Security National Q3 earnings fall to $6.2M
For the first nine months, net cash provided by operating activities was $93.4 million, while revenue and net earnings were below 2025.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Security National Financial Corporation reported third-quarter total revenue of $79.9 million and net earnings of $6.2 million for the three months ended September 30, 2026, compared with $89.3 million and $10.0 million, respectively, in 2025. Diluted net earnings per Class A equivalent common share were $0.23, versus $0.38.
For the nine months ended September 30, 2026, revenue was $243.6 million, versus $261.6 million, and net earnings were $22.1 million, versus $24.8 million. Diluted net earnings per Class A equivalent common share were $0.82, versus $0.93. Net cash provided by operating activities was $93.4 million, compared with $27.6 million in 2025.
At September 30, 2026, cash and cash equivalents were $195.8 million, compared with $102.3 million at December 31, 2025; bank and other loans payable were $139.5 million, versus $98.4 million. The company cites remediation of a material weakness in internal control over financial reporting as a risk.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Hollow bars mark forward-looking points. How the balance works
Positive
- Moderate pointNine-month operating cash flow was $93.4 million, versus $27.6 million in 2025.
Negative
- Major point. Forward-looking: it has not happened yet and may not happen.Material weakness remediation in internal control over financial reporting is cited as a risk.
- Moderate pointThird-quarter revenue was $79.9 million, versus $89.3 million in 2025.
- Moderate pointThird-quarter net earnings were $6.2 million, versus $10.0 million in 2025.
Filing Explained
The 2025 comparison figures were retrospectively adjusted after adoption of ASU 2018-12: the adjustment increased reported net earnings by
Key Figures
Key Terms
Allowance for credit losses financial
Interest rate remeasurement of future policy benefits financial
constant-level basis amortization financial
warehouse line borrowings financial
NAIC rating financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were SNFCA's third-quarter 2026 revenue and net earnings?
How did SNFCA perform in the first nine months of 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
or
For the transition period from _____ to ________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | |||
| Non-accelerated filer ☐ | Smaller reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No
As
of November 5, 2026, the registrant had
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements covered by Section 21E of the Securities Exchange Act of 1934 and, where applicable, Section 27A of the Securities Act of 1933. Statements other than statements of historical fact are forward-looking statements. Words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “plan,” “may,” “could,” “will,” “should,” “would,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements include statements regarding future operating performance, liquidity, financing, business strategy, mortgage origination activity, covenant compliance, waivers, renewals or replacement of mortgage warehouse lines of credit, remediation of internal control over financial reporting, expected future events, and assumptions underlying those statements. These statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include, among others, (i) competition and the Company’s ability to attract and retain customers; (ii) changes in laws, regulations and tax treatment affecting the Company’s businesses; (iii) changes in interest rates and their effect on investment income, investment values, interest expense and policy liabilities; (iv) the Company’s liquidity, including compliance with covenants under, and the renewal, waiver or replacement of, its mortgage warehouse lines of credit; (v) mortgage origination volumes, secondary market pricing and loan repurchase demands; (vi) the credit quality of the Company’s mortgage loans and deterioration in real estate markets; (vii) mortality, morbidity and lapse experience, medical costs and the adequacy of reinsurance; (viii) higher operating and information systems expenses; (ix) the Company’s ability to remediate the material weakness in internal control over financial reporting; and (x) the loss of key personnel, rating changes, and litigation, including claims relating to sales practices and claim denials. Additional factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, and in the Company’s other filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date of this report, and readers should not place undue reliance on them. Except as required by law, the Company undertakes no obligation to update or revise any forward-looking statement.
| 2 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2026
Table of Contents
| Page No. | ||
| Part I - Financial Information | ||
| Item 1. | Financial Statements (Unaudited) (at September 30, 2026 and December 31, 2025 and for the Three and Nine Months Ended September 30, 2026 and 2025) | |
| Condensed Consolidated Balance Sheets | 4 | |
| Condensed Consolidated Statements of Earnings | 6 | |
| Condensed Consolidated Statements of Comprehensive Income | 7 | |
| Condensed Consolidated Statements of Stockholders’ Equity | 8 | |
| Condensed Consolidated Statements of Cash Flows | 10 | |
| Notes to Condensed Consolidated Financial Statements: | 12 | |
| Note 1 - Basis of Presentation and Recent Accounting Pronouncements | 12 | |
| Note 2 - Investments | 16 | |
| Note 3 - Loans Held for Sale | 38 | |
| Note 4 - Receivables | 40 | |
| Note 5 - Restricted Assets | 43 | |
| Note 6 - Cemetery Perpetual Care Trust Investments and Obligation | 46 | |
| Note 7 - Mortgage Servicing Rights | 49 | |
| Note 8 - Deferred Policy and Pre-need Contract Acquisition Costs, Value of Business Acquired, and Unearned Premium Reserve | 51 | |
| Note 9 - Derivative Instruments | 52 | |
| Note 10 - Future Policy Benefits and Unpaid Claims | 54 | |
| Note 11 - Policyholder Account Balances | 58 | |
| Note 12 - Reinsurance | 60 | |
| Note 13 - Income Taxes | 60 | |
| Note 14 - Equity | 61 | |
| Note 15 - Earnings Per Share | 63 | |
| Note 16 - Business Segment Information | 64 | |
| Note 17 - Fair Value of Financial Instruments | 69 | |
| Note 18 - Stock Compensation Plans | 76 | |
| Note 19 - Commitments and Contingencies | 79 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 81 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 87 |
| Item 4. | Controls and Procedures | 88 |
| Part II - Other Information | ||
| Item 1. | Legal Proceedings | 89 |
| Item 1A. | Risk Factors | 89 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 89 |
| Item 3. | Defaults Upon Senior Securities | 89 |
| Item 4. | Mine Safety Disclosures | 89 |
| Item 5. | Other Information | 90 |
| Item 6. | Exhibits | 90 |
| Signatures | 91 |
| 3 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Part I - Financial Information
| Item 1. | Financial Statements. |
| Assets | September
30, 2026 | December
31, 2025 | ||||||
| Investments: | ||||||||
| Fixed
maturity securities, available for sale, at estimated fair value (amortized cost of $ | $ | $ | ||||||
| Equity
securities at estimated fair value (cost of $ | ||||||||
| Mortgage
loans held for investment (net of allowance for credit losses of $ | ||||||||
| Real
estate held for investment (net of accumulated depreciation of $ | ||||||||
| Real estate held for sale | ||||||||
| Other
investments and policy loans (net of allowance for credit losses of $ | ||||||||
| Accrued investment income | ||||||||
| Total investments | ||||||||
| Cash and cash equivalents | ||||||||
| Loans held for sale at estimated fair value | ||||||||
| Receivables
(net of allowance for credit losses of $ | ||||||||
| Restricted
assets (including $ | ||||||||
| Cemetery
perpetual care trust investments (including $ | ||||||||
| Receivable from reinsurers | ||||||||
| Cemetery land and improvements | ||||||||
| Mortgage servicing rights, net | ||||||||
| Property and equipment, net | ||||||||
| Deferred policy and pre-need contract acquisition costs | ||||||||
| Value of business acquired | ||||||||
| Goodwill | ||||||||
| Other | ||||||||
| Total Assets | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
| 4 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
| September
30, 2026 | December
31, 2025 | |||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities | ||||||||
| Future policy benefits and unpaid claims | $ | $ | ||||||
| Policyholder account balances | ||||||||
| Unearned premium reserve | ||||||||
| Bank and other loans payable | ||||||||
| Deferred pre-need funeral home and cemetery contract revenues | ||||||||
| Cemetery perpetual care obligation | ||||||||
| Accounts payable | ||||||||
| Other liabilities and accrued expenses | ||||||||
| Income taxes | ||||||||
| Total liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred
Stock - non-voting - $ | - | - | ||||||
| Class A: common stock - $ | ||||||||
| Class
B: non-voting common stock - $ | - | - | ||||||
| Class C: convertible common
stock - $ | ||||||||
| Common stock value | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive gain, net of taxes | ||||||||
| Retained earnings | ||||||||
| Treasury stock at cost - | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
| (1) |
See accompanying notes to condensed consolidated financial statements (unaudited).
| 5 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues: | ||||||||||||||||
| Insurance premiums and other considerations | $ | $ | $ | $ | ||||||||||||
| Mortgage fee income | ||||||||||||||||
| Net investment income | ||||||||||||||||
| Net funeral home and cemetery sales | ||||||||||||||||
| Gains on investments and other assets | ||||||||||||||||
| Other | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Benefits and expenses: | ||||||||||||||||
| Policyholder benefits and claims (including the impact of assumption updates to the liability for future policy benefits of nil and nil for the three and nine months ended September 30, 2026 and 2025, respectively) | ||||||||||||||||
| Amortization of deferred policy and pre-need acquisition costs and value of business acquired | ||||||||||||||||
| Selling, general and administrative expenses: | ||||||||||||||||
| Commissions | ||||||||||||||||
| Personnel | ||||||||||||||||
| Advertising | ||||||||||||||||
| Rent and rent related | ||||||||||||||||
| Depreciation on property and equipment | ||||||||||||||||
| Costs related to funding mortgage loans | ||||||||||||||||
| Other | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Cost of goods and services sold-funeral home and cemetery | ||||||||||||||||
| Total benefits and expenses | ||||||||||||||||
| Earnings before income taxes | ||||||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net earnings | $ | $ | $ | $ | ||||||||||||
| Net
earnings per Class A Equivalent common share (1) | $ | $ | $ | $ | ||||||||||||
| Net
earnings per Class A Equivalent common share-assuming dilution (1) | $ | $ | $ | $ | ||||||||||||
| Weighted-average
Class A equivalent common shares outstanding (1) | ||||||||||||||||
| Weighted-average
Class A equivalent common shares outstanding-assuming dilution (1) | ||||||||||||||||
| (1) |
See accompanying notes to condensed consolidated financial statements (unaudited).
| 6 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net earnings | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Unrealized gains (losses) on fixed maturity securities available for sale | $ | ( | ) | $ | ( | ) | ||||||||||
| Unrealized gains (losses) on restricted assets (1) | ( | ) | ( | ) | ||||||||||||
| Unrealized gains (losses) on cemetery perpetual care trust investments (1) | ( | ) | ||||||||||||||
| Interest rate remeasurement of future policy benefits | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income (loss), before income tax | ( | ) | ( | ) | ||||||||||||
| Income tax benefit (expense) | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income (loss), net of income tax | ( | ) | ( | ) | ||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||
| (1) |
See accompanying notes to condensed consolidated financial statements (unaudited).
| 7 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||||||||||
| Class A Common Stock | Class C Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total | ||||||||||||||||||||||
| December 31, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| Net earnings | - | - | - | - | - | |||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | |||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| Exercise of stock options | - | - | ||||||||||||||||||||||||||
| Vesting of restricted stock units | - | ( | ) | - | - | - | - | |||||||||||||||||||||
| Sale of treasury stock | - | - | - | - | ||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| March 31, 2026 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| Net earnings | - | - | - | - | - | |||||||||||||||||||||||
| Other comprehensive loss | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| Exercise of stock options | ( | ) | - | - | - | |||||||||||||||||||||||
| Vesting of restricted stock units | - | ( | ) | - | - | - | - | |||||||||||||||||||||
| Sale of treasury stock | - | - | - | - | ||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Conversion Class C to Class A | ( | ) | - | - | - | - | - | |||||||||||||||||||||
| Stock dividends | - | ( | ) | - | - | |||||||||||||||||||||||
| June 30, 2026 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| Net earnings | - | - | - | - | - | |||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | |||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| Vesting of restricted stock units | - | ( | ) | - | - | - | - | |||||||||||||||||||||
| Sale of treasury stock | - | - | - | - | ||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Conversion Class C to Class A | ( | ) | - | - | - | - | - | |||||||||||||||||||||
| Stock dividends | - | ( | ) | - | - | |||||||||||||||||||||||
| September 30, 2026 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| 8 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(Unaudited)
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||
| Class A Common Stock | Class C Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total | ||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| Net earnings | - | - | - | - | - | |||||||||||||||||||||||
| Other comprehensive loss | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| Exercise of stock options | ( | ) | - | - | ( | ) | ||||||||||||||||||||||
| Vesting of restricted stock units | - | ( | ) | - | - | - | - | |||||||||||||||||||||
| Sale of treasury stock | - | - | - | - | ||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| March 31, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| Net earnings | - | - | - | - | - | |||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | |||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| Vesting of restricted stock units | - | ( | ) | - | - | - | - | |||||||||||||||||||||
| Sale of treasury stock | - | - | - | - | ||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Conversion Class C to Class A | ( | ) | - | - | - | - | - | |||||||||||||||||||||
| Stock dividends | - | ( | ) | - | - | |||||||||||||||||||||||
| June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| Net earnings | - | - | - | - | - | |||||||||||||||||||||||
| Other comprehensive loss | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | - | |||||||||||||||||||||||
| Vesting of restricted stock units | - | ( | ) | - | - | - | - | |||||||||||||||||||||
| Sale of treasury stock | - | - | - | - | ||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||
| Conversion Class C to Class A | ( | ) | - | - | - | - | - | |||||||||||||||||||||
| Stock dividends | - | ( | ) | - | - | |||||||||||||||||||||||
| September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
| 9 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2026 | 2025 | |||||||
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net cash provided by operating activities | $ | $ | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of fixed maturity securities | ( | ) | ( | ) | ||||
| Sales, calls and maturities of fixed maturity securities | ||||||||
| Purchases of equity securities | ( | ) | ( | ) | ||||
| Sales of equity securities | ||||||||
| Purchases of restricted assets | ( | ) | ( | ) | ||||
| Sales, calls and maturities of restricted assets | ||||||||
| Purchases of cemetery perpetual care trust investments | ( | ) | ( | ) | ||||
| Sales, calls and maturities of perpetual care trust investments | ||||||||
| Mortgage loans held for investment, other investments and policy loans made | ( | ) | ( | ) | ||||
| Payments received for mortgage loans held for investment, other investments and policy loans | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Sales of property and equipment | ||||||||
| Purchases of real estate | ( | ) | ( | ) | ||||
| Sales of real estate | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Policyholder account balances - deposits | ||||||||
| Policyholder account balances - withdrawals | ( | ) | ( | ) | ||||
| Proceeds from stock options exercised | ||||||||
| Purchases of treasury stock | ( | ) | ( | ) | ||||
| Repayment of bank loans | ( | ) | ( | ) | ||||
| Proceeds from bank loans | - | |||||||
| Net change in warehouse line borrowings for loans held for sale | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash, cash equivalents, restricted cash and restricted cash equivalents | ( | ) | ||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period | ||||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Federal income taxes | ||||||||
| State income taxes | ||||||||
| Non Cash Operating, Investing and Financing Activities: | ||||||||
| Mortgage loans held for investment foreclosed into real estate held for sale | $ | $ | ||||||
| Transfer from restricted assets to cemetery perpetual care trust investments | - | |||||||
| Benefit plans funded with treasury stock | ||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | ||||||||
| Right-of-use assets obtained in exchange for finance lease liabilities | - | |||||||
| Transfer from fixed maturity securities available for sale to other investments | - | |||||||
| Loans held for sale foreclosed into real estate held for sale | - | |||||||
| Transfer of loans held for sale to mortgage loans held for investment | - | |||||||
| 10 |
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as shown in the condensed consolidated statements of cash flows are presented in the table below:
| September
30, 2026 | September
30, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted assets | ||||||||
| Cemetery perpetual care trust investments | ||||||||
| Total cash, cash equivalents, restricted cash and restricted cash equivalents | $ | $ | ||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements (unaudited).
| 11 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
1) Basis of Presentation and Recent Accounting Pronouncements
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Articles 8 and 10 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K (File Number 000-09341). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to adopt policies and make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. In applying these policies and estimates, the Company makes judgments that frequently require assumptions about matters that are inherently uncertain. Accordingly, significant estimates used in the preparation of the Company’s financial statements may be subject to significant adjustments in future periods. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining the liability for future policy benefits; those used in determining the value of loans held for sale; and those used in determining loan loss reserve. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.
Certain prior-period amounts related to accounting standards adopted have been reclassified to conform to the current-period presentation.
| 12 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
1) Basis of Presentation and Recent Accounting Pronouncements (Continued)
Recent Accounting Pronouncements
Accounting Standards Adopted in 2025
ASU No. 2018-12: “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts” — Issued in August 2018, ASU 2018-12 is intended to improve the timeliness of recognizing changes in the liability for future policy benefits on traditional long-duration contracts by requiring that assumptions be updated after contract inception and by modifying the rate used to discount future cash flows. The standard is aimed at improving the accounting for certain market-based options or guarantees associated with deposit or account balance contracts, simplifying amortization of deferred acquisition costs while improving and expanding required disclosures. In November 2020, ASU No. 2020-11: “Financial Services – Insurance (Topic 944): Effective Date and Early Application,” was issued. This ASU was issued to provide additional time for the implementation of ASU No. 2018-12 by deferring the effective date by one year. For smaller reporting companies, this update is effective for annual reporting periods beginning after December 15, 2024, and interim reporting periods beginning after December 15, 2025. On December 31, 2025, the Company adopted ASU No. 2018-12, using the modified retrospective approach, for changes to the liability for future policy benefits and deferred policy acquisition costs. The Company applied the guidance as of a transition date of January 1, 2024, and retrospectively adjusted prior period amounts to reflect the new guidance. The Company’s condensed consolidated financial statements are presented under the new guidance for reporting periods beginning January 1, 2024.
After adoption, cash flow assumptions, such as mortality, lapse, and expense, will be reviewed at least annually and, if necessary, they will be updated to reflect actual experience and current expectations in the calculation of the Company’s future policy benefits. Historically, cash flow assumptions were locked in at policy issuance and remained in place for the life of the business—even when material variances emerged between assumptions and actual experience—except in the case of a premium deficiency. Under the new guidance, net premiums are capped at 100 percent of gross premiums at the cohort level. Adoption of this standard also requires changes in the future treatment of the Company’s Deferred Acquisition Cost (“DAC”) asset.
Historically, the interest rate used to calculate the Company’s future policy benefits was set at policy issuance and remained in effect for the life of the policy. The Company used an expected investment portfolio rate of return based on a conservative experience assumption. The new guidance seeks to improve reporting on the financial impact associated with interest rate sensitivity. To accomplish this, future policy benefits are calculated using a discount rate based on an upper-medium-grade (A-rated) fixed income instrument.
The initial future policy benefit for each cohort is calculated using the original discount rate and then remeasured using the current discount rate curve. The original rate is used to determine interest accretion on the liability—which is included in net earnings—as well as to calculate the net premiums in both scenarios. The impact of remeasurement, from the original locked-in discount rate to the current rate, is reported as a component of the Company’s AOCI. This original discount rate is locked in at the cohort’s inception or at the Transition Date and will continue to be used in determining the impact on future net earnings associated with that contract.
DAC is used by insurance companies to defer costs related to acquiring insurance policies. Under the new guidance, amortization methods are simplified, and DAC for all insurance contracts will be subject to constant-level basis amortization over the lifetime of the policy. Historically, traditional life contracts were amortized in proportion to premiums over the expected premium-paying period. Additionally, shadow DAC is no longer reported.
The requirements of the new guidance did not impact capital and surplus or net income under statutory accounting practices, cash flows on the Company’s policies, or the underlying economics of the Company’s business.
| 13 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
1) Basis of Presentation and Recent Accounting Pronouncements (Continued)
The following tables present amounts as previously reported in 2025, the effect upon those amounts from the adoption of the new guidance under ASU No. 2018-12, and the resulting adjusted amounts that are reflected in the condensed consolidated financial statements included herein. The following tables only include those line items impacted by the adoption of the new guidance.
