SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2003 Commission File Number: 0-9341
- ------------------------------------ ------------------------------
SECURITY NATIONAL FINANCIAL CORPORATION
Exact Name of Registrant.
UTAH 87-0345941
- ------------------------------ -------------------------
(State or other jurisdiction IRS Identification Number
of incorporation or organization)
5300 South 360 West, Salt Lake City, Utah 84123
- ----------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including Area Code (801) 264-1060
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $2.00 par value 4,284,012
- ------------------------------------- ----------------------------------
Title of Class Number of Shares Outstanding as of
September 30, 2003
Class C Common Stock, $.20 par value 6,094,950
- ------------------------------------ ----------------------------------
Title of Class Number of Shares Outstanding as of
September 30, 2003
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements Page No.
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Consolidated Statement of Earnings - Nine and three
months ended September 30, 2003 and 2002 (unaudited).........3
Consolidated Balance Sheet - September 30, 2003 (unaudited)
and December 31, 2002 .......................................4-5
Consolidated Statement of Cash Flows -
Nine months ended September 30, 2003
and 2002 (unaudited).........................................6
Notes to Consolidated Financial Statements...................7-10
Item 2 Management's Discussion and Analysis.........................11-14
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Item 3 Quantitative and Qualitative Disclosure of Market Risk.......14
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Item 4 Controls and Procedures......................................15
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PART II - OTHER INFORMATION
Other Information............................................15-17
Signature Page...............................................18
Certifications...............................................19-21
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
Revenues: 2003 2002 2003 2002
- -------- ---- ---- ---- ----
Insurance premiums and other considerations $17,342,353 $10,319,892 $5,752,258 $3,627,683
Net investment income 13,630,206 8,504,297 5,264,666 3,052,659
Net mortuary and cemetery sales 8,026,021 7,954,592 2,730,776 2,717,806
Realized gains on investments and other assets (2,207) 746,021 (2,207) 27,205
Mortgage fee income 76,979,168 34,828,830 24,067,019 15,988,606
Other 245,893 415,292 62,468 106,325
------------- ------------- ------------- -------------
Total revenues 116,221,434 62,768,924 37,874,980 25,520,284
------------- ------------- ------------- -------------
Benefits and expenses:
Death benefits 9,768,115 4,298,196 2,725,055 1,325,095
Surrenders and other policy benefits 1,573,695 1,442,718 472,603 372,618
Increase in future policy benefits 4,921,318 3,628,655 2,113,665 1,569,539
Amortization of deferred policy acquisition costs
and cost of insurance acquired 3,622,216 2,334,477 1,353,437 565,708
General and administrative expenses:
Commissions 55,435,397 26,554,414 16,215,158 12,591,644
Salaries 10,378,702 8,308,534 3,421,014 2,925,397
Other 16,260,51 10,320,968 6,076,615 3,955,599
Interest expense 3,130,982 1,013,868 1,331,544 491,072
Cost of goods and services sold
of the mortuaries and cemeteries 1,699,005 1,515,575 575,267 535,029
------------- ------------- ------------- -------------
Total benefits and expenses 106,789,942 59,417,405 34,284,358 24,331,701
------------- ------------- ------------- -------------
Earnings before income taxes 9,431,492 3,351,519 3,590,622 1,188,583
Income tax expense (3,065,751) (825,614) (1,145,524) (294,796)
Minority interest (income) loss of subsidiary 17,219 18,263 31,625 3,898
------------- ------------- ------------- -------------
Net earnings $6,382,960 $2,544,168 $2,476,723 $897,685
============= ============= ============= =============
Net earnings per common share $1.24 $.54 $.49 $.19
===== ==== ==== ====
Weighted average outstanding common shares 5,165,311 4,680,665 5,034,832 4,684,250
============= ============= ============= =============
Net earnings per common share-assuming dilution $1.19 $.51 $.47 $.18
===== ===== ===== =====
Weighted average outstanding common shares
assuming-dilution 5,378,996 5,013,965 5,252,132 5,083,126
============= ============= ============= =============
See accompanying notes to consolidated financial statements
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2003 December 31,
(Unaudited) 2002
------------------ ------------
Assets:
- -------
Insurance-related investments:
Fixed maturity securities held
to maturity, at amortized cost $33,509,058 $33,015,097
Fixed maturity securities available
for sale, at market 17,841,657 18,514,943
Equity securities available for sale,
at market 3,033,204 2,642,093
Mortgage loans on real estate 25,041,443 21,016,008
Real estate, net of accumulated
depreciation and allowances for losses 8,863,328 9,331,248
Policy, student and other loans 10,924,403 10,974,165
Short-term investments 4,677,926 5,335,478
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Total insurance-related
investments 103,891,019 100,829,032
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Restricted assets of cemeteries and mortuaries 5,310,865 5,332,736
------------ -------------
Cash 30,294,277 38,199,041
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Receivables:
Trade contracts 9,786,737 11,358,027
Mortgage loans sold to investors 107,255,174 89,455,105
Receivable from agents 1,441,923 2,054,071
Receivable from officers 46,540 70,290
Other 1,593,581 1,131,977
