Security National Financial Corporation

Good afternoon, everyone, and welcome to Security National Financial Corporation's third quarter 2025 earnings call. We thank you for joining us today to review our financial and operational results for the period ended October 31st, 2025. Before we begin, we'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. With that, I'd like to turn the call over to our Chairman, President, and Chief Executive Officer, Scott Quist. Scott?

Good afternoon. My name is Scott Quist. I am the Chairman and Chief Executive Officer of Security National Financial Corp. With that, I welcome you to this call. While the third quarter was definitely weak from my point of view, being $4 million below on an after-tax basis, Q3 2024, roughly 33%, there are some definite bright spots which partially illuminate much of the hard work, and I will add progress, that was accomplished as gone on. For example, on a return on equity basis as of September 30th, We achieved a 7.9% ROE for the nine months, which, if annualized, would put us in double digits instead of 10.5%. That's an improvement over our June report, where the similar annualized ROE number was 8.5%. In some respects, that improvement highlights the financial diversity and resilience of our company, even when our operating earnings are a little disappointing. Another financial bright spot that deserves mention is our personnel costs, where they are still up roughly 6% on a year-to-date basis. On a quarter, for the quarter, they are flat, indicating that we have found and implemented sufficient efficiencies to offset the talent hiring we undertook commencing in Q4 of 2024. Another way to say it is that we have significantly improved our executive management talent, particularly in the sales area, and have been able to offset those immediate costs with operational efficiencies. In June, by way of further illustration, our year-to-date personnel costs were up roughly 10%. So to be up just 6% year-to-date in September indicates that significant progress has been made. Of course, improved management talent, particularly sales talent, should pay for themselves plus a margin. And I believe that is what I am, excuse me, I believe I am seeing that progress. I continue to be very impressed with the people who have chosen to join us. That process, however, is a process and will take a little time for it to play out. We had spent heavily and have expended much effort this past year to retain first and then recruit improved sales, sales support and executive talent in all of our segments. It has been and continues to be a major management focus. Going to our business segments. For the first quarter, our mortgage segment was profitable and was up over Q3 of 2024. While the numbers are not large, it represents a significant milestone, and I will add my applause to the accomplishment. The mortgage market continues to be troubled with this being only our third profitable quarter in the last three years. Nevertheless, it was a profitable quarter. Further, I would note that in my estimation, our operational quality has improved year over year, with actual operational improvements rather than simply accounting improvements and or drags, which we have seen both. Segwaying to accounting treatments for a moment, using current expected credit losses, CECL, if you will, is the acronym, or bad debt expense, as the example, which are for the most part formulaic in which affect all of our business segments We have set aside nearly $1 million for mortgage losses when, in fact, for at least the last 36 months, we have suffered no losses due to foreclosure. Please, I am not arguing that the accounting principles are being misapplied. I am simply saying that sometimes accounting treatments can have a timing effect of moving income between years, if not quarters. Our cemetery mortuary segment also posted improved results over Q3 2024. We are just now seeing stabilized, if not improved, pre-need cemetery land sales, which are a major profit driver. It is a fair statement that over the last nine months, we have completely revamped our cemetery sales force. Our life insurance segment's earnings were weak for the quarter, primarily due to DAC or deferred acquisition costs and their amortization, CECL, and lower unrealized gains on common stock. Our goal is to grow new live premium sales. We did not achieve that goal in the third quarter, and we are working diligently to rectify that situation. Much of the aforementioned management and sales talent and increased personnel costs were and are a standard in our life insurance segment. As a reminder, in Q4, we will be implementing new accounting standards known as Long Duration Targeted Improvements, or LDTI, in our life insurance segment. This implementation will cause significant adjustments to our benefit reserves, our deferred acquisition costs, and the implementation of a new concept of a deferred profit liability. among other items. Those accounting adjustments do not reflect any inappropriateness of our current calculations, but will reflect new accounting standards. Whether those new accounting standards are better or worse than existing standards, I will leave such judgment up to the discretion of the user. Our investment income returning out of operations continues to be good corporate-wide, particularly in the life insurance sector. As referenced in the June earnings press release, the nature of our real estate-based activities, lending, directly owning, and builder participations does create a significant current drag to income. We believe it will be positive, but we believe it will be positively accretive over time. Finally, just commenting on our real estate-based investments, we seem to be seeing weakness in the first-time buyer markets, but strength, if not continued strength, in the move-up markets. I thank you for your continued support. And I will now turn the time over to Mr. Garrett Sill, our Chief Financial Officer.

Thank you, Scott. Good afternoon, and thank you for joining us today. As Scott mentioned, my name is Garrett Sill, and I am the Chief Financial Officer of Security National Financial Corporation. I want to start off with a couple of highlights, just focusing on the changes between Q2 and Q3 of this year. Reviewing our balance sheet, invested assets increased $5 million, as we increased our investment in mortgage loans, real estate, and our equity portfolio saw a $1 million increase in fair value. Most of our liabilities remained relatively flat, with the largest increase of $6 million occurring to our future policy benefits quarter over quarter. Our stockholders' equity improved quarter over quarter due to both quarterly earnings and a continued improvement in the fair value of our bond portfolio. Looking at the income statement, Q3 revenues were essentially flat compared to Q2, but we did see a $2 million reduction in the total expenses in Q3, which resulted in an increase in pre-tax earnings of $2 million compared to our Q2 pre-tax earnings. Moving to the nine months ended 2025, the balance sheet shows that we've increased our investment in bonds, mortgage loans, real estates, and saw a continued improvement in the fair value of both our fixed income and equity investments. Stockholders' equity increased $27 million as a result of earnings and the improved fixed income portfolio fair value that flows through the company's equity statement. Unfortunately, our income statement does not show similar year-over-year results. Net earnings are down $8 million as a result of increased expenses in several areas, including death benefits, deferred acquisition costs, and personnel-related expenses. We continue to work on reducing costs to improve profitability, and our Q3 results show that we can be successful in our efforts. As mentioned in our last call, accelerated filing status brings with it some significant changes to the company. Since our Q2 earnings release, we have been on a sprint to both document and audit the company's internal controls on financial reporting. As you are aware, we did file our Q3 report one day earlier than normal. Not a huge step towards the accelerated filing timeline, but it is a step, none the less. Regarding our internal controls, we have a good documentation in place for the majority of our controls and are working through an audit of all our internal controls at this time. Finally, as promised in our last earnings call, Our range of impact and discussion on how adoption of ASU 2018-12, better known as targeted improvements to the accounting for long duration contracts, or LDTI, affects the company's financial statements is found on page 12 of our Q3 Form 10-Q. I would also note that for comparative purposes, our 2025 Form 10-K will show restated 2024 numbers and subsequent 2026 quarterly volumes will also show restated 2025 quarterly numbers. This restatement will affect both balance sheet and income statement. In closing, Q3 earnings improved over Q2 earnings, but our year-to-date net earnings remain well below the standard set for the nine months ended 2024. Despite the decrease in earnings year-over-year, we remain financially healthy as our balance sheet remains strong with minimal debt, and well-balanced investments that are poised for good future returns. For the rest of the year, we will continue to push through the accounting headwinds as we continue to prepare for an audit of the company's internal controls and as we revamp our Form 10-K because of the adoption of LDT. Next, we'll hear from Andrew Quist, President and Chief Executive Officer of the Security National Organization. Thank you.