SECURITY NATIONAL FINANCIAL CORP - 10-K Annual Report

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SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004, or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to

Commission File Number 0-9341

Security National Financial Corporation
(Exact name of registrant as specified in its Charter)

UTAH 87-0345941
- -------------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)

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

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each Class Name of each exchange on which registered
---------------------------- -----------------------------------------
Class A Common Stock, $2.00 Par Value Nasdaq National Market

Class C Common Stock, $0.20 Par Value None

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of the last business day of Registrant's most recently completed
second fiscal quarter was $19,539,000, based upon the closing price on that date
on the Nasdaq National Market. There were 5,441,685 shares of Class A Common
Stock and 6,380,197 shares of Class C Stock outstanding at March 31, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the registrant's 2005 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.

============================================================================

Item 1. Business

Security National Financial Corporation (the "Company") operates in three main
business segments: life insurance, cemetery and mortuary, and mortgage loans.
The life insurance segment is engaged in the business of selling and servicing
selected lines of life insurance, annuity products and accident and health
insurance. These products are marketed in 38 states through a commissioned sales
force of independent licensed insurance agents who may also sell insurance
products of other companies. The cemetery and mortuary segment of the Company
consists of five cemeteries in the state of Utah and one in the state of
California and eight mortuaries in the state of Utah and four in the state of
Arizona. The Company also engages in pre-need selling of funeral, cemetery and
cremation services through its Utah, Arizona and California operations. Many of
the insurance agents also sell pre-need funeral, cemetery and cremation
services. The mortgage loan segment is an approved governmental and conventional
lender that originates and underwrites residential and commercial loans for new
construction and existing homes and real estate projects. The mortgage loan
segment operates through 17 offices in seven states, and is an approved mortgage
lender in 20 states.

The design and structure of the Company is that each business segment is related
to the other business segments and contributes to the profitability of the other
segments. Because of the Company's cemetery and mortuary operations in Utah,
California and Arizona, the Company enjoys a level of public awareness that
assists in the sales and marketing of insurance and pre-need cemetery and
funeral products. The Company's insurance subsidiaries invest their assets
(representing in part the pre-paid funerals) in investments authorized by the
respective insurance departments of their states of domicile. One such
investment authorized by the insurance departments is high quality mortgage
loans. Thus, while each business segment is a profit center on a stand-alone
basis, this horizontal integration of each segment is planned to lead to
improved profitability of the Company. The Company also pursues growth through
acquisitions of both life insurance companies and cemeteries and mortuaries. The
Company's acquisition business strategy is based on reducing the overhead cost
of the acquired company by utilizing existing personnel, management, and
technology while still providing quality service to customers and policyholders.

The Company was organized as a holding company in 1979, when Security National
Life Insurance Company ("Security National Life") became a wholly owned
subsidiary of the Company and the former stockholders of Security National Life
became stockholders of the Company. Security National Life was formed in 1965
and has grown through the direct sale of life insurance and annuities and
through the acquisition of other insurance companies, including the acquisitions
of Capital Investors Life Insurance Company in 1994, Civil Service Employees
Life Insurance Company in 1995, Southern Security Life Insurance Company
"Southern Security Life" in 1998 and an asset purchase transaction with Acadian
Life Insurance Company ("Acadian") in December 2002. Effective January 26, 2004,
the Company purchased all of the outstanding common stock of Paramount Security
Life Insurance Company ("Paramount") now Security National Life Insurance
Company of Louisiana ("Security National Life of Louisiana"), a Louisiana
domiciled life insurance company, for the purchase price of $4,398,000. In
addition, effective January 1, 2005, Security National Life and its wholly-owned
subsidiary, SSLIC Holding Company, completed a merger transaction with Southern
Security Life Insurance Company in which SSLIC Holding Company was merged with
Southern Security Life Insurance Company, that resulted in Southern Security
Life Insurance Company becoming a wholly-owned subsidiary of Security National
Life and the unaffiliated stockholders of Southern Security Life Insurance
Company becoming entitled to receive an aggregate of $1,884,733 for their
shares.

The cemetery and mortuary operations have also grown through the acquisition of
other cemetery and mortuary companies, including the acquisitions of Paradise
Chapel Funeral Home, Inc. in 1989, Holladay Memorial Park, Inc., Cottonwood
Mortuary, Inc. and Deseret Memorial, Inc. in 1991, Sunset Funeral Home in 1994,
Greer-Wilson Funeral Home, Inc. in 1995 and Crystal Rose Funeral Home in 1997.
In 1993, the Company formed SecurityNational Mortgage Company ("SecurityNational
Mortgage") to originate and refinance mortgage loans. Since 1993
SecurityNational Mortgage has opened 17 branches in seven states. See Notes to
Consolidated Financial Statements for additional disclosure and discussion
regarding segments of the business.

Life Insurance

Products

The Company, through its insurance subsidiaries, Security National Life,
Southern Security Life Insurance Company, and Security National Life of
Louisiana, issues and distributes selected lines of life insurance and
annuities. The Company's life insurance business includes funeral plans,
interest-sensitive whole life insurance, as well as other traditional life and
accident and health insurance products. The Company places specific marketing
emphasis on funeral plans and traditional whole life products sold in
association with the funding of higher education costs.

A funeral plan is a small face value life insurance policy that generally has
face coverage of up to $15,000. The Company believes that funeral plans
represent a marketing niche that has lower competition since most insurance
companies do not offer similar coverages. The purpose of the funeral plan policy
is to pay the costs and expenses incurred at the time of a 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.

Through the Company's higher education funding division, the Company markets
strategies for savings for college and repayment of loans a child may have after
college. Pursuant to those strategies the Company conducts scholarship searches
and originates and funds government guaranteed student loans. The traditional
whole life product marketed in conjunction with funding of higher education
costs is a 10-Pay Whole Life Policy with an annuity rider. Both the paid-up
aspect of the whole life policy and the savings aspect of the annuity rider are
marketed as a tool for parents to help save for, fund or repay loans incurred
during college. The product is offered to parents who have children generally
under the age of 25.

Markets and Distribution

The Company is licensed to sell insurance in 38 states. The Company, in
marketing its life insurance products, seeks to locate, develop and service
specific "niche" markets. A "niche" market is an identifiable market, which the
Company believes is not emphasized by most insurers.

Funeral plan policies are sold primarily to persons who range in age from 45 to
75. Even though people of all ages and income levels purchase funeral plans, the
Company believes that the highest percentage of funeral plan purchasers are
individuals who are older than 45 and have low to moderate income.

Higher education funding is for families that desire to prepare for their
children's higher education needs. Such preparation can include searches for
scholarships, grant applications, guaranteed student loan applications, and the
purchase of life insurance and annuities. In 1965, the Higher Education Act
created the guaranteed student loan programs participated in by the Company.
Federal Family Education Loan (FFEL) Program, which now comprises Federal
Stafford Loans (formerly Guaranteed Student Loans), Federal PLUS Loans, and
Federal Consolidation Loans. The FFEL Program makes these long-term loans
available to students attending institutions of higher education, vocation,
technical, business and trade schools and some foreign schools. State or private
nonprofit guaranty agencies insure FFEL's and the Federal Government reimburses
these agencies for all or part of the insurance loans they pay to lenders. The
federal guaranty on a FFEL replaces the security (collateral) usually required
for a long-term consumer loan. These government programs have numerous rules for
qualification and have limits on how much you can borrow. The Company's whole
life product has an annuity rider that can provide a way for families to save
additional funds for their children's education. The Company has a student loan
resource department, which is available to policyholders to help parents and
students apply for various scholarships, grants and loans.

A majority of the Company's funeral plan premiums come from the states of
Arizona, Arkansas, Colorado, Idaho, Kansas, Mississippi, Oklahoma, Texas and
Utah. A majority of the Company's non-funeral plan life insurance premiums come
from the states of Alabama, California, Florida, Georgia, Louisiana, New Mexico,
South Carolina and Utah.

The Company sells its life insurance products through direct agents and brokers
and independent licensed agents who may also sell insurance products of other
companies. The commissions on life insurance products range from approximately
10% to 100% of first year premiums. In those cases where the Company utilizes
its direct agents in selling such policies, those agents customarily receive
advances against future commissions.

In some instances, funeral plan insurance is marketed in conjunction with the
Company's cemetery and mortuary sales force. When it is marketed by that group,
the beneficiary is usually the Company's cemeteries and mortuaries. Thus, death
benefits that become payable under the policy are paid to the Company's cemetery
and mortuary subsidiaries to the extent of services performed and products
purchased.

In marketing the funeral plan insurance, the Company also seeks and obtains
third-party endorsements from other cemeteries and mortuaries within its
marketing areas. Typically, these cemeteries and mortuaries will provide letters
of endorsement and may share in mailing and other lead-generating costs. The
incentive for such businesses to share the costs is that these businesses are
usually made the beneficiary of the policy. The following table summarizes the
life insurance business for the five years ended December 31, 2004:

2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Life Insurance

Policy/Cert
Count as of December 31 357,767(1)(2)(3) 353,017(1)(2) 341,909(1) 74,335 71,178
Insurance
in force as of December 31
(omitted 000) $2,914,135(1)(2)(3) $2,914,438(1)(2) $2,635,436(1) $2,425,557 $2,049,789
Premiums Collected
(omitted 000) $ 30,560(1)(2)(3) $ 28,598(1)(2) $ 14,699 $ 14,860 $ 14,959

(1) Includes asset purchase transaction with Acadian Life Insurance Company on
December 23, 2002.
(2) Includes reinsurance assumed under agreement with Guaranty Income Life
Insurance Company on October 1, 2003.
(3) Includes stock purchase transaction with Paramount Security Life Insurance
Company, now known as Security National Life Insurance Company of
Louisiana, on March 16, 2004.

Underwriting

Factors considered in evaluating an application for ordinary life insurance
coverage can include the applicant's age, occupation, general health and medical
history. Upon receipt of a satisfactory (non-funeral plan insurance)
application, which contains pertinent medical questions, the Company writes
insurance based upon its medical limits and requirements subject to the
following general non-medical limits:

Age Nearest Non-Medical
Birthday Limits

0-50 $75,000
51-up Medical information
required (APS or exam)

When underwriting life insurance, the Company will sometimes issue policies with
higher premium rates for substandard risks.

The Company also sells funeral plan insurance. This insurance is a small face
amount, with a maximum policy size of $15,000. It is written on a simplified
medical application with underwriting requirements being a completed
application, a phone inspection on selected applicant and a Medical Information
Bureau inquiry. There are several underwriting classes in which an applicant can
be placed.

Annuities

Products

The Company's annuity business includes single premium deferred annuities,
flexible premium deferred annuities and immediate annuities. A single premium
deferred annuity is a contract where the individual remits a sum of money to the
Company, which is retained on deposit until such time as the individual may wish
to annuitize or surrender the contract for cash. A flexible premium deferred
annuity gives the contract holder the right to make premium payments of varying
amounts or to make no further premium payments after his initial payment. These
single and flexible premium deferred annuities can have initial surrender
charges. The surrender charges act as a deterrent to individuals who may wish to
surrender their annuity contracts. Annuities have guaranteed interest rates of
3% to 4 1/2% per annum. Above that, the interest rate credited is periodically
determined by the Board of Directors at their discretion. An immediate annuity
is a contract in which the individual remits to the Company a sum of money in
return for the Company's obligation to pay a series of payments on a periodic
basis over a designated period of time, such as an individual's life, or for
such other period as may be designated.

Holders of annuities generally enjoy a significant benefit under the current
federal income tax law in that interest accretions that are credited to the
annuities do not incur current income tax expense on the part of the contract
holder. Instead, the interest income is tax deferred until such time as it is
paid out to the contract holder. In order for the Company to realize a profit on
an annuity product, the Company must maintain an interest rate spread between
its investment income and the interest rate credited to the annuities. From that
spread must be deducted commissions, issuance expenses and general and
administrative expenses. The Company's annuities currently have credited
interest rates ranging from 3% to 5%.

Markets and Distribution

The general market for the Company's annuities is middle to older age
individuals who wish to save or invest their money in a tax-deferred
environment, having relatively high yields. The major source of annuity
considerations comes from direct agents. Annuities are also sold in conjunction
with other insurance sales. This is true in both the funeral planning and higher
education planning areas. If an individual does not qualify for a funeral plan
due to health considerations, the agent will often sell that individual an
annuity to fund those final expenses. In the higher education planning area,
most life insurance sales have as part of the transaction an annuity portion
that is used to accumulate funds. The commission rates on annuities are up to
10%.

The following table summarizes the annuity business for the five years ended
December 31, 2004:

2004 2003 2002 2001 2000
---- ---- ---- ---- ----
Annuities
Policy/Cert
Count as of
December 31 7,365 7,206 7,711 8,021 8,443
Deposits Collected
(omitted 000) $1,972 $2,026 $3,215 $2,550 $3,039

Accident and Health

Products

Prior to the acquisition of Capital Investors Life in 1994, the Company did not
actively market accident and health products. With the acquisition of Capital
Investors Life, the Company acquired a block of accident and health policies
which pay limited benefits to policyholders. The Company is currently offering a
low-cost comprehensive diver's accident policy. The diver's policy provides
worldwide coverage for medical expense reimbursement in the event of diving or
water sports accidents.

Markets and Distribution

The Company currently markets its diver's policy through water sports magazine
advertising and dive shops throughout the world. The Company pays direct
commissions ranging from 15% to 30% for new business generated.

The following table summarizes the accident and health business for the five
years ended December 31, 2004:

2004 2003 2002 2001 2000
--- ---- ---- ---- ----
Accident and Health
Policy/Cert. Count
as of December 31 15,778 17,391 18,921 19,343 21,454
Premiums Collected
(omitted 000) $308 $352 $365 $413 $464

Reinsurance

When a given policy exceeds the Company's retention limits, the Company
reinsures with other companies that portion of the individual life insurance and
accident and health policies it has underwritten. The primary purpose of
reinsurance is to enable an insurance company to write a policy in an amount
larger than the risk it is willing to assume for itself. The Company remains
obligated for amounts ceded in the event the reinsurers do not meet their
obligations.

The Company's policy is to retain no more than $75,000 of ordinary insurance per
insured life. Excess risk is reinsured. The total amount of life insurance in
force at December 31, 2004, reinsured by other companies aggregated
$188,542,000, representing approximately 5.8% of the Company's life insurance in
force on that date.

The Company currently cedes and assumes certain risks with various authorized
unaffiliated reinsurers pursuant to reinsurance treaties which are renewable
annually. The premiums paid by the Company are based on a number of factors,
primarily including the age of the insured and the risk ceded to the reinsurer.

Investments

The investments that support the Company's life insurance and annuity
obligations are determined by the Investment Committee of the Board of Directors
of the various subsidiaries and ratified by the full Board of Directors of the
respective subsidiaries. A significant portion of the investments must meet
statutory requirements governing the nature and quality of permitted investments
by insurance companies. The Company's interest-sensitive type products,
primarily annuities and interest-sensitive whole life, compete with other
financial products such as bank

certificates of deposit, brokerage sponsored money market funds as well as
competing life insurance company products. While it is not the Company's policy
to offer the highest yield in this climate, in order to offer what the Company
considers to be a competitive yield, it maintains a diversified portfolio
consisting of common stocks, preferred stocks, municipal bonds, investment and
non-investment grade bonds including high-yield issues, mortgage loans, real
estate, short-term investments and other securities and investments.

See "Management's Discussion and Analysis of Results of Operations and Financial
Condition" and "Notes to Consolidated Financial Statements" for additional
disclosure and discussion regarding investments.

Cemetery and Mortuary

Products

The Company has six wholly-owned cemeteries and 12 wholly owned mortuaries. The
cemeteries are non-denominational. Through its cemetery and mortuary operations,
the Company markets a variety of products and services both on a pre-need basis
(prior to death) and an at-need basis (at the time of death). The products
include grave spaces, internment vaults, mausoleum crypts and niches, markers,
caskets, flowers and other related products. The services include professional
services of funeral directors, opening and closing of graves, use of chapels and
viewing rooms, and use of automobiles and clothing. The Company has a funeral
chapel at each of its cemeteries, other than Holladay Memorial Park and Singing
Hills Memorial Park, and has eight separate stand-alone mortuary facilities.

Markets and Distribution

The Company's pre-need cemetery and mortuary sales are marketed to persons of
all ages but are generally purchased by persons 45 years of age and older. The
Company also markets its mortuary and cemetery products on an at-need basis. The
Company is limited in its geographic distribution of these products to areas
lying within an approximate 20-mile radius of its mortuaries and cemeteries. The
Company's at-need sales are similarly limited in geographic area.

The Company actively seeks to sell its cemetery and funeral products to
customers on a pre-need basis. The Company employs cemetery sales
representatives on a commission basis to sell these products. Many of these
pre-need cemetery and mortuary sales representatives are also licensed insurance
salesmen and sell funeral plan insurance. In many instances, the Company's
cemetery and mortuary facilities are the named beneficiary of the funeral plan
policies.

The sales representatives of the Company's cemetery and mortuary operations are
commissioned and receive no salary. The sales commissions range from 4% to 21%
for cemetery products and services and 10% to 100% of first year premiums for
funeral plan insurance. Potential customers are located via telephone sales
prospecting, responses to letters mailed by the sales representatives, newspaper
inserts, referrals, contacts made at funeral services, and door-to-door
canvassing. The Company trains its sales representatives and generates leads for
them. If a customer comes to one of the Company's cemeteries on an at-need
basis, the sales representatives are compensated on a commission basis.

