UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the ~~quarter~~quarterly period ended ~~September 30, 2018,~~March 31, 2019, or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~Transition Period~~transition period from _____ to ________

Commission File Number: 000-09341

SECURITY NATIONAL FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

UTAH	87-0345941
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5300 South 360 West, Suite 250, Salt Lake City, Utah	84123
(Address of principal executive offices)	(Zip Code)

(801) 264-1060 (~~Registrant's~~Registrant’s telephone number, including area code)

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 by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ~~"large~~“large accelerated filer,~~" "accelerated~~” “accelerated filer,~~" "smaller~~” “smaller reporting ~~company"~~company,” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer [ ]	Accelerated filer [ ]
	Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]
		Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No[X]

Indicate the number of shares outstanding of each of the ~~issuer's~~issuer’s classes of common stock, as of the latest practicable date.

As of ~~November 13, 2018,~~May 14, 2019, the registrant had ~~14,575,881~~15,320,346 shares of Class A Common Stock, $2.00 par value, outstanding and ~~2,089,184~~2,190,361 shares of Class C Common Stock, $2.00 par value, outstanding.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED ~~SEPTEMBER 30, 2018~~MARCH 31, 2019

Table of Contents

		Page No.
	Part I - Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 (unaudited)	3-4

	Condensed Consolidated Statements of Earnings for the ~~Three~~three months Ended March 31, 2019 and ~~Nine Months Ended September 30,~~ 2018 ~~and 2017~~ (unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income for the ~~Three~~three months Ended March 31, 2019 and ~~Nine Months Ended September 30,~~ 2018 ~~and 2017~~ (unaudited)	6

	Condensed Consolidated Statements of Stockholders' Equity as of ~~September 30,~~March 31, 2019 and March 31, 2018 ~~and September 30, 2017~~ (unaudited)	~~7-8~~7

	Condensed Consolidated Statements of Cash Flows for the ~~Nine Months~~three months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ (unaudited)	~~9-10~~8-9

	Notes to Condensed Consolidated Financial Statements (unaudited)	1110

Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	4850

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54

Item 4.	Controls and Procedures	5455

	Part II - Other Information

Item 1.	Legal Proceedings	5455

Item 1A.	Risk Factors	5455

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5455

Item 3.	Defaults Upon Senior Securities	5556

Item 4.	Mine Safety Disclosures	5556

Item 5.	Other Information	5556

Item 6.	Exhibits	5657

	Signature Page	5960

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Part I - Financial Information

Item 1. Financial Statements.

Assets	September 30 2018 (Unaudited)		December 31 2017		March 31 2019 (Unaudited)		December 31 2018
Investments:
Fixed maturity securities, held to maturity, at amortized cost	$	230,386,875	$	228,397,623	$	231,378,413	$	232,078,723
Equity securities at estimated fair value		5,988,918		6,037,855		6,927,352		5,558,611
Mortgage loans held for investment (net of allowances for loan losses of $1,470,158 and $1,768,796 for 2018 and 2017)		181,381,522		204,210,885
Real estate held for investment (net of accumulated depreciation of $16,403,949 and $18,788,869 for 2018 and 2017)		119,076,609		141,298,706
Other investments and policy loans (net of allowances for doubtful accounts of $1,046,840 and $846,641 for 2018 and 2017)		44,038,625		45,895,472
Mortgage loans held for investment (net of allowances for loan losses of $1,378,215 and $1,347,972 for 2019 and 2018)						196,344,356		186,465,069
Real estate held for investment (net of accumulated depreciation of $17,213,134 and $16,739,578 for 2019 and 2018)						121,282,747		121,558,222
Other investments and policy loans (net of allowances for doubtful accounts of $1,263,475 and $1,092,528 for 2019 and 2018)						50,649,956		46,617,655
Accrued investment income		3,751,942		3,644,077		3,712,606		3,566,146
Total investments		584,624,491		629,484,618		610,295,430		595,844,426
Cash and cash equivalents		137,106,471		45,315,661		130,133,196		142,199,942
Loans held for sale at estimated fair value		165,507,394		133,414,188		123,374,303		136,210,853
Receivables (net of allowances for doubtful accounts of $1,614,057 and $1,544,518 for 2018 and 2017)		8,898,086		10,443,869
Restricted assets (including $810,056 and $809,958 for 2018 and 2017 at estimated fair value)		12,226,773		11,830,621
Cemetery perpetual care trust investments (including $677,699 and $682,315 for 2018 and 2017 at estimated fair value)		4,058,014		4,623,563
Receivables (net of allowances for doubtful accounts of $1,538,608 and $1,519,842 for 2019 and 2018)						8,990,449		8,935,343
Restricted assets (including $799,835 and $744,673 for 2019 and 2018 at estimated fair value)						12,087,375		10,981,562
Cemetery perpetual care trust investments (including $543,284 and $483,353 for 2019 and 2018 at estimated fair value)						4,080,363		4,335,869
Receivable from reinsurers		10,717,118		13,394,603		10,852,082		10,820,102
Cemetery land and improvements		9,885,331		9,942,933		9,873,851		9,878,427
Deferred policy and pre-need contract acquisition costs		87,899,386		80,625,304		90,734,682		89,362,096
Mortgage servicing rights, net		20,875,905		21,376,937		19,049,013		20,016,822
Property and equipment, net		7,206,802		8,069,380		9,347,138		7,010,778
Value of business acquired		5,963,308		6,588,759		5,626,782		5,765,190
Goodwill		2,765,570		2,765,570		3,516,315		2,765,570
Other		6,514,889		4,297,048		17,810,980		6,684,143

Total Assets	$	1,064,249,538	$	982,173,054	$	1,055,771,959	$	1,050,811,123

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

	September 30 2018 (Unaudited)			December 31 2017			March 31 2019 (Unaudited)			December 31 2018
Liabilities and Stockholders' Equity
Liabilities
Future policy benefits and unpaid claims	$	616,421,261		$	604,746,951		$	623,507,974		$	620,399,714
Unearned premium reserve		3,989,237			4,222,410			3,859,495			3,920,473
Bank and other loans payable		196,422,645			157,450,925			175,090,614			187,521,188
Deferred pre-need cemetery and mortuary contract revenues		12,442,497			12,873,068			12,650,552			12,508,625
Cemetery perpetual care obligation		3,793,575			3,710,740			3,851,164			3,821,979
Accounts payable		3,243,526			3,613,100			3,407,759			2,883,349
Other liabilities and accrued expenses		33,352,301			29,655,087			42,713,828			31,821,624
Income taxes		22,552,988			17,332,783			16,641,088			16,122,998
Total liabilities		892,218,030			833,605,064			881,722,474			878,999,950

Stockholders' Equity
Preferred Stock - non-voting - $1.00 par value; 5,000,000 shares authorized; none issued or outstanding		-			-			-			-
Class A: common stock - $2.00 par value; 20,000,000 shares authorized; issued 14,573,658 shares in 2018 and 14,535,577 shares in 2017		29,147,316			29,071,154
Class A: common stock - $2.00 par value; 20,000,000 shares authorized; issued 15,312,687 shares in 2019 and 15,304,798 shares in 2018								30,625,374			30,609,596
Class B: non-voting common stock - $1.00 par value; 5,000,000 shares authorized; none issued or outstanding		-			-			-			-
Class C: convertible common stock - $2.00 par value; 3,000,000 shares authorized; issued 2,089,184 shares in 2018 and 2,089,374 shares in 2017		4,178,368			4,178,748
Class C: convertible common stock - $2.00 par value; 3,000,000 shares authorized; issued 2,190,361 shares in 2019 and 2,193,643 shares in 2018								4,380,722			4,387,286
Additional paid-in capital		38,711,180			38,125,042			42,190,568			41,821,778
Accumulated other comprehensive income, net of taxes		(687	)		603,170			(2,003	)		(2,823	)
Retained earnings		100,293,129			77,520,951			97,131,281			95,201,732
Treasury stock at cost - 328,650 Class A shares in 2018 and 537,203 Class A shares in 2017		(297,798	)		(931,075	)
Treasury stock at cost - 261,384 Class A shares in 2019 and 302,541 Class A shares in 2018								(276,457	)		(206,396	)

Total stockholders' equity		172,031,508			148,567,990			174,049,485			171,811,173

Total Liabilities and Stockholders' Equity	$	1,064,249,538		$	982,173,054		$	1,055,771,959		$	1,050,811,123

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2018			2017			2018			2017			2019			2018
Revenues:
Insurance premiums and other considerations	$	18,639,401		$	17,489,560		$	56,640,590		$	52,345,184		$	19,027,002		$	18,810,358
Net investment income		9,641,496			8,220,430			29,457,892			25,559,113			10,041,668			10,074,431
Net mortuary and cemetery sales		3,646,290			2,717,311			10,430,128			9,356,659			3,678,628			3,232,729
Gains on investments and other assets		1,022,427			(319,666	)		25,371,595			713,066			1,806,661			22,020,939
Other than temporary impairments on investments		-			(163,375	)		-			(481,741	)
Mortgage fee income		31,664,704			41,597,573			88,833,944			122,086,734			24,478,871			25,460,160
Other		2,608,775			2,288,982			7,430,179			6,393,691			2,461,005			2,477,492
Total revenues		67,223,093			71,830,815			218,164,328			215,972,706			61,493,835			82,076,109

Benefits and expenses:
Death benefits		8,616,285			8,772,153			27,579,540			26,113,770			10,077,903			9,608,098
Surrenders and other policy benefits		692,445			547,648			2,198,479			2,085,296			865,931			810,128
Increase in future policy benefits		6,686,536			6,735,141			18,420,499			17,669,279			5,751,130			5,584,936
Amortization of deferred policy and pre-need acquisition costs and value of business acquired		2,746,288			2,238,955			7,967,003			6,271,763			3,128,274			3,109,933
Selling, general and administrative expenses:
Commissions		13,619,192			18,999,583			39,361,315			53,877,389			9,675,092			11,282,401
Personnel		17,075,236			17,059,279			50,547,638			53,754,920			15,031,336			16,566,688
Advertising		1,423,933			1,611,599			3,647,610			4,407,877			1,033,175			1,029,591
Rent and rent related		1,913,813			2,257,259			5,806,296			6,693,292			1,904,288			1,963,350
Depreciation on property and equipment		457,430			517,041			1,426,087			1,723,879			449,680			477,031
Costs related to funding mortgage loans		1,732,617			2,809,471			5,147,557			7,315,227			1,354,925			1,369,281
Other		7,616,264			7,035,570			21,562,432			22,227,370			7,645,127			6,810,324
Interest expense		1,855,548			1,655,870			5,297,066			4,295,263			1,491,887			1,761,677
Cost of goods and services sold-mortuaries and cemeteries		575,708			453,229			1,641,596			1,507,295			652,928			515,490
Total benefits and expenses		65,011,295			70,692,798			190,603,118			207,942,620			59,061,676			60,888,928

Earnings before income taxes		2,211,798			1,138,017			27,561,210			8,030,086			2,432,159			21,187,181
Income tax expense		(198,052	)		(41,179	)		(5,383,324	)		(2,587,384	)		(501,841	)		(4,261,258	)

Net earnings	$	2,013,746		$	1,096,838		$	22,177,886		$	5,442,702		$	1,930,318		$	16,925,923

Net earnings per Class A Equivalent common share (1)	$	0.12		$	0.07		$	1.36		$	0.34		$	0.11		$	1.00

Net earnings per Class A Equivalent common share-assuming dilution (1)	$	0.12		$	0.07		$	1.35		$	0.33		$	0.11		$	0.99

Weighted-average Class A equivalent common share outstanding (1)		16,330,839			16,026,199			16,250,714			15,928,911			17,239,564			16,993,229

Weighted-average Class A equivalent common shares outstanding-assuming dilution (1)		16,554,334			16,326,292			16,462,877			16,259,931			17,450,120			17,178,412

(1) Net earnings per share amounts have been adjusted retroactively for the effect of annual stock dividends.

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2018			2017			2018			2017			2019			2018
Net earnings	$	2,013,746		$	1,096,838		$	22,177,886		$	5,442,702		$	1,930,318		$	16,925,923
Other comprehensive income:
Unrealized gains on equity securities		-			144,381			-			106,543
Unrealized gains on derivative instruments		-			554			-			3,170
Foreign currency translation adjustments		1,013			-			(916	)		-			1,092			-
Other comprehensive income, before income tax		1,013			144,935			(916	)		109,713			1,092			-
Income tax expense		(252	)		(50,517	)		229			(37,904	)		(272	)		-
Other comprehensive income, net of income tax		761			94,418			(687	)		71,809			820			-
Comprehensive income	$	2,014,507		$	1,191,256		$	22,177,199		$	5,514,511		$	1,931,138		$	16,925,923

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS'~~STOCKHOLDERS’ EQUITY

(Unaudited)

Nine Months Ended September 30, 2018

Class A
Common
Stock

Class C
Common
Stock

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Income

Retained
Earnings

Treasury
Stock
Total

January 1, 2018 $ 29,071,154 $ 4,178,748 $ 38,125,042 $ 603,170 $ 77,520,951 $ (931,075 ) $ 148,567,990

Cumulative effect adjustment upon adoption of new accounting standard (ASU 2016-01) - - - (603,170 ) 603,170 - -
Net earnings - - - - 16,925,923 - 16,925,923
Stock-based compensation expense - - 58,087 - - - 58,087
Exercise of stock options 63,968 - (22,115 ) - - - 41,853
Sale of treasury stock - - 88,964 - - 222,410 311,374
Stock dividends 3,520 (4 ) 5,362 - (8,878 ) - -
March 31, 2018 29,138,642 4,178,744 38,255,340 - 95,041,166 (708,665 ) 165,905,227

Net earnings - - - - 3,238,217 - 3,238,217
Other comprehensive loss - - - (1,448 ) - (1,448 )
Stock-based compensation expense - - 58,053 - - - 58,053
Sale of treasury stock - - 163,335 - - 222,420 385,755
Conversion Class C to Class A 376 (376 ) - - - - -
June 30, 2018 29,139,018 4,178,368 38,476,728 (1,448 ) 98,279,383 (486,245 ) 169,585,804

Net earnings - - - - 2,013,746 - 2,013,746
Other comprehensive income - - - 761 - 761
Stock-based compensation expense - - 58,691 - - - 58,691
Exercise of stock options 8,298 - 7,261 - - - 15,559
Sale of treasury stock - - 168,500 - - 242,954 411,454
Purchase of treasury stock - - - - - (54,507 ) (54,507 )
September 30, 2018 $ 29,147,316 $ 4,178,368 $ 38,711,180 $ (687 ) $ 100,293,129 $ (297,798 ) $ 172,031,508

~~SECURITY NATIONAL FINANCIAL CORPORATION~~

~~AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)~~

~~(Unaudited)~~

	Nine Months Ended September 30, 2017																				Three Months Ended March 31, 2019
	Class A Common Stock		Class C Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Treasury Stock			Total			Class A Common Stock		Class C Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Treasury Stock			Total

January 1, 2017	$	27,638,012	$	3,804,458		$	34,813,246		$	264,822		$	67,409,204		$	(1,370,611	)	$	132,559,131
January 1, 2019																					$	30,609,596	$	4,387,286		$	41,821,778		$	(2,823	)	$	95,201,732		$	(206,396	)	$	171,811,173

Net earnings		-		-			-			-			1,860,000			-			1,860,000			-		-			-			-			1,930,318			-			1,930,318
Other comprehensive income		-		-			-			21,292			-			-			21,292
Other comprehensive gain																						-		-			-			820			-			-			820
Stock-based compensation expense		-		-			101,996			-			-			-			101,996			-		-			64,704			-			-			-			64,704
Exercise of stock options																						8,936		-			8,444			-			-			-			17,380
Sale of treasury stock		-		-			178,002			-			-			146,065			324,067			-		-			295,153			-			-			42,343			337,496
Purchase of treasury stock		-		-			-			-			-			(185,470	)		(185,470	)		-		-			-			-			-			(112,404	)		(112,404	)
Stock dividends		930		4			2,350			-			(3,284	)		-			-			282		(4	)		489			-			(769	)		-			(2	)
Conversion Class C to Class A		1,214		(1,214	)		-			-			-			-			-			6,560		(6,560	)		-			-			-			-			-
March 31, 2017		27,640,156		3,803,248			35,095,594			286,114			69,265,920			(1,410,016	)		134,681,016
March 31, 2019																					$	30,625,374	$	4,380,722		$	42,190,568		$	(2,003	)	$	97,131,281		$	(276,457	)	$	174,049,485

																					Three Months Ended March 31, 2018
																					Class A Common Stock		Class C Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Treasury Stock			Total

January 1, 2018																					$	29,071,154	$	4,178,748		$	38,125,042		$	603,170		$	77,520,951		$	(931,075	)	$	148,567,990

Net earnings		-		-			-			-			2,485,864			-			2,485,864			-		-			-			-			16,925,923			-			16,925,923
Other comprehensive loss		-		-			-			(43,901	)		-			-			(43,901	)
Stock-based compensation expense		-		-			101,316			-			-			-			101,316
Exercise of stock options		2		206,804			(206,806	)		-			-			-			-
Sale of treasury stock		-		-			195,383			-			-			205,092			400,475
June 30, 2017		27,640,158		4,010,052			35,185,487			242,213			71,751,784			(1,204,924	)		137,624,770
Net earnings		-		-			-			-			1,096,838			-			1,096,838
Other comprehensive income		-		-			-			94,418			-			-			94,418
Cumulative effect adjustment upon adoption of new accounting standard (ASU 2016-01)																						-		-			-			(603,170	)		603,170			-			-
Stock-based compensation expense		-		-			102,429			-			-			-			102,429			-		-			58,087			-			-			-			58,087
Sale of treasury stock		-		-			202,111			-			-			223,315			425,426			-		-			88,964			-			-			222,410			311,374
September 30, 2017	$	27,640,158	$	4,010,052		$	35,490,027		$	336,631		$	72,848,622		$	(981,609	)	$	139,343,881
Exercise of stock options																						63,968		-			(22,115	)		-			-			-			41,853
Stock dividends																						3,520		(4	)		5,362			-			(8,878	)		-			-
March 31, 2018																						29,138,642		4,178,744			38,255,340			-			95,041,166			(708,665	)		165,905,227

See accompanying notes to condensed consolidated financial statements (unaudited).

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30						Three Months Ended March 31
	2018			2017			2019			2018
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	(10,250,549	)	$	6,030,453
Net cash provided by operating activities							$	19,519,486		$	8,712,560

Cash flows from investing activities:
Purchases of fixed maturity securities		(29,074,605	)		(59,325,291	)		(928,996	)		(7,155,114	)
Calls and maturities of fixed maturity securities		26,356,188			11,933,573			1,541,770			3,604,516
Purchases of equity securities		(2,356,207	)		(5,126,062	)		(1,061,710	)		(1,084,398	)
Sales of equity securities		2,478,051			9,153,786			355,562			922,402
Purchases of short-term investments		-			(27,483,124	)
Sales of short-term investments		-			37,212,174
Net changes in restricted assets		121,418			(234,807	)		(482,975	)		(48,832	)
Net changes in perpetual care trusts		1,664,215			(195,340	)		484,581			2,376,461
Mortgage loans, other investments and policy loans made		(376,549,887	)		(340,424,956	)		(137,912,509	)		(132,321,562	)
Payments received for mortgage loans, other investments and policy loans		403,724,354			344,278,996			123,293,624			131,816,474
Purchase of property and equipment		(1,020,257	)		(508,846	)		(76,403	)		(169,564	)
Sale of property and equipment		2,014,704			9,977			799			48,314
Purchase of real estate		(22,399,516	)		(12,474,490	)		(1,309,373	)		(768,942	)
Sale of real estate		65,457,047			8,612,307			2,349,864			58,476,379
Cash paid for purchase of subsidiaries, net of cash acquired		(3,405,783	)		-			(3,261,788	)		-
Net cash provided by (used in) investing activities		67,009,722			(34,572,103	)		(17,007,554	)		55,696,134

Cash flows from financing activities:
Investment contract receipts		8,833,639			9,457,285			2,760,871			2,867,412
Investment contract withdrawals		(11,667,269	)		(11,522,652	)		(3,959,861	)		(4,410,074	)
Proceeds from stock options exercised		57,412			-			17,380			41,853
Purchase of treasury stock		(54,507	)		(185,470	)		(112,404	)		-
Repayment of bank loans		(27,873,253	)		(2,142,382	)
Repayment of bank and other loans								(46,299,191	)		(27,369,431	)
Proceeds from borrowing on bank loans		11,455,289			16,729,056			47,273,807			20,421,042
Net change in warehouse line borrowings		14,131,782			16,022,738			(13,643,525	)		(309,286	)
Net change in line of credit borrowings		41,250,000			-			-			1,250,000
Net cash provided by financing activities		36,133,093			28,358,575
Net cash used in financing activities								(13,962,923	)		(7,508,484	)

Net change in cash, cash equivalents, restricted cash and restricted cash equivalents		92,892,266			(183,075	)		(11,450,991	)		56,900,210

Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period		54,501,923			46,942,293			150,936,673			54,501,923

Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	147,394,189		$	46,759,218		$	139,485,682		$	111,402,133

Supplemental Disclosure of Cash Flow Information:
Cash paid (received) during the year for:
Interest (net of amount capitalized)	$	5,206,262		$	4,188,579
Cash paid during the year for:
Interest							$	1,508,895		$	1,674,074
Income taxes (net of refunds)		162,327			(788,601	)		(15,975	)		164

Non Cash Operating, Investing and Financing Activities:
Right-of-use assets obtained in exchange for operating lease liabilities							$	11,931,889		$	-
Right-of-use assets obtained in exchange for finance lease liabilities								238,335			-
Accrued real estate construction costs and retainage								786,859			26,769
Mortgage loans held for investment foreclosed into real estate held for investment								550,000			225,166
Benefit plans funded with treasury stock	$	1,108,583		$	1,149,968			337,496			311,374
Mortgage loans foreclosed into real estate		670,601			1,576,196
Mortgage loans held for investment foreclosed into receivables								155,347			-
Transfer of loans held for sale to mortgage loans held for investment		139,464			5,032,147			-			139,464
Accrued real estate construction costs and retainage		17,433			1,932,790

See Note 15 regarding non cash transactions included in the acquisition of Probst Family Funeral and Cremations and Heber Valley Funeral Home.

