Earnings call transcript: Security National Financial sees Q2 growth amid market challenges

Security National Financial Corporation (SNFC) reported its second-quarter earnings for 2025, highlighting improved revenues and net earnings compared to the first quarter. The company’s financial health remains strong, with InvestingPro data showing liquid assets significantly exceeding short-term obligations with a current ratio of 15.29. Despite challenging market conditions, especially in the mortgage sector, the company maintained a robust balance sheet with minimal debt, as evidenced by a conservative debt-to-equity ratio of 0.36. The stock closed at $9.13, reflecting an 8.32% decline, amid broader market trends and company-specific developments.

Key Takeaways

• Q2 revenues and net earnings improved over Q1.
• The company was added to the Russell 2000 index and crossed the accelerated filing status threshold.
• Investments in bonds, real estate, and mortgage loans increased.
• The stock saw an 8.32% decline, closing at $9.13.
• The company is preparing for ASU 2018-12 (LDTI) implementation by year-end.

Company Performance

Security National Financial demonstrated resilience in Q2 2025, with revenues and net earnings showing sequential growth from Q1. Despite a 1.2% year-over-year decrease in mortgage loan originations, the company managed to enhance its financial standing. The addition to the Russell 2000 index and crossing the accelerated filing status threshold are notable achievements, reflecting the company’s expanding market presence.

Financial Highlights

• Cash decreased by $60 million.
• Investments increased in bonds ($25 million), real estate activities ($28 million), and mortgage loans ($23 million).
• Funeral Homes segment saw an increase in cremation rates to 52.8%.
• Personnel costs in the Life segment rose by $800,000 in Q2.

Market Reaction

The stock price of Security National Financial experienced an 8.32% decline, closing at $9.13. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, despite a significant 27.21% decline over the past six months. The company trades at an attractive P/E ratio of 8.9x, suggesting potential value opportunity. This movement reflects a combination of broader market trends and specific company developments, including increased investments and strategic shifts. The stock remains within its 52-week range, with a high of $12.939 and a low of $7.324. Unlock comprehensive valuation insights and 5 additional ProTips with an InvestingPro subscription.

Outlook & Guidance

Looking ahead, Security National Financial is focusing on strategic investments in technology and talent, preparing for year-end internal controls audits, and implementing accelerated filing requirements. The company has set EPS forecasts of $0.98 for FY2025 and $1.0 for FY2026, with revenue projections of $346.23 million and $353.16 million for the respective years. InvestingPro analysis reveals the company maintains a healthy overall Financial Health Score of 2.77, rated as "GOOD," with particularly strong scores in cash flow (3.15) and relative value (3.23). Access the complete Pro Research Report for deep-dive analysis of SNFCA’s growth prospects and financial health metrics.

Executive Commentary

"We are financially healthy as our balance sheet remains strong with minimal debt," stated Garrett Zil, CFO. Adam Quith, Life Insurance CEO, emphasized, "We do not compete on price, but we compete on value." Steve Kiel, COO of Funeral Homes, added, "Our operating model is strong, and our core businesses have room to grow."

Risks and Challenges

• The mortgage market remains challenging, with Q2 pending home sales at the lowest level since 2012.
• Personnel costs in the Life segment have increased, potentially impacting margins.
• The cemetery division faces a significant sales team turnover, with 60% turnover since January 2025.
• The company must navigate the implementation of ASU 2018-12 (LDTI) by year-end.

Security National Financial’s Q2 performance showcases resilience in the face of market challenges, supported by strategic investments and a strong balance sheet. The company remains focused on long-term growth and value creation amidst evolving industry dynamics.

Full transcript - Security National Financial (SNFCA) Q2 2025:

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: 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 08/14/2025 is posted on our company’s website. Please refer to our second quarter press release for SNFC CEO, Scott Quiz, comments. With that, I’d like to turn the call over to our chief financial officer, Garrett Zil. Garrett?

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: Thank you, Heather. I wanna start by thanking those who are on this call. This is our second consecutive earnings call, and we are still working out some 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 60,000,000 as we increased investments in bonds by 25,000,000, real estate activities by 28,000,000, and mortgage loans by 23,000,000. These increases in investments were offset by Federal Home Loan Bank advances and outside warehouse line utilization of about 16,000,000, which is seen in the increase in 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 release. Despite these increases, Q2 and year to date net earnings were good. A lot has happened since our last call. On June 27, Security National Financial was added to the Russell two thousand. And then on June 30, Security National Financial crossed the 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 18. Accelerated filing status brings with it some significant changes to the company. First of all, financial reports filed after 12/31/2025 will need to be filed sooner. Basically, our Form 10 k will now be filed seventy five days after year end, and all forms two all forms 10 Q will be filed forty 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 20 eighteen-twelve, 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 10 Q 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 and 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 2025, Security National Mortgage Company had a net loss of $1,670,000 compared to a gain of $134,000 in the 2024, a decrease of $1,800,000. 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 2025, we originated $617,000,000 of loan volume compared to $624,000,000 in the 2024 or a 1.2% year over year decrease. This was our first year over year quarterly decrease since the 2024.