Schedule of Error Correction Prior Period Adjustments
| As Previously Reported | Effect of Change | As Currently Reported | As Previously Reported | Effect of Change | As Currently Reported | |||||||||||||||||||
| Condensed Consolidated Statements of Earnings: | Three Months Ended September 30, 2025 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||
| As Previously Reported | Effect of Change | As Currently Reported | As Previously Reported | Effect of Change | As Currently Reported | |||||||||||||||||||
| Benefits and expenses: | ||||||||||||||||||||||||
| Policyholder benefits and claims | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Amortization of deferred policy and pre-need acquisition costs and value of business acquired | ( | ) | ( | ) | ||||||||||||||||||||
| Total benefits and expenses | ( | ) | ( | ) | ||||||||||||||||||||
| Earnings before income taxes | ||||||||||||||||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net earnings | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net earnings per Class A equivalent common share (1) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Net earnings per Class A equivalent common share - assuming dilution (1) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (1) |
| As Previously Reported | Effect of Change | As Currently Reported | As Previously Reported | Effect of Change | As Currently Reported | |||||||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income: | Three Months Ended September 30, 2025 | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||
| As Previously Reported | Effect of Change | As Currently Reported | As Previously Reported | Effect of Change | As Currently Reported | |||||||||||||||||||
| Net earnings | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Other comprehensive income: | ||||||||||||||||||||||||
| Unrealized gains on fixed
maturity securities available for sale | ||||||||||||||||||||||||
| Interest rate remeasurement of future policy benefits | - | ( | ) | ( | ) | - | ( | ) | ( | ) | ||||||||||||||
| Other comprehensive income (loss), before income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Income tax benefit (expense) | ( | ) | ( | ) | ||||||||||||||||||||
| Other comprehensive income (loss), net of income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| As Previously Reported | Effect of Change | As Currently Reported | ||||||||||
| Condensed Consolidated Statements of Stockholders’ Equity: | Nine Months Ended September 30, 2025 | |||||||||||
| As Previously Reported | Effect of Change | As Currently Reported | ||||||||||
| Accumulated other comprehensive income | $ | $ | $ | |||||||||
| Retained earnings | ||||||||||||
| Total stockholders’ equity | $ | $ | $ | |||||||||
| 14 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
1) Basis of Presentation and Recent Accounting Pronouncements (Continued)
Accounting Standards Issued But Not Yet Adopted
ASU No. 2024-03: “Income Statement-Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” — Issued in November 2024, ASU 2024-03 requires public business entities to disclose, in the notes to the consolidated financial statements, specified information about certain expenses at each interim and annual reporting period. ASU 2024-03 requires disclosures about specific types of expenses (i.e., (a) purchases of inventory, (b) employee compensation, (c) depreciation and (d) intangible asset amortization) included in the expense captions presented on the face of the statement of earnings as well as disclosures about selling expenses. ASU 2024-03 does not change the requirements for the presentation of expenses on the statement of earnings. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Accordingly, the Company will adopt the standard commencing with its annual reporting period ending December 31, 2027. The Company is in the process of estimating the potential impact of this new standard on the consolidated financial statements.
ASU No. 2025-11: “Interim Reporting (Topic 270): Narrow-Scope Improvements” — Issued in December 2025, ASU 2025-11 clarifies the form, content, and disclosure requirements for interim financial statements and the application of Topic 270. The update differentiates requirements by entity type: SEC registrants must continue to follow SEC rules for condensed financial statements; non-SEC registrants may present either full or condensed statements, using either the ASU’s guidance or SEC-style condensed guidance; and not-for-profit entities follow the non-SEC model with additional presentation considerations specific to NFP reporting. The ASU also compiles a comprehensive list of required interim disclosures for condensed statements from across the Codification, supported by conforming edits, to improve usability (while not replacing underlying guidance). In addition, the ASU reinforces a disclosure principle requiring entities to provide interim disclosures for significant events or transactions that have had a material effect since the most recent year-end, such as changes in accounting principles, key estimates, financing arrangements, long-term contracts, or the reporting entity. The amendments are effective for public business entities for interim periods within annual periods beginning after December 15, 2027, with early adoption permitted. The guidance may be applied prospectively or retrospectively. The Company is in the process of estimating the potential impact of this new standard on the consolidated financial statements.
The Company has reviewed other recent accounting pronouncements and has determined that they will not significantly impact the Company’s results of operations or financial position.
| 15 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments
The Company’s investments as of September 30, 2026, are summarized as follows:
Schedule of Investments
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses (1) | Allowance for Credit Losses | Estimated Fair Value | ||||||||||||||||
| September 30, 2026: | ||||||||||||||||||||
| Fixed maturity securities, available for sale, at estimated fair value: | ||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | $ | $ | $ | ( | ) | $ | - | $ | ||||||||||||
| Obligations of states and political subdivisions | ( | ) | - | |||||||||||||||||
| Corporate securities including public utilities | ( | ) | ( | ) | ||||||||||||||||
| Mortgage-backed securities | ( | ) | ( | ) | ||||||||||||||||
| Redeemable preferred stock | - | ( | ) | - | ||||||||||||||||
| Total fixed maturity securities available for sale | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
| Equity securities at estimated fair value: | ||||||||||||||||||||
| Common stock: | ||||||||||||||||||||
| Industrial, miscellaneous and all other | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Total equity securities at estimated fair value | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Mortgage loans held for investment at amortized cost: | ||||||||||||||||||||
| Residential | $ | |||||||||||||||||||
| Development and construction | ||||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Less: Unamortized deferred loan fees, net | ( | ) | ||||||||||||||||||
| Less: Allowance for credit losses | ( | ) | ||||||||||||||||||
| Less: Net discounts | ( | ) | ||||||||||||||||||
| Total mortgage loans held for investment | $ | |||||||||||||||||||
| Real estate held for investment - net of accumulated depreciation: | ||||||||||||||||||||
| Residential | $ | |||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Total real estate held for investment | $ | |||||||||||||||||||
| Real estate held for sale: | ||||||||||||||||||||
| Residential | $ | |||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Total real estate held for sale | $ | |||||||||||||||||||
| Other investments and policy loans at amortized cost: | ||||||||||||||||||||
| Policy loans | $ | |||||||||||||||||||
| Insurance assignments | ||||||||||||||||||||
| Federal Home Loan Bank stock (2) | ||||||||||||||||||||
| Other investments | ||||||||||||||||||||
| Less: Allowance for credit losses for insurance assignments | ( | ) | ||||||||||||||||||
| Total other investments and policy loans | $ | |||||||||||||||||||
| Accrued investment income | $ | |||||||||||||||||||
| Total investments | $ | |||||||||||||||||||
| (1) |
| (2) |
| 16 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The Company’s investments as of December 31, 2025, are summarized as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses (1) | Allowance for Credit Losses | Estimated Fair Value | ||||||||||||||||
| December 31, 2025: | ||||||||||||||||||||
| Fixed maturity securities, available for sale, at estimated fair value: | ||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | $ | $ | $ | ( | ) | $ | - | $ | ||||||||||||
| Obligations of states and political subdivisions | ( | ) | - | |||||||||||||||||
| Corporate securities including public utilities | ( | ) | ( | ) | ||||||||||||||||
| Mortgage-backed securities | ( | ) | ( | ) | ||||||||||||||||
| Redeemable preferred stock | ( | ) | - | |||||||||||||||||
| Total fixed maturity securities available for sale | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
| Equity securities at estimated fair value: | ||||||||||||||||||||
| Common stock: | ||||||||||||||||||||
| Industrial, miscellaneous and all other | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Total equity securities at estimated fair value | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Mortgage loans held for investment at amortized cost: | ||||||||||||||||||||
| Residential | $ | |||||||||||||||||||
| Development and construction | ||||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Less: Unamortized deferred loan fees, net | ( | ) | ||||||||||||||||||
| Less: Allowance for credit losses | ( | ) | ||||||||||||||||||
| Less: Net discounts | ( | ) | ||||||||||||||||||
| Total mortgage loans held for investment | $ | |||||||||||||||||||
| Real estate held for investment - net of accumulated depreciation: | ||||||||||||||||||||
| Residential | $ | |||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Total real estate held for investment | $ | |||||||||||||||||||
| Real estate held for sale: | ||||||||||||||||||||
| Residential | $ | |||||||||||||||||||
| Commercial | ||||||||||||||||||||
| Total real estate held for sale | $ | |||||||||||||||||||
| Other investments and policy loans at amortized cost: | ||||||||||||||||||||
| Policy loans | $ | |||||||||||||||||||
| Insurance assignments | ||||||||||||||||||||
| Federal Home Loan Bank stock (2) | ||||||||||||||||||||
| Other investments | ||||||||||||||||||||
| Less: Allowance for credit losses for insurance assignments | ( | ) | ||||||||||||||||||
| Total policy loans and other investments | $ | |||||||||||||||||||
| Accrued investment income | $ | |||||||||||||||||||
| Total investments | $ | |||||||||||||||||||
| (1) |
| (2) | Includes $ |
| 17 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
There were no investments in fixed maturity securities or equity securities, aggregated by issuer, of more than 10% of shareholders’ equity (before net unrealized gains and losses on equity securities and fixed maturity securities) as of September 30, 2026, other than investments issued or guaranteed by the United States Government.
Fixed Maturity Securities
The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of September 30, 2026, and December 31, 2025. The fair values of fixed maturity securities that are actively traded are based on quoted market prices. For fixed maturity securities that are not actively traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements, are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit and maturity of the investments. The table below sets forth unrealized losses by duration with the fair value of the related fixed maturity securities.
Schedule of Fair Value of Fixed Maturity Securities
| Unrealized Losses for Less than Twelve Months | Fair Value | Unrealized Losses for More than Twelve Months | Fair Value | Total Unrealized Loss | Combined Fair Value | |||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||
| Corporate securities including public utilities | ||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||
| Redeemable preferred stock | ||||||||||||||||||||||||
| Totals | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Obligations of states and political subdivisions | ||||||||||||||||||||||||
| Corporate securities including public utilities | ||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||
| Redeemable preferred stock | - | - | ||||||||||||||||||||||
| Totals | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Relevant
holdings were comprised of 987 securities with fair values aggregating
| 18 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Evaluation of Allowance for Credit Losses
The Company evaluates its fixed maturity securities classified as available for sale on a quarterly basis to identify any potential credit losses. This evaluation includes a review of current ratings by the National Association of Insurance Commissioners (“NAIC”) and other industry rating agencies. Securities with NAIC rating of 1 or 2 are considered investment grade and are only reviewed for credit loss if current market data or recent company news could lead to a credit downgrade. Securities with NAIC ratings of 3 to 5 are considered non-investment grade and are evaluated for credit loss. The evaluation involves assessing all facts and circumstances surrounding each security including, but not limited to, historical values, interest payment history, projected earnings, and revenue growth rates as well as a review of the reason for a downgrade in the NAIC rating. Based on the analysis of a security that is rated 3 to 5, a determination is made whether the security will likely make payments in accordance with the terms of the financial instrument. Securities with a rating of 6 are automatically determined to be impaired, and a credit loss is recognized in earnings.
Where the decline in fair value of fixed maturity securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and the Company anticipates recovery of all contractual or expected cash flows, the Company does not consider these securities to have credit loss because the Company does not intend to sell these securities and it is not more likely than not the Company will be required to sell these securities before a recovery of amortized cost, which may be at maturity.
If the Company intends to sell a fixed maturity security or if it is more likely than not that the Company will be required to sell a security before recovery of its amortized cost basis, a credit loss has occurred and the difference between the amortized cost and the fair value that relates to the expected credit loss is recognized as a loss in earnings, included in gains (losses) on investments and other assets on the condensed consolidated statements of earnings.
If the Company does not intend to sell a fixed maturity security and it is less likely than not that the Company will be required to sell the security but the Company also does not expect to recover the entire amortized cost basis of the security, a credit loss is recognized in earnings for the amount of the expected credit loss with a corresponding allowance for credit losses as a contra-asset account. The credit loss is included in gains (losses) on investments and other assets on the condensed consolidated statements of earnings. The recognized credit loss is limited to the total unrealized loss on the security due to a change in credit.
Amounts due on available for sale fixed maturities that are deemed to be uncollectible are written off and removed from the allowance for credit loss. A write-off may also occur if the Company intends to sell a security or when it is more likely than not that the Company will be required to sell the security before the recovery of its amortized cost.
The Company does not calculate a credit loss allowance on accrued interest income, included in accrued investment income on the condensed consolidated balance sheets, as the Company writes off any accrued interest income to net investment income if the accrued but unpaid amount exceeds 90 days.
| 19 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Credit Quality Indicators
Based
on the NAIC securities designations, the Company had
Schedule of Credit Quality of Fixed Maturity Security Portfolio by NAIC Designation
| September 30, 2026 | December 31, 2025 | |||||||||||||||
| NAIC Designation | Amortized
Cost | Estimated
Fair Value | Amortized
Cost | Estimated
Fair Value | ||||||||||||
| 1 | $ | $ | $ | $ | ||||||||||||
| 2 | ||||||||||||||||
| 3 | ||||||||||||||||
| 4 | ||||||||||||||||
| 5 | - | - | - | - | ||||||||||||
| 6 | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The following tables present a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for sale for the three-month periods ended September 30, 2026, and 2025:
Schedule of Allowance for Credit Losses on Fixed Maturity Securities Available for Sale
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Three Months Ended September 30, 2026 | ||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Beginning balance - June 30, 2026 | $ | - | $ | - | $ | $ | $ | |||||||||||||
| Additions for credit losses not previously recorded | - | - | - | |||||||||||||||||
| Change in allowance on securities with previous allowance | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||
| Reductions for securities sold during the period | - | - | - | - | - | |||||||||||||||
| Reductions for securities with credit losses due to intent to sell | - | - | - | - | - | |||||||||||||||
| Write-offs charged against the allowance | - | - | - | - | - | |||||||||||||||
| Recoveries of amounts previously written off | - | - | - | - | - | |||||||||||||||
| Ending Balance - September 30, 2026 | $ | - | $ | - | $ | $ | $ | |||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Three Months Ended September 30, 2025 | ||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Beginning balance - June 30, 2025 | $ | - | $ | - | $ | $ | $ | |||||||||||||
| Additions for credit losses not previously recorded | - | - | - | |||||||||||||||||
| Change in allowance on securities with previous allowance | - | - | - | - | - | |||||||||||||||
| Reductions for securities sold during the period | - | - | - | - | - | |||||||||||||||
| Reductions for securities with credit losses due to intent to sell | - | - | - | - | - | |||||||||||||||
| Write-offs charged against the allowance | - | - | - | - | - | |||||||||||||||
| Recoveries of amounts previously written off | - | - | - | - | - | |||||||||||||||
| Ending Balance - September 30, 2025 | $ | - | $ | - | $ | $ | $ | |||||||||||||
| 20 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The following tables present a roll forward of the Company’s allowance for credit losses on fixed maturity securities available for sale for the nine-month periods ended September 30, 2026, and 2025:
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Beginning balance - December 31, 2025 | $ | - | $ | - | $ | $ | $ | |||||||||||||
| Additions for credit losses not previously recorded | - | - | ||||||||||||||||||
| Change in allowance on securities with previous allowance | - | - | ( | ) | ||||||||||||||||
| Reductions for securities sold during the period | - | - | - | - | - | |||||||||||||||
| Reductions for securities with credit losses due to intent to sell | - | - | - | - | - | |||||||||||||||
| Write-offs charged against the allowance | - | - | - | - | - | |||||||||||||||
| Recoveries of amounts previously written off | - | - | - | - | - | |||||||||||||||
| Ending Balance - September 30, 2026 | $ | - | $ | - | $ | $ | $ | |||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | Obligations of states and political subdivisions | Corporate securities including public utilities | Mortgage-backed securities | Total | ||||||||||||||||
| Beginning balance - December 31, 2024 | $ | - | $ | - | $ | $ | $ | |||||||||||||
| Additions for credit losses not previously recorded | - | - | - | |||||||||||||||||
| Change in allowance on securities with previous allowance | - | - | - | |||||||||||||||||
| Reductions for securities sold during the period | - | - | - | - | - | |||||||||||||||
| Reductions for securities with credit losses due to intent to sell | - | - | - | - | - | |||||||||||||||
| Write-offs charged against the allowance | - | - | - | - | - | |||||||||||||||
| Recoveries of amounts previously written off | - | - | - | - | - | |||||||||||||||
| Ending Balance - September 30, 2025 | $ | - | $ | - | $ | $ | $ | |||||||||||||
The table below presents the amortized cost and the estimated fair value of fixed maturity securities available for sale as of September 30, 2026, by contractual maturity. Actual or expected maturities may differ from contractual maturities because certain securities afford the issuer the right to call or prepay their obligations.
Schedule of Investments Classified by Contractual Maturity Date
| Amortized
Cost | Estimated
Fair Value | |||||||
| Due in 1 year | $ | $ | ||||||
| Due in 2-5 years | ||||||||
| Due in 5-10 years | ||||||||
| Due in more than 10 years | ||||||||
| Mortgage-backed securities | ||||||||
| Redeemable preferred stock | ||||||||
| Total | $ | $ | ||||||
| 21 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Information regarding sales of fixed maturity securities available for sale is presented as follows.
Schedule of Major Categories of Net Investment Income
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Proceeds from sales | $ | $ | $ | $ | ||||||||||||
| Gross realized gains | ||||||||||||||||
| Gross realized losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Assets on Deposit, Held in Trust, and Pledged as Collateral
Assets on deposit with life insurance regulatory authorities as required by law were as follows:
Schedule of Assets on Deposit with Life Insurance
| As
of September 30, 2026 | As of December 31, 2025 | |||||||
| Fixed maturity securities available for sale at estimated fair value | $ | $ | ||||||
| Other investments | - | |||||||
| Cash and cash equivalents | ||||||||
| Total assets on deposit | $ | $ | ||||||
Assets held in trust related to third-party reinsurance agreements were as follows:
| As
of September 30, 2026 | As of December 31, 2025 | |||||||
| Fixed maturity securities available for sale at estimated fair value | $ | $ | ||||||
| Other investments | - | |||||||
| Cash and cash equivalents | ||||||||
| Total assets held in trust | $ | $ | ||||||
The Company, through two of its life insurance subsidiaries, is a member of the Federal Home Loan Banks of Des Moines and Dallas (“FHLBs”). Assets pledged as collateral with the FHLBs are presented below. These pledged securities are used as collateral for any FHLB cash advances. As of September 30, 2026, the Company owed nil to the FHLBs for advances. Amounts owed, if any, are included in Bank and other loans payable on the condensed consolidated balance sheets. The Company did not receive or repay any advances during the nine months ended September 30, 2026.
| As
of September 30, 2026 | As of December 31, 2025 | |||||||
| Fixed maturity securities available for sale at estimated fair value | $ | $ | ||||||
| Total assets pledged as collateral | $ | $ | ||||||
| 22 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Real Estate Held for Investment and Held for Sale
The Company strategically deploys resources into real estate assets to match the income and yield durations of its primary obligations. The sources for these real estate assets come through its various business units in the form of acquisition, development, and mortgage foreclosures.
Commercial Real Estate Held for Investment and Held for Sale
The Company owns, invests in and manages commercial real estate as a means of both generating investment income and providing workspace for its employees. This asset class is acquired in accordance with the Company’s goals and objectives for risk-adjusted returns. Due diligence is conducted on each asset using internal and third-party resources. The geographic locations and asset sub-classes of investments are determined by senior management under the direction of the Board of Directors.
The Company employs full-time employees to manage the day-to-day operations of its commercial real estate within the greater Salt Lake area and close surrounding markets. The Company utilizes third party property managers where the geographic location does not warrant full-time staff or through strategic lease-up periods. The Company generally acquires commercial real estate in connection with company acquisitions or those that are in regions that are expected to have high growth in employment and population and that provide operational efficiencies.
The Company currently owns and operates commercial properties in Utah, California, and Louisiana. These properties include office buildings, flex office space, and the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah. The Company uses bank debt in strategic cases, primarily where it is anticipated to improve yields, or facilitate the acquisition of higher quality assets or asset class diversification.
The
aggregate net book value of commercial real estate serving as collateral for bank loans was $
During the three and nine month periods ended September 30, 2026, and 2025, the Company did not record any impairment losses on commercial real estate held for investment or held for sale. Impairment losses, if any, are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.
During
the three-month periods ended September 30, 2026, and 2025, the Company recorded depreciation expense on commercial real estate held
for investment of $
The Company’s commercial real estate held for investment is summarized as follows as of the respective dates indicated:
Schedule of Commercial Real Estate Investment
| Net Book Value | Total Square Footage | |||||||||||||||
| September
30, 2026 | December 31, 2025 | September
30, 2026 | December 31, 2025 | |||||||||||||
| Utah (1) | $ | $ | ||||||||||||||
| Louisiana | ||||||||||||||||
| $ | $ | |||||||||||||||
| (1) |
| 23 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The Company’s commercial real estate held for sale is summarized as follows as of the respective dates indicated:
| Net Book Value | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| California | $ | $ | - | |||||
| Mississippi (1) | ||||||||
| $ | $ | |||||||
| (1) |
Commercial Real Estate Owned and Occupied by the Company
The primary business units of the Company occupy a portion of the real estate owned by the Company. As of September 30, 2026, real estate owned and occupied by the Company is summarized as follows:
Schedule of Real Estate Owned and Occupied by the Company
| Location | Business Segment | Approximate Square Footage | Square Footage Occupied by the Company | |||||||
| 433 Ascension Way, Floors 4, 5 and 6, Salt Lake City, UT - Center53 Building 2 (1) | Corporate Offices, Life Insurance, Funeral Home/Cemetery Operations, and Mortgage Operations and Sales | % | ||||||||
| 1818 Marshall Street, Shreveport, LA (2) (3) | Life Insurance Operations | % | ||||||||
| (1) |
| (2) |
| (3) |
Residential Real Estate Held for Investment and Held for Sale
The Company occasionally acquires residential homes through the mortgage loan foreclosure process. The Company has the option to sell these properties or to continue to hold them for expected cash flow and price appreciation. The Company also looks for opportunities to acquire land that can be developed into single family lots. Once developed, finished lots are sold to builder partners and others.