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Total receivables 120,123,955 104,069,470
Allowance for doubtful accounts (4,817,755) (2,385,309)
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Net receivables 115,306,200 101,684,161
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Policyholder accounts on deposit
with reinsurer 6,822,334 6,955,691
Land and improvements held for sale 8,573,388 8,429,215
Accrued investment income 1,316,052 928,287
Deferred policy and pre-need acquisition costs 16,879,934 15,917,257
Property, plant and equipment, net 11,004,751 10,921,635
Cost of insurance acquired 15,229,005 16,330,711
Excess of cost over net assets
of acquired subsidiaries 683,191 683,191
Other 887,548 945,805
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Total assets $316,198,564 $307,156,762
============= =============
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
September 30, 2003 December 31,
(Unaudited) 2002
------------------ ------------
Liabilities:
- -----------
Future life, annuity, and other
policy benefits $218,603,200 $215,980,207
Unearned premium reserve 1,945,307 1,914,700
Bank loans payable 14,986,969 16,113,227
Notes and contracts payable 3,430,279 3,160,009
Potential stock redemption 1,800,000 --
Deferred pre-need cemetery and funeral
contracts revenues and estimated future
cost of pre-need sales 10,559,213 10,002,396
Accounts payable 1,290,172 1,553,777
Funds held under reinsurance treaties 1,304,981 1,334,964
Other liabilities and accrued expenses 10,843,157 10,182,382
Income taxes 11,036,256 8,103,882
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Total liabilities 275,799,534 268,345,544
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Commitments and Contingencies -- --
Minority interest 3,963,890 4,297,807
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Stockholders' Equity:
Common stock:
Class A: $2.00 par value, authorized 10,000,000
shares, issued 5,561,233 shares in 2003
and 5,794,492 shares in 2002 11,122,466 11,588,984
Class C: $0.20 par value, authorized
7,500,000 shares, issued 6,166,699
shares in 2003 and 6,182,669
shares in 2002 1,233,340 1,236,533
------------- -------------
Total common stock 12,355,806 12,825,517
Additional paid-in capital 10,316,658 11,280,842
Accumulated other comprehensive income
(loss) and other items, net of
deferred taxes (846,100) 1,191,863
Retained earnings 18,134,598 11,992,542
Treasury stock at cost (1,277,221 Class A
shares and 1,749 Class C shares in
2003; 1,151,811 Class A shares
and 71,749 Class C shares in 2002, held by
affiliated companies) (3,525,822) (2,777,353)
------------- -------------
Total stockholders' equity 36,435,140 34,513,411
------------- -------------
Total liabilities and stockholders' equity $316,198,564 $307,156,762
============= =============
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
2003 2002
---- ----
Cash flows from operating activities:
Net cash provided by operating
activities $4,097,189 $12,523,692
------------ -----------
Cash flows from investing activities:
Securities held to maturity:
Purchase - fixed maturity securities (8,080,087) (4,062,931)
Calls and maturities - fixed
maturity securities 7,607,038 7,122,717
Securities available for sale:
Calls and maturities - fixed
maturity securities 360,000 3,301,497
Purchases of equity securities (51,921) (367)
Purchases of short-term investments (15,608,535) (8,334,285)
Sales of short-term investments 16,661,402 7,425,705
Purchases of restricted assets 41,009 (147,552)
Mortgage, policy, and other loans made (17,258,017) (4,707,046)
Payments received for mortgage,
real estate, policy, and other loans 12,861,203 4,648,685
Purchases of property, plant,
and equipment (1,215,617) (1,160,274)
Purchases of real estate (1,012,284) (1,501,405)
Sale of real estate 1,230,802 --
------------ ------------
Net cash (used in) provided by
investing activities (4,465,007) 2,584,744
------------ ------------
Cash flows from financing activities:
Annuity receipts 4,422,489 6,153,617
Annuity withdrawals (8,061,431) (8,325,543)
Repayment of bank loans and notes and
contracts payable (3,174,736) (1,659,228)
Stock options exercised 25,200 --
Proceeds from borrowings on bank loans
and notes and contracts payable -- 186,594
Purchase of Treasury Stock (748,468) --
Sale of Treasury Stock -- 37,824
Other -- --
------------ ------------
Net cash (used in) provided by
financing activities (7,536,946) (3,606,736)
------------ ------------
Net change in cash (7,904,764) 11,501,700
Cash at beginning of period 38,199,041 8,757,246
------------ ------------
Cash at end of period $30,294,277 $20,258,946
============ ============
Non cash investing and financial activities
- -----------------------------------------------
During the nine months ended September 30, 2003, the Company entered into a
potential stock redemption agreement (see Note 7). As a result, the Company
reclassified $1,800,000 of common stock and additional paid-in capital to a
liability.
See accompanying notes to consolidated financial statements.
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2003, (Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 2003, are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 2002,
included in the Company's Annual Report on Form 10-K (file number 0-9341).
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
The estimates susceptible to significant change are those used in determining
the liability for future policy benefits and claims, those used in determining
valuation allowances for mortgage loans on real estate, and those used in
determining the estimated future costs for pre-need sales. Although some
variability is inherent in these estimates, management believes the amounts
provided are adequate.
