Security National Financial Corporation Q2 FY2026 earnings call

• Overall Company Performance

  • Consolidated Q2 2026 after-tax net earnings increased 7.3% year-over-year, and first half 2026 after-tax net earnings increased 8.1% year-over-year, despite total Q2 revenue decreasing 6.3% and first half revenue decreasing 5% year-over-year.
  • Management prioritized improving profitability over near-term revenue growth in the current market environment, and hit this profitability goal.
  • Total assets grew to $1.61 billion as of June 30, 2026, a 3% increase from year-end 2025. Stockholders' equity increased 5.5% to $433 million, and the debt-to-equity ratio improved to 2.72x from 2.81x at year-end, strengthening the company's capital position.
  • Combined commissions and personnel expenses decreased 11.8% year-to-date, reflecting ongoing company-wide efficiency efforts.

• Mortgage Segment Operational Progress

  • This was the segment's first profitable quarter since Q3 2025, resulting from multi-year restructuring of operations, management, pricing, underwriting, and back-office processes to cut inefficiencies.
  • Market share increased to 10 basis points in Q2 2026, up from 9 basis points in Q1 2026, as sequential origination volume growth outpaced industry-wide growth.
  • The segment's separation from a large group of loan originators in Q3 2025 reduced origination volumes but significantly improved profitability.
  • Focus on repeat borrowers has delivered results: repeat borrower share is at a three-year high, and refinance volume as a percentage of total volume increased to 17% in Q2 2026 from 14% in Q2 2025. HELOC originations have grown from near zero in Q4 2025 to an average of one transaction per day in Q2 2026.

• Cemetery Mortuary Segment Operational Progress

  • Mortuary operations grew revenue despite an industry-wide headwind of lower national death rates in 2026, and gained market share. Key performance metrics all improved: families served increased 1.1%, average revenue per case increased 6.2% to $5,549, and the share of cremation families choosing a memorial/funeral service rose to 41.9%.
  • Cemetery operations grew pre-need land sales by 6.1% to $2.34 million, and total interments increased 5.1% to 348, with traditional interments up 12.1%.
  • The segment has made deliberate investments in talent and technology to support long-term growth and efficiency, which reduced near-term operating margins.

• Life Insurance Segment Operational Progress

  • The company intentionally shifted away from low-margin single-premium products to focus on higher-value modal pay (multi-payment) products. First year modal pay premium sales are already up year-over-year, though the revenue and profit impact will be gradual as premium payments are received over time. The existing renewal premium base for individual whole life policies grew 1.5% year-to-date, indicating strong persistency.
  • Management deliberately increased land and residential subdivision development investments to $122 million (up from $98 million at year-end 2025) to drive future profitability; this investment does not generate GAAP income until lots are sold or construction begins, suppressing current period earnings.
  • Construction loan origination rebounded strongly in Q2 2026 after a weak Q1 2026. Total expenses were down 3.7% year-to-date, even as the company made targeted investments in sales talent, reflecting strong expense discipline. Policyholder claims experience has remained favorable, close to pre-COVID trends.

1. Mortgage Segment: Q2 2026 pre-tax net income was $71,000, compared to a pre-tax net loss of $1.671 million in Q2 2025. First half 2026 total profit improved by $3 million year-over-year. Origination volume was $548 million in Q2 2026, an 11% year-over-year decrease, with a 12% sequential quarter increase. First half 2026 revenue decreased 9% year-over-year. This segment contributed 0% to total net profit in Q2 2025, and ~0.8% of pre-tax profit in Q2 2026.

2. Cemetery Mortuary Segment: Q2 2026 revenue increased 21% year-over-year, and first half 2026 revenue increased 13% year-over-year. Q2 2026 pre-tax earnings increased 69% to $3 million, and first half 2026 pre-tax profit increased 29% year-over-year. Excluding investment results, Q2 2026 operating revenue increased 5.5% to $7.8 million, and operating pre-tax earnings decreased 4.8% to $963,000. Within the segment: mortuary-only Q2 revenue increased 7.4% to $3.5 million, pre-tax earnings decreased 3.2% to $375,000; cemetery-only Q2 revenue increased 4% to $4.3 million, pre-tax earnings decreased 5.8% to $588,000. Investment revenue increased 169.5% to $2 million year-over-year, driven by higher unrealized gains. The segment delivered a nearly 23% net profit margin for the first half of 2026, and contributed ~33.3% of total pre-tax profit in Q2 2026.

3. Life Insurance Segment: First half 2026 total revenue was $98.4 million, a 5% year-over-year decrease; Q2 2026 revenue was $49.5 million, down from $53.4 million year-over-year. First half 2026 pre-tax net earnings were $16.1 million, a 13% year-over-year decrease; Q2 2026 pre-tax net earnings were $8.5 million, down from $10.6 million year-over-year. First half 2026 net investment income decreased 14% to $33.4 million, and Q2 2026 net investment income decreased 21% to $15.7 million, driven primarily by lower home builder profit splits and lower construction lending interest income. This segment contributed ~94.4% of total pre-tax profit in Q2 2026.

Management did not issue explicit numerical forward guidance in this earnings call. The implicit directional guidance from management includes:

• The mortgage segment is expected to achieve full-year profitability after delivering a profitable Q2 2026 result, with further growth from repeat borrower and HELOC expansion.
• The life insurance segment's investments in distribution, sales processes, and land holdings are expected to drive higher durable profitability in future periods, even as they suppress current period results.
• The cemetery mortuary segment's recent investments in talent and technology are expected to translate into improved operating margins over time as operational improvements are scaled against lower industry death rate headwinds.

• Forward-looking statements are inherently uncertain, and actual results may differ materially from projections due to risks including changes in economic conditions, interest rates, regulatory developments, and competitive pressures.
  • Unrealized gains in the cemetery mortuary segment's investment portfolio are volatile and can move in either direction based on market conditions, creating quarterly earnings volatility.
  • Mortgage loans more than 90 days past due increased to $15.8 million as of June 30, 2026, up from $6.5 million at year-end 2025; while the allowance for credit losses is currently appropriately sized, this trend requires ongoing close monitoring.
  • The U.S. national death rate has fallen to multi-year lows in 2026, creating a sustained headwind for mortuary operations that pressure volume and profitability, even as the company gains market share.
  • Continued low new home construction starts in Utah have reduced construction loan origination volumes for the life insurance segment, suppressing near-term interest income.
  • The company holds elevated cash balances that earn lower interest than lending and investment activities, suppressing current period investment income.

No investor questions were submitted or raised during the Q&A portion of this earnings call.