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as shown in the condensed consolidated statements of cash flows is presented in the table below:

	Nine Months Ended September 30				Three Months Ended March 31
	2018		2017		2019		2018
Cash and cash equivalents	$	137,106,471	$	38,593,462	$	130,133,196	$	101,728,202
Restricted assets		8,717,416		7,263,952		7,751,804		7,468,609
Cemetery perpetual care trust investments		1,570,302		901,804		1,600,682		2,205,322

Total cash, cash equivalents, restricted cash and restricted cash equivalents	$	147,394,189	$	46,759,218	$	139,485,682	$	111,402,133

See accompanying notes to condensed consolidated financial statements (unaudited).

109

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

1)Basis of Presentation

The accompanying unaudited condensed 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 Articles 8 and 10 of Regulation S‑X. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto for the year ended December 31, ~~2017,~~2018, included in the ~~Company's~~Company’s Annual Report on Form 10-K ~~(file number~~(File Number 000-09341). 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 ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018. The presentation of certain amounts in the prior year have been reclassified to conform to the 2018 presentation.~~2019.

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.

Material estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining the value of mortgage loans foreclosed to real estate held for investment; those used in determining the liability for future policy ~~benefits and unearned revenue; those used in determining the estimated future costs for pre-need sales;~~benefits; those used in determining the value of mortgage servicing rights; those used in determining allowances for loan losses for mortgage loans held for investment; those used in determining loan loss reserve; and those used in determining deferred tax assets and liabilities. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.

2)Recent Accounting Pronouncements

Accounting Standards Adopted in ~~2018~~2019

ASU No. 2016-02: “Leases (Topic 842)” - Issued in February 2016, ASU 2016-02 supersedes the requirements in Accounting Standards ~~Update ("ASU"~~Codification (“ASC”) ~~No. 2017-01: "Business Combinations (Topic 805): Clarifying~~Topic 840, “Leases”, and was issued to increase transparency and comparability among organizations. The new standard sets forth the ~~Definition~~principles for the recognition, measurement, presentation, and disclosure of ~~a Business"~~ ~~– Issued in January 2017,~~leases for both lessees and lessors. ASU ~~2017-01 intends~~2016-02 requires lessees to ~~clarify~~classify leases as either finance or operating leases and to record on the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business: inputs, processes, and outputs. While an integrated set ofbalance sheet right-of-use assets and ~~activities, collectively referred~~lease liabilities, equal to as a "set," that is a business usually has outputs, outputs are not required to be present. ASU 2017-01 provides a screen to determine when a set is not a business. The screen requires that when substantially all of the ~~fair~~present value of the ~~gross assets acquired (or disposed of)~~remaining lease payments. The lease classification will determine whether the lease expense is ~~concentrated in a single identifiable asset~~recognized based on an effective interest rate method or a ~~group~~straight-line basis over the term of ~~similar identifiable assets,~~ the ~~set is not a business. While~~leases. The FASB further clarified ASU 2016-02 and provided targeted improvements by issuing ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20.

The Company adopted this standard on January 1, 2019 using the ~~Company's acquisitions have historically been classified as either business combinations or asset acquisitions, certain acquisitions that were classified as business combinations by~~modified retrospective transition method with no cumulative-effect adjustment to the opening balance of retained earnings. Under this transition method, the application date was the beginning of the reporting period, January 1, 2019, in which the Company ~~would~~first applied the standard. Under this transition option, the Company will apply the legacy guidance in ASC 840, “Leases”, including its disclosure requirements, in the comparative periods presented in the year of adoption. The Company has made an accounting policy election not to apply the recognition requirements to short-term leases, which are leases that, at the commencement date, have ~~been considered asset acquisitions under~~a lease term of 12 months or less and do not include an option to purchase the underlying assets that the lessee is reasonably certain to exercise. The new authoritative guidance allows for certain practical expedients to be utilized to assist with the implementation of the new standard. ~~As a result, transaction costs may be capitalized more often since~~The Company has elected the transition package of practical expedients which allows the Company ~~expects some of its future acquisitions~~ to ~~be classified as asset acquisitions under this new standard. In addition, goodwill that was previously allocated~~not reassess whether any expired or existing contracts are or contain leases, to ~~businesses that were sold~~not reassess the lease classification for any expired or ~~held~~existing leases and to not reassess initial direct costs for sale will no longer be allocated and written off upon sale if future sales were deemed to be sales of assets and not businesses. ASU 2017-01 was adopted by the Company on January 1, 2018 and it will be applied prospectively to transactions occurring after the adoption date, as applicable.

~~ASU No. 2016-18: "Statement of Cash Flows (Topic 230): Restricted Cash"~~ – Issued in November 2016, ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents in the consolidated statement of cash flows and disclose the nature of the restrictions on cash and cash equivalents. The Company currently discloses the restrictions on cash and cash equivalents in Note 8 of the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K and will continue these disclosures. Note 8 also discloses the components of the Company's restricted assets and cemetery perpetual care trust investments which include restricted cash and cash equivalents. ASU 2016-18 was adopted by the Company on January 1, 2018. The Company previously presented changes in restricted cash and cash equivalents under investing activities on the consolidated statements of cash flows. Upon adoption of ASU 2016-18, the Company amended the presentation in the consolidated statements of cash flows to include the restricted cash and cash equivalents with cash and cash equivalents and retrospectively reclassified all periods presented. The adoption of this standard does not impact the Company's total cash and cash equivalents but is a change in presentation within the consolidated statements of cash flows.

any existing leases.

1110

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

2)Recent Accounting Pronouncements (Continued)

~~ASU No. 2016-01: "Financial Instruments – Overall (Topic 825-10)"~~ – Issued in January 2016, ASU 2016-01 changes the accounting for non-consolidated equity investments that are not accounted for under the equity method of accounting by requiring changes in fair value to be recognized in income. The Company ~~adopted~~implemented a third-party lease accounting system to assist with the measurement of the lease liabilities and the related right-of-use assets. The Company compiled an inventory of its leases, determined the appropriate discount rates and has determined the impact of this standard which is not material to the Company’s results of operations, but has an effect on the balance sheet presentation for leased assets and obligations. The Company recognized a right-of-use asset and related lease liability for approximately $12,076,000 on January 1, ~~2018 using~~2019. This standard did not impact the ~~modified retrospective approach with~~Company’s accounting for leases where the ~~cumulative effect of~~Company is the ~~adoption made to the balance sheet as of the date of adoption. Thus, the adoption resulted in a reclassification of the related accumulated net unrealized gains of $603,170~~lessor. Additional disclosures required by this standard are included in accumulated other comprehensive income as of December 31, 2017 to retained earnings. Under previous guidance, changes in fair value for investments of this nature were recognized in accumulated other comprehensive income as a component of stockholders' equity. Additionally, ASU 2016-01 simplifies the impairment assessment of equity investments without readily determinable fair values; requires entities to use the exit price when estimating the fair value of financial instruments; and modifies various presentation disclosure requirements for financial instruments. The Company holds equity securities that were previously measured at fair value with changes in fair value recognized through other comprehensive income. Upon adoption of ASU 2016-01 the Company now recognizes the changes in the fair value of these equity securities through earnings as part of gains on investments and other assets on the condensed consolidated statements of earnings, thus increasing the volatility of the Company's earnings. The adoption of this standard does not significantly affect the Company's comprehensive income or stockholders' equity.Note 16.

~~ASU No. 2014-09: "Revenue from Contracts with Customers (Topic 606)"~~ - Issued in May 2014, ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, "Revenue Recognition". ASU 2014-09 clarifies the principles for recognizing revenue in order to improve comparability of revenue recognition practices across entities and industries. ASU 2014-09 provides guidance to assist in the identification of contracts with customers and separate performance obligations within those contracts, the determination and allocation of the transaction price to those identified performance obligations and the recognition of revenue when a performance obligation has been satisfied. ASU 2014-09 also requires disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. Premiums and related fees from insurance contracts and mortgage banking revenues are excluded from the scope of this new guidance.

The Company adopted this standard on January 1, 2018 using a modified retrospective approach. No cumulative effect adjustment was made to beginning retained earnings. The Company's revenues from contracts with customers that are subject to ASU 2014-09 include revenues on mortuary and cemetery contracts, which is less than 5% of the Company's total revenues. The recognition and measurement of these items did not change as a result of the Company's adoption of ASU 2014-09 and thus the adoption of ASU 2014-09 does not significantly impact the Company's condensed consolidated statements of earnings or condensed consolidated statements of cash flows. The Company reclassified $856,479 of amounts due from customers for unfulfilled performance obligations on cancelable pre-need contracts from Receivables, net to Deferred pre-need cemetery and mortuary contract revenues on the Company's condensed consolidated balance sheets.

The standard primarily impacts the manner in which the Company recognizes a) certain nonrefundable up-front fees and b) incremental costs to acquire new pre-need funeral trust contracts and pre-need and at-need cemetery contracts (i.e., selling costs). The nonrefundable fees will continue to be deferred and recognized as revenue when the underlying goods and services are delivered to the customer. The incremental selling costs will continue to be deferred and amortized by specific identification to the delivery of the underlying goods and services. Additionally, the amounts due from customers for undelivered performance obligations on cancelable pre-need contracts represent contract assets, which are required to be netted with deferred pre-need cemetery and mortuary contract revenues, instead of receivables on the Company's consolidated balance sheets.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

2)~~Recent Accounting Pronouncements~~ ~~(Continued)~~

Accounting Standards Issued But Not Yet Adopted

ASU No. 2016-13: ~~"Financial~~“Financial Instruments – Credit Losses (Topic 326)"” – Issued in September 2016, ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis (such as mortgage loans and held to maturity debt securities) and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current general accepted accounting principles ~~("GAAP"~~(“GAAP”) and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current ~~GAAP,~~GAAP; however, Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. The new authoritative guidance will be effective for the Company on January 1, 2020. The Company is in the process of evaluating the potential impact of this ~~standard.~~standard, especially as it relates to held to maturity portfolios.

~~ASU No. 2016-02: "Leases (Topic 842)"~~ - Issued in February 2016, ASU 2016-02 supersedes the requirements in Accounting Standards Codification ("ASC") Topic 840, "Leases", and was issued to increase transparency and comparability among organizations by recognizing right-of-use lease assets and lease liabilities on the balance sheet based on the present value of future lease payments. Disclosures of key information about leasing arrangements will also be required. The new authoritative guidance will be effective for the Company on January 1, 2019. The Company has compiled an inventory of its leases, has determined the appropriate discount rates and is in the process of reviewing preliminary reports to determine the potential impact of this standard which is not expected to be material to the Company's results of operations, but will have an effect on the balance sheet presentation for leased assets and obligations. The Company is also currently implementing a third party lease accounting system to assist with the measurement of the lease liabilities and the related right-of-use assets.

ASU No. 2018-13: ~~"Fair~~“Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value ~~Measurement"~~Measurement” – Issued in August 2018, ASU 2018-13 modifies the disclosure requirements of Topic 820 by removing, modifying or adding certain disclosures. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 does not change the fair value measurements already required or permitted by existing standards. This new authoritative guidance will be effective for the Company on January 1, 2020. The Company is in the process of evaluating the potential impact of this standard, which is not expected to materially impact the ~~Company's~~Company’s financial statements.

ASU No. 2018-12: ~~"Financial~~“Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration ~~Contracts"~~Contracts” – Issued in August 2018, ASU 2018-12 is intended to improve the timeliness of recognizing changes in the liability for future policy benefits on traditional long-duration contracts by requiring that assumptions be updated after contract inception and ~~modify~~by modifying the rate used to discount future cash flows. The ASU will simplify and improve the accounting for certain market-based options or guarantees associated with deposit or account balance contracts, simplify amortization of deferred acquisition costs while improving and expanding required disclosures. This new authoritative guidance will be effective for the Company on January 1, 2021. The Company is in the process of evaluating the potential impact of this standard.

The Company has reviewed other recent accounting pronouncements and has determined that they will not significantly impact the ~~Company's~~Company’s results of operations or financial position.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

3)~~Investments~~

~~The Company's investments as of September 30, 2018 are summarized as follows:~~

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

September 30, 2018

Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies $ 53,683,435 $ 142,299 $ (1,248,029 ) $ 52,577,705
Obligations of states and political subdivisions 6,987,405 40,224 (190,262 ) 6,837,367
Corporate securities including public utilities 155,372,733 7,544,943 (2,299,844 ) 160,617,832
Mortgage-backed securities 13,731,279 135,074 (323,564 ) 13,542,789
Redeemable preferred stock 612,023 36,437 - 648,460
Total fixed maturity securities held to maturity $ 230,386,875 $ 7,898,977 $ (4,061,699 ) $ 234,224,153

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other $ 5,891,712 $ 786,960 $ (689,754 ) $ 5,988,918

Total equity securities at estimated fair value $ 5,891,712 $ 786,960 $ (689,754 ) $ 5,988,918

Mortgage loans held for investment at amortized cost:
Residential $ 79,930,807
Residential construction 71,330,891
Commercial 32,869,447
Less: Unamortized deferred loan fees, net (1,279,465 )
Less: Allowance for loan losses (1,470,158 )
Total mortgage loans held for investment $ 181,381,522

Real estate held for investment net of accumulated depreciation:
Residential $ 26,988,179
Commercial 92,088,430
Total real estate held for investment $ 119,076,609

Other investments and policy loans at amortized cost:
Policy loans $ 6,389,122
Insurance assignments 32,166,750
Federal Home Loan Bank stock 2,308,700
Other investments 4,220,893
Less: Allowance for doubtful accounts (1,046,840 )

Total other investments and policy loans $ 44,038,625

Accrued investment income $ 3,751,942

Total investments $ 584,624,491

1411

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

3) Investments ~~(Continued)~~

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

3) Investments (Continued)

Fixed Maturity Securities

The following tables summarize unrealized losses on fixed maturity securities held to maturity, which are carried at amortized cost, at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. The unrealized losses were primarily related to interest rate fluctuations. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:

	Unrealized Losses for Less than Twelve Months		Fair Value		Unrealized Losses for More than Twelve Months		Fair Value		Total Unrealized Loss		Fair Value		Unrealized Losses for Less than Twelve Months		Fair Value		Unrealized Losses for More than Twelve Months		Fair Value		Total Unrealized Loss		Fair Value
At September 30, 2018
At March 31, 2019
U.S. Treasury securities and obligations of U.S. Government Agencies	$	104,070	$	9,996,147	$	1,143,956	$	41,197,425	$	1,248,029	$	51,193,572	$	767	$	495,115	$	455,961	$	40,408,121	$	456,728	$	40,903,236
Obligations of states and political subdivisions		46,178		2,447,348		144,084		2,644,649		190,262		5,091,997		-		-		55,394		3,032,383		55,394		3,032,383
Corporate securities		1,738,234		59,982,599		561,610		8,915,794		2,299,844		68,898,393		392,239		11,641,590		1,052,788		23,415,999		1,445,027		35,057,589
Mortgage and other asset-backed securities		51,253		6,780,302		272,311		2,352,453		323,564		9,132,755		24,997		389,730		102,776		1,804,667		127,773		2,194,397
Total unrealized losses	$	1,939,735	$	79,206,396	$	2,121,961	$	55,110,321	$	4,061,699	$	134,316,717	$	418,003	$	12,526,435	$	1,666,919	$	68,661,170	$	2,084,922	$	81,187,605

At December 31, 2017
At December 31, 2018
U.S. Treasury securities and obligations of U.S. Government Agencies	$	532,010	$	51,606,699	$	47,413	$	643,380	$	579,423	$	52,250,079	$	10,519	$	695,863	$	717,279	$	39,930,052	$	727,798	$	40,625,915
Obligations of states and political subdivisions		296		214,882		70,717		2,225,021		71,013		2,439,903		6,643		1,791,257		104,628		2,889,517		111,271		4,680,774
Corporate securities		167,786		11,551,865		839,718		13,193,258		1,007,504		24,745,123		2,514,549		61,090,431		1,189,588		11,767,349		3,704,137		72,857,780
Mortgage and other asset-backed securities		56,756		2,516,660		105,375		1,676,494		162,131		4,193,154		79,896		1,705,296		228,968		2,690,065		308,864		4,395,361
Redeemable preferred stock		191		11,421		-		-		191		11,421		5,125		90,000		-		-		5,125		90,000
Total unrealized losses	$	757,039	$	65,901,527	$	1,063,223	$	17,738,153	$	1,820,262	$	83,639,680	$	2,616,732	$	65,372,847	$	2,240,463	$	57,276,983	$	4,857,195	$	122,649,830

There were ~~364~~186 securities with fair value of ~~97.1%~~97.5% of amortized cost at ~~September 30, 2018.~~March 31, 2019. There were ~~141~~361 securities with fair value of ~~97.9%~~96.2% of amortized cost at December 31, ~~2017. During~~2018. No credit losses have been recognized for the three months ended ~~September 30, 2018~~March 31, 2019 and 2017, an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $-0- and $100,000, respectively, and for the nine months ended September 30, 2018 and 2017, an other than temporary decline in fair value resulted in the recognition of credit losses on fixed maturity securities of $-0- and $418,366, respectively.2018.

On a quarterly basis, the Company evaluates its fixed maturity securities held to maturity. This evaluation includes a review of current ratings by the National Association of Insurance Commissions ~~("NAIC"~~(“NAIC”). Securities with a rating of 1 or 2 are considered investment grade and are not reviewed for impairment. Securities with ratings of 3 to 5 are evaluated for impairment. Securities with a rating of 6 are automatically determined to be impaired and are written down. The evaluation involves an analysis of the securities in relation to historical values, interest payment history, projected earnings and revenue growth rates as well as a review of the reason for a downgrade in the NAIC rating. Based on the analysis of a security that is rated 3 to 5, a determination is made whether the security will likely make interest and principal payments in accordance with the terms of the financial instrument. If it is unlikely that the security will meet contractual obligations, the loss is considered to be other than temporary, the security is written down to the new anticipated market value and an impairment loss is recognized. Impairment losses are treated as credit losses as the Company holds fixed maturity securities to maturity unless the underlying conditions have changed in the financial instrument to require an impairment.

The fair values of fixed maturity securities are based on quoted market prices, when available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements, are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit and maturity of the investments.

1614

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

3)Investments (Continued)

The amortized cost and estimated fair value of fixed maturity securities held to maturity, at ~~September 30, 2018,~~March 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Held to Maturity:
Due in 1 year	$	2,899,715	$	2,964,076	$	16,752,164	$	16,817,929
Due in 2-5 years		66,428,822		66,259,870		66,507,390		67,272,309
Due in 5-10 years		69,688,359		69,760,698		66,149,179		67,744,587
Due in more than 10 years		77,026,677		81,048,260		66,228,780		72,247,644
Mortgage-backed securities		13,731,279		13,542,789		15,637,703		15,868,835
Redeemable preferred stock		612,023		648,460		103,197		107,069
Total held to maturity	$	230,386,875	$	234,224,153	$	231,378,413	$	240,058,373

The Company is a member of the Federal Home Loan Bank of Des Moines ~~("FHLB"~~(“FHLB”). The Company currently has deposited a total of $50,000,000, par value, of United States Treasury fixed maturity securities with FHLB. These securities generate interest income for the Company and are available to use as collateral on any cash borrowings from the FHLB. As of ~~September 30, 2018,~~March 31, 2019, the Company owed ~~$40,000,000~~$47,000,000 to the FHLB. This amount owed was paid in ~~October 2018.~~April 2019.

Equity Securities

The following tables summarize unrealized losses on equity securities that were carried at estimated fair value based on quoted trading prices at December 31, 2017. The unrealized losses were primarily the result of decreases in fair value in the retail, industrial and energy sectors. The tables set forth unrealized losses by duration and number of investment positions, together with the fair value of the related equity securities in a loss position:

Unrealized
Losses for
Less than
Twelve
Months

No. of
Investment
Positions

Unrealized
Losses for
More than
Twelve
Months

No. of
Investment
Positions

Total
Unrealized
Losses

At December 31, 2017

Industrial, miscellaneous and all other $ 213,097 98 $ 419,572 81 $ 632,669
Total unrealized losses $ 213,097 98 $ 419,572 81 $ 632,669
Fair Value $ 847,718 $ 1,329,213 $ 2,176,931

The average fair value of the equity securities was 77.5% of the original investment as of December 31, 2017. The intent of the Company is to retain equity securities for a period of time sufficient to allow for the recovery in fair value. However, the Company may sell equity securities during a period in which the fair value has declined below the amount of the original investment. In certain situations, new factors, including changes in the business environment, can change the Company's previous intent to continue holding a security.

The fair values for equity securities are based on quoted market prices.

~~See Note 2 regarding the adoption of ASU 2016-01 on January 1, 2018.~~ The Company ~~now~~ recognizes the changes (unrealized gains and losses) in the fair value of these equity securities through earnings as part of gains on investments and other assets on the condensed consolidated statements of earnings instead of other comprehensive income on the condensed consolidated balance sheets.

Investment Related Earnings

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

3)~~Investments~~ ~~(Continued)~~

The ~~Company's net gains from investments and other assets, including~~Company’s net realized gains and losses from sales, calls, and maturities, unrealized gains and losses on equity securities, and other than temporary impairments are summarized as follows:

	Three Months Ended September 30						Nine Months Ended September 30									Three Months Ended March 31
	2018			2017			2018					2017				2019			2018
Fixed maturity securities held to maturity:
Gross realized gains	$	109,554		$	110,529		$	397,190				$	163,950			$	85,587		$	28,133
Gross realized losses		(31,670	)		(651,754	)		(601,303	)				(686,819	)			(35,393	)		(308,931	)
Other than temporary impairments		-			(100,000	)		-					(418,366	)

Equity securities:
Gross realized gains		-			25,898			-					132,350
Gross realized losses		-			(26	)		-					(58,464	)
Other than temporary impairments		-			(63,375	)		-					(63,375	)
Gains and (losses) during 2018 on securities sold in 2018		11,214			-			(13,933	)				-
Gains on securities sold																	11,576			14,650
Unrealized gains and (losses) on securities held at the end of the period		284,192			-			71,143					-				761,208			(372,042	)

Other assets:
Gross realized gains		814,471			225,022			26,060,598		(1	)		2,006,721				1,104,935			22,951,723		(1	)
Gross realized losses		(165,334	)		(29,335	)		(542,100	)				(844,672	)			(121,252	)		(292,594	)
Total	$	1,022,427		$	(483,041	)	$	25,371,595				$	231,325			$	1,806,661		$	22,020,939

(1) Includes a one-time gain of $22,252,000 from the sale of Dry Creek at East Village apartments.
(1) Includes a one-time gain of $22,252,000 from the sale of Dry Creek at East Village Apartments.															(1) Includes a one-time gain of $22,252,000 from the sale of Dry Creek at East Village Apartments.