Mortgage Loans

Products

Beginning in 1993, the Company, through its subsidiary, SecurityNational
Mortgage Company has been active in both the residential as well as commercial
real estate markets. The Company has current approvals through HUD, Fannie Mae,
Freddie Mac and other substantial secondary market investors, which enable it to
originate a wide

variety of residential mortgage loan products that are subsequently sold to
these investors. The Company uses internal funding sources as well as
maintaining external warehouse lines of credit with unaffiliated financial
institutions. The Company also originates residential construction loans.

Security National Capital, a subsidiary of SecurityNational Mortgage Company,
originates commercial real estate loans both for internal investment as well as
for sale to unaffiliated investors.

Markets and Distribution

The Company's residential mortgage lending services are marketed primarily to
individual homeowners. SecurityNational Mortgage Company maintains a retail
origination presence in the Salt Lake City market in addition to 17 wholesale
branch offices located in Arizona, California, Colorado, Florida, Nevada, Utah
and Texas, with sales representatives in other states.

Recent Acquisitions and Other Business Activities

Southern Security Life Insurance Company

Effective as of January 1, 2005, Security National Life and SSLIC Holding
Company, a wholly owned subsidiary of Security National Life, completed a merger
transaction with Southern Security Life Insurance Company. Under the terms of
the merger and pursuant to the Agreement and Plan of Reorganization, dated
August 25, 2004, including the amendment thereto dated December 27, 2004, SSLIC
Holding Company was merged with and into Southern Security Life Insurance
Company, which resulted in (i) Southern Security Life Insurance Company becoming
a wholly-owned subsidiary of Security National Life Insurance Company, and (ii)
the unaffiliated stockholders of Southern Security Life Insurance Company,
holding an aggregate of 490,816 shares of common stock, becoming entitled to
receive $3.84 in cash for each issued and outstanding share of their common
stock of Southern Security Life Insurance Company, or an aggregate of
$1,884,733.

As a result of the merger, the separate existence of SSLIC Holding Company
ceased as Southern Security Life Insurance Company became the surviving
corporation of the merger. Southern Security Life Insurance Company continues to
be governed by the laws of the State of Florida, and its separate corporate
existence continues unaffected by the merger. In addition, as a result of the
merger, Security National Life owns all of the issued and outstanding common
shares of Southern Security Life Insurance Company. Security National Financial
Corporation, through its affiliates, Security National Life Insurance Company
and SSLIC Holding Company, owned 76.7% of the Company's outstanding common
shares prior to the merger.

The purpose of the merger is to terminate the registration of the common stock
of Southern Security Life Insurance Company under the Securities Exchange Act of
1934 (by reducing the number of its stockholders of record to fewer than 300
stockholders) and the Nasdaq listing of the common stock, reduce expenses
associated with such registration and listing, and provide the stockholders an
opportunity to sell their shares in an illiquid trading market without incurring
brokerage commissions. As a result of becoming a non-reporting company, Southern
Security Life Insurance Company is no longer required to file periodic reports
with the SEC, including among other things, annual reports on Form 10-K and
quarterly reports on Form 10-Q, and is no longer subject to the SEC's proxy
rules. In addition, its common stock is no longer eligible for trading on the
Nasdaq SmallCap Market.

Security National Life Insurance Company of Louisiana, formerly Paramount
Security Life Insurance Company

On March 16, 2004, Security National Life purchased all of the outstanding
common stock of Paramount Security Life Insurance Company, now known as Security
National Life of Louisiana, a Louisiana domiciled insurance

company located in Shreveport, Louisiana. As of December 31, 2003, Security
National Life of Louisiana had 9,383 policies in force and 29 agents. There were
no material changes to the number of policies in force or the number of agents
between December 31, 2003 and March 16, 2004. The purchase consideration was
$4,398,000 and was effective January 26, 2004. Security National Life of
Louisiana is licensed in the State of Louisiana and is permitted to appoint
agents who do not have a full life insurance license. These agents are limited
to selling small life insurance policies in the final expense market. The
Company believes that with this license it will be able to expand its operations
in Louisiana. The Company is servicing Security National Life of Louisiana
policyholders out of its Jackson, Mississippi office and has closed the
Shreveport office.

Acadian Life Insurance Company

On December 23, 2002, the Company completed an asset purchase transaction
through its wholly owned subsidiary, Security National Life with Acadian Life
Insurance Company ("Acadian") from which it acquired $75,000,000 in assets and
$75,000,000 in insurance reserves. The acquired assets consist primarily of
approximately 275,000 funeral insurance policies in force in the state of
Mississippi. The assets were originally acquired by Acadian from Gulf National
Life Insurance Company on June 6, 2001, which, at that time, consisted of all
the insurance policies of Gulf National Life Insurance Company in force and in
effect on June 1, 2001 (the "Reinsured Business").

As a part of the transaction, Security National Life entered into a coinsurance
agreement with Acadian, in which Security National Life agreed to reinsure all
the liabilities related to policies held by Mississippi policyholders. The terms
included the payment of all legal liabilities, obligations, claims and
commissions of the acquired policies. The effective date of the coinsurance
agreement was September 30, 2002, following Acadian's recapture of the insurance
in force from its reinsurer Scottish Re (U.S.) Inc. on September 30, 2002.

The coinsurance agreement also provides that Acadian is required to pay Security
National Life an initial coinsurance premium in cash or assets acceptable to
Security National Life in an amount equal to the full coinsurance reserves, not
including the incurred but not reported (IBNR) reserve as of the effective date.
The ceding commission to be paid by Security National Life to Acadian for the
reinsured policies is to be the recapture amount to be paid by Acadian to
Scottish Re (U.S.), Inc., which was approximately $10,000,000. After the initial
coinsurance premium, the coinsurance premiums payable by Acadian to Security
National Life are to be equal to all of the premiums collected by Acadian on the
reinsurance policies subsequent to December 31, 2002.

On January 1, 2003, Security National Life entered into an assumption agreement
with Acadian, in which Security National Life agreed to assume certain of the
liabilities related to the reinsurance policies. Under the terms of the
assumption agreement, Acadian agreed to cede to Security National Life, and
Security National Life agreed to assume the stated insurance risks and
contractual obligations of Acadian relating to the Reinsured Business. Security
National Life agreed to pay all legal liabilities and obligations, including
claims and commissions, of Acadian with respect to the Reinsured Business
arising on or after January 1, 2003, in accordance with the terms and conditions
of the reinsured policies.

Regulation

The Company's insurance subsidiaries, Security National Life, Southern Security,
and Security National Life of Louisiana are subject to comprehensive regulation
in the jurisdictions in which they do business under statutes and regulations
administered by state insurance commissioners. Such regulation relates to, among
other things, prior approval of the acquisition of a controlling interest in an
insurance company; standards of solvency which must be

met and maintained; licensing of insurers and their agents; nature of and
limitations on investments; deposits of securities for the benefit of
policyholders; approval of policy forms and premium rates; periodic examinations
of the affairs of insurance companies; annual and other reports required to be
filed on the financial condition of insurers or for other purposes; and
requirements regarding aggregate reserves for life policies and annuity
contracts, policy claims, unearned premiums, and other matters. The Company's
insurance subsidiaries are subject to this type of regulation in any state in
which they are licensed to do business. Such regulation could involve additional
costs, restrict operations or delay implementation of the Company's business
plans.

The Company is currently subject to regulation in Utah, Florida and Louisiana
under insurance holding company legislation, and other states where applicable.
Generally, intercorporate transfers of assets and dividend payments from its
insurance subsidiaries are subject to prior notice of approval from the State
Insurance Department, if they are deemed "extraordinary" under these statutes.
The insurance subsidiaries are required, under state insurance laws, to file
detailed annual reports with the supervisory agencies in each of the states in
which they do business. Their business and accounts are also subject to
examination by these agencies.

The Company's cemetery and mortuary subsidiaries are subject to the Federal
Trade Commission's comprehensive funeral industry rules and are subject to state
regulations in the various states where such operations are domiciled. The
morticians must be licensed by the respective state in which they provide their
services. Similarly, the mortuaries and cemeteries are governed and licensed by
state statutes and city ordinances in Utah, Arizona and California. Reports are
required to be kept on file on a yearly basis which include financial
information concerning the number of spaces sold and, where applicable, funds
provided to the Endowment Care Trust Fund. Licenses are issued annually on the
basis of such reports. The cemeteries maintain city or county licenses where
they conduct business.

The Company's mortgage loan subsidiary, SecurityNational Mortgage, is subject to
the rules and regulations of the U.S. Department of Housing and Urban
Development and to various state licensing acts and regulations. These
regulations, among other things, specify minimum capital requirements, the
procedures for the origination, the underwriting, the licensing of wholesale
brokers, quality review audits and the amounts that can be charged to borrowers
for all FHA and VA loans. Each year, the Company must have an audit by an
independent CPA firm to verify compliance under these regulations. In addition
to the government regulations, the Company must meet loan requirements of
various investors who purchase the loans.

Income Taxes

The Company's insurance subsidiaries, Security National Life, Southern Security
and Security National Life of Louisiana are taxed under the Life Insurance
Company Tax Act of 1984. Under the act, life insurance companies are taxed at
standard corporate rates on life insurance company taxable income. Life
insurance company taxable income is gross income less general business
deductions, reserves for future policyholder benefits (with modifications), and
a small life insurance company deduction (up to 60% of life insurance company
taxable income). The Company may be subject to the corporate Alternative Minimum
Tax (AMT). The exposure to AMT is primarily a result of the small life insurance
company deduction. Also, under the Tax Reform Act of 1986, distributions in
excess of stockholder's surplus account or a significant decrease in life
reserves will result in taxable income.

Security National Life, Southern Security and Security National Life of
Louisiana may continue to receive the benefit of the small life insurance
company deduction. In order to qualify for the small company deduction, the
combined assets of the Company must be less than $500,000,000 and the taxable
income of the life insurance companies must be less than $3,000,000. To the
extent that the net income limitation is exceeded, then the small life insurance
company deduction is phased out over the next $12,000,000 of life insurance
company taxable income.

Since 1990, Security National Life, Southern Security and Security National Life
of Louisiana have computed their life insurance taxable income after
establishing a provision representing a portion of the costs of acquisition of
such life insurance business. The effect of the provision is that a certain
percentage of the Company's premium income is characterized as deferred expenses
and recognized over a five to ten year period.

The Company's non-life insurance company subsidiaries are taxed in general under
the regular corporate tax provisions. For taxable years beginning January 1,
1987, the Company may be subject to the Corporate Alternative Minimum Tax and
the proportionate disallowance rules for installment sales under the Tax Reform
Act of 1986.

Competition

The life insurance industry is highly competitive. There are approximately 2,000
legal reserve life insurance companies in business in the United States. These
insurance companies differentiate themselves through marketing techniques,
product features, price and customer service. The Company's insurance
subsidiaries compete with a large number of insurance companies, many of which
have greater financial resources, a longer business history, and more
diversified line of insurance coverage than the Company. In addition, such
companies generally have a larger sales force. Further, many of the companies
with which the Company competes are mutual companies which may have a
competitive advantage because all profits accrue to policyholders. Because the
Company is small by industry standards and lacks broad diversification of risk,
it may be more vulnerable to losses than larger, better-established companies.
The Company believes that its policies and rates for the markets it serves are
generally competitive.

The cemetery and mortuary industry is also highly competitive. In the Salt Lake
City, Phoenix and San Diego areas in which the Company competes, there are a
number of cemeteries and mortuaries which have longer business histories, more
established positions in the community and stronger financial positions than the
Company. In addition, some of the cemeteries with which the Company must compete
for sales are owned by municipalities and, as a result, can offer lower prices
than can the Company. The Company bears the cost of a pre-need sales program
that is not incurred by those competitors that do not have a pre-need sales
force. The Company believes that its products and prices are generally
competitive with those in the industry.

The mortgage loan industry is highly competitive with a number of mortgage
companies and banks in the same geographic area in which the Company is
operating that are better capitalized, have longer business histories, and more
established positions in the community. The mortgage market in general is
sensitive to changes in interest rates and the refinancing market is
particularly vulnerable to changes in interest rates.

Employees

As of December 31, 2004, the Company employed 366 full-time and 34 part-time
employees.

Item 2. Properties

The following table sets forth the location of the Company's office facilities
and certain other information relating to these properties.

Approximate
Owned Square
Location Function Leased Footage
-------- -------- ------ -------

5300 So. 360 West Corporate Headquarters Owned (1) 33,000
Salt Lake City, Utah

755 Rinehart Road Insurance Operations/ Owned (2) 27,000
Lake Mary, Florida Mortgage Sales

6522 Dogwood View Parkway Insurance Operations Leased (3) 5,300
Jackson, Mississippi

7916 Wrenwood Blvd.,
Suite C Insurance Operations Leased (4) 300
Baton Rouge, Louisiana

2800 Youree Drive Bld. 1,
Suite 207 Insurance Operations Leased (5) 2,500
Shreveport, Louisiana

410 North 44th Street,
Suite 190 Mortgage Sales Leased (6) 3,700
Phoenix, Arizona

12150 Tributary Point Dr.,
Suite160 Mortgage Sales Leased (7) 1,800
Gold River, California

7676 Hazard Center Drive,
Suite 625 Mortgage Sales Leased (8) 1,300
San Diego, California

27201 Tourney Road,
Suite 125 Mortgage Sales Leased (9) 1,600
Valencia, California

6208 Lehman Drive, Suite 201 Mortgage Sales Leased (10) 2,200
Colorado Springs, Colorado

14001 East Lliff Ave.,
Suite 120 Mortgage Sales Leased (11) 1,800
Aurora, Colorado

7785 Baymeadows Way,
Suite 101 Mortgage Sales Leased (12) 1,800
Jacksonville, Florida

1617 Santa Barbara Blvd Mortgage Sales Leased (13) 700
Cape Coral, Florida

Item 2. Properties (Continued)
- --------------------
Approximate
Owned Square
Location Function Leased Footage
-------- -------- ------ -------

5620 Tara Blvd., Suite 103 Mortgage Sales Leased (14) 1,200
Bradenton, Florida

6655 W. Sahara, Suite A-214 Mortgage Sales Leased (15) 2,300
Las Vegas, Nevada

12750 Merit Drive, Suite 1212 Mortgage Sales Leased (16) 2,100
Dallas, Texas

10850 Richmond Ave., Suite 270 Mortgage Sales Leased (17) 2,400
Houston, Texas

5251 Green Street, Suite 350 Mortgage Sales Owned (18) 5,000
Salt Lake City, Utah

5258 Pinemont Dr., Suite B280 Mortgage Sales Owned (19) 2,900
Murray, Utah

970 East Murray-Holladay Rd., Mortgage Sales Leased (20) 6,400
Ste. 4A
Salt Lake City, Utah

474 West 800 North, Suite 102 Mortgage Sales Leased (21) 2,000
Orem, Utah

(1) The Company leases an additional 5,576 square feet of the facility to
unrelated third parties for approximately $96,500 per year, under leases
expiring at various dates after 2004.

(2) The Company leases an additional 9,903 square feet of the facility to
unrelated third parties for approximately $182,200 per year, under leases
expiring at various dates after 2004.

(3) The Company leases this facility for $84,000 per year. The lease expires in
July 2005

(4) The Company leases this facility for $5,900 per year. The lease expires May
2005.

(5) The Company leases this facility for $1,900 per year, with a month-to-month
lease.

(6) The Company leases this facility for $35,300 per year. The lease expires in
October 2006.

(7) The Company leases this facility for $48,100 per year. The lease expires in
August 2009.

(8) The Company leases this facility for $42,800 per year. The lease expires in
June 2008.

(9) The Company leases this facility for $39,200 per year. The lease expires in
November 2005.

Item 2. Properties (Continued)
- -------------------

(10) The Company leases this facility for $27,300 per year. The lease expires in
June 2006.

(11) The Company leases this facility for $27,500 per year. The lease expires in
June 2006.

(12) The Company leases this facility for $27,200 per year. The lease expires in
September 2006.

(13) The Company leases this facility for $8,400 per year, with a month-to-month
lease.

(14) The Company leases this facility for $23,800 per year. The lease expires in
July 2006.

(15) The Company leases this facility for $49,100 per year. The lease expires in
October 2006.

(16) The Company leases this facility for $25,600 per year. The lease expires in
January 2006.

(17) The Company leases this facility for $37,400 per year. The lease expires in
June 2008.

(18) The Company leases an additional 25,000 square feet of the facility to
unrelated third parties for approximately $442,500 per year, under leases
expiring at various dates after 2004.

(19) The Company leases an additional 135,700 square feet of the facility to
unrelated third parties for approximately $838,800 per year, under leases
expiring at various dates after 2004.

(20) The Company leases this facility for $75,000 per year. The lease expires in
January 2006.

(21) The Company leases this facility for $34,800 per year. The lease expires in
February 2007.

The Company believes the office facilities it occupies are in good operating
condition, are adequate for current operations and has no plans to build or
acquire additional office facilities. The Company believes its office facilities
are adequate for handling its business in the foreseeable future. As leases
expire the Company will either renew or find comparable leases or acquire
additional office space.

The following table summarizes the location and acreage of the six Company owned
cemeteries, which each include one or more mausoleums:

Net Saleable Acreage

Acres
Sold as Total
Name of Date Developed Total Cemetery Available
Cemetery Location Acquired Acreage(1) Acreage(1) Spaces(2) Acreage(1)
- ------------ -------- -------- ---------- ---------- --------- ----------
Memorial Estates, Inc.:

Lakeview
Cemetery(3) 1640 East Lakeview Dr.
Bountiful, Utah 1973 7 40 5 35
Mountain View
Cemetery(3) 3115 East 7800 South
Salt Lake City, Utah 1973 15 54 13 41

Redwood
Cemetery(3)(5) 6500 South Redwood Rd.
West Jordan, Utah 1973 27 78 26 52

Holladay Memorial
Park(4)(5) 4900 So. Memory Lane
Holladay, Utah 1991 5 14 3 11

Lakehills Cemetery(4)
10055 So. State Street
Sandy, Utah 1991 9 41 3 38

Singing Hills Memorial
Park(6) 2800 Dehesa Road
El Cajon, California 1995 8 35 3 32

(1) The acreage represents estimates of acres that are based upon survey
reports, title reports, appraisal reports or the Company's inspection of
the cemeteries.