During
the three-month periods ended September 30, 2026, and 2025 the Company recorded impairment losses on residential real estate held for
sale nil and nil, respectively, and of $
During
the three-month periods ended September 30, 2026, and 2025, the Company recorded depreciation expense on residential real estate held
for investment of $
| 24 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The Company’s residential real estate held for investment is summarized as follows as of the respective dates indicated:
Schedule of Residential Real Estate Investment
| Net Book Value | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Utah (1) | $ | $ | ||||||
| $ | $ | |||||||
| (1) |
The Company also invests in residential subdivision developments. The following table presents additional information regarding the Company’s residential subdivision development projects in Utah:
| September 30, 2026 | December 31, 2025 | |||||||
| Lots developed | ||||||||
| Lots to be developed | ||||||||
| Book Value | $ | $ | ||||||
The Company’s residential real estate held for sale is summarized as follows as of the respective dates indicated:
| Net Book Value | ||||||||
| September 30, 2026 | December 31, 2025 | |||||||
| Utah | $ | $ | ||||||
| Arizona | - | |||||||
| Georgia | ||||||||
| Hawaii | - | |||||||
| Nevada | ||||||||
| Colorado | ||||||||
| Florida | - | |||||||
| $ | $ | |||||||
The
net book value of foreclosed residential real estate included in residential real estate held for sale was $
| 25 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Mortgage Loans Held for Investment
Mortgage
loans held for investment consist of first and second mortgages and are generally classified into three distinct groups: Commercial,
Residential and Development and Construction. These mortgage loans bear interest at rates ranging from
Concentrations of credit risk arise when several mortgage loan debtors have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Although the Company has a diversified mortgage loan portfolio consisting of residential mortgages, commercial loans and development and construction loans and requires collateral on all real estate exposures, a substantial portion of the relevant debtors’ ability to honor obligations is dependent upon the economic stability of the geographic region in which the debtors do business or are employed.
The following table presents the distribution of the Company’s mortgage loans held for investment across the various states.
Schedule of Mortgage Loans Held for Investment
| Commercial | Residential | Development and Construction | Total | |||||||||||||
| As of September 30, 2026: | ||||||||||||||||
| Utah | % | % | % | % | ||||||||||||
| Florida | - | % | - | % | ||||||||||||
| California | % | % | - | % | ||||||||||||
| Texas | % | % | - | % | ||||||||||||
| Arizona | % | % | - | % | ||||||||||||
| Other states | % | % | % | % | ||||||||||||
| Total | % | % | % | % | ||||||||||||
| As of December 31, 2025: | ||||||||||||||||
| Utah | % | % | % | % | ||||||||||||
| Florida | % | % | - | % | ||||||||||||
| California | % | % | - | % | ||||||||||||
| Texas | % | % | - | % | ||||||||||||
| Arizona | % | % | - | % | ||||||||||||
| Other states | % | % | % | % | ||||||||||||
| Total | % | % | % | % | ||||||||||||
Mortgage loans held for investment are carried at their unpaid principal balances adjusted for net deferred fees, charge-offs, premiums, discounts, and the related allowance for credit losses. Interest income is included in net investment income on the condensed consolidated statements of earnings and is recognized when earned. The Company defers related material loan origination fees, net of related direct loan origination costs, and amortizes the net fees over the terms of the loans. Origination fees are included in net investment income on the condensed consolidated statements of earnings.
Mortgage loans are secured by the underlying property and require an appraisal at the time of underwriting and funding. Generally, the Company requires that loans not exceed 80% of the fair market value of the respective loan collateral. Loans that exceed 80% of the fair market value of the respective loan collateral require additional collateral or mortgage insurance by an approved third-party insurer.
| 26 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Evaluation of Allowance for Credit Losses
The 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. The Company reports in net earnings, as a credit loss expense, the amount necessary to adjust the allowance for credit losses for the Company’s current estimate of expected credit losses on mortgage loans held for investment. This credit loss expense is included in other expenses on the condensed consolidated statements of earnings.
Once
a mortgage loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and reverse any
interest income that had been accrued and the fair value is reassessed. Accrual of interest resumes if a mortgage loan is brought current.
Given this policy, the Company does not measure a credit loss allowance on accrued interest receivable, which is included in accrued
investment income on the condensed consolidated balance sheets. Payments received for mortgage loans on a non-accrual status are recognized
when received. The interest income recognized from payments received for mortgage loans on a non-accrual status was immaterial. Interest
income not accrued on these loans totaled approximately $
The Company measures expected credit losses based on the fair value of the collateral when the Company determines that foreclosure is probable. When a mortgage loan becomes delinquent, the Company proceeds to foreclose. Once foreclosed, the property is classified as real estate held for investment or held for sale.
To determine the allowance for credit losses, the Company has segmented its mortgage loans held for investment into the following loan types: commercial, residential, and development and construction. The inherent risks within each loan type vary as follows:
Commercial - Underwritten in accordance with the Company’s policies to determine the borrower’s ability to repay the obligation as agreed. Commercial loans are made primarily based on the underlying collateral supporting the loan. Accordingly, the repayment of a commercial loan depends primarily on the collateral and its ability to generate income and secondarily on the borrower’s (or guarantor’s) ability to repay.
Commercial loans are evaluated for credit loss by analyzing common metrics that are predictors for future credit losses such as debt service coverage ratio (“DSCR”), loan to value (“LTV”), local market conditions, borrower quality, and underlying collateral. The fair value of the underlying collateral is based on a third-party appraisal of the property at origination of the loan. The Company uses these metrics to pool similar loans. The allowance for credit losses is based on estimates, historical experience, probability of loss, value of the underlying collateral, and other factors that affect the collectability of the loan. The Company applies a future loss factor to the outstanding balance of each group to arrive at the allowance for credit losses.
Residential — These loans are secured by first and second mortgages on single-family dwellings. The borrower’s ability to repay is sensitive to life events and the general economic condition of the region. Where LTV exceeds 80%, the loan is generally guaranteed by private mortgage insurance, the FHA, or VA.
Residential loans are evaluated for credit loss by using relevant available information from both internal and external sources. Among other things, the Company uses its historical delinquency information and considers current and forecasted economic conditions. External sources include a monthly analysis of its residential portfolio by a third party. The third party uses the Company’s current loan data and runs it through various models to project cash flows and provide a projected life of loan loss. The models consider loan features such as loan type, LTV, payment status, age, and current property values. Analyzing the information from various sources allows the Company to arrive at an allowance for credit losses.
Development and construction – These loans are underwritten in accordance with the Company’s underwriting policies, which include a financial analysis of the builders, borrowers (guarantors), construction cost estimates, and independent appraisal valuations, and factor in estimates of the value of construction projects upon completion. Construction loans generally involve the disbursement of substantial funds over a short period of time with repayment substantially dependent upon the success of the completed project and the ability of the borrower to secure long-term financing.
| 27 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Additionally, land acquisition and development loans are underwritten in accordance with the Company’s underwriting policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots. These loans are of a higher risk than other mortgage loans due to their ultimate repayment being sensitive to general economic conditions, availability of long-term or construction financing, and interest rate sensitivity.
The
Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements. As of September
30, 2026, the Company’s commitments were approximately $
Development and construction mortgage loans are evaluated for credit loss by considering historical activity and current housing market trends to arrive at a per loan basis point allowance that is recognized at loan origination and subsequent draws. The per loan basis point is reviewed at least annually or as loan losses or market trends require.
The following table presents a roll forward of the allowance for credit losses as of the dates indicated:
Schedule of Allowance for Loan Losses
| Three Months Ended | ||||||||||||||||
| Commercial | Residential | Development and Construction | Total | |||||||||||||
| Beginning balance - June 30, 2026 | $ | $ | $ | $ | ||||||||||||
| Change in provision for credit losses (1) | ||||||||||||||||
| Charge-offs | - | - | - | - | ||||||||||||
| Ending balance - September 30, 2026 | $ | $ | $ | $ | ||||||||||||
| Beginning balance - June 30, 2025 | $ | $ | $ | $ | ||||||||||||
| Change in provision for credit losses (1) | ( | ) | ||||||||||||||
| Charge-offs | - | - | - | - | ||||||||||||
| Ending balance - September 30, 2025 | $ | $ | $ | $ | ||||||||||||
| (1) |
| Nine Months Ended | ||||||||||||||||
| Commercial | Residential | Development and Construction | Total | |||||||||||||
| Beginning balance - December 31, 2025 | $ | $ | $ | $ | ||||||||||||
| Change in provision for credit losses (1) | ||||||||||||||||
| Charge-offs | ( | ) | - | - | ( | ) | ||||||||||
| Ending balance - September 30, 2026 | $ | $ | $ | $ | ||||||||||||
| Beginning balance - December 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Change in provision for credit losses (1) | ( | ) | ||||||||||||||
| Charge-offs | - | - | - | - | ||||||||||||
| Ending balance - September 30, 2025 | $ | $ | $ | $ | ||||||||||||
| (1) |
| 28 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The following table presents the aging of mortgage loans held for investment by loan type as of the dates indicated:
Schedule of Aging of Mortgage Loans
| Commercial | Residential | Development
and Construction | Total | |||||||||||||
| September 30, 2026 | ||||||||||||||||
| 30-59 days past due | $ | - | $ | $ | - | $ | ||||||||||
| 60-89 days past due | - | |||||||||||||||
| Over 90 days past due (1) | - | - | ||||||||||||||
| In process of foreclosure (1) | - | |||||||||||||||
| Total past due | ||||||||||||||||
| Current | ||||||||||||||||
| Total mortgage loans | ||||||||||||||||
| Allowance for credit losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unamortized deferred loan fees, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unamortized discounts, net | ( | ) | ( | ) | - | ( | ) | |||||||||
| Net mortgage loans held for investment | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | ||||||||||||||||
| 30-59 days past due | $ | $ | $ | - | $ | |||||||||||
| 60-89 days past due | - | - | ||||||||||||||
| Over 90 days past due (1) | - | |||||||||||||||
| In process of foreclosure (1) | - | |||||||||||||||
| Total past due | - | |||||||||||||||
| Current | ||||||||||||||||
| Total mortgage loans | ||||||||||||||||
| Allowance for credit losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unamortized deferred loan fees, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unamortized discounts, net | ( | ) | ( | ) | - | ( | ) | |||||||||
| Net mortgage loans held for investment | $ | $ | $ | $ | ||||||||||||
| (1) |
| 29 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Credit Quality Indicators
The Company evaluates and monitors the credit quality of its commercial loans by analyzing LTV and DSCR. Monitoring a commercial mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.
The aggregate unpaid principal balance of commercial mortgage loans by credit quality indicator and origination year was as follows as of September 30, 2026:
Schedule of Commercial and Residential Mortgage Loans By Credit Quality Indicator
| Credit Quality Indicator | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Total | % of Total | ||||||||||||||||||||||||
| LTV: | ||||||||||||||||||||||||||||||||
| Less than 65% | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| 65% to 80% | - | % | ||||||||||||||||||||||||||||||
| Greater than 80% | - | - | - | - | - | % | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| DSCR | ||||||||||||||||||||||||||||||||
| >1.20x | $ | - | $ | - | $ | $ | - | $ | - | $ | $ | % | ||||||||||||||||||||
| 1.00x - 1.20x | % | |||||||||||||||||||||||||||||||
| <1.00x | - | - | - | - | % | |||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
The aggregate unpaid principal balance of commercial mortgage loans by credit quality indicator and origination year was as follows as of December 31, 2025:
| Credit Quality Indicator | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total | % of Total | ||||||||||||||||||||||||
| LTV: | ||||||||||||||||||||||||||||||||
| Less than 65% | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| 65% to 80% | - | - | % | |||||||||||||||||||||||||||||
| Greater than 80% | - | - | - | - | - | % | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| DSCR | ||||||||||||||||||||||||||||||||
| >1.20x | $ | $ | $ | $ | - | $ | - | $ | $ | % | ||||||||||||||||||||||
| 1.00x - 1.20x | % | |||||||||||||||||||||||||||||||
| <1.00x | - | - | - | - | - | % | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| 30 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The Company evaluates and monitors the credit quality of its residential mortgage loans by analyzing LTV and loan performance. The Company defines non-performing mortgage loans as loans more than 90 days past due and on a non-accrual status. Monitoring a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.
The aggregate unpaid principal balance of residential mortgage loans by credit quality indicator and origination year was as follows as of September 30, 2026:
| Credit Quality Indicator | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Total | % of Total | ||||||||||||||||||||||||
| Performance Indicators: | ||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| Non-performing (1) | % | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| (1) |
| LTV: | ||||||||||||||||||||||||||||||||
| Less than 65% | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| 65% to 80% | % | |||||||||||||||||||||||||||||||
| Greater than 80% | % | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % |
The aggregate unpaid principal balance of residential mortgage loans by credit quality indicator and origination year was as follows as of December 31, 2025:
| Credit Quality Indicator | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Total | % of Total | ||||||||||||||||||||||||
| Performance Indicators: | ||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| Non-performing (1) | - | % | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| (1) |
| LTV: | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |||||||||||||||||||||||||||
| Less than 65% | $ | $ | $ | $ | $ | $ | $ | % | ||||||||||||||||||||||||
| 65% to 80% | % | |||||||||||||||||||||||||||||||
| Greater than 80% | - | % | ||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | % |
| 31 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The Company evaluates and monitors the credit quality of its development and construction loans by analyzing LTV and loan performance. Monitoring a development and construction mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment.
The aggregate unpaid principal balance of development and construction mortgage loans by credit quality indicator and origination year was as follows as of September 30, 2026:
Schedule of Residential Construction Mortgage Loans
| Credit Quality Indicator | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Total | % of Total | ||||||||||||||||||||||||
| Performance Indicators: | ||||||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | $ | - | $ | $ | % | |||||||||||||||||||||||
| Non-performing | - | - | - | - | - | - | - | % | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | - | $ | $ | % | |||||||||||||||||||||||
| LTV: | ||||||||||||||||||||||||||||||||
| Less than 65% | $ | $ | $ | $ | $ | - | $ | $ | % | |||||||||||||||||||||||
| 65% to 80% | - | - | - | % | ||||||||||||||||||||||||||||
| Greater than 80% | - | - | - | - | - | % | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | - | $ | $ | % | |||||||||||||||||||||||
The aggregate unpaid principal balance of development and construction mortgage loans by credit quality indicator and origination year was as follows as of December 31, 2025:
| Credit Quality Indicator | 2025 | 2024 | 2023 | 2022 | 2021 | Total | % of Total | |||||||||||||||||||||
| Performance Indicators: | ||||||||||||||||||||||||||||
| Performing | $ | $ | $ | $ | - | $ | $ | % | ||||||||||||||||||||
| Non-performing | - | - | - | - | - | - | % | |||||||||||||||||||||
| Total | $ | $ | $ | $ | - | $ | $ | % | ||||||||||||||||||||
| LTV: | ||||||||||||||||||||||||||||
| Less than 65% | $ | $ | $ | $ | - | $ | $ | % | ||||||||||||||||||||
| 65% to 80% | - | - | - | % | ||||||||||||||||||||||||
| Greater than 80% | - | - | - | - | % | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | - | $ | $ | % | ||||||||||||||||||||
| 32 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Insurance Assignments
The following table presents the aging of insurance assignments, included in other investments and policy loans on the condensed consolidated balance sheets:
Schedule of Aging of Insurance Assignments
As of September 30, 2026 | As of December 31, 2025 | |||||||
| 30-59 days past due | $ | $ | ||||||
| 60-89 days past due | ||||||||
| Over 90 days past due | ||||||||
| Total past due | ||||||||
| Current | ||||||||
| Total insurance assignments | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Net insurance assignments | $ | $ | ||||||
The Company records an allowance for credit losses when the insurance assignment is funded. Once an insurance assignment is 90 days past due or is in legal proceedings, it is monitored for write-off and collectability, and any adjustments to the allowance are recorded at that time.
| 33 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
The following table presents a roll forward of the allowance for credit losses for insurance assignments as of the dates indicated:
Schedule of Allowance for Credit Losses for Insurance Assignments
| Three Months Ended | ||||
| Beginning balance - June 30, 2026 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2026 | $ | |||
| Beginning balance - June 30, 2025 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2025 | $ | |||
| (1) |
| Nine Months Ended | ||||
| Beginning balance - December 31, 2025 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2026 | $ | |||
| Beginning balance - December 31, 2024 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2025 | $ | |||
| (1) |
| 34 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Variable Interest Entities (“VIE”)
The
Company has
The following table presents the carrying value of the investments as of the dates indicated:
Schedule of Carrying Value of Investments
As of September 30, 2026 | As of December 31, 2025 | |||||||
| HHH (1) | $ | $ | ||||||
| Oquirrh (1) | ||||||||
| Towns (2) | ||||||||
| Total | $ | $ | ||||||
| (1) |
| (2) |
The Company has determined that HHH, Oquirrh and Towns are VIEs for which the Company is not the primary beneficiary for the following reasons: (1) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest, (2) the Company does not direct the activities and legal operations that most significantly affect the entity’s economic performance and (3) the Company does not have majority voting rights and no power to unilaterally direct the activities of the entity, and therefore, is not the primary beneficiary. The Company’s exposure to loss because of its involvement with the equity method investees is limited to the carrying value of the Company’s investments.
| 35 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Investment Related Earnings
The following table presents the realized gains and losses from sales, calls, and maturities, and unrealized gains and losses on equity securities from investments and other assets:
Schedule of Gain (Loss) on Investments
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fixed maturity securities: | ||||||||||||||||
| Gross realized gains | $ | $ | $ | $ | ||||||||||||
| Gross realized losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net credit loss provision | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Equity securities: | ||||||||||||||||
| Losses on securities sold | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized gains on securities held at the end of the period | ||||||||||||||||
| Real estate held for investment and sale: | ||||||||||||||||
| Gross realized gains | ||||||||||||||||
| Gross realized losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other assets, including call option derivative liabilities: | ||||||||||||||||
| Gross realized gains | ||||||||||||||||
| Gross realized losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The realized gains and losses on the sale of securities are recorded on the trade date, and the cost of the securities sold is determined using the specific identification method.
Net
realized gains and losses include gains and losses from cemetery perpetual care trust investments and the restricted assets of cemeteries
and mortuaries and totaled $
| 36 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
2) Investments (Continued)
Major categories of net investment income were as follows:
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fixed maturity securities available for sale | $ | $ | $ | $ | ||||||||||||
| Equity securities | ||||||||||||||||
| Mortgage loans held for investment | ||||||||||||||||
| Real estate held for investment and sale | ||||||||||||||||
| Policy loans | ||||||||||||||||
| Insurance assignments | ||||||||||||||||
| Other investments | ||||||||||||||||
| Cash and cash equivalents | ||||||||||||||||
| Gross investment income | ||||||||||||||||
| Investment expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net investment income | $ | $ | $ | $ | ||||||||||||
Net
investment income includes income earned from cemetery perpetual care trust investments and the restricted assets of cemeteries and mortuaries
of $
Net investment income on real estate consists primarily of rental revenue. Investment expenses consist primarily of depreciation, property taxes, operating expenses of real estate, and an estimated portion of administrative expenses relating to investment activities.
Accrued Investment Income
Accrued investment income consists of the following:
Schedule of Accrued Investment Income
As of September 30, 2026 | As of December 31, 2025 | |||||||
| Fixed maturity securities available for sale | $ | $ | ||||||
| Equity securities | ||||||||
| Mortgage loans held for investment | ||||||||
| Real estate held for investment | ||||||||
| Other investments | ||||||||
| Cash and cash equivalents | ||||||||
| Total accrued investment income | $ | $ | ||||||
| 37 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
3) Loans Held for Sale
The Company’s loans held for sale portfolio is valued using the fair value option. Changes in the fair value of the loans are included in mortgage fee income. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on recognition of mortgage loan interest income and is included in mortgage fee income on the condensed consolidated statement of earnings. See Note 17 to the condensed consolidated financial statements for additional disclosures regarding loans held for sale.
The following table presents the aggregate fair value and the aggregate unpaid principal balance of loans held for sale:
Schedule of Aggregate Fair Value Loans Held for Sale
As of September 30, 2026 | As of December 31, 2025 | |||||||
| Aggregate fair value | $ | $ | ||||||
| Unpaid principal balance | ||||||||
| Unrealized gain | ||||||||
Mortgage Fee Income
Mortgage fee income consists of origination fees, processing fees, interest income, and other income related to the origination and sale of mortgage loans held for sale.
