What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-31 · 172 added, 197 removed, 263 unchanged (58% of the section changed)

9 unchanged sentences

the Notes to Consolidated Financial Statements.

Years ended December 31

See Note 1 of the Notes to Consolidated Financial Statements regarding the adoption of

ended December 31

(in thousands of dollars)

2024 vs 2023 % Increase (Decrease)

% Increase (Decrease)

Revenues from external customers:

1 unchanged sentence

Net investment income

Mortgage fee income

Gains on investments and other assets

4 unchanged sentences

Profitability

for 2024 increased due to (a) a $4,998,000 increase in insurance premiums and other considerations, (b) a $3,301,000 decrease in

death, surrenders and other policy benefits, (c) a $2,323,000 decrease in amortization of deferred policy acquisition costs, (d) a

$1,092,000 increase in gains on investments and other assets, (e) a $443,000 increase in net investment income, and (f) a $354,000

decrease in interest expense, which were partially offset by (i) a $2,949,000 increase in income tax expense, (ii) a $2,929,000

increase in selling, general and administrative expenses, (iii) a $2,245,000 increase in future policy benefits, (iv) a $931,000

decrease in intersegment revenue, (v) a $102,000 decrease in other revenues, (vi) a $77,000 decrease in mortgage fee income, and

(vii) a $42,000 increase in intersegment interest expense and other expenses.

for 2025 increased due to (a) a $8,124,000 increase in net investment income, (b) a $1,174,000 increase in gains on investments and other

assets, (c) a $340,000 increase in other revenues, (d) a $219,000 decrease in intersegment expenses, and (e) a $101,000 increase in insurance

premiums and other considerations, which were partially offset by (i) a $6,134,000 increase in selling, general and administrative expenses,

(ii) a $711,000 increase in amortization of deferred policy acquisition costs, (iii) a $621,000 increase in income tax expense, (iv)

a $276,000 decrease in intersegment revenue, (v) a $205,000 increase in policyholder benefits and claims, and (vi) a $7,000 increase

in interest expense.

and Mortuary Operations

1 unchanged sentence

Note 20 of the Notes to Consolidated Financial Statements.

Years ended December 31

ended December 31

(in thousands of dollars)

2024 vs 2023 % Increase (Decrease)

% Increase (Decrease)

Revenues from external customers:

8 unchanged sentences

Profitability

in 2024 increased due to (a) a $1,140,000 increase in cemetery pre-need sales, (b) a $260,000 increase in mortuary at-need sales, (c)

a $156,000 increase in gains on investments and other assets, (d) a $139,000 increase in other revenues, and (e) a $26,000 decrease in

intersegment interest expense and other expenses, which were partially offset by (i) a $458,000 increase in selling, general and administrative

expenses, (ii) a $383,000 decrease in net investment income, (iii) a $239,000 increase in amortization of deferred policy acquisition

costs, (iv) a $228,000 decrease in cemetery at-need sales, and (v) a $96,000 increase in income tax expense.

in 2025 decreased due to (a) a $888,000 decrease in cemetery pre-need sales, (b) a $570,000 increase in selling, general and administrative

expenses, (c) a $223,000 decrease in net investment income, (d) an $8,000 increase in income tax expense, and (e) a $2,000 increase in

interest expense, which were partially offset by (i) a $526,000 increase in mortuary at-need sales, (ii) a $474,000 increase in gains

on investments and other assets, (iii) a $377,000 increase in other revenues, (iv) a $143,000 decrease in costs of goods and services

sold, (v) a $63,000 decrease in amortization of deferred policy acquisition costs, (vi) a $29,000 increase in cemetery at-need sales,

and (vii) a $29,000 decrease in intersegment expenses.

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

15 unchanged sentences

sub-servicer.

Treasury rates continue to remain elevated despite the downward trend in inflation data and the Federal Reserve’s action to reduce

This has resulted in higher-than-expected mortgage rates, which in turn has further decreased the demand for loan originations

classified as refinance.