(2) Includes spaces sold for cash and installment contract sales.

(3) As of December 31, 2004, there were mortgages of approximately $26,000
collateralized by the property and facilities at Memorial Estates Lakeview,
Mountain View and Redwood Cemeteries.

(4) As of December 31, 2004, there were mortgages of approximately $1,545,000
collateralized by the property and facilities at Deseret Mortuary,
Cottonwood Mortuary, Holladay Memorial Park, Lakehills Cemetery and
Colonial Mortuary.

(5) These cemeteries include two granite mausoleums.

(6) As of December 31, 2004, there was a mortgage of approximately $397,000
collateralized by the property.

The following table summarizes the location, square footage and the number of
viewing rooms and chapels of the twelve Company owned mortuaries:

Name of Date Viewing Square
Mortuary Location Acquired Room(s) Chapel(s) Footage
- -------- -------- --------- --------- --------- --------

Memorial Mortuary 5850 South 900 East
Murray, Utah 1973 3 1 20,000

Memorial Estates, Inc.:
Redwood Mortuary(3) 6500 South Redwood Rd.
West Jordan, Utah 1973 2 1 10,000

Mountain View Mortuary(3) 3115 East 7800 South
Salt Lake City, Utah 1973 2 1 16,000

Lakeview Mortuary(3) 1640 East Lakeview Dr.
Bountiful, Utah 1973 0 1 5,500

Paradise Chapel 3934 East Indian
Funeral Home School Road
Phoenix, Arizona 1989 2 1 9,800

Deseret Memorial, Inc.:
Colonial Mortuary(1) 2128 South State St.
Salt Lake City, Utah 1991 1 1 14,500

Deseret Mortuary(1) 36 East 700 South
Salt Lake City, Utah 1991 2 2 36,300

Lakehills Mortuary(3) 10055 South State St.
Sandy, Utah 1991 2 1 18,000

Cottonwood Mortuary(1)(3) 4670 South Highland Dr.
Holladay, Utah 1991 2 1 14,500

Greer-Wilson
Funeral Home 5921 West Thomas Road
Phoenix, Arizona 1995 2 2 25,000

Adobe Funeral Home 218 North Central
Avondale, Arizona 1995 1 1 1,850

Crystal Rose Funeral Home(2) 9155 W. VanBuren
Tolleson, Arizona 1997 0 1 9,000

(1) As of December 31, 2004, there were mortgages of approximately $1,545,000
collateralized by the property and facilities at Deseret Mortuary,
Cottonwood Mortuary, Holladay Memorial Park, Lakehills Cemetery and
Colonial Mortuary.

(2) As of December 31, 2004, there was a mortgage of approximately $112,000,
collateralized by the property and facilities of Crystal Rose Funeral Home.

(3) These funeral homes also provide burial niches at their respective
locations.

Item 3. Legal Proceedings

An action was brought against the Company in May 2001 by Glenna Brown Thomas,
individually and as personal representative of the Estate of Lynn W. Brown, in
the Third Judicial Court, Salt Lake County, Utah. The action asserts that
Memorial Estates, Inc. delivered to Lynn W. Brown six stock certificates
totaling 2,000 shares of its common stock in 1970 and 1971. Mr. Brown died in
1972. It is also asserted that at the time the 2,000 shares were issued and
outstanding, the shares represented a 2% ownership of Memorial Estates. It is
further alleged that Mr. Brown was entitled to preemptive rights and, after the
issuance of the stock to Mr. Brown, there were further issuances of stock
without providing written notice to Mr. Brown or his estate of his right to
purchase more stock.

It is further asserted that Thomas has the right to the transfer of Brown's
shares on the books of Security National Financial Corporation as well as
Memorial Estates, and to the restoration of Brown's proportion of share
ownership in Memorial Estates at the time of his death by issuance and delivery
to Thomas of sufficient shares of the Company's publicly traded and unrestricted
stock in exchange for the 2,000 shares of Memorial Estates stock, including
payment of all dividends from the date of Thomas's demand. The formal discovery
cutoff was January 15, 2004. The Company has been verbally informed that Thomas
will dismiss the case but such dismissal has not been communicated in writing.
Until the case is actually dismissed, the Company intends to vigorously defend
the matter, including the assertion that the statute of limitations bars the
claims in their entirety.

The Company received a letter dated November 9, 2004 on behalf of Charles Hood,
who worked at Singing Hills Memorial Park in El Cajon, California. He was hired
in April 2003 as a groundskeeper with his work concluding on October 30, 2003.
Mr. Hood claims that he wrote a letter to the Company outlining his concerns
regarding the operation of the cemetery, and that the next day he was
terminated. Even though he recognizes his relationship was as an at-will
employee. Mr. Hood's claims against the Company also include, but are not
limited to, violation of labor laws, whistleblower retaliation and infliction of
emotional distress. The letter proposes a settlement in the amount of $275,000.

No lawsuit has been filed in the matter. The Company has been engaged in a
review of the claims made in the letter. Based on its investigation, the Company
believes that Mr. Hood voluntarily quit and was not terminated. Counsel for the
Company and counsel for Mr. Hood have been in discussion concerning the matter.
At this stage of the investigation, the Company does not believe there is any
justification for the claims being made. If a resolution of the dispute is not
achieved and litigation ensues, the Company is prepared to vigorously defend the
action.

The Company also received a letter dated November 29, 2004 on behalf of Roger
Gornichec, who the Company recognizes as having been an independent contractor.
The attorney who wrote the letter on behalf of Mr. Hood also wrote the letter on
behalf of Mr. Gornichec. Mr. Gornichec concluded his services as an agent
selling insurance in the spring of 2003 and his license to sell cemetery plots
was not renewed in the summer of 2004. Mr. Gornichec asserts that he was an
employee contrary to the Company's position.

The claims made on behalf of Mr. Gornichec include, but are not limited to,
wrongful termination in violation of public policy, misrepresentation, age
discrimination, whistle-blower retaliation, interference with economic
advantage, breach of contract, breach of the covenant of good faith and fair
dealing, and infliction of emotional distress. Mr. Gornichec also claims that he
is owed a certain amount from a retirement plan. The letter proposes a
settlement in the amount of $420,000. Based on its investigation, the Company
believes that Mr. Gornichec was an independent contractor, not an employee, and
that the claims and the settlement amount sought are not justified. If the
matter is not resolved and litigation ensues, the Company is prepared to
vigorously defend the action.

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 financial position or results of
operations. Based on management's assessment and legal counsel's representations
concerning the likelihood of unfavorable outcomes, no amounts have been accrued
for the above claims in the consolidated financial statements.

Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------

No matters were submitted to a vote of the Company's shareholders during the
quarter ended December 31, 2004.

PART II

Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters

The Company's Class A Common Stock trades on the Nasdaq National Market under
the symbol "SNFCA." Prior to August 13, 1987, there was no active public market
for the Class A and Class C Common Stock. As of March 31, 2005, the closing
sales price of the Class A Common Stock was $3.51 per share. The following are
the high and low market closing sales prices for the Class A Common Stock by
quarter as reported by Nasdaq since January 1, 2003:

Period (Calendar Year) Price Range
High Low
2003
First Quarter $6.59 $4.31
Second Quarter 6.01 5.02
Third Quarter 5.98 4.98
Fourth Quarter 7.10 5.47

2004
First Quarter 8.47 6.36
Second Quarter 6.51 3.71
Third Quarter 3.89 3.08
Fourth Quarter 3.81 2.90

2005
First Quarter 4.29 2.99

The above sales prices have been adjusted for the effect of annual stock
dividends.

The Class C Common Stock is not actively traded, although there are occasional
transactions in such stock by brokerage firms. (See Note 11 to the Consolidated
Financial Statements.)

The Company has never paid a cash dividend on its Class A or Class C Common
Stock. The Company currently anticipates that all of its earnings will be
retained for use in the operation and expansion of its business and does not
intend to pay any cash dividends on its Class A or Class C Common Stock in the
foreseeable future. Any future determination as to cash dividends will depend
upon the earnings and financial position of the Company and such other factors
as the Board of Directors may deem appropriate. A 5% stock dividend on Class A
and Class C Common Stock has been paid each year from 1990 through 2004.

As of December 31, 2004, there were 4,437 record holders of Class A Common Stock
and 126 record holders of Class C Common Stock.

Item 6. Selected Financial Data - The Company and Subsidiaries (Consolidated)

The following selected financial data for each of the five years in the period
ended December 31, 2004, are derived from the audited consolidated financial
statements. The data as of December 31, 2004 and 2003, and for the three years
ended December 31, 2004, should be read in conjunction with the consolidated
financial statements, related notes and other financial information included
herein.

Consolidated Statement of Earnings Data:
Year Ended December 31,

2004 2003(1) 2002 2001 2000
---- ------- ---- ---- ----
Revenue

Premiums $ 25,979,000 $ 23,295,000 $14,077,000 $13,151,000 $12,876,000
Net investment income 15,939,000 17,303,000 12,540,000 12,947,000 12,136,000
Net mortuary and cemetery sales 11,661,000 10,944,000 10,638,000 9,881,000 8,741,000
Realized (losses) gains on investments 74,000 (2,000) 1,021,000 10,000 424,000
Mortgage fee income 62,690,000 92,955,000 57,008,000 40,086,000 22,922,000
Other 855,000 550,000 479,000 152,000 305,000
------------ ------------ ----------- ----------- -----------
Total revenue 117,198,000 145,045,000 95,763,000 76,227,000 57,404,000
------------ ------------ ----------- ----------- -----------

Expenses
Policyholder benefits 23,362,000 21,755,000 13,756,000 11,775,000 12,931,000
Amortization of deferred
policy acquisition costs 4,602,000 4,929,000 3,994,000 3,870,000 3,189,000
General and administrative expenses 82,097,000 102,926,000 68,459,000 52,247,000 35,959,000
Interest expense 2,174,000 3,642,000 1,970,000 2,791,000 2,126,000
Cost of goods and services of
the mortuaries and cemeteries 2,304,000 2,328,000 2,045,000 1,772,000 1,952,000
------------ ------------ ----------- ----------- -----------
Total benefits and expenses 114,539,000 135,580,000 90,224,000 72,455,000 56,157,000
------------ ------------ ----------- ----------- -----------
Income before income tax expense 2,659,000 9,465,000 5,539,000 3,772,000 1,247,000
Income tax expense (652,000) (2,891,000) (1,565,000) (913,000) (305,000)
Minority interest in (income)
loss of subsidiary 115,000 22,000 18,000 (18,000) (46,000)
------------ ------------ ----------- ---------- -----------
Net earnings $ 2,122,000 $ 6,596,000 $ 3,992,000 $ 2,841,000 $ 896,000
============ ============ =========== =========== ===========

Net earnings per common share(3) $.35 $1.13 $.72 $.52 $.16
==== ===== ==== ==== ====
Weighted average outstanding
common shares (3) 6,002,000 5,852,000 5,573,000 5,485,000 5,511,000
Net earnings per common
share-assuming dilution(3) $.34 $1.10 $.69 $.52 $.16
==== ===== ==== ==== ====
Weighted average outstanding
common shares-assuming dilution (3) 6,218,000 6,003,000 5,744,000 5,486,000 5,528,000

Item 6. Selected Financial Data - The Company and Subsidiaries (Consolidated) (Continued)

Balance Sheet Data:
December 31,

2004(2) 2003 2002(1) 2001 2000
------- ------- ---- ---- ----
Assets

Investments and restricted assets $183,876,000 $112,006,000 $106,161,000 $ 94,514,000 $108,810,000
Cash 15,334,000 19,704,000 38,199,000 8,757,000 11,275,000
Receivables 53,737,000 120,698,000 102,590,000 59,210,000 36,413,000
Other assets 63,527,000 61,075,000 61,112,000 51,088,000 52,249,000
------------ ------------ ------------ ------------ ------------
Total assets $316,474,000 $313,483,000 $308,062,000 $213,569,000 $208,747,000
============ ============ ============ ============ ============

Liabilities
Policyholder benefits $226,785,000 $220,739,000 $217,895,000 $142,291,000 $141,755,000
Notes & contracts payable 13,331,000 17,863,000 19,273,000 12,098,000 14,046,000
Cemetery & mortuary liabilities 10,789,000 10,562,000 10,076,000 9,344,000 8,659,000
Other liabilities 20,091,000 21,187,000 22,007,000 15,630,000 12,921,000
------------ ------------ ------------ ------------ ------------
Total liabilities 270,996,000 270,351,000 269,251,000 179,363,000 177,381,000
------------ ------------ ------------ ------------ ------------

Minority interest 3,813,000 3,957,000 4,298,000 4,237,000 4,625,000

Stockholders' equity 41,665,000 39,175,000 34,513,000 29,969,000 26,741,000
------------ ------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity $316,474,000 $313,483,000 $308,062,000 $213,569,000 $208,747,000
============ ============ ============ ============ ============

(1) Reflects the asset purchase transaction with Acadian Life Insurance Company
on December 23, 2002.

(2) Includes the purchase of Paramount Life Insurance Company, now Security
National Life Insurance Company of Louisiana, on March 16, 2004.

(3) Earnings per share amounts have been adjusted for the effect of annual
stock dividends.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

The Company's operations over the last several years generally reflect three
trends or events which the Company expects to continue: (i) increased attention
to "niche" insurance products, such as the Company's funeral plan policies and
traditional whole life products; (ii) emphasis on cemetery and mortuary
business; and (iii) capitalizing on lower interest rates by originating and
refinancing mortgage loans and other "niche" mortgage products.

SecurityNational Mortgage Company ("SNMC") is a mortgage lender incorporated
under the laws of the State of Utah. SNMC is approved and regulated by the
Federal Housing Administration (FHA), a department of the U.S. Department of
Housing and Urban Development (HUD), to originate mortgage loans that qualify
for government insurance in the event of default by the borrower. SNMC obtains
loans primarily from independent brokers and correspondents. SNMC funds the
loans from internal cash flows and lines of credit from financial institutions,
including the Company's insurance subsidiaries. SNMC receives fees from the
borrowers and other secondary fees from third party investors who purchased the
loans from SNMC. SNMC pays the brokers and correspondents a commission for loans
that are brokered through SNMC.

As of December 31, 2004, SNMC had 17 branches in seven states. In 2001, SNMC
opened wholesale branches in Phoenix, Arizona and Houston, Texas. In 2003, SNMC
opened offices in Tampa and Jacksonville, Florida; Las Vegas, Nevada; Denver,
Colorado; Bountiful, Utah; and Dallas, Texas. SNMC opened one office in 2004 at
Cape Coral, Florida. SNMC originated and sold 11,567 loans ($1,781,000,000 loan
amount), 17,494 loans ($2,560,000,000 loan amount), and 11,737 loans
($1,721,000,000 loan amount) in 2004, 2003 and 2002, respectively. SNMC's loan
volume decreased in 2004 due to an increase in interest rates resulting in fewer
borrowers refinancing their loans.

On December 17, 1998, the Company purchased all of the outstanding shares of
common stock of SSLIC Holding Company, formerly Consolidare Enterprises, Inc.,
and Insuradyne Corporation for a total cost of $12,248,194. As of December 31,
2004, Security National Life and its wholly-owned subsidiary, SSLIC Holding
Company, held approximately 77% of the outstanding shares of common stock of
Southern Security Life Insurance Company.

In addition, effective on January 1, 2005, Security National Life and its
wholly-owned subsidiary, SSLIC Holding Company, completed a merger transaction
with Southern Security Life Insurance Company in which SSLIC Holding Company was
merged with Southern Security Life Insurance Company, which resulted in Southern
Security Life Insurance Company becoming a wholly-owned subsidiary of Security
National Life and the unaffiliated stockholders of Southern Security Life
Insurance Company becoming entitled to receive an aggregate of $1,884,733 for
their shares.

On December 23, 2002, the Company completed an asset purchase transaction with
Acadian Life Insurance Company, a Louisiana domiciled life insurance company, in
which it acquired from Acadian $75,000,000 in assets and $75,000,000 in
insurance reserves through its wholly owned subsidiary, Security National Life
Insurance Company, a Utah domiciled life insurance company. The acquired assets
consist primarily of approximately 275,000 funeral insurance policies in force
in the state of Mississippi. The assets were originally acquired by Acadian from
Gulf National Life Insurance Company on June 6, 2001, consisting of all of the
insurance policies of Gulf National Life Insurance Company that were in force
and in effect on June 1, 2001.

On March 16, 2004, Security National Life purchased all of the outstanding
common stock of Paramount Security Life Insurance Company, now known as Security
National Life of Louisiana, a Louisiana domiciled insurance company located in
Shreveport, Louisiana. As of December 31, 2003, Security National Life of
Louisiana had

9,383 policies in force and 29 agents. There were no material changes in the
number of policies in force or the number of agents between December 31, 2003
and March 16, 2004. The purchase consideration was $4,398,000 and was effective
January 26, 2004. Security National Life of Louisiana is licensed in the State
of Louisiana where it is permitted to appoint agents who do not have a full life
insurance license.

These agents are limited to selling small life insurance policies in the final
expense market. The Company believes that with this license it will be able to
expand its operations in Louisiana. The Company is servicing Security National
Life of Louisiana policyholders out of its Jackson, Mississippi office and has
closed its Shreveport office.

