SEC Filing Summary: Security National Financial Corp (10-K)
Business Context and Reporting Period
Company: Security National Financial Corporation (SNFCA)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Segments: The Company operates three primary segments: Life Insurance (funeral plans, annuities, traditional life), Cemetery and Mortuary (pre-need and at-need services in Utah, California, and New Mexico), and Mortgages (residential and commercial lending).
Accounting Change: The Company adopted ASU 2018-12 (Targeted Improvements to the Accounting for Long-Duration Contracts) effective December 31, 2025, using the modified retrospective method applied as of January 1, 2024. This significantly modified the accounting for long-duration life insurance contracts.
Key Financial Metrics (2025 vs. 2024)
| Metric (in thousands) | 2025 | 2024 | Change |
|---|---|---|---|
| Total Revenues | $344,588 | $334,523 | +3.0% |
| Net Earnings | $32,152 | $29,119 | +10.4% |
| Net Investment Income | $79,339 | $71,725 | +10.6% |
| Insurance Premiums | $119,757 | $119,656 | +0.1% |
| Mortgage Fee Income | $108,209 | $107,559 | +0.6% |
| Cemetery/Mortuary Sales | $28,704 | $29,037 | -1.1% |
| Total Assets | $1,561,845 | $1,494,462 | +4.5% |
| Stockholders' Equity | $410,369 | $381,898 | +7.5% |
| Bank and Other Loans Payable | $98,388 | $106,740 | -7.8% |
Material Changes and Segment Performance
- Life Insurance Segment: Net earnings increased 7% to $29.4 million. Growth was driven by a $8.1 million increase in net investment income and higher gains on investments. This was partially offset by a $6.1 million increase in selling, general, and administrative (SG&A) expenses.
- Cemetery and Mortuary Segment: Net earnings decreased slightly (1%) to $6.6 million. A $888,000 decrease in cemetery pre-need sales and higher SG&A expenses were offset by a $526,000 increase in mortuary at-need sales and higher gains on investments.
- Mortgage Segment: The segment reported a net loss of $3.9 million, an improvement of 22% from the $4.9 million loss in 2024. The improvement was driven by a $5.5 million increase in secondary gains from investors and lower personnel expenses. However, the segment faced a $2.3 million decrease in the fair value of loans held for sale and a $1.6 million decrease in the fair value of loan commitments due to interest rate volatility.
- Investment Portfolio: Net investment income rose 10.6%, primarily due to increased mortgage loan interest income ($9.9 million increase) and fixed maturity securities income. Total investments grew to $1.04 billion.
Guidance, Outlook, Risks, and Contingencies
- Internal Control Material Weakness: The Company's independent auditors issued an adverse opinion on the effectiveness of internal control over financial reporting. A material weakness was identified regarding Information Technology General Controls (ITGCs), specifically deficiencies in user access controls and program change management for financial systems. Management is implementing a remediation plan.
- Debt Covenant Waivers: As of December 31, 2025, the mortgage subsidiary (SecurityNational Mortgage) was not in compliance with the net income covenant of its warehouse lines of credit with US Bank, Western Alliance Bank, and JP Morgan Chase. The Company has received waivers from all three lenders. Outstanding advances on these lines were approximately $4.2 million.
- Interest Rate Risk: The Company is exposed to interest rate fluctuations which affect the value of its fixed income portfolio and the competitiveness of its mortgage and insurance products. A 200 basis point increase in rates could decrease the fair value of the fixed income portfolio by approximately $47 million.
- Real Estate Development: The Company is actively developing commercial and residential assets, including the Center53 Development in Salt Lake City, with initial development costs exceeding $100 million.
- Dividend Policy: The Company does not intend to pay cash dividends in the foreseeable future. It paid a 5% stock dividend in 2025.
Key Facts for Investor Verification
- Adverse Audit Opinion: Verify the status of the remediation plan for the material weakness in ITGCs and the potential impact on future financial reporting reliability.
- Debt Covenants: Monitor the Company's ability to maintain compliance with the net income covenants on its mortgage warehouse lines of credit to avoid forced repayment of the ~$4.2 million outstanding balance.
- Accounting Transition: Review the impact of the ASU 2018-12 adoption on future earnings volatility, particularly regarding the remeasurement of future policy benefits through Accumulated Other Comprehensive Income (AOCI).
- Mortgage Segment Volatility: Assess the sensitivity of the mortgage segment's earnings to interest rate changes, given the significant fair value adjustments on loan commitments and loans held for sale.
- Pre-need Sales Trend: Investigate the cause of the decline in cemetery pre-need sales, which contributed to the flat performance of the cemetery and mortuary segment.