The net realized gains and losses on the sale of securities are recorded on the trade date, and the cost of the securities sold is determined using the specific identification method.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

3) Investments (Continued)

The carrying amount of held to maturity securities sold was ~~$4,998,249~~$369,263 and ~~$2,240,249~~$472,883 for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. The net realized loss related to these sales was ~~$243,023~~$35,388 and ~~$385,484~~$306,851 for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively. Although the Company has the positive intent isand ability to buy and hold a fixed maturity security to maturity, the Company will sell a security prior to maturity if conditions and circumstances have changed within the entity that issued the security to increase the risk of default to an unacceptable level.

Major categories of net investment income are as follows:

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2018			2017			2018			2017			2019			2018
Fixed maturity securities held to maturity	$	2,481,202		$	2,692,586		$	7,521,884		$	7,475,156		$	2,503,865		$	2,529,841
Equity securities		64,214			66,320			176,126			209,517			77,921			58,292
Mortgage loans held for investment		4,240,624			2,973,349			14,016,985			8,803,257			4,103,367			4,531,927
Real estate held for investment		2,124,138			2,818,672			6,423,996			8,540,756			1,910,294			2,670,440
Policy loans		85,044			195,098			296,540			621,854			88,137			102,866
Insurance assignments		3,583,964			3,234,520			10,956,651			9,943,561			4,212,120			3,860,937
Other investments		57,050			16,051			186,594			36,041			54,548			53,673
Cash and cash equivalents		375,310			109,939			752,339			311,989			498,918			137,368
Gross investment income		13,011,546			12,106,535			40,331,115			35,942,131			13,449,170			13,945,344
Investment expenses		(3,370,050	)		(3,886,105	)		(10,873,223	)		(10,383,018	)		(3,407,502	)		(3,870,913	)
Net investment income	$	9,641,496		$	8,220,430		$	29,457,892		$	25,559,113		$	10,041,668		$	10,074,431

Net investment income includes income earned by the restricted assets ~~of the~~ cemeteries and mortuaries of ~~$81,486~~$86,288 and ~~$129,235~~$110,802 for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $287,545 and $369,721 for the nine months ended September 30, 2018 and 2017,~~ respectively.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

3)~~Investments~~ ~~(Continued)~~

Net investment income on real estate consists primarily of rental revenue.

Investment expenses consist primarily of depreciation, property taxes, operating expenses of real estate and an estimated portion of administrative expenses relating to investment activities.

Securities on deposit with regulatory authorities as required by law amounted to ~~$9,204,288~~$9,807,938 at ~~September 30, 2018~~March 31, 2019 and ~~$9,264,977~~$9,220,520 at December 31, ~~2017.~~2018. These restricted securities are included in various assets under investments on the accompanying condensed consolidated balance sheets.

There were no investments, aggregated by issuer, in excess of 10% of ~~shareholders'~~shareholders’ equity (before net unrealized gains and losses on equity securities) at ~~September 30, 2018,~~March 31, 2019, other than investments issued or guaranteed by the United States Government.

Real Estate Held for Investment

The Company continues to strategically deploy resources into real estate to match the income and yield durations of its primary obligations. The sources for these real estate assets come through its various business units in the form of acquisition, development and mortgage foreclosures.

Commercial Real Estate Held for Investment

The Company owns and manages commercial real estate assets as a means of generating investment income. These assets are acquired in accordance with the ~~Company's~~Company’s goals and objectives for risk-adjusted returns. Due diligence is conducted on each asset using internal and third-party reports. Geographic locations and asset classes of the investment activity is determined by senior management under the direction of the Board of Directors.

The Company employs full-time employees to attend to the day-to-day operations of those assets within the greater Salt Lake area and close surrounding markets. The Company utilizes third party property managers when the geographic boundary does not warrant full-time staff or through strategic lease-up periods. The Company generally looks to acquire assets in regions that are high growth regions for employment and population and in assets that provide operational efficiencies.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

3) Investments (Continued)

The Company currently owns and operates 1211 commercial properties in 74 states. These properties include industrial warehouses, office buildings, retail centers, ~~undeveloped land,~~a restaurant, and includes the redevelopment and expansion of its corporate campus ~~("Center53"~~(“Center53”) in Salt Lake City, Utah. The Company also holds undeveloped land that may be used for future commercial developments. The Company uses bank debt in strategic cases to leverage established yields or to acquire a higher quality or different class of asset.

The aggregated net ending balance of commercial real estate that serves as collateral for bank borrowings was approximately ~~$84,976,000~~$85,950,000 and ~~$64,704,000~~$84,880,000 as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The associated bank loan carrying values totaled approximately ~~$52,139,000~~$52,395,000 and ~~$40,994,000~~$52,237,000 as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

During the three months ended March 31, 2019 and 2018, the Company did not record any impairment losses on commercial real estate held for investment. Impairment losses, if any, are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

3)~~Investments~~ ~~(Continued)~~

The following is a summary of the ~~Company's~~Company’s commercial real estate held for investment for the periods presented:

Net Ending Balance Total Square Footage
September 30 December 31 September 30 December 31
2018 2017 2018 2017
Arizona $ 4,000 (1 ) $ 4,000 (1 ) - -
Arkansas - 96,169 - 3,200
Kansas 6,086,759 7,200,000 222,679 222,679
Louisiana 474,069 493,197 7,063 7,063
Mississippi 3,655,283 3,725,039 33,821 33,821
New Mexico 7,000 (1 ) 7,000 (1 ) - -
Texas 335,000 (1 ) 335,000 (1 ) - 23,470
Utah 81,526,319 (2 ) 61,108,384 (2 ) 502,129 433,244

$ 92,088,430 $ 72,968,789 765,692 723,477

(1) Undeveloped land

(2) Includes Center53 completed in July 2017. The Company is currently in the process of leasing the building.

	Net Ending Balance								Total Square Footage
	March 31				December 31				March 31		December 31
	2019				2018				2019		2018
Arizona	$	4,000	(1	)	$	4,000	(1	)		-		-
Kansas		7,210,017				6,861,898				222,679		222,679
Louisiana		461,319				467,694				7,063		7,063
Mississippi		3,309,692				3,329,948				33,821		33,821
New Mexico		7,000	(1	)		7,000	(1	)		-		-
Texas		300,000	(2	)		300,000	(2	)		-		-
Utah		82,133,870				81,080,251				502,129		502,129

	$	93,425,898			$	92,050,791				765,692		765,692
___________________________
(1) Undeveloped land
(2) Improved commercial pad

Residential Real Estate Held for Investment

The Company owns a portfolio of residential homes primarily as a result of loan foreclosures. The strategy has been to lease these homes to produce cash flow and allow time for the economic fundamentals to return to the various markets. As an orderly and active market for these homes returns, the Company has the option to dispose or to continue and hold them for cash flow and acceptable returns.

The Company established Security National Real Estate Services ~~("SNRE"~~(“SNRE”) to manage the residential portfolio. SNRE cultivates and maintains the preferred vendor relationships necessary to manage costs and quality of work performed on the portfolio of homes across the country.

As of ~~September 30, 2018,~~March 31, 2019, SNRE manages 9065 residential properties in 86 states across the United States.

The net ending balance of residential real estate that serves as collateral for a bank borrowing was approximately $-0- and $34,431,000, as of September 30, 2018 and December 31, 2017, respectively. The associated bank loan carrying value was approximately $-0- and $26,773,000 as of September 30, 2018 and December 31, 2017, respectively. This real estate relates to the Company's Dry Creek at East Village apartment complex sold in March 2018.

The net ending balance of foreclosed residential real estate included in residential real estate held for investment is ~~$26,747,000~~$21,645,000 and ~~$33,372,000~~$23,532,000 as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

20During the three months ended March 31, 2019 and 2018, the Company recorded impairment losses on residential real estate held for investment of $-0- and $147,925, respectively. These impairment losses are included in gains (losses) on investment and other assets on the condensed consolidated statements of earnings.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

3)Investments (Continued)

The following is a summary of the ~~Company's~~Company’s residential real estate held for investment for the periods presented:

	Net Ending Balance				Net Ending Balance
	September		December 31		March 31		December 31
	2018		2017		2019		2018
Arizona	$	-	$	217,105
California		4,064,197		5,463,878	$	2,256,741	$	2,644,321
Florida		6,677,953		7,000,684		6,093,133		6,534,277
Hawaii		-		712,286
Ohio		10,000		10,000		10,000		10,000
Oklahoma		-		17,500
Tennesse		105,260		-
Tennessee						105,260		105,260
Texas		552,615		509,011		-		139,174
Utah		14,951,798		54,113,272		18,915,534		19,598,218
Virginia		150,175		-
Washington		476,181		286,181		476,181		476,181
	$	26,988,179	$	68,329,917	$	27,856,849	$	29,507,431

Real Estate Owned and Occupied by the Company

The primary business units of the Company occupy a portion of the real estate owned by the Company. Currently, the Company occupies nearly 70,000 square feet, or approximately 10% of the overall commercial real estate holdings.

As of ~~September 30, 2018,~~March 31, 2019, real estate owned and occupied by the Company is summarized as follows:

Location	Business Segment	Approximate Square Footage		Square Footage Occupied by the Company			Business Segment	Approximate Square Footage		Square Footage Occupied by the Company
5300 South 360 West, Salt Lake City, UT (1)	Corporate Offices, Life Insurance and Cemetery/Mortuary Operations		36,000		100	%	Corporate Offices, Life Insurance and Cemetery/Mortuary Operations		36,000		100	%
5201 Green Street, Salt Lake City, UT	Mortgage Operations		36,899		34	%	Mortgage Operations		36,899		34	%
1044 River Oaks Dr., Flowood, MS	Life Insurance Operations		21,521		27	%	Life Insurance Operations		21,521		27	%
121 West Election Road, Draper, UT	Mortgage Sales		78,978		19	%	Mortgage Sales		78,978		19	%

(1) This asset is included in property and equipment on the condensed consolidated balance sheets	(1) This asset is included in property and equipment on the condensed consolidated balance sheets						(1) This asset is included in property and equipment on the condensed consolidated balance sheets

Mortgage Loans Held for Investment

Mortgage loans held for investment consist of first and second mortgages. The mortgage loans bear interest at rates ranging from 2.0% to 10.5%, maturity dates range from nine months to 30 years and are secured by real estate. Concentrations of credit risk arise when a number of mortgage loan debtors have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. Although the Company has a diversified mortgage loan portfolio consisting of residential mortgages, commercial loans and residential construction loans and requires collateral on all real estate exposures, a substantial portion of its ~~debtors'~~debtors’ ability to honor obligations is reliant on the economic stability of the geographic region in which the debtors do business. At ~~September 30, 2018,~~March 31, 2019, the Company had ~~51%~~48%, ~~11%~~14%, ~~13%~~14%, 5%7%, 6%, 4%~~, 3%~~ and 3%2% of its mortgage loans from borrowers located in the states of Utah, Florida, Texas, California, Nevada, ~~California,~~ Arizona, and Tennessee, respectively.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

3)~~Investments~~ ~~(Continued)~~

Mortgage loans held for investment are carried at their unpaid principal balances adjusted for net deferred fees, charge-offs and the related allowance for loan losses. Interest income is included in net investment income on the condensed consolidated statements of earnings and is recognized when earned. The Company defers related material loan origination fees, net of related direct loan origination costs, and amortizes the net fees over the term of the loans. Origination fees are included in net investment income on the condensed consolidated statements of earnings.

Mortgage loans are secured by the underlying property and require an appraisal at the time of underwriting and funding. Generally, the Company will fund a loan not to exceed 80% of the ~~loan's~~loan’s collateral fair market value. Amounts over 80% will require additional collateral or mortgage insurance by an approved third-party insurer.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

3) Investments (Continued)

The Company provides for losses on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account). The allowance is comprised of two components. The first component is an allowance for collectively evaluated impairment that is based upon the ~~Company's~~Company’s historical experience in collecting similar receivables. The second component is based upon individual evaluation of loans that are determined to be impaired. Upon determining impairment, the Company establishes an individual impairment allowance based upon an assessment of the fair value of the underlying collateral. In addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income. When a loan becomes delinquent, the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred. Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment. The Company will rent the properties until it is deemed desirable to sell them.

The allowance for losses on mortgage loans held for investment could change based on changes in the value of the underlying collateral, the performance status of the loans, or the ~~Company's~~Company’s actual collection experience. The actual losses could change, in the near term, from the established allowance, based upon the occurrence or non-occurrence of these events.

For purposes of determining the allowance for losses, the Company has segmented its mortgage loans held for investment by loan type. The ~~Company's~~Company’s loan types are commercial, residential, and residential construction. The inherent risks within the portfolio vary depending upon the loan type as follows:

Commercial - Underwritten in accordance with the ~~Company's~~Company’s policies to determine the ~~borrower's~~borrower’s ability to repay the obligation as agreed. Commercial loans are made primarily based on the underlying collateral supporting the loan. Accordingly, the repayment of a commercial loan depends primarily on the collateral and its ability to generate income and secondary on the ~~borrower's~~borrower’s (or guarantors) ability to repay.

Residential – Secured by family dwelling units. These loans are secured by first mortgages on the unit, which are generally the primary residence of the borrower, generally at a loan-to-value ratio ~~("LTV"~~(“LTV”) of 80% or less.

Residential construction (including land acquisition and development) – Underwritten in accordance with the ~~Company's~~Company’s underwriting policies which include a financial analysis of the builders, borrowers (guarantors), construction cost estimates, and independent appraisal valuations. These loans will rely on the value associated with the project upon completion. These cost and valuation estimates may be inaccurate. Construction loans generally involve the disbursement of substantial funds over a short period of time with repayment substantially dependent upon the success of the completed project and the ability of the borrower to secure long-term financing. Additionally, land is underwritten according to the ~~Company's~~Company’s policies, which include independent appraisal valuations as well as the estimated value associated with the land upon completion of development into finished lots. These cost and valuation estimates may be inaccurate. These loans are considered to be of a higher risk than other mortgage loans due to their ultimate repayment being sensitive to general economic conditions, availability of long-term or construction financing, and interest rate sensitivity.

2219

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

3)Investments (Continued)

Allowance for Credit Losses and Recorded Investment in Mortgage Loans

	Commercial		Residential			Residential Construction		Total
March 31, 2019
Allowance for credit losses:
Beginning balance - January 1, 2019	$	187,129	$	1,125,623		$	35,220	$	1,347,972
Charge-offs		-		(24,141	)		-		(24,141	)
Provision		-		46,402			7,982		54,384
Ending balance - March 31, 2019	$	187,129	$	1,147,884		$	43,202	$	1,378,215

Ending balance: individually evaluated for impairment	$	-	$	39,884		$	-	$	39,884

Ending balance: collectively evaluated for impairment	$	187,129	$	1,108,000		$	43,202	$	1,338,331

Mortgage loans:
Ending balance	$	34,258,354	$	89,241,344		$	75,484,460	$	198,984,158

Ending balance: individually evaluated for impairment	$	851,953	$	3,317,070		$	502,991	$	4,672,014

Ending balance: collectively evaluated for impairment	$	33,406,401	$	85,924,274		$	74,981,469	$	194,312,144

December 31, 2018
Allowance for credit losses:
Beginning balance - January 1, 2018	$	187,129	$	1,546,447		$	35,220	$	1,768,796
Charge-offs		-		(5,725	)		-		(5,725	)
Provision		-		(415,099	)		-		(415,099	)
Ending balance - December 31, 2018	$	187,129	$	1,125,623		$	35,220	$	1,347,972

Ending balance: individually evaluated for impairment	$	-	$	74,185		$	-	$	74,185

Ending balance: collectively evaluated for impairment	$	187,129	$	1,051,438		$	35,220	$	1,273,787

Mortgage loans:
Ending balance	$	27,785,927	$	89,935,600		$	71,366,544	$	189,088,071

Ending balance: individually evaluated for impairment	$	196,182	$	2,939,651		$	502,991	$	3,638,824

Ending balance: collectively evaluated for impairment	$	27,589,745	$	86,995,949		$	70,863,553	$	185,449,247

Allowance for Credit Losses and Recorded Investment in Mortgage Loans

Commercial Residential Residential Construction Total
September 30, 2018
Allowance for credit losses:
Beginning balance - January 1, 2018 $ 187,129 $ 1,546,447 $ 35,220 $ 1,768,796
   Charge-offs - (84,902 ) - (84,902 )
   Provision - (213,736 ) - (213,736 )
Ending balance - September 30, 2018 $ 187,129 $ 1,247,809 $ 35,220 $ 1,470,158

Ending balance: individually evaluated for impairment $ - $ 75,064 $ - $ 75,064

Ending balance: collectively evaluated for impairment $ 187,129 $ 1,172,745 $ 35,220 $ 1,395,094

Mortgage loans:
Ending balance $ 32,869,447 $ 79,930,807 $ 71,330,891 $ 184,131,145

Ending balance: individually evaluated for impairment $ 195,911 $ 3,088,265 $ 1,078,529 $ 4,362,705

Ending balance: collectively evaluated for impairment $ 32,673,536 $ 76,842,542 $ 70,252,362 $ 179,768,440

December 31, 2017
Allowance for credit losses:
Beginning balance - January 1, 2017 $ 187,129 $ 1,461,540 $ 100,114 $ 1,748,783
   Charge-offs - (351,357 ) (64,894 ) (416,251 )
   Provision - 436,264 - 436,264
Ending balance - December 31, 2017 $ 187,129 $ 1,546,447 $ 35,220 $ 1,768,796

Ending balance: individually evaluated for impairment $ - $ 237,560 $ - $ 237,560

Ending balance: collectively evaluated for impairment $ 187,129 $ 1,308,887 $ 35,220 $ 1,531,236

Mortgage loans:
Ending balance $ 54,954,865 $ 102,527,111 $ 50,157,533 $ 207,639,509

Ending balance: individually evaluated for impairment $ - $ 4,923,552 $ 461,834 $ 5,385,386

Ending balance: collectively evaluated for impairment $ 54,954,865 $ 97,603,559 $ 49,695,699 $ 202,254,123

2320

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

3)Investments (Continued)

The following is a summary of the aging of mortgage loans held for investment for the periods presented:

Age Analysis of Mortgage Loans Held for Investment	Age Analysis of Mortgage Loans Held for Investment																							Age Analysis of Mortgage Loans Held for Investment

		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days (1)		In Process of Foreclosure (1)		Total Past Due		Current		Total Mortgage Loans		Allowance for Loan Losses			Unamortized deferred loan fees, net			Net Mortgage Loans			30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days (1)		In Process of Foreclosure (1)		Total Past Due		Current		Total Mortgage Loans		Allowance for Loan Losses			Unamortized deferred loan fees, net			Net Mortgage Loans
September 30, 2018
March 31, 2019																								March 31, 2019
Commercial		$	3,745,013	$	-	$	195,911	$	-	$	3,940,924	$	28,928,523	$	32,869,447	$	(187,129	)	$	(20,919	)	$	32,661,399		$	3,626,950	$	-	$	-	$	851,953	$	4,478,903	$	29,779,451	$	34,258,354	$	(187,129	)	$	25,582		$	34,096,807
Residential			10,783,020		1,769,338		2,019,323		1,068,942		15,640,623		64,290,184		79,930,807		(1,247,809	)		(678,985	)		78,004,013			9,148,810		2,888,568		2,306,154		1,010,916		15,354,448		73,886,896		89,241,344		(1,147,884	)		(833,055	)		87,260,405
Residential Construction			-		-		1,078,529		-		1,078,529		70,252,362		71,330,891		(35,220	)		(579,561	)		70,716,110			-		-		-		502,991		502,991		74,981,469		75,484,460		(43,202	)		(454,114	)		74,987,144

Total		$	14,528,033	$	1,769,338	$	3,293,763	$	1,068,942	$	20,660,076	$	163,471,069	$	184,131,145	$	(1,470,158	)	$	(1,279,465	)	$	181,381,522		$	12,775,760	$	2,888,568	$	2,306,154	$	2,365,860	$	20,336,342	$	178,647,816	$	198,984,158	$	(1,378,215	)	$	(1,261,587	)	$	196,344,356

December 31, 2017
December 31, 2018																								December 31, 2018
Commercial		$	1,943,495	$	-	$	-	$	-	$	1,943,495	$	53,011,370	$	54,954,865	$	(187,129	)	$	(67,411	)	$	54,700,325		$	4,588,424	$	-	$	196,182	$	-	$	4,784,606	$	23,001,321	$	27,785,927	$	(187,129	)	$	32,003		$	27,630,801
Residential			6,613,479		495,347		3,591,333		1,332,219		12,032,378		90,494,733		102,527,111		(1,546,447	)		(1,164,130	)		99,816,534			9,899,380		2,312,252		1,715,362		1,224,289		15,151,283		74,784,317		89,935,600		(1,125,623	)		(862,411	)		87,947,566
Residential Construction			-		-		461,834		-		461,834		49,695,699		50,157,533		(35,220	)		(428,287	)		49,694,026			-		-		-		502,991		502,991		70,863,553		71,366,544		(35,220	)		(444,622	)		70,886,702

Total		$	8,556,974	$	495,347	$	4,053,167	$	1,332,219	$	14,437,707	$	193,201,802	$	207,639,509	$	(1,768,796	)	$	(1,659,828	)	$	204,210,885		$	14,487,804	$	2,312,252	$	1,911,544	$	1,727,280	$	20,438,880	$	168,649,191	$	189,088,071	$	(1,347,972	)	$	(1,275,030	)	$	186,465,069

(1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.	(1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.																							(1) Interest income is not recognized on loans past due greater than 90 days or in foreclosure.

2421

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

3)Investments (Continued)

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

Loan Commitments and Forward Sale Commitments: The ~~Company's~~Company’s mortgage segment enters into loan commitments with potential borrowers and forward sale commitments to sell loans to third-party investors. The Company also uses a hedging strategy for these transactions. A loan commitment binds the Company to lend funds to a qualified borrower at a specified interest rate and within a specified period of time, generally up to 30 days after issuance of the loan commitment. Loan commitments are defined to be derivatives under GAAP and are recognized at fair value on the consolidated balance sheets with changes in their fair values recorded in current earnings.

The Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted MBS prices, estimates of the fair value of mortgage servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the commitment. The change in fair value of the underlying mortgage loan is measured from the date the loan commitment is issued. Following issuance, the value of a mortgage loan commitment can be either positive or negative depending upon the change in value of the underlying mortgage loans. Fallout rates and other factors from the ~~Company's~~Company’s recent historical data are used to estimate the quantity and value of mortgage loans that will fund within the terms of the commitments.

Impaired Mortgage Loans Held for Investment: The Company believes that the fair value of these nonperforming loans will approximate the unpaid principal balance expected to be recovered based on the fair value of the underlying collateral. For residential and commercial properties, the collateral value is estimated by obtaining an independent appraisal. The appraisal typically considers area comparables and property condition as well as potential rental income that could be generated (particularly for commercial properties). For residential construction loans, the collateral is typically incomplete, so fair value is estimated as the replacement cost using data from Marshall and Swift, a provider of building cost information to the real estate construction.

Real Estate Held for Investment: The Company believes that in an orderly market, fair value will approximate the replacement cost of a home and the rental income provides a cash flow stream for investment analysis. The Company believes the highest and best use of the properties are as income producing assets since it is the ~~Company's~~Company’s intent to hold the properties as rental properties, matching the income from the investment in rental properties with the funds required for future estimated policy claims.

It should be noted that for replacement cost, when determining the fair value of mortgage properties, the Company uses Marshall and Swift, a provider of building cost information to the real estate construction industry. For the investment analysis, the Company uses market data based upon its real estate operation experience and projected the present value of the net rental income over seven years. The Company also considers area comparables and property condition when determining fair value.

In addition to this analysis performed by the Company, the Company depreciates Real Estate Held for Investment. This depreciation reduces the book value of these properties and lessens the exposure to the Company from further deterioration in real estate values.

Mortgage Servicing Rights: The Company initially recognizes Mortgage Servicing Rights ~~("MSRs"~~(“MSRs”) at their estimated fair values derived from the net cash flows associated with the servicing contracts, where the Company assumes the obligation to service the loan in the sale transaction. The precise fair value of MSRs cannot be readily determined because MSRs are not actively traded in stand-alone markets. Considerable judgment is required to estimate the fair values of these assets and the exercise of such judgment can significantly affect the ~~Company's~~Company’s earnings.

3330

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

The following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a recurring basis by their classification in the condensed consolidated balance sheet at ~~September 30, 2018.~~March 31, 2019.

	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets accounted for at fair value on a recurring basis
Common stock	$	6,927,352		$	6,927,352		$	-	$	-
Total equity securities	$	6,927,352		$	6,927,352		$	-	$	-

Loans held for sale	$	123,374,303		$	-		$	-	$	123,374,303
Restricted assets (1)		799,835			799,835			-		-
Cemetery perpetual care trust investments (1)		543,284			543,284			-		-
Derivatives - loan commitments (2)		2,849,706			-			-		2,849,706

Total assets accounted for at fair value on a recurring basis	$	134,494,480		$	8,270,471		$	-	$	126,224,009

Liabilities accounted for at fair value on a recurring basis
Derivatives - call options (3)	$	(50,305	)	$	(50,305	)	$	-	$	-
Derivatives - put options (3)		(89,733	)		(89,733	)		-		-
Derivatives - loan commitments (3)		(325,363	)		-			-		(325,363	)

Total liabilities accounted for at fair value on a recurring basis	$	(465,401	)	$	(140,038	)	$	-	$	(325,363	)

_______________________________________________
(1) Mutual funds and equity securities
(2) Included in other assets on the condensed consolidated balance sheets
(3) Included in other liabilities and accrued expenses on the condensed consolidated balance sheets

Total
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant Unobservable
Inputs
(Level 3)

Assets accounted for at fair value on a recurring basis
Common stock $ 5,988,918 $ 5,988,918 $ - $ -
Total equity securities $ 5,988,918 $ 5,988,918 $ - $ -

Loans held for sale $ 165,507,394 $ - $ - $ 165,507,394
Restricted assets (1) 810,056 810,056 - -
Cemetery perpetual care trust investments (1) 677,699 677,699 - -
Derivatives - loan commitments (2) 2,595,146 - - 2,595,146

Total assets accounted for at fair value on a recurring basis $ 175,579,213 $ 7,476,673 $ - $ 168,102,540

Liabilities accounted for at fair value on a recurring basis
Derivatives - call options (3) $ (38,020 ) $ (38,020 ) $ - $ -
Derivatives - put options (3) (23,393 ) (23,393 ) - -
Derivatives - loan commitments (3) (60,861 ) - - (60,861 )

Total liabilities accounted for at fair value on a recurring basis $ (122,274 ) $ (61,413 ) $ - $ (60,861 )

(1) Mutual funds and equity securities
(2) Included in other assets on the condensed consolidated balance sheets
(3) Included in other liabilities and accrued expenses on the condensed consolidated balance sheets

Following is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs:

		Net Loan Commitments		Loans Held for Sale				Net Loan Commitments		Loans Held for Sale
Balance - December 31, 2017		$	1,996,589	$	133,414,188
Balance - December 31, 2018								$	1,591,816	$	136,210,853
Originations					1,692,673,286						428,500,921
Sales					(1,719,346,884	)					(456,552,964	)
Transfer to mortgage loans held for investment					(139,464	)
Total gains (losses):
Included in earnings (1)			537,696		58,906,268				932,527		15,215,493

Balance - September 30, 2018		$	2,534,285	$	165,507,394
Balance - March 31, 2019								$	2,524,343	$	123,374,303

________________________________________
(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings	(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings						(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings

3431

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

The following tables summarize Level 1, 2 and 3 financial assets and financial liabilities measured at fair value on a nonrecurring basis by their classification in the condensed consolidated balance sheet at ~~September 30, 2018.~~March 31, 2019.

			Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
Assets accounted for at fair value on a nonrecurring basis
Impaired mortgage loans held for investment	$	1,421,028	$	-	$	-	$	1,421,028	$	711,448	$	-	$	-	$	711,448
Impaired real estate held for investment		7,079,822		-		-		7,079,822
Mortgage servicing rights additions		1,922,230		-		-		1,922,230
Total assets accounted for at fair value on a nonrecurring basis	$	10,423,080	$	-	$	-	$	10,423,080	$	711,448	$	-	$	-	$	711,448

		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)				Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets accounted for at fair value on a recurring basis
Common stock		$	6,037,855		$	6,037,855		$	-	$	-			$	5,558,611		$	5,558,611		$	-	$	-
Total equity securities		$	6,037,855		$	6,037,855		$	-	$	-			$	5,558,611		$	5,558,611		$	-	$	-

Loans held for sale		$	133,414,188		$	-		$	-	$	133,414,188			$	136,210,853		$	-		$	-	$	136,210,853
Restricted assets (1)			809,958			809,958			-		-				744,673			744,673			-		-
Cemetery perpetual care trust investments (1)			682,315			682,315			-		-				483,353			483,353			-		-
Derivatives - loan commitments (2)			2,032,782			-			-		2,032,782				1,969,967			-			-		1,969,967

Total assets accounted for at fair value on a recurring basis		$	9,562,910		$	7,530,128		$	-	$	2,032,782			$	8,756,604		$	6,786,637		$	-	$	1,969,967
Liabilities accounted for at fair value on a recurring basis
Derivatives - call options (3)			(64,689	)		(64,689	)		-		-				(4,629	)		(4,629	)		-		-
Derivatives - put options (3)			(20,568	)		(20,568	)		-		-				(296,053	)		(296,053	)		-		-
Derivatives - loan commitments (3)			(36,193	)		-			-		(36,193	)			(378,151	)		-			-		(378,151	)

Total liabilities accounted for at fair value on a recurring basis		$	(121,450	)	$	(85,257	)	$	-	$	(36,193	)		$	(678,833	)	$	(300,682	)	$	-	$	(378,151	)

_________________________________
(1) Mutual funds and equity securities
(2) Included in other assets on the condensed consolidated balance sheets	(2) Included in other assets on the condensed consolidated balance sheets												(2) Included in other assets on the condensed consolidated balance sheets
(3) Included in other liabilities and accrued expenses on the condensed consolidated balance sheets	(3) Included in other liabilities and accrued expenses on the condensed consolidated balance sheets												(3) Included in other liabilities and accrued expenses on the condensed consolidated balance sheets

3532

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

Following is a summary of changes in the condensed consolidated balance sheet line items measured using level 3 inputs:

		Net Loan Commitments			Bank Loan Interest Rate Swaps			Loans Held for Sale				Net Loan Commitments			Loans Held for Sale
Balance - December 31, 2016		$	6,809,332		$	(3,308	)	$	-
Balance - December 31, 2017												$	1,996,589		$	133,414,188
Originations									1,233,683,666							2,194,607,543
Sales									(1,151,031,388	)						(2,259,145,473	)
Transfer to mortgage loans held for investment																(10,827,797	)
Total gains (losses):
Included in earnings (1)			(4,812,743	)		-			50,761,910				(404,773	)		78,162,392
Included in other comprehensive income (2)			-			3,308			-
Balance - December 31, 2017		$	1,996,589		$	-		$	133,414,188
Balance - December 31, 2018												$	1,591,816		$	136,210,853

__________________________________
(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings	(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings										(1) As a component of Mortgage fee income on the condensed consolidated statements of earnings
(2) As a component of Unrealized gains on derivative instruments on the condensed consolidated statements of comprehensive income

			Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)

Assets accounted for at fair value on a nonrecurring basis
Assets accounted for at fair value on a
nonrecurring basis
Impaired mortgage loans held for investment	$	1,363,440	$	-	$	-	$	1,363,440	$	1,253,302	$	-	$	-	$	1,253,302
Mortgage servicing rights additions		6,085,352		-		-		6,085,352
Impaired real estate held for investment		8,500,000		-		-		8,500,000		1,611,384		-		-		1,611,384
Impaired fixed maturity securities, held to maturity		426,984		-		426,984		-

Total assets accounted for at fair value on a nonrecurring basis	$	16,375,776	$	-	$	426,984	$	15,948,792	$	2,864,686	$	-	$	-	$	2,864,686

3633

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

8) Fair Value of Financial Instruments (Continued)`

Fair Value of Financial Instruments Carried at Other Than Fair Value

ASC 825, Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value.

Management uses its best judgment in estimating the fair value of the ~~Company's~~Company’s financial instruments; however, there are inherent limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows as of ~~September 30, 2018:~~March 31, 2019:

		Carrying Value			Level 1		Level 2		Level 3			Total Estimated Fair Value				Carrying Value			Level 1		Level 2		Level 3			Total Estimated Fair Value
Assets
Fixed maturity securities held to maturity		$	230,386,875		$	-	$	201,221,369	$	33,002,784		$	234,224,153			$	231,378,413		$	-	$	235,280,653	$	4,777,720		$	240,058,373
Mortgage loans held for investment:
Residential			78,004,013			-		-		82,516,040			82,516,040				87,260,405			-		-		91,648,513			91,648,513
Residential construction			70,716,110			-		-		70,716,110			70,716,110				74,987,143			-		-		74,987,143			74,987,143
Commercial			32,661,399			-		-		33,475,276			33,475,276				34,096,808			-		-		34,884,705			34,884,705
Mortgage loans held for investment, net		$	181,381,522		$	-	$	-	$	186,707,426		$	186,707,426			$	196,344,356		$	-	$	-	$	201,520,361		$	201,520,361
Policy loans			6,389,122			-		-		6,389,122			6,389,122				6,354,430			-		-		6,354,430			6,354,430
Insurance assignments, net (1)			31,119,910			-		-		31,119,910			31,119,910				37,560,276			-		-		37,560,276			37,560,276
Restricted assets (2)			1,199,301			-		1,201,983		-			1,201,983				1,262,819			-		1,279,342		-			1,279,342
Restricted assets (3)			1,500,000			-		-		1,500,000			1,500,000				1,964,168			-		-		1,969,979			1,969,979
Cemetery perpetual care trust investments (2)			973,821			-		963,621		-			963,621				999,907			-		1,010,578		-			1,010,578
Mortgage servicing rights, net			20,875,905			-		-		32,327,266			32,327,266				19,049,013			-		-		26,133,155			26,133,155

Liabilities
Bank and other loans payable		$	(196,422,645	)	$	-	$	-	$	(196,422,645	)	$	(196,422,645	)		$	(175,090,614	)	$	-	$	-	$	(175,090,614	)	$	(175,090,614	)
Policyholder account balances (4)			(46,706,179	)		-		-		(34,223,082	)		(34,223,082	)			(46,019,974	)		-		-		(36,999,896	)		(36,999,896	)
Future policy benefits - annuities (4)			(98,558,234	)		-		-		(96,511,305	)		(96,511,305	)			(97,583,996	)		-		-		(97,207,710	)		(97,207,710	)

______________________________															______________________________
(1) Included in other investments and policy loans on the condensed consolidated balance sheet.	(1) Included in other investments and policy loans on the condensed consolidated balance sheet.														(1) Included in other investments and policy loans on the condensed consolidated balance sheet.
(2) Fixed maturity securities held to maturity
(3) Participation in mortgage loans held for investment (residential construction)
(3) Mortgage loans held for investment
(4) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheet.	(4) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheet.														(4) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheet.

3734

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows as of December 31, ~~2017:~~2018:

		Carrying Value			Level 1		Level 2		Level 3			Total Estimated Fair Value				Carrying Value			Level 1		Level 2		Level 3			Total Estimate Fair Value
Assets
Fixed maturity securities held to maturity		$	228,397,623		$	-	$	233,806,219	$	7,692,190		$	241,498,409			$	232,078,723		$	-	$	229,668,844	$	5,082,014		$	234,750,858
Mortgage loans held for investment:
Residential			99,816,535			-		-		106,050,169			106,050,169				87,947,566			-		-		92,503,553			92,503,553
Residential construction			49,694,025			-		-		49,694,025			49,694,025				70,886,702			-		-		70,886,702			70,886,702
Commercial			54,700,325			-		-		56,473,156			56,473,156				27,630,801			-		-		28,359,205			28,359,205
Mortgage loans held for investment, net		$	204,210,885		$	-	$	-	$	212,217,350		$	212,217,350			$	186,465,069		$	-	$	-	$	191,749,460		$	191,749,460
Policy loans			6,531,352			-		-		6,531,352			6,531,352				6,424,325			-		-		6,424,325			6,424,325
Insurance assignments, net (1)			35,455,098			-		-		35,455,098			35,455,098				34,146,868			-		-		34,146,868			34,146,868
Restricted assets (2)			1,130,088			-		1,152,324		-			1,152,324				1,258,397			-		1,271,687		-			1,271,687
Restricted assets (3)			1,701,811			-		-		1,796,910			1,796,910				1,799,268			-		-		1,810,185			1,810,185
Cemetery perpetual care trust investments (2)			943,211			-		953,404		-			953,404				990,390			-		983,410		-			983,410
Cemetery perpetual care trust investments (3)			4,128			-		-		4,411			4,411
Mortgage servicing rights, net			21,376,937			-		-		27,427,174			27,427,174				20,016,822			-		-		28,885,316			28,885,316

Liabilities
Bank and other loans payable		$	(157,450,925	)	$	-	$	-	$	(157,450,925	)	$	(157,450,925	)		$	(187,521,188	)	$	-	$	-	$	(187,521,188	)	$	(187,521,188	)
Policyholder account balances (4)			(47,867,037	)		-		-		(34,557,111	)		(34,557,111	)			(46,479,853	)		-		-		(37,348,289	)		(37,348,289	)
Future policy benefits - annuities (4)			(99,474,392	)		-		-		(98,827,107	)		(98,827,107	)			(98,137,615	)		-		-		(97,641,146	)		(97,641,146	)

______________________________
(1) Included in other investments and policy loans on the condensed consolidated balance sheet.	(1) Included in other investments and policy loans on the condensed consolidated balance sheet.														(1) Included in other investments and policy loans on the condensed consolidated balance sheet.
(2) Fixed maturity securities held to maturity
(3) Participation in mortgage loans held for investment (commercial)	(3) Participation in mortgage loans held for investment (commercial)														(3) Participation in mortgage loans held for investment (commercial)
(4) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheet.	(4) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheet.														(4) Included in future policy benefits and unpaid claims on the condensed consolidated balance sheet.

The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of these financial instruments are summarized as follows:

Fixed Maturity Securities Held to Maturity: The fair values of fixed maturity securities are based on quoted market prices, when available. For fixed maturity securities not actively traded, fair values are estimated using values obtained from independent pricing services, or in the case of private placements, are estimated by discounting expected future cash flows using a current market value applicable to the coupon rate, credit and maturity of the investments.

Mortgage Loans Held for Investment: The estimated fair value of the ~~Company's~~Company’s mortgage loans held for investment is determined using various methods. The ~~Company's~~Company’s mortgage loans are grouped into three categories: Residential, Residential Construction and Commercial. When estimating the expected future cash flows, it is assumed that all loans will be held to maturity, and any loans that are non-performing are evaluated individually for impairment.

Residential – The estimated fair value is determined through a combination of discounted cash flows (estimating expected future cash flows of interest payments and discounting them using current interest rates from single family mortgages) and considering pricing of similar loans that were sold recently.

Residential Construction – These loans are primarily short in maturity. Accordingly, the estimated fair value is determined to be the carrying value.

Commercial – The estimated fair value is determined by estimating expected future cash flows of interest payments and discounting them using current interest rates for commercial mortgages.

Policy Loans: The carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values because they are fully collateralized by the cash surrender value of the underlying insurance policies.

3835

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

8) Fair Value of Financial Instruments (Continued)

Insurance Assignments, Net: These investments are primarily short in maturity, accordingly, the carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values.

Bank and Other Loans Payable: The carrying amounts reported in the accompanying condensed consolidated balance sheet for these financial instruments approximate their fair values due to their relatively short-term maturities and variable interest rates.

Policyholder Account Balances and Future Policy Benefits-Annuities: Future policy benefit reserves for interest-sensitive insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances. Interest crediting rates for interest-sensitive insurance products ranged from 1.5% to 6.5%. The fair values for these investment-type insurance contracts are estimated based on the present value of liability cash flows.

The fair values for the ~~Company's~~Company’s insurance contracts other than investment-type contracts are not required to be disclosed. However, the fair values of liabilities under all insurance contracts are taken into consideration in the ~~Company's~~Company’s overall management of interest rate risk, such that the ~~Company's~~Company’s exposure to changing interest rates is minimized through the matching of investment maturities with amounts due under insurance contracts.

9) Allowance for Doubtful Accounts

The Company records an allowance and recognizes an expense for potential losses from other investments and receivables in accordance with generally accepted accounting principles.

Receivables are the result of cemetery and mortuary operations, mortgage loan operations and life insurance operations. The allowance is based upon the ~~Company's~~Company’s historical experience for collectively evaluated impairment. Other allowances are based upon receivables individually evaluated for impairment. Collectability of the cemetery and mortuary receivables is significantly influenced by current economic conditions. The critical issues that impact recovery of mortgage loan operations are interest rate risk, loan underwriting, new regulations and the overall ~~economy.~~

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~economy

10)Derivative Instruments

Mortgage Banking Derivatives

Loan Commitments

The Company is exposed to price risk due to the potential impact of changes in interest rates on the values of loan commitments from the time a loan commitment is made to an applicant to the time the loan that would result from the exercise of that loan commitment is funded. Managing price risk is complicated by the fact that the ultimate percentage of loan commitments that will be exercised (i.e., the number of loans that will be funded) fluctuates. The probability that a loan will not be funded or the loan application is denied or withdrawn within the terms of the commitment is driven by a number of factors, particularly the change, if any, in mortgage rates following the issuance of the loan commitment.

In general, the probability of funding increases if mortgage rates rise and decreases if mortgage rates fall. This is due primarily to the relative attractiveness of current mortgage rates compared to the ~~applicant's~~applicant’s committed rate. The probability that a loan will not be funded within the terms of the mortgage loan commitment also is influenced by the source of the applications (retail, broker or correspondent channels), proximity to rate lock expiration, purpose for the loan (purchase or refinance), product type and the application approval status. The Company has developed fallout estimates using historical data that take into account all of the variables, as well as renegotiations of rate and point commitments that tend to occur when mortgage rates fall. These fallout estimates are used to estimate the number of loans that the Company expects to be funded within the terms of the loan commitments and are updated periodically to reflect the most current data.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

10)Derivative Instruments (Continued)

The Company estimates the fair value of a loan commitment based on the change in estimated fair value of the underlying mortgage loan, quoted mortgage-backed securities ~~("MBS"~~(“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the commitment. The change in fair value of the underlying mortgage loan is measured from the date the loan commitment is issued and is shown net of expenses. Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of the underlying mortgage loans.

Forward Sale Commitments

The Company utilizes forward commitments to economically hedge the price risk associated with its outstanding mortgage loan commitments. A forward commitment protects the Company from losses on sales of the loans arising from exercise of the loan commitments. Management expects these types of commitments will experience changes in fair value opposite to changes in fair value of the loan commitments, thereby reducing earnings volatility related to the recognition in earnings of changes in the values of the commitments.

The net changes in fair value of loan commitments and forward sale commitments are shown in current earnings as a component of mortgage fee income on the consolidated statements of earnings. Mortgage banking derivatives are shown in other assets and other liabilities and accrued expenses on the condensed consolidated balance sheets.

