Form 10-Q SECURITY NATIONAL FINANC For: Mar 31

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May 17, 2021 11:45 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ________

Commission File Number: 000-09341

SECURITY NATIONAL FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

UTAH	87-0345941
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

121 West Election Road, Suite 100, Draper, Utah	84020
(Address of principal executive offices)	(Zip Code)

(801) 264-1060 (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
Class A Common Stock	SNFCA	The Nasdaq Global Select Market

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.

Yes [X] No [ ]

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).

Yes [X] No [ ]

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 [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]
	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[X]

As of May 12, 2021, the registrant had 16,701,916 shares of Class A Common Stock, $2.00 par value, outstanding and 2,631,076 shares of Class C Common Stock, $2.00 par value, outstanding.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED MARCH 31, 2021

Table of Contents

		Page No.
	Part I - Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020	3-4
	Condensed Consolidated Statements of Earnings for the three months ended March 31, 2021 and 2020 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 (unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity as of March 31, 2021 and March 31, 2020 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)	8-9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4.	Controls and Procedures	55
	Part II - Other Information
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	57
	Signature Page	59

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Part I - Financial Information

Item 1. Financial Statements.

Assets	March 31 2021 (Unaudited)	December 31 2020
Investments:
Fixed maturity securities, available for sale, at estimated fair value (amortized cost of $256,894,421 and $265,150,484 for 2021 and 2020)	`$279,550,528`	`$294,656,679`
Equity securities at estimated fair value (cost of $8,913,275 and $9,698,490 for 2021 and 2020)	`11,154,495`	`11,324,239`
Mortgage loans held for investment (net of allowances for loan losses of $1,897,155 and $2,005,127 for 2021 and 2020)	`244,951,952`	`249,343,936`
Real estate held for investment (net of accumulated depreciation of $14,473,417 and $13,800,973 for 2021 and 2020)	`157,040,536`	`131,684,453`
Real estate held for sale	`5,556,866`	`7,878,807`
Other investments and policy loans (net of allowances for doubtful accounts of $1,662,394 and $1,645,475 for 2021 and 2020)	`74,690,150`	`73,696,661`
Accrued investment income	`6,266,403`	`5,360,523`
Total investments	`779,210,930`	`773,945,298`
Cash and cash equivalents	`144,159,566`	`106,219,429`
Loans held for sale at estimated fair value	`304,030,372`	`422,772,418`
Receivables (net of allowances for doubtful accounts of $1,698,691 and $1,685,382 for 2021 and 2020)	`13,970,177`	`10,899,207`
Restricted assets (including $4,160,721 and $3,989,415 for 2021 and 2020 at estimated fair value)	`16,494,477`	`16,150,036`
Cemetery perpetual care trust investments (including $2,947,117 and $2,810,070 for 2021 and 2020 at estimated fair value)	`6,602,118`	`6,413,167`
Receivable from reinsurers	`15,836,062`	`15,569,156`
Cemetery land and improvements	`8,524,629`	`8,761,436`
Deferred policy and pre-need contract acquisition costs	`101,695,734`	`100,075,276`
Mortgage servicing rights, net	`42,779,361`	`35,210,516`
Property and equipment, net	`14,836,721`	`12,473,345`
Value of business acquired	`8,748,055`	`8,955,249`
Goodwill	`3,519,588`	`3,519,588`
Other	`27,819,736`	`27,976,357`
Total Assets	`$1,488,227,526`	`$1,548,940,478`

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

	March 31 2021 (Unaudited)	December 31 2020
Liabilities and Stockholders' Equity
Liabilities
Future policy benefits and unpaid claims	`$846,737,059`	`$844,790,087`
Unearned premium reserve	`3,265,505`	`3,328,623`
Bank and other loans payable	`245,973,378`	`297,824,368`
Deferred pre-need cemetery and mortuary contract revenues	`13,514,055`	`13,080,179`
Cemetery perpetual care obligation	`4,130,579`	`4,087,704`
Accounts payable	`10,404,210`	`8,932,683`
Other liabilities and accrued expenses	`64,282,931`	`87,650,981`
Income taxes	`28,051,968`	`25,258,800`
Total liabilities	`1,216,359,685`	`1,284,953,425`

Stockholders' Equity
Preferred Stock - non-voting - $1.00 par value; 5,000,000 shares authorized; none issued or outstanding	`-`	`-`
Class A: common stock - $2.00 par value; 20,000,000 shares authorized; issued 16,672,236 shares in 2021 and 16,595,783 shares in 2020	`33,344,472`	`33,191,566`
Class B: non-voting common stock - $1.00 par value; 5,000,000 shares authorized; none issued or outstanding	`-`	`-`
Class C: convertible common stock - $2.00 par value; 3,000,000 shares authorized; issued 2,631,076 shares in 2021 and 2,679,603 shares in 2020	`5,262,152`	`5,359,206`
Additional paid-in capital	`50,650,188`	`50,287,253`
Accumulated other comprehensive income, net of taxes	`17,854,611`	`23,243,133`
Retained earnings	`165,867,882`	`153,739,167`
Treasury stock at cost - 77,825 Class A shares and 56,276 Class C shares in 2021; and 227,852 Class A shares and 10,985 Class C shares in 2020	`(1,111,464)`	`(1,833,272)`

Total stockholders' equity	`271,867,841`	`263,987,053`
Total Liabilities and Stockholders' Equity	`$1,488,227,526`	`$1,548,940,478`

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended March 31
	2021	2020
Revenues:
Mortgage fee income	`$72,998,612`	`$40,281,761`
Insurance premiums and other considerations	`23,350,210`	`22,291,276`
Net investment income	`14,293,887`	`13,400,499`
Net mortuary and cemetery sales	`5,942,126`	`4,458,091`
Gains (losses) on investments and other assets	`1,960,113`	`(3,212,247)`
Other	`4,113,658`	`2,389,569`
Total revenues	`122,658,606`	`79,608,949`

Benefits and expenses:
Death benefits	`18,312,006`	`13,407,627`
Surrenders and other policy benefits	`1,077,644`	`1,070,475`
Increase in future policy benefits	`4,254,658`	`7,038,033`
Amortization of deferred policy and pre-need acquisition costs and value of business acquired	`3,576,865`	`3,515,057`
Selling, general and administrative expenses:
Commissions	`32,729,680`	`16,554,743`
Personnel	`24,371,505`	`18,719,998`
Advertising	`1,800,998`	`1,005,317`
Rent and rent related	`1,865,898`	`1,614,741`
Depreciation on property and equipment	`501,645`	`516,213`
Costs related to funding mortgage loans	`2,937,225`	`1,956,282`
Other	`11,949,864`	`10,075,542`
Interest expense	`1,825,599`	`1,818,609`
Cost of goods and services sold-mortuaries and cemeteries	`1,099,964`	`842,078`
Total benefits and expenses	`106,303,551`	`78,134,715`

Earnings before income taxes	`16,355,055`	`1,474,234`
Income tax expense	`(4,226,340)`	`(49,785)`

Net earnings	`$12,128,715`	`$1,424,449`

Net earnings per Class A Equivalent common share (1)	`$0.63`	`$0.08`

Net earnings per Class A Equivalent common share-assuming dilution (1)	`$0.61`	`$0.08`

Weighted-average Class A equivalent common shares outstanding (1)	`19,124,001`	`18,641,950`

Weighted-average Class A equivalent common shares outstanding-assuming dilution (1)	`20,008,050`	`18,833,396`

(1) Net earnings per share amounts have been adjusted retroactively for the effect of annual stock dividends. The weighted-average shares outstanding includes the weighted-average Class A common shares and the weighted-average Class C common shares determined on an equivalent Class A common stock basis. Net earnings per common share represent net earnings per equivalent Class A common share.

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended March 31
	2021	2020
Net earnings	`$12,128,715`	`$1,424,449`
Other comprehensive income:
Unrealized gains (losses) on fixed maturity securities available for sale	`$(6,805,903)`	`(11,181,151)`
Unrealized gains (losses) on restricted assets	`(10,428)`	`(13,085)`
Unrealized gains (losses) on cemetery perpetual care trust investments	`(8,197)`	`(12,046)`
Foreign currency translation adjustments	`2,835`	`(445)`
Other comprehensive income (loss), before income tax	`(6,821,693)`	`(11,206,727)`
Income tax benefit (expense)	`1,433,171`	`2,354,414`
Other comprehensive income (loss), net of income tax	`(5,388,522)`	`(8,852,313)`
Comprehensive income (loss)	`$6,740,193`	`$(7,427,864)`

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Three Months Ended March 31, 2021

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income

Retained Earnings

Treasury Stock

Total

January 1, 2021

$33,191,566

$5,359,206

$50,287,253

$23,243,133

$153,739,167

$(1,833,272)

$263,987,053

Net earnings

-

12,128,715

-

12,128,715

Other comprehensive loss

-

(5,388,522)

-

(5,388,522)

Stock-based compensation expense

-

39,153

-

39,153

Exercise of stock options

55,852

-

33,401

-

89,253

Sale of treasury stock

-

290,381

-

1,632,041

1,922,422

Purchase of treasury stock

-

(910,233)

Conversion Class C to Class A

97,054

(97,054)

-

March 31, 2021

$33,344,472

$5,262,152

$50,650,188

$17,854,611

$165,867,882

$(1,111,464)

$271,867,841

Three Months Ended March 31, 2020

Class A Common Stock

Class C Common Stock

Additional Paid-in Capital

Accumulated Other Comprehensive Income

Retained Earnings

Treasury Stock

Total

January 1, 2020

$32,215,558

$5,001,774

$46,091,112

$13,726,514

$101,256,229

$(1,580,582)

$196,710,605

Net earnings

-

1,424,449

-

1,424,449

Other comprehensive loss

-

(8,852,313)

-

(8,852,313)

Stock-based compensation expense

-

65,877

-

65,877

Exercise of stock options

44,822

-

(33,930)

-

10,892

Sale of treasury stock

-

218,280

-

264,081

482,361

Purchase of treasury stock

-

(129,608)

Stock dividends

2,322

(1,020)

2,292

-

(3,594)

-

Conversion Class C to Class A

22,324

(22,324)

-

March 31, 2020

$32,285,026

$4,978,430

$46,343,631

$4,874,201

$102,677,084

$(1,446,109)

$189,712,263

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31
	2021	2020
Cash flows from operating activities:
Net cash provided by (used in) operating activities	`$100,975,851`	`$(63,771,244)`

Cash flows from investing activities:
Purchases of fixed maturity securities	`(1,753,606)`	`(28,691,834)`
Sales, calls and maturities of fixed maturity securities	`9,993,624`	`44,166,424`
Purchases of equity securities	`(367,786)`	`(10,650,102)`
Sales of equity securities	`1,376,669`	`7,576,507`
Net changes in restricted assets	`179,052`	`753,326`
Net changes in perpetual care trusts	`(47,841)`	`(107,286)`
Mortgage loans held for investment, other investments and policy loans made	`(200,084,136)`	`(153,050,405)`
Payments received for mortgage loans held for investment, other investments and policy loans	`203,929,458`	`149,366,124`
Purchases of property and equipment	`(2,865,020)`	`(534,737)`
Purchases of real estate	`(23,554,515)`	`(750,018)`
Sales of real estate	`5,147,199`	`4,153,329`
Net cash provided by (used in) investing activities	`(8,046,902)`	`12,231,328`

Cash flows from financing activities:
Investment contract receipts	`2,542,681`	`2,640,020`
Investment contract withdrawals	`(4,386,172)`	`(4,662,891)`
Proceeds from stock options exercised	`89,253`	`10,892`
Purchases of treasury stock	`(910,233)`	`(129,608)`
Repayment of bank loans	`(46,367,270)`	`(810,623)`
Proceeds from bank loans	`54,896,199`	`20,172,821`
Net change in warehouse line borrowings for loans held for sale	`(60,432,330)`	`16,982,783`
Net cash provided by (used in) financing activities	`(54,567,872)`	`34,203,394`

Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	`38,361,077`	`(17,336,522)`

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	`115,465,086`	`137,735,673`

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	`$153,826,163`	`$120,399,151`

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest	`$2,142,375`	`$1,845,747`
Income taxes (net of refunds)	`-`	`-`

Non Cash Operating, Investing and Financing Activities:
Accrued real estate construction costs and retainage	`$4,521,048`	`$399,976`
Benefit plans funded with treasury stock	`1,922,422`	`482,361`
Right-of-use assets obtained in exchange for operating lease liabilities	`1,082,388`	`3,271,518`
Mortgage loans held for investment foreclosed into real estate held for investment	`389,145`	`-`
Transfer of loans held for sale to mortgage loans held for investment	`201,951`	`8,933,676`
Right-of-use assets obtained in exchange for finance lease liabilities	`-`	`9,394`

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 is presented in the table below:

	Three Months Ended March 31
	2021	2020
Cash and cash equivalents	`$144,159,566`	`$103,769,066`
Restricted assets	`9,256,997`	`15,347,648`
Cemetery perpetual care trust investments	`409,600`	`1,282,437`

Total cash, cash equivalents, restricted cash and restricted cash equivalents	`$153,826,163`	`$120,399,151`

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

1)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 of 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, 2020, 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 months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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 value of mortgage loans foreclosed to real estate held for investment; those used in determining the liability for future policy benefits; those used in estimating other than temporary impairments on available for sale securities; those used in determining the value of mortgage servicing rights; those used in determining allowances for loan losses for mortgage loans held for investment; those used in determining loan loss reserve; and those used in determining deferred tax assets and liabilities. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.