The higher-than-expected mortgage rates have also continued to have a negative effect on loan originations classified

as purchases.

2024 and 2023, SecurityNational Mortgage originated 7,269 loans ($2,295,830,000 total volume) and 7,185 loans ($2,173,081,000 total volume),

respectively.

rates have followed the US Treasury yields in response to inflation and slowing new home sales.

As expected, the lack of mortgage rate

reductions has resulted in a decrease in loan originations classified as ‘refinance.’ Higher than anticipated mortgage rates

have also had a negative effect on loan originations classified as ‘purchases’ although not as significant as those in the

refinance classification.

2025, and 2024, SecurityNational Mortgage originated 6,844 loans ($2,296,055,000 total volume) and 7,269 loans ($2,295,830,000 total

volume), respectively.

following table shows the condensed financial results for the Company’s mortgage operations for 2025, and 2024.

See Note 15 of the

Notes to Consolidated Financial Statements.

Years ended December 31

See Note 20 of

the Notes to Consolidated Financial Statements.

ended December 31

(in thousands of dollars)

2024 vs 2023 % Increase (Decrease)

% Increase (Decrease)

Revenues from external customers:

Secondary gains from investors

Secondary gains

from investors

Income from loan originations

Change in fair value of loans held for sale

Change in fair value of loan commitments

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

Gains (losses) on investments and other assets

Other revenues

2 unchanged sentences

Segment net loss

in 2024 compared to 2023 decreased due to (a) a $4,251,000 decrease in other expenses, (b) a $3,348,000 increase in the fair value

of loans held for sale, (c) a $2,359,000 increase in income from loan originations, (d) a $2,177,000 decrease in personnel expenses,

(e) a $1,927,000 increase in secondary gains from investors, (f) a $1,854,000 increase in the fair value of loan commitments, (g) a

$1,729,000 decrease in rent and rent related expenses, (h) a $921,000 increase in other revenues, (i) a $904,000 decrease in

intersegment interest expense and other expenses, (j) a $330,000 decrease in advertising expenses, (k) a $306,000 decrease in costs

related to funding mortgage loans, (l) a $257,000 decrease in interest expense, (m) a $42,000 increase in intersegment revenues, and

(n) a $29,000 decrease in depreciation on property and equipment, which were partially offset by (i) a $7,410,000 increase in

commissions, (ii) a $2,717,000 increase in income tax expense, (iii) a $1,143,000 decrease in gains on investments and other assets,

and (iv) a $678,000 decrease in net investment income.

in 2025 compared to 2024 decreased due to (a) a $5,462,000 increase in secondary gains from investors, (b) a $3,076,000 decrease in personnel

expenses, (c) a $1,302,000 decrease in rent and rent related expenses, (d) a $1,046,000 increase in gains on investments and other assets,

(e) a $248,000 decrease in intersegment expenses, and (f) a $13,000 decrease in depreciation on property and equipment, which were partially

offset by (i) a $2,254,000 decrease in the fair value of loans held for sale, (ii) a $1,563,000 decrease in the fair value of loan commitments,

(iii) a $1,379,000 decrease in other revenues, (iv) a $994,000 decrease in income from loan originations, (v) an $845,000 increase in

commissions, (vi) an $833,000 increase in other expenses, (vii) a $488,000 increase in costs related to funding mortgage loans, (viii)

a $390,000 increase in advertising expenses, (iv) a $374,000 increase in income tax expense, (x) a $287,000 decrease in net investment

income, (xi) a $255,000 increase in interest expense, (xii) a $220,000 decrease in intersegment revenues, and (xiii) a $187,000 increase

in data processing and IT related expenses.

Accounting Policies and Estimates

2 unchanged sentences

See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information.

Five of these policies, discussed below, relate to

critical estimates because they require management to make difficult, subjective and complex judgments about matters that are inherently

uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.

of these policies, discussed below, relate to critical estimates because they require management to make difficult, subjective and complex

judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under

different conditions or using different assumptions.

Actual results could differ from those estimates.