Significant Accounting Policies

The following is a brief summary of our significant accounting policies and a
review of our most critical accounting estimates. Please also refer to Note 1 of
our consolidated financial statements.

Insurance Operations

In accordance with accounting principles generally accepted in the United States
of America (GAAP), premiums and considerations received for interest sensitive
products such as universal life insurance and ordinary annuities are reflected
as increases in liabilities for policyholder account balances and not as
revenues. Revenues reported for these products consist of policy charges for the
cost of insurance, administration charges, amortization of policy initiation
fees and surrender charges assessed against policyholder account balances.
Surrender benefits paid relating to these products are reflected as decreases in
liabilities for policyholder account balances and not as expenses. The Company
receives investment income earned from the funds deposited into account
balances, a portion of which is passed through to the policyholders in the form
of interest credited. Interest credited to policyholder account balances and
benefit claims in excess of policyholder account balances are reported as
expenses in the consolidated financial statements.

Premium revenues reported for traditional life insurance products are recognized
as revenues when due. Future policy benefits are recognized as expenses over the
life of the policy by means of the provision for future policy benefits.

The costs related to acquiring new business, including certain costs of issuing
policies and other variable selling expenses (principally commissions), defined
as deferred policy acquisition costs, are capitalized and amortized into
expense. For nonparticipating traditional life products, these costs are
amortized over the premium paying period of the related policies, in proportion
to the ratio of annual premium revenues to total anticipated premium revenues.
Such anticipated premium revenues are estimated using the same assumption used
for computing liabilities for future policy benefits and are generally "locked
in" at the date the policies are issued. For interest sensitive products, these
costs are amortized generally in proportion to expected gross profits from
surrender charges and investment, mortality and expense margins. This
amortization is adjusted when the Company revises the estimate of current or
future gross profits or margins. For example, deferred policy acquisition costs
are amortized earlier than originally estimated when policy terminations are
higher than originally estimated or when investments backing the related
policyholder liabilities are sold at a gain prior to their anticipated maturity.

Death and other policyholder benefits reflect exposure to mortality risk and
fluctuate from year to year on the level of claims incurred under insurance
retention limits. The profitability of the Company is primarily affected by
fluctuations in mortality, other policyholder benefits, expense levels, interest
spreads (i.e., the difference between interest earned on investments and
interest credited to policyholders) and persistency. The Company has the ability
to mitigate adverse experience through sound underwriting, asset/liability
duration matching, sound actuarial practices, adjustments to credited interest
rates, policyholder dividends or cost of insurance charges.

Cemetery and Mortuary Operations

Pre-need 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.

Pre-need sales of cemetery internment rights (cemetery burial property) -
revenue and costs associated with the sales of pre-need cemetery internment
rights are recognized in accordance with the retail land sales provisions of
Statement of Financial Accounting Standards No. 66, "Accounting for the Sales of
Real Estate" (SFAS No. 66). Under SFAS 66, recognition of revenue and associated
costs from constructed cemetery property must be deferred until a minimum
percentage of the sales price has been collected. Revenues related to the
pre-need sale of unconstructed cemetery property will be deferred until such
property is constructed and meets the criteria of SFAS 66, described above.

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

Pre-need sales of cemetery services (primarily merchandise delivery and
installation fees and burial opening and closing 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 obtaining costs - costs
incurred related to obtaining new pre-need cemetery and prearranged funeral
business are accounted for under the guidance of the provisions of Statement of
Financial Accounting Standards No. 60 "Accounting and Reporting by Insurance
Enterprises" (FAS No. 60). Obtaining costs, which include only costs that vary
with and are primarily related to the acquisition of new pre-need cemetery and
prearranged funeral business, 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.

Mortgage Operations

Mortgage fee income is generated through the origination and refinancing of
mortgage loans and is realized in accordance with SFAS No. 140.

The majority of loans originated are sold to third party investors. The amounts
sold to investors are shown on the balance sheet as due from sale of loans, and
are shown on the basis of the amount of fees due from the investors.

Use of Significant Accounting Estimates

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect reported amounts and
disclosures. It is reasonably possible that actual experience could differ from
the estimates and assumptions utilized which could have a material impact on the
financial statements. The following is a summary of our significant accounting
estimates, and critical issues that impact them:

Fixed Maturities Available for Sale

Securities available-for-sale are carried at fair value, with unrealized holding
gains and losses reported in accumulated other comprehensive income which is
included in stockholders' equity after adjustment for deferred income taxes and
deferred acquisition costs related to universal life products.

The Company is required to exercise judgment to determine when a decline in the
value of a security is other than temporary. When the value of a security
declines and the decline is determined to be other than temporary, the carrying
value of the investment is reduced to its fair value and a realized loss is
recorded to the extent of the decline.

Deferred Acquisition Costs

Amortization of deferred policy acquisition costs for interest sensitive
products is dependent upon estimates of current and future gross profits or
margins on this business. Key assumptions used include the following: yield on
investments supporting the liabilities, amount of interest or dividends credited
to the policies, amount of policy fees and charges, amount of expenses necessary
to maintain the policies, and amount of death and surrender benefits and the
length of time the policies will stay in force.

For nonparticipating traditional life products, these costs are amortized over
the premium paying period of the related policies, in proportion to the ratio of
annual premium revenues to total anticipated premium revenues. Such anticipated
premium revenues are estimated using the same assumption used for computing
liabilities for future policy benefits and are generally "locked in" at the date
the policies are issued.

Cost of Insurance Acquired

Cost of insurance acquired is the present value of estimated future profits of
the acquired business and is amortized similar to deferred acquisition costs.
The critical issues explained for deferred acquisition costs would also apply
for cost of insurance acquired.

Allowance for Doubtful Accounts

The Company accrues an estimate of potential losses for the collection of
receivables. The significant receivables are the result of receivables due on
mortgage loans sold to investors, cemetery and mortuary operations, mortgage
loan operations and other receivables. The allowance is based upon the Company's
experience. The critical issues that would impact recovery of the cemetery and
mortuary receivables is the overall economy. The critical issues that would
impact recovery of mortgage loan operations would be interest rate risk and loan
underwriting.

Future Policy Benefits

Reserves for future policy benefits for traditional life insurance products
requires the use of many assumptions, including the duration of the policies,
mortality experience, expenses, investment yield, lapse rates, surrender rates,
and dividend crediting rates.

These assumptions are made based upon historical experience, industry standards
and a best estimate of future results and, for traditional life products,
include a provision for adverse deviation. For traditional life insurance, once
established for a particular series of products, these assumptions are generally
held constant.

Unearned Revenue

The universal life products the Company sells have a significant policy
initiation fees (front-end load), which are deferred and amortized into revenues
over the estimated expected gross profits from surrender charges and investment,
mortality and expense margins. The same issues that impact deferred acquisition
costs would apply to unearned revenue.

Deferred Pre-need Cemetery and Funeral Contracts Revenues and Estimated Future
Cost of Pre-need Sales

The revenue and cost associated with the sales of pre-need cemetery merchandise
and funeral services are deferred until the merchandise is delivered or the
service is performed.

The Company, through its mortuary and cemetery operations, provides a guaranteed
funeral arrangement wherein a prospective customer can receive future goods and
services at guaranteed prices. To accomplish this, the Company, through its life
insurance operations, sells to the customer an increasing benefit life insurance
policy that is assigned to the mortuaries. If, at the time of need, the
policyholder/potential mortuary customer utilizes one of the Company's
facilities, the guaranteed funeral arrangement contract that has been assigned
will provide the funeral goods and services at the contracted price. The
increasing life insurance policy will cover the difference between the original
contract prices and current prices. Risks may arise if the difference cannot be
fully met by the life insurance policy.

Mortgage Loan Loss Reserve

The Company accrues an estimate of future losses on mortgage loans sold to third
party investors. The Company may be required to reimburse third party investors
for costs associated with early payoff of loans within the first year of
duration and to repurchase loans in default within the first year. The estimates
are based upon historical experience and best estimate of future liabilities.

Deferred Compensation

The Company has deferred compensation agreements with several of its current and
past executive officers. The deferred compensation is payable upon retirement or
death of these individuals either in annual installments (10 years) or lump sum
settlement, if approved by the Board of Directors. The Company has accrued the
present value of these benefits based upon their future retirement dates and
other factors, on its consolidated financial statements.

Depreciation

Depreciation is calculated principally on the straight-line-method over the
estimated useful lives of the assets which range from 3 to 40 years. Leasehold
improvements are amortized over the lesser of the useful life or remaining lease
terms.

Results of Operations

2004 Compared to 2003

Total revenues decreased by $27,847,000, or 19.2%, from $145,045,000 for fiscal
year 2003 to $117,198,000 for fiscal year 2004. Contributing to this decrease in
total revenues was a $30,265,000 decrease in mortgage fee income and a
$1,364,000 decrease in net investment income. This decrease was partially offset
by an increase in mortuary and cemetery sales of $717,000, an increase in
insurance premium and other considerations of $2,684,000, an increase in
realized gains on investments of $76,000 and an increase in other revenue of
$305,000.

Insurance premiums and other considerations increased by $2,684,000, from
$23,295,000 in 2003 to $25,979,000 in 2004. This increase was primarily due to
the additional insurance premiums that were realized on new insurance sales and
included premiums from policies acquired from Paramount Security Life Insurance
Company in 2004.

Net investment income decreased by $1,364,000, from $17,303,000 in 2003 to
$15,939,000 in 2004. This decrease was primarily attributable to reduced
interest income on fewer mortgage loans originated by SecurityNational Mortgage
Company during 2004.

Net mortuary and cemetery sales increased by $717,000, from $10,944,000 in 2003
to $11,661,000 in 2004. This increase was primarily due to pre-need cemetery
sales.

Realized gains on investments and other assets increased by $76,000, from a loss
of $2,000 in 2003 to a gain of $74,000 in 2004.

Other revenue increased by $305,000 from $550,000 in 2003 to $855,000 in 2004.
Other revenue increased in part from the recovery of funds from a member of
management who was found to have fraudulently obtained expense reimbursements
over a period of several years. The total amount of payments that the employee
fraudulently obtained was $111,000. The employee was terminated and the Company
demanded and received full restitution. The employee made restitution by
transferring to the Company shares of the Company's common stock that the
employee owned at the time he was terminated.

Mortgage fee income decreased by $30,265,000, from $92,955,000 in 2003 to
$62,690,000 in 2004. This decrease was primarily attributable to a decrease in
the number of loan originations during 2004 due to an increase in interest rates
resulting in fewer borrowers refinancing mortgage loans.

Total benefits and expenses were $114,539,000 for 2004, which constituted 97.7%
of the Company's total revenues, as compared to $135,580,000, or 93.5% of the
Company's total revenues for 2003.

During 2004, there was a net increase of $1,607,000 in death benefits,
surrenders and other policy benefits, and in future policy benefits from
$21,755,000 in 2003 to $23,362,000 in 2004. This net increase was the result of
an increase in reserves for policyholders offset by decreases in death benefits,
and surrenders and other policy benefits.

Amortization of deferred policy and pre-need acquisition costs and cost of
insurance acquired decreased by $327,000, from $4,929,000 in 2003 to $4,602,000
in 2004. This decrease was primarily due to reduced amortization of deferred
policy acquisition costs and cost of insurance acquired, which is in line with
actuarial assumptions.

General and administrative expenses decreased by $20,829,000, from $102,926,000
in 2003 to $82,097,000 in 2004. Contributing to this decrease was an $18,846,000
decrease in commission expenses, from $67,537,000 in 2003 to $48,691,000 in 2004
due to fewer mortgage loan originations made by SecurityNational Mortgage
Company during 2004. Salaries increased $312,000, from $14,080,000 in 2003 to
$14,392,000 in 2004 primarily due to merit increases. Other expenses decreased
$2,295,000, from $21,310,000 in 2003 to $19,015,000 in 2004. These decreases
were primarily the result of reduced expenses due to fewer mortgage loan
originations made by SecurityNational Mortgage Company during 2004.

Interest expense decreased by $1,468,000, from $3,642,000 in 2003 to $2,174,000
in 2004. This decrease was primarily due to reduced warehouse lines of credit
required for fewer mortgage loan originations by SecurityNational Mortgage
Company during 2004.

2003 Compared to 2002

Total revenues increased by $49,282,000, or 50.5%, from $95,763,000 for fiscal
year 2002 to $145,045,000 for fiscal year 2003. Contributing to this increase in
total revenues was a $35,947,000 increase in mortgage fee income, a $4,763,000
increase in net investment income, and a $9,218,000 increase in insurance
premiums and other considerations.

Insurance premiums and other considerations increased by $9,218,000, from
$14,077,000 in 2002 to $23,295,000 in 2003. This increase was primarily due to
the additional premiums from policies acquired in the asset purchase transaction
with Acadian Life.

Net investment income increased by $4,763,000, from $12,540,000 in 2002 to
$17,303,000 in 2003. This increase was primarily attributable to the additional
investment income from the assets acquired in the asset purchase transaction
with Acadian Life.

Net mortuary and cemetery sales increased by $306,000, from $10,638,000 in 2002
to $10,944,000 in 2003. This increase was primarily due to additional at-need
cemetery and mortuary sales.

Realized gains on investments and other assets decreased by $1,023,000, from a
gain of $1,021,000 in 2002 to a loss of $2,000 in 2003. The realized gains on
investment and other assets in 2002 was primarily from the sale of property at
Lake Hills Cemetery.

Mortgage fee income increased by $35,947,000, from $57,008,000 in 2002 to
$92,955,000 in 2003. This increase was primarily attributable to a greater
number of loan originations during 2003 due to the opening of new offices and to
lower interest rates resulting in additional borrowers refinancing their
mortgage loans.

Total benefits and expenses were $135,580,000 for 2003, which constituted 93.5%
of the Company's total revenues, as compared to $90,224,000, or 94.2% of the
Company's total revenues for 2002.

During 2003, there was a net increase of $7,999,000 in death benefits,
surrenders and other policy benefits, and in future policy benefits from
$13,756,000 in 2002 to $21,755,000 in 2003. This net increase was primarily due
to the additional death benefits, surrenders and other policy benefits acquired
from the additional policies acquired in the asset purchase transaction with
Acadian Life.

Amortization of deferred policy and pre-need acquisition costs and cost of
insurance acquired increased by $935,000, from $3,994,000 in 2002 to $4,929,000
in 2003. This increase was primarily due to the additional amortization of
deferred policy acquisition costs and cost of insurance acquired from the
additional policies acquired in the asset purchase transaction with Acadian
Life.

General and administrative expenses increased by $34,467,000, from $68,459,000
in 2002 to $102,926,000 in 2003. Contributing to this increase was a $25,422,000
increase in commission expenses, from $42,114,000 in 2002 to $67,537,000 in
2003. Salaries increased $3,666,000, from $10,414,000 in 2002 to $14,080,000 in
2003. Other expenses increased $5,379,000, from $15,931,000 in 2002 to
$21,310,000 in 2003. These increases were primarily the result of additional
expenses due to increased numbers of loan originations made by the Company's
mortgage subsidiary in 2003 and to additional expenses associated with the asset
purchase transaction with Acadian Life.

Interest expense increased by $1,672,000, from $1,970,000 in 2002 to $3,642,000
in 2003. This increase was primarily due to additional warehouse lines of credit
required from the additional mortgage loan originations by the Company's
mortgage subsidiary, SecurityNational Mortgage Company, and bank borrowings for
the asset purchase transaction with Acadian Life.

Cost of the mortuary and cemetery goods and services sold increased by $282,000,
from $2,045,000 in 2002 to $2,327,000 in 2003. This increase was primarily due
to increased at-need cemetery and mortuary sales.

Liquidity and Capital Resources

The Company's life insurance subsidiaries and cemetery and mortuary subsidiaries
realize cash flow from premiums, contract payments and sales on personal
services rendered for cemetery and mortuary business, from interest and
dividends on invested assets, and from the proceeds from the maturity of
held-to-maturity investments or sale of other investments. The mortgage
subsidiary realizes cash flow from fees generated by originating and refinancing
mortgage loans and interest earned on mortgages sold to investors. The Company
considers these sources of cash flow to be adequate to fund future policyholder
and cemetery and mortuary liabilities, which generally are long-term, and
adequate to pay current policyholder claims, annuity payments, expenses on the
issuance of new policies, the maintenance of existing policies, debt service,
and to meet operating expenses.

The Company attempts to match the duration of invested assets with its
policyholder and cemetery and mortuary liabilities. The Company may sell
investments other than those held-to-maturity in the portfolio to help in this
timing; however, to date, that has not been necessary. The Company purchases
short-term investments on a temporary basis to meet the expectations of
short-term requirements of the Company's products.

The Company's investment philosophy is intended to provide a rate of return
which will persist during the expected duration of policyholder and cemetery and
mortuary liabilities regardless of future interest rate movements.

The Company's investment policy is to invest predominately in fixed maturity
securities, mortgage loans, and the 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 $81,051,000 as of December 31, 2004
compared to $51,564,000 as of December 31, 2003. This represents 62% of the
total insurance related investments in 2004 as compared to 48% in 2003.
Generally, all bonds owned by the life insurance subsidiaries are rated by the
National Association of Insurance Commissioners (NAIC). Under this rating
system, there are six categories used for rating bonds. At December 31, 2004, 2%
($1,659,000) and at December 31, 2003, 3% ($1,739,000) of the Company's total
bond investments were invested in bonds in rating categories three through six
which are considered non-investment grade.

