Security National Financial Corporation

Good afternoon, everyone, and welcome to Security National Financial Corporation's second quarter 2025 earnings call. We thank you for joining us today to review our financial and operational results for the period ended June 30th, 2025. Before we begin, I'd like to remind everyone that our remarks today will include forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from those projected. Such risks include but are not limited to changes in economic conditions, interest rates, regulatory developments, competitive pressures, and other factors detailed in our filings with the Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements. which speak only as of today's date. We undertake no obligation to publicly update or revise these statements to reflect future events or circumstances, except as required by law. Our second quarter press release issued August 14th, 2025 is posted on our company's website. Please refer to our second quarter press release over to our Chief Financial Officer, Garrett Zill.

Garrett. Thank you, Heather. I want to start by thanking those who are on this call. This is our second consecutive earnings call, and we are still working out some of the formalities. So thank you again for joining us. And thank you for your patience as we continue to improve these shareholders' events. Our press release was a little more comprehensive this quarter, so I just want to hit a couple of highlights. Reviewing our balance sheet, our cash decreased $60 million as we increased investments in bonds by $25 million, real estate activities by $28 million, and mortgage loans by $23 million. These increases in investments were offset by Better Home Loan Bank advances and now which is seen in the recent bank loans on the liability section of our balance sheet. Stockholders' equity improved quarter over quarter due to both good earnings and an improvement in the fair value of our bond portfolio. Moving to the income statement, Q2 revenues increased over Q1, which resulted in Q2 net earnings also improving over Q1 net earnings. Expenses remained elevated in strategic areas, as explained in the Q2 press releases. Despite these increases, Q2 and year-to-date net earnings were good. A lot has happened since our last call. On June 27th, Security National Financial was added to the Russell 2000, and then on June 30th, Security National Financial crossed the threshold for accelerated filing status. Although we remain a small reporting company, accelerated filing will have a significant impact on our financial audits and our SEC reporting requirements. Finally, the company distributed a 5% stock dividend on July 18th. Accelerated filing status brings with it some significant changes to the company. First of all, financial reports filed after December 31st, 2025 will need to be filed sooner. Basically, our Form 10-K will now be filed 75 days after year-end, and all Forms 10-Q will be filed 40 days following a quarter-end. Secondly, and probably more importantly, our year-end audit will also include an audit and an opinion by Deloitte on the company's internal controls. The audit of our internal controls will come with a significant increase in audit fees and other implementation expenses. To be a little more precise, the company has good internal controls. However, accelerated filers are required to document their controls in a specific manner, and those controls must be tested both internally and externally. We have a good framework in place. We are working towards compliance by year end. Finally, our progress with our adoption of ASU 2018-12, better known as targeted improvements to the accounting for long duration contracts or LDTI, is still on track to be implemented for year end reporting. Our Q3 form 10Q will disclose a range of impact when adopted at year end. In closing, Q2 and year to date net earnings were good for the company. We are financially healthy as our balance sheet remains strong with minimal debt and well-balanced investments that are poised for great future returns. We will have some significant accounting headwinds moving forward as we adapt to the required changes, but we are confident that we will meet the challenge. Next, we will hear from Andrew Quist, President, Chief Executive Officer of Security National Mortgage. Andrew.

Good afternoon, fellow shareholders. As Garrett mentioned, I'm Andrew Quist, President and CEO of Security National Mortgage Company. In the second quarter of 2025, Security National Mortgage Company had a net loss of $1,670,000 compared to a gain of $134,000 in the second quarter of 2024, a decrease of $1.8 million. This is a disappointing result and one we are working urgently to fix. The number one contributor to the worsening performance was a decrease in our origination volume. In the second quarter of 2025, we originated $617 million of loan volume, compared to $624 million in the second quarter of 2024, for a 1.2% year-over-year decrease. This was our first year-over-year quarterly decrease since the first quarter of 2024. Mortgage market conditions in the United States worsened in the second quarter with Q2 pending home sales at their lowest level since 2012 at 1.4 million contracts signed. This had a significant impact on our results as we are a purchase money focused lender. Almost 90% of our originations in 2025 have been purchased mortgages. Our decrease in origination volume was a reversal from our outperformance in the first quarter. Fannie Mae and Freddie Mac reported single family originations in Q2 were up 3.5% year over year. Thus, from the data available, it appears we underperformed the market conditions, mainly as a result of our purchase focus, as purchase volume was down 6% quarter over quarter at the GSEs. While we work to increase volumes back to the outperformance we experienced in quarter one, we must at the same time continue to rationalize our expenses to lower volume levels. We're well on our way to doing that. In summary, year over year decreasing origination volumes significantly impacted Q2's results. It appears Security National's market outperformance in Q1 was reversed in Q2. The other factors impacting Q2's performance year over year were the same as I reported in Q1, namely current expected credit loss accruals increasing and deferred compensation accruals increasing. I'm confident with the loan officers and employee team we have at Security National Mortgage will return to the market outperformance we experienced earlier. Thank you.