives in the first quarter

revenues decreased by $4,888,000, or 85.2%, to $849,000 for the three month period ended September 30, 2023, from $5,737,000 for the

comparable period in 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 $75,083,000, or 93.6% of total revenues, for the three month period ended September 30, 2023, as compared

to $86,780,000, or 104.0% of total revenues, for the comparable period in 2022.

revenues decreased by $247,000, or 20.8%, to $940,000 for the three month period ended March 31, 2024, from $1,187,000 for the comparable

period in 2023.

This decrease was primarily attributable to a decrease of $180,000 in servicing fee revenue due to a decrease in the

retention of mortgage servicing rights.

benefits and expenses were $71,569,000, or 88.2% of total revenues, for the three month period ended March 31, 2024, as compared to $77,916,000,

or 98.0% of total revenues, for the comparable period in 2023.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $409,000 or 1.6%, to $26,275,000

for the three month period ended September 30, 2023, from $22,724,000 for the comparable period in 2022.

This increase was primarily

the result of a $2,087,000 increase in future policy benefits, a $681,000 increase in death benefits, and a $130,000 increase in surrender

and other policy benefits.

for the three month period ended March 31, 2024, from $25,866,000 for the comparable period in 2023.

This increase was primarily the

result of a $1,291,000 increase in future policy benefits and an $83,000 increase in surrender and other policy benefits, which were

partially offset by a $965,000 decrease in death benefits.

of deferred policy and pre-need acquisition costs and value of business acquired decreased by $140,000, or 2.9%, to $4,744,000 for the

three month period ended September 30, 2023, from $5,062,000 for the comparable period in 2022.

three month period ended March 31, 2024, from $4,884,000 for the comparable period in 2023.

This decrease was primarily due to increased

payment consistency from premium-paying products.

general and administrative expenses decreased by $13,005,000, or 23.4%, to $42,652,000 for the three month period ended September 30,

general and administrative expenses decreased by $6,279,000, or 14.1%, to $38,248,000 for the three month period ended March 31, 2024,

from $44,527,000 for the comparable period in 2023.

This decrease was primarily the result of a $4,537,000 decrease in commissions,

a $4,158,000 decrease in personnel expenses, a $4,053,000 decrease in other expenses, a $378,000 decrease in advertising expense, a $46,000

decrease in depreciation on property and equipment, and a $23,000 decrease in rent and rent related expenses which were partially offset

by a $192,000 increase in costs related to funding mortgage loans.

expense decreased by $985,000, or 46.1%, to $1,152,000 for the three month period ended September 30, 2023, from $2,137,000 for the comparable

This decrease was primarily the result of a $2,107,000 decrease in personnel expenses,

a $1,692,000 decrease in commissions, a $1,495,000 decrease in other expenses, a $393,000 decrease in costs related to funding mortgage

loans, a $376,000 decrease in rent and rent related expenses, and a $216,000 decrease in advertising expense.

expense decreased by $426,000, or 29.3%, to $1,027,000 for the three month period ended March 31, 2024, from $1,453,000 for the comparable

period in 2023.

1 unchanged sentence

loans held for sale and a decrease of $119,000 in interest expense on bank loans.

month period ended September 30, 2023, Compared to Nine month period ended September 30, 2022

revenues decreased by $37,881,000, or 13.5%, to $243,589,000 for the nine month period ended September 30, 2023, from $281,470,000 for

the comparable period in 2022.

Contributing to this decrease in total revenues was a $41,979,000 decrease in mortgage fee income, a $13,389,000

decrease in other revenues, and a $52,000 decrease in net mortuary and cemetery sales, which were partially offset by a $7,427,000 increase

in net investment income, a $7,196,000 increase in insurance premiums and other considerations, and a $2,916,000 increase in gains on

investments and other assets.

fee income decreased by $41,979,000, or 35.3%, to $77,004,000, for the nine month period ended September 30, 2023, from $118,983,000

for the comparable period in 2022.

This decrease was primarily due to a $48,451,000 decrease in secondary gains from mortgage loans sold

to third-party investors into the secondary market due to the decline in origination activity because of increasing interest rates and

a $2,650,000 decrease in loan fees and interest income net of an increase in the provision for loan loss reserve, which were partially

offset by a $7,257,000 increase in the fair value of loans held for sale and a $1,865,000 increase in the fair value of loan commitments.

premiums and other considerations increased by $7,196,000, or 9.2%, to $85,687,000 for the nine month period ended September 30, 2023,

from $78,491,000 for the comparable period in 2022.

This increase was primarily due to an increase of $6,755,000 in first year premiums

and an increase of $441,000 in renewal premiums.

investment income increased by $7,427,000, or 14.9%, to $57,195,000 for the nine month period ended September 30, 2023, from $49,769,000

for the comparable period in 2022.

This increase was primarily attributable to a $3,762,000 increase in fixed maturity securities income,

a $1,953,000 increase in interest on cash and cash equivalents, a $1,008,000 decrease in investment expenses, a $583,000 increase in

real estate income, a $205,000 increase in income from other investments, a $116,000 increase in mortgage loan interest, and a $66,000

increase in equity securities income, which were partially offset by a $138,000 decrease in insurance assignment income and a $128,000

decrease in policy loan income.

mortuary and cemetery sales decreased by $52,000, or 0.3%, to $20,874,000 for the nine month period ended September 30, 2023, from $20,926,000

for the comparable period in 2022.

