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 June 30, 2001 Commission File Number: 0-9341
- ------------------------------- ------------------------------
SECURITY NATIONAL FINANCIAL CORPORATION
Exact Name of Registrant.
UTAH 87-0345941
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(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 XX 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 3,874,566
- ------------------------------------- ---------------------------------
Title of Class Number of Shares Outstanding as of
June 30, 2001
Class C Common Stock, $.20 par value 5,762,729
- ------------------------------------ ----------------------------------
Title of Class Number of Shares Outstanding as of
June 30, 2001
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10Q
QUARTER ENDED JUNE 30, 2001
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements Page No.
- ------ --------
Consolidated Statement of Earnings -
Six and Three months ended June 30, 2001 and
2000 (unaudited)..............................................3
Consolidated Balance Sheet - June 30, 2001 (unaudited)
and December 31, 2000 ......................................4-5
Consolidated Statement of Cash Flows -
Six months ended June 30, 2001 and 2000 (unaudited).........6
Notes to Consolidated Financial Statements..................7-9
Item 2 Management's Discussion and Analysis........................10-13
- ------
Item 3 Quantitative and Qualitative Disclosure of Market Risk......13
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PART II - OTHER INFORMATION
Other Information...........................................13-14
Signature Page..............................................15
2
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
Revenues: 2001 2000 2001 2000
- -------- ---- ---- ---- ----
Insurance premiums and
other considerations $6,583,184 $6,599,889 $3,102,047 $3,206,115
Net investment income 6,559,980 5,894,207 3,410,622 3,090,458
Net mortuary and cemetery sales 6,370,439 5,186,292 3,362,310 2,491,271
Realized gains on investments
and other assets 3,986 31,567 (111) (1,158)
Mortgage fee income 17,189,891 11,108,165 8,569,183 6,466,954
Other 54,998 66,689 23,674 14,203
------------ ------------ ------------ ------------
Total revenues 36,762,478 28,886,809 18,467,725 15,267,843
Benefits and expenses:
------------
Death benefits 2,790,758 2,484,425 1,242,464 1,294,389
Surrenders and other policy benefits 836,554 1,362,206 539,955 768,130
Increase in future policy benefits 2,543,794 2,210,335 1,292,635 862,627
Amortization of deferred policy
acquisition costs and cost of
insurance acquired 1,948,946 2,317,592 871,209 1,196,563
General and administrative expenses:
Commissions 13,259,123 8,939,115 6,721,924 5,168,667
Salaries 4,240,182 3,933,161 2,203,522 1,993,311
Other 5,968,907 4,637,745 2,931,753 2,406,049
Interest expense 1,616,682 894,114 909,129 561,276
Cost of goods and services sold
of the mortuaries and cemeteries 2,253,492 1,660,660 1,171,740 814,451
------------ ------------ ------------ ------------
Total benefits and expenses 35,468,438 28,439,353 17,884,331 15,065,463
Earnings before income taxes 1,294,040 447,456 583,394 202,380
Income tax expense (354,660) (110,316) (164,504) (51,254)
Minority interest (income)
loss of subsidiary 35,186 (30,660) 26,683 (11,852)
------------ ------------ ------------ ------------
Net earnings $974,566 $306,480 $445,573 $139,274
============ ============ ============ ============
Net earnings per common share $0.22 $0.07 $0.10 0.03
============ ============ ============ ============
Weighted average outstanding
common shares 4,450,839 4,307,694 4,450,839 4,238,724
Net earnings per common
share-assuming dilution $0.22 $0.07 $0.10 $0.03
============ ============ ============ ============
Weighted average outstanding
common shares assuming-dilution 4,451,094 4,356,876 4,451,048 4,259,794
See accompanying notes to consolidated financial statements.