Major categories of mortgage fee income for loans held for sale are summarized as follows:
Schedule of Mortgage Fee Income for Loans Held for Sale
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Loan fees | $ | $ | $ | $ | ||||||||||||
| Interest income | ||||||||||||||||
| Secondary gains | ||||||||||||||||
| Change in fair value of loan commitments | ( | ) | ( | ) | ||||||||||||
| Change in fair value of loans held for sale | ( | ) | ( | ) | ||||||||||||
| Provision for loan loss reserve | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Mortgage fee income | $ | $ | $ | $ | ||||||||||||
| 38 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
3) Loans Held for Sale (Continued)
Loan Loss Reserve
Repurchase demands (“demand(s)”) from third party investors for mortgage loans previously held for sale and sold are reviewed, and relevant data is captured so that an estimated future loss can be calculated. The key factors that are used in the estimated future loss calculation are as follows: (i) lien position, (ii) payment status, (iii) claim type, (iv) unpaid principal balance, (v) interest rate, and (vi) validity of the demand. Other data is captured and is useful for management purposes; the actual estimated loss is generally based on these key factors. The Company conducts its own review upon the receipt of a demand. In many instances, the Company can resolve the issues relating to the demand by the third-party investor without having to make any payments to the investor.
The loan loss reserve, which is included in other liabilities and accrued expenses, is summarized as follows:
Summary of Loan Loss Reserve Included in Other Liabilities and Accrued Expenses
As of September 30, 2026 | As of December 31, 2025 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Provision on current loan originations (1) | ||||||||
| Additional provision (2) | - | |||||||
| Charge-offs, net of recaptured amounts | ( | ) | ( | ) | ||||
| Balance, end of period | $ | $ | ||||||
| (1) |
| (2) |
The
Company maintains reserves for estimated losses on current production volumes. For the three-month period ended September 30, 2026, $
| 39 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
4) Receivables
Receivables consist of the following:
Schedule of Receivable
As of September 30, 2026 | As of December 31, 2025 | |||||||
| Contracts with customers | $ | $ | ||||||
| Receivables from sales agents | ||||||||
| Insurance premiums due | ||||||||
| Other | ||||||||
| Total receivables | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Net receivables | $ | $ | ||||||
The Company records an allowance for credit losses for its receivables in accordance with GAAP.
The following table presents a roll forward of the allowance for credit losses as of the dates indicated:
Schedule of Allowance for Credit Losses
| Three Months Ended | ||||
| Beginning balance - June 30, 2026 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2026 | $ | |||
| Beginning balance - June 30, 2025 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2025 | $ | |||
| (1) |
| Nine Months Ended | ||||
| Beginning balance - December 31, 2025 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2026 | $ | |||
| Beginning balance - December 31, 2024 | $ | |||
| Change in provision for credit losses (1) | ||||
| Charge-offs | ( | ) | ||
| Ending balance - September 30, 2025 | $ | |||
| (1) |
| 40 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
4) Receivables (Continued)
Contracts with Customers
The Company reports revenues from contracts with customers pursuant to ASC No. 606, Revenue from Contracts with Customers.
Information about Performance Obligations and Contract Balances
The Company’s funeral home and cemetery segment sells a variety of goods and services to customers in both at-need and pre-need situations. Due to the timing of the fulfillment of the obligation, revenue is deferred until that obligation is fulfilled.
The Company’s two types of future obligations are as follows:
Pre-need Merchandise and Service Revenue: All pre-need merchandise and service revenue are deferred, and the funds are placed in trust until the need arises; the merchandise is received, or the service is performed. The trust is then relieved, and the revenue and commissions are recognized. Pre-need contracts are required to be paid in full prior to a customer using a good or service from a pre-need contract. Goods and services from pre-need contracts can be transferred when paid in full from one owner to another. In such cases, the Company will act as an agent in transferring the requested goods and services. The transfer of goods and services does not fulfill the contract and revenue remains deferred.
At-need Specialty Merchandise Revenue: At-need specialty merchandise revenue consists of customizable merchandise ordered from manufacturers such as markers and bases. When specialty merchandise is ordered, it can take time to manufacture and deliver the product. Revenue is deferred until the at-need merchandise is received.
Complete payment does not constitute fulfillment of the contract. Goods or services are deferred until such a time the service is performed, or merchandise is received.
The opening and closing balances of the Company’s receivables, contract assets and contract liabilities are as follows:
Schedule of Opening and Closing Balances of Receivables, Contract Assets and Contract Liabilities
| Contract Balances | ||||||||||||
| Receivables (1) | Contract Asset | Contract Liability | ||||||||||
| Opening (December 31, 2025) | $ | $ | - | $ | ||||||||
| Closing (September 30, 2026) | - | |||||||||||
| Increase/(decrease) | - | |||||||||||
| Contract Balances | ||||||||||||
| Receivables (1) | Contract Asset | Contract Liability | ||||||||||
| Opening (December 31, 2024) | $ | $ | - | $ | ||||||||
| Closing (December 31, 2025) | - | |||||||||||
| Increase/(decrease) | ( | ) | - | |||||||||
| (1) |
The
amount of revenue recognized and included in the opening contract liability balance for the three-month periods ended September 30, 2026,
and 2025 was $
| 41 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
4) Receivables (Continued)
The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment.
Disaggregation of Revenue
The following table disaggregates revenue for the Company’s funeral home and cemetery contracts:
Schedule of Revenues of the Cemetery and Mortuary Contracts
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Major goods/service lines | ||||||||||||||||
| At-need | $ | $ | $ | $ | ||||||||||||
| Pre-need | ||||||||||||||||
| Net mortuary and cemetery sales | $ | $ | $ | $ | ||||||||||||
| Timing of Revenue Recognition | ||||||||||||||||
| Goods transferred at a point in time | $ | $ | $ | $ | ||||||||||||
| Services transferred at a point in time | ||||||||||||||||
| Net mortuary and cemetery sales | $ | $ | $ | $ | ||||||||||||
| 42 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
5) Restricted Assets
The Company has also established certain restricted assets to provide for future merchandise and service obligations incurred in connection with its pre-need sales for its funeral home and cemetery segment.
Additionally, restricted cash represents escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds held by warehouse banks in accordance with loan purchase agreements and funds held in escrow for certain real estate construction development projects. Additionally, the Company elected to maintain its medical benefit fund without change from the prior year and has included this amount as a component of restricted cash. These restricted cash items are for the Company’s life insurance and mortgage segments.
Restricted assets as of September 30, 2026, are summarized as follows:
Schedule of Restricted Assets in Cemetery and Mortuary Endowment Care and Pre need Merchandise Funds
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| September 30, 2026: | ||||||||||||||||
| Fixed maturity securities, available for sale, at estimated fair value: | ||||||||||||||||
| Obligations of states and political subdivisions | $ | $ | $ | ( | ) | $ | ||||||||||
| Total fixed maturity securities available for sale | $ | $ | $ | ( | ) | $ | ||||||||||
| Equity securities at estimated fair value: | ||||||||||||||||
| Common stock: | ||||||||||||||||
| Industrial, miscellaneous and all other | $ | $ | $ | ( | ) | $ | ||||||||||
| Total equity securities at estimated fair value | $ | $ | $ | ( | ) | $ | ||||||||||
| Mortgage loans held for
investment at amortized cost: | ||||||||||||||||
| Development and construction | $ | |||||||||||||||
| Less: Allowance for credit losses | ( | ) | ||||||||||||||
| Total mortgage loans held for investment | $ | |||||||||||||||
| Other investments | $ | |||||||||||||||
| Cash and cash equivalents (1) | $ | |||||||||||||||
| Accrued investment income | $ | |||||||||||||||
| Total restricted assets | $ | |||||||||||||||
| (1) |
| 43 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
5) Restricted Assets (Continued)
Restricted assets as of December 31, 2025, are summarized as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| December 31, 2025: | ||||||||||||||||
| Fixed maturity securities, available for sale, at estimated fair value: | ||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | $ | $ | $ | - | $ | |||||||||||
| Obligations of states and political subdivisions | ( | ) | ||||||||||||||
| Corporate securities including public utilities | - | ( | ) | |||||||||||||
| Total fixed maturity securities available for sale | $ | $ | $ | ( | ) | $ | ||||||||||
| Equity securities at estimated fair value: | ||||||||||||||||
| Common stock: | ||||||||||||||||
| Industrial, miscellaneous and all other | $ | $ | $ | ( | ) | $ | ||||||||||
| Total equity securities at estimated fair value | $ | $ | $ | ( | ) | $ | ||||||||||
| Mortgage loans held for
investment at amortized cost: | ||||||||||||||||
| Development and construction | $ | |||||||||||||||
| Less: Allowance for credit losses | ( | ) | ||||||||||||||
| Total mortgage loans held for investment | $ | |||||||||||||||
| Other investments | $ | |||||||||||||||
| Cash and cash equivalents (1) | $ | |||||||||||||||
| Accrued investment income | $ | |||||||||||||||
| Total restricted assets | $ | |||||||||||||||
| (1) |
| 44 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
5) Restricted Assets (Continued)
Fixed Maturity Securities
The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of September 30, 2026, and December 31, 2025. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities.
Schedule of Fair Value of Fixed Maturity Securities
| Unrealized Losses for Less than Twelve Months | Fair Value | Unrealized Losses for More than Twelve Months | Fair Value | Total Unrealized Loss | Fair Value | |||||||||||||||||||
| At September 30, 2026 | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
| Total unrealized losses | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
| At December 31, 2025 | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
| Corporate securities including public utilities | - | - | ||||||||||||||||||||||
| Total unrealized losses | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
Relevant
holdings were comprised of three securities with fair values aggregating
The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of September 30, 2026, by contractual maturity. Actual or expected maturities may differ from contractual maturities because certain securities afford the issuer the right to call or prepay their obligations.
Schedule of Investments Classified by Contractual Maturity Date
| Amortized | Estimated Fair | |||||||
| Cost | Value | |||||||
| Due in 1 year | $ | $ | ||||||
| Due in 2-5 years | ||||||||
| Due in 5-10 years | - | - | ||||||
| Due in more than 10 years | - | - | ||||||
| Total | $ | $ | ||||||
See Notes 2 and 17 for additional information regarding restricted assets.
| 45 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
6) Cemetery Perpetual Care Trust Investments and Obligation
State law requires the Company to pay into endowment care trusts a portion of the proceeds from the sale of certain cemetery property interment rights for cemeteries that have established an endowment care trust. These endowment care trusts are defined as Variable Interest Entities pursuant to GAAP. The Company is the primary beneficiary of these trusts, as it absorbs both the losses and any expenses associated with the trusts. The Company has consolidated cemetery endowment care trust investments with a corresponding amount recorded as Cemetery Perpetual Care Obligation in the accompanying consolidated balance sheets.
The components of cemetery perpetual care investments and obligation as of September 30, 2026, are as follows:
Schedule of Investments and Obligation
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| September 30, 2026: | ||||||||||||||||
| Fixed maturity securities, available for sale, at estimated fair value: | ||||||||||||||||
| Obligations of states and political subdivisions | $ | $ | - | $ | ( | ) | $ | |||||||||
| Total fixed maturity securities available for sale | $ | $ | - | $ | ( | ) | $ | |||||||||
| Equity securities at estimated fair value: | ||||||||||||||||
| Common stock: | ||||||||||||||||
| Industrial, miscellaneous and all other | $ | $ | $ | ( | ) | $ | ||||||||||
| Total equity securities at estimated fair value | $ | $ | $ | ( | ) | $ | ||||||||||
| Mortgage loans held for
investment at amortized cost: | ||||||||||||||||
| Development and construction | $ | |||||||||||||||
| Less: Allowance for credit losses | ( | ) | ||||||||||||||
| Total mortgage loans held for investment | $ | |||||||||||||||
| Other investments | $ | |||||||||||||||
| Cash and cash equivalents | $ | |||||||||||||||
| Accrued investment income | $ | |||||||||||||||
| Total cemetery perpetual care trust investments | $ | |||||||||||||||
| Cemetery perpetual care obligation | $ | ( | ) | |||||||||||||
| Trust investments in excess of trust obligations | $ | |||||||||||||||
| 46 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
6) Cemetery Perpetual Care Trust Investments and Obligation (Continued)
The components of cemetery perpetual care investments and obligation as of December 31, 2025, are as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| December 31, 2025: | ||||||||||||||||
| Fixed maturity securities, available for sale, at estimated fair value: | ||||||||||||||||
| U.S. Treasury securities and obligations of U.S. Government agencies | $ | $ | $ | - | $ | |||||||||||
| Obligations of states and political subdivisions | - | ( | ) | |||||||||||||
| Total fixed maturity securities available for sale | $ | $ | $ | ( | ) | $ | ||||||||||
| Equity securities at estimated fair value: | ||||||||||||||||
| Common stock: | ||||||||||||||||
| Industrial, miscellaneous and all other | $ | $ | $ | ( | ) | $ | ||||||||||
| Total equity securities at estimated fair value | $ | $ | $ | ( | ) | $ | ||||||||||
| Mortgage loans held for investment at amortized cost: | ||||||||||||||||
| Development and construction | $ | |||||||||||||||
| Less: Allowance for credit losses | ( | ) | ||||||||||||||
| Total mortgage loans held for investment | $ | |||||||||||||||
| Cash and cash equivalents | $ | |||||||||||||||
| Other investments | $ | |||||||||||||||
| Accrued investment income | $ | |||||||||||||||
| Total cemetery perpetual care trust investments | $ | |||||||||||||||
| Cemetery perpetual care obligation | $ | ( | ) | |||||||||||||
| Trust investments in excess of trust obligations | $ | |||||||||||||||
| 47 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
6) Cemetery Perpetual Care Trust Investments and Obligation (Continued)
Fixed Maturity Securities
The table below summarizes unrealized losses on fixed maturity securities available for sale that were carried at estimated fair value as of September 30, 2026, and December 31, 2025. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:
Schedule of Fair Value of Fixed Maturity Securities
| Unrealized Losses for Less than Twelve Months | Fair Value | Unrealized Losses for More than Twelve Months | Fair Value | Total Unrealized Loss | Fair Value | |||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
| Totals | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| Obligations of states and political subdivisions | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
| Totals | $ | - | $ | - | $ | $ | $ | $ | ||||||||||||||||
Relevant
holdings were comprised of two securities with fair values aggregating
The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of September 30, 2026, by contractual maturity. Actual or expected maturities may differ from contractual maturities because certain securities afford the issuer the right to call or prepay their obligations.
Schedule of Investments Classified by Contractual Maturity Date
| Amortized | Estimated Fair | |||||||
| Cost | Value | |||||||
| Due in 1 year | $ | $ | ||||||
| Due in 2-5 years | ||||||||
| Due in 5-10 years | - | - | ||||||
| Due in more than 10 years | - | - | ||||||
| Total | $ | $ | ||||||
See Notes 2 and 17 for additional information regarding cemetery perpetual care trust investments.
| 48 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
7) Mortgage Servicing Rights
The Company initially records its MSRs at fair value. After being initially recorded at fair value, MSRs backed by mortgage loans are accounted for using the amortization method. Amortization expenses are included in other expenses on the condensed consolidated statements of earnings. MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets.
The Company periodically assesses MSRs for impairment. Impairment occurs when the current fair value of the MSR falls below the carrying value (carrying value is the amortized cost reduced by any related valuation allowance). If MSRs are impaired, the impairment is recognized in current-period earnings and the carrying value of the MSRs is adjusted through a valuation allowance.
The Company periodically reviews the various loan strata to determine whether the value of the MSRs in each stratum is impaired and likely to recover. If the Company deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance.
The following table presents the MSR balance and activity:
Schedule of Mortgage Servicing Rights
As of September 30, 2026 | As of December 31, 2025 | |||||||
| Amortized cost: | ||||||||
| Balance before valuation allowance at beginning of year | $ | $ | ||||||
| MSR additions resulting from loan sales (1) | ||||||||
| Amortization (2) | ( | ) | ( | ) | ||||
| Sale of MSRs | - | - | ||||||
| Application of valuation allowance to write down MSRs with other than temporary impairment | - | - | ||||||
| Balance before valuation allowance at end of period | $ | $ | ||||||
| Valuation allowance for impairment of MSRs: | ||||||||
| Balance at beginning of year | $ | - | $ | - | ||||
| Additions | - | - | ||||||
| Application of valuation allowance to write down MSRs with other than temporary impairment | - | - | ||||||
| Balance at end of period | $ | - | $ | - | ||||
| Mortgage servicing rights, net | $ | $ | ||||||
| Estimated fair value of MSRs at end of period | $ | $ | ||||||
| (1) |
| (2) |
| 49 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
7) Mortgage Servicing Rights (Continued)
The table below summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost. This projection was developed using the Company’s assumptions in its September 30, 2026, valuation of MSRs. The assumptions used in the following table are likely to change as market conditions, portfolio composition and borrower behavior change, causing both actual and projected amortization levels to change over time.
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense, Mortgage Servicing Rights
| Estimated MSR Amortization | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total | $ | |||
The Company collected the following contractual service fee income and late fee income as reported in other revenues on the condensed consolidated statement of earnings.
Schedule of Other Revenues
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Contractual service fees | $ | $ | $ | $ | ||||||||||||
| Late fees | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio.
Summary of Unpaid Principal Balances of the Servicing Portfolio
As of September 30, 2026 | As of December 31, 2025 | |||||||
| Servicing UPB | $ | $ | ||||||
The following key assumptions were used in determining MSR value:
Schedule of Assumptions Used in Determining MSR Value
| Prepayment Speeds | Average Life (Years) | Discount Rate | ||||||||||
| September 30, 2026 | ||||||||||||
| December 31, 2025 | ||||||||||||
| 50 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
8) Deferred Policy and Pre-need Contract Acquisition Costs, Value of Business Acquired, and Unearned Premium Reserve
Refer to Note 1 regarding the adoption of ASU 2018-12.
Deferred Policy and Pre-need Contract Acquisition Costs (“DAC”)
The following tables show a roll forward for the lines of business that contain DAC balances, along with a reconciliation to the Company’s total DAC balance:
Schedule of Roll Forward for the Lines of Business that Contain DAC Balances
| Traditional Life | Fixed Annuities | Universal Life | Accident and Health | Pre-need Contracts | Total | |||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | - | $ | $ | |||||||||||||||||
| Deferrals | - | - | ||||||||||||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | - | ( | ) | ( | ) | |||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | - | $ | $ | |||||||||||||||||
| Traditional Life | Fixed Annuities | Universal Life | Accident and Health | Pre-need Contracts | Total | |||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Deferrals | - | - | ||||||||||||||||||||||
| Amortization | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | - | $ | $ | |||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | - | $ | $ | |||||||||||||||||
Value of Business Acquired (“VOBA”)
The following tables show a roll forward for the lines of business that contain VOBA balances, along with a reconciliation to the Company’s total VOBA balance:
Schedule of Roll Forward for the Lines of Business That Contain VOBA Balances
| Traditional Life | Fixed Annuities | Universal Life | Accident and Health | Total | ||||||||||||||||
| Balance at December 31, 2025 | $ | $ | - | $ | $ | $ | ||||||||||||||
| Deferrals | - | - | - | - | - | |||||||||||||||
| Amortization | ( | ) | - | ( | ) | ( | ) | ( | ) | |||||||||||
| Balance at September 30, 2026 | $ | $ | - | $ | $ | $ | ||||||||||||||
| Traditional Life | Fixed Annuities | Universal Life | Accident and Health | Total | ||||||||||||||||
| Balance at December 31, 2024 | $ | $ | - | $ | $ | $ | ||||||||||||||
| Balance, beginning of period | $ | $ | - | $ | $ | $ | ||||||||||||||
| Deferrals | - | - | - | - | - | |||||||||||||||
| Amortization | ( | ) | - | ( | ) | ( | ) | ( | ) | |||||||||||
| Balance at September 30, 2025 | $ | $ | - | $ | $ | $ | ||||||||||||||
| Balance, end of period | $ | $ | - | $ | $ | $ | ||||||||||||||
Unearned Premium Reserve
The balance and the changes in Unearned Premium Reserve are as follows:
Schedule of Balance and the Changes in Unearned Premium Reserve
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Universal Life | Universal Life | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Deferrals | - | - | ||||||
| Amortization (1) | ( | ) | ( | ) | ||||
| Unearned premium reserve, end of period | $ | $ | ||||||
| (1) |
| 51 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
9) Derivative Instruments
Mortgage Banking Derivatives
Loan Commitments
The Company is exposed to price risk due to the potential impact of changes in interest rates on the values of loan commitments from the time a loan commitment is made to an applicant to the time the loan that would result from the exercise of that loan commitment is funded. Managing price risk is complicated by the fact that the ultimate percentage of loan commitments that will be exercised (i.e., the number of loans that will be funded) fluctuates. The probability that a loan will not be funded, or the loan application is denied or withdrawn within the terms of the commitment is driven by several factors, particularly the change, if any, in mortgage rates following the issuance of the loan commitment.
In general, the probability of funding increases if mortgage rates rise and decreases if mortgage rates fall. This is due primarily to the relative attractiveness of current mortgage rates compared to the applicant’s committed rate. The probability that a loan will not be funded within the terms of the mortgage loan commitment also is influenced by proximity to rate lock expiration, purpose for the loan (purchase or refinance), product type and the application approval status. The Company has developed fallout estimates using historical data that consider all the variables, as well as renegotiations of rate and point commitments that tend to occur when mortgage rates fall. These fallout estimates are used to estimate the number of loans that the Company expects to be funded within the terms of the loan commitments and are updated periodically to reflect the most current data.
The Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted mortgage-backed securities (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense. The change in fair value of the underlying mortgage loan is measured from the date the loan commitment is issued and is shown net of related expenses. Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of the underlying mortgage loans. Fallout rates and other factors from the Company’s recent historical data are used to estimate the quantity and value of mortgage loans that will be funded within the terms of the commitments.
Forward Sale Commitments
The Company utilizes forward commitments to economically hedge the price risk associated with its outstanding mortgage loan commitments. A forward commitment protects the Company from losses on sales of the loans arising from the exercise of the loan commitments. Management expects these types of commitments will experience changes in fair value in contrast to changes in fair value of the loan commitments, thereby reducing earnings volatility related to the recognition in earnings of changes in the values of the commitments.
The net changes in fair value of loan commitments and forward sale commitments are shown in current earnings as a component of mortgage fee income on the consolidated statements of earnings. Mortgage banking derivatives are shown in other assets and other liabilities and accrued expenses on the condensed consolidated balance sheets.
| 52 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
9) Derivative Instruments (Continued)
Call Option Derivatives
The Company, through a broker, sells call options (“options”) on certain equity securities it owns as a source of revenue. The options give the purchaser the right to buy from the Company specified equity securities at a set price up to a pre-determined date in the future. The liability for the options is adjusted to fair value at each reporting date. In the event an option is exercised, the Company sells the equity security at a favorable price enhanced by the value of the option that was sold. If the option expires unexercised, the Company recognizes a gain from the expired option. The net changes in the fair value of its options are shown in current earnings as a component of realized gains (losses) on investments and other assets. These options are shown in other liabilities and accrued expenses on the condensed consolidated balance sheets.
The following table shows the fair value and notional amounts of derivative instruments:
Schedule of Derivative Assets at Fair Value
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| Balance Sheet Location | Notional Amount | Asset Fair Value | Liability Fair Value | Notional Amount | Asset Fair Value | Liability Fair Value | ||||||||||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||
| Loan commitments | Other assets and Other liabilities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| Call options | Other liabilities | - | - | - | - | |||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
The table below presents the gains (losses) on derivatives. There were no gains or losses reclassified from accumulated other comprehensive income into income or gains or losses recognized in income on derivatives ineffective portion, or any amounts excluded from effective testing.
Schedule of Gains and Losses on Derivatives
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| Derivative | Classification | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Loan commitments | Mortgage fee income | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||
| Call options | Gains on investments and other assets | $ | ( | ) | $ | - | $ | ( | ) | $ | - | |||||||
| 53 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
10) Future Policy Benefits and Unpaid Claims
The Company establishes liabilities for amounts payable under insurance policies. These liabilities are comprised of traditional and limited-payment contracts and associated deferred profit liabilities, unpaid claims, and additional insurance liabilities. Also, refer to Note 1 regarding the adoption of ASU 2018-12.
The following table provides a reconciliation of future policy benefits and unpaid claims and the related receivable from reinsurers to the condensed consolidated balance sheets.
Schedule of Liability for Future Policy Benefits, by Product Segment
| September 30, 2026 | December 31, 2025 | |||||||
| Traditional and limited-payment life | $ | $ | ||||||
| Deferred profit liability - traditional and limited-payment life | ||||||||
| Payout annuities | ||||||||
| Accident and health | ||||||||
| Other policyholder funds | ||||||||
| Reported but unpaid claims | ||||||||
| Incurred but not reported claims | ||||||||
| Gross future policy benefits and unpaid claims | $ | $ | ||||||
| Receivable from reinsurers | ||||||||
| Traditional and limited-payment life | ||||||||
| Deferred profit liability - traditional and limited-payment life | ||||||||
| Accident and health | ||||||||
| Reported but unpaid claims | ||||||||
| Incurred but not reported claims | ||||||||
| Total receivable from reinsurers | ||||||||
| Net future policy benefits and unpaid claims | $ | $ | ||||||
| Net unpaid claims | $ | $ | ||||||
| 54 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
10) Future Policy Benefits and Unpaid Claims (Continued)
Traditional and Limited-Payment Life
The following table summarizes the balance of and changes in the liability for future policy benefits for traditional and limited-payment life:
Schedule of Balances of and Changes in the Liability for Future Policy Benefits
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Present Value of Expected Net Premiums: | ||||||||
| Balance, beginning of year | $ | $ | ||||||
| Beginning balance at original discount rate | ||||||||
| Effect of changes in cash flow assumptions | - | - | ||||||
| Effect of actual variances from expected experience (1) | ( | ) | ( | ) | ||||
| Adjusted beginning of year balance | ||||||||
| Issuances | ||||||||
| Interest accrual | ||||||||
| Net premiums collected (2) | ( | ) | ( | ) | ||||
| Ending balance at original discount rate | ||||||||
| Effect of changes in discount rate assumptions | ( | ) | ||||||
| Balance, end of period | $ | $ | ||||||
| Present Value of Expected Future Policy Benefits: | ||||||||
| Balance, beginning of year | $ | $ | ||||||
| Beginning balance at original discount rate | ||||||||
| Effect of changes in cash flow assumptions | - | - | ||||||
| Effect of actual variances from expected experience (1) | ( | ) | ( | ) | ||||
| Adjusted beginning of year balance | ||||||||
| Issuances | ||||||||
| Interest accrual | ||||||||
| Benefit payments | ( | ) | ( | ) | ||||
| Ending balance at original discount rate | ||||||||
| Effect of changes in discount rate assumptions | ( | ) | ( | ) | ||||
| Balance, end of period | $ | $ | ||||||
| Net liability for future policy benefits, pre-flooring | $ | $ | ||||||
| Flooring impact, end of period | ||||||||
| Net liability for future policy benefits, post-flooring | ||||||||
| Less: Receivable from reinsurers | ||||||||
| Net liability for future policy benefits, after reinsurance | $ | $ | ||||||
| (1) |
| (2) |
| 55 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
10) Future Policy Benefits and Unpaid Claims (Continued)
The following table summarizes the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for traditional and limited-payment life:
Schedule of Amount of Undiscounted and Discounted Expected Gross Premiums and Expected Future Benefit Payments
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Undiscounted expected future benefit payments | $ | $ | ||||||
| Discounted expected future benefit payments (at original discount rate) | ||||||||
| Discounted expected future benefit payments (at current discount rate) | ||||||||
| Undiscounted expected future gross premiums | $ | $ | ||||||
| Discounted expected future gross premiums (at original discount rate) | ||||||||
| Discounted expected future gross premiums (at current discount rate) | ||||||||
The following table summarizes the amount of gross premiums and interest accretion recognized in insurance premiums and other considerations and policyholder benefits and claims, respectively, in the condensed consolidated statements of earnings for traditional and limited-payment life:
Schedule of Gross Premiums and Interest Accretion
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Gross premiums | $ | $ | ||||||
| Interest accretion | $ | $ | ||||||
The following table summarizes the weighted-average interest rates for traditional and limited-payment life:
Schedule of Weighted-average Interest Rates
| As of September 30, | ||||||||
| 2026 | 2025 | |||||||
| Interest accretion rate | % | % | ||||||
| Current discount rate | % | % | ||||||
The following table summarizes the weighted-average duration of the liability for traditional and limited-payment life:
Schedule of Weighted Average Duration of the Liability
| As of September 30, | ||||||||
| 2026 | 2025 | |||||||
| Duration of the liability in years (at original discount rate) | ||||||||
| Duration of the liability in years (at current discount rate) | ||||||||
Adverse Development
For the three and nine months ended September 30, 2026 and 2025, respectively, there were no material impacts to net earnings for traditional and limited-payment life, where net premiums exceeded gross premiums for certain issue-year cohorts.
| 56 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
10) Future Policy Benefits and Unpaid Claims (Continued)
Deferred Profit Liability
The following table summarizes the balances of and changes in deferred profit liability for traditional and limited-payment life:
Schedule of Balances of and Changes in Deferred Profit Liability for Traditional and Limited- Payment Life
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Balance, beginning of year | $ | $ | ||||||
| Effect of actual variances from expected experience (1) | ( | ) | ( | ) | ||||
| Adjusted balance, beginning of period | ||||||||
| Profits deferred | ||||||||
| Interest accrual | ||||||||
| Amortization | ( | ) | ( | ) | ||||
| Other adjustments | - | - | ||||||
| Balance, end of period | ||||||||
| Less: Receivable from reinsurers | ||||||||
| Deferred profit liability, net of reinsurance | $ | $ | ||||||
| (1) |
Unpaid Claims
The following table provides a roll forward of the Company’s liability for reported but unpaid claims and incurred but not reported claims, net of the related receivable from reinsurers.
Schedule of Liability for Reported but Unpaid Claims and Incurred but not Reported Claims
| Life | Annuities | Accident and Health | Total | |||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ||||||||||||
| Incurred | (1) | (2) | (3) | |||||||||||||
| Settled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | ||||||||||||
| Life | Annuities | Accident and Health | Total | |||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Incurred | (1) | (2) | (3) | |||||||||||||
| Settled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ||||||||||||
| (1) |
| (2) |
| (3) |
| 57 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
11) Policyholder Account Balances
The Company establishes liabilities for policyholder account balances, which are generally equal to the account value, and which include interest credited.
The following table provides a reconciliation of policyholder account balances and the related receivable from reinsurers to the condensed consolidated balance sheets.
Schedule of Reconciliation of Policyholder Account Balances and the Related Receivable from Reinsurers to the Consolidated Balance Sheets
| September 30, 2026 | December 31, 2025 | |||||||
| Policyholder account balances - fixed annuities | $ | $ | ||||||
| Deferred profit liability - fixed annuities | ||||||||
| Policyholder account balances - universal life | ||||||||
| Gross policyholder account balances | $ | $ | ||||||
| Receivable from reinsurers | ||||||||
| Policyholder account balances - fixed annuities | ||||||||
| Total receivable from reinsurers | ||||||||
| Net policyholder account balances | $ | $ | ||||||
The following table summarizes the balances and changes in policyholder account balances for the lines of business indicated:
Schedule of Balances and Changes in Policyholder Account Balances
| Universal Life | Fixed Annuities | Universal Life | Fixed Annuities | |||||||||||||
| Nine Months Ended September 30, 2026 | Nine Months Ended September 30, 2025 | |||||||||||||||
| Universal Life | Fixed Annuities | Universal Life | Fixed Annuities | |||||||||||||
| Balance, beginning of year | $ | $ | $ | $ | ||||||||||||
| Deposits | ||||||||||||||||
| Interest credited | ||||||||||||||||
| Policy charges (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Surrenders, withdrawals and benefit payments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance, end of period | ||||||||||||||||
| Less: Receivable from reinsurers | - | - | ||||||||||||||
| Policyholder account balances, net of reinsurance | $ | $ | $ | $ | ||||||||||||
| Weighted-average crediting rate | % | % | % | % | ||||||||||||
| Net amount at risk (2) | N/A | N/A | ||||||||||||||
| Cash surrender value | ||||||||||||||||
| (1) |
| (2) |
The following table summarizes the balances of and changes in deferred profit liability for fixed annuities:
Schedule of Balances of and Changes in Deferred Profit Liability for Fixed Annuities
| 2026 | 2025 | |||||||
| Nine Months Ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Balance, beginning of year | $ | $ | ||||||
| Effect of actual variances from expected experience | - | - | ||||||
| Adjusted balance, beginning of period | ||||||||
| Profits deferred | - | - | ||||||
| Interest accrual | - | - | ||||||
| Amortization | ( | ) | ( | ) | ||||
| Other adjustments | - | - | ||||||
| Balance, end of period | ||||||||
| Less: Receivable from reinsurers | - | - | ||||||
| Deferred profit liability, net of reinsurance | $ | $ | ||||||
| 58 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
11) Policyholder Account Balances (Continued)
The balance of account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums for the lines of business indicated are as follows:
Schedule of Account Values by Range of Guaranteed Minimum Crediting Rates and the Related Range of Difference
| Range of Guaranteed Minimum Crediting Rate | At guaranteed minimum | 1-50 bps above guaranteed minimum | 51-150 bps above guaranteed minimum | Greater than 150 bps above guaranteed minimum | Total | |||||||||||||||
| September 30, 2026 | ||||||||||||||||||||
| Range of Guaranteed Minimum Crediting Rate | At guaranteed minimum | 1-50 bps above guaranteed minimum | 51-150 bps above guaranteed minimum | Greater than 150 bps above guaranteed minimum | Total | |||||||||||||||
| Universal Life | ||||||||||||||||||||
| Less than 1.00% | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| 1.00% - 1.99% | - | - | - | - | - | |||||||||||||||
| 2.00% - 2.99% | - | - | - | - | - | |||||||||||||||
| 3.00% - 4.00% | - | - | ||||||||||||||||||
| Greater than 4.00% | - | - | ||||||||||||||||||
| Total | $ | $ | $ | $ | - | $ | ||||||||||||||
| Fixed Annuities | ||||||||||||||||||||
| Less than 1.00% | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| 1.00% - 1.99% | - | - | ||||||||||||||||||
| 2.00% - 2.99% | - | |||||||||||||||||||
| 3.00% - 4.00% | ||||||||||||||||||||
| Greater than 4.00% | - | - | ||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| Range of Guaranteed Minimum Crediting Rate | At guaranteed minimum | 1-50 bps above guaranteed minimum | 51-150 bps above guaranteed minimum | Greater than 150 bps above guaranteed minimum | Total | |||||||||||||||
| September 30, 2025 | ||||||||||||||||||||
| Range of Guaranteed Minimum Crediting Rate | At guaranteed minimum | 1-50 bps above guaranteed minimum | 51-150 bps above guaranteed minimum | Greater than 150 bps above guaranteed minimum | Total | |||||||||||||||
| Universal Life | ||||||||||||||||||||
| Less than 1.00% | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| 1.00% - 1.99% | - | - | - | - | - | |||||||||||||||
| 2.00% - 2.99% | - | - | - | - | - | |||||||||||||||
| 3.00% - 4.00% | - | - | ||||||||||||||||||
| Greater than 4.00% | - | - | ||||||||||||||||||
| Total | $ | $ | $ | $ | - | $ | ||||||||||||||
| Fixed Annuities | ||||||||||||||||||||
| Less than 1.00% | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| 1.00% - 1.99% | - | - | ||||||||||||||||||
| 2.00% - 2.99% | - | |||||||||||||||||||
| 3.00% - 4.00% | ||||||||||||||||||||
| Greater than 4.00% | - | - | ||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||
| 59 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
12) Reinsurance
The
Company follows the procedure of reinsuring risks of more than a specified limit, which ranges from $
13) Income Taxes
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes provisions that allow for the immediate expensing of domestic research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign operations. OBBBA did not have a material impact on the Company’s estimated effective tax rate for 2025 and is not anticipated to have a material impact on the effective tax rate for 2026.
The
Company’s overall effective tax rate for the three-month periods ended September 30, 2026 and 2025 was
Interim income taxes are based on an estimated annualized effective tax rate applied to the respective quarterly periods, adjusted for discrete tax items in the period in which they occur. Although the Company believes its tax estimates are reasonable, the Company can make no assurance that the final tax outcome of these matters will not be different from that which it has reflected in its historical income tax provisions and accruals.
| 60 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
14) Equity
Capital Stock
The following table summarizes the activity in shares of capital stock.
Summary of Activities in Shares of Capital Stock
| Class A | Class C | |||||||
| Outstanding shares at December 31, 2025 (1) | ||||||||
| Exercise of stock options | ||||||||
| Vesting of restricted stock units | - | |||||||
| Conversion of Class C to Class A | ( | ) | ||||||
| Outstanding shares at September 30, 2026 (1) | ||||||||
| Outstanding shares at December 31, 2024 (1) | ||||||||
| Outstanding shares, beginning | ||||||||
| Exercise of stock options | ||||||||
| Vesting of restricted stock units | - | |||||||
| Conversion of Class C to Class A | ( | ) | ||||||
| Outstanding shares at September 30, 2025 (1) | ||||||||
| Outstanding shares, ending | ||||||||
| (1) |
Accumulated Other Comprehensive Income (Loss)
Refer to Note 1 regarding the adoption of ASU 2018-12.
The following table summarizes the changes in accumulated other comprehensive income (loss):
Schedule of Changes in Accumulated Other Comprehensive Income (Loss)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Unrealized gains (losses) on fixed maturity securities available for sale | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Amounts reclassified into net earnings | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net unrealized gains (losses) before taxes | ( | ) | ( | ) | ||||||||||||
| Tax (expense) benefit | ( | ) | ( | ) | ||||||||||||
| Net | ( | ) | ( | ) | ||||||||||||
| Unrealized gains (losses) on restricted assets (1) | ( | ) | ( | ) | ||||||||||||
| Tax (expense) benefit | ( | ) | ( | ) | ||||||||||||
| Net | ( | ) | ( | ) | ||||||||||||
| Unrealized gains (losses) on cemetery perpetual
care trust investments (1) | ( | ) | ||||||||||||||
| Tax (expense) benefit | ( | ) | ( | ) | ( | ) | ||||||||||
| Net | ( | ) | ||||||||||||||
| Interest rate remeasurement of future policy benefits | ( | ) | ( | ) | ||||||||||||
| Tax (expense) benefit | ( | ) | ( | ) | ||||||||||||
| Net | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income (loss) changes | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| (1) |
| 61 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
14) Equity (Continued)
The following table presents the accumulated balances of other comprehensive income (loss) as of September 30, 2026:
Schedule of Accumulated Balances of Other Comprehensive Income
| Beginning Balance December 31, 2025 | Change for the period | Ending
Balance September 30, 2026 | ||||||||||
| Unrealized gains (losses) on fixed maturity securities available for sale | $ | $ | ( | ) | $ | ( | ) | |||||
| Unrealized gains (losses) on restricted assets (1) | ( | ) | ( | ) | ||||||||
| Unrealized gains (losses) on cemetery perpetual care trust investments (1) | ( | ) | ( | ) | ||||||||
| Interest rate remeasurement of future policy benefits | ||||||||||||
| Other comprehensive income | $ | $ | $ | |||||||||
| (1) |
The following table presents the accumulated balances of other comprehensive income (loss) as of December 31, 2025:
| Beginning Balance December 31, 2024 | Change for the period | Ending
Balance December 31, 2025 | ||||||||||
| Unrealized gains (losses) on fixed maturity securities available for sale | $ | ( | ) | $ | $ | |||||||
| Unrealized gains (losses) on restricted assets (1) | ( | ) | ||||||||||
| Unrealized gains (losses) on cemetery perpetual care trust investments (1) | ( | ) | ( | ) | ||||||||
| Interest rate remeasurement of future policy benefits | $ | ( | ) | |||||||||
| Other comprehensive income (loss) | $ | $ | ( | ) | $ | |||||||
| (1) |
| 62 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
15) Earnings Per Share
Earnings per share have been retroactively adjusted for the effect of annual stock dividends. In accordance with GAAP, the basic and diluted earnings per share were calculated as follows:
Schedule of Earnings Per Share, Basic and Diluted
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net earnings | $ | $ | (1) | $ | $ | (1) | ||||||||||
| Denominator: | ||||||||||||||||
| Basic weighted-average shares outstanding | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Employee stock options | ||||||||||||||||
| Unvested restricted stock units | - | - | ||||||||||||||
| Diluted weighted-average shares outstanding | ||||||||||||||||
| Basic net earnings per share | $ | $ | $ | $ | ||||||||||||
| Diluted net earnings per share | $ | $ | $ | $ | ||||||||||||
| (1) |
For
the nine-month periods ended September 30, 2026, and 2025, there were
| 63 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
16) Business Segment Information
Description of Products and Services by Segment
The
Company has identified
Services and Cost Sharing Policies
The accounting policies of the Company’s operating and reportable segments are the same as those described in Part II, Item 8, Note 1 - Significant Accounting Policies of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Intersegment revenues are recorded at cost plus an agreed upon intercompany profit and are eliminated upon consolidation. In addition to revenues, the reportable segments share in business services and costs including personnel expenses, rent, information technology, software, interest expense, and other similar operating costs. These shared services and costs are allocated between the segments using prevailing market rates and other agreed upon allocation methods.
Factors Management Used to Identify the Company’s Operating and Reportable Segments
The Company’s operating and reportable segments are business units that are managed separately due to the different products provided and the need to report separately to the various regulatory jurisdictions.