2 unchanged sentences

Policy Benefits

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

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

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

life products, include a provision for adverse deviation.

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

products, these assumptions are generally held constant.

liability for future policy benefits is accrued as premium revenue is recognized, which is the present value of expected future

policy benefits to be paid to or on behalf of policyholders less the present value of expected future net premiums to be collected

from policyholders.

This liability is calculated using a discount rate assumption that is an upper-medium grade fixed-income

instrument yield as provided by Bloomberg’s Evaluated Pricing (“BVAL”) methodology.

This discount rate for a

particular cohort is locked-in when that cohort is closed to new contracts and is used for purposes of interest accretion for the

future policy benefits liability and is reflected in policyholder benefits and claims on the consolidated statements of earnings.

The current rate as of each reporting date is used to calculate an adjusted future

policy benefit liability and is recognized through accumulated other comprehensive income (“AOCI”).

Other assumptions include best-estimate

mortality and lapse rates that are based on the company’s historical experience, industry data, and other factors;

estimates of expected non-level costs, such as termination or settlement costs.

Routine policy maintenance costs are not included.

These assumptions are reviewed at least annually.

Any changes to these assumptions will be reflected in policyholder benefits and

claims on the consolidated statements of earnings.

The DPL equals accumulated deferrals (prior to and including the valuation

date) minus accumulated amortization, where “deferrals” equals the difference between gross and net premium, and

“amortization” equals the product of the measure of in force policies (units in force) and an amortization ratio which

is updated at the same time as the net premium ratio.

Acquisition Costs and Value of Business Acquired

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

gross profits or margins on this business.

Key assumptions used include the following:

yield on investments supporting the liabilities,

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

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

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

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

Such anticipated premium revenues are estimated using

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

policies are issued.

and other acquisition costs, net of commission and expense allowances for reinsurance ceded, that vary with and are primarily related

to the production of new insurance business that have been incurred are deferred.

For traditional long-duration life insurance products,

deferred policy acquisition costs (“DAC”) are amortized on a constant-level basis established on a cohort-grouped contract

basis over the expected term of the related contracts, with the amortization basis being units in force using assumptions consistent

with those used in computing the liability for future policy benefits.

For policyholder account balance insurance products, DAC is amortized

using the policy counts for annuities and units in-force for interest sensitive life products.

Deferred acquisition costs are written

off when policies terminate.

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

like deferred acquisition costs.

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

Deficiency and Loss Recognition Testing

least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA)

recorded for life insurance and annuity products.

The Company tests for recoverability by using the Company’s current best-estimate

assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns.

These tests evaluate whether

the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets.

These cash flows consist primarily

of premium income, less benefits, and expenses.

If the current contract liabilities plus the present value of future premiums is greater

than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium

reserve balances, then the capitalized assets are deemed recoverable.

The present values are calculated using the best estimate of the

after-tax net investment earned rate.

Company provides for losses on its mortgage loans held for sale through the mortgage loan loss reserve (a liability account).

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

mortgage loans sold to third-party investors.

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

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

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

The Company’s estimates

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

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

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

at loan sale.

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

This estimate

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

Subsequent updates to the

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

The estimated liability

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

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

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

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

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

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

the underlying mortgage loans.

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

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

the same way as DAC.

of Consolidated Operations

2 unchanged sentences

Contributing to this increase in total

revenues was primarily a $9,411,000 increase in mortgage fee income, a $4,997,000 increase in insurance premiums and other considerations,

a $1,172,000 increase in net cemetery and mortuary sales, a $958,000 increase in other revenues, and a $105,000 increase in gains on

investments and other assets.

This increase in total revenues was offset by a $618,000 decrease in net investment income.

revenues was primarily a $7,613,000 increase in net investment income, a $2,695,000 increase in gains on investments and other assets,

a $651,000 increase in mortgage fee income, and a $101,000 increase in insurance premiums and other considerations.

This increase in

total revenues was offset by a $662,000 decrease in other revenues and a $333,000 decrease in net cemetery and mortuary sales.

fee income increased by $651,000, or 0.6%, to $108,209,000 for 2025, from $107,558,000 for 2024.