3
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, 2001 December 31,
(Unaudited) 2000
-------------- -----------
Assets:
Insurance-related investments:
Fixed maturity securities held
to maturity, at amortized cost $31,728,604 $39,384,168
Fixed maturity securities available
for sale, at market 22,798,901 23,504,989
Equity securities available for sale,
at market 2,795,171 2,774,077
Mortgage loans on real estate 17,757,621 17,435,178
Real estate, net of accumulated
depreciation 8,414,590 8,564,395
Policy, student and other loans 11,257,971 11,277,742
Short-term investments 2,468,829 1,027,927
------------- -------------
Total insurance-related
investments 97,221,687 103,968,476
Restricted assets
of cemeteries and mortuaries 5,136,872 4,841,819
Cash 6,796,966 11,275,030
Receivables:
Trade contracts 6,485,450 5,342,380
Mortgage loans sold to investors 38,536,362 26,886,162
Receivable from agents 2,132,285 2,225,784
Receivable from officers 107,600 111,500
Other 4,005,404 3,503,320
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Total receivables 51,267,101 38,069,146
Allowance for doubtful accounts (1,666,120) (1,656,223)
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Net receivables 49,600,981 36,412,923
Policyholder accounts on deposit
with reinsurer 7,325,828 7,434,750
Land and improvements held for sale 8,385,195 8,485,523
Accrued investment income 1,262,840 1,302,552
Deferred policy acquisition costs 12,353,769 12,043,527
Property, plant and equipment, net 10,761,305 10,824,700
Cost of insurance acquired 8,027,429 8,729,264
Excess of cost over net assets
of acquired subsidiaries 1,117,812 1,172,599
Other 603,863 695,683
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Total assets $208,594,547 $207,186,846
============= =============
See accompanying notes to consolidated financial statements.
4
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
June 30, 2001 December 31,
(Unaudited) 2000
-------------- -----------
Liabilities:
- ------------
Future life, annuity, and other
policy benefits $140,357,410 $140,000,344
Unearned premium reserve 1,749,899 1,754,980
Bank loans payable 8,865,526 9,805,118
Notes and contracts payable 3,952,519 4,240,830
Estimated future costs of
pre-need sales 7,748,824 7,119,544
Accounts payable 1,054,486 1,242,407
Funds held under reinsurance
treaties 1,391,740 1,417,216
Other liabilities and
accrued expenses 4,783,818 4,115,920
Income taxes 6,644,649 6,124,512
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Total liabilities 176,548,871 175,820,871
Minority interest 4,115,061 4,624,614
Stockholders' Equity:
- --------------------
Common stock:
Class A: $2 par value,
authorized 10,000,000
shares, issued 5,107,630
shares in 2001 and 5,107,631
shares in 2000 10,215,260 10,215,262
Class C: $0.20 par value,
authorized 7,500,000 shares,
issued 5,827,805 shares in
2001 and 2000 1,165,561 1,165,561
------------- -------------
Total common stock 11,380,821 11,380,823
Additional paid-in capital 10,054,714 10,054,714
Accumulated other comprehensive
income, net of deferred taxes 1,051,441 836,751
Retained earnings 8,805,872 7,831,306
Treasury stock at cost (1,233,064
Class A shares and 65,078
Class C shares in 2001 and 2000 held
by affiliated companies) (3,362,233) (3,362,233)
------------- -------------
Total stockholders' equity 27,930,615 26,741,361
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Total liabilities and
stockholders' equity $208,594,547 $207,186,846
============= =============
See accompanying notes to consolidated financial statements.
5
SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2001 2000
---- ----
Cash flows from operating activities:
Net cash provided by (used in)
operating activities $(6,249,704) $2,349,410
------------ ------------
Cash flows from investing activities:
Securities held to maturity:
Purchase - fixed maturity securities (402,995) (4,798,597)
Calls and maturities - fixed
maturity securities 8,094,041 2,520,856
Securities available for sale:
Purchases - equity securities -- (92,563)
Sales - equity securities 11,381 71,913
Calls and maturities - fixed
maturity securities 1,064,816 1,214,748
Purchases of short-term investments (10,015,902) (2,917,187)
Sales of short-term investments 8,575,000 3,699,117
Purchases of restricted assets (295,053) (301,907)
Mortgage, policy, and other loans made (2,161,454) (2,244,580)
Payments received for mortgage,
policy, and other loans 1,851,468 3,523,682
Purchases of property, plant,
and equipment (431,896) (446,141)
Purchases of real estate (28,085) (808,421)
Disposal of property, plant
and equipment -- (240)
------------ ------------
Net cash provided by
(used in) investing activities 6,261,321 (579,320)
------------ ------------
Cash flows from financing activities:
Annuity receipts 3,540,035 4,643,939
Annuity withdrawals (6,801,813) (6,011,888)
Repayment of bank loans and
notes and contracts payable (1,227,903) (798,185)
Net change in line of credit
for financing of mortgage loans -- (6,387,023)
Purchase of treasury stock -- (815,121)
------------ ------------
Net cash (used in) provided by
financing activities (4,489,681) (9,368,278)
------------ ------------
Net change in cash (4,478,064) (7,598,188)
Cash at beginning of period 11,275,030 12,422,864
------------ ------------
Cash at end of period $ 6,796,966 $ 4,824,676
============ ============
See accompanying notes to consolidated financial statements.