Chief Operating Decision Maker (“CODM”)
The Company’s CODM is the Chief Executive Officer. The following table summarizes significant segment expenses. The significant expenses are based on the information that the CODM is regularly provided to assess segment performance. The CODM reviews the regularly provided information for each segment monthly and gives added emphasis on month-over-month and year-over-year comparative results. The CODM considers these comparative results when making decisions about the allocation of the Company’s resources to each segment. The measure of segment profit or loss for the Company’s three operating and reportable business segments is net earnings.
| 64 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
16) Business Segment Information (Continued)
Schedule of Revenues and Expenses by Reportable Segment
| Insurance | Cemetery | Mortgage | Total | |||||||||||||
| For the Three Months Ended September 30, 2026 | ||||||||||||||||
| Life | Funeral Home | |||||||||||||||
| Insurance | and Cemetery | Mortgage | Total | |||||||||||||
| Revenues: | ||||||||||||||||
| From external sources: | ||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Net investment income | ||||||||||||||||
| Gains (losses) on investments and other assets | ( | ) | ||||||||||||||
| Other revenues | ||||||||||||||||
| Intersegment revenues | ||||||||||||||||
| Total segment revenues | ||||||||||||||||
| Elimination of intersegment revenues | ( | ) | ||||||||||||||
| Total consolidated revenues | ||||||||||||||||
| Less: | ||||||||||||||||
| Policyholder benefits and claims | - | - | ||||||||||||||
| Amortization of deferred policy and pre-need acquisition costs and value of business acquired | - | |||||||||||||||
| Selling, general and administrative expenses: | ||||||||||||||||
| Commissions | ||||||||||||||||
| Personnel | ||||||||||||||||
| Advertising | ||||||||||||||||
| Rent and rent related | ||||||||||||||||
| Depreciation on property and equipment | ||||||||||||||||
| Cost related to funding mortgage loans | - | - | ||||||||||||||
| Data processing and IT related (1) | ||||||||||||||||
| Premium taxes on insurance premiums and other considerations (1) | - | - | ||||||||||||||
| Other segment items (1)(2) | ||||||||||||||||
| Intersegment expenses (3) | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Costs of goods and services sold-mortuaries and cemeteries | - | - | ||||||||||||||
| Income tax expense | ( | ) | ||||||||||||||
| Segment net earnings | ( | ) | ||||||||||||||
| Net earnings | $ | |||||||||||||||
| (1) | |||
| (2) | |||
| Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses. | |||
| Funeral Home and Cemetery - bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible assets, and certain overhead expenses. | |||
| Mortgage - bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization expense of mortgage servicing rights, and certain overhead expenses. | |||
| (3) | |||
| Life Insurance - mortgage servicing fees and interest expense. | |||
| Funeral Home/Cemetery - rent expense, data processing and IT related expenses, and interest expense. | |||
| Mortgage - rent expense and interest expense. | |||
| 65 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
16) Business Segment Information (Continued)
| Insurance | Cemetery | Mortgage | Total | |||||||||||||
| For the Three Months Ended September 30, 2025 | ||||||||||||||||
| Life | Funeral Home | |||||||||||||||
| Insurance | and Cemetery | Mortgage | Total | |||||||||||||
| Revenues: | ||||||||||||||||
| From external sources: | ||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Net investment income | ||||||||||||||||
| Gains on investments and other assets | ||||||||||||||||
| Other revenues | ||||||||||||||||
| Intersegment revenues | ||||||||||||||||
| Total segment revenues | ||||||||||||||||
| Elimination of intersegment revenues | ( | ) | ||||||||||||||
| Total consolidated revenues | ||||||||||||||||
| Less: | ||||||||||||||||
| Policyholder benefits and claims | - | - | ||||||||||||||
| Amortization of deferred policy and pre-need acquisition costs and value of business acquired | - | |||||||||||||||
| Selling, general and administrative expenses: | ||||||||||||||||
| Commissions | ||||||||||||||||
| Personnel | ||||||||||||||||
| Advertising | ||||||||||||||||
| Rent and rent related | ||||||||||||||||
| Depreciation on property and equipment | ||||||||||||||||
| Cost related to funding mortgage loans | - | - | ||||||||||||||
| Data processing and IT related (1) | ||||||||||||||||
| Premium taxes on insurance premiums and other considerations (1) | - | - | ||||||||||||||
| Other segment items (1)(2) | ||||||||||||||||
| Intersegment expenses (3) | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Costs of goods and services sold-mortuaries and cemeteries | - | - | ||||||||||||||
| Income tax expense | ||||||||||||||||
| Segment net earnings | ||||||||||||||||
| Net earnings | $ | |||||||||||||||
| (1) | ||
| (2) | ||
| Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses. | ||
| Funeral Home and Cemetery - bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible assets, and certain overhead expenses. | ||
| Mortgage - bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization expense of mortgage servicing rights, and certain overhead expenses. | ||
| (3) | ||
| Life Insurance - mortgage servicing fees and interest expense. | ||
| Funeral Home/Cemetery - rent expense, data processing and IT related expenses, and interest expense. | ||
| Mortgage - rent expense and interest expense. | ||
| 66 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
16) Business Segment Information (Continued)
| Insurance | and Cemetery | Mortgage | Total | |||||||||||||
| For the Nine Months Ended September 30, 2026 | ||||||||||||||||
| Life | Funeral Home | |||||||||||||||
| Insurance | and Cemetery | Mortgage | Total | |||||||||||||
| Revenues: | ||||||||||||||||
| From external sources: | ||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Net investment income | ||||||||||||||||
| Gains (losses) on investments and other assets | ( | ) | ||||||||||||||
| Other revenues | ||||||||||||||||
| Intersegment revenues | ||||||||||||||||
| Total segment revenues | ||||||||||||||||
| Elimination of intersegment revenues | ( | ) | ||||||||||||||
| Total consolidated revenues | ||||||||||||||||
| Less: | ||||||||||||||||
| Policyholder benefits and claims | - | - | ||||||||||||||
| Amortization of deferred policy and pre-need acquisition costs and value of business acquired | - | |||||||||||||||
| Selling, general and administrative expenses: | ||||||||||||||||
| Commissions | ||||||||||||||||
| Personnel | ||||||||||||||||
| Advertising | ||||||||||||||||
| Rent and rent related | ||||||||||||||||
| Depreciation on property and equipment | ||||||||||||||||
| Cost related to funding mortgage loans | - | - | ||||||||||||||
| Data processing and IT related (1) | ||||||||||||||||
| Premium taxes on insurance premiums and other considerations (1) | - | - | ||||||||||||||
| Other segment items (1)(2) | ||||||||||||||||
| Intersegment expenses (3) | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Costs of goods and services sold-mortuaries and cemeteries | - | - | ||||||||||||||
| Income tax expense (benefit) | ( | ) | ||||||||||||||
| Segment net earnings (loss) | ( | ) | ||||||||||||||
| Net earnings | $ | |||||||||||||||
| Segment assets | $ | $ | $ | $ | ||||||||||||
| Elimination of intersegment assets | ( | ) | ||||||||||||||
| Total consolidated assets | $ | |||||||||||||||
| Expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| (1) | ||
| (2) | ||
| Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses. | ||
| Funeral Home and Cemetery - bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible assets, and certain overhead expenses. | ||
| Mortgage - bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization expense of mortgage servicing rights, and certain overhead expenses. | ||
| (3) | ||
| Life Insurance - mortgage servicing fees and interest expense. | ||
| Funeral Home and Cemetery - rent expense, data processing and IT related expenses, and interest expense. | ||
| Mortgage - rent expense and interest expense. | ||
| 67 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
16) Business Segment Information (Continued)
| Insurance | and Cemetery | Mortgage | Total | |||||||||||||
| For the Nine Months Ended September 30, 2025 | ||||||||||||||||
| Life | Funeral Home | |||||||||||||||
| Insurance | and Cemetery | Mortgage | Total | |||||||||||||
| Revenues: | ||||||||||||||||
| From external sources: | ||||||||||||||||
| Revenue from external customers | $ | $ | $ | $ | ||||||||||||
| Net investment income | ||||||||||||||||
| Gains on investments and other assets | ||||||||||||||||
| Other revenues | ||||||||||||||||
| Intersegment revenues | ||||||||||||||||
| Total segment revenues | ||||||||||||||||
| Elimination of intersegment revenues | ( | ) | ||||||||||||||
| Total consolidated revenues | ||||||||||||||||
| Less: | ||||||||||||||||
| Policyholder benefits and claims | - | - | ||||||||||||||
| Amortization of deferred policy and pre-need acquisition costs and value of business acquired | - | |||||||||||||||
| Selling, general and administrative expenses: | ||||||||||||||||
| Commissions | ||||||||||||||||
| Personnel | ||||||||||||||||
| Advertising | ||||||||||||||||
| Rent and rent related | ||||||||||||||||
| Depreciation on property and equipment | ||||||||||||||||
| Cost related to funding mortgage loans | - | - | ||||||||||||||
| Data processing and IT related (1) | ||||||||||||||||
| Premium taxes on insurance premiums and other considerations (1) | - | - | ||||||||||||||
| Other segment items (1)(2) | ||||||||||||||||
| Intersegment expenses (3) | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Costs of goods and services sold-mortuaries and cemeteries | - | - | ||||||||||||||
| Income tax expense (benefit) | ( | ) | ||||||||||||||
| Segment net earnings (loss) | ( | ) | ||||||||||||||
| Net earnings | $ | |||||||||||||||
| Segment assets | $ | $ | $ | $ | ||||||||||||
| Elimination of intersegment assets | ( | ) | ||||||||||||||
| Total consolidated assets | $ | |||||||||||||||
| Expenditures for long-lived assets | $ | $ | $ | $ | ||||||||||||
| (1) | ||
| (2) | ||
| Life Insurance - bad debt, insurance expenses, professional service expenses, state insurance department fees, amortization of intangible assets, and certain overhead expenses. | ||
| Funeral Home and Cemetery - bad debt, insurance expenses, professional service expenses, maintenance and utility expenses, property taxes, amortization of intangible assets, and certain overhead expenses. | ||
| Mortgage - bad debt, insurance expenses, professional service expenses, business license and registration fees, dues and subscriptions, amortization expense of mortgage servicing rights, and certain overhead expenses. | ||
| (3) | ||
| Life Insurance - mortgage servicing fees and interest expense. | ||
| Funeral Home and Cemetery - rent expense, data processing and IT related expenses, and interest expense. | ||
| Mortgage - rent expense and interest expense. | ||
| 68 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
17) Fair Value of Financial Instruments
GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. GAAP also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. Fair value measurements are classified under the following hierarchy:
Level 1: Financial assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.
Level 2: Financial assets and financial liabilities whose values are based on the following:
| a) | Quoted prices for similar assets or liabilities in active markets. | |
| b) | Quoted prices for identical or similar assets or liabilities in non-active markets; or | |
| c) | Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability. |
Level 3: Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs may reflect the Company’s estimates of the assumptions that market participants would use in valuing financial assets and financial liabilities.
The Company utilizes a combination of third-party valuation service providers, brokers, and internal valuation models to determine fair value.
The following methods and assumptions were used by the Company in estimating the fair value presented in its disclosures related to significant financial instruments.
The items shown under Level 1 and Level 2 are valued as follows:
Fixed Maturity Securities Available for Sale: The fair values of fixed maturity securities are based on quoted market prices (when available). For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements (considered Level 3 financial assets), are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit and maturity of the investments.
Equity Securities: The fair values for equity securities are based on quoted market prices.
Restricted Assets: A portion of these assets include equity securities and fixed maturity securities that have quoted market prices that are used to determine fair value. Also included are cash and cash equivalents and participations in mortgage loans. The carrying amounts reported in the accompanying condensed consolidated balance sheets for these financial instruments approximate their fair values due to their short-term nature.
Cemetery Perpetual Care Trust Investments: A portion of these assets include equity securities and fixed maturity securities that have quoted market prices that are used to determine fair value. Also included are cash and cash equivalents. The carrying amounts reported in the accompanying condensed consolidated balance sheets for these financial instruments approximate their fair values due to their short-term nature.
Call Option Derivatives: The fair values for call options are based on quoted market prices.
Additionally, there were no transfers between Level 1 and Level 2 in the fair value hierarchy.
| 69 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
17) Fair Value of Financial Instruments (Continued)
The items shown under Level 3 are valued as follows:
Loans Held for Sale: The Company elected the fair value option for loans held for sale. The fair value is based on quoted market prices (when available). When a quoted market price is not readily available, the Company uses the market price from its last sale of similar assets. Fair value is often difficult to determine in volatile markets and may contain significant unobservable inputs.
Loan Commitments and Forward Sale Commitments: The Company’s mortgage segment enters loan commitments with potential borrowers and forward sale commitments to sell loans with third-party investors. The Company also uses a hedging strategy for these transactions. A loan commitment binds the Company to lend funds to a qualified borrower at a specified interest rate and within a specified period, generally up to 30 days after issuance of the loan commitment. Loan commitments are defined to be derivatives under GAAP and are recognized at fair value on the consolidated balance sheets with changes in their fair values recorded in current earnings.
The Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted 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. The change in fair value of the underlying mortgage loan is measured from the date the loan commitment is issued. Following issuance, the value of a mortgage 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.
Impaired Mortgage Loans Held for Investment: The Company believes that the fair value of these nonperforming loans will approximate the unpaid principal balance expected to be recovered based on the fair value of the underlying collateral. For residential and commercial properties, the collateral value is estimated by obtaining an independent appraisal. The appraisal typically considers comparable sales in the area, property condition, and potential rental income that could be generated (particularly for commercial properties). For development and construction loans, the collateral is typically incomplete, so the fair value is estimated as the replacement cost using data from a provider of building cost information to the real estate construction.
Impaired Real Estate Held for Investment: Fair value is generally determined by obtaining an independent appraisal, which typically considers area comparable properties and property conditions. The Company believes that in an orderly market, fair value approximates the replacement cost of a home and will list for sale any foreclosed properties. In a disorderly market, the Company believes the highest and best use of the properties is as income producing assets and will hold the properties as rental properties, matching the income from the investment in rental property with the funds required for estimated future policy benefits. Accordingly, in addition to an appraisal, the determination of fair value will generally be weighed more heavily toward the rental analysis.
It should be noted that for replacement cost, when determining the fair value of real estate held for investment, the Company uses a provider of building cost information to the real estate construction industry. For the investment analysis, the Company uses market data based upon its real estate operation experience and projected the present value of net rental income over seven years. The Company also considers comparable properties in the area and property conditions when determining fair value.
In addition to this analysis performed by the Company, the Company depreciates Real Estate Held for Investment. This depreciation reduces the book value of these properties and lessens the exposure to the Company from further deterioration in real estate values.
Mortgage Servicing Rights: The Company initially recognizes Mortgage Servicing Rights (“MSRs”) at their estimated fair values derived from the net cash flows associated with the servicing contracts, where the Company assumes the obligation to service the loan in the sale transaction.
| 70 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
17) Fair Value of Financial Instruments (Continued)
The following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by their classification in the condensed consolidated balance sheet as of September 30, 2026:
Schedule of Fair Value Assets and Liabilities Measured on a Recurring Basis
| Total | Quoted
Prices in Active Markets for Identical Assets (Level 1) | Significant
Observable Inputs (Level 2) | Significant
Unobservable Inputs (Level 3) | |||||||||||||
| Assets accounted for at fair value on a recurring basis | ||||||||||||||||
| Fixed maturity securities available for sale | $ | $ | - | $ | $ | - | ||||||||||
| Equity securities | - | - | ||||||||||||||
| Loans held for sale | - | - | ||||||||||||||
| Restricted assets (1) | - | - | ||||||||||||||
| Restricted assets (2) | - | - | ||||||||||||||
| Cemetery perpetual care trust investments (1) | - | - | ||||||||||||||
| Cemetery perpetual care trust investments (2) | - | - | ||||||||||||||
| Derivatives - loan commitments (3) | - | - | ||||||||||||||
| Total assets accounted for at fair value on a recurring basis | $ | $ | $ | $ | ||||||||||||
| Liabilities accounted for at fair value on a recurring basis | ||||||||||||||||
| Derivatives - loan commitments (4) | ( | ) | - | - | ( | ) | ||||||||||
| Derivatives - call options (4) | ( | ) | ( | ) | - | - | ||||||||||
| Total liabilities accounted for at fair value on a recurring basis | $ | ( | ) | $ | ( | ) | $ | - | $ | ( | ) | |||||
| (1) |
| (2) |
| (3) |
| (4) |
| 71 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
17) Fair Value of Financial Instruments (Continued)
The following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by their classification in the condensed consolidated balance sheet as of December 31, 2025:
| Total | Quoted
Prices in Active Markets for Identical Assets (Level 1) | Significant
Observable Inputs (Level 2) | Significant
Unobservable Inputs (Level 3) | |||||||||||||
| Assets accounted for at fair value on a recurring basis | ||||||||||||||||
| Fixed maturity securities available for sale | $ | $ | - | $ | $ | |||||||||||
| Equity securities | - | - | ||||||||||||||
| Loans held for sale | - | - | ||||||||||||||
| Restricted assets (1) | - | - | ||||||||||||||
| Restricted assets (2) | - | - | ||||||||||||||
| Cemetery perpetual care trust investments (1) | - | - | ||||||||||||||
| Cemetery perpetual care trust investments (2) | - | - | ||||||||||||||
| Derivatives - loan commitments (3) | - | - | ||||||||||||||
| Total assets accounted
for at fair value on a recurring basis | $ | $ | $ | $ | ||||||||||||
| Liabilities accounted for at fair value on
a recurring basis | ||||||||||||||||
| Derivatives - loan commitments (4) | $ | ( | ) | $ | - | $ | - | $ | ( | ) | ||||||
| Total liabilities accounted
for at fair value on a recurring basis | $ | ( | ) | $ | - | $ | - | $ | ( | ) | ||||||
| (1) |
| (2) |
| (3) |
| (4) |
For Level 3 assets and liabilities measured at fair value on a recurring basis as of September 30, 2026, the significant unobservable inputs used in the fair value measurements were as follows:
Schedule of Level 3 Assets and Liabilities Measured at Fair Value on Recurring Basis
| Fair Value at | Significant | Range of Inputs | ||||||||||||||||||
| September 30, | Valuation | Unobservable | Minimum | Maximum | Weighted | |||||||||||||||
| 2026 | Technique | Input(s) | Value | Value | Average | |||||||||||||||
| Loans held for sale | $ | Market approach | Investor contract pricing as a percentage of unpaid principal balance | % | % | % | ||||||||||||||
| Derivatives - loan commitments (net) | Market approach | Pull-through rate | % | % | % | |||||||||||||||
| Initial-Value | N/A | N/A | N/A | |||||||||||||||||
| Servicing | 0 bps | 150 bps | 30 bps | |||||||||||||||||
For Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2025, the significant unobservable inputs used in the fair value measurements were as follows:
| Fair Value at | Significant | Range of Inputs | ||||||||||||||||||
| December 31, | Valuation | Unobservable | Minimum | Maximum | Weighted | |||||||||||||||
| 2025 | Technique | Input(s) | Value | Value | Average | |||||||||||||||
| Loans held for sale | $ | Market approach | Investor contract pricing as a percentage of unpaid principal balance | % | % | % | ||||||||||||||
| Derivatives - loan commitments (net) | Market approach | Pull-through rate | % | % | % | |||||||||||||||
| Initial-Value | N/A | N/A | N/A | |||||||||||||||||
| Servicing | 0 bps | 251 bps | 52 bps | |||||||||||||||||
| Fixed maturity securities available for sale | Broker quotes | Pricing quotes | $ | $ | $ | |||||||||||||||
| 72 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
17) Fair Value of Financial Instruments (Continued)
The following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the three-month period ended September 30, 2026:
Schedule of Changes in the Consolidated Balance Sheet Line Items Measured Using Level 3 Inputs
| Net Loan Commitments | Loans Held for Sale | Fixed Maturity Securities Available for Sale | ||||||||||
| Balance - June 30, 2026 | $ | $ | $ | |||||||||
| Originations and purchases | - | - | ||||||||||
| Sales, maturities and paydowns | - | ( | ) | ( | ) | |||||||
| Total gains (losses): | ||||||||||||
| Included in earnings | ( | )(1) | (1) | - | ||||||||
| Included in other comprehensive income | - | - | - | |||||||||
| Balance - September 30, 2026 | $ | $ | $ | - | ||||||||
| (1) |
The following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the three-month period ended September 30, 2025:
| Net Loan Commitments | Loans Held for Sale | Fixed Maturity Securities Available for Sale | ||||||||||
| Balance - June 30, 2025 | $ | $ | $ | |||||||||
| Originations and purchases | - | - | ||||||||||
| Sales, maturities and paydowns | - | ( | ) | ( | ) | |||||||
| Total gains (losses): | ||||||||||||
| Included in earnings | ( | )(1) | (1) | - | (2) | |||||||
| Included in other comprehensive income | - | - | ( | ) | ||||||||
| Balance - September 30, 2025 | $ | $ | $ | |||||||||
| (1) |
| (2) |
The following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the nine-month period ended September 30, 2026:
| Net Loan Commitments | Loans Held for Sale | Fixed Maturity Securities Available for Sale | ||||||||||
| Balance - December 31, 2025 | $ | $ | $ | |||||||||
| Originations and purchases | - | - | ||||||||||
| Sales, maturities and paydowns | - | ( | ) | ( | ) | |||||||
| Total gains (losses): | ||||||||||||
| Included in earnings | (1) | (1) | - | (2) | ||||||||
| Included in other comprehensive income | - | - | ( | ) | ||||||||
| Balance - September 30, 2026 | $ | $ | $ | - | ||||||||
| (1) |
| (2) |
The following table is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs for the nine-month period ended September 30, 2025:
| Net Loan Commitments | Loans Held for Sale | Fixed Maturity Securities Available for Sale | ||||||||||
| Balance - December 31, 2024 | $ | $ | $ | |||||||||
| Originations and purchases | - | - | ||||||||||
| Sales, maturities and paydowns | - | ( | ) | ( | ) | |||||||
| Transfer to mortgage loans held for investment | ( | ) | ||||||||||
| Loans held for sale foreclosed into real estate held for sale | ( | ) | ||||||||||
| Total gains (losses): | ||||||||||||
| Included in earnings | (1) | (1) | - | (2) | ||||||||
| Included in other comprehensive income | - | - | ( | ) | ||||||||
| Balance - September 30, 2025 | $ | $ | $ | |||||||||
| (1) | |
| (2) |
| 73 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
17) Fair Value of Financial Instruments (Continued)
The Company did not have any financial assets and financial liabilities measured at fair value on a nonrecurring basis as of September 30, 2026, or as of December 31, 2025.
