Security National Financial (SNFCA) - 2025 Q2 - Quarterly Report

Part I - Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2025, including balance sheets, statements of earnings, comprehensive income, stockholders' equity, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $1.544 billion as of June 30, 2025, from $1.490 billion at December 31, 2024, primarily driven by growth in total investments Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments | $1,042,892 | $966,391 | | Cash and cash equivalents | $79,318 | $140,546 | | Total Assets | $1,543,978 | $1,489,807 | | Total Liabilities | $1,189,223 | $1,151,025 | | Total Stockholders' Equity | $354,755 | $338,782 | Condensed Consolidated Statements of Earnings For the six months ended June 30, 2025, total revenues increased to $172.3 million, but net earnings declined to $10.8 million due to higher benefits and expenses Six Months Ended June 30, Performance Comparison (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $172,281 | $166,980 | | Total Benefits and Expenses | $158,373 | $147,971 | | Net Earnings | $10,845 | $14,746 | | Diluted EPS | $0.42 | $0.59 | Three Months Ended June 30, Performance Comparison (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $89,541 | $85,791 | | Total Benefits and Expenses | $81,205 | $76,402 | | Net Earnings | $6,506 | $7,272 | | Diluted EPS | $0.25 | $0.29 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for the six months ended June 30, 2025, was $16.0 million, driven by a $5.1 million positive change in other comprehensive income from unrealized gains on fixed maturity securities Comprehensive Income Comparison (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net Earnings | $10,845 | $14,746 | | Other Comprehensive Income (Loss), net of tax | $5,121 | $(1,412) | | Comprehensive Income | $15,966 | $13,334 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased by $16.0 million during the first six months of 2025, primarily due to $10.8 million in net earnings and $5.1 million in other comprehensive income Roll-Forward of Stockholders' Equity (Six Months Ended June 30, 2025, in thousands) | Description | Amount | | :--- | :--- | | Beginning Balance (Dec 31, 2024) | $338,782 | | Net Earnings | $10,845 | | Other Comprehensive Income | $5,121 | | Stock Dividends | $(11,160) | | Net Treasury Stock & Other | $(8,833) | | Ending Balance (June 30, 2025) | $354,755 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities sharply declined to $1.9 million for the first six months of 2025, with $72.4 million used in investing activities, resulting in a $57.7 million net decrease in cash Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $1,905 | $8,104 | | Net Cash from Investing Activities | $(72,443) | $13,384 | | Net Cash from Financing Activities | $12,839 | $(4,726) | | Net Change in Cash | $(57,699) | $16,762 | Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, investments, segment performance, fair value measurements, and contingencies, including non-compliance with a debt covenant - The company is nearing completion of its implementation of ASU 2018-12 for long-duration insurance contracts, which will be adopted for the year ending December 31, 2025, and is expected to impact its financial statements[36] - Total investments increased to $1.043 billion as of June 30, 2025, from $966.4 million at year-end 2024, with notable growth in mortgage loans and real estate held for investment[41][42][45] - As of June 30, 2025, the company was not in compliance with the net income covenant of its Western Alliance Bank warehouse line of credit. The company is seeking waivers and believes it has sufficient cash to repay the outstanding $12.8 million if required[233] Segment Net Earnings (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Life Insurance | $10,549 | $12,329 | | Cemetery/Mortuary | $3,068 | $3,835 | | Mortgage | $(2,772) | $(1,418) | | Total Net Earnings | $10,845 | $14,746 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial condition and results of operations across its Insurance, Cemetery/Mortuary, and Mortgage segments, noting increased revenues but a decline in net earnings due to higher expenses and a wider loss in the Mortgage segment Overview The company's operational strategy focuses on growing niche insurance products, expanding its cemetery and mortuary business, and originating mortgage loans - The company's core strategy is focused on three pillars: niche insurance products (funeral plans), cemetery and mortuary operations, and mortgage loan origination[290] Insurance Operations The Insurance segment's total revenues for the first six months of 2025 increased by 3% to $104.0 million, but segment net earnings decreased by 14% to $10.5 million due to higher expenses Insurance Segment Financial Highlights (in thousands) | Period | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | | Q2 | Total Segment Revenues | $53,353 | $49,143 | 9% | | | Segment Net Earnings | $6,403 | $5,617 | 14% | | H1 | Total Segment Revenues | $103,959 | $100,494 | 3% | | | Segment Net Earnings | $10,549 | $12,329 | (14%) | Cemetery and Mortuary Operations For