6
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2001
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 six months ended June 30, 2001, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 2000, included
in the Company's Annual Report on Form 10-K (file number 0-9341).
The preparation of financial statements in conformity with generally accepted
accounting principles 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 six months ended June 30, 2001 and 2000, total comprehensive income
amounted to $1,189,256 and $165,373, respectively. For the three months ended
June 30, 2001, total comprehensive income amounted to $526,238 and $137,002,
respectively.
3. Capital Stock
In accordance with SFAS 128, the basic and diluted earnings per share amounts
were calculated as follows:
Six Months Ended June 30,
2001 2000
---- ----
Numerator:
Net income $974,566 $306,480
========== ==========
Denominator:
Denominator for basic
earnings per share--
weighted-average shares 4,450,839 4,307,694
Effect of dilutive securities:
Employee stock options 255 49,182
Stock appreciation rights -- --
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Dilutive potential
common shares 255 49,182
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Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions 4,451,094 4,356,876
========== ==========
Basic earnings per share $0.22 $0.07
========== ==========
Diluted earnings per share $0.22 $0.07
========== ==========
There are no dilutive effects on net income for purpose of this calculation.
7
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2001
(Unaudited)
3. Capital Stock
Three Months Ended June 30,
2001 2000
---- ----
Numerator:
Net income $445,573 $139,274
========== ==========
Denominator:
Denominator for basic
earnings per share--
weighted-average shares 4,450,839 4,238,724
Effect of dilutive securities:
Employee stock options 209 21,070
Stock appreciation rights -- --
---------- ----------
Dilutive potential
common shares 209 21,070
---------- ----------
Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions 4,451,048 4,259,794
========== ==========
Basic earnings per share $0.10 $0.03
========== ==========
Diluted earnings per share $0.10 $0.03
========== ==========
There are no dilutive effects on net income for purpose of this calculation.
8
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2001
(Unaudited)
4. Business Segment
Life Cemetery/ Reconciling
Insurance Mortuary Mortgage Corporate Items Consolidated
--------- -------- -------- --------- ----- ------------
For the Six Months Ended
June 30, 2001
Revenues from
external customers $10,330,177 $6,870,769 $19,561,393 $139 $ -- $36,762,478
Intersegment revenues 1,910,525 -- -- 1,981,178 (3,891,703) --
Segment profit (120,150) 155,876 562,735 695,579 -- 1,294,040
Identifiable assets 196,522,979 36,555,814 4,892,580 2,443,800 (31,820,626) 208,594,547
For the Six Months Ended
June 30, 2000
Revenues from external
customers $10,782,158 $5,560,823 $12,543,770 $58 $ -- $28,886,809
Intersegment revenues 1,501,044 -- -- 1,932,619 (3,433,663) --
Segment profit 114,344 (207,107) (130,988) 671,207 -- 447,456
Identifiable assets 195,450,371 34,629,760 3,287,654 2,863,827 (30,423,881) 205,807,731
For the Three Months Ended
June 30, 2001
Revenues from
external customers $4,986,436 $3,615,367 $9,865,804 $118 $ -- $18,467,725
Intersegment revenues 941,771 -- -- 1,014,430 (1,956,201) --
Segment profit (126,638) (13,964) 348,194 375,802 -- 583,394
For the Three Months Ended
June 30, 2000
Revenues from external
customers $5,228,653 $2,683,449 $7,355,704 $37 $ -- $15,267,843
Intersegment revenues 804,245 -- -- 970,193 (1,774,438) --
Segment profit 137,549 (271,551) (44,644) 381,026 -- 202,380
9
SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2001
(Unaudited)
Item 2. Management's Discussion and Analysis
Overview
The Company's operations over the last several years generally reflect six
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
interest sensitive products; (ii) emphasis on cemetery and mortuary business;
and (iii) capitalizing on lower interest rates by originating and refinancing
mortgage loans.
Results of Operations
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
Total revenues increased by $7,876,000, or 27.3%, to $36,762,000 for the six
months ended June 30, 2001, from $28,887,000 for the six months ended June 30,
2000. Contributing to this increase in total revenues was a $6,082,000 increase
in mortgage fee income, a $666,000 increase in net investment income, and a
$1,184,000 increase in net mortuary and cemetery sales.
Insurance premiums and other considerations decreased by $17,000, or .3%, to
$6,583,000 for the six months ended June 30, 2001, from $6,600,000 for the
comparable period in 2000. This decrease was primarily due to the adjustment of
the amortization rate of unearned premium reserve to the Company's current
actuarial assumptions.