COVID-19. During 2020, the outbreak of COVID-19 had spread worldwide and was declared a global pandemic by the World Health Organization on March 11, 2020. COVID-19 poses a threat to the health and economic well-being of the Company’s employees, customers, and vendors. The Company is closely monitoring developments relating to the COVID-19 pandemic and assessing its impact on the Company’s business. The COVID-19 pandemic has had and continues to have a major impact on the global economy and financial markets. Governments and businesses have taken numerous measures to try to contain the virus, which include the implementation of travel bans, self-imposed quarantine periods, and social distancing. These measures have disrupted and will continue to disrupt businesses globally. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize the economic conditions.

Like most businesses, COVID-19 has impacted the Company. However, the Company cannot, with any certainty predict the severity or duration with which COVID-19 will impact the Company’s business, financial condition, results of operations, and cash flows. To the extent the COVID-19 pandemic adversely affects the Company’s business, financial condition, and results of operations, it may also have the effect of heightening many of the other risks described in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. These uncertainties have the potential to negatively affect the risk of credit default for the issuers of the Company’s fixed maturity debt securities and individual borrowers with mortgage loans held by the Company.

The Company has implemented risk management, business continuity plans and has taken preventive measures and other precautions, such as business travel restrictions and remote work arrangements. Such measures and precautions have enabled the Company to continue to conduct business.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

2)Recent Accounting Pronouncements

Accounting Standards Adopted in 2020

ASU No. 2018-13: “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement” – Issued in August 2018, ASU 2018-13 modifies the disclosure requirements of Topic 820 by removing, modifying or adding certain disclosures. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 does not change the fair value measurements already required or permitted by existing standards. The Company adopted this standard on January 1, 2020. The adoption of this standard did not materially impact the Company’s financial statements. See Note 8 for the Company’s fair value disclosures.

Accounting Standards Issued But Not Yet Adopted

ASU No. 2016-13: “Financial Instruments – Credit Losses (Topic 326)” – Issued in September 2016, ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis (such as mortgage loans and held to maturity debt securities) and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP; however, Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. In October 2019, the FASB proposed an update to ASU No. 2016-13 that would make the ASU effective for the Company on January 1, 2023. The Company is in the process of evaluating the potential impact of this standard, especially as it relates to mortgage loans held for investment.

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 ASU will simplify and improve the accounting for certain market-based options or guarantees associated with deposit or account balance contracts, simplify amortization of deferred acquisition costs while improving and expanding required disclosures. In November 2020, the FASB issued an update to ASU No. 2018-12 that made the ASU effective for the Company on January 1, 2025. The Company is in the process of evaluating the potential impact of this standard.

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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments

The Company’s investments as of March 31, 2021 are summarized as follows:

	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
March 31, 2021:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies	`$42,427,856`	`$1,099,519`	`$-`	`$43,527,375`
Obligations of states and political subdivisions	`5,370,754`	`209,554`	`(24,569)`	`5,555,739`
Corporate securities including public utilities	`179,026,864`	`21,203,792`	`(501,358)`	`199,729,298`
Mortgage-backed securities	`29,799,733`	`892,449`	`(236,547)`	`30,455,635`
Redeemable preferred stock	`269,214`	`13,267`	`-`	`282,481`
Total fixed maturity securities available for sale	`$256,894,421`	`$23,418,581`	`$(762,474)`	`$279,550,528`
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	`$8,913,275`	`$2,586,343`	`$(345,123)`	`$11,154,495`
Total equity securities at estimated fair value	`$8,913,275`	`$2,586,343`	`$(345,123)`	`$11,154,495`
Mortgage loans held for investment at amortized cost:
Residential	`$88,266,355`
Residential construction	`105,450,591`
Commercial	`55,065,455`
Less: Unamortized deferred loan fees, net	`(1,223,014)`
Less: Allowance for loan losses	`(1,897,155)`
Less: Net discounts	`(710,280)`
Total mortgage loans held for investment	`$244,951,952`
Real estate held for investment - net of accumulated depreciation:
Residential	`$39,752,530`
Commercial	`117,288,006`
Total real estate held for investment	`$157,040,536`
Real estate held for sale:
Residential	`$1,156,313`
Commercial	`4,400,553`
Total real estate held for sale	`$5,556,866`
Other investments and policy loans at amortized cost:
Policy loans	`$13,946,739`
Insurance assignments	`54,618,319`
Federal Home Loan Bank stock (1)	`2,544,700`
Other investments	`5,242,786`
Less: Allowance for doubtful accounts	`(1,662,394)`
Total policy loans and other investments	`$74,690,150`
Accrued investment income	`$6,266,403`
Total investments	`$779,210,930`

(1)Includes $905,700 of Membership stock and $1,639,000 of Activity stock due to short-term borrowings.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

The Company’s investments as of December 31, 2020 are summarized as follows:

	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
December 31, 2020:
Fixed maturity securities, available for sale, at estimated fair value:
U.S. Treasury securities and obligations of U.S. Government agencies	`$42,381,805`	`$1,358,562`	`$-`	`$43,740,367`
Obligations of states and political subdivisions	`5,383,762`	`312,214`	`(1,261)`	`5,694,715`
Corporate securities including public utilities	`186,067,912`	`27,216,496`	`(681,478)`	`212,602,930`
Mortgage-backed securities	`31,047,791`	`1,565,377`	`(267,106)`	`32,346,062`
Redeemable preferred stock	`269,214`	`3,391`	`-`	`272,605`
Total fixed maturity securities available for sale	`$265,150,484`	`$30,456,040`	`$(949,845)`	`$294,656,679`
Equity securities at estimated fair value:
Common stock:
Industrial, miscellaneous and all other	`$9,698,490`	`$2,376,156`	`$(750,407)`	`$11,324,239`
Total equity securities at estimated fair value	`$9,698,490`	`$2,376,156`	`$(750,407)`	`$11,324,239`
Mortgage loans held for investment at amortized cost:
Residential	`$95,822,448`
Residential construction	`111,111,777`
Commercial	`46,836,866`
Less: Unamortized deferred loan fees, net	`(1,161,132)`
Less: Allowance for loan losses	`(2,005,127)`
Less: Net discounts	`(1,260,896)`
Total mortgage loans held for investment	`$249,343,936`
Real estate held for investment - net of accumulated depreciation:
Residential	`$24,843,743`
Commercial	`106,840,710`
Total real estate held for investment	`$131,684,453`
Real estate held for sale:
Residential	`$3,478,254`
Commercial	`4,400,553`
Total real estate held for sale	`$7,878,807`
Other investments and policy loans at amortized cost:
Policy loans	`$14,171,589`
Insurance assignments	`53,231,131`
Federal Home Loan Bank stock (1)	`2,506,600`
Other investments	`5,432,816`
Less: Allowance for doubtful accounts	`(1,645,475)`
Total policy loans and other investments	`$73,696,661`
Accrued investment income	`$5,360,523`
Total investments	`$773,945,298`

(1)Includes $866,900 of Membership stock and $1,639,700 of Activity stock due to short-term borrowings.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

Fixed Maturity Securities

The following tables summarize unrealized losses on fixed maturity securities available for sale, which were carried at estimated fair value, at March 31, 2021 and December 31, 2020. The unrealized losses were primarily related to interest rate fluctuations and uncertainties relating to COVID-19. The tables set forth unrealized losses by duration with the fair value of the related 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 March 31, 2021

Obligations of States and Political Subdivisions

$24,569

$778,979

$-

$24,569

$778,979

Corporate Securities

137,661

9,760,180

363,697

9,199,818

501,358

18,959,998

Mortgage and other asset-backed securities

90,713

5,235,918

145,834

2,026,009

236,547

7,261,927

Total unrealized losses

$252,943

$15,775,077

$509,531

$11,225,827

$762,474

$27,000,904

At December 31, 2020

Obligations of States and Political Subdivisions

$1,261

$206,812

$-

$1,261

$206,812

Corporate Securities

242,596

9,919,298

438,882

2,593,026

681,478

12,512,324

Mortgage and other asset-backed securities

266,522

3,455,574

584

51,961

267,106

3,507,535

Total unrealized losses

$510,379

$13,581,684

$439,466

$2,644,987

$949,845

$16,226,671

There were 79 securities with fair value of 97.3% of amortized cost at March 31, 2021. There were 63 securities with fair value of 94.7% of amortized cost at December 31, 2020. No credit losses have been recognized for the three months ended March 31, 2021 and 2020.

On a quarterly basis, the Company evaluates its fixed maturity securities available for sale. This evaluation includes a review of current ratings by the National Association of Insurance Commissions (NAIC). Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for impairment. Securities with ratings of 3 to 5 are evaluated for impairment. Securities with a rating of 6 are automatically determined to be impaired and are written down. The evaluation involves an analysis of the securities in relation 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 interest and principal payments in accordance with the terms of the financial instrument. If it is unlikely that the security will meet contractual obligations, the loss is considered to be other than temporary, the security is written down to the new anticipated market value and an impairment loss is recognized.

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, are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit and maturity of the investments.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

The following table presents a rollforward of the Company's cumulative other than temporary credit impairments (“OTTI”) recognized in earnings on fixed maturity securities available for sale for the three months ended March 31:

	2021	2020
Balance of credit-related OTTI at January 1	`$370,975`	`$-`

Additions for credit impairments recognized on:
Securities not previously impaired	`-`	`-`
Securities previously impaired	`-`	`-`

Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period (realized)	`-`	`-`
Securities due to an increase in expected cash flows	`-`	`-`

Balance of credit-related OTTI at March 31	`$370,975`	`$-`

The amortized cost and estimated fair value of fixed maturity securities available for sale at March 31, 2021, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost	Estimated Fair Value
Due in 1 year	`$21,362,110`	`$21,444,660`
Due in 2-5 years	`66,817,800`	`71,062,356`
Due in 5-10 years	`70,609,309`	`77,487,611`
Due in more than 10 years	`68,036,255`	`78,817,785`
Mortgage-backed securities	`29,799,733`	`30,455,635`
Redeemable preferred stock	`269,214`	`282,481`
Total	`$256,894,421`	`$279,550,528`

The Company is a member of the Federal Home Loan Bank of Des Moines and Dallas (“FHLB”). The Company pledged a total of $40,000,000, par value, of United States Treasury fixed maturity securities with the FHLB at March 31, 2021. These securities are used as collateral on any cash borrowings from the FHLB. As of March 31, 2021, the Company did not have any amounts outstanding with the FHLB and its estimated remaining maximum borrowing capacity was $38,559,265.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

Investment Related Earnings

The Company’s net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities, and other than temporary impairments are summarized as follows:

	Three Months Ended March 31
	2021	2020
Fixed maturity securities:
Gross realized gains	`$97,622`	`$95,821`
Gross realized losses	`(24,997)`	`-`

Equity securities:
Gains (losses) on securities sold	`106,569`	`(57,442)`
Unrealized gains and (losses) on securities held at the end of the period	`952,030`	`(2,761,856)`

Other assets:
Gross realized gains	`1,109,358`	`457,028`
Gross realized losses	`(280,469)`	`(945,798)`
Total	`$1,960,113`	`$(3,212,247)`

The net 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.

Information regarding sales of fixed maturity securities available for sale is summarized as follows:

	Three Months Ended March 31
	2021	2020
Proceeds from sales	`$819,565`	`$645,750`
Gross realized gains	`59,794`	`79,411`
Gross realized losses	`-`	`-`

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

Major categories of net investment income are as follows:

	Three Months Ended March 31
	2021	2020
Fixed maturity securities	`$2,824,111`	`$2,924,714`
Equity securities	`128,229`	`92,042`
Mortgage loans held for investment	`6,084,417`	`5,653,890`
Real estate	`3,042,829`	`3,153,385`
Policy loans	`232,353`	`233,966`
Insurance assignments	`5,345,729`	`4,299,205`
Other investments	`13,707`	`25,023`
Cash and cash equivalents	`39,594`	`298,005`
Gross investment income	`17,710,969`	`16,680,230`
Investment expenses	`(3,417,082)`	`(3,279,731)`
Net investment income	`$14,293,887`	`$13,400,499`

Net investment income includes income earned by the restricted assets cemeteries and mortuaries of $161,211 and $110,639 for the three months ended March 31, 2021 and 2020, respectively.

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.

Securities on deposit with regulatory authorities as required by law amounted to $9,864,903 at March 31, 2021 and $9,684,409 at December 31, 2020. These restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

There were no investments, aggregated by issuer, in excess of 10% of shareholders’ equity (before net unrealized gains and losses on equity securities and fixed maturity securities) at March 31, 2021, other than investments issued or guaranteed by the United States Government.