If market conditions were to cause interest rates to change, the market value of
the fixed income portfolio (approximately $149,469,000) could change by the
following amounts based on the respective basis point swing (the change in the
market values were calculated using a modeling technique):

-200 bps -100 bps +100 bps +200 bps
-------- -------- -------- --------
Change in
Market Value
(in thousands) $18,169 $10,620 $(12,346) $(26,842)

The Company has classified certain of its fixed income securities, including
high-yield securities, in its portfolio as available for sale, with the
remainder classified as held to maturity. However, in accordance with Company
policy, any such securities purchased in the future will be classified as held
to maturity. Business conditions, however, may develop in the future which may
indicate a need for a higher level of liquidity in the investment portfolio. In
that event the Company believes it could sell short-term investment grade
securities before liquidating higher-yielding longer-term securities.

The Company is subject to risk based capital guidelines established by statutory
regulators requiring minimum capital levels based on the perceived risk of
assets, liabilities, disintermediation, and business risk. At December 31, 2004
and 2003, the life subsidiaries exceeded the regulatory criteria.

The Company's total capitalization of stockholders' equity and bank debt and
notes payable was $54,995,000 and $57,039,000 as of December 31, 2004 and 2003,
respectively. Stockholders' equity as a percent of total capitalization was 76%
and 69% as of December 31, 2004 and 2003, respectively.

Lapse rates measure the amount of insurance terminated during a particular
period. The Company's lapse rate for life insurance in 2004 was 9.0%, as
compared to a rate of 8.6% in 2003.

On December 17, 1998, the Company completed the acquisition of Consolidare
Enterprises, Inc., a Florida corporation ("Consolidare") pursuant to the terms
of the Acquisition Agreement, which the Company entered into on April 17, 1998,
with Consolidare and certain shareholders of Consolidare for the purchase of all
of the outstanding shares of common stock of Consolidare. Consolidare owns
approximately 77% of the outstanding shares of common stock of Southern Security
Life Insurance Company, a Florida corporation ("SSLIC"). The Company also
acquired all of the outstanding shares of stock of Insuradyne Corp., a Florida
corporation ("Insuradyne").

As consideration for the purchase of the shares of Consolidare, the Company paid
to the stockholders of Consolidare at closing an aggregate of $12,248,194. In
order to pay the purchase consideration, the Company obtained $6,250,000 from
bank financing, with the balance of $5,998,194 obtained from funds then
currently held by the Company. In addition to the purchase consideration, the
Company caused SSLIC to pay, on the closing date, $1,050,000 to George Pihakis,
the President and Chief Executive Officer of SSLIC prior to closing, as a lump
sum settlement of the executive compensation agreement between SSLIC and Mr.
Pihakis.

The Company entered into an Administrative Services Agreement dated December 17,
1998 with SSLIC. Under the terms of the agreement, the Company agreed to provide
SSLIC with certain defined administrative and financial services, including
accounting services, financial reports and statements, actuarial, policyholder
services, underwriting, data processing, legal, building management, marketing
advisory services and investment services. In consideration for the services to
be provided by the Company, SSLIC will pay the Company an administrative
services fee of $250,000 per month, or $3,000,000 on an annual basis, which may
be increased, beginning on January 1, 2001, to reflect increases in the Consumer
Price Index over the index amount as of January 1, 2000. However, such fee is to
be reduced to zero for so long as the capital and surplus of SSLIC is less than
or equal to $6,000,000, unless SSLIC and the Company otherwise agree in writing
and such agreement is approved by the Florida Department of Insurance. The
Company has not made any increases in the amount of the Administrative Services
Fee to reflect increases in the Consumer Price Index.

The Administrative Services Agreement is to remain in effect for an initial term
expiring on December 16, 2003. The term of the agreement was automatically
extended for an additional one-year term expiring December 16, 2004. The
agreement may be automatically extended for additional one-year terms unless
either the Company or SSLIC shall deliver a written notice on or before
September 30 of any year stating to the other its desire not to extend the term
of the agreement. Neither the Company nor SSLIC provided written notice prior to
September 30, 2004, stating a desire not to extend the term of the agreement. As
a result, the agreement will be extended for an additional one-year term ending
December 31, 2005.

Effective as of January 1, 2005, Security National Life and SSLIC Holding
Company, a wholly owned subsidiary of Security National Life, completed a merger
transaction with Southern Security Life Insurance Company. Under the terms of
the merger and pursuant to the Agreement and Plan of Reorganization, dated
August 25, 2004, including the amendment thereto dated December 27, 2004, SSLIC
Holding Company was merged with and into Southern Security Life Insurance
Company, which resulted in (i) Southern Security Life Insurance Company

becoming a wholly-owned subsidiary of Security National Life Insurance Company,
and (ii) the unaffiliated stockholders of Southern Security Life Insurance
Company, holding an aggregate of 490,816 shares of common stock, becoming
entitled to receive $3.84 in cash for each issued and outstanding share of their
common stock of Southern Security Life Insurance Company, or an aggregate of
$1,884,733.

As a result of the merger, the separate existence of SSLIC Holding Company
ceased as Southern Security Life Insurance Company became the surviving
corporation of the merger. Southern Security Life Insurance Company continues to
be governed by the laws of the State of Florida, and its separate corporate
existence continues unaffected by the merger. In addition, as a result of the
merger, Security National Life owns all of the issued and outstanding common
shares of Southern Security Life Insurance Company. Security National Financial
Corporation, through its affiliates, Security National Life Insurance Company
and SSLIC Holding Company, owned 76.7% of the Company's outstanding common
shares prior to the merger.

The purpose of the merger is to terminate the registration of the common stock
of Southern Security Life Insurance Company under the Securities Exchange Act of
1934 (by reducing the number of its stockholders of record to fewer than 300
stockholders) and the Nasdaq listing of the common stock, reduce expenses
associated with such registration and listing, and provide the stockholders an
opportunity to sell their shares in an illiquid trading market without incurring
brokerage commissions. As a result of becoming a non-reporting company, Southern
Security Life Insurance Company is no longer required to file periodic reports
with the SEC, including among other things, annual reports on Form 10-K and
quarterly reports on Form 10-Q, and is no longer subject to the SEC's proxy
rules. In addition, its common stock is no longer eligible for trading on the
Nasdaq SmallCap Market.

On December 23, 2002, the Company completed an asset purchase transaction
through its wholly owned subsidiary, Security National Life with Acadian from
which it acquired $75,000,000 in assets and $75,000,000 in insurance reserves.
The acquired assets consist primarily of approximately 275,000 funeral insurance
policies in force in the state of Mississippi. The assets were originally
acquired by Acadian from Gulf National Life Insurance Company on June 6, 2001,
which, at that time, consisted of all of the insurance policies of Gulf National
Life Insurance Company in force and in effect on June 1, 2001 (the "Reinsured
Business").

As a part of the transaction, Security National Life entered into a coinsurance
agreement with Acadian, in which Security National Life agreed to reinsure all
the liabilities related to policies held by Mississippi policyholders. The terms
included the payment of all legal liabilities, obligations, claims and
commissions of the acquired policies. The effective date of the coinsurance
agreement was September 30, 2002, following Acadian's recapture of the insurance
in force from its reinsurer Scottish Re (U.S.) Inc. on September 30, 2002.

The coinsurance agreement further provides that Acadian is required to pay
Security National Life an initial coinsurance premium in cash or assets
acceptable to Security National Life in an amount equal to the full coinsurance
reserves, not including the incurred but not reported (IBNR) reserve as of the
effective date. The ceding commission to be paid by Security National Life to
Acadian for the reinsured policies is to be the recapture amount to be paid by
Acadian to Scottish Re (U.S.), Inc., which was approximately $10,000,000. After
the initial coinsurance premium, the coinsurance premiums payable by Acadian to
Security National Life are to be equal to all of the premiums collected by
Acadian on the reinsurance policies subsequent to December 31, 2002.

On January 1, 2003, Security National Life entered into an assumption agreement
effective January 1, 2003, with Acadian, in which Security National Life agreed
to assume certain of the liabilities related to the reinsurance policies. Under
the terms of the assumption agreement, Acadian agreed to cede to Security
National Life, and Security National Life agreed to assume the stated insurance
risks and contractual obligations of Acadian relating to the Reinsured Business.
Security National Life agreed to pay all legal liabilities and obligations,
including claims and commissions, of Acadian with respect to the Reinsured
Business arising on or after January 1, 2003, in accordance with the terms and
conditions of the reinsured policies.

On March 16, 2004, Security National Life purchased all of the outstanding
common stock of Paramount Security Life Insurance Company, now known as Security
National Life of Louisiana, a Louisiana domiciled insurance company located in
Shreveport, Louisiana. As of December 31, 2003, Security National Life of
Louisiana had 9,383 policies in force and 29 agents. There were no material
changes in the number of policies in force or the number of agents between
December 31, 2003 and March 16, 2004. The purchase consideration was $4,398,000
and was effective January 26, 2004. Security National Life of Louisiana is
licensed in the State of Louisiana where it is permitted to appoint agents who
do not have a full life insurance license.

These agents are limited to selling small life insurance policies in the final
expense market. The Company believes that with this license it will be able to
expand its operations in Louisiana. The Company is servicing Security National
Life of Louisiana policyholders out of its Jackson, Mississippi office and has
closed its Shreveport office.

At December 31, 2004, $27,208,316 of the Company's consolidated stockholders'
equity represents the statutory stockholders' equity of the Company's insurance
subsidiaries. The life insurance subsidiaries need to comply with applicable
state regulations before a dividend can be paid to their parent company.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements to encourage companies to provide prospective
information about their businesses without fear of litigation so long as those
statements are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in such statements. The
Company desires to take advantage of the "safe harbor" provisions of the act.

Forward-Looking Statements

This Annual Report of Form 10-K contains forward-looking statements, together
with related data and projections, about the Company's projected financial
results and its future plans and strategies. However, actual results and needs
of the Company may vary materially from forward-looking statements and
projections made from time to time by the Company on the basis of management's
then-current expectations. The business in which the Company is engaged involves
changing and competitive markets, which may involve a high degree of risk, and
there can be no assurance that forward-looking statements and projections will
prove accurate.

Factors that may cause the Company's actual results to differ materially from
those contemplated or projected, forecast, estimated or budgeted in such forward
looking statements include among others, the following possibilities: (i)
heightened competition, including the intensification of price competition, the
entry of new competitors, and the introduction of new products by new and
existing competitors; (ii) adverse state and federal legislation or regulation,
including decreases in rates, limitations on premium levels, increases in
minimum capital and reserve requirements, benefit mandates and tax treatment of
insurance products; (iii) fluctuations in interest rates causing a reduction of
investment income or increase in interest expense and in the market value of
interest rate sensitive investment; (iv) failure to obtain new customer, retain
existing customers or reductions in policies in force by existing customers; (v)
higher service, administrative, or general expense due to the need for
additional advertising, marketing, administrative or management information
systems expenditures; (vi) loss or retirement of key executives or employees;
(vii) increases in medical costs; (viii) changes in the Company's liquidity due
to changes in asset and liability matching; (ix) restrictions on insurance
underwriting based on genetic testing and other criteria; (x) adverse changes in
the ratings obtained by independent rating agencies; (xi) failure to maintain
adequate reinsurance; (xii) possible claims relating to sales practices for
insurance products and claim denials and (xiii) adverse trends in mortality and
morbidity.

Off-Balance Sheet Agreements

The Company's off-balance sheet arrangements consist of operating leases for
rental of office space and equipment.

The Company leases office space and equipment under various non-cancelable
agreements, with remaining terms up to five years. Minimum lease payments under
these non-cancelable operating leases as of December 31, 2004, are approximately
as follows:

Years Ending December 31:
-------------------------
2005 $ 588,000
2006 381,000
2007 97,000
2008 90,000
2009 49,000
----------
Total $1,205,000

Total rent expense related to these non-cancelable operating leases for the
years ended December 31, 2004, 2003 and 2002 was approximately $734,000,
$396,000 and $200,000, respectively.

Recent Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement is effective for
contracts entered into or modified after June 30, 2003, with certain exceptions,
and for hedging relationships designated after September 30, 2003. The adoption
of SFAS No. 149 did not have a material effect on the Company's results of
operations or financial position.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous guidance may
have been accounted for as equity, must now be accounted for as liabilities (or
an asset in some circumstances). The financial instruments affected include
mandatory redeemable stock, certain financial instruments that require or may
require the issuer to buy back some of its shares in exchange for cash or other
assets and certain obligations that can be settled with shares of stock. This
Statement is effective for all such financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company entered into an
agreement with a stockholder in August 2003, in which it purchased 124,000
shares of Class A Common Stock from this stockholder for $6.00 per share. The
purchase of these shares is reflected in treasury stock. Also, under the terms
of this agreement, the stockholder has agreed not to purchase or control,
directly or indirectly, any additional shares of Class A or Class C Common Stock
through August 2007, and on August 27, 2004, 2005, and 2006, the stockholder may
request, but is not obligated to request, the Company to purchase an additional
100,000 shares of Class A Common Stock held by this stockholder for $6.00 per
share. On October 26, 2004, the Company completed the stock purchase agreement,
when the Company purchased the remaining amount of 51,929 shares, thus under the
agreement the Company will not be required to purchase any additional shares.

Effective December 31, 2003, the Company adopted EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments ("EITF 03-1"). EITF 03-1 provides guidance on the disclosure
requirements for other-than-temporary Impairments of debt and marketable equity
investments that are accounted for under Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The adoption of EITF 03-1 requires the Company to include
certain quantitative and qualitative disclosures for debt and marketable equity
securities classified as available-for-sale or held-to-maturity under SFAS 115
that are impaired at the balance sheet date but for which an
other-than-temporary impairment has not been recognized. The adoption of EITF
03-1 did not have a material impact on the Company's financial position or
results of operations.

In April 2003, the FASB cleared Statement 133 Implementation Issue No. B36,
Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments
That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially
Related to the Creditworthiness of the Obligor under Those Instruments ("Issue
B36"). Issue B36 concluded that (i) a company's funds withheld payable and/or
receivable under certain reinsurance arrangements, and (ii) a debt instrument
that incorporates credit risk exposures that are unrelated or only partially
related to the creditworthiness of the obligor include an embedded derivative
feature that is not clearly and closely related to the host contract. Therefore,
the embedded derivative feature must be measured at fair value on the balance
sheet and changes in fair value reported in income. Issue B36 became effective
on October 1, 2003. The adoption of Issue No. B36 did not have a material impact
on the Company's financial position or results of operations.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51", and subsequently issued a revision to this
Interpretation in December 2003. This Interpretation addresses the consolidation
by business enterprises of variable interest entities as defined in the
Interpretation. The Interpretation applies to those variable interest entities
considered to be special-purpose entities no later than December 31, 2003. The
Interpretation must also be applied to all other variable interest entities no
later March 31, 2004. Interpretation No. 46 did not have a material impact on
the Company's financial position or results of operations.

In December 2004, FASB revised SFAS 123 to Share-Based Payment ("SFAS 123(R)").
SFAS 123(R) provides additional guidance on determining whether certain
financial instruments awarded in share-based payment transactions are
liabilities. SFAS 123(R) also requires that the cost of all share-based
transactions be recorded in the financial statements. The revised pronouncement
must be adopted by the Company by July 1, 2005. Implementation of SFAS 123(R)
will not have a significant impact on the Company's consolidated financial
statements in the period of implementation. However, any future stock options
granted could have a significant impact on the Company's consolidated financial
statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company has no activities in derivative financial or commodity instruments
other than those recorded and disclosed in the financial statements. See note 17
of the consolidated financial statements included elsewhere in this Form 10K.
The Company's exposure to market risks (i.e., interest rate risk, foreign
currency exchange rate risk and equity price risk) through other financial
instruments, including cash equivalents, accounts receivable and lines of
credit, is not material.

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

Page No.

Financial Statements:

Report of Independent Registered Public Accounting Firm............36

Consolidated Balance Sheet, December 31,
2004 and 2003......................................................37

Consolidated Statement of Earnings,
Years Ended December 31, 2004, 2003, and 2002......................39

Consolidated Statement of Stockholders'
Equity, Years Ended December 31, 2004, 2003
and 2002. .........................................................40

Consolidated Statement of Cash Flows,
Years Ended December 31, 2004, 2003 and 2002.......................41

Notes to Consolidated Financial Statements.........................43

Financial Statement Schedules:

I. Summary of Investments -- Other than
Investments in Related Parties...................................83

II. Condensed Financial Information of Registrant....................85

IV. Reinsurance......................................................91

V. Valuation and Qualifying Accounts................................92

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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of Security National Financial Corporation

We have audited the accompanying consolidated balance sheet of Security National
Financial Corporation and subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for the three years in the period ended December 31, 2004. In connection
with our audits of the consolidated financial statements, we have also audited
the amounts included in the consolidated financial statement schedules as listed
in the accompanying index under Item 8. These consolidated financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Security National Financial Corporation and subsidiaries as of December 31, 2004
and 2003, and the consolidated results of their operations and their cash flows
for the three years in the period ended December 31, 2004, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the related consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.