Net investment income increased by $666,000, or 11.3%, to $6,560,000 for the six
months ended June 30, 2001, from $5,894,000 for the comparable period in 2000.
This increase was primarily attributable to additional interest earned as a
result of a greater number of loan originations during the six months of 2001.
Net mortuary and cemetery sales increased by $1,184,000, or 22.8%, to $6,370,000
for the six months ended June 30, 2001, from $5,186,000 for the comparable
period in 2000. This increase was primarily due to additional pre-need cemetery
sales.
Mortgage fee income increased by $6,082,000, or 54.8%, to $17,190,000 for the
six months ended June 30, 2001, from $11,108,000 for the comparable period in
2000. This increase was primarily attributable to a greater number of loan
originations during the six months of 2001 due to lower interest rates resulting
in more borrowers refinancing their mortgage loans.
Total benefits and expenses were $35,468,000, or 96.5%, of total revenues for
the six months ended June 30, 2001, as compared to $28,439,000, or 98.5%, of
total revenues for the comparable period in 2000.
Death benefits, surrenders and other policy benefits, and increase in future
policy benefits increased by an aggregate of $114,000, or 1.9%, to $6,171,000
for the six months ended June 30, 2001, from $6,057,000 for the comparable
period in 2000. This increase was primarily the result of an increase in death
claims.
Amortization of deferred policy acquisition costs and cost of insurance acquired
decreased by $369,000, or 15.9%, to $1,949,000 for the six months ended June 30,
2001, from $2,318,000 for the comparable period in 2000. This decrease was in
line with actuarial assumptions.
10
General and administrative expenses increased by $5,958,000, or 34.0%, to
$23,468,000 for the six months ended June 30, 2001, from $17,510,000 for the
comparable period in 2000. 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 six months of
2001.
Interest expense increased by $723,000, or 80.8%, to $1,617,000 for the six
months ended June 30, 2001, from $894,000 for the comparable period in 2000.
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
$603,000, or 36.3%, to $2,263,000 for the six months ended June 30, 2001, from
$1,660,000 for the comparable period in 2000. This increase was primarily due to
additional pre-need cemetery sales.
Second Quarter of 2001 Compared to Second Quarter of 2000
Total revenues increased by $3,200,000, or 21.0%, to $18,468,000 for the three
months ended June 30, 2001, from $15,268,000 for the three months ended June 30,
2000. Contributing to this increase in total revenues was a $2,102,000 increase
in mortgage fee income, a $320,000 increase in net investment income and an
$871,000 increase in net mortuary and cemetery sales.
Insurance premiums and other considerations decreased by $104,000, or 3.2%, to
$3,102,000 for the three months ended June 30, 2001, from $3,206,000 for the
comparable period in 2000. This decrease was primarily due to the adjustment of
the amortization rate of unearned premium reserve to the Company's current
actuarial assumptions.
Net investment income increased by $320,000, or 10.4%, to $3,411,000 for the
three months ended June 30, 2001, from $3,091,000 for the comparable period in
2000. This increase was primarily attributable to additional interest earned as
a result of a greater number of loan originations during the second quarter of
2001.
Net mortuary and cemetery sales increased by $871,000, or 35.0%, to $3,362,000
for the three months ended June 30, 2001, from $2,491,000 for the comparable
period in 2000. This increase is primarily due to additional pre-need cemetery
sales.
Mortgage fee income increased by $2,102,000, or 32.5%, to $8,569,000 for the
three months ended June 30, 2001, from $6,467,000 for the comparable period in
2000. This increase was primarily attributable to a greater number of loan
originations during the second quarter of 2001, due to lower interest rates
resulting in more borrowers refinancing their mortgage loans.
Total benefits and expenses were $17,884,000, or 96.8%, of total revenues for
the three months ended June 30 2001, as compared to $15,065,000, or 98.7%, of
total revenues for the comparable period in 2000.
Death benefits, surrenders and other policy benefits, and increase in future
policy benefits increased by an aggregate of $150,000, or 5.1%, to $3,075,000
for the three months ended June 30, 2001, from $2,925,000 for the comparable
period in 2000. This increase was primarily the result of an increase in
interest credited on policyholder account balances.
Amortization of deferred policy acquisition costs and cost of insurance acquired
decreased by $325,000 or 27.2, to $871,000, for the three months ended June 30,
2001, from $1,196,000 for the comparable period in 2000. This decrease was in
line with actuarial assumptions.