2. Comprehensive Income
For the nine months ended September 30, 2003 and 2002, total comprehensive
income amounted to $4,344,997 and $2,357,975, respectively.
For the three months ended September 30, 2003 and 2002, total comprehensive
income amounted to $2,339,192 and $807,461, respectively.
3. Stock-Based Compensation
The Company accounts for stock-based compensation under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. The Company has adopted SFAS No. 123,
"Accounting for Stock-Based Compensation". In accordance with the provisions of
SFAS 123, the Company has elected to continue to apply Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion
No. 25"), and related interpretations in accounting for its stock option plans.
In accordance with APB Opinion No. 25, no compensation cost has been recognized
for these plans. Had compensation cost for these plans been determined based
upon the fair value at the grant date consistent with the methodology prescribed
under SFAS No. 123, the Company's net earnings for three months ended September
30, 2003, and 2002 would not have been effected. Net earnings for the nine
months ended September 30, 2003 and 2002 would have been reduced by the
following:
Nine Months Ended September 30,
2003 2002
---- ----
Net earnings as reported $6,382,960 $2,544,168
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related
tax effects (133,000) --
----------- ----------
Pro forma net earnings $6,249,960 $2,544,168
========== ==========
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2003 (Unaudited)
Nine Months Ended September 30,
2003 2002
---- ----
Net earnings per common share:
Basic - as reported $1.24 $.54
Basic - pro forma $1.21 $.54
Diluted - as reported $1.19 $.51
Diluted - pro forma $1.16 $.51
4. Earnings Per Share In accordance with SFAS 128, the basic and diluted
earnings per share amounts were calculated as follows:
Nine Months Ended September 30,
2003 2002
---- ----
Numerator:
Net income $6,382,960 $2,544,168
========== ==========
Denominator:
Denominator for basic earnings per share-
weighted-average shares 5,165,311 4,680,665
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Effect of dilutive securities:
Employee stock options 208,961 305,041
Stock appreciation rights 4,724 28,259
------------ ------------
Dilutive potential common shares 213,685 333,300
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Denominator for diluted earnings
per share-adjusted
weighted-average shares and
assumed conversions 5,378,996 5,013,965
=========== ===========
Basic earnings per share $1.24 $.54
===== ====
Diluted earnings per share $1.19 $.51
===== ====
Three Months Ended September 30,
2003 2002
---- ----
Numerator:
Net income $2,476,723 $ 897,685
========== ============
Denominator:
Denominator for basic earnings
per share-weighted-average
shares 5,034,832 4,684,250
---------- -----------
Effect of dilutive securities:
Employee stock options 212,541 314,024
Stock appreciation rights 4,759 84,852
---------- ----------
Dilutive potential common shares 217,300 398,876
------------ -----------
Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions 5,252,132 5,083,126
=========== ===========
Basic earnings per share $.49 $.19
==== ====
Diluted earnings per share $.47 $.18
==== ====
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2003, (Unaudited)
5. Business Segment
Life Cemetery/ Reconciling
Insurance Mortuary Mortgage Items Consolidated
For the Nine Months Ended
September 30, 2003
- --------------------------
Revenues from
external customers $ 22,137,919 $ 8,880,150 $85,203,365$ -- $116,221,434
Intersegment revenues 7,379,515 -- -- (7,379,515) --
Segment profit 1,114,422 135,785 8,181,285 -- 9,431,492
Identifiable assets 296,676,591 43,828,908 19,512,932 (43,819,867) 316,198,564
For the Nine Months Ended
September 30, 2002
- -------------------------
Revenues from
external customers $ 14,844,979 $ 9,454,018 $38,469,927$ -- $ 62,768,924
Intersegment revenues 3,474,189 -- -- (3,474,189) --
Segment profit 563,976 1,221,538 1,566,005 -- 3,351,519
Identifiable assets 203,071,749 41,053,996 10,180,717 (34,485,755) 219,820,707
For the Three Months Ended
September 30, 2003
- --------------------------
Revenues from
external customers $ 7,363,273 $ 3,051,572 $27,460,135$ -- $ 37,874,980
Intersegment revenues 2,675,710 -- -- (2,675,710) --
Segment profit 511,322 225,413 2,853,887 -- 3,590,622
For the Three Months Ended
September 30, 2002
- --------------------------
Revenues from
external customers $ 5,083,781 $ 3,005,034 $17,431,469$ -- $ 25,520,284
Intersegment revenues 1,186,158 -- -- (1,186,158) --
Segment profit 59,282 195,121 934,180 -- 1,188,583
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2003, (Unaudited)
6. Recent Acquisition
On December 23, 2002, the Company completed an asset purchase transaction with
Acadian Life Insurance Company, a Louisiana domiciled life insurance company
("Acadian Life"), in which it acquired from Acadian Life $75,000,000 in assets
and $75,000,000 in insurance reserves through its wholly owned subsidiary,
Security National Life Insurance Company, a Utah domiciled life insurance
company. The acquired assets consist primarily of approximately 275,000 funeral
insurance policies in force in the state of Mississippi. The assets were
originally acquired by Acadian Life from Gulf National Life Insurance Company
("GNLIC") on June 6, 2001, consisting of all of GNLIC's insurance policies in
force and in effect on June 1, 2001.