Real Estate Held for Investment and Held for Sale

The Company strategically deploys resources into real estate 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 and manages commercial real estate assets as a means of generating investment income. These assets are 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 reports. Geographic locations and asset classes of the investment activity is determined by senior management under the direction of the Board of Directors.

The Company employs full-time employees to attend to the day-to-day operations of those assets within the greater Salt Lake area and close surrounding markets. The Company utilizes third party property managers when the geographic boundary does not warrant full-time staff or through strategic lease-up periods. The Company generally looks to acquire assets in regions that are high growth regions for employment and population and in assets that provide operational efficiencies.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

The Company currently owns and operates 11 commercial properties in 5 states. These properties include office buildings, a funeral home, flex office space, and includes the redevelopment and expansion of its corporate campus (“Center53”) in Salt Lake City, Utah. The Company also holds undeveloped land that may be used for future commercial developments. The Company uses bank debt in strategic cases to leverage established yields or to acquire a higher quality or different class of asset.

The aggregated net ending balance of commercial real estate that serves as collateral for bank loans was $99,547,615 and $71,517,902 as of March 31, 2021 and December 31, 2020, respectively. The associated bank loan carrying values totaled $55,831,600 and $46,153,283 as of March 31, 2021 and December 31, 2020, respectively.

During the three months ended March 31, 2021 and 2020, the Company recorded impairment losses on commercial real estate held for sale of $-0- and $31,429, respectively. These impairment losses relate to an office building held by the life insurance segment. Impairment losses are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

The following is a summary of the Company’s commercial real estate held for investment for the periods presented:

	Net Ending Balance		Total Square Footage
	March 31 2021	December 31 2020	March 31 2021	December 31 2020
Utah (1)	`$111,008,057`	`$100,927,528`	`379,066`	`379,066`
Louisiana	`2,981,296`	`2,998,684`	`84,841`	`84,841`
Mississippi	`2,909,508`	`2,914,498`	`21,521`	`21,521`
California	`389,145`	`-`	`2,872`	`-`

	`$117,288,006`	`$106,840,710`	`488,300`	`485,428`

(1) Includes Center53 phase 1 and phase 2 which is under construction.

The following is a summary of the Company’s commercial real estate held for sale for the periods presented:

	Net Ending Balance		Total Square Footage
	March 31 2021	December 31 2020	March 31 2021	December 31 2020
Kansas	`4,000,000`	`4,000,000`	`222,679`	`222,679`
Texas (1)	`249,000`	`249,000`	`-`	`-`
Mississippi	`151,553`	`151,553`	`-`	`-`

	`$4,400,553`	`$4,400,553`	`222,679`	`222,679`

(1) Improved commercial pad

These properties are all actively being marketed with the assistance of commercial real estate brokers in the markets where the properties are located. The Company expects these properties to sell within the coming 12 months.

Residential Real Estate Held for Investment and Held for Sale

The Company owns a small portfolio of residential homes primarily as a result of loan foreclosures. The Company has the option to sell them or to continue to hold them for cash flow and acceptable returns. The Company also invests in residential subdivision land developments.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

The Company established Security National Real Estate Services (“SNRE”) to manage the residential portfolio. SNRE cultivates and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the portfolio of homes across the country.

As of March 31, 2021, SNRE manages 5 residential properties in 4 states across the United States.

The net ending balance of foreclosed residential real estate included in residential real estate held for investment and sale is $1,657,285 and $4,327,079 as of March 31, 2021 and December 31, 2020, respectively.

During the three months ended March 31, 2021 and 2020 the Company did not record any impairment losses on residential 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.

The following is a summary of the Company’s residential real estate held for investment for the periods presented:

	Net Ending Balance
	March 31 2021	December 31 2020
Utah (1)	`39,466,349`	`$24,557,562`
Washington (2)	`286,181`	`286,181`
	`$39,752,530`	`$24,843,743`

(1) Includes subdivision land developments

(2) Improved residential lots

Additional information regarding the Company’s subdivision land developments in Utah is summarized as follows:

	March 31 2021	December 31 2020
Lots available for sale	`81`	`36`
Lots to be developed	`369`	`350`
Ending Balance (1)	`$39,251,557`	`$23,777,478`

(1) The estimated remaining cost to complete the undeveloped lots is $15,613,000 and $17,354,000 as of March 31, 2021 and December 31, 2020, respectively.

The following is a summary of the Company’s residential real estate held for sale for the periods presented:

	Net Ending Balance
	March 31 2021	December 31 2020
Nevada	`$979,640`	`$979,640`
Florida	`166,673`	`744,322`
Ohio	`10,000`	`10,000`
Utah	`-`	`1,744,292`
	`$1,156,313`	`$3,478,254`

These properties are all actively being marketed with the assistance of residential real estate brokers in the markets where the properties are located. The Company expects these properties to sell within the coming 12 months.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

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 March 31, 2021, real estate owned and occupied by the Company is summarized as follows:

Location	Business Segment	Approximate Square Footage	Square Footage Occupied by the Company
121 W. Election Rd., Draper, UT	Corporate Offices, Life Insurance and Cemetery/Mortuary Operations	78,979	18%
5201 Green Street, Salt Lake City, UT (1)	Life Insurance and Mortgage Operations	39,157	73%
1044 River Oaks Dr., Flowood, MS	Life Insurance Operations	19,694	28%
1818 Marshall Street, Shreveport, LA (1)	Life Insurance Operations	12,274	100%
909 Foisy Street, Alexandria, LA (1)	Life Insurance Sales	8,059	100%
812 Sheppard Street, Minden, LA (1)	Life Insurance Sales	1,560	100%
1550 N 3rd Street, Jena, LA (1)	Life Insurance Sales	1,737	100%

(1) Included in property and equipment on the condensed consolidated balance sheets

Mortgage Loans Held for Investment

Mortgage loans held for investment consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 2.0% to 10.5%, maturity dates range from nine months to 30 years and are secured by real estate. Concentrations of credit risk arise when a number of 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 residential construction loans and requires collateral on all real estate exposures, a substantial portion of its debtors’ ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors do business. At March 31, 2021, the Company had 54%, 14%, 9%, 3%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada, and Arizona, respectively. At December 31, 2020, the Company had 57%, 13%, 9%, 4%, 3% and 3% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada and Arizona, respectively.

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 loan 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 term 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 will fund a loan not to exceed 80% of the loan’s collateral fair market value. Amounts over 80% will require additional collateral or mortgage insurance by an approved third-party insurer.

The Company provides for losses on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account). The allowance is comprised of two components. The first component is an allowance for collectively evaluated impairment that is based upon the Company’s historical experience in collecting similar receivables. The second component is based upon individual evaluation of loans that are determined to be impaired. Upon determining impairment, the Company establishes an individual impairment allowance based upon an

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

assessment of the fair value of the underlying collateral. In addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income. When a loan becomes delinquent, the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred. Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment or held for sale.

The allowance for losses on mortgage loans held for investment could change based on changes in the value of the underlying collateral, the performance status of the loans, or the Company’s actual collection experience. The actual losses could change, in the near term, from the established allowance, based upon the occurrence or non-occurrence of these events.

For purposes of determining the allowance for losses, the Company has segmented its mortgage loans held for investment by loan type. The Company’s loan types are commercial, residential, and residential construction. The inherent risks within the portfolio vary depending upon the loan type 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 secondary on the borrower’s (or guarantors) ability to repay.

Residential – Secured by family dwelling units. These loans are secured by first mortgages on the unit, which are generally the primary residence of the borrower, generally at a loan-to-value ratio (“LTV”) of 80% or less.

Residential construction (including land acquisition and development) – 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. These loans will rely on the value associated with the project upon completion. These cost and valuation estimates may be inaccurate. 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. Additionally, land is underwritten according to the Company’s policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots. These cost and valuation estimates may be inaccurate. These loans are considered to be 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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

The Company establishes a valuation allowance for credit losses in its mortgage loans held for investment portfolio. The following is a summary of the allowance for loan losses as a contra-asset account for the periods presented:

	Commercial	Residential	Residential Construction	Total
March 31, 2021
Allowance for credit losses:
Beginning balance - January 1, 2021	`$187,129`	`$1,774,796`	`$43,202`	`$2,005,127`
Charge-offs	`-`	`-`	`-`	`-`
Provision	`-`	`(107,972)`	`-`	`(107,972)`
Ending balance - March 31, 2021	`$187,129`	`$1,666,824`	`$43,202`	`$1,897,155`

Ending balance: individually evaluated for impairment	`$-`	`$207,578`	`$-`	`$207,578`

Ending balance: collectively evaluated for impairment	`$187,129`	`$1,459,246`	`$43,202`	`$1,689,577`

Mortgage loans:
Ending balance	`$55,065,455`	`$88,266,355`	`$105,450,591`	`$248,782,401`

Ending balance: individually evaluated for impairment	`$1,068,365`	`$4,436,082`	`$200,963`	`$5,705,410`

Ending balance: collectively evaluated for impairment	`$53,997,090`	`$83,830,273`	`$105,249,628`	`$243,076,991`

December 31, 2020
Allowance for credit losses:
Beginning balance	`$187,129`	`$1,222,706`	`$43,202`	`$1,453,037`
Charge-offs	`-`	`-`	`-`	`-`
Provision	`-`	`552,090`	`-`	`552,090`
Ending balance	`$187,129`	`$1,774,796`	`$43,202`	`$2,005,127`

Ending balance: individually evaluated for impairment	`$-`	`$219,905`	`$-`	`$219,905`

Ending balance: collectively evaluated for impairment	`$187,129`	`$1,554,891`	`$43,202`	`$1,785,222`

Mortgage loans:
Ending balance	`$46,836,866`	`$111,111,777`	`$95,822,448`	`$253,771,091`

Ending balance: individually evaluated for impairment	`$2,148,827`	`$7,932,680`	`$200,963`	`$10,282,470`

Ending balance: collectively evaluated for impairment	`$44,688,039`	`$103,179,097`	`$95,621,485`	`$243,488,621`

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

The following is a summary of the aging of mortgage loans held for investment for the periods presented:

	Commercial	Residential	Residential Construction	Total
March 31, 2021
30-59 Days Past Due	`$-`	`$4,352,659`	`$301,071`	`$4,653,730`
60-89 Days Past Due	`2,027,048`	`1,317,057`	`-`	`3,344,105`
Greater Than 90 Days (1)	`817,429`	`2,522,314`	`-`	`3,339,743`
In Process of Foreclosure (1)	`250,936`	`1,913,768`	`200,963`	`2,365,667`
Total Past Due	`3,095,413`	`10,105,798`	`502,034`	`13,703,245`
Current	`51,970,042`	`78,160,557`	`104,948,557`	`235,079,156`
Total Mortgage Loans	`55,065,455`	`88,266,355`	`105,450,591`	`248,782,401`
Allowance for Loan Losses	`(187,129)`	`(1,666,824)`	`(43,202)`	`(1,897,155)`
Unamortized deferred loan fees, net	`(115,893)`	`(951,108)`	`(156,013)`	`(1,223,014)`
Unamortized discounts, net	`(358,587)`	`(351,693)`	`-`	`(710,280)`
Net Mortgage Loans	`$54,403,846`	`$85,296,730`	`$105,251,376`	`$244,951,952`

December 31, 2020
30-59 Days Past Due	`$233,200`	`$5,866,505`	`$127,191`	`$6,226,896`
60-89 Days Past Due	`812,780`	`2,048,148`	`-`	`2,860,928`
Greater Than 90 Days (1)	`2,148,827`	`5,669,583`	`-`	`7,818,410`
In Process of Foreclosure (1)	`-`	`2,263,097`	`200,963`	`2,464,060`
Total Past Due	`3,194,807`	`15,847,333`	`328,154`	`19,370,294`
Current	`43,642,059`	`79,975,115`	`110,783,623`	`234,400,797`
Total Mortgage Loans	`46,836,866`	`95,822,448`	`111,111,777`	`253,771,091`
Allowance for Loan Losses	`(187,129)`	`(1,774,796)`	`(43,202)`	`(2,005,127)`
Unamortized deferred loan fees, net	`(32,557)`	`(909,864)`	`(218,711)`	`(1,161,132)`
Unamortized discounts, net	`(880,721)`	`(380,175)`	`-`	`(1,260,896)`
Net Mortgage Loans	`$45,736,459`	`$92,757,613`	`$110,849,864`	`$249,343,936`

(1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

Impaired Mortgage Loans Held for Investment

Impaired mortgage loans held for investment include loans with a related specific valuation allowance or loans whose carrying amount has been reduced to the expected collectible amount because the impairment has been considered other than temporary. The recorded investment in and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, for each reporting period and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:

	Recorded Investment	Unpaid Principal Balance	Related Allowance	Average Recorded Investment	Interest Income Recognized
March 31, 2021
With no related allowance recorded:
Commercial	`$1,068,365`	`$1,068,365`	`$-`	`$1,068,365`	`$-`
Residential	`3,054,262`	`3,054,262`	`-`	`3,054,262`	`-`
Residential construction	`200,963`	`200,963`	`-`	`200,963`	`-`

With an allowance recorded:
Commercial	`$-`	`$-`	`$-`	`$-`	`$-`
Residential	`1,381,820`	`1,381,820`	`207,578`	`1,381,820`	`-`
Residential construction	`-`	`-`	`-`	`-`	`-`

Total:
Commercial	`$1,068,365`	`$1,068,365`	`$-`	`$1,068,365`	`$-`
Residential	`4,436,082`	`4,436,082`	`207,578`	`4,436,082`	`-`
Residential construction	`200,963`	`200,963`	`-`	`200,963`	`-`

December 31, 2020
With no related allowance recorded:
Commercial	`$2,148,827`	`$2,148,827`	`$-`	`$1,866,819`	`$-`
Residential	`6,415,419`	`6,415,419`	`-`	`5,010,078`	`-`
Residential construction	`200,963`	`200,963`	`-`	`555,278`	`-`

With an allowance recorded:
Commercial	`$-`	`$-`	`$-`	`$-`	`$-`
Residential	`1,517,261`	`1,517,261`	`219,905`	`1,182,368`	`-`
Residential construction	`-`	`-`	`-`	`-`	`-`

Total:
Commercial	`$2,148,827`	`$2,148,827`	`$-`	`$1,866,819`	`$-`
Residential	`7,932,680`	`7,932,680`	`219,905`	`6,192,446`	`-`
Residential construction	`200,963`	`200,963`	`-`	`555,278`	`-`

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

3)Investments (Continued)

Credit Risk Profile Based on Performance Status

The Company’s mortgage loan held for investment portfolio is monitored based on performance of the loans. Monitoring a mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. The Company defines non-performing mortgage loans as loans 90 days or greater delinquent or on non-accrual status.