This increase was primarily due to

a $5,202,000 increase in the fair value of loans held for sale and loan commitments, a $3,264,000 increase in loan fees and interest

income, a $1,850,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market.

This increase

in mortgage fee income was partially offset by a $905,000 increase in the provision for loan loss reserve.

This increase was primarily due to a

$5,462,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market.

This increase in

mortgage fee income was partially offset by a $3,817,000 decrease in the fair value of loans held for sale and loan commitments and a

$994,000 decrease in loan fees and interest income net of the provision for loan loss reserve.

premiums and other considerations increased by $101,000, or 0.1%, to $119,757,000 for 2025, from $119,656,000 for 2024.

This increase

was due to an increase of $2,555,000 in first year premiums because of increased preneed insurance sales and an increase of $2,442,000

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 decreased by $618,000, or 0.9%, to $71,725,000 for 2024, from $72,343,000 for 2023.

This decrease was primarily attributable

to a $3,416,000 decrease in rental income from real estate held for investment and a $3,290,000 decrease in mortgage loan interest.

decrease was partially offset by a $2,427,000 increase in interest on cash and cash equivalents, a $1,853,000 increase in insurance assignment

income, a $941,000 decrease in investment expenses, a $461,000 increase in fixed maturity securities income, a $189,000 increase in income

in other investments, a $137,000 increase in policy loan income, and an $82,000 increase in equity securities income.

mortuary and cemetery sales increased by $1,172,000, or 4.2%, to $29,037,000 for 2024, from $27,865,000 for 2023.

was primarily due to an increase of $2,564,000 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.

This increase was partially offset by a decrease of $2,463,000

in first year premiums because of decreased preneed insurance sales.

investment income increased by $7,613,000, or 10.6%, to $79,338,000 for 2025, from $71,725,000 for 2024.

This increase was primarily

due to a $1,140,000 increase in cemetery pre-need sales and a $260,000 increase in mortuary at-need sales.

This increase was partially

offset by a $228,000 decrease in cemetery at-need sales.

attributable to a $9,875,000 increase in mortgage loan interest, a $1,603,000 increase in fixed maturity securities income, a $928,000

increase in insurance assignment income, $258,000 increase in rental income from real estate held for investment, a $189,000 increase

in income in other investments, a $156,000 increase in equity securities income, and a $12,000 increase in policy loan income.

This increase

was partially offset by a $2,773,000 increase in investment expenses and a $2,635,000 decrease in interest on cash and cash equivalents.

mortuary and cemetery sales decreased by $333,000, or 1.1%, to $28,704,000 for 2025, from $29,037,000 for 2024.

This decrease was primarily

due to an $888,000 decrease in cemetery pre-need sales.

This decrease was partially offset by a $526,000 increase in mortuary at-need

sales and a $29,000 increase in cemetery at-need sales.

on investments and other assets increased by $2,695,000, or 138.8%, to $4,636,000 for 2025, from $1,942,000 for 2024.

This increase in gains

on investments and other assets was primarily due to a $614,000 increase in gains on real estate held for investment, a $234,000 increase

in gains on other assets, a $210,000 increase in gains on equity securities mostly attributable to increases in the fair value of these

equity securities, and a $208,000 increase in gains on fixed maturity securities.

This increase was partially offset by a $1,161,000

decrease in gains on mortgage loans held for investment.

revenues increased by $958,000, or 26.3%, to $4,604,000 for 2024 from $3,646,000 for 2023.

This increase was primarily attributable to

a $1,350,000 legal settlement, which was partially offset by a decrease of $392,000 in other miscellaneous revenues.

This increase in

gains on investments and other assets was primarily due to a $1,167,000 increase in gains on mortgage loans held for investment, an $864,000

increase in gains on real estate held for investment and sale, and an $856,000 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 $101,000 decrease in gains on fixed

maturity securities and a $91,000 decrease in gains on other investments and assets.

revenues decreased by $662,000, or 14.4%, to $3,942,000 for 2025 from $4,604,000 for 2024.