Call and Put Options

The Company uses a strategy of selling ~~"out~~“out of the ~~money"~~money” call options on its equity securities as a source of revenue. The options give the purchaser the right to buy from the Company specified equity securities at a set price up to a pre-determined date in the future. The Company uses the strategy of selling put options as a means of generating cash or purchasing equity securities at lower than current market prices. The Company receives an immediate payment of cash for the value of the option and establishes a liability for the fair value of the option. The liability for options is adjusted to fair value at each reporting date. In the event a call option is exercised, the Company ~~recognizes a gain on the sale of~~sells the equity security at a favorable price enhanced by the value of the option that was sold. If the option expires unexercised, the Company realizes a gain from the sale of the option. In the event a put option is exercised, the Company acquires an equity security at the strike price of the option reduced by the value received from the sale of the put option. The equity security is then traded as a normal equity security in the ~~Company's~~Company’s portfolio. The net changes in the fair value of call and put options are shown in current earnings as a component of gains (losses) on investments and other assets. Call and put options are shown in other liabilities and accrued expenses on the condensed consolidated balance sheets.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

~~10)~~ ~~Derivative Instruments~~ ~~(Continued)~~

The following table shows the notional amount and fair value of derivatives as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

	Fair Values and Notional Values of Derivative Instruments														Fair Values and Notional Values of Derivative Instruments
		September 30, 2018						December 31, 2017							March 31, 2019						December 31, 2018
	Balance Sheet Location	Notional Amount		Asset Fair Value		Liability Fair Value		Notional Amount		Asset Fair Value		Liability Fair Value
Balance Sheet Location														Balance Sheet Location	Notional Amount		Asset Fair Value		Liability Fair Value		Notional Amount		Asset Fair Value		Liability Fair Value
Derivatives not designated as hedging instruments:
Loan commitments	Other assets and Other liabilities	$	150,947,240	$	2,595,146	$	60,861	$	105,679,107	$	2,032,782	$	36,193	Other assets and Other liabilities	$	179,148,085	$	2,849,706	$	325,363	$	93,758,218	$	1,969,967	$	378,151
Call options	Other liabilities		1,758,900		--		38,020		1,488,550		--		64,689	Other liabilities		1,881,800		--		50,305		805,500		--		4,629
Put options	Other liabilities		2,888,400		--		23,393		2,265,900		--		20,568	Other liabilities		3,218,200		--		89,733		4,861,700		--		296,053
Total		$	155,594,540	$	2,595,146	$	122,274	$	109,433,557	$	2,032,782	$	121,450		$	184,248,085	$	2,849,706	$	465,401	$	99,425,418	$	1,969,967	$	678,833

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

10)Derivative Instruments (Continued)

The following table shows the gains and losses on derivatives for the periods presented.

		Net Amount Gain (Loss)					Net Amount Gain (Loss)						Net Amount Gain (Loss)
		Three Months Ended September 30					Nine Months Ended September 30						Three Months Ended March 31
Derivative	Classification	2018		2017			2018		2017			Classification	2019		2018
Loan commitments	Mortgage fee income	$	94,569	$	(4,833,268	)	$	537,696	$	(3,677,554	)	Mortgage fee income	$	932,527	$	440,958

Call and put options	Gains on investments and other assets	$	83,612	$	27,734		$	313,913	$	216,561		Gains on investments and other assets	$	290,028	$	79,171

11) Reinsurance, Commitments and Contingencies

Reinsurance

The Company follows the procedure of reinsuring risks in excess of a specified limit, which ranges from $25,000 to $100,000. The Company is liable for these amounts in the event such reinsurers are unable to pay their portion of the claims. The Company has also assumed insurance from other companies.

Mortgage Loan Loss Settlements

Future loan losses can be extremely difficult to estimate. However, management believes that the ~~Company's~~Company’s reserve methodology and its current practice of property preservation allow it to estimate its potential losses on loans sold. The estimated liability for indemnification losses is included in other liabilities and accrued expenses and, as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the balances were ~~$3,508,000~~$3,704,000 and ~~$2,572,000,~~$3,605,000, respectively.

Mortgage Loan Loss Litigation

Lehman Brothers Holdings Litigation – Delaware and New York

In January 2014, Lehman Brothers Holdings, Inc. ("(“Lehman ~~Holdings"~~Holdings”) entered into a settlement with the Federal National Mortgage Association (Fannie Mae) concerning the mortgage loan claims that Fannie Mae had asserted against Lehman Holdings, which were based on alleged breaches of certain representations and warranties by Lehman Holdings in the mortgage loans it had sold to Fannie Mae. Lehman Holdings had acquired these loans from Aurora Bank, FSB, formerly known as Lehman Brothers Bank, FSB, which in turn purchased the loans from certain residential mortgage loan originators, including SecurityNational Mortgage. A settlement based on similar circumstances was entered into between Lehman Holdings and the Federal Home Loan Mortgage Corporation (Freddie Mac) in February 2014.

Lehman Holdings filed a motion in May 2014 with the U.S. Bankruptcy Court of the Southern District of New York to require the mortgage loan originators, including SecurityNational Mortgage, to engage in non-binding mediations of the alleged indemnification claims against the mortgage loan originators relative to the Fannie Mae and Freddie Mac settlements with Lehman Holdings. The mediation was not successful in resolving any issues between SecurityNational Mortgage and Lehman Holdings.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

~~11)Reinsurance, Commitments and Contingencies~~ ~~(Continued)~~

On January 26, 2016, SecurityNational Mortgage filed a declaratory judgment action against Lehman Holdings in the Superior Court for the State of Delaware. In the Delaware action, SecurityNational Mortgage asserted its right

to obtain a declaration of rights in that there are allegedly millions of dollars in dispute with Lehman Holdings pertaining to approximately 136 mortgage loans. SecurityNational Mortgage sought a declaratory judgment as to its rights as it contends that it has no liability to Lehman Holdings as a result of Lehman ~~Holdings'~~Holdings’ settlements with Fannie Mae and Freddie Mac. Lehman Holdings filed a motion in the Delaware court seeking to stay or dismiss the declaratory judgment action. On August 24, 2016, the Court ruled that it would exercise its discretion to decline jurisdiction over the action and granted Lehman ~~Holdings'~~Holdings’ motion to dismiss.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

11)Reinsurance, Commitments and Contingencies (Continued)

On February 3, 2016, Lehman Holdings filed an adversary proceeding against approximately 150 mortgage loan originators, including SecurityNational Mortgage, in the U.S. Bankruptcy Court of the Southern District of New York seeking a declaration of rights similar in nature to the declaratory judgment that SecurityNational Mortgage sought in its Delaware lawsuit, and for damages relating to the alleged obligations of the defendants under the indemnification provisions of the alleged agreements, in amounts to be determined at trial, including interest, ~~attorneys'~~attorneys’ fees and costs incurred by Lehman Holdings in enforcing the obligations of the defendants. No response was required to be filed relative to the Complaint or the Amended Complaint dated March 7, 2016. A Case Management Order was entered on November 1, 2016.

On December 27, 2016, pursuant to the Case Management Order, Lehman Holdings filed a Second Amended Complaint against SecurityNational Mortgage, which eliminates the declaratory judgment claim but retains a similar claim for damages as in the Complaint. Many of the defendants, including SecurityNational Mortgage, filed a joint motion in the case asserting that the Bankruptcy Court does not have subject matter jurisdiction concerning the matter and that venue is improper. Lehman ~~Holdings'~~Holdings’ response memorandum was filed on May 31, 2017 and a reply memorandum of the defendants filing the motion was filed on July 14, 2017. A hearing on the motion was held on June 12, 2018.

On August 13, 2018, the Court issued its Memorandum Decision and Order (“Decision”) denying the motion. On August 27, 2018, a number of the defendants, including SecurityNational Mortgage, filed a joint motion with the United States District Court (Case No. 18-mc-00392(VEC)) requesting that the Bankruptcy Court’s Decision be treated as findings of fact and conclusions of law, and for the District Court to review the Decision de novo as to jurisdiction. Included with the motion were proposed objections to the Bankruptcy Court’s Decision. On September 18, 2018, Lehman Holdings filed its response to the joint motion, and defendants’ reply was filed on October 2, 2018.

On September 17, 2018, certain defendants, including SecurityNational Mortgage, also filed a notice of appeal, and thereafter a motion for leave to file an interlocutory appeal as to the Bankruptcy ~~Court's~~Court’s Decision pertaining to jurisdiction and improper venue as a ~~"protective"~~“protective” appeal should the District Court decide not to treat the Decision as findings of fact and conclusions of law. Separately, certain other defendants also filed a notice of appeal and motion for leave to file an interlocutory appeal with respect to the Bankruptcy ~~Court's~~Court’s Decision concerning improper venue. Lehman Holdings filed its response on October 22, 2018, and defendants ~~are permitted to file~~filed a joint reply to Lehman ~~Holdings'~~Holdings’ response ~~no later than~~on November 26, 2018. The motions to file appeals were consolidated before Valerie Caproni, U.S. District Court Judge, Case No. ~~18-cv-8986.~~18-cv-08986 (VEC). Case No. 18-mc-00392 (VEC) is also before Judge Caproni.

On October 1, 2018, Lehman Holdings filed a motion for leave to file a Third Amended ~~Complaints~~Complaint against numerous defendants including SecurityNational Mortgage. In addition to the Fannie Mae and Freddie Mac related loans, the amendments/supplements include additional mortgage loans sold to Lehman Holdings that were packaged for securitization ("(“RMBS ~~loans"~~loans”). The RMBS loans had allegedly been sold by defendants to Lehman Bank that, in turn, sold them to Lehman Holdings. The allegations pertaining to the RMBS loans include, e.g., purported breaches of representations and warranties made to the securitization trusts by Lehman Holdings. Lehman Holdings asserts that it made representations and warranties purportedly based in part by representations and warranties made to Lehman Bank by loan originators, including SecurityNational Mortgage.

The alleged RMBS loans in dispute with SecurityNational Mortgage allegedly involve millions of dollars pertaining to approximately 577 mortgage loans in addition to the Fannie Mae and Freddie Mac related loans. Lehman Holdings also moved the Court to simultaneously allow ~~alternate~~alternative dispute resolution procedures to take place, including potential mediation. Over objections, at a hearing on October 29, 2018, the Court granted Lehman ~~Holdings'~~Holdings’ motion to amend/supplement its complaints adding the RMBS loans, and also to mandate alternative dispute resolution procedures affecting many defendants, including SecurityNational Mortgage.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

~~No answer~~11)Reinsurance, Commitments and Contingencies (Continued)

Instead of filing a Third Amended Complaint to include the RMBS loans referenced above, Lehman ~~Holdings'~~Holdings filed the matter against SecurityNational Mortgage as a new complaint ("RMBS Complaint") (United States Bankruptcy Court, Southern District of New York, Adversary Proceeding 18-01819) pertaining to the approximately 577 RMBS loans, with the Second Amended Complaint ~~has been required, and no date has been established for response~~remaining the same. The RMBS Complaint seeks alleged damages relating to ~~the proposed Third Amended Complaints, which have yet~~obligations under alleged contractual indemnification provisions in an amount to be ~~served.~~determined at trial, reasonable interest, costs and expenses incurred by LBHI in enforcing alleged obligations, including attorneys' fees and any expert witness fees incurred in litigation; and such other relief as the Court deems just and proper. SecurityNational Mortgage denies ~~that it has~~ any liability to Lehman Holdings and intends to vigorously protect and defend its position.

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~In response to a Court order, certain defendants referenced in the Second Amended Complaint and the RMBS Complaints negotiated with Lehman Holdings concerning an amended case management order pertaining to certain case procedures and management for both lawsuits including, but not limited to, timing for filing motions and answering the complaints, and provisions concerning discovery such as document production, taking depositions, and use of experts. At a hearing held on March 7, 2019, the Court considered differences of the parties as to the content of an amended case management order, and thereafter signed an amended case management order dated March 13, 2019. Certain discovery has begun in the cases, and on or before May 13, 2019, answers to the complaints are to be filed or, in the case of RMBS litigation, certain motion filing may be done without requiring an answer at the time.

~~Notes~~Debt Covenants for Mortgage Warehouse Lines of Credit

The Company, through its subsidiary SecurityNational Mortgage, has a $100,000,000 line of credit with Wells Fargo Bank N.A. The agreement charges interest at the 1-Month LIBOR rate plus 3% and matures on June 16, 2019. SecurityNational Mortgage is required to ~~Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~maintain an adjusted tangible net worth of $19,000,000, unrestricted cash of $10,000,000, indebtedness to adjusted tangible net worth of 12:1, liquidity overhead coverage of 1.75:1, and a quarterly gross profit of at least $1.

The Company, through its subsidiary SecurityNational Mortgage, also uses a line of credit with Texas Capital Bank N.A. This agreement with the bank allows SecurityNational Mortgage to borrow up to $100,000,000 for the sole purpose of funding mortgage loans. SecurityNational Mortgage is currently approved to borrow $30,000,000 of the $100,000,000 available. The agreement charges interest at the 1-Month LIBOR rate plus 3% and matures on September 7, 2019. The Company is required to maintain an adjusted tangible net worth of $70,000,000, unrestricted cash of $15,000,000, and no two consecutive quarters with a net loss. The Company is currently seeking to obtain a waiver from Texas Capital Bank as SecurityNational Mortgage did not meet the profitability covenant for the year with a loss at March 31, 2019.

The agreements for both warehouse lines include cross default provisions in that a covenant violation under one agreement constitutes a covenant violation under the other agreement. SecurityNational Mortgage has requested but not yet received a waiver from Wells Fargo in regard to its covenant violation with Texas Capital Bank. SecurityNational Mortgage anticipates that it will not meet the profitability covenant with Texas Capital Bank at the end of the second quarter of 2019, which will trigger a default with Wells Fargo under the cross default provisions, and will seek new waivers at that time. In the unlikely event the Company is required to repay both warehouse lines, the Company has sufficient cash and borrowing capacity to do so and to continue to fund its origination activities through the other internal funding sources.

SecurityNational Mortgage believes that it has taken appropriate actions to return to meeting all the covenant requirements of Texas Capital Bank and that it will continue to meet the financial covenant requirements of Wells Fargo. As of March 31, 2019, the Company had approximately $56,112,000 and $22,060,000 outstanding on the Texas Capital Bank Wells Fargo warehouse lines, respectively.

~~11)Reinsurance, Commitments and Contingencies~~ ~~(Continued)~~

Other Contingencies and Commitments

The Company has entered into commitments to fund construction and land development loans and has also provided financing for land acquisition and development. As of ~~September 30, 2018,~~March 31, 2019, the ~~Company's~~Company’s commitments were approximately ~~$100,981,000~~$98,511,000 for these loans, of which ~~$72,831,000~~$77,165,000 had been funded. The Company will advance funds once the work has been completed and an independent inspection is made. The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed 5.50% to 8.00% per annum. Maturities range between ~~nine~~six and eighteen months.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

11)Reinsurance, Commitments and Contingencies (Continued)

The Company belongs to a captive insurance group for certain casualty insurance, worker compensation and liability programs. Insurance reserves are maintained relative to these programs. The level of exposure from catastrophic events is limited by the purchase of stop-loss and aggregate liability reinsurance coverage. When estimating the insurance liabilities and related reserves, the captive insurance management considers a number of factors, which include historical claims experience, demographic factors, severity factors and valuations provided by independent third-party actuaries. If actual claims or adverse development of loss reserves occurs and exceed these estimates, additional reserves may be required. The estimation process contains uncertainty since captive insurance management must use judgment to estimate the ultimate cost that will be incurred to settle reported claims and unreported claims for incidents incurred but not reported as of the balance sheet date.

The Company is a defendant in various other legal actions arising from the normal conduct of business. Management believes that none of the actions will have a material effect on the ~~Company's~~Company’s financial position or results of operations. Based on ~~management's~~management’s assessment and legal ~~counsel's~~counsel’s representations concerning the likelihood of unfavorable outcomes, no amounts have been accrued for the above claims in the consolidated financial statements.

The Company is not a party to any other material legal proceedings outside the ordinary course of business or to any other legal proceedings, which, if adversely determined, would have a material adverse effect on its financial condition or results of operations.

12) Mortgage Servicing Rights

The Company initially records these MSRs at fair value as discussed in Note 8.

After being initially recorded at fair value, MSRs backed by mortgage loans are accounted for using the amortization method. Amortization expense is included in other expenses on the consolidated statements of earnings. MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of the estimated future net servicing income of the underlying financial assets.

The Company periodically assesses MSRs for impairment. Impairment occurs when the current fair value of the MSR falls below the ~~asset's~~asset’s carrying value (carrying value is the amortized cost reduced by any related valuation allowance). If MSRs are impaired, the impairment is recognized in current-period earnings and the carrying value of the MSRs is adjusted through a valuation allowance.

Management periodically reviews the various loan strata to determine whether the value of the MSRs in a given stratum is impaired and likely to recover. When management deems recovery of the value to be unlikely in the foreseeable future, a write-down of the cost of the MSRs for that stratum to its estimated recoverable value is charged to the valuation allowance.

The following is a summary of the MSR activity for the periods presented.

	As of March 31 2019			As of December 31 2018
Amortized cost:
Balance before valuation allowance at beginning of year	$	20,016,822		$	21,376,937
MSR additions resulting from loan sales		275,533			3,922,816
Amortization (1)		(1,243,342	)		(5,282,931	)
Application of valuation allowance to write down MSRs with other than temporary impairment		-			-
Balance before valuation allowance at end of period	$	19,049,013		$	20,016,822

Valuation allowance for impairment of MSRs:
Balance at beginning of year	$	-		$	-
Additions		-			-
Application of valuation allowance to write down MSRs with other than temporary impairment		-			-
Balance at end of period	$	-		$	-

Mortgage servicing rights, net	$	19,049,013		$	20,016,822

Estimated fair value of MSRs at end of period	$	26,133,155		$	28,885,316

_________________________
(1) Included in other expenses on the condensed consolidated statements of earnings

4341

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

12) Mortgage Servicing Rights (Continued)

The following ~~is a summary of the MSR activity for the periods presented.~~

As of
September 30
2018

As of
December 31
2017

Amortized cost:
Balance before valuation allowance at beginning of year $ 21,376,937 $ 18,872,362
MSR additions resulting from loan sales 1,922,230 6,085,352
Amortization (1) (2,423,262 ) (3,580,777 )
Application of valuation allowance to write down MSRs with other than temporary impairment - -
Balance before valuation allowance at end of period $ 20,875,905 $ 21,376,937

Valuation allowance for impairment of MSRs:
Balance at beginning of year $ - $ -
Additions - -
Application of valuation allowance to write down MSRs with other than temporary impairment - -
Balance at end of period $ - $ -

Mortgage servicing rights, net $ 20,875,905 $ 21,376,937

Estimated fair value of MSRs at end of period $ 32,327,266 $ 27,427,174

(1) Included in other expenses on the condensed consolidated statements of earnings

~~The following~~ table summarizes the ~~Company's~~Company’s estimate of future amortization of its existing MSRs carried at amortized cost:

	Estimated MSR Amortization		Estimated MSR Amortization
2018		1,634,568
2019		4,469,364		2,117,384
2020		4,469,364		2,437,671
2021		4,469,203		2,103,851
2022		3,570,974		1,802,199
2023				1,551,340
Thereafter		2,262,432		9,036,568
Total	$	20,875,905	$	19,049,013

The Company collected the following contractual servicing fee income and late fee income as reported in other revenues on the condensed consolidated statement of earnings:

	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended March 31
	2018		2017		2018		2017		2019		2018
Contractual servicing fees	$	1,905,887	$	1,848,831	$	5,670,346	$	5,359,425	$	1,858,599	$	1,876,883
Late fees		106,354		99,281		334,452		266,218		87,291		111,748
Total	$	2,012,241	$	1,948,112	$	6,004,798	$	5,625,643	$	1,945,890	$	1,988,631

The following is a summary of the unpaid principal balances (“UPB”) of the servicing portfolio for the periods presented:

		As of March 31 2019				As of December 31 2018
Servicing UPB		$	2,902,805,249			$	2,941,231,563

The following key assumptions were used in determining MSR value:

	Prepayment Speeds			Average Life (Years)		Discount Rate
March 31, 2019		3.54	%		5.8		9.51
December 31, 2018		3.86	%		6.33		9.51

13) Income Taxes

The Company’s overall effective tax rate for the three months ended March 31, 2019 and 2018 was 20.6% and 20.1%, respectively, which resulted in a provision for income taxes of $502,000 and $4,261,000, respectively. The Company's effective tax rates differ from the U.S. federal statutory rate of 21% partially due to its provision for state income taxes. The effective tax rate in the current period increased when compared to the prior year period partly due to the Company’s provision for state income taxes.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

14) Revenues from Contracts with Customers

The Company reports revenues from contracts with customers pursuant to ASC No. 606, Revenue from Contracts with Customers.

Information about Performance Obligations and Contract Balances

The Company’s cemetery and mortuary segment sells a variety of goods and services to customers in both at-need and pre-need situations. Due to the timing of the fulfillment of the obligation, revenue is deferred until that obligation is fulfilled.

The Company’s three types of future obligations are as follows:

Pre-need Merchandise and Service Revenue: All pre-need merchandise and service revenue is deferred and the funds are placed in trust until the need arises, the merchandise is received or the service is performed. The trust is then relieved, and the revenue and commissions are recognized.

At-need Specialty Merchandise Revenue: At-need specialty merchandise revenue consists of customizable merchandise ordered from a manufacturer such as markers and bases. When specialty merchandise is ordered, it can take time to manufacture and deliver the product. Revenue is deferred until the at-need merchandise is received.

Deferred Pre-need Land Revenue: Deferred pre-need revenue and corresponding commissions are deferred until 10% of the funds are received from the customer through regular monthly payments. Deferred pre-need land revenue is not placed in trust.

Complete payment of the contract does not constitute fulfillment of the performance obligation. Goods or services are deferred until such time the service is performed or merchandise is received. Pre-need contracts are required to be paid in full prior to a customer using a good or service from a pre-need contract. Goods and services from pre-need contracts can be transferred when paid in full from one owner to another. In such cases, the Company will act as an agent in transferring the requested goods and services. A transfer of goods and services does not fulfill an obligation and revenue remains deferred.

The opening and closing balances of the Company’s receivables, contract assets and contract liabilities are as follows:

	Contract Balances
	Receivables (1)		Contract Asset		Contract Liability
Opening (1/1/2019)	$	2,816,225	$	-	$	12,508,625
Closing (3/31/2019)		2,913,958		-		12,650,552
Increase/(decrease)		97,733		-		141,927

_______________________
(1) Included in Receivables, net on the condensed consolidated balance sheets

The amount of revenue recognized for the three months ended March 31, 2019 and 2018 that was included in the opening contract liability balance was $741,520 and $724,097, respectively.

The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment.