Mortgage market conditions in The United States worsened in the second quarter with q two pending home sales at their lowest level since 2012 at 1,400,000 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 q two 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 volume significantly impacted q two’s results. It appears Security National’s market outperformance in q one was reversed in q two.

The other factors impacting q two’s performance year over year were the same as I reported in q one, 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, we’ll return to the market outperformance we experienced earlier. Thank you. Thank you, Andrew. My name is Adam Quith, and I serve as president and CEO of Security National Life Insurance Companies.

And today, I’ll be reporting on our life segment’s results for the second quarter ended 06/30/2025. On a GAAP basis, our life segment generated earnings approximately $8,200,000 in the second quarter twenty twenty five compared to $7,200,000 in Q2 twenty twenty four or an increase of roughly $1,000,000 year over year. This improvement was primarily driven by stronger investment income despite several notable headwinds. As we mentioned in our press release, premium collections for Q2 were essentially flat compared to the same period last year. While top line premium growth remains a priority, I believe the equally important story, both for the second quarter and for this year as a whole, is our margin improvement.

The premium rate increases we implemented are achieving their intended effect and generating significantly stronger margins on new business. While these changes have created some disruption for our sales force and new sales activity, they represent a positive ongoing trend that we believe is essential to our long term profitability. I would also note that due to the multiplayer nature of the majority of our business, it will take time for the improved margins to be fully recognized in our financial statements. As discussed, the primary driver of our improved earnings this quarter was increased investment income largely from gains through our homebuilder relationship investments. As we discussed in our earnings release, we continue to invest significantly in residential landholdings and homebuilder relationships.

While these investments may exert short term pressure on earnings, we believe they will generate superior long term returns. We also faced several pressures offsetting our increased investment income. First, our personnel costs rose by approximately $800,000 in Q2 compared to Q2 of the prior year, bringing the year to date total increase to about $2,000,000 This reflects ongoing investments in our sales teams, improving our operational infrastructure, remaining market marketplace competitive in our compensation rates and long term growth initiatives as previously outlined in q one. Notably, I would point out that the pace of our personnel cost increases moderated in q two relative to q one twenty twenty five, highlighting our continued efforts to rationalize expenses while still supporting strategic growth priorities, which, by their very nature, do require investment. Next, death benefits were about 1,000,000 higher than in q two twenty twenty four.

We believe our mortality levels for the 2025 to be an estimated four percent above trend relative to both 2024 and 2039 or excuse me, and 2019 pre COVID levels. While short and medium term medium term fluctuations are expected, we remain confident in our pricing assumptions and long term experience outlook. Additionally, the increase in amortization of commission expenses, often called deferred acquisition costs or DAC, observed in Q1 continued in q two, bringing the year to date increase to approximately 1,500,000.0. Of note, upon the payment of a death benefit, any remaining unamortized DAC associated with that policy is then amortized. Additionally, the DAC assumptions are reviewed and updated periodically.

Lastly, our current expected credit losses or CECL increased by approximately $250,000 during the quarter, bringing the year to date increase to about 1,000,000. As a reminder, CECL is driven by formula based accounting standards combined with generalized market assumptions, which may not reflect our actual long term credit experience. As we mentioned in the press release, in the past month, we executed leadership changes within our life sales organization. These changes are designed to accelerate new premium sales while preserving the improved profitability delivered by our pricing strategies. We believe these adjust we believe this adjustment positions us well to meet our growth targets in the future.

In summary, I believe the second quarter was a strong quarter for our Life segment, featuring more than $1,000,000 in earnings growth relative to Q2 twenty twenty four, improved margins and ongoing strategic investment. Despite elevated mortality and other headwinds, we delivered stronger profitability than in the same quarter last year. We remain confident that our disciplined pricing, strategic investment and operational improvements will continue to drive sustainable long term success. Thank you for your continued support, and I look forward to updating you on our progress in the next quarter. I will now turn the time over to Steve Thank you, Adam.