This decrease was primarily attributable to

a $1,350,000 legal settlement that was received in 2024, which was partially offset by an increase in other miscellaneous revenues in

benefits and expenses were $303,178,000, or 88.0% of total revenues for 2025, as compared to $297,149,000, or 88.8% of total revenues

benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $1,056,000, or 1.1%, to $98,956,000

for 2024, from $100,012,000 for 2023.

This decrease was primarily the result of a $3,274,000 decrease in death benefits and a $27,000

decrease in surrender and other policy benefits.

This decrease was partially offset by a $2,245,000 increase in future policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired decreased by $2,084,000, or 11.6%, to $15,940,000 for

benefits and claims increased by an aggregate of $205,000, or 0.2%, to $100,818,000 for 2025, from $100,613,000 for 2024.

This increase

was primarily the result of a $2,306,000 increase in death benefits and a $485,000 increase in surrender and other policy benefits.

increase was partially offset by a $2,586,000 decrease in future policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $648,000, or 5.9%, to $11,661,000 for 2025,

from $11,013,000 for 2024.

This decrease was primarily due to increased payment consistency from premium-paying products along

with a decrease in new business.

This increase is due to a $689,000 increase in the amortization of deferred policy and pre-need acquisition

costs due to an increase in the average outstanding balance.

This increase was partially offset by a $41,000 decrease in the amortization

of value of business acquired due to no new deferrals and a decreasing average outstanding balance.

general and administrative expenses increased by an aggregate of $5,055,000, or 2.9%, to $181,520,000 for 2025, from $176,465,000 for

This increase was primarily the result of a $7,043,000 increase in commissions, a $1,943,000 increase in personnel expenses, and

a $32,000 increase in depreciation on property and equipment.

This increase was partially offset by a $4,432,000 decrease in other expenses,

a $1,710,000 decrease in rent and rent related expenses, a $595,000 decrease in advertising expenses, and a $306,000 decrease in costs

related to funding mortgage loans.

expense decreased by $611,000, or 12.6%, to $4,254,000 for 2024, from $4,865,000 for 2023.

This decrease was primarily due to a decrease

of $354,000 in interest expense on bank loans and a decrease of $257,000 in interest expense on mortgage warehouse lines of credit for

loans held for sale.

This increase was primarily the result of a $3,370,000 increase in other expenses, a $2,067,000 increase in personnel expenses,

a $488,000 increase in costs related to funding mortgage loans, a $400,000 increase in advertising expenses, a $76,000 increase in commissions,

and a $42,000 increase in depreciation on property and equipment.

This increase was partially offset by a $1,386,000 decrease in rent

and rent related expenses.

expense increased by $265,000, or 6.2%, to $4,519,000 for 2025, from $4,254,000 for 2024.

This increase was primarily due to an increase

of $256,000 in interest expense on mortgage warehouse lines of credit for loans held for sale and an increase of $9,000 in interest expense

on bank loans.

tax expense increased by $1,002,000, or 12.1%, to $9,257,000 for 2025, from $8,255,000 for 2024.

This increase was primarily due to

an increase in earnings before income taxes for 2024 compared to 2023.

This increase was primarily due to an

increase in earnings before income taxes for 2025 compared to 2024.

The Company’s overall effective tax rate increased from 22.1%

for 2024 to 22.4% in 2025, a 0.3% increase in the effective tax rate or a 1.4% change.

This increase was partially due to the

prior period reducing the valuation allowance to zero and no valuation allowance adjustment in the current period.

This increase was partially due to an increase

in non-deductible items.

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

23 unchanged sentences

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

2024 and 2023 the Company increased its loan loss reserve by $150,000 and decreased its loan loss reserve by $1,178,000, respectively,

2025 and 2024 the Company decreased its loan loss reserve by $312,000 and increased its loan loss reserve by $150,000, respectively,

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

8 unchanged sentences

in foreclosure proceedings.