4443

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

~~12)Mortgage Servicing Rights~~ ~~(Continued)~~

~~The following is a summary of the unpaid principal balances ("UPB") of the servicing portfolio for the periods presented:~~

As of
September 30
2018

As of
December 31
2017

Servicing UPB $ 2,990,572,817 $ 2,924,868,843

~~The following key assumptions were used in determining MSR value:~~

Prepayment
Speeds

Average
Life (Years)

Discount
Rate

September 30, 2018 4.24 % 7.02 9.51
December 31, 2017 3.67 % 6.34 10.01

~~13)~~ ~~Income Taxes~~

The Company's overall effective tax rate for the three months ended September 30, 2018 and 2017 was 9.0% and 3.6%, respectively, which resulted in a provision for income taxes of $198,000 and $41,000, respectively. The Company's overall effective tax rate for the nine months ended September 30, 2018 and 2017 was 19.5% and 32.2%, respectively, which resulted in a provision for income taxes of $5,383,000 and $2,587,000, respectively. The Company's effective tax rates differ from the U.S. federal statutory rate of 21% partly due to its provision for state income taxes. The effective tax rate in the current period decreased when compared to the prior year period largely due to the Tax Cuts and Jobs Act reduction of the federal statutory rate from 35% to 21%. The decrease also includes discrete provision-to-return adjustments. Further, the effective tax rate for the three months ended September 30, 2018 increased over the three months ended September 30, 2017 as the three months ended September 30, 2017 reflected a benefit from reducing a valuation allowance.

~~14)~~ ~~Revenues from Contracts with Customers~~

See Note 2 regarding the adoption of ASU No. 2014-09. The Company's cemetery and mortuary revenues are the only revenues recognized from contracts with customers, thus they are the only revenues subject to ASU No. 2014-09.

Pre-need contract sales of funeral services and caskets - revenue and costs associated with the sales of pre-need funeral services and caskets are deferred until the services are performed or the caskets are delivered.

Sales of cemetery interment rights (cemetery burial property) - revenue and costs associated with the sale of cemetery interment rights are recognized in accordance with the retail land sales provisions based on GAAP. Under GAAP, recognition of revenue and associated costs from constructed cemetery property must be deferred until 10% of the sales price has been collected.

Pre-need contract sales of cemetery merchandise (primarily markers and vaults) - revenue and costs associated with the sale of pre-need cemetery merchandise is deferred until the merchandise is delivered.

Pre-need contract sales of cemetery services (primarily merchandise delivery and installation fees) - revenue and costs associated with the sales of pre-need cemetery services are deferred until the services are performed.

Prearranged funeral and pre-need cemetery customer acquisition costs - costs incurred related to obtaining new pre-need contract cemetery and prearranged funeral services are accounted for under the guidance of the provisions based on GAAP. Obtaining costs, which include only costs that vary with and are primarily related to the acquisition of new pre-need cemetery and prearranged funeral services, are deferred until the merchandise is delivered or services are performed.

~~Revenues and costs for at‑need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured and there are no significant obligations remaining.~~

~~SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~September 30, 2018 (Unaudited)~~

14) Revenues from Contracts with Customers (Continued)

Disaggregation of Revenue

The following table disaggregates revenue for the ~~Company's~~Company’s cemetery and mortuary ~~contracts.~~contracts for the periods presented:

	Three Months Ended September 30		Nine Months Ended September 30		Three Months Ended March 31
	2018		2018		2019		2018
Major goods/service lines
At-need	$	2,772,859	$	7,973,554	$	2,969,067	$	2,737,625
Pre-need		873,431		2,456,574		709,561		495,104
	$	3,646,290	$	10,430,128	$	3,678,628	$	3,232,729

Timing of Revenue Recognition
Goods transferred at a point in time	$	2,448,836	$	6,934,973	$	2,390,609	$	2,072,481
Services transferred at a point in time		1,197,454		3,495,155		1,288,019		1,160,248
	$	3,646,290	$	10,430,128	$	3,678,628	$	3,232,729

The following table reconciles revenues from cemetery and mortuary contracts to Note 7 – Business Segment Information for the Cemetery/Mortuary Segment for the ~~three and nine months ended September 30, 2018:~~periods presented:

	Three Months Ended September 30		Nine Months Ended September 30		Three Months Ended March 31
	2018		2018		2019		2018
Net mortuary and cemetery sales	$	3,646,290	$	10,430,128	$	3,678,628	$	3,232,729
Gains on investments and other assets		245,448		2,330,701		498,597		409,088
Net investment income		56,284		194,425		112,809		88,078
Other revenues		60,921		105,103		69,251		45,850
Revenues from external customers		4,008,943		13,060,357		4,359,285		3,775,745

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

15) Acquisitions

Probst Family Funerals and Cremations and Heber Valley Funeral Home

On February 15, 2019, the Company, through its wholly-owned subsidiary, Memorial Mortuary Inc., completed an asset purchase transaction with Probst Family Funerals and Cremations, LLC. (“Probst Family Funerals”) and Heber Valley Funeral Home, Inc. (“Heber Valley Funeral Home”). These funeral homes are both located in Heber Valley, a community situated about 45 miles southeast of Salt Lake City. For the year ended December 31, 2018, Probst Family Funerals and Heber Valley Funeral Home had combined revenues of $1,055,634 and a combined net pre-tax income of $179,613. As of December 31, 2018, Probst Family Funerals and Heber Valley Funeral Home had combined assets of $1,161,029 and a combined total equity of $18,052.

Under the terms of the transaction, as set forth in the Asset Purchase Agreement, dated February 15, 2019, by and among SN Probst, a wholly owned subsidiary of Memorial Mortuary, and Probst Family Funerals, Heber Valley Funeral Home, Joe T. Probst, Clinton Wayne Probst, Calle J. Probst, and Marsha L. Probst, Memorial Mortuary, through its wholly owned subsidiary SN Probst, paid a net purchase price of $3,315,647 for the business and assets of Probst Family Funerals and Heber Valley Funeral Home, subject to a $150,000 holdback. At the closing, Probst Funeral Homes and Heber Valley Funeral Home paid off the $907,407 principal balance and $4,340 in interest on a loan at Zions Bank that was secured by the Heber Valley Funeral Home. Also, at the closing, Probst Funeral Homes and Heber Valley Funeral Home paid off the $157,148 loan with Utah Community Credit Union and the $32,987 line of credit with Zions Bank.

The ~~opening and closing balances~~estimated fair values of the ~~Company's receivables, contract~~ assets acquired and ~~contract~~ liabilities ~~are~~assumed as of the date of acquisition were as follows:

Contract Balances
Receivables (1)
Contract
Asset (2)

Contract
Liability (2)

Opening (1/1/2018) $ 2,742,765 $ 856,479 $ 13,729,547
Closing (9/30/2018) 3,010,663 697,832 13,140,329
Increase/(decrease) 267,898 (158,647 ) (589,218 )

(1) Included in Receivables, net on the condensed consolidated balance sheets
(2) The contract asset and liability are netted together in Deferred pre-need cemetery and mortuary contract revenues on the condensed consolidated balance sheets.

Cash	$	53,859
Property and equipment		2,475,526
Receivables		13,620
Goodwill		750,745
Other		25,073
Total assets acquired		3,318,823

Bank and other loans payable		(3,176	)
Total liabilities assumed		(3,176	)
Fair value of net assets acquired/consideration paid	$	3,315,647

The ~~amount~~estimated fair values of ~~revenue recognized for the three~~buildings, land and ~~nine months ended September 30, 2018 that was~~warehouses included in property and equipment are based on independent appraisals using a sales comparison approach which are considered to be Level 3 under the ~~opening contract liability balance was $724,097 and $2,079,157.~~

fair value hierarchy. The ~~difference between~~Company determined that the ~~opening and closing balances~~estimated fair value of the ~~Company's contract~~remaining assets and ~~contract~~ liabilities ~~primarily results from~~acquired approximated their book values. The fair value of assets acquired and liabilities assumed are subject to adjustment during the ~~timing difference between~~first twelve months after the ~~Company's performance and the customer's payment.~~acquisition date if additional information becomes available to indicate a more accurate or appropriate value for an asset or liability.

4645

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~September 30, 2018~~March 31, 2019 (Unaudited)

15) Acquisitions (Continued)

Beta Capital Corp

Under the terms of the transaction, as set forth in the Stock Purchase Agreement dated June 1, 2018, by and among the Company, Beta Capital and Maxson, the Company paid Maxson the purchase consideration at the closing of the transaction equal to the sum of (i) $890,000 in cash plus (ii) the accounts receivable value of $2,515,783, representing the total amount of the Company's outstanding receivables as of the closing date of June 1, 2018, for a total closing payment of $3,405,783. From the $3,405,783 closing payment, a holdback amount equal to $175,000 was deposited into an interest bearing escrow account to be held for a period of eighteen months from the closing date to pay off any uncollected accounts receivable and other liabilities of Beta Capital as of the closing date.

The estimated fair values of the assets acquired as of the date of acquisition were as follows:

Other investments - insurance assignments	$	2,515,783	$	2,515,783
Other - intangible asset		890,000
Other - customer list intangible asset				890,000
Total assets acquired		3,405,783		3,405,783
Fair value of net assets acquired/consideration paid	$	3,405,783	$	3,405,783

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

16) Leases

On January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 regarding Leases ASC Topic 842. See Note 2 of the Notes to Condensed Consolidated Financial Statements regarding the adoption of this standard.

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. The Company determines if a contract is a lease at the inception of the contract. At the commencement date of a lease, the Company measures the lease liability at the present value of the lease payments over the lease term, discounted using the discount rate for the lease. The Company uses the rate implicit in the lease, if available, otherwise the Company uses its incremental borrowing rate. Also, at the commencement date of a lease, the Company measures the cost of the related right-of-use asset which consists of the amount of the initial measurement of the lease liability, any lease payments made to the lessor at or before the commencement date, minus any lease incentives received and any initial direct costs incurred by the Company.

Information about the Nature of Leases and Subleases

The Company ~~determined~~leases office space and equipment from third-parties under various non-cancelable agreements. The Company has operating leases for office space for its segments in areas where it conducts business. The Company subleases some of this office space. The Company also has finance leases for certain equipment, such as copy machines and postage machines. The Company does not have any lease agreements with variable lease payments. The Company has not included any options to extend or terminate leases in the recognition of the right-of-use assets or lease liabilities because of the uncertainty that they will be exercised. No residual value guarantees have been provided to the Company. The Company does not have any restrictions or covenants imposed by leases.

Leases that have not Commenced

The Company does not have any leases that have not commenced that create significant rights or obligations for the Company.

Related Party Lease Transactions

The Company does not have any related party lease transactions that require disclosure as of March 31, 2019.

Short-term Leases

The Company made an accounting policy election not to apply the recognition requirements of ASC 842 to short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying assets that the ~~estimated fair value~~lessee is reasonably certain to exercise.

Significant Judgments and Assumptions

The Company does not use any significant judgments or assumptions regarding the determination of whether a contract contains a lease; the allocation of the ~~customer list intangible asset acquired was equal to~~consideration in a contract between lease and nonlease components; or the ~~consideration paid less~~determination of the ~~insurance assignments value.~~discount rates for the leases.

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

16) Leases (Continued)

The following table presents the Company’s total lease cost recognized in earnings, amounts capitalized as right-of- use assets and cash flows from lease transactions for the period presented:

	Three Months Ended March 31
	2019
Lease Cost
Finance lease cost:
Amortization of right-of-use assets (1)	$	32,835
Interest on lease liabilities (2)		1,873
Operating lease cost (3)		1,532,256
Short-term lease cost (3)(4)		40,676
Variable lease cost		-
Sublease income (3)		(167,071	)
Total lease cost	$	1,440,569

Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,472,852
Operating cash flows from finance leases		1,873
Financing cash flows from finance leases		32,290

Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	11,931,889
Finance leases		238,336

Weighted-average remaining lease term (in years)
Finance leases		3.30
Operating leases		4.53

Weighted-average discount rate
Finance leases		5.14	%
Operating leases		4.88	%

________________________________
(1) Included in Depreciation on property and equipment on the condensed consolidated statements of earnings
(2) Included in Interest expense on the condensed consolidated statements of earnings
(3) Included in Rent and rent related expenses on the condensed consolidated statements of earnings
(4) Includes leases with a term of 12 months or less

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2019 (Unaudited)

16) Leases (Continued)

The following table presents the maturity analysis of the Company’s lease liabilities.

Maturity Analysis of Lease Liabilities
	Finance Leases			Operating Leases
Lease payments due in:
Remainder of 2019	$	71,007		$	3,978,317
2020		62,357			3,401,717
2021		41,235			1,841,369
2022		27,474			806,858
2023		22,566			686,698
Thereafter		1,156			2,339,369
Total undiscounted lease payments		225,795			13,054,328
Less: Discount on cash flows		(19,749	)		(2,504,322	)
Present value of lease liabilities		206,046			10,550,006

The following table presents the Company’s right-of-use assets and lease liabilities for the period presented:

	Balance Sheet Location	As of March 31 2019
Operating Leases
Right-of-use assets	Other assets	$	10,494,641

Lease liabilities	Other liabilities and accrued expenses	$	10,550,006

Finance Leases
Right-of-use assets		$	238,336
Accumulated amortization			(32,835	)
Right-of-use assets, net	Property and equipment, net	$	205,501

Lease liabilities	Bank and other loans payable	$	206,046

The Company is also a lessor and has operating lease agreements with various tenants that lease its commercial and residential properties. See Note 3 of the Notes to Condensed Consolidated Financial Statements for information about the Company’s real estate held for investment.

Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

The ~~Company's~~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"~~“niche” insurance products, such as the ~~Company's~~Company’s funeral plan policies and traditional whole life products; (ii) emphasis on cemetery and mortuary business; and (iii) capitalizing on an improving housing market by originating mortgage loans.

Insurance Operations

The ~~Company's~~Company’s life insurance business includes funeral plans and interest-sensitive life insurance, as well as other traditional life, accident and health insurance products. The Company places specific marketing emphasis on funeral plans through pre-need planning.

A funeral plan is a small face value life insurance policy that generally has face coverage of up to $25,000. The Company believes that funeral plans represent a marketing niche that is less competitive because most insurance companies do not offer similar coverage. The purpose of the funeral plan policy is to pay the costs and expenses incurred at the time of a ~~person's~~person’s death. On a per thousand-dollar cost of insurance basis, these policies can be more expensive to the policyholder than many types of non-burial insurance due to their low face amount, requiring the fixed cost of the policy administration to be distributed over a smaller policy size, and the simplified underwriting practices that result in higher mortality costs.

The following table shows the condensed financial results of the insurance operations for three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. See Note 7 to the condensed consolidated financial statements.

	Three months ended September 30 (in thousands of dollars)								Nine months ended September 30 (in thousands of dollars)								Three months ended March 31 (in thousands of dollars)
	2018		2017			% Increase (Decrease)			2018		2017			% Increase (Decrease)			2019		2018		% Increase (Decrease)
Revenues from external customers
Insurance premiums	$	18,639	$	17,490			7	%	$	56,641	$	52,345			8	%	$	19,027	$	18,810		1	%
Net investment income		9,376		7,974			18	%		28,574		24,847			15	%		9,753		9,778		0	%
Gains on investments and other assets		466		(645	)		172	%		22,786		(623	)		3757	%		1,343		21,860		(94	%)
Other		482		259			86	%		1,198		543			121	%		382		412		(7	%)
Total	$	28,963	$	25,078			15	%	$	109,199	$	77,112			42	%	$	30,505	$	50,860		(40	%)
Intersegment revenue	$	1,108	$	1,880			(41	%)	$	2,915	$	4,930			(41	%)	$	895	$	819		9	%
Earnings before income taxes	$	2,192	$	497			341	%	$	28,841	$	4,780			503	%	$	2,085	$	23,712		(91	%)

Intersegment revenues are primarily interest income from the warehouse line provided to SecurityNational Mortgage Company ("(“SecurityNational ~~Mortgage"~~Mortgage”). Profitability in the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 has ~~increased~~decreased due to the ~~realized of~~ $22,252,000 gain that was realized on the sale of Dry Creek at East Village Apartments ~~increases~~ in ~~investment income and increases in insurance premiums. These increases were partially offset by increases in benefits and expenses.~~the first quarter of 2018.

Cemetery and Mortuary Operations

The Company sells mortuary services and products through its eight mortuaries in Utah. The Company also sells cemetery products and services through its five cemeteries in Utah and one cemetery in San Diego County, California. At-need product sales and services are recognized as revenue when the services are performed or when the products are delivered. Pre-need cemetery product sales are deferred until the merchandise is delivered and services performed. Recognition of revenue for cemetery land sales occurs when 10% of the purchase price is received.

4850

The following table shows the condensed financial results of the cemetery and mortuary operations for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. See Note 7 to the condensed consolidated financial statements.

	Three months ended September 30 (in thousands of dollars)							Nine months ended September 30 (in thousands of dollars)							Three months ended March 31 (in thousands of dollars)
	2018		2017		% Increase (Decrease)			2018		2017		% Increase (Decrease)			2019		2018		% Increase (Decrease)
Revenues from external customers
Mortuary revenues	$	1,422	$	1,168		22	%	$	4,071	$	3,735		9	%	$	1,633	$	1,391		17	%
Cemetery revenues		2,225		1,551		43	%		6,359		5,622		13	%		2,046		1,842		11	%
Net investment income		56		107		(48	%)		194		310		(37	%)		113		88		28	%
Gains on investments and other assets		245		151		62	%		2,331		166		1304	%		498		409		22	%
Other		61		23		165	%		105		74		42	%		69		46		50	%
Total	$	4,009	$	3,000		34	%	$	13,060	$	9,907		32	%	$	4,359	$	3,776		15	%
Earnings before income taxes	$	782	$	248		215	%	$	3,714	$	1,332		179	%	$	1,185	$	861		38	%

Included in Net investment income iswas rental income from residential and commercial properties purchased from Security National Life. Memorial Estates purchased these properties from financing provided by Security National Life. The rental income is offset by property insurance, taxes, maintenance expenses and ~~maintenance expenses.~~depreciation. Memorial Estates has recorded depreciation on these properties of ~~$104,000~~$134,000 and ~~$157,000~~$154,000 for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $413,000 and $490,000 for the nine months ended September 30, 2018 and 2017,~~ respectively. Profitability in the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 has increased due to ~~a realized gain on the sale of assets of Deseret Mortuary and an increase~~increases in cemetery preneed sales and mortuary ~~revenues.~~at-need sales.

Mortgage Operations

The ~~Company's~~Company’s wholly owned subsidiaries, SecurityNational Mortgage and EverLEND Mortgage Company (formerly known as Green Street Mortgage Services, Inc.), are mortgage lenders incorporated under the laws of the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), which originate mortgage loans that qualify for government insurance in the event of default by the borrower, in addition to various conventional mortgage loan products. SecurityNational Mortgage and EverLEND Mortgage originate and refinance mortgage loans on a retail basis. Mortgage loans originated or refinanced by the ~~Company's~~Company’s mortgage subsidiaries are funded through loan purchase agreements with Security National Life and unaffiliated financial institutions.

The ~~Company's~~Company’s mortgage subsidiaries receive fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from third party investors that purchase the mortgage loans originated by the mortgage subsidiaries. Mortgage loans originated by the mortgage subsidiaries are generally sold with mortgage servicing rights released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the mortgage servicing rights on approximately ~~30%~~19% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ SecurityNational Mortgage originated ~~7,953~~1,953 loans ($~~1,169,071,000~~419,493,000 total volume) and ~~9,773~~2,368 loans ($~~1,913,207,000~~471,508,000 total volume), respectively. For the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ EverLEND Mortgage originated ~~130~~40 loans ($~~33,603,000~~9,008,000 total volume) and 2931 loans ($~~6,715,000~~8,446,000 total volume), respectively.

4951

The following table shows the condensed financial results of the mortgage operations for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. See Note 7 to the condensed consolidated financial statements.

	Three months ended September 30 (in thousands of dollars)								Nine months ended September 30 (in thousands of dollars)								Three months ended March 31 (in thousands of dollars)
	2018			2017		% Increase (Decrease)			2018			2017		% Increase (Decrease)			2019			2018			% Increase (Decrease)
Revenues from external customers
Income from loan originations	$	9,350		$	12,931		(28	%)	$	30,201		$	34,778		(13	%)	$	8,114		$	9,882			(18	%)
Secondary gains from investors		22,315			28,667		(22	%)		58,633			87,308		(33	%)		16,365			15,578			5	%
Net investment income																		176			208			(15	%)
Gains on investments and other assets																		(35	)		(248	)		86	%
Other		2,587			2,156		20	%		7,071			6,867		3	%		2,009			2,019			0	%
Total	$	34,252		$	43,754		(22	%)	$	95,905		$	128,953		(26	%)	$	26,629		$	27,439			(3	%)
Earnings before income taxes	$	(762	)	$	393		(294	%)	$	(4,994	)	$	1,919		(360	%)	$	(838	)	$	(3,385	)		75	%

Included in other revenues is ~~net investment income, gains on investments and other assets and~~ service fee income. The decrease in ~~earnings~~losses for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 was due to ~~a reduction in mortgage loan originations~~the efforts to reduce costs and ~~refinancings, and subsequent sales into the secondary market.~~restructure internal processes.

Mortgage Loan Loss Settlements

Future mortgage loan losses can be extremely difficult to estimate. However, management believes that the ~~Company's~~Company’s reserve methodology and its current practice of property preservation allow it to estimate its potential losses on mortgage loans sold. The estimated liability for indemnification losses was included in other liabilities and accrued expenses and, as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the balances were ~~$3,508,000~~$3,704,000 and ~~$2,572,000,~~$3,605,000, respectively.

Mortgage Loan Loss Litigation

For a description of the litigation involving SecurityNational Mortgage and Lehman Brothers Holdings, see Part I, Item 1. Notes to Condensed Consolidated Financial Statements (unaudited) in Note 11.

Consolidation

Three Months Ended ~~September 30, 2018~~March 31, 2019 Compared to Three Months Ended ~~September 30, 2017~~March 31, 2018

Total revenues decreased by ~~$4,608,000,~~$20,582,000, or ~~6.4%~~25.1%, to ~~$67,223,000~~$61,494,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$71,831,000~~$82,076,000 for the comparable period in ~~2017.~~2018. Contributing to this decrease in total revenues was a ~~$9,933,000~~$20,214,000 decrease in gains on investments and other assets, a $981,000 decrease in mortgage fee ~~income.~~income, a $33,000 decrease in net investment income, and a $17,000 decrease in other revenues. This decrease in total revenues was partially offset by a ~~$1,421,000 increase in net investment income, a $1,342,000 increase in gains on investments and other assets, a $1,150,000 increase in insurance premiums and other considerations, a $929,000~~$446,000 increase in net mortuary and cemetery sales and a ~~$320,000~~$217,000 increase in insurance premiums and other ~~revenues, and a $163,000 decrease in other than temporary impairments on investments.~~considerations.