the first six months of 2025, the Cemetery and Mortuary segment's revenues declined by 5% to $16.4 million, leading to a 20% decrease in segment net earnings to $3.1 million Cemetery & Mortuary Segment Financial Highlights (in thousands) | Period | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | | Q2 | Total Segment Revenues | $8,225 | $8,363 | (2%) | | | Segment Net Earnings | $1,364 | $1,568 | (13%) | | H1 | Total Segment Revenues | $16,429 | $17,234 | (5%) | | | Segment Net Earnings | $3,068 | $3,835 | (20%) | Mortgage Operations The Mortgage segment's revenues for the first half of 2025 grew 5% to $55.4 million, but its net loss widened by 95% to $2.8 million due to higher costs, despite increased loan origination volume - For the six months ended June 30, 2025, the company originated 3,375 loans with a total volume of $1.135 billion, compared to 3,494 loans totaling $1.090 billion in the same period of 2024[301] Mortgage Segment Financial Highlights (in thousands) | Period | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | | Q2 | Total Segment Revenues | $29,950 | $30,422 | (2%) | | | Segment Net Earnings (Loss) | $(1,261) | $86 | (1,566%) | | H1 | Total Segment Revenues | $55,406 | $52,998 | 5% | | | Segment Net Earnings (Loss) | $(2,772) | $(1,418) | (95%) | Consolidated Results of Operations For the first six months of 2025, total revenues rose 3.2% to $172.3 million, but total benefits and expenses increased more significantly by 7.0%, leading to a 26.5% decline in net earnings - For Q2 2025 vs Q2 2024, total revenues increased 4.4% to $89.5 million, while total benefits and expenses grew 6.3% to $81.2 million[304][316] - For H1 2025 vs H1 2024, total revenues increased 3.2% to $172.3 million, while total benefits and expenses grew 7.0% to $158.4 million[318][331] Liquidity and Capital Resources Cash flow from operations decreased significantly to $1.9 million in the first half of 2025, with total capitalization at $477.7 million, and the company is seeking waivers for a debt covenant non-compliance - Cash provided by operations for H1 2025 was $1.9 million, a significant decrease from $8.1 million in H1 2024, primarily due to lower net earnings[334] - As of June 30, 2025, the company was not in compliance with the net income covenant of its Western Alliance Bank warehouse line of credit and is in the process of receiving waivers[333] - The combined statutory capital and surplus of the life insurance subsidiaries was approximately $127.1 million as of June 30, 2025, an increase from $120.2 million at year-end 2024[341] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is not required to provide the information typically disclosed under this item - As a smaller reporting company, the Company is not required to provide information typically disclosed under this item[343] Controls and Procedures The company's CEO and CFO concluded that its disclosure controls and procedures were effective as of June 30, 2025, with no significant changes in internal control over financial reporting - The company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[344] - No significant changes were made to the company's internal control over financial reporting during the quarter[345] Part II - Other Information Legal Proceedings The company is not a party to any material legal proceedings outside the ordinary course of business that would have a material adverse effect on its financial condition - The Company is not a party to any material legal proceedings outside the ordinary course of business[347] Risk Factors As a smaller reporting company, the company is not required to provide the information typically disclosed under this item - As a smaller reporting company, this disclosure is not required[348] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities but repurchased 95,584 shares of its Class A Common Stock at an average price of $9.99 per share during Q2 2025 - The company executed a 10b5-1 agreement on April 22, 2025, to repurchase up to $1 million of its Class A Common Stock[350] Q2 2025 Share Repurchase Activity (Class A Stock) | Period | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | April 2025 | 24,039 | $9.88 | | May 2025 | 28,643 | $10.19 | | June 2025 | 42,902 | $9.80 | | Total | 95,584 | $9.99 | Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[354] Mine Safety Disclosures The company reported no mine safety disclosures - None reported[355] Other Information The company is evaluating the impact of the newly enacted 'One Big Beautiful Bill Act' (OBBBA) and reported no Section 16 officer or director trading arrangement changes - The 'One Big Beautiful Bill Act' (OBBBA) was enacted on July 4, 2025. The company is evaluating its impact but does not expect it to be material[356] - No Section 16 officers or directors adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025[357] Exhibits This section lists the exhibits filed with the Form 10-Q, which include Sarbanes-Oxley certifications and Inline XBRL documents - The report includes standard exhibits such as CEO/CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data files (101 series)[362]