The Company’s performing and non-performing mortgage loans held for investment were as follows:

Commercial

Residential

Residential Construction

Total

March
31, 2021

December
31, 2020

March
31, 2021

December
31, 2020

March
31, 2021

December
31, 2020

March
31, 2021

December
31, 2020

Performing

$53,997,090

$44,688,039

$83,830,273

$87,889,768

$105,249,628

$110,910,814

$243,076,991

$243,488,621

Non-performing

1,068,365

2,148,827

4,436,082

7,932,680

200,963

5,705,410

10,282,470

Total

$55,065,455

$46,836,866

$88,266,355

$95,822,448

$105,450,591

$111,111,777

$248,782,401

$253,771,091

Non-Accrual Mortgage Loans Held for Investment

Once a loan is past due 90 days, it is the policy of the Company to end the accrual of interest income on the loan and write off any interest income that had been accrued. Payments received for loans on a non-accrual status are recognized on a cash basis. Interest income recognized from any payments received for loans on a non-accrual status was immaterial. Accrual of interest resumes if a loan is brought current. Interest not accrued on these loans totals approximately $321,000 and $491,000 as of March 31, 2021 and December 31, 2020, respectively.

The following is a summary of mortgage loans held for investment on a non-accrual status for the periods presented.

	As of March 31 2021	As of December 31 2020
Commercial	`$1,068,365`	`$2,148,827`
Residential	`4,436,082`	`7,932,680`
Residential construction	`200,963`	`200,963`
Total	`$5,705,410`	`$10,282,470`

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

4)Loans Held for Sale

The Company has elected the fair value option for loans held for sale. 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 mortgage loans held for investment and is included in mortgage fee income on the condensed consolidated statement of earnings. See Note 8 to the condensed consolidated financial statements for additional disclosures regarding loans held for sale.

The following is a summary of the aggregate fair value and the aggregate unpaid principal balance of loans held for sale for the periods presented:

	As of March 31 2021	As of December 31 2020

Aggregate fair value	`$304,030,372`	`$422,772,418`
Unpaid principal balance	`294,207,728`	`406,407,323`
Unrealized gain	`9,822,644`	`16,365,095`

Mortgage Fee Income

Mortgage fee income consists of origination fees, processing fees, interest income and certain 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 as follows:

	Three Months Ended March 31
	2021	2020
Loan fees	`$9,539,956`	`$8,916,153`
Interest income	`2,311,802`	`1,680,459`
Secondary gains	`68,438,933`	`26,641,492`
Change in fair value of loan commitments	`314,466`	`3,275,032`
Change in fair value of loans held for sale	`(6,945,882)`	`381,734`
Provision for loan loss reserve	`(660,663)`	`(613,109)`
Mortgage fee income	`$72,998,612`	`$40,281,761`

Loan Loss Reserve

When a repurchase demand corresponding to a mortgage loan previously held for sale and sold to a third-party investor is received from a third-party investor, the relevant data is reviewed and captured so that an estimated future loss can be calculated. The key factors that are used in the estimated 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 repurchase demand. In many instances, the Company is able to resolve the issues relating to the repurchase demand by the third-party investor without having to make any payments to the investor.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

4)Loans Held for Sale (Continued)

The following is a summary of the loan loss reserve that is included in other liabilities and accrued expenses:

	As of March 31 2021	As of December 31 2020
Balance, beginning of period	`$20,583,618`	`$4,046,288`
Provision on current loan originations (1)	`660,663`	`4,938,214`
Additional provision for loan loss reserve	`-`	`16,506,030`
Charge-offs, net of recaptured amounts	`(19,039,298)`	`(4,906,914)`
Balance, end of period	`$2,204,983`	`$20,583,618`

(1) Included in mortgage fee income

The Company maintains reserves for estimated losses on current production volumes. For the three months ended March 31, 2021, $660,663 in reserves were added at a rate of 4.5 basis points per loan, the equivalent of $450 per $1,000,000 in loans originated. This is an increase over the three months ended March 31, 2020, when reserves were added at a rate of 2.5 basis points per loan originated, the equivalent of $250 per $1,000,000 in loans originated. The Company also increased its loan loss reserve for the year ended December 31, 2020 by an additional $16,506,030 to account for changes in estimates specific to settlements of loan losses. See Note 11 for additional information regarding mortgage loan loss settlements. The economic impact of COVID-19 and subsequent government action has increased the potential for losses due to early payoff penalties and potential for losses due to increased delinquency. The unique nature of these current events creates significant difficulty for forecasting potential future losses. The Company will continue to monitor data and economic conditions in order to maintain adequate loss reserves on current production. Thus, the Company believes that the final loan loss reserve as of March 31, 2021, represents its best estimate for adequate loss reserves on loans sold.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

5)Stock Compensation Plans

The Company has two fixed option plans (the “2013 Plan” and the “2014 Director Plan”). Compensation expense for options issued of $39,153 and $65,877 has been recognized for these plans for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the total unrecognized compensation expense related to the options issued was $-0-.

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.

A summary of the status of the Company’s stock compensation plans as of March 31, 2021, and the changes during the three months ended March 31, 2021, are presented below:

	Number of Class A Shares	Weighted Average Exercise Price	Number of Class C Shares	Weighted Average Exercise Price

Outstanding at January 1, 2021	`1,072,863`	`$4.33`	`662,666`	`$4.73`
Adjustment for effect of stock dividends	`-`		`-`
Granted	`-`		`-`
Exercised	`(32,925)`		`-`
Cancelled	`-`		`-`
Outstanding at March 31, 2021	`1,039,938`	`$4.34`	`662,666`	`$4.73`

As of March 31, 2021:
Options exercisable	`1,039,938`	`$4.34`	`662,666`	`$4.73`

As of March 31, 2021:
Available options for future grant	`330,371`		`266,500`

Weighted average contractual term of options
outstanding at March 31, 2021	6.28years		6.71years

Weighted average contractual term of options
exercisable at March 31, 2021	6.28years		6.71years

Aggregated intrinsic value of options
outstanding at March 31, 2021 (1)	`$5,212,677`		`$3,059,620`

Aggregated intrinsic value of options
exercisable at March 31, 2021 (1)	`$5,212,677`		`$3,059,620`

(1) The Company used a stock price of $9.35 as of March 31, 2021 to derive intrinsic value.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

5)Stock Compensation Plans (Continued)

A summary of the status of the Company’s stock compensation plans as of March 31, 2020, and the changes during the three months ended March 31, 2020, are presented below:

	Number of Class A Shares	Weighted Average Exercise Price	Number of Class C Shares	Weighted Average Exercise Price

Outstanding at January 1, 2020	`1,086,053`	`$4.41`	`594,132`	`$5.36`
Adjustment for effect of stock dividends	`829`		`-`
Granted	`37,500`		`90,000`
Exercised	`(42,294)`		`-`
Cancelled	`-`		`-`
Outstanding at March 31, 2020	`1,082,088`	`$4.44`	`684,132`	`$5.15`

As of March 31, 2020:
Options exercisable	`985,366`	`$4.42`	`452,381`	`$5.39`

As of March 31, 2020:
Available options for future grant	`97,218`		`-`

Weighted average contractual term of options
outstanding at March 31, 2020	5.57years		5.96years

Weighted average contractual term of options
exercisable at March 31, 2020	5.16years		4.70years

Aggregated intrinsic value of options
outstanding at March 31, 2020 (1)	`$489,237`		`$41,150`

Aggregated intrinsic value of options
exercisable at March 31, 2020 (1)	`$471,642`		`$-`

(1) The Company used a stock price of $4.27 as of March 31, 2020 to derive intrinsic value.

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 three months March 31, 2021 and 2020 was $139,035 and $73,072, respectively.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

6)Earnings Per Share

The basic and diluted earnings per share amounts were calculated as follows:

	Three Months Ended March 31
	2021	2020
Numerator:
Net earnings	`$12,128,715`	`$1,424,449`
Denominator:
Basic weighted-average shares outstanding	`19,124,001`	`18,641,950`
Effect of dilutive securities:
Employee stock options	`884,049`	`191,446`

Diluted weighted-average shares outstanding	`20,008,050`	`18,833,396`

Basic net earnings per share	`$0.63`	`$0.08`

Diluted net earnings per share	`$0.61`	`$0.08`

Net earnings per share amounts have been retroactively adjusted for the effect of annual stock dividends. For the three months March 31, 2021 and 2020, there were -0- and 1,316,506 of anti-dilutive employee stock option shares, respectively, that were not included in the computation of diluted net earnings per common share as their effect would be anti-dilutive. Basic and diluted earnings per share amounts are the same for each class of common stock.

The following table summarizes the activity in shares of capital stock for the periods presented:

	Class A	Class C
Outstanding shares at December 31, 2019	`16,107,779`	`2,500,887`
Exercise of stock options	`22,411`	`-`
Stock dividends	`404,839`	`61,720`
Conversion of Class C to Class A	`11,162`	`(11,162)`
Outstanding shares at March 31, 2020	`16,546,191`	`2,551,445`

Outstanding shares at December 31, 2020	`16,595,783`	`2,679,603`
Exercise of stock options	`27,926`	`-`
Stock dividends	`-`	`-`
Conversion of Class C to Class A	`48,527`	`(48,527)`
Outstanding shares at March 31, 2021	`16,672,236`	`2,631,076`

7)Business Segment Information

Description of Products and Services by Segment

The Company has three reportable business segments: life insurance, cemetery and mortuary, and mortgage. The Company’s life insurance segment consists of life insurance premiums and operating expenses from the sale of insurance products sold by the Company’s independent agency force and net investment income derived from investing policyholder and segment surplus funds. The Company’s cemetery and mortuary segment consists of revenues and operating expenses from the sale of at-need cemetery and mortuary merchandise and services at its mortuaries and cemeteries, pre-need sales of cemetery spaces after collection of 10% or more of the purchase price and the net investment income from investing segment surplus funds. The Company’s mortgage segment consists of fee income and expenses from the originations of residential mortgage loans and interest earned and interest expenses from warehousing loans held for sale.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

7)Business Segment Information (Continued)

Measurement of Segment Profit or Loss and Segment Assets

The accounting policies of the reportable segments are the same as those described in the Significant Accounting Principles of the Form 10-K for the year ended December 31, 2020. Intersegment revenues are recorded at cost plus an agreed upon intercompany profit, and are eliminated upon consolidation.

Factors Management Used to Identify the Enterprise’s Reportable Segments

The Company’s 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. The Company regularly reviews the quantitative thresholds and other criteria to determine when other business segments may need to be reported.