Insurance premiums and other considerations increased by ~~$1,150,000,~~$217,000, or ~~6.6%~~1.2%, to ~~$18,639,000~~$19,027,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$17,489,000~~$18,810,000 for the comparable period in ~~2017.~~2018. This increase was primarily due to an increase in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying business in force.

Net investment income ~~increased~~decreased by ~~$1,421,000,~~$33,000, or ~~17.3%~~0.3%, to ~~$9,641,000~~$10,042,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$8,220,000~~$10,075,000 for the comparable period in ~~2017.~~2018. This ~~increase~~decrease was primarily attributable to a $1,267,000 increase in mortgage loan interest, a $516,000 decrease in investment expenses, a $349,000 increase in insurance assignment income, an $265,000 increase interest on cash and cash equivalents, and a $40,000 increase in income from other investments. This increase was partially offset by a $695,000$760,000 decrease in rental income from real estate held for investment, a ~~$211,000~~$428,000 decrease in mortgage loan interest, a $26,000 decrease in fixed maturity securities income, and a ~~$110,000~~$15,000 decrease in policy loan income. This decrease was partially offset by a $463,000 decrease in investment expenses, a $362,000 increase interest on cash and cash equivalents, a $351,000 increase in insurance assignment income, and a $20,000 increase in equity securities income.

Net mortuary and cemetery sales increased by ~~$929,000,~~$446,000, or ~~34.2%~~13.8%, to ~~$3,646,000~~$3,679,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$2,717,000~~$3,233,000 for the comparable period in ~~2017.~~2018. This increase was primarily due to a ~~$402,000 increase in cemetery at-need sales, a $273,000~~$214,000 increase in cemetery preneed sales and ~~$254,000~~a $242,000 increase in mortuary at-need sales.

Gains on investments and other assets ~~increased~~decreased by ~~$1,342,000,~~$20,214,000, or ~~419.8%~~91.8%, to ~~$1,022,000 in gains~~$1,807,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$320,000 in losses~~$22,021,000 for the comparable period in ~~2017.~~2018. This ~~increase~~decrease in gains on investments and other assets was primarily attributable to a ~~$619,000~~$21,675,000 decrease in gains on other assets due to the $22,252,000 gain that was realized on the sale of Dry Creek at East Village Apartments in the first quarter 2018. This decrease was partially offset by a $331,000 increase in gains on fixed maturity securities ~~a $453,000 increase in gains on other assets,~~ and a ~~$270,000~~$1,130,000 increase in gains on equity securities mostly attributable to increases in the fair value of these securities. Due to the adoption of Accounting Standards Update ~~("ASU"~~(“ASU”) 2016-01 on January 1, 2018, these changes in fair value are now recognized in earnings instead of other comprehensive income. ~~See the discussion of the adoption of this ASU in Note 2 of the notes to condensed consolidated financial statements.~~

Mortgage fee income decreased by ~~$9,933,000,~~$981,000, or ~~23.9%~~3.9%, to ~~$31,665,000,~~$24,479,000, for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$41,598,000~~$25,460,000 for the comparable period in ~~2017.~~2018. This decrease was primarily due to a net decrease of $2,110,000 in the fair value of loans held for sale and loan commitments. This decrease was partially offset by a $786,000 increase in secondary gains, a $249,000 decrease in the provision for loan loss reserve, and an $94,000 increase in other loan fees and interest income. It should be noted that the recent overall decline in mortgage fee income was due to a reduction in mortgage loan originations that was indicative of the mortgage loan industry as a whole. ~~The decline in mortgage loan originations~~This reduction was primarily caused by a national shortage of available new housing for mortgage loan origination ~~transactions, and the~~transactions. The reduction was also caused by a decline in mortgage loan refinancings, which ~~were primarily caused by~~was due to recent increases in interest rates on mortgage loans. Additionally, the decline in mortgage originations by SecurityNational Mortgage has resulted in a decline in fees earned from third-party investors that purchase mortgage loans from SecurityNational Mortgage.

Other revenues increased by ~~$320,000,~~$16,000, or ~~14.0%~~0.7%, to ~~$2,609,000~~$2,461,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$2,289,000~~$2,477,000 for the comparable period in ~~2017.~~2018. This increase was ~~due~~primarily attributable to an increase in ~~mortgage~~the cemetery and mortuary segment primarily due to the acquisition of Probst Family Funerals and Cremations and Heber Valley Funeral Home. This was partially offset by a decrease in servicing ~~fees.~~fee revenue.

Total benefits and expenses were ~~$65,011,000,~~$59,062,000, or ~~96.7%~~96.0% of total revenues, for the three months ended ~~September 30, 2018,~~March 31, 2019, as compared to ~~$70,693,000,~~$60,889,000, or ~~98.4%~~74.2% of total revenues, for the comparable period in ~~2017.~~2018.

Death benefits, surrenders and other policy benefits, and future policy benefits ~~decreased~~increased by an aggregate of ~~$60,000~~$692,000 or ~~0.4%~~4.3%, to ~~$15,995,000~~$16,695,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$16,055,000~~$16,003,000 for the comparable period in ~~2017.~~2018. This ~~decrease~~increase was primarily the result of a ~~$156,000 decrease~~$470,000 increase in death benefits, a $166,000 increase in future policy benefits, and a ~~$49,000 decrease~~$56,000 increase in surrender and other ~~policy benefits. The decrease was partially offset by a $145,000 increase in future~~ policy benefits.

Amortization of deferred policy and pre-need acquisition costs and value of business acquired increased by ~~$507,000,~~$18,000, or ~~22.7%~~0.6%, to ~~$2,746,000~~$3,128,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$2,239,000~~$3,110,000 for the comparable period in ~~2017.~~2018. This increase was primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs.

Selling, general and administrative expenses decreased by ~~$6,451,000,~~$2,405,000, or ~~12.8%~~6.1%, to ~~$43,839,000~~$37,094,000 for the three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$50,290,000~~$39,499,000 for the comparable period in ~~2017.~~2018. This decrease was primarily the result of a ~~$5,380,000~~$1,607,000 decrease in commissions, ~~due to the decline in mortgage loan originations,~~ a ~~$1,077,000~~$1,535,000 decrease in ~~costs related to funding mortgage loans,~~personnel expenses, a ~~$343,000~~$59,000 decrease in rent and rent related expenses, a ~~$188,000 decrease in advertising, and a $60,000~~$27,000 decrease in depreciation on property and ~~equipment.~~equipment, and a $14,000 decrease in costs related to funding mortgage loans. This decrease was partially offset by a ~~$581,000~~$835,000 increase in other expenses. The decreases in commissions and personnel expenses are primarily a result of the efforts of the Mortgage segment to reduce costs and ~~a $16,000 increase~~restructure internal processes in ~~personnel expenses.~~

~~Interest expense increased by $200,000, or 12.1%,~~order to ~~$1,856,000 for~~offset the three months ended September 30, 2018, from $1,656,000 for the comparable period in 2017. This increase was primarily due to an increase in interest expense on mortgage warehouse lines and interest expense on bank loans for real estate held for investment.

~~Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017~~

Total revenues increased by $2,191,000, or 1.0%, to $218,164,000 for the nine months ended September 30, 2018, from $215,973,000 for the comparable period in 2017. Contributing to this increase in total revenues was a $24,659,000 increase in gains on investments and other assets, a $4,295,000 increase in insurance premiums and other considerations, a $3,899,000 increase in net investment income, a $1,073,000 increase in net mortuary and cemetery sales, a $1,036,000 increase in other revenues, and a $482,000 decrease in other than temporary impairments on investments. This increase in total revenues was mostly offset by a $33,253,000 decreasereductions in mortgage fee ~~income.~~

~~Insurance premiums and other considerations increased by $4,295,000, or 8.2%, to $56,640,000 for the nine months ended September 30, 2018,~~income that resulted from $52,345,000 for the comparable period in 2017. This increase was primarily due to an increase in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying business in force.

Net investment income increased by $3,899,000, or 15.3%, to $29,458,000 for the nine months ended September 30, 2018, from $25,559,000 for the comparable period in 2017. This increase was primarily attributable to a $5,214,000 increase in mortgage loan interest, a $1,013,000 increase in insurance assignment income, a $440,000 increase in interest on cash and cash equivalents, a $151,000 increase in income from other investments, and a $17,000 increase in fixed maturity securities income. This increase was partially offset by a $2,117,000 decrease in rental income from real estate held for investment, a $490,000 increase in investment expenses, a $325,000 decrease in policy loan income and a $4,000 decrease in equity securities income.

Net mortuary and cemetery sales increased by $1,073,000, or 11.5%, to $10,430,000 for the nine months ended September 30, 2018, from $9,357,000 for the comparable period in 2017. This increase was primarily due to a $371,000 increase in cemetery at-need sales, a $360,000 increase in cemetery preneed sales, and a $342,000 increase in mortuary at-need sales.

Gains on investments and other assets increased by $24,658,000, or 3,458.1%, to $25,372,000 in gains for the nine months ended September 30, 2018, from $713,000 in gains for the comparable period in 2017. This increase in gains on investments and other assets was primarily attributable to a gain of $22,252,000 realized from the sale of Dry Creek at East Village Apartments, a gain of $1,603,000 realized on the sale of assets of Deseret Mortuary, and a $501,000 increase in gains on other assets due to the sale of various other residential real estate properties, a $319,000 increase in gains on fixed maturity securities. This increase was partially offset by a $17,000 increase in net losses on equity securities partially attributable to increases in the fair value of these securities. Due to the adoption of Accounting Standards Update ("ASU") 2016-01, these changes in fair value are now recognized in earnings instead of other comprehensive income. See the discussion of the adoption of this ASU in Note 2 of the notes to condensed consolidated financial statements.

Mortgage fee income decreased by $33,253,000, or 27.2%, to $88,834,000, for the nine months ended September 30, 2018, from $122,087,000 for the comparable period in 2017. This decrease was primarily due to a declinereduction in mortgage loan originations that was indicative of the mortgage loan industry as a ~~whole. The decline in mortgage loan originations was primarily caused by~~whole and a ~~national shortage of available new housing for mortgage loan origination transactions, and the decline~~reduction in mortgage loan refinancings, which ~~were primarily caused by~~was due to recent increases in interest rates on mortgage loans. Additionally, the decline in mortgage originations by SecurityNational Mortgage has resulted in a decline in fees earned from third-party investors that purchase mortgage loans from SecurityNational Mortgage.

~~Other revenues increased~~Interest expense decreased by ~~$1,036,000,~~$270,000, or ~~16.2%~~15.3%, to ~~$7,430,000~~$1,492,000 for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, from ~~$6,394,000~~$1,762,000 for the comparable period in ~~2017.~~2018. This ~~increase was due to an increase in mortgage servicing fees.~~

Total benefits and expenses were $190,603,000, or 87.4% of total revenues, for the nine months ended September 30, 2018, as compared to $207,943,000, or 96.3% of total revenues, for the comparable period in 2017.

Death benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $2,330,000 or 5.1%, to $48,198,000 for the nine months ended September 30, 2018, from $45,868,000 for the comparable period in 2017. This increase was primarily the result of a $1,466,000 increase in death benefits, a $751,000 increase in future policy benefits, and a $113,000 increase in surrender and other policy benefits.

Amortization of deferred policy and pre-need acquisition costs and value of business acquired increased by $1,695,000, or 27.0%, to $7,967,000 for the nine months ended September 30, 2018, from $6,272,000 for the comparable period in 2017. This increasedecrease was primarily due to ~~an increase in the average outstanding balance of deferred policy and pre-need acquisition costs.~~

Selling, general and administrative expenses decreased by $22,501,000, or 15.0%, to $127,499,000 for the nine months ended September 30, 2018, from $150,000,000 for the comparable period in 2017. This decrease was primarily the result of a ~~$14,516,000~~ decrease in commissions due to the decline in mortgage loan originations, a $3,207,000 decrease in personnel expenses due to a reduction in mortgage loan originators, a $2,168,000 decrease in costs related to funding mortgage loans, a $887,000 decrease in rent and rent related expenses, a $760,000 decrease in advertising, a $665,000 decrease in other expenses, and a $298,000 decrease in depreciation on property and equipment.

Interest expense increased by $1,002,000, or 23.3%, to $5,297,000 for the nine months ended September 30, 2018, from $4,295,000 for the comparable period in 2017. This increase was primarily due to an increase in interest expense on mortgage warehouse lines and interest expense on bank loans for real estate held for ~~investment.~~investment due to the sale of the Dry Creek Apartments at East Village in the first quarter 2018.

Cost of goods and services sold-mortuaries and cemeteries increased by $137,000, or 26.7%, to $653,000 for the three months ended March 31, 2019, from $515,000 for the comparable period in 2018. This increase was primarily due to increases in both mortuary at-need and cemetery preneed sales.

Liquidity and Capital Resources

The ~~Company's~~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 subsidiaries realize cash flow from fees generated by originating and refinancing mortgage loans, and fees earned from mortgage loans held for sale that are 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 related to the issuance of new policies, the maintenance of existing policies, and debt service, and to meet current operating expenses.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ the Company's operations ~~used cash of $10,251,000 and~~ provided cash of ~~$6,030,000,~~$19,519,000 and $8,713,000, respectively. This ~~decrease~~increase was due primarily to an increase in cash ~~used to fund~~collected from mortgage loans held for sale.

The ~~Company's~~Company’s liability for future policy benefits is expected to be paid out over the long-term due to the ~~Company's~~Company’s market niche of selling funeral plans. Funeral plans are small face value life insurance that will pay the costs and expenses incurred at the time of a ~~person's~~person’s death. A person generally will keep these policies in force and will not surrender them prior to a ~~person's~~person’s death. Because of the long-term nature of these liabilities, the Company is able to hold to maturity its bonds, real estate, and mortgage loans, thus reducing the risk of having to liquidate these long-term investments as a result of any sudden changes in their fair values.

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. The Company purchases short-term investments on a temporary basis to meet the expectations of short-term requirements of the ~~Company's~~Company’s products. The ~~Company's~~Company’s investment philosophy is intended to provide a rate of return that will persist during the expected duration of policyholder and cemetery and mortuary liabilities regardless of future interest rate movements.

The ~~Company's~~Company’s investment policy is to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of 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 insurance subsidiaries amounted to ~~$229,775,000~~$231,275,000 and ~~$227,774,000~~$231,976,000 as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. This represents ~~39.3%~~37.9% and ~~35.1%~~38.9% of the total investments as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, 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 nine categories used for rating bonds. At ~~September 30, 2018, 3.4%~~March 31, 2019, 3.68% (or ~~$7,782,000)~~$8,513,000) and at December 31, ~~2017, 5.4%~~2018, 3.6% (or ~~$12,293,000)~~$8,413,000) of the ~~Company's~~Company’s total bond investments were invested in bonds in rating categories three through nine, which were considered non‑investment grade.

The Company has classified its fixed income securities as held to maturity. Notwithstanding, business conditions 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 ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the life insurance subsidiaries were in compliance with the regulatory criteria.

The ~~Company's~~Company’s total capitalization of ~~stockholders'~~stockholders’ equity, bank and other loans payable was ~~$368,454,000~~$349,274,000 as of ~~September 30, 2018,~~March 31, 2019, as compared to ~~$306,019,000~~$359,172,000 as of December 31, ~~2017. Stockholders'~~2018. Stockholders’ equity as a percent of total capitalization was ~~46.7%~~49.9% and ~~48.5%~~47.8% as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

Lapse rates measure the amount of insurance terminated during a particular period. The ~~Company's~~Company’s lapse rate for life insurance in ~~2017~~2018 was ~~10.6%~~9.9% as compared to a rate of ~~9.6%~~10.6% for ~~2016.~~2017. The ~~2018~~2019 lapse rate to date has been approximately the same as ~~2017.~~2018.

At ~~September 30, 2018,~~March 31, 2019, the combined statutory capital and surplus of the ~~Company's~~Company’s life insurance subsidiaries was ~~$56,688,000.~~$56,810,000. The life insurance subsidiaries cannot pay a dividend to its parent company without approval of state insurance regulatory authorities.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

As of ~~September 30, 2018,~~March 31, 2019, the Company carried out an evaluation under the supervision and with the participation of its Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the ~~Company's~~Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ~~"Exchange Act"~~“Exchange Act”). The ~~Company's~~Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the Securities and Exchange Commission (SEC) reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified by the ~~SEC's~~SEC’s rules and forms and that such information is accumulated and communicated to management, including the ~~Company's~~Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. The executive officers have concluded that the ~~Company's~~Company’s disclosure controls and procedures were effective as of ~~September 30, 2018,~~March 31, 2019, and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, the ~~Company's~~Company’s financial condition, results of operations, and cash flows for the periods presented in conformity with United States Generally Accepted Accounting Principles (GAAP).

Changes in Internal Control over Financial Reporting

There have been no changes in the ~~Company's~~Company’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings.

For a description of the litigation involving SecurityNational Mortgage and Lehman Brothers Holdings, see Part I, Item 1. Notes to Condensed Consolidated Financial Statements (unaudited) in Note 11.

The Company is not a party to any other material legal proceedings outside the ordinary course of business or to any other legal proceedings, which if adversely determined, would have a material adverse effect on its financial condition or results of operation.

Item 1A. Risk Factors.

As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities

None.

Issuer Purchases of Equity Securities

On September 7, 2018, the Board of Directors of the Company approved a Stock Repurchase Plan that authorized the repurchase of 300,000 shares of the Company's Class A Common Stock in the open market. The repurchased shares of Class A common stock will be held as treasury shares to be used as the Company's employer matching contribution to the Employee 401(k) Retirement Savings Plan.

The following table shows the Company's repurchase activity during the three months ended ~~September 30, 2018~~March 31, 2019 under the Stock Repurchase Plan.

Period (a) Total Number of Class A Shares Purchased (b) Average Price Paid per Class A Share (c) Total Number of Class A Shares Purchased as Part of Publicly Announced Plan or Program (d) Maximum Number (or Approximate Dollar Value) of Class A Shares that May Yet Be Purchased Under the Plan or Program
7/1/2018-7/31/2018 - - - -
8/1/2018-8/31/2018 - - - -
9/1/2018-9/30/2018 10,000 $ 5.45 - 290,000

Total 10,000 $ 5.45 - 290,000

Period	(a) Total Number of Class A Shares Purchased		(b) Average Price Paid per Class A Share		(c) Total Number of Class A Shares Purchased as Part of Publicly Announced Plan or Program		(d) Maximum Number (or Approximate Dollar Value) of Class A Shares that May Yet Be Purchased Under the Plan or Program
1/1/2019-1/31/2019		10,080	$	5.40		-		251,220
2/1/2019-2/28/2019		10,000		5.44		-		241,220
3/1/2019-3/31/2019		600		5.11		-		240,620

Total		20,680	$	5.40		-		240,620

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

None.

Item 5.Other Information.

Acquisition of Probst Family Funerals and Cremations and Heber Valley Funeral Home

Acquisition of Beta Capital Corp.

On June 1, 2018, the Company completed a stock purchase transaction with Beta Capital Corp. ("Beta Capital") and Ronald D. Maxson ("Maxson"), the sole owner of all the outstanding shares of common stock of Beta Capital, to purchase all of the outstanding shares of common stock of Beta Capital. Beta Capital is engaged in the operation of a factoring business with the principal purpose of providing funding for funeral homes and mortuaries. For the year ended December 31, 2017, Beta Capital had revenues of $1,208,000 with a net pre-tax income of $204,000. As of December 31, 2017, the total assets of Beta Capital were $3,270,000 and total equity was $1,832,000.

Under the terms of the transaction, as set forth in the Stock Purchase Agreement dated September 1, 2018 (the "Purchase Agreement"), by and among the Company, Beta Capital and Maxson, the Company paid Maxson the purchase consideration at the closing of the transaction equal to the sum of (i) $890,000 in cash plus (ii) the accounts receivable value of $2,515,783, representing the total amount of the Company's outstanding receivables as of the closing date of September 1, 2018, for a total closing payment of $3,405,783. From the $3,405,783 closing payment, a holdback amount equal to $175,000 was deposited into an interest bearing escrow account to be held for a period of eighteen months from the closing date to pay off any uncollected accounts receivable and other liabilities of Beta Capital as of the closing date.

Sale of Dry Creek at East Village Apartments

On March 29, 2018, the Company through its wholly owned subsidiary, Security National Life Insurance Company ("(“Security National ~~Life"~~Life”), completed the sale of the Dry Creek at East Village ("(“Dry ~~Creek"~~Creek”) apartments to a subsidiary of Dinapoli Capital Partners, LLC ("(“Dinapoli ~~Capital"~~Capital”) pursuant to the terms of the Purchase and Sale Agreement, dated February 14, 2018, between Security National Life and Dinapoli Capital. The purchase price paid for the Dry Creek apartments was $57,000,000. From the proceeds that Security National Life received from the sale of the apartment complex, $26,802,904 was used to pay off an existing loan at Zions First National Bank, N.A., which was secured by a security interest in the apartment complex. A brokerage commission of $285,000 and legal fees and related costs were also paid from the purchase proceeds. The ~~Company's~~Company’s book basis in Dry Creek was approximately $34,400,000, and the Company ~~has~~ recognized the gain net of tax effects from the sale in the first quarter of 2018.

The Dry Creek apartments consist of 282 units, with a mixture of one, two, and three-bedroom units. The construction of Dry Creek was completed in December 2015. As of December 31, 2017, the apartments were 95% leased. Also, rental rates in the market had increased by 9.8% over pro forma rents, and effective (achieved) rates net of concessions increased. The Company had owned the land for the development since 1991, when the Company purchased the land, along with the cemetery and mortuary that are adjacent to the property. The Company continues to operate the cemetery and mortuary. The Company may use the net proceeds from the sale of the Dry Creek apartments to invest in residential and commercial real estate projects. This may include the possible use of a Section 1031 real property exchange transaction.

