Security National Financial Corporation

Good afternoon, everyone. Welcome to Security National Financial Corporation's first quarter 2026 earnings call. We thank you for joining us today to review our financial and operational results for the period ended March 31st, 2026. 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. With that, I'd like to turn the call over to our Chairman, President, and Chief Executive Officer, Scott List. Scott?

Thank you, Heather. To have an increase of over 9% in after-tax earnings despite a top-line decrease is a testament to the operational efficiencies our teams have been implementing over the last several years. Of course, we are working diligently to increase our top lines, and that is a very standard objective of all our units. Nevertheless, improved profitability is the ultimate goal, and we did improve profitability. Our mortgage segment had an outstanding quarter, despite the fact that we were still not profitable. improving over 65% from Q1 of 2025. We were cautiously optimistic that we would be profitable at Q1 of 2026. Our teams had worked diligently to improve revenue and to rationalize costs in arguably the weakest quarter of the year. But our secondary investor pricing in March declined for what was indicated when we lost loans to what was realized when the loans were sold. That unexpected decline represented nearly 50 basis points of revenue or profit in this case are nearly 200 million in volume. So it was significant. Obviously we're reevaluating our processes, but it's fair to say that we had followed our customary policies and procedures and were surprised at the ultimate investor price. Even with that unfortunate secondary result, I believe congratulations are due for an outstanding 65% quarter over quarter group. Our cemetery mortuary group did improve their top line by 4.4% in Q1, but had a decrease in net income. That decrease, I think, deserves some explanation. On an ongoing operational basis, meaning before investment results, our operating income actually improved some 16% in Q1 2025 over Q, excuse me, Q1 2026 over Q1 2025. This was accomplished primarily by a 35% improvement in pre-need cemetery sales. The hard work that has been put in over the last year is showing up in sales, which argues for an even brighter future. Congratulations to our sales team for a fabulous result, in my opinion. The culprit leading to our decrease in net income, again, as opposed to operational income, was our investment income. with the largest factor there being an increase in unrealized losses in our common stock portfolio. Our cemetery and mortuary segment, because of consistently profitable operations, has a very considerable investment portfolio which we intend to use as conditions warrant in financing future growth to include acquisitions. Our life insurance segment, per the table, excuse me, had a 4% decrease in its top line. As has been noted in several press releases, we have been and are continuing to reorganize and improve our sales forces, which has necessitated reorganizations, terminations, and turmoil. I believe I am seeing the turnaround in all our marketing channels. But progress continues to be somewhat considerate and somewhat considered and deliberate. I will note that the majority of the top line decrease is in our least profitable products. In fact, our underwriting profit as measured using statutory accounting principles significantly increased due to our improved premium margins. That has been a very deliberate strategy over the last period of time. If I were to point to a single factor leading to our net income decrease, it would be a decline in our builder profit splits. Or phrased another way, similar to our cemetery moratorium segment, a decrease in net investment income. That characterization is somewhat nuanced in that we also increased our land holdings by some $37 million which has the effect of decreasing all of the things being equal, our investment income since profit on land holdings, at least in the current period I should say, since profit on land holdings is only recognized either when the land is sold or when vertical construction begins. I think it important to keep in mind our net portfolio yield for Q1, as near as I can tell, is still about 100 basis points above industry averages. So it is important to maintain perspective in the face of decreased investment income. To summarize, our top-line revenue did decrease some 4%, but our profitability did increase over 9%. I think all of our teams did a great job implementing efficiency. Make no mistake. Topline growth continues to be a primary objective, but improved profitability is the primary objective, which objective we achieved. Thank you.

Thank you, Scott. Good afternoon, and thank you for joining us today. My name is Garrett Sill, and I am the Chief Financial Officer of Security National Financial Corporation. This was a good quarter for the company, and I want to highlight a few items regarding our consolidated financial statements. First, on our balance sheet, most of our assets remained relatively flat compared to our year-end reporting. However, we did see a combined $32 million decrease in our bond and mortgage loan portfolios. I would note that the decrease in the mortgage portfolios was across all products in commercial, residential, and construction lending. This decrease was offset by a $20 million increase in real estate investments. Just by way of clarification, Scott referenced $37 million increase in real estate investments. That was a quarter over quarter number. The $20 million is comparing year-end 2025 with Q1 and March 31st, 2026. Our cash balances also increased significantly in Q1, and we've been active in deploying that cash in Q2. Our total liabilities also remain relatively flat with a $9 million decrease in our future policy benefits, which was offset by increased bank debt of 10 million. This increase in bank debt was the result of increased borrowings on warehouse lines of credit mortgage loan funds. Our equity also increased $15 million or 3.7% when compared to year end. And I'll discuss in a few minutes, a few items related to our equity. Moving to our statement of earnings, revenues were down 3.6% as we saw decreases in insurance premiums, mortgage-free income, and net investment income. This decrease in revenues was offset by a 5.6% decrease in total expenses as we saw decreases in nearly every category. The net result, as has been discussed, was an increase in net earnings quarter over quarter of nearly $600,000 or 9.2%. As mentioned in our last call, accelerated filing status and implementation of ASU 2018-12, better known as targeted improvements to the accounting for long duration contracts, or LDTI, brought with it some significant changes and challenges to the company. I want to acknowledge and thank our finance, actuary, and information and technology groups, for their work on SOX 404 compliance and the implementation of LDTI. It has been a significant lift for them in addition to all their other duties and responsibilities. Regarding the reporting of our adoption of LDTI, I would encourage you to review the statement of comprehensive income on page six of our 10Q, as it provides the details behind our $15 million increase in equity when our net earnings were only $7 million. This additional $8 million in equity is a result of a $4 million decrease in the fair value of our bond portfolio, which was offset by a decrease in reserves of $14 million and a tax effect of $2 million. This movement in fair values is a result of a decrease in interest rates as compared to year-end. Going forward, our statement of comprehensive income will be an important statement to review to better understand the movement in the company's equities. I would also draw your attention to page 12, which contains a reconciliation of our restated Q1 2025 earnings, comprehensive income, and equity. Throughout 2026, we will continue to restate our 2025 quarterly earnings for comparison purposes. For Q1 2025, earnings were restated nearly $2 million. This is primarily a result of our deferred acquisition costs, or DAC, being amortized over the life of the policy instead of the premium paying period. This result was lower DAC amortization, which resulted in an increase in earnings. In closing, Q1 2026 was a good quarter for the company as we saw growth in total assets, stockholders' equity, and net earnings. We still have significant amount of work to do as we continue to test, improve, and remediate our internal controls and financial reporting but the future does look bright. Next, we'll hear from Andrew Quist. Thank you.