Good afternoon, everyone. My name is Steve Kiel, and I’m the chief operating officer of Security National Funeral Homes and Cemeteries. I’d like to begin by expressing my heartfelt appreciation to our funeral home, cemetery, grounds, and operational support teams. Your unwavering dedication to service excellence and operational professionalism continues to be the cornerstone of our success. Even in the face of today’s challenging economic environment, your commitment inspires confidence and upholds the highest standards of care for the families we have the privilege to serve.

In the 2025, we reported net earnings before tax of 1,790,000.00, which is down from our $2,090,000 second quarter twenty twenty four or 14.2%. Much of this decline rests within our operating earnings, but more specifically derived from our cemetery operations. Our total revenue in the second quarter was $8,140,000 which was down from the $8,280,000 in revenue in 2024 or 1.7%. These results are not only a reminder of the challenges we’re currently navigating, but they’re also a catalyst. We continue to act with urgency to to address today’s pressures while making the investments and implementing operational improvements that will strengthen our foundation and position us for long term success.

Within our funeral home division in our 2025, our earnings came in at 387,000, which were down slightly from the 394,000 earned in ’24. Revenue, however, rose 1.2% to $3,260,000 This was driven by a 3.3% increase in our funeral sales averages. In addition, we continue to see our sales mix move another 3.6% towards cremation as our total cremation rate realized in q two at ’25 sits at 52.8. As Scott alluded to in his press release, we have realized a 6.1% increase in these cremation families that are choosing to have service associated with honoring their loved one’s life. In our cemetery division, in our second quarter twenty twenty five, our earnings were at 822,000, which were down from prior year quarter’s 1,430,000.00.

Revenue declined 10% from $4,810,000 to $4,330,000 with our preneed land sales lagging behind prior year’s quarter, which included large land sales that were absent in ’25. Another contributing factor to the revenue decrease is from our interment volumes being down 16.4% or 65 interments within the quarter. This is driven largely by the continued consumer shift towards cremation. We have raised both the level of professionalism and our standards of excellence expectations within our cemetery sales team this year. This initiative has come at a short term cost.

Since January 2025, we have turned over 60% of our sales team. At the end of q two, 50% of our cemetery sales team have joined us within the last six months. We have recruited heavily and that has brought us talented professionals with proper mindsets. We also remain committed to investing in and developing our cemeteries to offer a full range of both burial and cremation options options that meet the evolving family needs as our team educates on the importance of having a final resting place to honor the life lived. For the remainder of 2025, our focus is clear.

Talent development, technology, expense management, and sales culture. We remain optimistic. Our operating model is strong, and our core businesses have room to grow. We recognize that reaching our desired destination of sustained growth will require more than simply repeating what we have done in the past. Our deliberate and significant investments in people, technology and customer service innovation, combined with disciplined cost control, will strengthen our competitive position and support performance gains in the quarters ahead.

Thank you for your time, for your confidence, and most importantly, your continued partnership. I now turn the time back over to Heather Street.

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: Before we conclude today’s call, we’d like to open the floor for questions. As a reminder to ask a question, please use the Zoom platform to raise your hand to unmute, or you may submit questions through the Zoom q and a panel. Include your name and organization. We’ll take as many as time permits. The question comes in, what specific steps are being taken to turn around the mortgage company losses?

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: Yep. This is Andrew Quist again. The specific steps that are being taken are both expense reduction on the mortgage side and an increase in margins. And so we are, are working on both the revenue and expense side of the equation. We have increased our margins, in the second quarter going into the third quarter, which will certainly increase revenue in the third quarter on a comparative basis, and we continue to rationalize our expenses.

The two areas that we saw the biggest expense increases year over year in the second quarter were what I mentioned, two that we don’t have operational control over, that being CECL, current expected credit losses, and deferred compensation accruals. Outside of that, we continue to work feverishly at reducing the operational expenses we can control.

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: Yeah. Do you feel that the premium increases play a role in the life side?

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: Yeah. Good question. This is Adam Quist. I’ll be answering that question. It certainly plays a role.

Anytime you increase premiums, there is, in my opinion, a mindset challenge that you have with your Salesforce, and that is something that we’re currently navigating. We are working on the mindset of our Salesforce that we are a value proposition company, that we do not compete on price, but we compete on value. And that because we compete on value, our offerings are still a very compelling offering in the marketplace. I would say that I think we are making good progress on that and that we are seeing some good headway with our Salesforce mindset and its sales velocity.

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: Next question. What is the main cause of the $4,000,000 increase in personnel costs?