General and administrative expenses increased by $2,289,000 or 23.9%, to
$11,857,000 for the three months ended June 30, 2001, from $9,568,000 for the
comparable period in 2000. 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 2001.
11
Interest expense increased by $348,000, or 62.0%, to $909,000 for the three
months ended June 30, 2001, from $561,000 for the comparable period in 2000.
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 mortuaries and cemeteries goods and services sold increased by $357,000,
or 43.9%, to $1,172,000 for the three months ended June 30, 2001, from $814,000
for the comparable period in 2000. This increase was primarily due to additional
pre-need cemetery sales.
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 $54,528,000 as of June 30, 2001, compared to
$62,889,000 as of December 31, 2000. This represents 56% and 60% of the total
insurance-related investments as of June 30, 2001, and December 31, 2000,
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 June 30, 2001, .75%
($408,000) and at December 31, 2000, .68% ($429,000) 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 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 June 30, 2001, and
December 31, 2000, the life insurance subsidiary exceeded the regulatory
criteria.
12
The Company's total capitalization of stockholders' equity and bank debt and
notes payable was $40,749,000 as of June 30, 2001, as compared to $40,787,000 as
of December 31, 2000. Stockholders' equity as a percent of capitalization
increased to 69% as of June 30, 2001, from 64% as of December 31, 2000.
Lapse rates measure the amount of insurance terminated during a particular
period. The Company's lapse rate for life insurance in 2000 was 15% as compared
to a rate of 10% for 1999. The 2001 lapse rate is approximately the same as
2000.
At June 30, 2001, $22,794,000 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, 2001.
Part II Other Information:
Item 1. Legal Proceedings
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, 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
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. A. Articles of Restatement of Articles of Incorporation (8)
B. Bylaws (1)
4. A. Specimen Class A Stock Certificate (1)
B. Specimen Class C Stock Certificate (1)
C. Specimen Preferred Stock Certificate and Certificate of
Designation of Preferred Stock (1)
10.A. Restated and Amended Employee Stock Ownership Plan and Trust
Agreement (1)
B. Deferred Compensation Agreement with George R. Quist (2)
C. 1993 Stock Option Plan (3)
D Promissory Note with Key Bank of Utah (4)
E. Loan and Security Agreement with Key Bank of Utah (4)
F. General Pledge Agreement with Key Bank of Utah (4)
G. Note Secured by Purchase Price Deed of Trust and Assignment
of Rents with the Carter Family Trust and the Leonard M. Smith
Family Trust (5)
H. Deed of Trust and Assignment of Rents with the Carter
Family Trust and the Leonard M. Smith Family Trust (5)
13
I. Promissory Note with Page and Patricia Greer (6)
J. Pledge Agreement with Page and Patricia Greer (6)
K. Promissory Note with Civil Service Employees Insurance Company (7)
L. Deferred Compensation Agreement with William C. Sargent (8)
M. Employment Agreement with Scott M. Quist. (8)
N. Acquisition Agreement with Consolidare Enterprises, Inc., and
certain shareholders of Consolidare. (9)
O. Agreement and Plan of Merger between Consolidare Enterprises, Inc.,
and SSLIC Holding Company. (10)
P. Administrative Services Agreement with Southern Security Life
Insurance Company. (11)
Q. Promissory Note with George R. Quist. (12)
R. Settlement Agreement with Capitol Indemnity Corporation, George A.
Fait, and Joel G. Fait. (13)
(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 Report on Form 8-K, as filed on
February 24, 1995.
(5) Incorporated by reference from Annual Report on Form 10K, as
filed on March 31, 1995.
(6) Incorporated by reference from Report on Form 8-K, as filed on
May 1, 1995.
(7) Incorporated by reference from Report on Form 8-K, as filed on
January 16, 1996.
(8) Incorporated by reference from Annual Report on Form 10-K, as
filed on March 31, 1998.
(9) Incorporated by reference from Report on Form 8-K, as filed on
May 11, 1998.
(10) Incorporated by reference from Report on Form 8-K, as filed on
January 4, 1999.
(11) Incorporated by reference from Report on Form 8-K, as filed on
March 4, 1999.
(12) Incorporated by reference from Annual Report on Form 10-K, as
filed on April 14, 1999.
(13) Incorporated by reference from Quarterly Report on Form 10-Q, as
filed on August 21, 2000.
(b) Reports on Form 8-K:
NONE
14
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: August 20, 2001 By: George R. Quist,
----------------
Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
DATED: August 20, 2001 By: Scott M. Quist
--------------
First Vice President, General Counsel,
Treasurer and Director (Principal
Financial and Accounting Officer)
15