7. Potential Stock Redemption
The Company entered into an agreement with a stockholder in August 2003 wherein
it purchased 124,000 shares of Class A Common Stock from this stockholder for
$6.00 per share. The purchase of these shares is reflected in treasury stock as
of September 30, 2003.
Also under the terms of this agreement, this stockholder has agreed not to
purchase or control, directly or indirectly, any additional shares of Class A or
Class C common stock through August 2007, and on August 27, 2004, 2005 and 2006,
this stockholder may request, but is not obligated to request, the Company to
purchase an additional 100,000 shares of Class A common stock held by this
stockholder for $6.00 per share. In accordance with the Statement of Financial
Accounting Standards ("SFAS") No. 150, the Company has recorded $1,800,000 as a
liability under the assumption that the stockholder could request the Company to
purchase these shares, and has reduced stockholders' equity for the same amount.
This amount has not been recorded at its present value because the discount is
not material. The Company is not aware of the intention of the stockholder to
exercise his right in the future. In the event that the stockholder does not
exercise his right, the amount recorded as a liability will be reduced and
stockholders' equity will be increased.
8. Recent Accounting Pronouncements
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement is effective for
contracts entered into or modified after June 30, 2003, with certain exceptions,
and for hedging relationships designated after September 30, 2003. We are
currently evaluating the effect that the adoption of SFAS No. 149 will have on
our results of operations and financial position.
In January 2003, the FASB issued SFAS No. 46, "Consolidation of Variable
Interest Entities." SFAS No. 46 is currently effective for periods beginning
after December 15, 2003. SFAS No. 46 clarifies the application of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from a separate enterprise. Such entities are identified as Variable
Interest Entities. The objective of SFAS No. 46 is to improve financial
reporting by those separate enterprises involved with variable interest
entities. If those separate enterprises have a controlling financial interest in
a variable interest entity, the assets, liabilities, and results of the
activities of the variable interest entity should be included in the financial
statements with those of the business enterprise. Management does not believe
the adoption of SFAS No. 46 will have a material effect on the Company's
financial position or results of operations. SFAS No. 46 further requires the
disclosure of certain information related to variable interest entities in which
the Company holds a significant variable interest. The Company does not believe
that it owns any such interests that require disclosure at this time.
Item 2. Management's Discussion and Analysis
Overview
The Company's operations over the last several years generally reflect three
trends or events which the Company expects to continue: (i) increased attention
to "niche" insurance products, such as the Company's funeral plan policies and
traditional whole-life products; (ii) emphasis on cemetery and mortuary
business; and (iii) capitalizing on lower interest rates by originating and
refinancing mortgage loans.
During the nine months ended September 30, 2003, Security National Mortgage
Company ("SNMC") experienced increases in revenue and expenses due to the
increase in loan volume of its operations. SNMC is a mortgage lender
incorporated under the laws of the State of Utah. SNMC is approved and regulated
by the Federal Housing Administration (FHA), a department of the U.S. Department
of Housing and Urban Development (HUD), to originate mortgage loans that qualify
for government insurance in the event of default by the borrower. SNMC obtains
loans primarily from independent brokers and correspondents. SNMC funds the
loans from internal cash flows and lines of credit from financial institutions.
SNMC receives fees from the borrowers and other secondary fees from third party
investors who purchase the loans from SNMC. SNMC sells all of its loans to third
party investors and does not retain servicing to these loans. SNMC pays the
brokers and correspondents a commission for loans that are brokered through
SNMC. SNMC originated and sold 14,487 ($2,125,995,000) and 7,403
($1,075,229,000) loans respectively for the nine months ended September 30, 2003
and 2002.
On December 23, 2002, the Company completed an asset purchase transaction with
Acadian Life Insurance Company, a Louisiana domiciled life insurance company, in
which it acquired from Acadian Life $75,000,000 in assets and $75,000,000 in
insurance reserves through its wholly owned subsidiary, Security National Life
Insurance Company, a Utah domiciled life insurance company. The acquired assets
consist primarily of approximately 275,000 funeral insurance policies in force
in the state of Mississippi. The assets were originally acquired by Acadian Life
from Gulf National Life Insurance Company ("GNLIC") on June 6, 2001, consisting
of all of GNLIC's insurance policies in force and in effect on June 1, 2001.
Results of Operations
Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30,
2002
Total revenues increased by $53,452,000, or 85.2%, to $116,221,000 for the nine
months ended September 30, 2003, from $62,769,000 for the nine months ended
September 30, 2002. Contributing to this increase in total revenues was a
$42,150,000 increase in mortgage fee income, a $7,022,000 increase in insurance
premiums and other considerations, and a $5,126,000 increase in net investment
income.