/s/ TANNER LC

Salt Lake City, Utah
March 31, 2005

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES

Consolidated Balance Sheet

December 31,
Assets: 2004 2003
- ------- ---- ----

Insurance-related investments:
Fixed maturity securities
held to maturity, at amortized cost (market
$72,330,878 and $38,624,978 for 2004 and 2003) $ 69,984,761 $ 37,293,989
Fixed maturity securities available
for sale, at market (cost $10,486,309 in 2004
and $13,214,057 in 2003) 11,066,025 14,270,037
Equity securities available for sale,
at market (cost $2,037,249 and $1,981,461
for 2004 and 2003) 4,166,769 3,453,444
Mortgage loans on real estate and construction loans,
net of allowances for losses of $254,893
and $14,893 for 2004 and 2003 65,831,586 29,914,745
Real estate, net of accumulated
depreciation and allowances for
losses of $4,408,030 and $4,059,934
for 2004 and 2003 9,709,129 8,519,680
Policy, student and other loans 13,312,471 11,753,617
Short-term investments 4,628,999 2,054,248
------------ ------------
Total insurance-related investments 178,699,740 107,259,760
------------ ------------
Restricted assets of cemeteries and mortuaries 5,176,463 4,745,709
------------ ------------
Cash 15,333,668 19,704,358
------------ ------------
Receivables:
Trade contracts 5,333,891 5,173,964
Mortgage loans sold to investors 47,167,150 114,788,185
Receivable from agents 1,416,211 1,318,958
Receivable from officers 1,540 37,540
Other 1,120,157 1,086,523
------------ ------------
Total receivables 55,038,949 122,405,170
Allowance for doubtful accounts (1,302,368) (1,706,678)
------------ ------------
Net receivables 53,736,581 120,698,492
------------ ------------
Policyholder accounts on deposit
with reinsurer 6,689,422 6,795,983
Cemetery land and improvements held for sale 8,547,764 8,387,061
Accrued investment income 1,743,721 1,142,690
Deferred policy and pre-need
contract acquisition costs 20,181,818 17,202,489
Property and equipment, net 10,520,665 11,009,416
Cost of insurance acquired 14,053,497 14,980,763
Excess of cost over net assets
of acquired subsidiaries 683,191 683,191
Other 1,107,230 873,424
------------ ------------
Total assets $316,473,760 $313,483,336
============ ============

See accompanying notes to consolidated financial statements.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)

December 31,
2004 2003
---- ----
Liabilities:
- ------------
Future life, annuity, and other
policy benefits $224,529,539 $218,793,693
Unearned premium reserve 2,254,991 1,945,203
Bank loans payable 10,442,106 14,422,670
Notes and contracts payable 2,888,539 3,440,694
Deferred pre-need cemetery and funeral
contract revenues 10,762,357 10,520,280
Accounts payable 1,064,269 1,274,183
Funds held under reinsurance treaties 1,184,463 1,294,589
Other liabilities and accrued expenses 6,371,343 7,745,120
Income taxes 11,497,967 10,914,845
------------ ------------
Total liabilities 270,995,574 270,351,277
------------ ------------

Commitments and contingencies -- --
------------ ------------

Minority interest 3,813,346 3,956,628
------------ ------------

Stockholders' Equity:
Common stock:
Class A: $2 par value, authorized
10,000,000 shares, issued 6,755,870
shares in 2004 and 6,275,104 shares in 2003 13,511,740 12,550,208
Class C: convertible, $0.20 par value,
authorized 7,500,000 shares, issued
6,468,199 shares in 2004 and 6,469,638
shares in 2003 1,293,641 1,293,927
------------ ------------
Total common stock 14,805,381 13,844,135
Additional paid-in capital 14,922,851 13,569,582
Accumulated other comprehensive (loss)
and other items, net of deferred
taxes of $445,761 and $274,091 for
2004 and 2003, respectively (11,352) (437,973)
Retained earnings 15,365,259 15,414,681
Treasury stock at cost (1,315,075
Class A shares and 79,103 Class C
shares in 2004; 1,276,518 Class A
shares and 75,336 Class C shares
in 2003, held by affiliated companies) (3,417,299) (3,214,994)
------------ ------------
Total stockholders' equity 41,664,840 39,175,431
------------ ------------
Total liabilities and
stockholders' equity $316,473,760 $313,483,336
============ ============

See accompanying notes to consolidated financial statements.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES

Consolidated Statement of Earnings

Years Ended December 31,
------------------------
2004 2003 2002
---- ---- ----
Revenues:

Insurance premiums and other considerations $ 25,979,341 $ 23,294,373 $14,076,652
Net investment income 15,939,176 17,302,597 12,539,430
Net mortuary and cemetery sales 11,661,053 10,944,365 10,638,754
Realized gains (losses) on investments
and other assets 74,431 (2,155) 1,020,820
Mortgage fee income 62,689,391 92,955,165 57,008,283
Other 854,425 550,064 479,424
------------ ------------ -----------
Total revenue 117,197,817 145,044,409 95,763,363
------------ ------------ -----------

Benefits and expenses:
Death benefits 13,248,960 13,315,266 5,637,217
Surrenders and other policy benefits 1,291,621 1,726,275 2,086,829
Increase in future policy benefits 8,821,497 6,712,961 6,031,685
Amortization of deferred
policy and pre-need acquisition
costs and cost of insurance acquired 4,602,072 4,929,006 3,993,393
General and administrative expenses:
Commissions 48,690,807 67,536,703 42,114,240
Salaries 14,391,958 14,079,908 10,414,392
Other 19,014,776 21,309,897 15,930,804
Interest expense 2,173,778 3,642,046 1,970,342
Cost of goods and services sold of the
mortuaries and cemeteries 2,303,821 2,327,475 2,045,476
------------ ------------ -----------

Total benefits and expenses 114,539,290 135,579,537 90,224,378
------------ ------------ -----------

Earnings before income taxes 2,658,527 9,464,872 5,538,985
Income tax expense (651,536) (2,890,669) (1,565,393)
Minority interest 115,281 22,294 17,688
------------ ------------ -----------
Net earnings $ 2,122,272 $ 6,596,497 $ 3,991,280
============ ============ ===========

Net earnings per common share (1) $.35 $1.13 $.72
==== ===== ====

Weighted average
outstanding common shares (1) 6,001,861 5,851,814 5,572,783

Net earnings per common share
assuming dilution (1) $.34 $1.10 $.69
==== ===== ====

Weighted average outstanding common
shares assuming dilution (1) 6,217,951 6,003,773 5,744,154

See accompanying notes to consolidated financial statements.

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

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity

Accumulated
Other
Additional Comprehensive
Class Class Paid-in Income (loss), Retained Treasury
A C Capital and Other Items Earnings Stock Total
-------- ------- --------- --------------- -------- ----- -----

Balance as of January 1, 2002 $10,727,182 $1,222,686 $10,168,523 $1,223,930 $ 9,989,230 $(3,362,233) $29,969,318
Comprehensive income:
Net earnings -- -- -- -- 3,991,280 -- 3,991,280
Unrealized losses -- -- -- (32,067) -- -- (32,067)
----------
Total comprehensive income -- -- -- -- -- -- 3,959,213
----------
Stock dividends 552,024 58,883 690,316 -- (1,301,223) -- --
Conversion Class C to Class A 45,036 (45,036) -- -- -- -- --
Exercise of stock options 264,742 -- 422,003 -- (686,745) -- --
Sale of treasury stock -- -- -- -- -- 584,880 584,880
----------- ---------- ----------- ----------- ------------ ----------- -----------
Balance at December 31, 2002 $11,588,984 $1,236,533 $11,280,842 $1,191,863 $11,992,542 $(2,777,353) $34,513,411
----------- ---------- ----------- ---------- ----------- ----------- -----------

Comprehensive income:
Net earnings $ -- $ -- $ -- $ -- $ 6,596,497 $ -- $ 6,596,497
Unrealized gains -- -- -- 352,784 -- -- 352,784
-----------
Total comprehensive income -- -- -- -- -- -- 6,949,281
-----------
Acquisition of Company Stock
held in escrow (see note 17) -- -- -- (1,982,620) -- -- (1,982,620)
Stock dividends 603,549 61,617 1,529,240 -- (2,194,406) -- --
Conversion Class C to Class A 4,225 (4,223) (2) -- -- -- --
Exercise of stock options 353,450 -- 759,502 -- (979,952) -- 133,000
Purchase of treasury stock -- -- -- -- -- (437,641) (437,641)
----------- ----------- ----------- ---------- ----------- ----------- -----------
Balance at December 31, 2003 $12,550,208 $1,293,927 $13,569,582 $ (437,973) $15,414,681 $(3,214,994 $39,175,431
----------- ----------- ----------- ---------- ----------- ----------- -----------

Comprehensive income:
Net earnings $ -- $ -- $ -- $ -- $ 2,122,272 $ -- $ 2,122,272
Unrealized gain -- -- -- 426,621 -- -- 426,621
-----------
Total comprehensive income -- -- -- -- -- -- 2,548,893
-----------
Exercise of stock options 255,776 -- 775,801 -- (1,031,577) -- --
Purchase of Treasury stock -- -- -- -- -- (422,946) (422,946)
Sale of Treasury stock -- -- 142,500 -- -- 220,641 363,141
Stock dividends 643,864 61,602 433,862 -- (1,139,328) -- --
Conversion Class C to Class A 61,892 (61,888) 1,106 -- (789) -- 321
----------- ---------- ----------- ---------- ----------- ----------- -----------
Balance at December 31, 2004 $13,511,740 $1,293,641 $14,922,851 $ (11,352) $15,365,259 $(3,417,299) $41,664,840)
=========== ========== =========== ========== =========== =========== ===========

See accompanying notes to consolidated financial statements

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Cash Flows

Years Ended December 31,
------------------------
2004 2003 2002
---- ---- ----
Cash flows from operating activities:

Net earnings $ 2,122,272 $ 6,596,497 $ 3,991,280
Adjustments to reconcile net earnings
to net cash provided by (used in) operating
activities:
Realized (gains) losses on investments
and other assets (74,431) 2,155 (1,020,820)
Depreciation 2,013,113 1,866,924 1,553,399
Provision for losses on real estate
accounts and loans receivable (165,781) 225,072 (300,412)
Amortization of premiums and discounts (2,489) 44,092 121,329
Provision for deferred income taxes 636,430 2,862,343 970,139
Policy and pre-need acquisition costs deferred (6,051,793) (4,527,546) (4,462,624)
Policy and pre-need acquisition costs amortized 3,370,763 3,611,674 3,214,710
Cost of insurance acquired amortized 1,231,308 1,317,332 778,683
Change in assets and liabilities net of effects
from purchases and disposals of subsidiaries:
Land and improvements held for sale (160,703) 42,154 626,688
Future life and other benefits 9,000,715 7,426,761 5,349,152
Receivables for mortgage loans sold 67,621,035 (25,333,080) (38,760,032)
Other operating assets and liabilities (2,624,510) 3,402,371 975,682
----------- ----------- -----------
Net cash provided by (used in)
operating activities 76,915,929 (2,463,251) (26,962,826)
----------- ----------- -----------
Cash flows from investing activities:
Securities held to maturity:
Purchase - fixed maturity securities (37,371,166) (15,396,993) (4,147,878)
Calls and maturities - fixed maturity securities 6,293,614 11,147,744 8,025,610
Securities available for sale:
Purchases - equity securities (21,993) (51,921) (327,726)
Sales - equity securities 2,675,301 3,860,000 3,303,095
Purchases of short-term investments (29,893,323) (19,065,874) (13,819,476)
Sales of short-term investments 26,731,711 22,347,104 9,937,642
Purchases of restricted assets (262,195) 610,155 (56,899)
Mortgage, policy, and other loans made (78,437,965) (30,192,467) (10,129,993)
Payments received for mortgage, policy, and
other loans 41,116,662 20,479,056 4,939,374
Purchases of property and equipment (1,241,898) (1,623,310) (1,348,752)
Cash received on sale of property and equipment 149,040 -- --
Purchases of real estate (1,856,931) (1,807,658) (3,153,299)
Cash paid for purchase of subsidiary (304,042) -- --
Sale of real estate 352,054 2,287,831 2,825,666
Cash received in assumed reinsurance transaction -- -- 55,827,793
----------- ----------- -----------
Net cash (used in) provided by investing activities (72,071,131) (7,406,333) 51,875,157
----------- ----------- -----------

See accompanying notes to the consolidated financial statements.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Continued)

Years Ended December 31,
------------------------
2004 2003 2002
---- ---- ----
Cash flows from financing activities:

Annuity and pre-need contract receipts 5,387,393 5,785,310 7,635,422
Annuity and pre-need contract withdrawals (10,276,576) (10,410,247) (10,866,398)
Repayment of bank loans and notes and
contracts payable (4,401,500) (3,695,521) (1,824,440)
Proceeds from borrowing on notes and contracts 135,000 -- --
Proceeds from borrowings on bank loans and notes
and contracts payable -- -- 9,000,000
Stock options exercised -- 133,000 --
Purchase of Treasury stock (422,946) (437,641) --
Sale of treasury stock 363,141 -- 584,880
----------- ------------ ------------
Net cash (used in) provided by financing activities (9,215,488) (8,625,099) 4,529,464
----------- ------------ ------------
Net change in cash (4,370,690) (18,494,683) 29,441,795
----------- ------------ ------------
Cash at beginning of year 19,704,358 38,199,041 8,757,246
----------- ------------ ------------
Cash at end of year $15,333,668 $19,704,358 $38,199,041
=========== ============ ============

Supplemental Schedule of Cash Flow Information:

The following information shows the non-cash items in connection with the
assumption of reinsurance from Acadian Life Insurance Company on December 23,
2002:

Liabilities assumed:
Future life, annuity and other policy benefits $74,199,194
Less non-cash items:
Cost of insurance acquired (9,106,309)
Bonds received (9,032,818)
Policy loans received (82,126)
Premiums due and unpaid (150,148)
-----------
Cash received $55,827,793
===========

The following information shows the non-cash items in connection with the
purchase of Security National Life Insurance Company of Louisiana on March 16,
2004:

Liabilities assumed:
Future life, annuity and other policy benefits $ 1,865,038
Less non-cash items
Cost of insurance acquired (304,042)
Bonds received (1,537,801)
Common stock received (326,325)
Mortgage loans received (471,593)
Real estate received (32,668)
Policy loans received (28,180)
Short-term investments 586,601
Receivables (13,589)
Accrued investment income (24,983)
Property, plant and equipment (16,500)
-----------
Cash paid $ (304,042)
===========

See accompanying notes to the consolidated financial statements.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles

General Overview of Business

Security National Financial Corporation and its wholly owned subsidiaries (the
"Company") operates in three main business segments; life insurance, cemetery
and mortuary, and mortgage loans. The life insurance segment is engaged in the
business of selling and servicing selected lines of life insurance, annuity
products and accident and health insurance marketed primarily in the
intermountain west, California, Florida, Mississippi, Oklahoma and Texas. The
cemetery and mortuary segment of the Company consists of five cemeteries in
Utah, one cemetery in California, eight mortuaries in Utah and four mortuaries
in Arizona. The mortgage loan segment is an approved governmental and
conventional lender that originates and underwrites residential and commercial
loans for new construction, existing homes and real estate projects primarily in
Arizona, California, Colorado, Florida, Nevada, Texas and Utah.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles which, for the
life insurance subsidiaries, differ from statutory accounting principles
prescribed or permitted by regulatory authorities. Certain amounts in prior
years have been reclassified to conform with the 2004 presentation.

Risks

The following is a description of the most significant risks facing the Company
and how it mitigates those risks:

Legal/Regulatory Risk - the risk that changes in the legal or regulatory
environment in which the Company operates will create additional expenses and/or
risks not anticipated by the Company in developing and pricing its products.
That is, regulatory initiatives designed to reduce insurer profits, new legal
theories or insurance company insolvencies through guaranty fund assessments may
create costs for the insurer beyond those recorded in the consolidated financial
statements. In addition, changes in tax law with respect to mortgage interest
deductions or other public policy or legislative changes may affect the
Company's mortgage sales. Also, the Company may be subject to further
regulations in the cemetery/mortuary business. The Company mitigates this risk
by offering a wide range of products and by diversifying its operations, thus
reducing its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the adverse impact
of such risk.

Credit Risk - the risk that issuers of securities owned by the Company,
mortgagors of mortgage loans on real estate and obligors on construction loans,
will default or that other parties, including reinsurers and holders of
cemetery/ mortuary contracts which owe the Company money, will not pay. The
Company minimizes this risk by adhering to a conservative investment strategy,
by maintaining sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

Interest Rate Risk - the risk that interest rates will change which may cause a
decrease in the value of the Company's investments or impair the ability of the
Company to market its mortgage and cemetery/mortuary products. This change in
rates may cause certain interest-sensitive products to become uncompetitive or
may cause disintermediation. The Company mitigates this risk by charging fees
for non-conformance with certain policy provisions, by offering products that
transfer this risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its liabilities. To the
extent that liabilities come due more quickly than assets mature, the Company
might have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.

Mortality/Morbidity Risk - the risk that the Company's actuarial assumptions may
differ from actual mortality/morbidity experience may cause the Company's
products to be underpriced, may cause the Company to liquidate insurance or
other claims earlier than anticipated and other potentially adverse consequences
to the business. The Company minimizes this risk through sound underwriting
practices, asset/liability duration matching, and sound actuarial practices.

Estimates The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

The estimates susceptible to significant change are those used in determining
the liability for future policy benefits and claims, those used in determining
valuation allowances for mortgage loans on real estate, construction loans and
other receivables, and those used in determining the estimated future costs for
pre-need sales. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts and
operations of the Company. The Company's subsidiaries at December 31, 2004, are
as follows:

Security National Life Insurance Company
SecurityNational Mortgage Company
Memorial Estates, Inc.
Memorial Mortuary
Paradise Chapel Funeral Home
California Memorial Estates
Cottonwood Mortuary, Inc.
Deseret Memorial, Inc.
Holladay Cottonwood Memorial Foundation
Holladay Memorial Park, Inc.
Sunset Funeral Home, Inc.
Greer-Wilson Funeral Home

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

Crystal Rose Funeral Home
Hawaiian Land Holdings
SSLIC Holding Company
Insuradyne Corporation
Southern Security Life Insurance Company (77%)
Security National Life Insurance Company of Louisiana
(formerly Paramount Security Life Insurance Company)
Security National Capital, Inc.
Security National Funding

All significant intercompany transactions and accounts have been eliminated in
consolidation.

