Security National Financial Corporation (SNFC) (NASDAQ:SNFCA)
announced financial results for the quarter ended June 30, 2017.
For the three months ended June 30, 2017, SNFC’s
pre-tax earnings from operations decreased 50% from $7,986,000 in
2016 to $3,994,000 in 2017, on an 8.6% decrease in revenues to
$73,172,000. After tax earnings also decreased 50.4% from
$5,017,000 in 2016 to $2,486,000 in 2017.
Scott Quist, Chairman of the Board, President and Chief
Executive Officer of the Company, commenting on both the recent
financial statement restatements and current earnings, said:
“We acknowledge the hard work of our professional accountants
and advisors in restating the company's financial results. I would
urge the readers of those financial statements to read them in
their entirety to understand the complexities and details regarding
the changes.
“I find it helpful to view such things in the aggregate or from
a broader time perspective. For the three years and one quarter
which were restated, those being year-end 2014, 2015, 2016, and Q1
2017, total pre-tax income as originally filed was $57,156,354.
Total pre-tax income as restated is $57,341,424, an increase of
$185,070 or one-third of 1%. To be clear, income did shift
between periods. Please note that I used pre-tax income in
this comparison. After-tax income actually decreased due to
the recharacterization of a tax valuation allowance as a prior
period adjustment which resulted in a higher effective tax
rate.
“The retained earnings of the company as of Q1 2017 were
restated upwards to $134,681,016, for an increase of $4,771,113, or
3.6% over the previously filed amount. The major driver in this
retained earnings increase is the aforementioned tax valuation
allowance reclassification/restatement as a prior period adjustment
to periods prior to 2014. The tax valuation allowance had
been disclosed in the notes to our financial statements for some
years.
“For the year ended December 31, 2016, total assets and
liabilities increased approximately $98,000,000. Those
increases are attributable to the recharacterization of preexisting
warehouse financing agreements. Those agreements are, and
continue to be, repurchase agreements whose terms have not
changed. They had previously been disclosed in the notes as
'Off Balance Sheet Financings.' Mortgage banking accounting
practices have evolved to suggest that those repurchase agreements
now be characterized on our balance sheet as 'Loans Held for Sale'
on the asset side, and as 'Bank Loans Payable' on the liability
side.
“Moving on to Q2 2017, we would note that there were several
trends we deem significant. On the Mortgage side we continue to see
considerable softness in our markets. Our Q1 mortgage
origination volume was down 5% and our Q2 volume was down 17%, for
an aggregate Q2 year-to-date decrease of 12% over the prior
year. It is difficult to say what our position is vis-à-vis
our competitors, however, I would note that in a major bank’s
earnings release it showed a decline in volume of 22% and that
another publicly reported mortgage company has shown volume
decreases of as much as 48%. It would appear that even though
our volumes are down, we may have picked up market share.
Nevertheless, our goal has been, and continues to be, to increase
in both volume and profitability.
“With regards to our Memorial operations we believe there to be
a similar circumstance. Our interments are down 11% Q2 year-to-date
and our mortuary case counts are down 8% Q2 year-to-date over the
prior year. Anecdotally, through industry conversation we
believe that the death rate for our markets was actually down more
than what our volume numbers would suggest. Reinforcing that
notion is the fact that our preneed related interments and mortuary
cases actually declined more than our at-need related cases, which
would suggest improvement in our at-need efforts. Thus, we
believe that we may have also gained a little market share on our
death care side for the markets we serve.
“Our insurance side had a 9% improvement in revenue and an 11.9%
improvement in profitability. New first-year sales continue
to increase year-over-year at a mid-teens rate, with which we are
quite pleased. We continue to note that the investment
climate remains difficult and that achieving the yields necessary
to increase profitability remains challenging.
“We are working diligently to improve operations and to conform
our sales to the environments within which we must work.”
SNFC has three business segments. The following
table shows the revenues and earnings before taxes for the three
months ended June 30, 2017, as compared to 2016 for each of the
segments:
|
Revenues |
|
Earnings before Taxes |
|
2017 |
|
2016 |
|
% |
|
2017 |
|
2016 |
|
% |
Life
Insurance |
$ |
25,724,000 |
|
$ |
23,569,000 |
|
9.1% |
|
|
$ |
2,818,000 |
|
$ |
2,542,000 |
|
10.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cemeteries/Mortuaries |
|
3,314,000 |
|
|
3,814,000 |
|
(13.1%) |
|
|
|
336,000 |
|
|
760,000 |
|
(55.8%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgages |
|
44,134,000 |
|
|
52,704,000 |
|
(16.3%) |
|
|
|
840,000 |
|
|
4,684,000 |
|
(82.1%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
73,172,000 |
|
$ |
80,087,000 |
|
(8.6%) |
|
|
$ |
3,994,000 |
|
$ |
7,986,000 |
|
(50.0%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2017:
|
Revenues |
|
Earnings before Taxes |
|
2017 |
|
2016 |
|
% |
|
2017 |
|
2016 |
|
% |
Life
Insurance |
$ |
51,882,000 |
|
$ |
45,645,000 |
|
13.7% |
|
|
$ |
4,302,000 |
|
$ |
3,646,000 |
|
18.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cemeteries/Mortuaries |
|
6,919,000 |
|
|
7,144,000 |
|
(3.1%) |
|
|
|
1,095,000 |
|
|
1,229,000 |
|
(10.9%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgages |
|
85,200,000 |
|
|
96,755,000 |
|
(11.9%) |
|
|
|
1,495,000 |
|
|
7,182,000 |
|
(79.2%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
144,001,000 |
|
$ |
149,544,000 |
|
(3.7%) |
|
|
$ |
6,892,000 |
|
$ |
12,057,000 |
|
(42.8%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The net gain per common share was $.16 for the
three months ended June 30, 2017, compared to a net gain of $.34
per share for the same period last year, as adjusted for the effect
of annual stock dividends. Book value per common share was
$9.05 as of June 30, 2017, compared to $8.83 as of December 31,
2016. The Company has two classes of common stock
outstanding, Class A and Class C. As of June 30, 2017, there
were 15,199,234 shares outstanding.
If there are any questions, please contact Mr. Scott M. Quist or Mr. Garrett S. Sill at:
Security National Financial Corporation
P.O. Box 57250
Salt Lake City, Utah 84157
Phone (801) 264-1060
Fax (801) 265-9882
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