	Life Insurance	Cemetery/ Mortuary	Mortgage	Intercompany Eliminations	Consolidated
For the Three Months Ended
March 31, 2021
Revenues from external customers	`$38,943,834`	`$6,999,265`	`$76,715,507`	`$-`	`$122,658,606`
Intersegment revenues	`1,902,052`	`77,507`	`161,016`	`(2,140,575)`	`-`
Segment profit before income taxes	`2,695,028`	`2,700,945`	`10,959,082`	`-`	`16,355,055`

Identifiable Assets	`1,174,305,180`	`57,269,639`	`337,524,300`	`(84,391,181)`	`1,484,707,938`
Goodwill	`2,765,570`	`754,018`	`-`	`-`	`3,519,588`
Total Assets	`1,177,070,750`	`58,023,657`	`337,524,300`	`(84,391,181)`	`1,488,227,526`
		`-`
For the Three Months Ended
March 31, 2020
Revenues from external customers	`$33,205,762`	`$4,013,696`	`$42,389,491`	`$-`	`$79,608,949`
Intersegment revenues	`908,168`	`103,514`	`200,332`	`(1,212,014)`	`-`
Segment profit before income taxes	`(3,069,167)`	`104,801`	`4,438,600`	`-`	`1,474,234`

Identifiable Assets	`1,124,244,140`	`79,695,043`	`278,195,425`	`(109,493,359)`	`1,372,641,249`
Goodwill	`2,765,570`	`754,018`	`-`	`-`	`3,519,588`
Total Assets	`1,127,009,710`	`80,449,061`	`278,195,425`	`(109,493,359)`	`1,376,160,837`

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)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 the 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 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 investments), 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 mutual funds and 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 and Put Option Derivatives: The fair values for call and put options are based on quoted market prices.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)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.

Loan Commitments and Forward Sale Commitments: The Company’s mortgage segment enters into loan commitments with potential borrowers and forward sale commitments to sell loans to 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 of time, 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 fund 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 area comparables and property condition as well as potential rental income that could be generated (particularly for commercial properties). For residential construction loans, the collateral is typically incomplete, so 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: The Company believes that in an orderly market, fair value will approximate the replacement cost of a home and the rental income provides a cash flow stream for investment analysis. The Company believes the highest and best use of the properties are as income producing assets since it is the Company’s intent to hold the properties as rental properties, matching the income from the investment in rental properties with the funds required for future estimated policy claims.

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 the net rental income over seven years. The Company also considers area comparables and property condition 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. See Note 12 for more information regarding MSRs.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)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 at March 31, 2021.

	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	`$279,550,528`	`$-`	`$277,359,435`	`$2,191,093`
Equity securities	`11,154,495`	`11,154,495`	`-`	`-`
Loans held for sale	`304,030,372`	`-`	`-`	`304,030,372`
Restricted assets (1)	`1,456,017`	`-`	`1,456,017`	`-`
Restricted assets (2)	`2,704,704`	`2,704,704`	`-`	`-`
Cemetery perpetual care trust investments (1)	`738,979`	`-`	`738,979`	`-`
Cemetery perpetual care trust investments (2)	`2,208,138`	`2,208,138`	`-`	`-`
Derivatives - loan commitments (3)	`10,671,623`	`-`	`-`	`10,671,623`
Total assets accounted for at fair value on a recurring basis	`$612,514,856`	`$16,067,337`	`$279,554,431`	`$316,893,088`

Liabilities accounted for at fair value on a recurring basis
Derivatives - call options (4)	`$(79,567)`	`$(79,567)`	`$-`	`$-`
Derivatives - loan commitments (4)	`(228,547)`	`-`	`-`	`(228,547)`
Total liabilities accounted for at fair value on a recurring basis	`$(308,114)`	`$(79,567)`	`$-`	`$(228,547)`

(1) Fixed maturity securities available for sale

(2) Equity securities

(3) Included in other assets on the consolidated balance sheets

(4) Included in other liabilities and accrued expenses on the consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)Fair Value of Financial Instruments (Continued)

	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	`$294,656,679`	`$-`	`$292,455,504`	`$2,201,175`
Equity securities	`11,324,239`	`11,324,239`	`-`	`-`
Loans held for sale	`422,772,418`	`-`	`-`	`422,772,418`
Restricted assets (1)	`1,473,637`	`-`	`1,473,637`	`-`
Restricted assets (2)	`2,515,778`	`2,515,778`	`-`	`-`
Cemetery perpetual care trust investments (1)	`747,767`	`-`	`747,767`	`-`
Cemetery perpetual care trust investments (2)	`2,062,303`	`2,062,303`	`-`	`-`
Derivatives - loan commitments (3)	`12,592,672`	`-`	`-`	`12,592,672`
Total assets accounted for at fair value on a recurring basis	`$748,145,493`	`$15,902,320`	`$294,676,908`	`$437,566,265`

Liabilities accounted for at fair value on a recurring basis
Derivatives - call options (4)	`$(43,097)`	`$(43,097)`	`$-`	`$-`
Derivatives - loan commitments (4)	`(2,464,062)`	`-`	`-`	`(2,464,062)`
Total liabilities accounted for at fair value on a recurring basis	`$(2,507,159)`	`$(43,097)`	`$-`	`$(2,464,062)`

(1) Fixed maturity securities available for sale

(2) Equity securities

(3) Included in other assets on the consolidated balance sheets

(4) Included in other liabilities and accrued expenses on the consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)Fair Value of Financial Instruments (Continued)

For Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

			Significant	Range of Inputs
	Fair Value at	Valuation	Unobservable	Minimum	Maximum	Weighted
	3/31/2021	Technique	Input(s)	Value	Value	Average
Loans held for sale	`$304,030,372`	Market approach	Investor contract pricing as a percentage of unpaid principal balance	`95.0%`	`109.0%`	`103.0%`

Derivatives - loan commitments (net)	`10,443,076`	Market approach	Pull-through rate	`61.0%`	`92.0%`	`82.0%`
			Initial-Value	N/A	N/A	N/A
			Servicing	0 bps	129 bps	55 bps

Fixed maturity securities available for sale	`2,191,093`	Broker quotes	Pricing quotes	`$90.83`	`$119.33`	`$113.57`

For Level 3 assets and liabilities measured at fair value on a recurring basis as of December 31, 2020, the significant unobservable inputs used in the fair value measurements were as follows:

			Significant	Range of Inputs
	Fair Value at	Valuation	Unobservable	Minimum	Maximum	Weighted
	12/31/2020	Technique	Input(s)	Value	Value	Average
Loans held for sale	`$422,772,418`	Market approach	Investor contract pricing as a percentage of unpaid principal balance	`99.0%`	`110.0%`	`104.0%`

Derivatives - loan commitments (net)	`10,128,610`	Market approach	Pull-through rate	`52.0%`	`92.0%`	`81.0%`
			Initial-Value	N/A	N/A	N/A
			Servicing	0 bps	184 bps	58 bps

Fixed maturity securities available for sale	`2,201,175`	Broker quotes	Pricing quotes	`$90.83`	`$119.33`	`$113.47`

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)Fair Value of Financial Instruments (Continued)

Following is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs:

	Net Loan Commitments		Loans Held for Sale		Fixed Maturity Securities Available for Sale
Balance - December 31, 2020	`$10,128,610`		`$422,772,418`		`$2,201,175`
Originations and purchases	`-`		`1,449,841,009`		`-`
Sales, maturities and paydowns	`-`		`(1,614,880,058)`		`(11,100)`
Transfer to mortgage loans held for investment	`-`		`(201,951)`		`-`
Total gains (losses):
Included in earnings	`314,466`	(1)	`46,498,954`	(1)	`893`	(2)
Included in other comprehensive income	`-`		`-`		`125`

Balance - March 31, 2021	`$10,443,076`		`$304,030,372`		`$2,191,093`

(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component of Net investment income on the condensed consolidated statements of earnings

Following is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs:

	Net Loan Commitments		Loans Held for Sale		Fixed Maturity Securities Available for Sale
Balance - December 31, 2019	`$2,491,233`		`$213,457,632`		`$3,216,382`
Originations and purchases	`-`		`792,193,592`		`-`
Sales, maturities and paydowns	`-`		`(739,130,456)`		`(10,300)`
Transfer to mortgage loans held for investment	`-`		`(8,933,676)`		`-`
Total gains (losses):
Included in earnings	`3,275,032`	(1)	`23,465,484`	(1)	`828`	(2)
Included in other comprehensive income	`-`		`-`		`68,416`

Balance - March 31, 2020	`$5,766,265`		`$281,052,576`		`$3,275,326`

(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings

(2) As a component of Net investment income on the condensed consolidated statements of earnings

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)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 nonrecurring basis by their classification in the condensed consolidated balance sheet at March 31, 2021.

	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 nonrecurring basis
Impaired mortgage loans held for investment	`$1,174,242`	`$-`	`$-`	`$1,174,242`
Total assets accounted for at fair value on a nonrecurring basis	`$1,174,242`	`$-`	`$-`	`$1,174,242`

	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 nonrecurring basis
Impaired mortgage loans held for investment	`$1,297,356`	`$-`	`$-`	`$1,297,356`
Impaired real estate held for sale	`4,249,000`	`-`	`-`	`4,249,000`
Total assets accounted for at fair value on a nonrecurring basis	`$5,546,356`	`$-`	`$-`	`$5,546,356`

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)Fair Value of Financial Instruments (Continued)

Fair Value of Financial Instruments Carried at Other Than Fair Value

ASC 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.

Management 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 at March 31, 2021 and December 31, 2020.

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 March 31, 2021:

	Carrying Value	Level 1	Level 2	Level 3	Total Estimated Fair Value
Assets
Mortgage loans held for investment
Residential	`$85,296,730`	`$-`	`$-`	`$90,940,077`	`$90,940,077`
Residential construction	`105,251,376`	`-`	`-`	`105,251,376`	`105,251,376`
Commercial	`54,403,846`	`-`	`-`	`55,014,500`	`55,014,500`
Mortgage loans held for investment, net	`$244,951,952`	`$-`	`$-`	`$251,205,953`	`$251,205,953`
Policy loans	`13,946,739`	`-`	`-`	`13,946,739`	`13,946,739`
Insurance assignments, net (1)	`52,955,925`	`-`	`-`	`52,955,925`	`52,955,925`
Restricted assets (2)	`3,076,760`	`-`	`-`	`3,076,760`	`3,076,760`
Cemetery perpetual care trust investments (2)	`1,450,600`	`-`	`-`	`1,450,600`	`1,450,600`
Mortgage servicing rights, net	`42,779,361`	`-`	`-`	`55,087,150`	`55,087,150`

Liabilities
Bank and other loans payable	`$(245,973,378)`	`$-`	`$-`	`$(245,973,378)`	`$(245,973,378)`
Policyholder account balances (3)	`(43,728,587)`	`-`	`-`	`(42,141,870)`	`(42,141,870)`
Future policy benefits - annuities (3)	`(108,202,268)`	`-`	`-`	`(112,119,227)`	`(112,119,227)`

(1) Included in other investments and policy loans on the condensed consolidated balance sheets

(2) Mortgage loans held for investment

(3) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)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, 2020:

	Carrying Value	Level 1	Level 2	Level 3	Total Estimated Fair Value
Assets
Mortgage loans held for investment
Residential	`$92,757,613`	`$-`	`$-`	`$100,384,283`	`$100,384,283`
Residential construction	`110,849,864`	`-`	`-`	`110,849,864`	`110,849,864`
Commercial	`45,736,459`	`-`	`-`	`45,259,425`	`45,259,425`
Mortgage loans held for investment, net	`$249,343,936`	`$-`	`$-`	`$256,493,572`	`$256,493,572`
Policy loans	`14,171,589`	`-`	`-`	`14,171,589`	`14,171,589`
Insurance assignments, net (1)	`51,585,656`	`-`	`-`	`51,585,656`	`51,585,656`
Restricted assets (2)	`3,317,877`	`-`	`-`	`3,317,877`	`3,317,877`
Cemetery perpetual care trust investments (2)	`1,468,600`	`-`	`-`	`1,468,600`	`1,468,600`
Mortgage servicing rights, net	`35,210,516`	`-`	`-`	`38,702,358`	`38,702,358`

Liabilities
Bank and other loans payable	`$(297,824,368)`	`$-`	`$-`	`$(297,824,368)`	`$(297,824,368)`
Policyholder account balances (3)	`(44,026,809)`	`-`	`-`	`(42,220,725)`	`(42,220,725)`
Future policy benefits - annuities (3)	`(106,522,113)`	`-`	`-`	`(112,354,186)`	`(112,354,186)`

(1) Included in other investments and policy loans on the consolidated balance sheets

(2) Mortgage loans held for investment

(3) Included in future policy benefits and unpaid claims on the consolidated balance sheets

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, Residential 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.

Residential Construction – These loans are primarily short in maturity. 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: The carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values because they are fully collateralized by the cash surrender value of the underlying insurance policies.

Insurance Assignments, Net: These investments are primarily short in maturity, accordingly, the carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

8)Fair Value of Financial Instruments (Continued)

Bank and Other Loans Payable: The carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values due to their relatively short-term maturities and variable interest rates.

Policyholder Account Balances and Future Policy Benefits-Annuities: Future policy benefit reserves 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 in excess of related policy account balances. Interest crediting rates for interest-sensitive insurance products ranged from 1.5% to 6.5%. The fair values for these investment-type insurance contracts are estimated based on the present value of liability cash flows. The fair values for the Company’s insurance contracts other than investment-type contracts are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company’s overall management of interest rate risk, such that the Company’s exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.

9)Allowance for Doubtful Accounts

The Company records an allowance and recognizes an expense for potential losses from other investments and receivables in accordance with generally accepted accounting principles.