This decrease was primarily due to a $729,000 decrease in cemetery at-need sales and a $589,000 decrease

in mortuary at-need sales, which were partially offset by a $1,266,000 increase in cemetery pre-need sales.

on investments and other assets decreased by $2,916,000, or 99.8%, to $5,000 for the nine month period ended September 30, 2023, from

$2,921,000 for the comparable period in 2022.

This decrease in losses on investments and other assets was primarily due to a $4,011,000

decrease in losses on equity securities mostly attributable to increases in the fair value of these equity securities, which were partially

offset by a $439,000 increase in losses on fixed maturity securities, a $292,000 decrease in gains on other invested assets, a $238,000

decrease in gains on real estate, and a $126,000 decrease in gains on call and put option derivatives due to the Company discontinuing

is use of call and put option derivatives in the first quarter of 2023.

revenues decreased by $13,389,000, or 82.5%, to $2,832,000 for the nine month period ended September 30, 2023, from $16,221,000 for the

comparable period in 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 $228,696,000, or 93.9% of total revenues, for the nine month period ended September 30, 2023, as compared

to $275,599,000, or 97.9% of total revenues, for the comparable period in 2022.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $6,098,000 or 8.7%, to $76,394,000

for the nine month period ended September 30, 2023, from $70,296,000 for the comparable period in 2022.

This increase was primarily the

result of a $5,270,000 increase in future policy benefits and a $1,092,000 increase in death benefits, which were partially offset by

a $264,000 decrease in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $104,000, or 0.8%, to $13,615,000 for the

nine month period ended September 30, 2023, from $13,511,000 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 $51,346,000, or 28.2%, to $131,052,000 for the nine month period ended September 30,

2023, from $182,398,000 for the comparable period in 2022.

This decrease was primarily the result of a $22,426,000 decrease in commissions,

a $14,067,000 decrease in personnel expenses, a $12,136,000 decrease in other expenses, a $1,817,000 decrease in advertising expense,

a $1,009,000 decrease in costs related to funding mortgage loans, and a $114,000 decrease in depreciation on property and equipment,

which were partially offset by a $223,000 increase in rent and rent related expenses.

expense decreased by $1,744,000, or 30.3%, to $4,020,000 for the nine month period ended September 30, 2023, from $5,764,000 for the

comparable period in 2022.

This decrease was primarily due to a decrease of $2,152,000 in interest expense on mortgage warehouse lines

of credit for loans held for sale, which was partially offset by an increase of $408,000 in interest expense on bank loans.

and Capital Resources

8 unchanged sentences

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

As of September 30, 2023, the Company’s

subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under its Warehouse Lines of Credit and 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 $10,200,000 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.

the nine month periods ended September 30, 2023 and 2022, the Company’s operations provided cash of $18,384,000 and $109,318,000,

respectively.

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

As of March 31, 2024, the Company’s subsidiary

SecurityNational Mortgage was not in compliance with the net income covenants under its Warehouse Lines of Credit and 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 $6,963,000 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.

the three month periods ended March 31, 2024 and 2023, the Company’s operations provided cash of approximately $25,077,000 and

used cash of approximately $16,074,000, respectively.

The increase in cash provided by operations was due primarily to increased proceeds

from the sale of mortgage loans held for sale.

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

19 unchanged sentences

Bonds owned by the insurance

subsidiaries amounted to $341,252,000 (at estimated fair value) and $345,598,000 (at estimated fair value) as of September 30, 2023 and

December 31, 2022, respectively.

This represented 38.5% and 36.4% of the total investments of the Company as of September 30, 2023, and

December 31, 2022, respectively.

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

of Insurance Commissioners.

subsidiaries amounted to $360,314,000 (at estimated fair value) and $362,663,000 (at estimated fair value) as of March 31, 2024 and December

31, 2023, respectively.

This represented 38.5% and 38.7% of the total investments of the Company as of March 31, 2024 and December 31,

2023, 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.

As of September 30, 2023, 1.9%

(or $6,307,000) and as of 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.

As of March 31, 2024, 1.9% (or $7,042,000) and

as of December 31, 2023, 1.8% (or $6,954,000) of the Company’s total bond investments were invested in bonds in rating categories

three through six, which are considered non-investment grade.

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 September 30,

As of March 31, 2024

and December 31, 2023, the life insurance subsidiaries were in compliance with the regulatory criteria.

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $406,325,000 as of September 30,

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $424,439,000 as of March 31, 2024,

as compared to $418,450,000 as of December 31, 2023.

This decrease was primarily due to a decrease of $53,281,000 in bank loans

and other loans payable, which was partially offset by a $5,107,000 increase in stockholders’ equity.

Stockholders’ equity

as a percent of total capitalization was 73.3% and 64.4% as of September 30, 2023, and December 31, 2022, respectively.

This increase was primarily due to an increase of $7,209,000 in stockholders’

equity as partially offset by a decrease of $1,220,000 in bank loans and other loans payable.

Stockholders’ equity as a percent

of total capitalization was 75.4% and 74.8% as of March 31, 2024 and December 31, 2023, respectively.

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

2 unchanged sentences

The 2024 lapse rate to date has been approximately the same as 2023.

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $103,984,000 and $94,254,000 as of September

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $110,239,000 and $107,385,000 as of March

31, 2024, and December 31, 2023, respectively.

1 unchanged sentence

the approval of state insurance regulatory authorities.

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.

Quantitative and Qualitative Disclosures About Market Risk.

1 unchanged sentence

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