Insurance premiums and other considerations increased by $7,022,000, or 68.0%,
to $17,342,000 for the nine months ended September 30, 2003, from $10,320,000
for the comparable period in 2002. This increase was primarily due to the
additional insurance premiums from the policies acquired in the asset purchase
transaction with Acadian Life.
Net investment income increased by $5,126,000, or 60.3%, to $13,630,000 for the
nine months ended September 30, 2003, from $8,504,000 for the comparable period
in 2002. This increase was primarily attributable to the additional investment
income from the assets acquired in the asset purchase transaction with Acadian
Life.
Net mortuary and cemetery sales increased by $71,000, or 0.9%, to $8,026,000 for
the nine months ended September 30, 2003, from $7,955,000 for the comparable
period in 2002. This increase was primarily due to increased sales of cemetery
properties.
Realized gains on investments and other assets decreased by $748,000 or 100.3%,
to $(2,000) for the nine months ended September 30, 2003, from $746,000 for the
comparable period in 2002. The realized gains on investments and other assets in
2002 were from the sale of property at Lake Hills Cemetery.
Mortgage fee income increased by $42,150,000, or 121.0%, to $76,979,000 for the
nine months ended September 30, 2003, from $34,829,000 for the comparable period
in 2002. This increase was primarily attributable to a greater number of loan
originations during the nine months of 2003 due to lower interest rates
resulting in more borrowers refinancing their mortgage loans.
Total benefits and expenses were $106,790,000, or 91.9%, of total revenues for
the nine months ended September 30, 2003, as compared to $59,417,000, or 94.7%,
of total revenues for the comparable period in 2002.
Death benefits, surrenders and other policy benefits, and increase in future
policy benefits increased by an aggregate of $6,893,000, or 73.6%, to
$16,263,000 for the nine months ended September 30, 2003, from $9,370,000 for
the comparable period in 2002. This increase was primarily due to the additional
death benefits, surrenders and other policy benefits from the policies acquired
in the asset purchase transaction with Acadian Life.
Amortization of deferred policy acquisition costs and cost of insurance acquired
increased by $1,288,000, or 55.2%, to $3,622,000 for the nine months ended
September 30, 2003, from $2,334,000 for the comparable period in 2002. This
increase was primarily due to the additional amortization of deferred policy
acquisition costs and cost of insurance acquired from the additional policies
acquired in the asset purchase transaction with Acadian Life.
General and administrative expenses increased by $36,891,000, or 81.6%, to
$82,075,000 for the nine months ended September 30, 2003, from $45,184,000 for
the comparable period in 2002. This increase primarily resulted from an increase
in commissions and other expenses due to additional mortgage loan originations
having been made by the Company's mortgage subsidiary during the nine months of
2003.
Interest expense increased by $2,117,000, or 208.8%, to $3,131,000 for the nine
months ended September 30, 2003, from $1,014,000 for the comparable period in
2002. This increase was primarily due to additional warehouse lines of credit
required for the additional mortgage loan originations by the Company's mortgage
subsidiary.
Cost of goods and services sold of the mortuaries and cemeteries increased by
$184,000, or 12.1%, to $1,699,000 for the nine months ended September 30, 2003,
from $1,515,000 for the comparable period in 2002. This increase was primarily
due to increased costs of funeral products.
Third Quarter of 2003 Compared to Third Quarter of 2002
Total revenues increased by $12,355,000, to $37,875,000 for the three months
ended September 30, 2003, from $25,520,000 for the three months ended September
30, 2002. Contributing to this increase in total revenues was a $8,078,000
increase in mortgage fee income, a $2,124,000 increase in insurance premiums and
other considerations, and a $2,212,000 increase in net investment income.
Insurance premiums and other considerations increased by $2,124,000, or 58.6%,
to $5,752,000 for the three months ended September 30, 2003, from $3,628,000 for
the comparable period in 2002. This increase was primarily due to the additional
insurance premiums from the policies acquired in the asset purchase transaction
with Acadian Life.
Net investment income increased by $2,212,000, or 72.5%, to $5,265,000 for the
three months ended September 30, 2003, from $3,053,000 for the comparable period
in 2002. This increase was primarily attributable to the additional investment
income from the assets acquired in the asset purchase transaction with Acadian
Life.
Net mortuary and cemetery sales increased by $13,000, or .5%, to $2,731,000 for
the three months ended September 30, 2003, from $2,718,000 for the comparable
period in 2002. This increase was primarily due to increased sales of cemetery
properties.
Mortgage fee income increased by $8,078,000, or 50.5 %, to $24,067,000 for the
three months ended September 30, 2003, from $15,989,00 for the comparable period
in 2002. This increase was primarily attributable to a greater number of loan
originations during the third quarter of 2003, due to lower interest rates
resulting in more borrowers refinancing their mortgage loans.
Total benefits and expenses were $34,284,000, or 90.5%, of total revenues for
the three months ended September 30 2003, as compared to $24,332,000, or 95.3%,
of total revenues for the comparable period in 2002.
Death benefits, surrenders and other policy benefits, and increase in future
policy benefits increased by an aggregate of $2,044,000, or 62.6%, to $5,311,000
for the three months ended September 30, 2003, from $3,267,000 for the
comparable period in 2002. This increase was primarily due to the additional
death benefits, surrenders and other policy benefits from the policies acquired
in the asset purchase transaction with Acadian Life.