Receivables are the result of cemetery and mortuary operations, mortgage loan operations and life insurance operations. The allowance is based upon the Company’s historical experience for collectively evaluated impairment. Other allowances are based upon receivables individually evaluated for impairment. Collectability of the cemetery and mortuary receivables is significantly influenced by current economic conditions. The critical issues that impact recovery of mortgage loan operations are interest rate risk, loan underwriting, new regulations and the overall economy

10)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 a number of 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 the source of the applications (retail, broker or correspondent channels), 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 take into account all of 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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

10)Derivative Instruments (Continued)

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. 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 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.

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 exercise of the loan commitments. Management expects these types of commitments will experience changes in fair value opposite 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.

Call and Put Options

The Company uses a strategy of selling “out of the money” call options on its equity securities 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 Company uses the strategy of selling put options as a means of generating cash or purchasing equity securities at lower than current market prices. The Company receives an immediate payment of cash for the value of the option and establishes a liability for the fair value of the option. The liability for options is adjusted to fair value at each reporting date. In the event a call 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. In the event a put option is exercised, the Company acquires an equity security at the strike price of the option reduced by the value received from the sale of the put option. The equity security is then treated as a normal equity security in the Company’s portfolio. The net changes in the fair value of call and put options are shown in current earnings as a component of realized gains (losses) on investments and other assets. Call and put options are shown in other liabilities and accrued expenses on the condensed consolidated balance sheets.

The following table shows the notional amount and fair value of derivatives as of March 31, 2021 and December 31, 2020.

Fair Values and Notional Values of Derivative Instruments

March 31, 2021

December 31, 2020

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

$817,802,853

$10,671,623

$228,547

$659,245,038

$12,592,672

$2,464,062

Call options

Other liabilities

2,042,500

-

79,567

1,873,200

-

43,097

Total

$819,845,353

$10,671,623

$308,114

$661,118,238

$12,592,672

$2,507,159

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

10)Derivative Instruments (Continued)

The following table shows the gains and losses on derivatives for the periods presented.

		Net Amount Gain (Loss)
		Three Months Ended March 31
Derivative	Classification	2021	2020
Loan commitments	Mortgage fee income	`$314,466`	`$3,275,032`

Call and put options	Gains on investments and other assets	`$26,762`	`$(737,860)`

11)Reinsurance, Commitments and Contingencies

Reinsurance

The Company follows the procedure of reinsuring risks in excess of a specified limit, which ranges from $25,000 to $100,000. The Company is liable for these amounts in the event such reinsurers are unable to pay their portion of the claims. The Company has also assumed insurance from other companies.

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. The estimated liability for indemnification losses is included in other liabilities and accrued expenses and, as of March 31, 2021 and December 31, 2020, the balances were $2,204,983 and $20,583,618, respectively. The Company believes that the final loan loss reserve as of March 31, 2021, represents its best estimate for adequate loss reserves on loans sold.

Mortgage Loan Loss Litigation

Settlement Agreement and Mutual Release with Lehman Brothers Holdings Inc.

From 2004 to early 2008, SecurityNational Mortgage Company (“SecurityNational Mortgage”), a wholly owned subsidiary of the Company, originated “limited documentation” or “reduced documentation” loans which were sold to certain affiliates of Lehman Brothers Holdings Inc. (“Lehman Holdings”). Certain of these loans became the subject of disputes between SecurityNational Mortgage and Lehman Holdings and certain Lehman Holdings affiliates. Lehman Holdings filed a Petition for Relief under Chapter 11 of the United States Bankruptcy Code in 2008. In May of 2011, SecurityNational Mortgage filed a complaint in U.S. District Court against certain Lehman Holdings affiliates. In June of 2011, Lehman Holdings filed a complaint in Federal District Court against SecurityNational Mortgage, both of which were later resolved. In 2016, certain other pending loan disputes between SecurityNational Mortgage and Lehman Holdings became the subject of an unsuccessful, non-binding alternate dispute resolution mediation proceeding.

Thereafter, in 2016, Lehman Holdings filed an adversary proceeding complaint against approximately 150 mortgage loan originators, including SecurityNational Mortgage, in the U.S. Bankruptcy Court of the Southern District of New York, which included seeking damages relating to the alleged obligations of the defendants under indemnification provisions of alleged agreements, in amounts to be determined at trial, including interest, attorneys’ fees and costs incurred by Lehman Holdings in enforcing the obligations of the defendants. The complaint was later amended with the latest amended complaint filed against SecurityNational Mortgage on December 27, 2016, seeking damages to be determined at trial, including interest, attorneys’ fees and costs. This complaint involved approximately 135 mortgage loans, there being millions of dollars allegedly in dispute. These claims against SecurityNational Mortgage were asserted as a result of Lehman Holdings’ earlier settlements with the FederalNational Mortgage Association (“Fannie Mae”) and the Federal Home Loan Corporation (“Freddie Mac”).

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

11)Reinsurance, Commitments and Contingencies (Continued)

In 2018, Lehman Holdings filed a separate adversary proceeding complaint against SecurityNational Mortgage. This adversary proceeding allegedly involved approximately 577 mortgage loans relative to private securitization trusts (“RMBS Loans”) and millions of dollars in damages. Thereafter, Lehman Holdings made a filing that effectively reduced the number of RMBS Loans to 248. This proceeding was in addition to the above-referenced proceeding involving the Fannie Mae and Freddie Mac mortgage loans. As with the above-referenced proceeding, damages were sought including interest, costs, and attorneys’ fees.

SecurityNational Mortgage, as well as other defendants, have been involved in written discovery, and production of documents relative to the cases, and the filing of motions. The deposition phase of the cases was yet to begin, as well as the later expert witness phase. Those phases would require substantial expenditures of legal fees and costs.

On February 1, 2021, SecurityNational Mortgage executed a settlement agreement with Lehman Holdings in relation to these two adversary proceedings wherein all mortgage loan related claims were resolved, thereby ending all liabilities asserted by Lehman Holdings and conclusively ending all proceedings between SecurityNational Mortgage and Lehman Holdings. In accordance with GAAP, the full amount of SecurityNational Mortgage’s settlement payment was accounted for in the Company’s loan loss reserve as of December 31, 2020 and was paid during the first quarter 2021.

Debt Covenants for Mortgage Warehouse Lines of Credit

The Company, through its subsidiary SecurityNational Mortgage, has a $150,000,000 line of credit with Wells Fargo Bank N.A. The agreement charges interest at the 1-Month LIBOR rate plus 2.1% and matures on June 24, 2021. SecurityNational Mortgage is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, the ratio of indebtedness to adjusted tangible net worth, and the liquidity overhead coverage ratio, and a quarterly gross profit of at least $1.00.

The Company, through its subsidiary SecurityNational Mortgage, has a line of credit with Texas Capital Bank N.A. This agreement with the bank allows SecurityNational Mortgage to borrow up to $175,000,000 for the sole purpose of funding mortgage loans. The agreement charges interest at the 1-Month LIBOR rate plus 2% and matures on November 15, 2021. The Company is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax income (excluding any changes in the fair value of mortgage servicing rights) of at least $1.00 on a rolling four-quarter basis.

The Company through its subsidiary SecurityNational Mortgage, has a line of credit with Comerica Bank. This agreement with the bank allows SecurityNational Mortgage to borrow up to $90,000,000 for the sole purpose of funding mortgage loans. The agreement charges interest at the 1-Month LIBOR rate plus 2.5% and matures on May 27, 2021. The Company is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax income (excluding any changes in the fair value of mortgage servicing rights) of at least $1.00 on a rolling twelve months.

The Company, through its subsidiary EverLEND Mortgage, has a line of credit with Texas Capital Bank N.A. This agreement with the bank allows EverLEND Mortgage to borrow up to $5,000,000 for the sole purpose of funding mortgage loans. The agreement charges interest at the 1-Month LIBOR rate plus 2.5% and matures on August 1, 2021. The Company is required to comply with covenants for adjusted tangible net worth, unrestricted cash balance, and minimum combined pre-tax income (excluding any changes in the fair value of mortgage servicing rights) of at least $1.00 on a rolling four-quarter basis.

The agreements for warehouse lines include cross default provisions in that a covenant violation under one agreement constitutes a covenant violation under the other agreement. As of March 31, 2021, the Company believes that it was in compliance with all debt covenants.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

11)Reinsurance, Commitments and Contingencies (Continued)

Other Contingencies and Commitments

The Company has entered into commitments to fund construction and land development loans and has also provided financing for land acquisition and development. As of March 31, 2021, the Company’s commitments were approximately $194,792,000 for these loans, of which $109,977,951 had been funded. The Company will advance funds once the work has been completed and an independent inspection is made. The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed 5.50% to 8.00% per annum. Maturities range between six and eighteen months.

The Company belongs to a captive insurance group for certain casualty insurance, worker compensation and liability programs. Insurance reserves are maintained 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 insurance management considers a number of 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. 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 other legal actions arising from the normal conduct of business. Management believes that none of the actions will have a material effect on the Company’s financial position or results of operations. Based on management’s assessment and legal counsel’s representations 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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

12)Mortgage Servicing Rights

The Company initially records these MSRs at fair value as discussed in Note 8.

After being initially recorded at fair value, MSRs backed by mortgage loans are accounted for using the amortization method. Amortization expense is included in other expenses on the 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 asset’s 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.

Management periodically reviews the various loan strata to determine whether the value of the MSRs in a given stratum is impaired and likely to recover. When management 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 is a summary of the MSR activity for the periods presented.

	As of March 31 2021	As of December 31 2020
Amortized cost:
Balance before valuation allowance at beginning of year	`$35,210,516`	`$17,155,529`
MSR additions resulting from loan sales	`11,008,149`	`29,896,465`
Amortization (1)	`(3,439,304)`	`(11,841,478)`
Application of valuation allowance to write down MSRs with other than temporary impairment	`-`	`-`
Balance before valuation allowance at end of period	`$42,779,361`	`$35,210,516`

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	`$42,779,361`	`$35,210,516`

Estimated fair value of MSRs at end of period	`$55,087,150`	`$38,702,358`

(1) Included in other expenses on the condensed consolidated statements of earnings

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

12)Mortgage Servicing Rights (Continued)

The following table summarizes the Company’s estimate of future amortization of its existing MSRs carried at amortized cost:

		Estimated MSR Amortization
2021		`5,760,982`
2022		`4,670,850`
2023		`4,116,524`
2024		`3,617,054`
2025		`3,191,065`
Thereafter		`21,422,886`
Total		`$42,779,361`

The Company collected the following contractual servicing fee income and late fee income as reported in other revenues on the condensed consolidated statement of earnings:

	Three Months Ended March 31
	2021	2020
Contractual servicing fees	`$3,387,472`	`$1,784,944`
Late fees	`81,050`	`97,808`
Total	`$3,468,522`	`$1,882,752`

The following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio for the periods presented:

	As of March 31 2021		As of December 31 2020
Servicing UPB	`$5,824,986,566`		`$5,070,287,864`

The following key assumptions were used in determining MSR value:

	Prepayment Speeds	Average Life (Years)	Discount Rate
March 31, 2021	11.90	6.72	9.50
December 31, 2020	15.60	5.30	9.50

13) Income Taxes

The Company’s overall effective tax rate for the three months ended March 31, 2021 and 2020 was 25.8% and 3.4%, respectively, which resulted in a provision for income taxes of $4,226,340 and $49,785, respectively. The Company's effective tax rates differ from the U.S. federal statutory rate of 21% partially due to its provision for state income taxes. The effective tax rate in the current period increased when compared to the prior year period partly due the Coronavirus Aid Relief and Economic Security (“CARES”) Act.

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.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2020 (Unaudited)

14) Revenues from 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 cemetery and mortuary 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 three types of future obligations are as follows:

Pre-need Merchandise and Service Revenue: All pre-need merchandise and service revenue is 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.

At-need Specialty Merchandise Revenue: At-need specialty merchandise revenue consists of customizable merchandise ordered from a manufacturer 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.

Deferred Pre-need Land Revenue: Deferred pre-need revenue and corresponding commissions are deferred until 10% of the funds are received from the customer through regular monthly payments. Deferred pre-need land revenue is not placed in trust.

Complete payment of the contract does not constitute fulfillment of the performance obligation. Goods or services are deferred until such time the service is performed or merchandise is received. 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. A transfer of goods and services does not fulfill an obligation and revenue remains deferred.

The opening and closing balances of the Company’s receivables, contract assets and contract liabilities are as follows:

	Contract Balances
	Receivables (1)	Contract Asset	Contract Liability
Opening (1/1/2021)	`$4,119,988`	`$-`	`$13,080,179`
Closing (3/31/2021)	`3,988,538`	`-`	`13,514,055`
Increase/(decrease)	`(131,450)`	`-`	`433,876`

	Contract Balances
	Receivables(1)	Contract Asset	Contract Liability
Opening (1/1/2020)	`$2,778,879`	`$-`	`$12,607,978`
Closing (12/31/2020)	`4,119,988`	`-`	`13,080,179`
Increase/(decrease)	`1,341,109`	`-`	`472,201`

(1) Included in Receivables, net on the condensed consolidated balance sheets

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (Unaudited)

14) Revenues from Contracts with Customers (Continued)

The amount of revenue recognized and included in the opening contract liability balance for the three months ended March 31, 2021 and 2020 was $1,135,001 and $950,772, respectively.