The Company has not received or recognized any interest income on the $11,400,000 in mortgage loans with

delinquencies exceeding 90 days.

During 2024 and 2023, the Company decreased its allowance for credit losses by $1,934,000 and increased

it by $1,184,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses for

The main reasons for the decrease in 2024 when compared to 2023 were due to a decrease in the commercial loan held for investment

portfolio, further refinement of the Company’s quantitative loss analysis and general market improvements related to the residential

mortgage loan held for investment single family portfolio.

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

for investment portfolio as of December 31, 2024 and 2023 were $1,885,000 and $3,819,000, respectively.

The Company has not received or recognized any interest income on the $6,516,000 in mortgage loans with delinquencies

exceeding 90 days.

During 2025 and 2024, the Company increased its allowance for credit losses by $704,000 and decreased it by $1,934,000,

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

main reasons for the increase in 2025 when compared to 2024 were due to an increase in the commercial loan held for investment portfolio

and in the residential construction loan held for investment portfolio.

The allowances for credit losses on the Company’s mortgage

loans held for investment portfolio as of December 31, 2025 and 2024 were $2,589,000 and $1,885,000, respectively.

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

36 unchanged sentences

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

of December 31, 2024, 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 $10,587,449 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.

of December 31, 2025, SecurityNational Mortgage was not in compliance with the net income covenant of the US Bank, Western Alliance

Bank and JP Morgan Chase Bank warehouse lines of credit.

SecurityNational Mortgage has since received waivers from each of these

lenders with respect to this covenant.

In the unlikely event the Company is required to repay the outstanding advances of

approximately $4,173,449 on the warehouse lines of credit, the Company has sufficient cash to do so.

The Company has also performed

an analysis of its funding capacities from both internal and external sources and has determined that there are sufficient funds to

continue its current business model.

The Company continues to negotiate other warehouse lines of credit with other lenders.

2025 and 2024, the Company’s operations provided cash of $45,540,000 and of $57,320,000, respectively.

The increase in cash provided

by operations was due primarily to the increase in net earnings.

The decrease in cash provided

by operations was due primarily to a decrease in proceeds from loans held for sale.

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

24 unchanged sentences

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 December 31, 2024, 2.4% (or $8,431,000) and as of December

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

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

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

As of December 31, 2025, 1.6% (or $5,825,000) and as

of December 31, 2024, 2.4% (or $8,431,000) 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

10 unchanged sentences

and 2024, 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 $445,758,000 as of December

31, 2024, as compared to $418,450,000 as of December 31, 2023.

This increase was primarily due to a $26,122,000 increase in stockholders’

equity and an increase of $1,185,000 in bank loans and other loans payable.

Stockholders’ equity as a percentage of total capitalization

was 76.1% and 74.8% as of December 31, 2024 and 2023, respectively.

Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable were $508,757,000 and $488,639,000

as of December 31, 2025 and 2024, respectively.

This increase was primarily due to a $28,470,000 increase in stockholders’ equity,

which was partially offset by a decrease of $8,352,000 in bank loans and other loans payable.

Stockholders’ equity as a percentage

of total capitalization was 80.7% and 78.2% as of December 31, 2025 and 2024, respectively.

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

44 unchanged sentences

As of December

31, 2024, the Company’s commitments were approximately $216,368,000 for these loans, of which $152,361,000 had been funded.

31, 2025, the Company’s commitments were approximately $201,220,000 for these loans, of which $158,908,000 had been drawn.

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

6 unchanged sentences

leases for office space, agreements with respect to borrowed funds and future policy benefits.

See Notes 7, 22, 24 of the Notes to Consolidated

Financial Statements for more information about these obligations.

See Notes 15, 16, and 24 of the Notes

to Consolidated Financial Statements for more information about these obligations.

Insurance Participation

8 unchanged sentences

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

See Note 10, “Reinsurance,

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

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.

See Note 24 of the

Notes to Consolidated Financial Statements for additional discussion of commitments associated with the insurance program.

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

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-K

Item 7. Management’s Discussion and Analysis