Fair Value of Financial Instruments Carried at Other Than Fair Value
The Company uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction as of September 30, 2026, and December 31, 2025.
The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows as of September 30, 2026:
Schedule of Financial Instruments Carried at Other Than Fair Value
| Carrying Value | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Mortgage loans held for investment | ||||||||||||||||||||
| Residential | $ | $ | - | $ | - | $ | $ | |||||||||||||
| Development and construction | - | - | ||||||||||||||||||
| Commercial | - | - | ||||||||||||||||||
| Mortgage loans held for investment, net | $ | $ | - | $ | - | $ | $ | |||||||||||||
| Policy loans (1) | - | - | ||||||||||||||||||
| Insurance assignments, net (1) | - | - | ||||||||||||||||||
| Restricted assets (2) | - | - | ||||||||||||||||||
| Cemetery perpetual care trust investments (2) | - | - | ||||||||||||||||||
| Mortgage servicing rights, net | - | - | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Bank and other loans payable | $ | ( | ) | $ | - | $ | - | $ | ( | ) | $ | ( | ) | |||||||
| Policyholder account balances - universal life | ( | ) | - | - | ( | ) | ( | ) | ||||||||||||
| Policyholder account balances - fixed annuities | ( | ) | - | - | ( | ) | ( | ) | ||||||||||||
| (1) | Included in other investments and policy loans on the condensed consolidated balance sheets |
| (2) |
| 74 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
17) Fair Value of Financial Instruments (Continued)
The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows as of December 31, 2025:
| Carrying Value | Level 1 | Level 2 | Level 3 | Total Estimated Fair Value | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Mortgage loans held for investment | ||||||||||||||||||||
| Residential | $ | $ | - | $ | - | $ | $ | |||||||||||||
| Development and construction | - | - | ||||||||||||||||||
| Commercial | - | - | ||||||||||||||||||
| Mortgage loans held for investment, net | $ | $ | - | $ | - | $ | $ | |||||||||||||
| Policy loans (1) | - | - | ||||||||||||||||||
| Insurance assignments, net (1) | - | - | ||||||||||||||||||
| Restricted assets (2) | - | - | ||||||||||||||||||
| Cemetery perpetual care trust investments (2) | - | - | ||||||||||||||||||
| Mortgage servicing rights, net | - | - | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Bank and other loans payable | $ | ( | ) | $ | - | $ | - | $ | ( | ) | $ | ( | ) | |||||||
| Policyholder account balances - universal life | ( | ) | - | - | ( | ) | ( | ) | ||||||||||||
| Policyholder account balances - fixed annuities | ( | ) | - | - | ( | ) | ( | ) | ||||||||||||
| (1) |
| (2) |
The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of these financial instruments are summarized as follows:
Mortgage Loans Held for Investment: The estimated fair value of the Company’s mortgage loans held for investment is determined using various methods. The Company’s mortgage loans are grouped into three categories: Residential, Development and Construction, and Commercial. When estimating the expected future cash flows, it is assumed that all loans will be held to maturity, and any loans that are non-performing are evaluated individually for impairment.
Residential – The estimated fair value is determined through a combination of discounted cash flows (estimating expected future cash flows of payments and discounting them using current interest rates from single-family mortgages) and considering pricing of similar loans that were sold recently.
Development and Construction – These loans primarily have short term maturities. Accordingly, the estimated fair value is determined to be the carrying value.
Commercial – The estimated fair value is determined by estimating expected future cash flows of payments and discounting them using current interest rates for commercial mortgages.
Policy Loans: These loans are fully collateralized by the cash surrender value of the underlying policy. Accordingly, the carrying amounts reported in the accompanying condensed consolidated balance sheet approximates their fair values.
Insurance Assignments, Net: These investments primarily have short-term maturities. Accordingly, the carrying amounts reported in the accompanying condensed consolidated balance sheet approximates their fair values.
Bank and Other Loans Payable: The carrying amounts reported in the accompanying condensed consolidated balance sheet for warehouse lines of credit approximate their fair values due to their relatively short-term maturities and variable interest rates. The estimated fair value for bank loans collateralized by real estate is determined by estimating future cash flows of payments and discounting them using current market rates.
Policyholder
Account Balances: Policyholder account balances for interest-sensitive insurance products are computed under a retrospective
deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged
to expense include benefit claims incurred in the period of more than related policy account balances. Interest crediting rates for interest-sensitive
insurance products ranged from
| 75 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
18) Stock Compensation Plans
The Company has three active equity incentive plans (the “2013 Plan”, the “2014 Director Plan” and the “2022 Plan” or “the Plans”).
Stock Options
Stock
based compensation expense for stock options issued of $
The fair value of each option granted is estimated on the date of grant using the Black Scholes Option Pricing Model. The Company estimates the expected life of the options using the simplified method. Future volatility is estimated based upon the weighted historical volatility of the Company’s Class A common stock over a period equal to the expected life of the options. The risk-free interest rate for the expected life of the options is based upon the Federal Reserve Board’s daily interest rates in effect at the time of the grant.
The activity of the Plans during the nine-month period ended September 30, 2026, is summarized as follows:
Schedule of Activity of Stock Option Plans
| Number
of Class A Shares | Weighted Average Exercise Price (2) | Number
of Class C Shares | Weighted Average Exercise Price (2) | |||||||||||||
| Outstanding at December 31, 2025 | $ | $ | ||||||||||||||
| Adjustment for the effect of stock dividends | ||||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Cancelled | ( | ) | - | |||||||||||||
| Outstanding at September 30, 2026 | $ | $ | ||||||||||||||
| As of September 30, 2026: | ||||||||||||||||
| Options exercisable | $ | $ | ||||||||||||||
| As of September 30, 2026: | ||||||||||||||||
| Available options for future grant | ||||||||||||||||
| Weighted average contractual term of options outstanding at September 30, 2026 | ||||||||||||||||
| Weighted average contractual term of options exercisable at September 30, 2026 | ||||||||||||||||
| Aggregated intrinsic value of options outstanding at September 30, 2026 (1) | $ | $ | ||||||||||||||
| Aggregated intrinsic value of options exercisable at September 30, 2026 (1) | $ | $ | ||||||||||||||
| (1) |
| (2) |
| 76 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
18) Stock Compensation Plans (Continued)
The activity of the Plans during the nine-month period ended September 30, 2025, is summarized as follows:
| Number
of Class A Shares | Weighted Average Exercise Price (2) | Number
of Class C Shares | Weighted Average Exercise Price (2) | |||||||||||||
| Outstanding at December 31, 2024 | $ | $ | ||||||||||||||
| Adjustment for the effect of stock dividends | ||||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||
| Cancelled | ( | ) | - | |||||||||||||
| Outstanding at September 30, 2025 | $ | $ | ||||||||||||||
| As of September 30, 2025: | ||||||||||||||||
| Options exercisable | $ | $ | ||||||||||||||
| As of September 30, 2025: | ||||||||||||||||
| Available options for future grant | ||||||||||||||||
| Weighted average contractual term of options outstanding at September 30, 2025 | ||||||||||||||||
| Weighted average contractual term of options exercisable at September 30, 2025 | ||||||||||||||||
| Aggregated intrinsic value of options outstanding at September 30, 2025 (1) | $ | $ | ||||||||||||||
| Aggregated intrinsic value of options exercisable at September 30, 2025 (1) | $ | $ | ||||||||||||||
| (1) |
| (2) |
The
total intrinsic value (which is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on
the exercise date) of stock options exercised during the nine-month periods ended September 30, 2026, and 2025 were $
| 77 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
18) Stock Compensation Plans (Continued)
Restricted Stock Units (“RSUs”)
Stock
based compensation expense for RSUs issued of $
Activity of the RSUs during the nine-month period ended September 30, 2026, is summarized as follows:
Schedule of Activity Restricted Stock Units
| Number
of Class A Shares | Weighted Average Grant Date Fair Value | |||||||
| Non-vested at December 31, 2025 | $ | |||||||
| Granted | - | |||||||
| Vested | ( | ) | ||||||
| Cancelled | ( | ) | ||||||
| Non-vested at September 30, 2026 | $ | |||||||
| Available RSUs for future grant | ||||||||
Activity of the RSUs during the nine-month period ended September 30, 2025, is summarized as follows:
| Number
of Class A Shares | Weighted Average Grant Date Fair Value | |||||||
| Non-vested at December 31, 2024 | $ | |||||||
| Granted | - | |||||||
| Vested | ( | ) | ||||||
| Non-vested at September 30, 2025 | $ | |||||||
| Available RSUs for future grant | ||||||||
| 78 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
19) Commitments and Contingencies
Mortgage Loan Loss Settlements
Future loan losses can be extremely difficult to estimate. However, the Company believes that the Company’s reserve methodology and its current practice of property preservation allow it to estimate its potential losses on loans sold. See Note 3 to the condensed consolidated financial statements for additional information about the Company’s loan loss reserve.
Debt Covenants for Mortgage Warehouse Lines of Credit
The Company, through its subsidiary SecurityNational Mortgage, has three lines of credit agreements for funding mortgage loans held for sale: one through U.S. Bank, a second through Western Alliance Bank, and a third through JPMorgan Chase Bank.
The
U.S. Bank warehouse line of credit agreement allows SecurityNational Mortgage to borrow up to $
The
Western Alliance Bank warehouse line of credit agreement allows SecurityNational Mortgage to borrow up to $
The
JPMorgan Chase Bank warehouse line of credit agreement allows SecurityNational Mortgage to borrow up to $
The
agreements for the U.S. Bank warehouse line of credit include default provisions under which certain events of default under other
obligations of SecurityNational Mortgage constitute events of default under the U.S. Bank warehouse line of credit. As of September
30, 2026, SecurityNational Mortgage was not in compliance with the net income covenant of the U.S. Bank and the Western Alliance
Bank warehouse lines of credit. SecurityNational Mortgage received a waiver from U.S. Bank and is in the process of receiving a
waiver from Western Alliance Bank. If the lenders were to require repayment of the outstanding advances of approximately $
| 79 |
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2026 (Unaudited)
19) Commitments and Contingencies (Continued)
Debt Covenants for Revolving Lines of Credit and Bank Loans
The Company’s revolving line of credit agreement contains an annual “zero balance” covenant and quarterly segment financial statements. The Company is also subject to debt covenants under one of its real estate loans which require maintenance of a minimum consolidated operating cash flow ratio, minimum liquidity amounts, and minimum consolidated net worth value. In addition to these financial debt covenants, the Company is required to provide building specific financial statements and rent rolls for each of its real estate loans. As of September 30, 2026, the Company was in compliance with these debt covenants and required reporting.
Other Contingencies and Commitments
The Company belongs to a captive insurance group (“the captive group”) for certain casualty insurance, worker compensation and general liability programs. The captive group maintains insurance reserves relative to these programs. The level of exposure from catastrophic events is limited by the purchase of stop-loss and aggregate liability reinsurance coverage. When estimating the insurance liabilities and related reserves, the captive group considers several factors, which include historical claims experience, demographic factors, severity factors and valuations provided by independent third-party actuaries. If actual claims or adverse development of loss reserves occurs and exceed these estimates, additional reserves may be required from the Company and its subsidiaries. The estimation process contains uncertainty since captive insurance management must use judgment to estimate the ultimate cost that will be incurred to settle reported claims and unreported claims for incidents incurred but not reported as of the balance sheet date.
The Company is a defendant in various legal actions arising from the normal conduct of business. The Company believes that none of the actions, if adversely determined, will have a material effect on the Company’s financial position or results of operations. Based on management’s assessment and analysis concerning the likelihood of unfavorable outcomes, no amounts have been accrued for the above claims in the consolidated financial statements. The Company is not a party to any other material legal proceedings outside the ordinary course of business or to any other legal proceedings, which, if adversely determined, would have a material adverse effect on its financial condition or results of operations.
| 80 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
The Company’s operations over the last several years generally reflect three strategies which the Company expects to continue: (i) increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products; (ii) increased emphasis on the funeral home and cemetery business; and (iii) capitalizing on the housing market by originating mortgage loans.
Insurance Operations
The Company’s life insurance business includes funeral plans and interest-sensitive life insurance, as well as other traditional life, accident and health insurance products. The Company places specific marketing emphasis on funeral plans through pre-need planning.
A funeral plan is a small face value life insurance policy that generally has face coverage of up to $30,000. The Company believes that funeral plans represent a marketing niche that is less competitive because most insurance companies do not offer similar coverage. The purpose of the funeral plan policy is to pay the costs and expenses incurred at the time of a person’s death. On a per thousand-dollar cost of insurance basis, these policies can be more expensive to the policyholder than many types of non-burial insurance due to their low face amount, requiring the fixed cost of the policy administration to be distributed over a smaller policy size, and the simplified underwriting practices that result in higher mortality costs.
The following table shows the condensed financial results of the insurance operations for the three and nine month periods ended September 30, 2026, and 2025. See Note 16 to the condensed consolidated financial statements.
| Three months ended September 30, (in thousands of dollars) | Nine months ended September 30, (in thousands of dollars) | |||||||||||||||||||||||
| 2026 | 2025 | % Increase (Decrease) | 2026 | 2025 | % Increase (Decrease) | |||||||||||||||||||
| Revenues from external customers: | ||||||||||||||||||||||||
| Insurance premiums | $ | 28,426 | $ | 29,881 | (5 | %) | $ | 85,986 | $ | 89,846 | (4 | %) | ||||||||||||
| Net investment income | 19,726 | 19,279 | 2 | % | 53,136 | 57,910 | (8 | %) | ||||||||||||||||
| Gains on investments and other assets | 1,210 | 1,259 | (4 | %) | 4,640 | 2,423 | 91 | % | ||||||||||||||||
| Other revenues | 362 | 372 | (3 | %) | 1,130 | 1,423 | (21 | %) | ||||||||||||||||
| Intersegment revenues | 1,003 | 2,044 | (51 | %) | 4,205 | 5,193 | (19 | %) | ||||||||||||||||
| Total segment revenues | $ | 50,727 | $ | 52,835 | (4 | %) | $ | 149,097 | $ | 156,795 | (5 | %) | ||||||||||||
| Segment net earnings | $ | 6,394 | $ | 7,741 | (17 | %) | $ | 18,979 | $ | 22,230 | (15 | %) | ||||||||||||
Profitability for the nine-month period ended September 30, 2026 decreased due to (a) a $4,774,000 decrease in net investment income, (b) a $3,860,000 decrease in insurance premiums and other considerations, (c) a $988,000 decrease in intersegment revenue (d) a $293,000 decrease in other revenues, and (e) a $38,000 increase in amortization of deferred policy acquisition costs, which were partially offset by (i) a $3,050,000 decrease in policyholder benefits and claims, (ii) a $2,218,000 increase in gains on investments and other assets, (iii) an $874,000 decrease in income tax expense, (iv) a $366,000 decrease in selling, general and administrative expenses, (v) a $130,000 decrease in interest expense, and (vi) a $63,000 decrease in intersegment expenses.
| 81 |
Funeral Home and Cemetery Operations
The Company sells funeral home services and products through its eleven funeral homes in Utah and four funeral homes in New Mexico. The Company also sells cemetery services, products and land (burial plots) through its five cemeteries in Utah, one cemetery in San Diego County, California, and one cemetery in Santa Fe, New Mexico. At-need funeral home and cemetery product sales and services are recognized as revenue when the services are performed or when the products are delivered. Pre-need funeral home and cemetery product sales and services are deferred until the merchandise is delivered, or services are performed. Revenue for pre-need cemetery land sales is recognized at the time of sale, and land is removed from inventory.
The following table shows the condensed financial results of the funeral home and cemetery operations for the three and nine month periods ended September 30, 2026, and 2025. See Note 16 to the condensed consolidated financial statements.
| Three
months ended September 30, (in thousands of dollars) | Nine
months ended September 30, (in thousands of dollars) | |||||||||||||||||||||||
| 2026 | 2025 | % Increase (Decrease) | 2026 | 2025 | % Increase (Decrease) | |||||||||||||||||||
| Revenues from external customers: | ||||||||||||||||||||||||
| Cemetery revenues | $ | 4,066 | $ | 3,624 | 12 | % | $ | 12,432 | $ | 11,428 | 9 | % | ||||||||||||
| Funeral home revenues | 3,692 | 3,517 | 5 | % | 10,659 | 10,271 | 4 | % | ||||||||||||||||
| Net investment income | 781 | 642 | 22 | % | 1,975 | 1,529 | 29 | % | ||||||||||||||||
| Gains on investments and other assets | 315 | 712 | (56 | %) | 1,774 | 1,193 | 49 | % | ||||||||||||||||
| Other revenues | 194 | 433 | (55 | %) | 509 | 767 | (34 | %) | ||||||||||||||||
| Intersegment revenues | 86 | 86 | 0 | % | 254 | 254 | 0 | % | ||||||||||||||||
| Total segment revenues | $ | 9,134 | $ | 9,014 | 1 | % | $ | 27,603 | $ | 25,442 | 8 | % | ||||||||||||
| Segment net earnings | $ | 1,907 | $ | 2,287 | (17 | %) | $ | 5,826 | $ | 5,355 | 9 | % | ||||||||||||
Profitability in the nine-month period ended September 30, 2026 increased due to (a) a $581,000 increase in gains on investments and other assets, (b) a $527,000 increase in cemetery pre-need sales, (c) a $478,000 increase in cemetery at-need sales, (d) a $446,000 increase in net investment income, (e) a $387,000 increase in funeral home at-need sales, and (f) a $22,000 decrease in intersegment expenses, which were partially offset by (i) a $1,307,000 increase in selling, general and administrative expenses, primarily attributable to a $688,000 increase in personnel expenses, (ii) a $258,000 decrease in other revenues, (iii) a $191,000 increase in amortization of deferred policy acquisition costs, (iv) a $172,000 increase in income tax expense, (v) a $39,000 increase in cost of goods and services sold, and (vi) a $4,000 increase in interest expense.
Mortgage Operations
The Company’s wholly owned subsidiary, SecurityNational Mortgage Company (“SecurityNational Mortgage”), is a mortgage lender incorporated under the laws of the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), which 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 basis. 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 Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from third party investors that purchase the mortgage loans. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”) released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the mortgage servicing rights on approximately 2% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.
Mortgage 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.
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For the nine month periods ended September 30, 2026, and 2025, SecurityNational Mortgage originated 4,426 loans ($1,506,112,000 total loan volume principal amount) and 5,216 loans ($1,756,289,000 total loan volume principal amount), respectively.