On December 17, 1998, the Company purchased all of the outstanding shares of
common stock of SSLIC Holding Company, formerly Consolidare Enterprises, Inc.,
and Insuradyne Corporation for a total cost of $12,248,194. As of December 31,
2004, Security National Life and its wholly owned subsidiary, SSLIC Holding,
owned approximately 77% of the outstanding shares of common stock of Southern
Security Life Insurance Company. The acquisition was accounted for using the
purchase method.

Effective as of January 1, 2005, Security National Life and SSLIC Holding
Company, a wholly owned subsidiary of Security National Life, completed a merger
transaction with Southern Security Life Insurance Company. Under the terms of
the merger and pursuant to the Agreement and Plan of Reorganization, dated
August 25, 2004, among Security National Life, SSLIC Holding Company and
Southern Security Life Insurance Company, including the amendment thereto dated
December 27, 2004, SSLIC Holding Company was merged with and into Southern
Security Life Insurance Company, which resulted in (i) Southern Security Life
Insurance Company becoming a wholly-owned subsidiary of Security National Life
Insurance Company, and (ii) the unaffiliated stockholders of Southern Security
Life Insurance Company, holding an aggregate of 490,816 shares of common stock,
becoming entitled to receive $3.84 in cash for each issued and outstanding share
of their common stock of Southern Security Life Insurance Company, or an
aggregate of $1,884,733.

As a result of the merger, the separate existence of SSLIC Holding Company
ceased as Southern Security Life Insurance Company became the surviving
corporation of the merger. Southern Security Life Insurance Company continues to
be governed by the laws of the State of Florida, and its separate corporate
existence continues unaffected by the merger. In addition, as a result of the
merger, Security National Life owns all of the issued and outstanding common
shares of Southern Security Life Insurance Company. Security National Financial
Corporation, through its affiliates, Security National Life Insurance Company
and SSLIC Holding Company, owned 76.7% of the Company's outstanding common
shares prior to the merger.

The purpose of the merger is to terminate the registration of the common stock
of Southern Security Life Insurance Company under the Securities Exchange Act of
1934 (by reducing the number of its stockholders of record to fewer than 300
stockholders) and the Nasdaq listing of the common stock, reduce expenses
associated with such registration and listing, and provide the stockholders an
opportunity to sell their shares in an illiquid trading market without incurring
brokerage commissions. As a result of becoming a non-reporting company, Southern
Security Life Insurance Company is no longer required to file periodic reports
with the SEC, including among other things, annual reports on Form 10-K and
quarterly reports on Form 10-Q, and is no longer subject to the SEC's proxy
rules. In addition, its common stock is no longer eligible for trading on the
Nasdaq SmallCap Market.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

On December 23, 2002, the Company, through its wholly-owned subsidiary Security
National Life Insurance Company completed the asset purchase transaction with
Acadian Life Insurance Company ("Acadian") from which it acquired from Acadian
$75,000,000 in assets and $75,000,000 in statutory insurance reserves. Security
National Life paid a ceding commission of $10,254,803. On January 1, 2003,
Security National Life entered into an assumption agreement in which Acadian
transferred and assigned to Security National Life all of its right, title and
interest in the reinsured policies and Security National Life took over the
operations of this block of business. The assets and liabilities acquired have
been included in the Company's consolidated balance sheet as of December 31,
2002. Since the Company did not take over the operations from Acadian until
January 1, 2003, nothing was included in the consolidated statement of earnings
during 2002.

On March 16, 2004, Security National Life purchased all of the outstanding
common stock of Paramount Security Life Insurance Company, now known as Security
National Life of Louisiana, a Louisiana domiciled insurance company located in
Shreveport, Louisiana. As of December 31, 2003, Security National Life of
Louisiana had 9,383 policies in force and 29 agents. There were no material
changes to the number of policies in force or the number of agents between
December 31, 2003 and March 16, 2004. The purchase consideration was $4,398,000
and was effective January 26, 2004. Security National Life of Louisiana is
licensed in the State of Louisiana where it is permitted to appoint agents who
do not have a full life insurance license. These agents are limited to selling
small life insurance policies in the final expense market. The Company believes
that with this license it will be able to expand its operations in Louisiana.
The Company is servicing Security National Life of Louisiana policyholders out
of its Jackson, Mississippi office and has closed its Shreveport office.

Investments

Investments are shown on the following basis:

Fixed maturity securities held to maturity - at cost, adjusted for amortization
of premium or accretion of discount. Although the Company has the ability and
intent to hold these investments to maturity, infrequent and unusual conditions
could occur under which it would sell certain of these securities. Those
conditions include unforeseen changes in asset quality, significant changes in
tax laws, and changes in regulatory capital requirements or permissible
investments.

Fixed maturity and equity securities available for sale - at fair value, which
is based upon quoted trading prices. Changes in fair values net of income taxes
are reported as unrealized appreciation or depreciation and recorded as an
adjustment directly to stockholders' equity and, accordingly, have no effect on
net income.

Mortgage loans on real estate - at unpaid principal balances, adjusted for
amortization of premium or accretion of discount, less allowance for possible
losses.

Real estate - at cost, less accumulated depreciation provided on a straight-line
basis over the estimated useful lives of the properties, and net of allowance
for impairment in value, if any.

Policy, student, and other loans - at the aggregate unpaid balances, less
allowances for possible losses.

Short-term investments at cost - consists of certificates of deposit and
commercial paper with maturities of up to one year.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

Restricted assets of cemeteries and mortuaries - consist of assets held in Trust
Account for future mortuary services and merchandise and consist of cash,
participations in mortgage loans with Security National Life Insurance Company,
and mutual funds carried at cost; fixed maturity securities carried at cost
adjusted for amortization of premium or accretion of discount; and equity
securities carried at fair market value.

Realized gains and losses on investments - realized gains and losses on
investments and declines in value considered to be other than temporary, are
recognized in operations on the specific identification basis.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.

Property and Equipment

Property, plant and equipment is recorded at cost. Depreciation is calculated
principally on the straight-line method over the estimated useful lives of the
assets which range from three to forty years. Leasehold improvements are
amortized over the lesser of the useful life or remaining lease terms.

Recognition of Insurance Premiums and Other Considerations

Premiums for traditional life insurance products (which include those products
with fixed and guaranteed premiums and benefits and consist principally of whole
life insurance policies, limited-payment life insurance policies, and certain
annuities with life contingencies) are recognized as revenues when due from
policyholders. Revenues for interest-sensitive insurance policies (which include
universal life policies, interest-sensitive life policies, deferred annuities,
and annuities without life contingencies) consist of policy charges for the cost
of insurance, policy administration charges, and surrender charges assessed
against policyholder account balances during the period.

Deferred Policy Acquisition Costs and Cost of Insurance Acquired

Commissions and other costs, net of commission and expense allowances for
reinsurance ceded, that vary with and are primarily related to the production of
new insurance business have been deferred. Deferred policy acquisition costs for
traditional life insurance are amortized over the premium-paying period of the
related policies using assumptions consistent with those used in computing
policy benefit reserves. For interest-sensitive insurance products, deferred
policy acquisition costs are amortized generally in proportion to the present
value of expected gross profits from surrender charges, investment, mortality
and expense margins. This amortization is adjusted when estimates of current or
future gross profits to be realized from a group of products are reevaluated.
Deferred acquisition costs are written off when policies lapse or are
surrendered.

Cost of insurance acquired is the present value of estimated future profits of
the acquired business and is amortized similar to deferred policy acquisition
costs.

Allowance for Doubtful Accounts

The Company accrues an estimate of potential losses for the collection of
receivables. The significant receivables are the result of receivables due on
mortgage loans sold to investors, cemetery and mortuary operations, mortgage
loan operations and other receivables. The allowance is based upon the Company's
experience. The critical issues that would impact recovery of the cemetery and
mortuary receivables is the overall economy. The critical issues that would
impact recovery of mortgage loan operations would be interest rate risk and loan
underwriting.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

Future Life, Annuity and Other Policy Benefits

Future policy benefit reserves for traditional life insurance are computed using
a net level method, including assumptions as to investment yields, mortality,
morbidity, withdrawals, and other assumptions based on the life insurance
subsidiaries experience, modified as necessary to give effect to anticipated
trends and to include provisions for possible unfavorable deviations. Such
liabilities are, for some plans, graded to equal statutory values or cash values
at or prior to maturity. The range of assumed interest rates for all traditional
life insurance policy reserves was 4.5% to 10%. Benefit reserves for traditional
limited-payment life insurance policies include the deferred portion of the
premiums received during the premium-paying period. Deferred premiums are
recognized as income over the life of the policies. Policy benefit claims are
charged to expense in the period the claims are incurred.

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 4% to 6.5%.

Participating Insurance

Participating business constitutes 2%, 2%, and 2% of insurance in force for
2004, 2003 and 2002, respectively. The provision for policyholders' dividends
included in policyholder obligations is based on dividend scales anticipated by
management. Amounts to be paid are determined by the Board of Directors.

Reinsurance

The Company follows the procedure of reinsuring risks in excess of $75,000 to
provide for greater diversification of business, allow management to control
exposure to potential losses arising from large risks, and provide additional
capacity for growth. The Company remains liable for amounts ceded in the event
the reinsurers are unable to meet their obligations.

The Company has entered into coinsurance agreements with unaffiliated insurance
companies under which the Company assumed 100% of the risk for certain life
insurance policies and certain other policy-related liabilities of the insurance
company.

Reinsurance premiums, commissions, expense reimbursements, and reserves related
to reinsured business are accounted for on a basis consistent with those used in
accounting for the original policies issued and the terms of the reinsurance
contracts. Expense allowances received in connection with reinsurance ceded are
accounted for as a reduction of the related policy acquisition costs and are
deferred and amortized accordingly.

Cemetery and Mortuary Operations

Pre-need 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.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

Pre-need sales of cemetery internment rights (cemetery burial property) -
revenue and costs associated with the sales of pre-need cemetery internment
rights are recognized in accordance with the retail land sales provisions of
Statement of Financial Accounting Standards No. 66, "Accounting for the Sales of
Real Estate" (FAS No. 66). Under FAS 66, recognition of revenue and associated
costs from constructed cemetery property must be deferred until a minimum
percentage of the sales price has been collected. Revenues related to the
pre-need sale of unconstructed cemetery property will be deferred until such
property is constructed and meets the criteria of FAS No. 66 described above.

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

Pre-need sales of cemetery services (primarily merchandise delivery and
installation fees and burial opening and closing 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 obtaining costs - costs
incurred related to obtaining new pre-need cemetery and prearranged funeral
business are accounted for under the guidance of the provisions of Statement of
Financial Accounting Standards No. 60 "Accounting and Reporting by Insurance
Enterprises" (FAS No. 60). Obtaining costs, which include only costs that vary
with and are primarily related to the acquisition of new pre-need cemetery and
prearranged funeral business, 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 reasonably assured and there are no
significant obligations remaining.

The Company, through its mortuary and cemetery operations, provides a guaranteed
funeral arrangement wherein a prospective customer can receive future goods and
services at guaranteed prices. To accomplish this, the Company, through its life
insurance operations, sells to the customer an increasing benefit life insurance
policy that is assigned to the mortuaries. If, at the time of need, the
policyholder/potential mortuary customer utilizes one of the Company's
facilities, the guaranteed funeral arrangement contract that has been assigned
will provide the funeral goods and services at the contracted price. The
increasing life insurance policy will cover the difference between the original
contract prices and current prices. Risks may arise if the difference cannot be
fully met by the life insurance policy. However, management believes that given
current inflation rates and related price increases of goods and services, the
risk of exposure is minimal.

Mortgage Operations

Mortgage fee income consists of origination fees, processing fees and certain
other income related to the sale of mortgages. For mortgages sold, mortgage fee
income and related expenses are recognized at the time the loan meets the sales
criteria for financial assets which are: (1) the transferred assets have been
isolated from the Company and its creditors, (2) the transferee has the right to
pledge or exchange the mortgage, and (3) the Company does not maintain effective
control over the transferred mortgage.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

The majority of loans originated are sold to third party investors. The amounts
sold to investors are shown on the balance sheet as mortgage loans sold to
investors and are shown on the basis of the amount due from the investors, which
includes fees. Any impairment to sold loans or possible loan losses are included
in a separate provision for loan losses. The estimates are based upon historical
experience and best estimate of future liabilities. At December 31, 2004 and
2003 the provision for loan losses was $1,432,000 and $1,919,000, respectively.

The Company accrues an estimate of future losses on mortgage loans sold to third
party investors. The Company may be required to reimburse third party investors
for costs associated with early payoff of loans within the first year of
duration and to repurchase loans in default within the first year. The estimates
are based upon historical experience and best estimate of future liabilities.

Excess of Cost Over Net Assets of Acquired Businesses

Previous acquisitions have been accounted for as purchases under which assets
acquired and liabilities assumed were recorded at the fair values. The Company
evaluates annually or when changes in circumstances warrant the recoverability
of the amounts recorded and if there is a decrease in value they are recognized
in income. In accordance with FAS 142 the Company no longer amortizes excess of
cost over net assets of acquired business ("goodwill"). Pro forma information
related to the amortization of goodwill has not been presented since it is not
material.

Long-lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the related carrying amount may
not be recoverable. When required, impairment losses on assets to be held and
used are recognized based on the fair value of the asset, and long-lived assets
to be disposed of are reported at the lower of carrying amount or fair value
less costs to sell.

Income Taxes

Income taxes include taxes currently payable plus deferred taxes related to the
tax effect of temporary differences in the financial reporting basis and tax
basis of assets and liabilities. Such temporary differences are related
principally to the deferral of policy acquisition costs and the provision for
future policy benefits in the insurance operations, and unrealized gains on
fixed maturity and equity securities available for sale.

Earnings Per Common Share

The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". This
Standard requires presentation of basic and diluted earnings per share. Basic
earnings per share are computed by dividing net earnings by the weighted average
number of common

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

shares outstanding during each year presented, after the effect of the assumed
conversion of Class C Common Stock to Class A Common Stock, the acquisition of
treasury stock, and the retroactive effect of stock dividends declared. Diluted
earnings per share is computed by dividing net earnings by the weighted average
number of common shares outstanding during the year plus the incremental shares
that would have been outstanding under certain deferred compensation plans.

Stock Compensation

In accordance with the provisions of SFAS 123, the Company has elected to
continue to apply Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB Opinion No. 25"), and related interpretations
in accounting for its stock option plans.

The Company has three fixed option plans (the "1993 Plan" the "2000 Plan", and
the "2003 Plan"). In accordance with APB Opinion No. 25, no compensation cost
has been recognized for these plans. Had compensation cost for these plans been
determined based upon the fair value at the grant date consistent with the
methodology prescribed under SFAS No. 123, the Company's net income would have
been reduced by approximately $1,090,458, $490,145 and $533,520 in 2004, 2003
and 2002, respectively. As a result, basic and diluted earnings per share would
have been reduced by $.18 and $.08 in 2004 and 2003, respectively, and basic of
$.10 and diluted of $.09 for the year 2002.

The weighted average fair value of options granted in 2004 under the 2000 Plan
and the 2003 Plan is estimated at $1.71 as of the grant date using the Black
Scholes Option Pricing Model with the following assumptions: dividend yield of
5%, volatility of 74%, risk-free interest rate of 3.4%, and an expected life of
five to ten years.

The weighted average fair value of each option granted in 2003 under the 1993
Plan, and the 2000 Plan is estimated at $2.63 as of the grant date using the
Black Scholes option-pricing model with the following assumptions: dividend
yield of 5%, volatility of 73%, risk-free interest rate of 4%, and an expected
life of two years.

The weighted average fair value of options granted in 2002 under the 1993 Plan,
and the 2000 Plan, is estimated at $2.88 as of the grant date using the Black
Scholes Option Pricing Model with the following assumptions: dividend yield of
5%, volatility of 74%, risk-free interest rate of 3.8%, and an expected life of
five to ten years.

The Company also has one variable option plan (the "1987 Plan"). In accordance
with APB Opinion No. 25, compensation cost related to options granted and
outstanding under these plans is estimated and recognized over the period of the
award based on changes in the current market price of the Company's stock over
the vesting period. Options granted under the 1987 Plan are exercisable for a
period of ten years from the date of grant.

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts, which at times exceed
federally insured limits. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit risk on cash
and cash equivalents.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

Recent Accounting Pronouncements

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement is effective for
contracts entered into or modified after June 30, 2003, with certain exceptions,
and for hedging relationships designated after September 30, 2003. The adoption
of SFAS No. 149 did not have a material effect on the Company's results of
consolidated operations or financial position.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
requires that certain financial instruments, which under previous guidance may
have been accounted for as equity, must now be accounted for as liabilities (or
an asset in some circumstances). The financial instruments affected include
mandatory redeemable stock, certain financial instruments that require or may
require the issuer to buy back some of its shares in exchange for cash or other
assets and certain obligations that can be settled with shares of stock. This
Statement is effective for all such financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. The Company entered into an
agreement with a stockholder in August 2003, wherein it purchased 124,000 shares
of Class A Common Stock from this stockholder for $6.00 per share. The purchase
of these shares is reflected in treasury stock. Also, under the terms of this
agreement, the stockholder has agreed not to purchase or control, directly or
indirectly, any additional shares of Class A or Class C Common Stock through
August 2007, and on August 27, 2004, 2005, and 2006, the stockholder may
request, but is not obligated to request, the Company to purchase an additional
100,000 shares of Class A Common Stock held by this stockholder for $6.00 per
share. On October 26, 2004, the Company completed the stock purchase agreement
when the Company purchased the remaining amount of 51,959 shares, thus under the
agreement the Company will not be required to purchase any additional shares.