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: Yeah. I can take that. So there’s there’s a couple of things that that cause it. I mean, if you’re looking for one main cause, there are certain natural increases that we have to take to keep competitive with market rate compensation. We find that retaining individuals, while you do have to increase market rate to market rates, it is still cheaper than having to retrain someone.

And so that is one element of it. But the other element of it would be strategic investments that we have made and strategic hires that we have made that we believe will make us a stronger company going forward. Speaking, specifically, I think that, things such as, generating a proprietary aftercare program and a proprietary CRM program for our Salesforce, those things do cost money. It does require a personnel investment, but we believe that that investment will be returned, in the future.

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: Next question from Melanie Smith. What other issues do you feel have created a drop in life sales?

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: Well, I would note that, our premium collections were flat, so I I might, question the the use of the word drop there. But, I think the main issue, if I were to summarize it, is our leadership. And we’ve addressed that sales leadership. We’ve made changes there, and we mentioned that in the press release and then also in my comments today. I simply think that we did not have good sales leadership at the positions we needed to, and combining that with a premium increase created some challenges for our field level sales.

But I think we have addressed the leadership issues, and I think we are seeing some good returns from our Salesforce at the moment, albeit we’re still very early and young in the process.

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: Next question from mortgage. Carlos Plata says, on the mortgage side, if we increase margin, don’t we run the risk to be less competitive and have lower volume?

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: This is Andrew Quist again. Certainly, that’s a a risk. Thank you for the question, Carlos. That is why we pay close attention to the market environment. And we can see through both our pricing engine, not specific competitor, but market conditions, and through publicly traded results that our competitors in the market right now, have been increasing margin as well.

So it’s something that we have to monitor carefully and make sure that we don’t increase more than what we’re seeing the market increase. But, yes, that is something that we we certainly monitor and we have to balance. Next

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: question. Can you speak to the overall investment exposure to real estate and your relationships with builders?

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: So this is Garrett Sill. I’ll I’ll answer kind of the first part of that question as far as investment exposure. It’s something we look at when we look at our investments. I noted that we had increased our investment in real estate by about 25,000,000 this year. And we do look at it, but in spite of that increase of 25,000,000, we’ve kind of offset that with an increased investment in our bond portfolio as well.

And so, you know, we we try to look at it. We look at all our investments in buckets. Year over year, I don’t think the percentage increase in real estate investment is is significant given our balance sheet size, but it is something we review on our on a regular basis. And we made a concerted effort beginning of the year. Actually, it started back in q four last year to increase our bond portfolio, which is is a little more stable, albeit it is subject to interest rates and and mark market movements, but the income portion of that portfolio is fixed in nature and pretty steady.

So, you know, we feel pretty good where we’re at as far as ratios go with our investment expenses sorry, our investment in various assets. And so nothing too concerning the the increase in q two of our real estate. And I’ll let Jason Overbought answer kind of a little bit more on the on the builder side.

Jason Oberbaugh, Vice President and Director, Security National Financial Corporation: Thank you, Garrett. Yes. This is Jason Oberbaugh, vice president and director with responsibilities

Garrett Zil, Chief Financial Officer, Security National Financial Corporation: for

Jason Oberbaugh, Vice President and Director, Security National Financial Corporation: our builder relationships. I’ll say two things about the relationships with builders we work with. One, we choose to only work with high quality builders who have a very strong track record of performance. Typically, these builders are working in the production home models, which provide a very stable base of buyers for their homes. And then the other point I would make about these relationships is we stay very much in markets that we see as growing and expanding where there’s strong employment basis to be able to have the ultimate buyers to take out these homes.

So high quality builders, stable markets are very much a important part of our strategy. And I will say maybe a third thing, we’ve acquired some very talented people that, you know, Adam didn’t really give a nod to or maybe the right phrase is recognized in the increase in in compensation that bring twenty plus years of banking experience so that we are sure of our valuations, and we are sure of our processes protecting the investments that we’re making in Security National. So high quality builders, high quality markets, and then high quality talent here at Security National ensuring the investments are handled properly.

Heather Street, Moderator/Call Coordinator, Security National Financial Corporation: Are there any further questions? Noting no more questions, we want to thank you again for your questions and participation. We value the engagement and thoughtful input of our shareholders and analysts. For more information about the meeting, our latest financial reports, or any other investment materials investor materials, we invite you to visit the investor relations section of our website at www.securitynational.com. We appreciate your continued support of Security National Financial Corporation.

This concludes our second quarter twenty twenty five earnings call. We We look forward to speaking with you again very soon. Thank you, and have a great day.

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