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 cemetery and mortuary contracts for the periods presented:

	Three Months Ended March 31
	2021	2020
Major goods/service lines
At-need	`$4,042,020`	`$3,385,191`
Pre-need	`1,900,106`	`1,072,900`
	`$5,942,126`	`$4,458,091`

Timing of Revenue Recognition
Goods transferred at a point in time	`$4,198,673`	`$2,993,704`
Services transferred at a point in time	`1,743,453`	`1,464,387`
	`$5,942,126`	`$4,458,091`

The following table reconciles revenues from cemetery and mortuary contracts to Note 7 – Business Segment Information for the Cemetery/Mortuary Segment for the periods presented:

	Three Months Ended March 31
	2021	2020
Net mortuary and cemetery sales	`$5,942,126`	`$4,458,091`
Gains (losses) on investments and other assets	`798,340`	`(660,123)`
Net investment income	`230,304`	`204,846`
Other revenues	`28,495`	`10,882`
Revenues from external customers	`6,999,265`	`4,013,696`

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 trends or events which the Company expects to continue to focus on: (i) increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products; (ii) emphasis on cemetery and mortuary business; and (iii) capitalizing on an improving housing market by originating mortgage loans. The Company has adjusted its strategy to respond to the changing economic circumstances resulting from the COVID-19 pandemic.

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 $25,000. 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.

In response to the COVID-19 pandemic, the life insurance sales force has transitioned to virtual and tele sales processes and transitioned approximately 95% of office staff to work remotely.

The following table shows the condensed financial results of the insurance operations for three months ended March 31, 2021 and 2020. See Note 7 to the condensed consolidated financial statements.

	Three months ended March 31 (in thousands of dollars)
	2021	2020	% Increase (Decrease)
Revenues from external customers
Insurance premiums	`$23,350`	`$22,291`	`5%`
Net investment income	`13,939`	`13,051`	`7%`
Gains (losses) on investments and other assets	`1,162`	`(2,545)`	`146%`
Other	`493`	`408`	`21%`
Total	`$38,944`	`$33,205`	`17%`
Intersegment revenue	`$1,902`	`$908`	`109%`
Earnings before income taxes	`$2,695`	`$(3,069)`	`188%`

Intersegment revenues are primarily interest income from the warehouse line for loans held for sale provided to SecurityNational Mortgage Company (“SecurityNational Mortgage”). Profitability for the three months ended March 31, 2021 has increased due to a $3,707,000 increase in gains on investments and other assets primarily due to an increase in the fair value of equity securities, a $2,783,000 decrease in future policy benefits, a $1,059,000 increase in insurance premiums and other considerations, a $994,000 increase in intersegment revenue, a $980,000 decrease in selling, general and administrative expenses, a $887,000 increase in net investment income, a $253,000 decrease in interest expense, an $85,000 increase in other revenues, and a $59,000 decrease in intersegment interest expense and other expenses. This increase was partially offset by a $4,912,000 increase in death, surrenders and other policy benefits and a $131,000 increase in amortization of deferred policy acquisition costs primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs.

Cemetery and Mortuary Operations

The Company sells mortuary services and products through its eight mortuaries in Utah. The Company also sells cemetery products and services through its five cemeteries in Utah and one cemetery in San Diego County, California. At-need product sales and services are recognized as revenue when the services are performed or when the products are delivered. Pre-need cemetery product sales are deferred until the merchandise is delivered and services performed. Recognition of revenue for cemetery land sales occurs when 10% of the purchase price is received.

As a result of the COVID-19 pandemic, the Company has seen a decrease in its average case size as funeral services have been limited. The Company has transitioned its pre-need sales force to virtual selling and has done in home sales as local regulations permit.

The following table shows the condensed financial results of the cemetery and mortuary operations for the three months ended March 31, 2021 and 2020. See Note 7 to the condensed consolidated financial statements.

	Three months ended March 31 (in thousands of dollars)
	2021	2020	% Increase (Decrease)
Revenues from external customers
Mortuary revenues	`$2,020`	`$1,762`	`15%`
Cemetery revenues	`3,922`	`2,696`	`45%`
Net investment income	`230`	`205`	`12%`
Gains (losses) on investments and other assets	`798`	`(660)`	`221%`
Other	`29`	`11`	`164%`
Total	`$6,999`	`$4,014`	`74%`
Earnings before income taxes	`$2,701`	`$105`	`2472%`

Profitability in the three months ended March 31, 2021 has increased due to a $1,458,000 increase in gains on investments and other assets primarily attributable to a $649,000 increase in gains on real estate sales and an $810,000 increase in the fair value of equity securities classified as restricted assets and cemetery perpetual care trust investments, an $827,000 increase in cemetery pre-need sales, a $398,000 increase in cemetery at-need sales, a $259,000 increase in mortuary at-need sales, a $69,000 decrease in amortization of deferred policy acquisition costs, a $48,000 decrease in interest expense, a $25,000 increase in net investment income, a $19,000 decrease in intersegment interest expense and other expenses, and a $17,000 increase in other revenues. This increase was partially offset by a $242,000 increase in selling, general and administrative expenses, a $258,000 increase in costs of goods sold, and a $26,000 decrease in intersegment revenues.

Mortgage Operations

The Company’s wholly owned subsidiaries, SecurityNational Mortgage and EverLEND Mortgage Company, are mortgage lenders incorporated under the laws of the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), which originate mortgage loans that qualify for government insurance in the event of default by the borrower, in addition to various conventional mortgage loan products. SecurityNational Mortgage and EverLEND Mortgage originate and refinance mortgage loans on a retail basis. Mortgage loans originated or refinanced by the Company’s mortgage subsidiaries are funded through loan purchase agreements with Security National Life, Kilpatrick Life and unaffiliated financial institutions.

The Company’s mortgage subsidiaries receive fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from third party investors that purchase the mortgage loans originated by the mortgage subsidiaries. Mortgage loans originated by the mortgage subsidiaries are generally sold with mortgage servicing rights released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the mortgage servicing rights on approximately 70% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.

For the three months ended March 31, 2021 and 2020, SecurityNational Mortgage originated 5,361 loans ($1,415,821,000 total volume) and 3,067 loans ($769,309,000 total volume), respectively. For the three months ended March 31, 2021 and 2020, EverLEND Mortgage originated 110 loans ($34,020,000 total volume) and 86 loans ($22,885,000 total volume), respectively.

During the COVID-19 pandemic, the demand for mortgage loans has increased. The Company has seen most markets increase their demand for new homes and refinances on existing homes. The Company has transitioned 90% of its processes to a work from home environment.

The following table shows the condensed financial results of the mortgage operations for the three months ended March 31, 2021 and 2020. See Note 7 to the condensed consolidated financial statements.

	Three months ended March 31 (in thousands of dollars)
	2021	2020	% Increase (Decrease)
Revenues from external customers
Secondary gains from investors	`$68,439`	`$26,641`	`157%`
Income from loan originations	`11,192`	`9,984`	`12%`
Change in fair value of loans held for sale	`(6,946)`	`382`	`(1918%)`
Change in fair value of loan commitments	`314`	`3,275`	`(90%)`
Net investment income	`125`	`144`	`(13%)`
Gains on investments and other assets	`-`	`(7)`	`(100%)`
Other	`3,592`	`1,970`	`82%`
Total	`$8,277`	`$15,748`	`81%`
Earnings before income taxes	`$10,959`	`$4,439`	`147%`

Included in other revenues is service fee income. The increase in earnings for the three months ended March 31, 2021 was due to an increase in mortgage loan originations and refinancings, and subsequent sales of mortgage loans into the secondary market. This increase in earnings is primarily attributable to a $41,798,000 increase in secondary gains from investors, a $1,622,000 increase in other revenues, and a $1,208,000 increase in income from loan originations. This increase was partially offset by a $16,264,000 increase in commissions, by a $7,328,000 decrease in the fair value of loans held for sale, a $2,960,000 decrease in the fair value of loan commitments, a $5,666,000 increase in personnel expenses, a $2,548,000 increase in other expenses, a $1,008,000 increase in intersegment interest expense, a $981,000 increase in costs related to funding mortgage loans, a $735,000 increase in advertising expenses, a $308,000 increase in interest expense, and a $252,000 increase in rent and rent related expenses.

Mortgage Loan Loss Settlements

Future mortgage loan losses can be extremely difficult to estimate. However, management believes that the Company’s reserve methodology and its current practice of property preservation allow it to estimate its potential losses on mortgage loans sold. The estimated liability for indemnification losses was included in other liabilities and accrued expenses and, as of March 31, 2021 and December 31, 2020, the balances were $2,204,983 and $20,583,618, respectively.

Consolidation

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

Total revenues increased by $43,050,000, or 54.1%, to $122,659,000 for the three months ended March 31, 2021, from $79,609,000 for the comparable period in 2020. Contributing to this increase in total revenues was a $32,717,000 increase in mortgage fee income, a $5,172,000 increase in gains on investments and other assets, a $1,484,000 increase in net mortuary and cemetery sales, a $1,724,000 increase in other revenues, a $1,059,000 increase in insurance premiums and other considerations, and an $894,000 increase in net investment income.

Insurance premiums and other considerations increased by $1,059,000, or 4.8%, to $23,350,000 for the three months ended March 31, 2021, from $22,291,000 for the comparable period in 2020. This increase was due to an increase in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying business in force.

Net investment income increased by $894,000, or 6.7%, to $14,294,000 for the three months ended March 31, 2021, from $13,400,000 for the comparable period in 2020. This increase was primarily attributable to a $1,047,000 increase in insurance assignment income, a $431,000 increase in mortgage loan interest, and a $36,000 increase in equity securities income. This increase was partially offset by a $258,000 decrease in interest on cash and cash equivalents, a $137,000 increase in investment expenses, a $111,000 decrease in rental income from real estate held for investment, a $101,000 decrease in fixed maturity securities income, an $11,000 decrease in income on other investments, and a $2,000 decrease in policy loan income.

Net mortuary and cemetery sales increased by $1,484,000, or 33.3%, to $5,942,000 for the three months ended March 31, 2021, from $4,458,000 for the comparable period in 2020. This increase was primarily due to an $827,000 increase in cemetery pre-need sales, a $398,000 increase in cemetery at-need sales, and a $259,000 increase in mortuary at-need sales.

Gains on investments and other assets increased by $5,172,000, or 161.0%, to gains of $1,960,000 for the three months ended March 31, 2021, from losses of $3,212,000 for the comparable period in 2020. This increase in gains on investments and other assets was primarily due a $1,318,000 increase in gains on other assets mostly attributable to increases in the the fair value of call and put option derivatives. This increase in gains on investments and other assets was also due to a $3,878,000 increase in gains on equity securities mostly attributable to increases in the fair value of these equity securities. This increase in gains on investments and other assets was partially offset by a $23,000 decrease in gains on fixed maturity securities.

Mortgage fee income increased by $32,717,000, or 81.2%, to $72,999,000, for the three months ended March 31, 2021, from $40,282,000 for the comparable period in 2020. This increase was primarily due to a $41,798,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market and a $1,208,000 increase in loan fees and interest income net of an increase in the provision for loan loss reserve. This increase in mortgage fee income was partially offset by a $7,328,000 decrease in the fair value of loans held for sale and a $2,960,000 decrease in the the fair value of loan commitments.

Other revenues increased by $1,724,000, or 72.2%, to $4,114,000 for the three months ended March 31, 2021, from $2,390,000 for the comparable period in 2020. This increase was primarily attributable to an increase in servicing fee revenue.

Total benefits and expenses were $106,304,000, or 86.7% of total revenues, for the three months ended March 31, 2021, as compared to $78,135,000, or 98.1% of total revenues, for the comparable period in 2020.

Death benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $2,128,000 or 9.9%, to $23,644,000 for the three months ended March 31, 2021, from $21,516,000 for the comparable period in 2020. This increase was primarily the result of a $4,904,000 increase in death benefits (approximately $4,100,000 for COVID-19 related deaths) and a $7,000 increase in surrender and other policy benefits. This increase was partially offset by a $2,783,000 decrease in future policy benefits.

Amortization of deferred policy and pre-need acquisition costs and value of business acquired increased by $62,000, or 1.8%, to $3,577,000 for the three months ended March 31, 2021, from $3,515,000 for the comparable period in 2020. This increase was primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs

Selling, general and administrative expenses increased by $25,714,000, or 51.0%, to $76,157,000 for the three months ended March 31, 2021, from $50,443,000 for the comparable period in 2020. This increase was primarily the result of a $16,175,000 increase in commissions, a $5,652,000 increase in personnel expenses, a $1,874,000 increase in other expenses, a $981,000 increase in costs related to funding mortgage loans, a $796,000 increase in advertising expenses, and a $251,000 increase in rent and rent related expenses. Most of these increases are

attributable to the mortgage segment due to the increase in mortgage loan originations and refinancings, most notably $16,264,000 in commissions, $5,666,000 in personnel expenses, $2,548,000 in other expenses, $735,000 in advertising expenses, and $252,000 in rent and rent related expenses.