~~Acquisition of Beta Capital Corp.~~

In addition to the escrow amount, prior to closing Maxson estimated the amount of outstanding, accrued or unpaid liabilities and indebtedness owed by Beta Capital as of the closing date, including but not limited to salaries, commissions, employment taxes, and accounts payable (the "Trailing Liabilities") and left a cash balance in the Company's checking account at closing in the amount of at least 200% of such estimate (the "Cash Amount"). Ninety days after closing, Beta Capital is required to provide Maxson with an accounting of all post-closing payments by Beta Capital of the Trailing Liabilities from the Cash Amount and transfer the remaining balance of the Cash Amount to Maxson. In the event the Cash Amount is insufficient to pay the entire amount of the Trailing Liabilities, Maxson is required to reimburse the Company until the Company has been reimbursed in full for the total amount of the Trailing Liabilities.

Moreover, during the 18-month period from the closing date, the Company shall cause Beta Capital to use commercially reasonable efforts to collect all outstanding accounts receivable as of the closing date. Within 15 days after expiration of the 18-month period following the closing date, the Company shall provide written notice to Maxson of the amounts of the outstanding accounts receivables that had not been collected in full by the Company during the 18-month period. Maxson shall then be required to reimburse the Company for such uncollected accounts receivable. These payments shall be made by Maxson to the Company from the escrow funds then held in the escrow account. The balance of funds, if any, in the escrow account after disbursement of the uncollected accounts receivable payment to the Company shall be paid to Maxson by the escrow agent.

Also at closing, the Company and Beta Capital entered into a non-competition and confidentiality agreement with Maxson. Further at closing, the Company and Beta Capital entered into a lease agreement with Maxson for the use of the office space currently occupied by Beta Capital in Portsmouth, Virginia. The lease is for a period of two years payable in the amount of $3,000 per month.

Item 6. Exhibits, Financial Statements Schedules and Reports on Form 8-K.

(a)(1)	Financial Statements

	See “Table of Contents – Part I – Financial Information” under page 2 above

(a)(2)	Financial Statement Schedules

	None

	All other schedules to the consolidated financial statements required by Article 7 of Regulation S‑X are not required under the related instructions or are inapplicable and therefore have been omitted.

(a)(3)	Exhibits

	The following Exhibits are filed herewith pursuant to Rule 601 of Regulation S‑K or are incorporated by reference to previous filings.

~~(a)(1)Financial Statements~~

~~See "Table of Contents – Part I – Financial Information" under page 2 above~~

~~(a)(2)Financial Statement Schedules~~

~~None~~

All other schedules to the consolidated financial statements required by Article 7 of Regulation S‑X are not required under the related instructions or are inapplicable and therefore have been omitted.

5657

~~(a)(3)Exhibits~~

~~The following Exhibits are filed herewith pursuant to Rule 601 of Regulation S‑K or are incorporated by reference to previous filings.~~

3.1	Articles of Amendment and Restatement to Articles of Incorporation ~~(8)~~(6)

3.2	Amended and Restated Bylaws ~~(10)~~

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)

~~7.1~~	~~Letter from Eide Bailly, LLP (9)~~

10.1	Amended and Restated Employee Stock Ownership Plan (ESOP) and Trust Agreement (1)

10.2	~~2003~~2013 Amended and Restated Stock Option and Other Equity Incentive Awards Plan (2)

10.3	~~2006~~2014 Director Stock Option Plan (3)

10.4	~~2013 Amended and Restated Stock Option and Other Equity Incentive Awards Plan (7)~~Employment Agreement with Scott M. Quist (4)

10.5	~~2014 Director Stock Option Plan (4)~~

~~10.6~~	~~Employment Agreement with Scott M. Quist (5)~~

~~10.7~~	~~Stock Purchase Agreement among Security National Financial Corporation and Reppond Holding Company to purchase First Guaranty Insurance Company (7)~~

~~10.8~~	Stock Purchase Agreement among Security National Financial Corporation, Beta Capital Corp., and Ronald D. Maxson ~~(11)~~(7)

~~10.9~~10.6	Stock Repurchase Plan (8)

10.7	Asset Purchase Agreement among SN Probst LLC, Probst Family Funerals and Cremations, L.L.C, Heber Valley Funeral Home, Inc., Joe T. Probst, Clinton Wayne Probst, Calle J. Probst, and Marsha J. Probst (9)

14	Code of Business Conduct and Ethics

21	Subsidiaries of the Registrant

23.1	Consent of Eide Bailly LLP ~~(6)~~(5)

23.2	Consent of Mackey Price & Mecham ~~(6)~~(5)

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

101.xml	Instance Document

101.xsd	Taxonomy Extension Schema Document

101.cal	Taxonomy Extension Calculation Linkbase Document

101.def	Taxonomy Extension Definition Linkbase Document

101.lab	Taxonomy Extension Label Linkbase Document

101.pre	Taxonomy Extension Presentation Linkbase Document

5758

(1)	Incorporated by reference from Registration Statement on Form S‑1, as filed on September 29, 1987

(2)	Incorporated by reference from ~~Schedule 14A Definitive Proxy Statement,~~Report on Form 10-Q, as filed on ~~September 5, 2003, relating to the Company's Annual Meeting of Stockholders~~August 15, 2016

(3)	Incorporated by reference from Schedule 14A Definitive Proxy Statement, as filed on September ~~1, 2007, relating~~2, 2014, related to ~~the Company's~~Company’s Annual Meeting of Stockholders

(4)	~~Incorporated by reference from Schedule 14A Definitive Proxy Statement, as filed on September 2, 2014, related to Company's Annual Meeting of Stockholders~~

~~(5)~~	Incorporated by reference from Report on Form 10-Q, as filed on November 15, 2015

~~(6)~~(5)	Incorporated by reference from Registration Statement on Form S-8, as filed on October 20, 2015

~~(7)~~	~~Incorporated by reference from Report on Form 10-Q, as filed on August 15, 2016~~

~~(8)~~(6)	Incorporated by reference from Report on Form 10-K, as filed on March 31, 2017

(7)	Incorporated by reference from Report on Form 8-K, as filed on June 6, 2018

(8)	Incorporated by reference from Report on Form 10-Q, as filed on November 13, 2018

(9)	Incorporated by reference from Report on Form 8-K, as filed on ~~August 4, 2017~~

~~(10)~~	~~Incorporated by reference from Report on Form 10-Q, as filed on August 25, 2017~~

~~(11)~~	~~Incorporated by reference from Form 8-K, as filed on September 6, 2018~~February 28, 2019

5859

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 13, 2018~~May 15, 2019		/s/ Scott M. Quist
		Scott M. Quist
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

Dated: ~~November 13, 2018~~May 15, 2019		/s/ Garrett S. Sill
		Garrett S. Sill
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

5960

	As of September 30, 2018		As of March 31 2019		As of December 31 2018

Aggregate fair value	$	165,507,394	$	123,374,303	$	136,210,853
Unpaid principal balance		160,124,093		119,925,635		131,663,946
Unrealized gain		5,383,301		3,448,668		4,546,907

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
	2018			2017			2018			2017			2019			2018
Loan fees	$	7,758,284		$	15,086,168		$	21,347,320		$	33,149,877		$	5,741,262		$	5,745,308
Interest income		1,993,895			2,097,249			4,698,899			5,679,868			1,214,632			1,116,454
Secondary gains		22,315,022			28,667,234			58,633,363			87,307,806			16,364,771			15,578,495
Change in fair value of loan commitments		94,569			(4,833,268	)		537,696			(3,677,554	)		932,527			440,958
Change in fair value of loans held for sale ~~(1)~~		(203,623	)		1,061,917			4,563,222			1,061,917			328,058			2,929,996
Provision for loan loss reserve		(293,443	)		(481,727	)		(946,556	)		(1,435,180	)		(102,379	)		(351,051	)
Mortgage fee income	$	31,664,704		$	41,597,573		$	88,833,944		$	122,086,734		$	24,478,871		$	25,460,160

(1) See Fair Value Option Election

	As of September 30 2018			As of December 31 2017		As of March 31 2019			As of December 31 2018
Balance, beginning of period	$	2,571,524		$	627,733	$	3,604,869		$	2,571,524
Provision on current loan originations (1)		946,556			1,851,187		102,379			1,148,334
Charge-offs, net of recaptured amounts		(10,061	)		92,604		(3,233	)		(114,989	)
Balance, end of period	$	3,508,019		$	2,571,524	$	3,704,015		$	3,604,869

_______________________________
(1) Included in Mortgage fee income

	Number of Class A Shares			Weighted Average Exercise Price		Number of Class C Shares		Weighted Average Exercise Price

Outstanding at December 31, 2017		880,426		$	4.35		523,603	$	5.24
Granted		-					-
Exercised		(36,133	)				-
Cancelled		(5,704	)				-
Outstanding at September 30, 2018		838,589		$	4.48		523,603	$	5.24

As of September 30, 2018:
Options exercisable		805,902		$	4.46		505,227	$	5.26

As of September 30, 2018:
Available options for future grant		421,241					165,638

Weighted average contractual term of options outstanding at September 30, 2018	6.05 years					2.69 years

Weighted average contractual term of options exercisable at September 30, 2018	6.05 years					2.45 years

Aggregated intrinsic value of options outstanding at September 30, 2018 (1)	$	867,356				$	267,943

Aggregated intrinsic value of options exercisable at September 30, 2018 (1)	$	862,157				$	260,592

(1) The Company used a stock price of $5.20 as of September 30, 2018 to derive intrinsic value.

	Number of Class A Shares			Weighted Average Exercise Price		Number of Class C Shares		Weighted Average Exercise Price

Outstanding at December 31, 2018		1,011,274		$	4.49		577,280	$	5.15
Granted		2,000					-
Exercised		(968	)				-
Cancelled		-					-
Outstanding at March 31, 2019		1,012,306		$	4.49		577,280	$	5.15

As of March 31, 2019:
Options exercisable		898,472		$	4.36		506,404	$	5.13

As of March 31, 2019:
Available options for future grant		295,128					146,425

Weighted average contractual term of options outstanding at March 31, 2019	5.89 years					3.71 years

Weighted average contractual term of options exercisable at March 31, 2019	5.71 years					2.87 years

Aggregated intrinsic value of options outstanding at March 31, 2019 (1)	$	704,498				$	137,424

Aggregated intrinsic value of options exercisable at March 31, 2019 (1)	$	704,498				$	137,424

__________________________________
(1) The Company used a stock price of $4.72 as of March 31, 2019 to derive intrinsic value.

	Nine Months Ended September 30, 2018
	Class A Common Stock		Class C Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Treasury Stock			Total

January 1, 2018	$	29,071,154	$	4,178,748		$	38,125,042		$	603,170		$	77,520,951		$	(931,075	)	$	148,567,990

Cumulative effect adjustment upon adoption of new accounting standard (ASU 2016-01)		-		-			-			(603,170	)		603,170			-			-
Net earnings		-		-			-			-			16,925,923			-			16,925,923
Stock-based compensation expense		-		-			58,087			-			-			-			58,087
Exercise of stock options		63,968		-			(22,115	)		-			-			-			41,853
Sale of treasury stock		-		-			88,964			-			-			222,410			311,374
Stock dividends		3,520		(4	)		5,362			-			(8,878	)		-			-
March 31, 2018		29,138,642		4,178,744			38,255,340			-			95,041,166			(708,665	)		165,905,227

Net earnings		-		-			-			-			3,238,217			-			3,238,217
Other comprehensive loss		-		-			-			(1,448	)					-			(1,448	)
Stock-based compensation expense		-		-			58,053			-			-			-			58,053
Sale of treasury stock		-		-			163,335			-			-			222,420			385,755
Conversion Class C to Class A		376		(376	)		-			-			-			-			-
June 30, 2018		29,139,018		4,178,368			38,476,728			(1,448	)		98,279,383			(486,245	)		169,585,804

Net earnings		-		-			-			-			2,013,746			-			2,013,746
Other comprehensive income		-		-			-			761						-			761
Stock-based compensation expense		-		-			58,691			-			-			-			58,691
Exercise of stock options		8,298		-			7,261			-			-			-			15,559
Sale of treasury stock		-		-			168,500			-			-			242,954			411,454
Purchase of treasury stock		-		-			-			-			-			(54,507	)		(54,507	)
September 30, 2018	$	29,147,316	$	4,178,368		$	38,711,180		$	(687	)	$	100,293,129		$	(297,798	)	$	172,031,508

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
September 30, 2018
Fixed maturity securities held to maturity carried at amortized cost:
Bonds:
U.S. Treasury securities and obligations of U.S. Government agencies	$	53,683,435		$	142,299	$	(1,248,029	)	$	52,577,705
Obligations of states and political subdivisions		6,987,405			40,224		(190,262	)		6,837,367
Corporate securities including public utilities		155,372,733			7,544,943		(2,299,844	)		160,617,832
Mortgage-backed securities		13,731,279			135,074		(323,564	)		13,542,789
Redeemable preferred stock		612,023			36,437		-			648,460
Total fixed maturity securities held to maturity	$	230,386,875		$	7,898,977	$	(4,061,699	)	$	234,224,153

Equity securities at estimated fair value:

Common stock:

Industrial, miscellaneous and all other	$	5,891,712		$	786,960	$	(689,754	)	$	5,988,918

Total equity securities at estimated fair value	$	5,891,712		$	786,960	$	(689,754	)	$	5,988,918

Mortgage loans held for investment at amortized cost:
Residential	$	79,930,807
Residential construction		71,330,891
Commercial		32,869,447
Less: Unamortized deferred loan fees, net		(1,279,465	)
Less: Allowance for loan losses		(1,470,158	)
Total mortgage loans held for investment	$	181,381,522

Real estate held for investment net of accumulated depreciation:
Residential	$	26,988,179
Commercial		92,088,430
Total real estate held for investment	$	119,076,609

Other investments and policy loans at amortized cost:
Policy loans	$	6,389,122
Insurance assignments		32,166,750
Federal Home Loan Bank stock		2,308,700
Other investments		4,220,893
Less: Allowance for doubtful accounts		(1,046,840	)

Total other investments and policy loans	$	44,038,625

Accrued investment income	$	3,751,942

Total investments	$	584,624,491

	Unrealized Losses for Less than Twelve Months			No. of Investment Positions		Unrealized Losses for More than Twelve Months			No. of Investment Positions		Total Unrealized Losses
At December 31, 2017
Industrial, miscellaneous and all other		$	213,097		98		$	419,572		81		$	632,669
Total unrealized losses		$	213,097		98		$	419,572		81		$	632,669
Fair Value		$	847,718				$	1,329,213				$	2,176,931

	Net Ending Balance								Total Square Footage
	September 30				December 31				September 30		December 31
	2018				2017				2018		2017
Arizona	$	4,000	(1	)	$	4,000	(1	)		-		-
Arkansas		-				96,169				-		3,200
Kansas		6,086,759				7,200,000				222,679		222,679
Louisiana		474,069				493,197				7,063		7,063
Mississippi		3,655,283				3,725,039				33,821		33,821
New Mexico		7,000	(1	)		7,000	(1	)		-		-
Texas		335,000	(1	)		335,000	(1	)		-		23,470
Utah		81,526,319	(2	)		61,108,384	(2	)		502,129		433,244

	$	92,088,430			$	72,968,789				765,692		723,477

(1) Undeveloped land

(2) Includes Center53 completed in July 2017. The Company is currently in the process of leasing the building.

Impaired Loans	Impaired Loans											Impaired Loans

		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized			Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
September 30, 2018
March 31, 2019
With no related allowance recorded:
Commercial		$	195,911	$	195,911	$	-	$	65,304	$	-		$	851,953	$	851,953	$	-	$	851,953	$	-
Residential			1,592,174		1,592,174		-		2,693,459		-			2,565,738		2,565,738		-		2,565,738		-
Residential construction			1,078,529		1,078,529		-		733,603		-			502,991		502,991		-		502,991		-

With an allowance recorded:
Commercial		$	-	$	-	$	-	$	-	$	-		$	-	$	-	$	-	$	-	$	-
Residential			1,496,091		1,496,091		75,064		1,615,392		-			751,332		751,332		39,884		751,332		-
Residential construction			-		-		-		-		-			-		-		-		-		-

Total:
Commercial		$	195,911	$	195,911	$	-	$	65,304	$	-		$	851,953	$	851,953	$	-	$	851,953	$	-
Residential			3,088,265		3,088,265		75,064		4,308,851		-			3,317,070		3,317,070		39,884		3,317,070		-
Residential construction			1,078,529		1,078,529		-		733,603		-			502,991		502,991		-		502,991		-

December 31, 2017
December 31, 2018
With no related allowance recorded:
Commercial		$	-	$	-	$	-	$	365,220	$	-		$	196,182	$	196,182	$	-	$	98,023	$	-
Residential			3,322,552		3,322,552		-		3,290,094		-			1,612,164		1,612,164		-		2,423,135		-
Residential construction			461,834		461,834		-		277,232		-			502,991		502,991		-		675,950		-

With an allowance recorded:
Commercial		$	-	$	-	$	-	$	-	$	-		$	-	$	-	$	-	$	-	$	-
Residential			1,601,000		1,601,000		237,560		1,350,115		-			1,327,487		1,327,487		74,185		1,543,416		-
Residential construction			-		-		-		-		-			-		-		-		-		-

Total:
Commercial		$	-	$	-	$	-	$	365,220	$	-		$	196,182	$	196,182	$	-	$	98,023	$	-
Residential			4,923,552		4,923,552		237,560		4,640,209		-			2,939,651		2,939,651		74,185		3,966,551		-
Residential construction			461,834		461,834		-		277,232		-			502,991		502,991		-		675,950		-

Mortgage Loans Held for Investment Credit Exposure	Mortgage Loans Held for Investment Credit Exposure																	Mortgage Loans Held for Investment Credit Exposure
Credit Risk Profile Based on Payment Activity	Credit Risk Profile Based on Payment Activity																	Credit Risk Profile Based on Payment Activity

		Commercial				Residential				Residential Construction				Total					Commercial				Residential				Residential Construction				Total
		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017			March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018

Performing		$	32,673,536	$	54,954,865	$	76,842,542	$	97,603,559	$	70,252,362	$	49,695,699	$	179,768,440	$	202,254,123		$	33,406,401	$	27,589,745	$	85,924,274	$	86,995,949	$	74,981,469	$	70,863,553	$	194,312,144	$	185,449,247
Non-performing			195,911		-		3,088,265		4,923,552		1,078,529		461,834		4,362,705		5,385,386			851,953		196,182		3,317,070		2,939,651		502,991		502,991		4,672,014		3,638,824

Total		$	32,869,447	$	54,954,865	$	79,930,807	$	102,527,111	$	71,330,891	$	50,157,533	$	184,131,145	$	207,639,509		$	34,258,354	$	27,785,927	$	89,241,344	$	89,935,600	$	75,484,460	$	71,366,544	$	198,984,158	$	189,088,071

	Mortgage Loans on Non-Accrual Status				Mortgage Loans on Non-Accrual Status

	As of September 30 2018		As of December 31 2017		As of March 31 2019		As of December 31 2018
Commercial	$	195,911	$	-	$	851,953	$	196,182
Residential		3,088,265		4,923,552		3,317,070		2,939,651
Residential construction		1,078,529		461,834		502,991		502,991
Total	$	4,166,794	$	5,385,386	$	3,820,061	$	3,442,642

	Number of Class A Shares		Weighted Average Exercise Price		Number of Class C Shares			Weighted Average Exercise Price

Outstanding at December 31, 2016		741,973	$	4.33		556,298		$	4.61
Granted		-				-
Exercised		-				(103,402	)
Cancelled		-				(24,227	)
Outstanding at September 30, 2017		741,973	$	4.33		428,669		$	5.59

As of September 30, 2017:
Options exercisable		706,854	$	4.21		407,669		$	5.50

As of September 30, 2017:
Available options for future grant		525,682				227,750

Weighted average contractual term of options outstanding at September 30, 2017	6.62 years				2.63 years

Weighted average contractual term of options exercisable at September 30, 2017	6.50 years				2.55 years

Aggregated intrinsic value of options outstanding at September 30, 2017 (1)	$	941,567			$	151,012

Aggregated intrinsic value of options exercisable at September 30, 2017 (1)	$	941,311			$	151,012

(1) The Company used a stock price of $5.10 as of September 30, 2017 to derive intrinsic value.

	Life Insurance		Cemetery/ Mortuary		Mortgage			Intercompany Eliminations			Consolidated
For the Three Months Ended
March 31, 2019
Revenues from external customers	$	30,505,368	$	4,359,285	$	26,629,182		$	-		$	61,493,835
Intersegment revenues		895,372		116,651		126,358			(1,138,381	)		-
Segment profit before income taxes		2,085,341		1,184,865		(838,047	)		-			2,432,159
				-
Identifiable Assets		935,021,695		87,087,362		155,695,585			(125,548,998	)		1,052,255,644
Goodwill		2,765,570		750,745		-			-			3,516,315
Total Assets		937,787,265		87,838,107		155,695,585			(125,548,998	)		1,055,771,959

For the Three Months Ended
March 31, 2018
Revenues from external customers	$	50,860,529	$	3,775,745	$	27,439,835		$	-		$	82,076,109
Intersegment revenues		819,292		109,017		133,370			(1,061,679	)		-
Segment profit before income taxes		23,711,809		860,763		(3,385,391	)		-			21,187,181

Identifiable Assets		873,263,596		92,747,811		163,896,491			(134,701,132	)		995,206,766
Goodwill		2,765,570		-		-						2,765,570
Total Assets		876,029,166		92,747,811		163,896,491			(134,701,132	)		997,972,336

a)	Quoted prices for similar assets or liabilities in active markets;
b)	Quoted prices for identical or similar assets or liabilities in non-active markets; or
c)	Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

	Contract Balances
	Receivables (1)		Contract Asset (2)			Contract Liability (2)
Opening (1/1/2018)	$	2,742,765	$	856,479		$	13,729,547
Closing (9/30/2018)		3,010,663		697,832			13,140,329
Increase/(decrease)		267,898		(158,647	)		(589,218	)

(1) Included in Receivables, net on the condensed consolidated balance sheets
(2) The contract asset and liability are netted together in Deferred pre-need cemetery and mortuary contract revenues on the condensed consolidated balance sheets.

Period	(a) Total Number of Class A Shares Purchased		(b) Average Price Paid per Class A Share		(c) Total Number of Class A Shares Purchased as Part of Publicly Announced Plan or Program		(d) Maximum Number (or Approximate Dollar Value) of Class A Shares that May Yet Be Purchased Under the Plan or Program
7/1/2018-7/31/2018		-		-		-		-
8/1/2018-8/31/2018		-		-		-		-
9/1/2018-9/30/2018		10,000	$	5.45		-		290,000

Total		10,000	$	5.45		-		290,000