Amortization of deferred policy acquisition costs and cost of insurance acquired
increased by $787,000 or 139.2%, to $1,353,000 for the three months ended
September 30, 2003, from $566,000 for the comparable period in 2002. This
increase was primarily due to the additional amortization of deferred policy
acquisition costs and cost of insurance acquired from the additional policies
acquired in the asset purchase transaction with Acadian Life.
General and administrative expenses increased by $6,240,000, or 32.0%, to
$25,713,000 for the three months ended September 30, 2003, from $19,473,000 for
the comparable period in 2002. This increase primarily resulted from an increase
in commissions and other expenses due to additional mortgage loan originations
having been made by the Company's mortgage subsidiary during the second quarter
of 2003.
Interest expense increased by $840,000, or 171.2%, to $1,332,000 for the three
months ended September 30, 2003, from $491,000 for the comparable period in
2002. This increase was primarily due to additional warehouse lines of credit
required for the additional mortgage loan originations by the Company's mortgage
subsidiary.
Cost of goods and services sold of the mortuaries and cemeteries increased by
$40,000, or 7.5%, to $575,000 for the three months ended September 30, 2003,
from $535,000 for the comparable period in 2002. This increase was primarily due
to the increase in the cost of merchandise of funeral products.
Liquidity and Capital Resources
The Company's life insurance subsidiaries and cemetery and mortuary subsidiaries
realize cash flow from premiums, contract payments and sales on personal
services rendered for cemetery and mortuary business, from interest and
dividends on invested assets, and from the proceeds from the maturity of
held-to-maturity investments, or sale of other investments. The mortgage
subsidiary realizes cash flow from fees generated by originating and refinancing
mortgage loans and interest earned on mortgages sold to investors. The Company
considers these sources of cash flow to be adequate to fund future policyholder
and cemetery and mortuary liabilities, which generally are long-term, and
adequate to pay current policyholder claims, annuity payments, expenses on the
issuance of new policies, the maintenance of existing policies, debt service,
and operating expenses.
The Company attempts to match the duration of invested assets with its
policyholder and cemetery and mortuary liabilities. The Company may sell
investments other than those held-to-maturity in the portfolio to help in this
timing; however, to date, that has not been necessary. The Company purchases
short-term investments on a
temporary basis to meet the expectations of short-term requirements of the
Company's products. The Company's investment philosophy is intended to provide a
rate of return, which will persist during the expected duration of policyholder
and cemetery and mortuary liabilities regardless of future interest rate
movements.
The Company's investment policy is to invest predominantly in fixed maturity
securities, mortgage loans, and warehouse mortgage loans on a short-term basis
before selling the loans to investors in accordance with the requirements and
laws governing the life insurance subsidiaries. Bonds owned by the life
insurance subsidiaries amounted to $51,351,000 as of September 30, 2003,
compared to $51,530,000 as of December 31, 2002. This represents 49% and 51% of
the total insurance-related investments as of September 30, 2003, and December
31, 2002, respectively. Generally, all bonds owned by the life insurance
subsidiaries are rated by the National Association of Insurance Commissioners.
Under this rating system, there are six categories used for rating bonds. At
September 30, 2003 and December 31, 2002, 3% ($1,785,000) and 4% ($1,903,000) of
the Company's total investment in bonds were invested in bonds in rating
categories three through six, which are considered non-investment grade.
The Company has classified certain of its fixed income securities, including
high-yield securities, in its portfolio as available for sale, with the
remainder classified as held to maturity. However, in accordance with Company
policy, any such securities purchased in the future will be classified as held
to maturity. Business conditions, however, may develop in the future which may
indicate a need for a higher level of liquidity in the investment portfolio. In
that event the Company believes it could sell short-term investment grade
securities before liquidating higher-yielding longer-term securities.
The Company has a substantial portion of its assets invested in cash, short-term
investments and mortgage loans sold to investors. If market conditions were to
change so that rates for these investments were to decline or if these
investments and higher yielding long-term investments were not available, the
Company's interest rate spread (excess interest earned over interest credited to
policyholders) would be adversely affected and could result in significant
decreases in the Company's overall profitability or losses.
The Company is subject to risk based capital guidelines established by statutory
regulators requiring minimum capital levels based on the perceived risk of
assets, liabilities, disintermediation, and business risk. At September 30,
2003, and December 31, 2002, the life insurance subsidiary exceeded the
regulatory criteria.
The Company's total capitalization of stockholders' equity and bank debt and
notes payable was $54,852,000 as of September 30, 2003, as compared to
$53,787,000 as of December 31, 2002. Stockholders' equity as a percent of
capitalization increased to 66% as of September 30, 2003, from 64% as of
December 31, 2002.
Lapse rates measure the amount of insurance terminated during a particular
period. The Company's lapse rate for life insurance in 2002 was 10.7% as
compared to a rate of 13.2% for 2001. The 2003 lapse rate has been approximately
the same as 2002.