The following table shows the condensed financial results of the mortgage operations for the three and nine month periods ended September 30, 2026, and 2025. See Note 16 to the condensed consolidated financial statements.
| Three
months ended September 30, (in thousands of dollars) | Nine
months ended September 30, (in thousands of dollars) | |||||||||||||||||||||||
| 2026 | 2025 | % Increase (Decrease) | 2026 | 2025 | % Increase (Decrease) | |||||||||||||||||||
| Revenues from external customers | ||||||||||||||||||||||||
| Secondary gains from investors | $ | 16,003 | $ | 20,378 | (21 | %) | $ | 49,313 | $ | 57,518 | (14 | %) | ||||||||||||
| Income from loan originations | 6,929 | 8,953 | (23 | %) | 22,445 | 24,551 | (9 | %) | ||||||||||||||||
| Change in fair value of loans held for sale | (2,037 | ) | 11 | N/M | (2,595 | ) | 960 | (370 | %) | |||||||||||||||
| Change in fair value of loan commitments | (78 | ) | (203 | ) | 62 | % | 941 | 404 | 133 | % | ||||||||||||||
| Net investment income | 193 | 189 | 2 | % | 520 | 455 | 14 | % | ||||||||||||||||
| Gains (losses) on investments and other assets | (89 | ) | 1 | N/M | (47 | ) | 85 | (155 | %) | |||||||||||||||
| Other revenues | 247 | 279 | (11 | %) | 778 | 844 | (8 | %) | ||||||||||||||||
| Intersegment revenues | 70 | 76 | (8 | %) | 209 | 272 | (23 | %) | ||||||||||||||||
| Total segment revenues | $ | 21,238 | $ | 29,684 | (28 | %) | $ | 71,564 | $ | 85,089 | (16 | %) | ||||||||||||
| Segment net earnings (loss) | $ | (2,135 | ) | $ | 20 | N/M | $ | (2,655 | ) | $ | (2,752 | ) | 4 | % | ||||||||||
Losses for the nine-month period ended September 30, 2026 decreased due to (a) a $7,193,000 decrease in commissions, (b) a $5,918,000 decrease in personnel expenses, (c) a $966,000 decrease in intersegment expenses, (d) a $539,000 decrease in rent and rent related expenses, (e) a $538,000 increase in the fair value of loan commitments, (f) a $436,000 decrease in advertising expenses, (g) a $398,000 decrease in costs related to funding mortgage loans, (h) an $88,000 decrease in depreciation on property and equipment, and (i) a $65,000 increase in net investment income, which were partially offset by (1) an $8,205,000 decrease in secondary gains from investors, (2) a $3,555,000 decrease in the fair value of loans held for sale, (3) a $2,107,000 decrease in income from loan originations, (4) a $933,000 increase in other expenses, (5) a $489,000 increase in data processing and IT related expenses, (6) a $264,000 increase in interest expense, (7) a $228,000 decrease in income tax benefit, (8) a $132,000 decrease in gains on investments and other assets, (9) a $67,000 decrease in other revenues, and (10) a $64,000 decrease in intersegment revenues.
Consolidated Results of Operations
Three-month period ended September 30, 2026, Compared to Three-month period ended September 30, 2025
Total revenues decreased by $9,384,000, or 10.5%, to $79,942,000 for the three-month period ended September 30, 2026, from $89,326,000 for the comparable period in 2025. Contributing to this decrease in total revenues was an $8,322,000 decrease in mortgage fee income, a $1,455,000 decrease in insurance premiums and other considerations, a $536,000 decrease in gains on investments and other assets, and a $279,000 decrease in other revenues, which were partially offset by a $617,000 increase in net funeral home and cemetery sales and a $591,000 increase in net investment income.
Insurance premiums and other considerations decreased by $1,455,000, or 4.9%, to $28,426,000 for the three-month period ended September 30, 2026, from $29,881,000 for the comparable period in 2025. This decrease was primarily due to a decrease of $1,655,000 in first year premiums because of a decrease in sales, which was partially offset by an increase of $200,000 in renewal premiums.
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Mortgage fee income decreased by $8,322,000, or 28.6%, to $20,817,000, for the three-month period ended September 30, 2026, from $29,139,000 for the comparable period in 2025. This decrease was primarily due to a $4,375,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market reflecting lower overall loan volume and less favorable pricing conditions, a $2,048,000 decrease in the fair value of loans held for sale, and a $2,024,000 decrease in income from loan originations, which were partially offset by a $125,000 increase in the fair value of loan commitments.
Net investment income increased by $591,000, or 2.9%, to $20,701,000 for the three-month period ended September 30, 2026, from $20,110,000 for the comparable period in 2025. This increase was primarily attributable to a $1,338,000 increase in other investment income, a $767,000 increase in interest on cash and cash equivalents, a $4,000 increase in equity securities income, and a $1,000 increase in policy loan interest, which were partially offset by a $1,111,000 decrease in mortgage loan interest resulting from a decline in the average balance of the mortgage loan portfolio held for investment, a $297,000 increase in investment expenses, a $49,000 decrease in insurance assignment income, a $49,000 decrease in real estate income, and a $13,000 decrease in fixed maturity securities income.
Net funeral home and cemetery sales increased by $617,000, or 8.6%, to $7,758,000 for the three-month period ended September 30, 2026, from $7,141,000 for the comparable period in 2025. This increase was primarily due to a $322,000 increase in cemetery at-need sales, a $175,000 increase in funeral home at-need sales, and a $120,000 increase in cemetery pre-need sales.
Gains on investments and other assets decreased by $536,000 to $1,436,000 for the three-month period ended September 30, 2026, from $1,972,000 for the comparable period in 2025. This decrease in gains on investments and other assets was primarily due to a $1,010,000 decrease in gains on equity securities primarily attributable to decreases in the fair value of these equity securities, which was partially offset by a $347,000 increase in gains on other assets, a $94,000 increase in gains on real estate, and a $33,000 increase in gains on fixed maturity securities.
Other revenues decreased by $279,000, or 25.8%, to $804,000 for the three-month period ended September 30, 2026, from $1,083,000 for the comparable period in 2025. This decrease was primarily due to a decrease of $279,000 in other miscellaneous revenues.
Policyholder benefits and claims decreased by $936,000 or 3.8%, to $23,587,000 for the three-month period ended September 30, 2026, from $24,523,000 for the comparable period in 2025. This decrease was primarily the result of an $888,000 decrease in future policy benefits, a $206,000 decrease in death benefits, and a $44,000 decrease in surrender and other policy benefits, which were partially offset by a $202,000 increase in interest credited to policyholder account balances.
Amortization of deferred policy and pre-need acquisition costs and value of business acquired decreased by $18,000, or 0.6%, to $2,977,000 for the three-month period ended September 30, 2026, from $2,995,000 for the comparable period in 2025. Amortization of value of business acquired decreased by $14,000 because of a declining average outstanding balance, with no additions from new acquisitions. Amortization of deferred policy and pre-need acquisition costs decreased by $4,000, reflecting a relatively stable average outstanding balance between periods.
Selling, general and administrative expenses decreased by $4,041,000, or 8.7%, to $42,484,000 for the three-month period ended September 30, 2026, from $46,526,000 for the comparable period in 2025. This decrease was primarily the result of a $4,267,000 decrease in commissions, a $1,731,000 decrease in personnel expenses, a $375,000 decrease in costs related to funding mortgage loans, a $250,000 decrease in advertising expense, a $185,000 decrease in rent and rent related expenses, and a $21,000 decrease in depreciation on property and equipment, which were partially offset by a $2,789,000 increase in other expenses.
Interest expense increased by $450,000, or 42.2%, to $1,516,000 for the three-month period ended September 30, 2026, from $1,066,000 for the comparable period in 2025. This increase was primarily due to a $465,000 increase in interest expense on mortgage warehouse lines of credit for loans held for sale, which was partially offset by a decrease of $15,000 in interest expense on bank loans.
Funeral home and cemetery cost of goods and services sold increased by $40,000, or 3.6%, to $1,154,000 for the three-month period ended September 30, 2026, from $1,113,000 for the comparable period in 2025. This increase was primarily due to an increase of $44,000 in at-need sales, which was partially offset by a decrease of $4,000 in pre-need sales.
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Income tax expense decreased by $997,000, or 32.6%, to $2,057,000 for the three-month period ended September 30, 2026, from $3,054,000 for the comparable period in 2025. This decrease was primarily due to a decrease in earnings before income taxes for 2026 compared to 2025. The Company’s overall effective tax rate increased from 23.3% for 2025 to 25.0% in 2026, a 1.7 percentage point increase in the effective tax rate or a 7.3% change. This increase was primarily due to certain permanent tax adjustments that are higher when compared to the prior year.
Nine-month period ended September 30, 2026, Compared to Nine-month period ended September 30, 2025
Total revenues decreased by $18,010,000, or 6.9%, to $243,596,000 for the nine-month period ended September 30, 2026, from $261,607,000 for the comparable period in 2025. Contributing to this decrease in total revenues was a $13,329,000 decrease in mortgage fee income, a $4,262,000 decrease in net investment income, a $3,860,000 decrease in insurance premiums and other considerations, and a $617,000 decrease in other revenues, which were partially offset by a $2,666,000 increase in gains on investments and other assets and a $1,392,000 increase in net funeral home and cemetery sales.
Insurance premiums and other considerations decreased by $3,860,000, or 4.3%, to $85,986,000 for the nine-month period ended September 30, 2026, from $89,846,000 for the comparable period in 2025. This decrease was primarily due to a decrease of $4,441,000 in first year premiums because of a decrease in sales, which was partially offset by an increase of $581,000 in renewal premiums.
Mortgage fee income decreased by $13,329,000, or 16.0%, to $70,104,000, for the nine-month period ended September 30, 2026, from $83,433,000 for the comparable period in 2025. This decrease was primarily due to an $8,205,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market reflecting lower overall loan volume and less favorable pricing conditions, a $3,555,000 decrease in the fair value of loans held for sale, and a $2,107,000 decrease in income from loan originations, which were partially offset by a $538,000 increase in the fair value of loan commitments.
Net investment income decreased by $4,262,000, or 7.1%, to $55,631,000 for the nine-month period ended September 30, 2026, from $59,893,000 for the comparable period in 2025. This decrease was primarily attributable to a $6,917,000 decrease in mortgage loan interest resulting from a decline in the average balance of the mortgage loan portfolio held for investment, a $597,000 decrease in insurance assignment income, a $29,000 decrease in real estate income, a $28,000 decrease in policy loan interest, and a $24,000 decrease in fixed maturity securities income, which were partially offset by a $1,606,000 increase in other investment income, a $1,067,000 decrease in investment expenses, a $655,000 increase in interest on cash and cash equivalents, and a $6,000 increase in equity securities income.
Net funeral home and cemetery sales increased by $1,392,000, or 6.4%, to $23,091,000 for the nine-month period ended September 30, 2026, from $21,699,000 for the comparable period in 2025. This increase was primarily due to a $527,000 increase in cemetery pre-need sales, a $478,000 increase in cemetery at-need sales, and a $387,000 increase in funeral home at-need sales.
Gains on investments and other assets increased by $2,666,000, or 72%, to $6,367,000 for the nine-month period ended September 30, 2026, from $3,701,000 for the comparable period in 2025. This increase in gains on investments and other assets was primarily due to a $1,628,000 increase in gains on equity securities primarily attributable to increases in the fair value of these equity securities, a $879,000 increase in gains on real estate, and a $357,000 increase in gains on other assets, which were partially offset by a $198,000 decrease in gains on fixed maturity securities.
Other revenues decreased by $617,000, or 20.3%, to $2,417,000 for the nine-month period ended September 30, 2026, from $3,034,000 for the comparable period in 2025. This decrease was primarily due to a decrease of $617,000 in other miscellaneous revenues.
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Policyholder benefits and claims decreased by $3,050,000 or 4.0%, to $72,444,000 for the nine-month period ended September 30, 2026, from $75,494,000 for the comparable period in 2025. This decrease was primarily the result of a $2,546,000 decrease in future policy benefits, a $697,000 decrease in death benefits, and a $48,000 decrease in surrender and other policy benefits, which were partially offset by a $241,000 increase in interest credited to policyholder account balances.
Amortization of deferred policy and pre-need acquisition costs and value of business acquired increased by $229,000, or 2.6%, to $8,894,000 for the nine-month period ended September 30, 2026, from $8,665,000 for the comparable period in 2025. Amortization of deferred policy and pre-need acquisition costs increased by $262,000 because of a higher average outstanding balance. This increase was partially offset by a $33,000 decrease in amortization of value of business acquired, reflecting a declining average outstanding balance with no additions from new acquisitions.
Selling, general and administrative expenses decreased by $12,209,000, or 8.8%, to $126,142,000 for the nine-month period ended September 30, 2026, from $138,351,000 for the comparable period in 2025. This decrease was primarily the result of a $9,060,000 decrease in commissions, a $4,978,000 decrease in personnel expenses, a $547,000 decrease in advertising expense, a $502,000 decrease in rent and rent related expenses, a $398,000 decrease in costs related to funding mortgage loans, and a $68,000 decrease in depreciation on property and equipment, which were partially offset by a $3,345,000 increase in other expenses.
Interest expense increased by $137,000, or 4.0%, to $3,617,000 for the nine-month period ended September 30, 2026, from $3,479,000 for the comparable period in 2025. This increase was primarily due to an increase of $264,000 in interest expense on mortgage warehouse lines of credit for loans held for sale, which was partially offset by a decrease of $127,000 in interest expense on bank loans.
Funeral home and cemetery cost of goods and services sold increased by $39,000, or 1.1%, to $3,565,000 for the nine-month period ended September 30, 2026, from $3,526,000 for the comparable period in 2025. This increase was primarily due to an increase of $22,000 in at-need sales and an increase of $17,000 in pre-need sales.
Income tax expense decreased by $474,000, or 6.5%, to $6,785,000 for the nine-month period ended September 30, 2026, from $7,259,000 for the comparable period in 2025. This decrease was primarily due to a decrease in earnings before income taxes for 2026 compared to 2025. The Company’s overall effective tax rate increased from 22.6% for 2025 to 23.5% in 2026, a 0.9 percentage point increase in the effective tax rate or a 3.7% change. This increase was primarily due to certain permanent tax adjustments that are higher when compared to the prior year.
Liquidity and Capital Resources
The Company’s life insurance subsidiaries and funeral home and cemetery subsidiaries realize cash flow from premiums, contract payments and sales on personal services rendered for funeral home and cemetery business, from interest and dividends on invested assets, and from the proceeds from the sale or maturity of investments. The mortgage subsidiaries realize cash flow from fees generated by originating and refinancing mortgage loans and fees from mortgage loans held for sale that are sold to investors into the secondary market. It should be noted that current conditions in the financial markets and economy may affect the realization of these expected cash flows. The Company considers these sources of cash flow to be adequate to fund future policyholder and funeral home and cemetery liabilities, which generally are long-term, and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of new policies, the maintenance of existing policies, debt service, and to meet current operating expenses.
During the nine-month periods ended September 30, 2026, and 2025, the Company’s operations provided cash of approximately $93,387,000 and of approximately $27,553,000, respectively. The increase in cash provided by operations was due primarily to a decrease in originations of loans held for sale.
The 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 pay out upon a person’s death to cover funeral and 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.
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The Company attempts to match the duration of invested assets with its policyholder and funeral home and cemetery liabilities. The Company may sell investments other than those held to maturity in the portfolio to help in this timing matching. The Company purchases short-term investments on a temporary basis to meet the expected short-term requirements of the Company’s insurance products. The Company’s investment philosophy is intended to provide a rate of return for the expected duration of its funeral home and cemetery policies that will exceed the accruing of liabilities under those policies regardless of future interest rate movements.
The Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage loans. 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 $360,448,000 (at estimated fair value) and $365,986,000 (at estimated fair value) as of September 30, 2026, and December 31, 2025, respectively. This represented 34.5% and 35.2% of the total investments of the Company as of September 30, 2026, and December 31, 2025, 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 the rating of bonds. As of September 30, 2026, 1.7% (or $6,036,000) and as of December 31, 2025, 1.6% (or $5,825,000) of the Company’s total bond investments were invested in bonds in rating categories three through six, which are considered non-investment grade.
The 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, 2026, and December 31, 2025, the life insurance subsidiaries were in compliance with the regulatory criteria.
The Company’s total capitalization of stockholders’ equity, bank and other loans payable was $608,130,000 as of September 30, 2026, as compared to $508,757,000 as of December 31, 2025. This increase was primarily due to an increase of $58,224,000 in stockholders’ equity and an increase of $41,149,000 in bank and other loans payable. Stockholders’ equity as a percentage of total capitalization was 77.1% and 80.7% as of September 30, 2026, and December 31, 2025, respectively.
As of September 30, 2026, SecurityNational Mortgage was not in compliance with the net income covenant of the U.S. Bank and the Western Alliance Bank warehouse lines of credit. SecurityNational Mortgage received a waiver from U.S. Bank and is in the process of receiving a waiver from Western Alliance Bank. If the lenders require repayment of the outstanding advances of approximately $46,800,000 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 of 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.
Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance in 2025 was 7.2% as compared to a lapse rate of 7.0% for 2024. The 2026 lapse rate to date has been approximately the same as 2025.
The combined statutory capital and surplus of the Company’s life insurance subsidiaries was approximately $146,702,000 and $139,068,000 as of September 30, 2026, and December 31, 2025, respectively. The life insurance subsidiaries cannot pay a dividend to their parent company without the approval of state insurance regulatory authorities.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.
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| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
As of September 30, 2026, the Company carried out an evaluation under the supervision and with the participation of its Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has designed these controls and procedures to ensure that information the Company is required to disclose in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to Company management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
The CEO and CFO have concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2026, because of the material weakness in the Company’s internal control over financial reporting described below. This material weakness was also identified during the fourth quarter of 2025 and is disclosed in the Company’s Annual Report on Form 10-K along with the report of the Company’s registered public accounting firm.
The Company identified a material weakness related to information technology general controls (“ITGCs”) because the Company did not design and maintain effective ITGCs for information systems that are relevant to the preparation of the financial statements. Specifically, deficiencies were identified related to user access controls and program change management controls for financial systems. These deficiencies resulted in related control deficiencies with respect to information generated from the impacted systems and used in the performance of controls relevant to the preparation of the financial statements. The material weakness related to the ITGCs did not result in adjustments to the financial statements for the quarter ended September 30, 2026.
Changes in Internal Control over Financial Reporting
The Company is taking actions to remediate the material weakness relating to its internal control over financial reporting. Other than the changes to the Company’s internal control over financial reporting described in “Remediation Plan and Status” below, there were no changes to the Company’s internal control over financial reporting as defined by Rule 13a-15(f) under the Exchange Act during the quarter ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Remediation Plan and Status
The Company is committed to remediating its material weakness as promptly as possible. Management is in the process of implementing its remediation plan, which includes enhancing user access controls and strengthening program change management controls for the Company’s financial systems. Management will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weakness cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
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Part II - Other Information
| Item 1. | Legal Proceedings. |
The Company is not a party to any material legal proceedings outside the ordinary course of business or to any other legal proceedings, which if adversely determined, would be expected to have a material adverse effect on its financial condition or results of operations.
| Item 1A. | Risk Factors. |
As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities
None.
Issuer Purchases of Equity Securities
On February 16, 2026, the Company entered into a Rule 10b5-1 trading plan with a broker to repurchase up to $1,000,000 of the Company’s Class A Common Stock under the Company’s Stock Repurchase Plan. The Stock Repurchase Plan, approved by the Board of Directors in September 2018 and amended on December 4, 2020, authorized the repurchase of up to 1,000,000 shares of Class A Common Stock in the open market. Purchases under the 10b5-1 plan commenced on March 16, 2026, and were subject to the daily time, price, and volume conditions of Rule 10b-18. On June 16, 2026, the Company terminated the 10b5-1 plan because the 1,000,000-share limit authorized under the Stock Repurchase Plan had been reached. The Company did not repurchase any shares under the Stock Repurchase Plan during the three-month period ended September 30, 2026.
| Period | (a) Total Number of Class A Shares Purchased | (b) Average Price Paid per Class A Share | (c) Total Number of Class A Shares Purchased as Part of Publicly Announced Plan or Program | (d) Maximum Number (or Approximate Dollar Value) of Class A Shares that May Yet Be Purchased Under the Plan or Program | ||||||||||||
| 7/1/2026-7/31/2026 | 616 | (1) | $ | 9.79 | - | - | ||||||||||
| 8/1/2026-8/31/2026 | - | - | - | - | ||||||||||||
| 9/1/2026-9/30/2026 | - | - | - | - | ||||||||||||
| Total | 616 | $ | 9.79 | - | - | |||||||||||
(1) Represents shares repurchased directly from a member of the Board of Directors, at the director’s request, following the vesting of restricted stock units. These shares were not purchased under the Company’s Stock Repurchase Plan.
| Item 3. | Defaults Upon Senior Securities. |
None.
| Item 4. | Mine Safety Disclosures. |
None.
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| Item 5. | Other Information. |
None
of our directors or officers informed us of the
| Item 6. | Exhibits. |
| (a)(1) | Financial Statements |
| See “Table of Contents – Part I – Financial Information” under page 2 above. | |
| (a)(2) | Financial Statement Schedules |
| None. | |
| All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted. | |
| (a)(3) | Exhibits |
| The following Exhibits are filed or furnished herewith pursuant to Item 601 of Regulation S-K or are incorporated by reference to previous filings. |
| 3.1 | Amended and Restated Articles of Incorporation (1) | |
| 3.2 | Amended and Restated Bylaws (2) | |
| 31.1 | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
| * | Furnished herewith. These certifications are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and are not incorporated by reference into any filing except to the extent the Company specifically incorporates them by reference. |
(1) Incorporated by reference from Report on Form 10-K, as filed on March 31, 2017
(2) Incorporated by reference from Report on Form 10-Q, as filed on May 15, 2019
| 90 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
REGISTRANT
SECURITY NATIONAL FINANCIAL CORPORATION
Registrant
| Dated: November 9, 2026 | /s/ Scott M. Quist |
| Scott M. Quist | |
| Chairman, President and Chief Executive Officer | |
| (Principal Executive Officer) | |
| Dated: November 9, 2026 | /s/ Garrett S. Sill |
| Garrett S. Sill | |
| Chief Financial Officer and Treasurer | |
| (Principal Financial Officer and Principal Accounting Officer) |
| 91 |