Interest expense increased by $7,000, or 0.4%, to $1,826,000 for the three months ended March 31, 2021, from $1,819,000 for the comparable period in 2020. This increase was primarily due to an increase of $308,000 in interest expense on mortgage warehouse lines for loans held for sale. This increase was partially offset by a $301,000 decrease in interest expense on bank loans collateralized by real estate held for investment.

Cost of goods and services sold-mortuaries and cemeteries increased by $258,000, or 30.6%, to $1,100,000 for the three months ended March 31, 2021, from $842,000 for the comparable period in 2020. This increase was primarily due to a $163,000 increase in cemetery pre-need sales, a $58,000 increase in cemetery at-need sales, and a $37,000 increase in mortuary at-need sales.

Liquidity and Capital Resources

The Company’s life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments and sales on personal services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from the proceeds from the maturity or sale of investments. The mortgage subsidiaries realize cash flow from fees generated by originating and refinancing mortgage loans, and fees earned from mortgage loans held for sale that are sold to investors into the secondary market. The Company considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities, which generally are long-term and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of new policies, the maintenance of existing policies, and debt service, and to meet current operating expenses. It should be noted that current conditions in the financial markets and economy caused by the COVID-19 pandemic may affect the cash flows of the Company.

During the three months ended March 31, 2021 and 2020, the Company's operations provided cash of $100,976,000 and used cash of $63,771,000, respectively. This increase was due primarily to sales of mortgage loans held for sale.

The Company’s liability for future policy benefits is expected to be paid out over the long-term due to the Company’s market niche of selling funeral plans. Funeral plans are small face value life insurance that will pay the costs and expenses incurred at the time of a person’s death. A person generally will keep these policies in force and will not surrender them prior to a person’s death. Because of the long-term nature of these liabilities, the Company is able to hold to maturity its bonds, real estate, and mortgage loans, thus reducing the risk of having to liquidate these long-term investments as a result of any sudden changes in their fair values.

The Company attempts to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities. The Company may sell investments other than those held to maturity in the portfolio to help in this timing. The Company purchases short-term investments on a temporary basis to meet the expectations of short-term requirements of the Company’s products. The Company’s investment philosophy is intended to provide a rate of return that will persist during the expected duration of policyholder and cemetery and mortuary liabilities regardless of future interest rate movements.

The Company’s investment policy is to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage loans on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing the life insurance subsidiaries. Bonds owned by the insurance subsidiaries and classified as fixed maturity securities available for sale carried at estimated fair value amounted to $279,268,000 (at estimated fair value) and $294,384,000 (at estimated fair value) as of March 31, 2021 and December 31, 2020, respectively. This represents 35.8% and 38.0% of the total investments as of March 31, 2021 and December 31, 2020, respectively. Generally, all bonds owned by the life insurance subsidiaries are rated by the National Association of Insurance Commissioners. Under this rating system, there are six categories used for rating bonds. At March 31, 2021, 4.1% (or $11,460,000) and at December 31, 2020, 4.2% (or $12,418,000) of the Company’s total bond investments were invested in bonds in rating categories three through six, which were considered non-investment grade.

The Company is subject to risk-based capital guidelines established by statutory regulators requiring minimum capital levels based on the perceived risk of assets, liabilities, disintermediation, and business risk. At March 31, 2021 and December 31, 2020, 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 $517,841,000 as of March 31, 2021, as compared to $561,811,000 as of December 31, 2020. Stockholders’ equity as a percent of total capitalization was 52.5% and 47.0% as of March 31, 2021 and December 31, 2020, respectively.

Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance in 2020 was 5.9% as compared to a rate of 9.8% for 2019. The 2021 lapse rate to date has been approximately the same as 2020.

At March 31, 2021, the combined statutory capital and surplus of the Company’s life insurance subsidiaries was $75,104,000. The life insurance subsidiaries cannot pay a dividend to its parent company without approval of state insurance regulatory authorities.

COVID-19 Pandemic

During 2020, the outbreak of COVID-19 had spread worldwide and was declared a global pandemic by the World Health Organization on March 11, 2020. COVID-19 poses a threat to the health and economic well-being of the Company’s employees, customers, and vendors. The Company is closely monitoring developments relating to the COVID-19 pandemic and assessing its impact on the Company’s business. The COVID-19 pandemic has had and continues to have a major impact on the global economy and financial markets. Governments and businesses have taken numerous measures to try to contain the virus, which include the implementation of travel bans, self-imposed quarantine periods, and social distancing. These measures have disrupted and will continue to disrupt businesses globally. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize the economic conditions.

Like most businesses, COVID-19 has impacted the Company. However, the Company cannot, with any certainty predict the severity or duration with which COVID-19 will impact the Company’s business, financial condition, results of operations, and cash flows. To the extent the COVID-19 pandemic adversely affects the Company’s business, financial condition, and results of operations, it may also have the effect of heightening many of the other Company risks. These uncertainties have the potential to negatively affect the risk of credit default for the issuers of the Company’s fixed maturity debt securities and individual borrowers with mortgage loans held by the Company.

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.

Item 4.Controls and Procedures.

Disclosure Controls and Procedures

As of March 31, 2021, 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’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the Securities and Exchange Commission (SEC) reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms and that such information is accumulated and communicated

to management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. The executive officers have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2021, and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, the Company’s financial condition, results of operations, and cash flows for the periods presented in conformity with United States Generally Accepted Accounting Principles (GAAP).

Changes in Internal Control over Financial Reporting

There have not been any significant changes in the Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings.

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 operation.

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

In September 2018, the Board of Directors of the Company approved a Stock Repurchase Plan that authorized the repurchase of 300,000 shares of the Company's Class A Common Stock in the open market. The Stock Repurchase Plan was amended on December 4, 2020. The amendment authorized the repurchase of a total of 1,000,000 shares of the Company’s Class A Common Stock in the open market. The repurchased shares of Class A common stock will be held as treasury shares to be used as the Company's employer matching contribution to the Employee 401(k) Retirement Savings Plan.

The following table shows the Company's repurchase activity during the three months ended March 31, 2021 under the Stock Repurchase Plan.

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
1/1/2021-1/31/2021	`10,402`	`$8.84`	`-`	`740,575`
2/1/2021-2/28/2021	`4,598`	`8.68`	`-`	`735,977`
3/1/2021-3/31/2021	`-`	`-`	`-`	`735,977`

Total	`15,000`	`$8.80`	`-`	`735,977`

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

None.

Item 5.Other Information.

None.

Item 6.Exhibits, Financial Statements Schedules and Reports on Form 8-K.

(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 herewith pursuant to Rule 601 of Regulation S-K or are incorporated by reference to previous filings.

3.1	Amended and Restated Articles of Incorporation (4)
3.2	Amended and Restated Bylaws (7)
4.1	Specimen Class A Stock Certificate (1)
4.2	Specimen Class C Stock Certificate (1)
4.3	Specimen Preferred Stock Certificate and Certificate of Designation of Preferred Stock (1)
10.1	Employee Stock Ownership Plan, as amended and restated (ESOP) and Trust Agreement (1)
10.2	Amended and Restated 2013 Stock Option and Other Equity Incentive Awards Plan (3)
10.3	Amended and Restated 2014 Director Stock Option Plan (10)
10.4	Employment Agreement with Scott M. Quist (2)
10.5	Stock Repurchase Plan (5)
10.6	Asset Purchase Agreement among SN Probst LLC, Probst Family Funerals and Cremations, L.L.C, Heber Valley Funeral Home, Inc., Joe T. Probst, Clinton Wayne Probst, Calle J. Probst, and Marsha J. Probst (6)
10.7	Coinsurance Agreement between Kilpatrick Life Insurance Company and Security National Life Insurance Company (8)
10.8	Stock Purchase Agreement among Security National Financial Corporation, Kilpatrick Life Insurance Company, and the Shareholders of Kilpatrick Life Insurance Company (8)
10.9	Consolidated Statement of Assets Acquired and Liabilities Assumed at December 13, 2019 (9)
14	Code of Business Conduct and Ethics (7)
21	Subsidiaries of the Registrant
31.1	Certification pursuant to 18 U.S.C. Section 1350, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to 18 U.S.C. Section 1350, as enacted by 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.xml	Instance Document
101.xsd	Taxonomy Extension Schema Document
101.cal	Taxonomy Extension Calculation Linkbase Document
101.def	Taxonomy Extension Definition Linkbase Document
101.lab	Taxonomy Extension Label Linkbase Document
101.pre	Taxonomy Extension Presentation Linkbase Document

(1)Incorporated by reference from Registration Statement on Form S-1, as filed on June 29, 1987

(2)Incorporated by reference from Report on Form 10-Q, as filed on November 13, 2015

(3)Incorporated by reference from Report on Form 10-Q, as filed on August 15, 2016

(4)Incorporated by reference from Report on Form 10-K, as filed on March 31, 2017

(5)Incorporated by reference from Report on Form 10-Q, as filed on November 13, 2018

(6)Incorporated by reference from Report on Form 8-K, as filed on February 27, 2019

(7)Incorporated by reference from Report on Form 10-Q, as filed on May 15, 2019

(8)Incorporated by reference from Report on Form 8-K, as filed on November 12, 2019

(9)Incorporated by reference from Report on Form 8-K/A, as filed on February 26, 2020

(10)Incorporated by reference from Report on Form 10-Q, as filed on August 14, 2020

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: May 17, 2021	/s/ Scott M. Quist
	Scott M. Quist
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

Dated: May 17, 2021	/s/ Garrett S. Sill
	Garrett S. Sill
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and Principal Accounting Officer)

EXHIBIT 21

Subsidiaries of Security National Financial Corporation

As of March 31, 2021

Life Insurance Segment

Security National Life Insurance Company

Reppond Holding Company

First Guaranty Insurance Company

Kilpatrick Life Insurance Company

Bluebonnet Properties, LLC

Kilpatrick Financial, Inc.

Memorial Insurance Company of America

Southern Security Life Insurance Company, Inc.

Trans-Western Life Insurance Company

SN Farmington LLC

5300 Development LLC

434 Holdings LLC

Ascension 433 LLC

SN Diamond LLC

Security National Real Estate Services, Inc. also dba Security National Commercial Capital

Marketing Source Center, Inc. dba Security National Travel Services

SNFC Subsidiary, LLC

American Funeral Financial, LLC

FFC Acquisition Co., LLC dba Funeral Funding Center

Canadian Funeral Financial, LLC

Mortician's Choice, LLC

C & J Financial, LLC

Beta Capital Corp.

Beneficiary Advance LLC

SNA-Venture LLC

SNA-VR LLC; SNA-AM LLC; SNA-GV LLC; SNA-MM LLC; SNA-RP LLC; SNA-SP LLC; SNA-SR LLC; SNA-WC LLC; SNA-MB LLC; SNA-AS LLC; SNA-SE LLC; SNA-TC LLC; SNA-ST LLC; SNA-SW LLC; SNA-MV LLC; SNA-DM LLC; SNA-WF LLC; SNA-SP2 LLC; SNA-MP LLC; SNA-TR LLC; SNA-CV LLC; SNA-WF2 LLC; SNA-WL LLC; SNA-HAFB LLC

Mortgage Segment

SecurityNational Mortgage Company

EverLEND Mortgage Company

SN Sunset LLC

Cemetery/Mortuary Segment

California Memorial Estates, Inc.

Paradise Chapel Funeral Home

Holladay Memorial Park, Inc.

Cottonwood Mortuary, Inc.

Deseret Memorial, Inc.

Holladay Cottonwood Memorial Foundation

Memorial Estates, Inc.

Memorial Mortuary, Inc.

Affordable Funerals and Cremations of America, Inc.

SN Probst LLC

SN Silver Creek LLC

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER,

AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott M. Quist, certify that:

1.I have reviewed this report on Form 10-Q of Security National Financial Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period covered in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 17, 2021	/s/ Scott M. Quist
	Scott M. Quist
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER,

AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Garrett S. Sill, certify that:

1.I have reviewed this report on Form 10-Q of Security National Financial Corporation;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 17, 2021	/s/ Garrett S. Sill
	Garrett S. Sill
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and Principal Accounting Officer)

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER,

AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Security National Financial Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott M. Quist, Chairman of the Board, President and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 17, 2021	/s/ Scott M. Quist
	Scott M. Quist
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER,

AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Security National Financial Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Garrett S. Sill, Chief Financial Officer and Treasurer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 17, 2021	/s/ Garrett S. Sill
	Garrett S. Sill
	Chief Financial Officer and Treasurer
	(Principal Financial Officer and Principal Accounting Officer)

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Form 10-Q SECURITY NATIONAL FINANC For: Mar 31

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