At September 30, 2003, $23,355,000 of the Company's consolidated stockholders'
equity represents the statutory stockholders' equity of the Company's life
insurance subsidiaries. The life insurance subsidiaries cannot pay a dividend to
its parent company without the approval of insurance regulatory authorities.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
There have been no significant changes since the annual report Form 10-K filed
for the year ended December 31, 2002.
Item 4. Controls and Procedures
The Company's Chief Executive Officer and its Chief Financial Officer (the
"Certifying Officers"), are responsible for establishing and maintaining
disclosure controls and procedures for the Company. The Certifying Officers have
concluded (based on their evaluation of these controls and procedures as of a
date within 90 days of the filing of this report) that the design and operation
of the Company's disclosure controls and procedures (as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934) are effective. No
significant changes were made in the Company's internal controls or in other
factors that could significantly affect those controls subsequent to the date of
the evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Part II Other Information:
Item 1. Legal Proceedings
An action was brought against the Company in May 2001, by Glenna Brown Thomas
individually and as personal representative of the Estate of Lynn W. Brown in
the Third Judicial Court, Salt Lake County, Utah. The action asserts that
Memorial Estates delivered to Lynn W. Brown six stock certificates representing
2,000 shares in 1970 and 1971. Mr. Brown died in 1972. It is asserted that at
the time the 2,000 shares were issued and outstanding, such represented a 2%
ownership of Memorial Estates. It is alleged Mr. Brown was entitled to
preemptive rights and that after the issuance of the stock to Mr. Brown there
were further issuances of stock without providing written notice to Mr. Brown or
his estate with respect to an opportunity to purchase more stock. It is asserted
among other things that the plaintiff "has the right to a transfer of Brown's
shares to Thomas on defendants' (which includes Security National Financial
Corporation as well as Memorial Estates, Inc.) books and to restoration of
Brown's proportion of share ownership in Memorial at the time of his death by
issuance and delivery to Thomas of sufficient shares of defendant's publicly
traded and unrestricted stock in exchange for the 2,000 shares of Memorial stock
and payment of all dividends from the date of Thomas's demand, as required by
Article XV of the Articles of Incorporation." The formal discovery cutoff is
January 15, 2004. Based on present information, the Company intends to
vigorously defend the matter, including an assertion that the statute of
limitations bars the claims.
An action was brought against Southern Security Life Insurance Company by
National Group Underwriters, Inc. ("NGU") in state court in the State of Texas.
The case was removed by the Company to the United States District Court for the
Northern District of Texas, Fort Worth Division, with Civil No. 4:01-CV-403-E.
An Amended Complaint was filed on or about July 18, 2001. The Amended Complaint
asserted that NGU had a contract with the Company wherein NGU would submit
applications for certain policies of insurance to be issued by the Company. It
alleged that disputes had arisen between NGU and the Company with regard to the
calculation and payment of certain advanced commissions as well as certain
production bonuses.
NGU alleged that it had been damaged far in excess of the $75,000 minimum
jurisdictional limits of the Federal Court. NGU also sought attorney's fees and
costs as well as prejudgment and postjudgment interest. A second amended
complaint and a third amended complaint, which included a fraud claim, were
filed. A motion was filed by the Company to dismiss the third amended complaint,
including the fraud claim. The court denied the motion. The Company
counterclaimed for what it claimed to be a debit balance owing to it pursuant to
the relationship between the parties with said counterclaim seeking such from
NGU (the amount subject to reduction as premiums are received). The Company also
sought to recover attorney's fees and costs, as well as punitive damages on
three of its causes of action. Certain discovery took place. The federal case
was dismissed per stipulation. The matter was refiled in Texas state court,
Tarrant County, Case No. 348 195490 02. The claims of the respective parties are
essentially the same as set forth above, which claims against Southern Security
Life Insurance Company include fraudulent inducement relative to entering into a
contract, fraud, breach of contract, breach of duty of good faith and fair
dealing, attorneys' fees and exemplary damages. Certain depositions have been
taken since the filing again in state court and further discovery is
anticipated. The Company intends to vigorously defend the matter as well as
prosecute its counterclaim. A trial is presently set for July, 2004.
The Company is not a party to any other legal proceedings outside the ordinary
course of the Company's business or to any other legal proceedings, which, if
adversely determined, would have a material adverse effect on the Company or its
business.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
At the annual stockholders meeting held on July 11, 2003, the
following matters were acted upon: (i) seven directors consisting
of George R. Quist, J. Lynn Beckstead, Jr., Scott M. Quist,
Charles L. Crittenden, Dr. Robert G. Hunter, H. Craig Moody and
Norman G. Wilbur were elected to serve until the next annual
stockholders meeting or until their respective successors are
elected and qualified (for George R. Quist, Class A and Class C
shares, 9,065,935 votes were cast in favor of election, no votes
were cast against election and there were 13,542 abstentions; for
J. Lynn Beckstead, Jr., Class A shares only, 3,594,399 votes were
cast in favor of election, no votes were cast against election
and there were 87,757 abstentions; for Scott M. Quist, Class A
and Class C shares, 9,066,826 votes were cast in favor of
election, no votes were cast against election and there were
12,651 abstentions; for Charles L. Crittenden, Class A shares
only, 3,675,477 votes were cast in favor of election and no votes
were cast against election and there were 6,552 abstentions; for
Dr. Robert G. Hunter, Class A and Class C shares, 9,067,239 votes
were cast in favor of election, no votes cast against election
and there were 12,238 abstentions; for H. Craig Moody, Class A
and C shares, 9,067,174 votes were cast in favor of election, no
votes cast against election and there were 12,303 abstentions;
for Norman G. Wilbur, Class A and Class C shares, 9,067,239 votes
were cast in favor of election, no votes were cast against
election and there were 12,238 abstentions; (ii) the appointment
of Tanner + Co., as the Company's independent accountants for the
fiscal year ended December 31, 2003, was ratified (with 9,039,595
votes cast for appointment, 9,173 votes against appointment and
24,207 abstentions); and (iii) adoption of the 2003 Stock Option
Plan and the reservation of 500,000 shares of Class A Common
Stock and 1,000,000 shares of Class C Common Stock was ratified
(with 7,772,537 votes cast for adoption, 300,330 votes cast
against adoption and 15,071 abstentions).
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1. Articles of Restatement of Articles of Incorporation (8)
3.2. Amended Bylaws
4.1. Specimen Class A Stock Certificate (1) 4.2. Specimen Class C Stock
Certificate (1)
4.3 Specimen Preferred Stock Certificate and Certificate of Designation
of Preferred Stock (1)
10.1 Restated and Amended Employee Stock Ownership Plan and Trust
Agreement (1)
10.2 1993 Stock Option Plan (3)
10.3 2000 Director Stock Option Plan (5)
10.4 2003 Stock Option Plan (10)
10.5 Deferred Compensation Agreement with George R. Quist (2)
10.6 Employment Agreement with Scott M. Quist. (4)
10.7 Promissory Note with George R. Quist (6)
10.8 Deferred Compensation Plan (7)
10.9 Coinsurance Agreement between Security National Life and
Acadian (8)
10.10 Assumption Agreement among Acadian, Acadian Financial Group,
Inc., Security National Life and the Company (8)
10.11 Asset Purchase Agreement between Acadian, Acadian Financial
Group, Inc., Security National Life and the Company (8)
10.12 Promissory Note with Key Bank of Utah (9)
10.13 Loan and Security Agreement with Key Bank of Utah (9)
10.14 Stock Purchase and Sale Agreement with Ault Glazer & Co.
Investment Management LLC
31.1 Certification pursuant to 18 U.S.C. Section 1350 as enacted by
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to 18 U.S.C. Section 1350 as enacted by
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(1) Incorporated by reference from Registration Statement on Form
S-1, as filed on June 29, 1987.
(2) Incorporated by reference from Annual Report on Form 10-K, as
filed on March 31, 1989.
(3) Incorporated by reference from Annual Report on Form 10-K, as
filed on March 31, 1994.
(4) Incorporated by reference from Annual Report on Form 10-K, as
filed on March 31, 1998.
(5) Incorporated by reference from Schedule 14A Definitive
Proxy Statement, filed August 29, 2000, relating to the
Company's Annual Meeting of Shareholders.
(6) Incorporated by reference from Annual Report on Form 10-K,
as filed on April 16, 2001.
(7) Incorporated by reference from Annual Report on Form 10-K, as
filed on April 3, 2002.
(8) Incorporated by reference from Report on Form 8-K-A as filed
on January 8, 2003.
(9) Incorporated by reference from Annual Report on Form 10-K, as
filed on April 15, 2003.
(10) Incorporated by reference from Schedule 14A Definitive
Proxy Statement, Filed on June 5, 2003, relating to the
Company's Annual Meeting of Shareholders.
Subsidiaries of the Registrant
(b) Reports on Form 8-K:
No Current Report on Form 8-K was filed by the Company during the
quarter ended September 30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT
SECURITY NATIONAL FINANCIAL CORPORATION
Registrant
DATED: November 14, 2003 By: George R. Quist,
----------------
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
DATED: November 14, 2003 By: Stephen M. Sill
---------------
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ENACTED BY SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, George R. Quist, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Security National
Financial Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: November 14, 2003 By: George R. Quist
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ENACTED BY SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Stephen M. Sill, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Security National
Financial Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: November 14, 2003 By: Stephen M. Sill
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Security National Financial
Corporation (the "Company") on Form 10Q for the period ending September 30,
2003, as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, George R. Quist, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and (2) the information
contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.
George R. Quist
Chief Executive Officer
November 14, 2003
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Security National Life Insurance
Company and will be retained by Security National Life Insurance Company and
furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Security National Financial
Corporation (the "Company") on Form 10Q for the period ending September 30,
2003, as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Stephen M. Sill, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and (2) the information
contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.
Stephen M. Sill
Chief Financial Officer
November 14, 2003
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Security National Life Insurance
Company and will be retained by Security National Life Insurance Company and
furnished to the Securities and Exchange Commission or its staff upon request.