Effective December 31, 2003, the Company adopted EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments ("EITF 03-1"). EITF 03-1 provides guidance on the disclosure
requirements for other-than-temporary Impairments of debt and marketable equity
investments that are accounted for under Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The adoption of EITF 03-1 requires the Company to include
certain quantitative and qualitative disclosures for debt and marketable equity
securities classified as available-for-sale or held-to-maturity under SFAS 115
that are impaired at the balance sheet date but for which an
other-than-temporary impairment has not been recognized. The adoption of EITF
03-1 did not have a material impact on the Company's consolidated financial
position or results of operations.

In April 2003, the FASB cleared Statement 133 Implementation Issue No. B36,
Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments
That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially
Related to the Creditworthiness of the Obligor under Those Instruments ("Issue
B36"). Issue B36 concluded that (i) a company's funds withheld payable and/or
receivable under certain reinsurance arrangements, and (ii) a debt instrument
that incorporates credit risk exposures that are unrelated or only partially
related to the

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

1) Significant Accounting Principles (Continued)

credit worthiness of the obligor include an embedded derivative feature that is
not clearly and closely related to the host contract. Therefore, the embedded
derivative feature must be measured at fair value on the balance sheet and
changes in fair value reported in income. Issue B36 became effective on October
1, 2003. The adoption of Issue No. B36 did not have a material impact on the
Company's consolidated financial position or results of operations.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51", and subsequently issued a revision to this
Interpretation in December 2003. This Interpretation addresses the consolidation
by business enterprises of variable interest entities as defined in the
Interpretation. The Interpretation applies to those variable interest entities
considered to be special-purpose entities no later than December 31, 2003. The
Interpretation must also be applied to all other variable interest entities no
later March 31, 2004. Interpretation No. 46 did not have a material impact on
the Company's consolidated financial position or results of operations.

In December 2004, FASB revised SFAS 123 to Share-Based Payment ("SFAS 123(R)").
SFAS 123(R) provides additional guidance on determining whether certain
financial instruments awarded in share-based payment transactions are
liabilities. SFAS 123(R) also requires that the cost of all share-based
transactions be recorded in the financial statements. The revised pronouncement
must be adopted by the Company by July 1, 2005. Implementation of SFAS 123(R)
will not have a significant impact on the Company's consolidated financial
statements in the period of implementation. However, any future stock options
granted could have a significant impact on the Company's consolidated financial
statements.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

2) Investments

The Company's investments in fixed maturity securities held to maturity and
equity securities available for sale as of December 31, 2004 are summarized as
follows:

Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- --------- ---------- ---------
December 31, 2004:
Fixed maturity securities held to maturity:
Bonds:

U.S. Treasury securities
and obligations of U.S.
Government agencies $15,033,673 $ 194,811 $ (43,407) $15,185,077

Obligations of states and
political subdivisions 492,290 30,274 (2,765) 519,799

Corporate securities including
public utilities 50,572,235 2,261,608 (33,151) 52,800,692

Mortgage-backed securities 3,865,680 34,075 (115,578) 3,784,177

Redeemable preferred stock 20,883 20,250 -- 41,133
----------- ---------- --------- -----------
Total fixed maturity
securities held to maturity $69,984,761 $2,541,018 $(194,901) $72,330,878
=========== ========== ========= ===========

Securities available for sale:
Bonds
U.S. Treasury securities and
obligations of U.S.
Government agencies $ 596,898 $59,626 $ -- $ 656,524

Corporate securities including
public utilities 9,889,411 520,090 -- 10,409,501

Non-redeemable preferred stock 56,031 49,063 (3,431) 101,663

Common stock 1,981,218 2,564,992 (481,104) 4,065,106
----------- ---------- --------- -----------
Total securities available for sale $12,523,558 $ 3,193,771 $ (484,535) $15,232,794
=========== ========== ========= ===========

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

2) Investments (Continued)

The Company's investments in fixed maturity securities held to maturity and
equity securities available for sale as of December 31, 2003, are summarized as
follows:

Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- --------- ---------- ---------
December 31, 2003:
Fixed maturity securities held to maturity:
Bonds:

U.S. Treasury securities
and obligations of U.S
. Government agencies $ 3,080,471 $ 180,125 $ -- $ 3,260,596

Obligations of states and
political subdivisions 261,360 25,091 (693) 285,758

Corporate securities including
public utilities 30,289,401 1,176,618 (110,514) 31,355,505

Mortgage-backed securities 3,634,752 78,663 (28,654) 3,684,761

Redeemable preferred stock 28,005 17,400 (7,047) 38,358
----------- ---------- --------- -----------
Total fixed maturity
securities held to maturity $37,293,989 $1,477,897 $(146,908) $38,624,978
=========== ========== ========= ===========

Securities available for sale:
Bonds
U.S. Treasury securities and obligations of U.S.
Government agencies $ 595,177 $ 81,604 $ -- $ 676,781

Corporate securities including
public utilities 12,618,880 974,376 -- 13,593,256

Non-redeemable preferred stock 56,030 42,688 (4,006) 94,712

Common stock 1,925,431 1,958,319 (525,018) 3,358,732
----------- ---------- --------- -----------
Total securities available for sale $15,195,518 $3,056,987 $(529,024) $17,723,481
=========== ========== ========== ===========

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

2) Investments (Continued)

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

The amortized cost and estimated fair value of fixed maturity securities at
December 31, 2004, 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 Estimated Fair
Held to Maturity: Cost Value
---------- -------------
Due in 2005 $ 1,687,683 $ 1,709,558
Due in 2006 through 2009 5,209,521 5,600,338
Due in 2010 through 2014 11,252,266 11,767,372
Due after 2014 43,538,491 44,989,369
Mortgage-backed securities 8,275,917 8,223,108
Redeemable preferred stock 20,883 41,133
----------- -----------
Total held to maturity $69,984,761 $72,330,878
=========== ===========

Amortized Estimated Fair
Available for Sale: Cost Value
---------- --------------
Due in 2005 $ 4,014,336 $ 4,091,321
Due in 2006 through 2009 5,212,933 5,557,089
Due in 2010 through 2014 1,161,101 1,300,541
Due after 2014 97,939 117,074
Non-redeemable preferred stock 56,031 101,663
Common stock 1,981,218 4,065,106
----------- -----------
Total available for sale $12,523,558 $15,232,794
=========== ===========

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

2) Investments (Continued)

The Company's realized gains and losses in investments and other assets are
summarized as follows:

2004 2003 2002
---- ---- ----
Fixed maturity securities
held to maturity:
Gross realized gains $36,933 $ 3,549 $ 37,172
Gross realized losses (26,355) (5,665) (557)

Securities available for sale:
Gross realized gains 3,310 1 354
Gross realized losses (6,364) (40) (1,424)
Other assets 66,907 -- 985,275
------- ------- ----------
Total $74,431 $(2,155) $1,020,820
======= ======= ==========

Generally gains and losses from held to maturity securities are a result of
early calls and related amortization of premiums or discounts.

Mortgage loans consist of first and second mortgages. The mortgage loans bear
interest at rates ranging from 3.625% to 21%, maturity dates range from three
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' ability to
honor obligations is reliant on the economic stability of the geographic region
in which the debtors do business. The Company has 76% of its mortgage loans in
the state of Utah. The mortgage loans on real estate balances on the
consolidated balance sheet are reflected net of an allowance for bad debt
$254,893 and $14,893 at December 31, 2004 and 2003, respectively.

There were no investments, aggregated by issuer, in excess of 10% of
shareholders' equity (before net unrealized gains and losses on available for
sale securities) at December 31, 2004, other than investments issued or
guaranteed by the United States Government.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

2) Investments (Continued)

Major categories of net investment income are as follows:

2004 2003 2002
---- ---- ----
Fixed maturity securities $ 4,438,808 $ 3,407,177 $ 3,228,042
Equity securities 67,120 54,481 53,889
Mortgage loans on real estate 3,403,110 1,931,358 1,350,882
Real estate 1,322,796 1,509,932 1,501,534
Policy loans 673,404 676,201 663,554
Short-term investments and other 7,276,009 10,918,563 6,691,657
----------- ----------- -----------
Gross investment income 17,181,247 18,497,712 13,489,558
Investment expenses (1,242,071) (1,195,115) (950,128)
----------- ----------- -----------
Net investment income $15,939,176 $17,302,597 $12,539,430
=========== =========== ===========

Net investment income includes net investment income earned by the restricted
assets of the cemeteries and mortuaries of approximately $781,000, $848,000 and
$924,000 for 2004, 2003, and 2002, respectively.

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

Securities on deposit for regulatory authorities as required by law amounted to
$9,710,534 at December 31, 2004 and $8,850,755 at December 31, 2003.

3) Cost of Insurance Acquired

Information with regard to cost of insurance acquired is as follows:

2004 2003 2002
---- ---- ----
Balance at
beginning of year $14,980,763 $16,408,849 $ 8,081,223
----------- ----------- -----------
Cost of insurance
acquired 304,042 (110,754) 9,106,309
----------- ----------- -----------

Imputed interest at 7% 1,016,199 1,098,636 857,153
Amortization (2,247,507) (2,415,968) (1,635,836)
----------- ----------- -----------
Net amortization
charged to income (1,231,308) (1,317,332) (778,683)
----------- ----------- -----------
Balance at end
of year $14,053,497 $14,980,763 $16,408,849
============ =========== ===========

Presuming no additional acquisitions, net amortization charged to income is
expected to approximate $1,130,151, $1,031,605, $962,386, $899,312, and $860,501
for the years 2005 through 2009. Actual amortization may vary based on changes
in assumptions or experience.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

4) Property and Equipment

The cost of property and equipment is summarized below:

December 31,
2004 2003
---- ----
Land and buildings $11,310,114 $11,140,690
Furniture and equipment 11,066,917 10,288,299
----------- -----------
22,377,031 21,428,989
Less accumulated depreciation (11,856,366) (10,419,573)
----------- -----------
Total $10,520,665 $11,009,416
=========== ===========

5) Bank Loans Payable

Bank loans payable are summarized as follows:
December 31,
2004 2003
---- ----
6.59% note payable in monthly installments
of $34,680 including principal and
interest, collateralized by 15,000
shares of Security National Life stock,
due December 2004. $ -- $ 391,363

6% note payable in monthly installments
of $5,693 including principal and
interest, collateralized by real
property, with a book value of
approximately $850,000, due
September 2010. 633,596 662,944

6.93% note payable in monthly installments
of $14,175 including principal and
interest, collateralized by real
property with a book
value of approximately $860,000,
due November 2007. 1,476,813 1,519,198

$1,153,572 in 2004 and $2,230,016 in
2003 revolving line of credit at 6.15%,
interest payable monthly and a reduction
in principal due in semi-annual
installments, collateralized by 15,000
shares of Security National Life
Insurance Company stock, due December 2005. 445,811 2,178,075

Bank prime rate plus 1/2% (5.75% at
December 31, 2004) note payable in
monthly installments of $7,235
including principal and interest,
collateralized by real property,
with a book value of approximately
$678,000, due August 2004. -- 60,683

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

5) Bank Loans Payable (Continued)
December 31,
2004 2003
---- ----
Bank prime rate less 1.35% (3.90% at December 31,
2004) note payable in monthly installments of
$2,736 including principal and interest,
collateralized by 15,000 shares of Security
National Life Insurance Company stock, due
December 2005. $ 68,562 98,880

7.35% note payable in monthly installments of
$14,975 including principal and interest,
collateralized by 15,000 shares of Security
National Life Insurance Company stock,
due December 2006. 333,145 482,394

5.87% note payable, interest only to July 1, 2003,
thereafter, interest and monthly principal
payments of $134,000, collateralized by 15,000
shares of Security National Life
Insurance Company Stock, due January 2010. 7,206,641 8,413,993

Mark to market adjustment (see note 17) 36,810 303,029

Other collateralized bank loans payable 240,728 312,111
---------- ---------
Total bank loans 10,442,106 14,422,670

Less current installments 2,136,957 3,688,647
------------ -----------
Bank loans, excluding current installments $ 8,305,149 $10,734,023
============ ===========

In addition to the lines of credit described above, the Company has line of
credit agreements with a bank for $2,500,000, of which none were outstanding at
December 31, 2004 or 2003. The lines of credit are for general operating
purposes and bear interest at the bank's prime rate and must be repaid every 30
days.

See Note 6 for summary of maturities in subsequent years.

6) Notes and Contracts Payable

Notes and contracts payable are summarized as follows:

December 31,
2004 2003
---- ----
Unsecured note payable due to former
stockholders of Deseret Memorial, Inc.
resulting from the acquisition of such
entity. Amount represents the present
value, discounted at 8%, of monthly
annuity payments ranging from $4,600 to
$5,000 plus an index adjustment in the
7th through the 12th years, due September 2011. $520,477 $545,921

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

6) Notes and Contracts Payable (Continued)
December 31,
2004 2003
---- ----
Due to former stockholders of Greer Wilson
resulting from the acquisition of
such entity. Amount represents the present
value, discounted at 10%, of monthly annuity
payments of $7,000, due March 2005. 20,655 98,319

9% note payable in monthly installments of
$10,000 including principal and interest,
collateralized by real property, with a
book value of approximately
$2,908,000, due July 2008. 397,133 459,138

Due to Memorial Estates Endowment Care Trust
Fund for the remodel of the Cottonwood
Funeral Home. 6% note payable in monthly
installments of $5,339 including principal
and interest collateralized by the Funeral
Home, with a book value of approximately
$780,000, due March 2030. 932,924 954,475

Unsecured note payable due to former shareholder
of Southern Security Life Insurance Company
resulting from the acquisition of such entity.
6.5% note payable in five annual installments
with principal payments of $158,840, due
April 2005. 158,840 317,680

Due to shareholder of Security National Financial
Corporation, 6.0% note payable in annual
installments of $100,000 including principal
and interest, due July 2005, secured
by Company stock held in escrow. 100,000 200,000

Due to shareholder of Security National Financial
Corporation, 4.0% note payable in annual
installments of $160,873 including principal
and interest, due January 2006,
secured by Company stock held in escrow 321,747 482,620

Other notes payable 436,763 382,541
---------- ----------
Total notes and contracts payable 2,888,539 3,440,694
Less current installments 700,321 732,715
---------- ----------

Notes and contracts, excluding
current installments $2,188,218 $2,707,979
========== ==========

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

6) Notes and Contracts Payable (Continued)

The following tabulation shows the combined maturities of bank loans payable,
lines of credit and notes and contracts payable:

2005 $ 2,837,278
2006 2,197,709
2007 1,825,997
2008 1,895,911
2009 1,874,575
Thereafter 2,699,175
-----------
Total $13,330,645
===========

Interest paid approximated interest expense in 2004, 2003 and 2002.

7) Cemetery and Mortuary Endowment Care and Pre-need Merchandise Funds

The Company owns and operates several endowment care cemeteries, for which it
has established and maintains an endowment care fund. The Company records a
liability to the fund for each space sold at current statutory rates. As of
December 31, 2003 the Company owed the fund $41,335 in excess of the required
contribution to the fund, and as of December 31, 2004, the Company owed the fund
$26,587, which is recorded in other liabilities.

The Company has established and maintains certain restricted asset accounts to
provide for future merchandise and service obligations incurred in connection
with its pre-need sales. Such amounts are reported as restricted assets of
cemeteries and mortuaries in the accompanying consolidated balance sheet.

Assets in the restricted asset account are summarized as follows:

December 31,
2004 2003
---- ----
Cash and cash equivalents $ 776,997 $ 617,142
Mutual funds 273,258 188,732
Fixed maturity securities -- 108,554
Equity securities 86,555 77,778
Participation in mortgage loans
with Security National Life 4,005,957 3,719,807
Time certificate of deposit 33,696 33,696
---------- ----------
Total $5,176,463 $4,745,709
========== ==========

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

8) Income Taxes

The Company's income tax liability at December 31 is summarized as follows:

December 31,
2004 2003
---- ----
Current $ 18,585 $ 18,585
Deferred 11,479,382 10,896,260
----------- -----------
Total $11,497,967 $10,914,845
=========== ===========

Significant components of the Company's deferred tax (assets) and liabilities at
December 31 are approximately as follows:

December 31,
2004 2003
---- ----
Assets
Future policy benefits $(1,917,789) $(1,676,881)
Unearned premium (1,524,191) (1,635,912)
Difference between book
and tax basis of bonds (73,964) (27,951)
Other (337,038) (605,932)
----------- -----------
Total deferred tax assets (3,852,982) (3,946,676)
----------- -----------

Liabilities
Deferred policy acquisition costs 5,056,822 4,889,696
Cost of insurance acquired 2,317,477 2,486,035
Installment sales 2,940,268 2,367,510
Depreciation 824,718 891,725
Trusts 1,155,566 1,054,323
Tax on unrealized appreciation 689,478 568,944
Reinsurance 2,084,117 1,974,996
Other 263,918 609,707
----------- -----------
Total deferred tax liabilities 15,332,364 14,842,936
----------- -----------
Net deferred tax liability $11,479,382 $10,896,260
=========== ===========

The Company paid $126,894, $55,442 and $462,983 in income taxes for 2004, 2003
and 2002, respectively. The Company's income tax expense (benefit) is summarized
as follows:

2004 2003 2002
---- ---- ----
Current $ 15,106 $ 28,326 $ 595,254
Deferred 636,430 2,862,343 970,139
-------- ---------- ----------
Total $651,536 $2,890,669 $1,565,393
======== ========== ==========

The reconciliation of income tax expense at the U.S. federal statutory rates is
as follows:

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

8) Income Taxes (Continued)
2004 2003 2002
---- ---- ----
Computed expense at statutory rate $903,899 $3,218,056 $1,883,255
Special deductions allowed
small life insurance companies (243,873) (285,991) (315,923)
Dividends received deduction (5,619) (5,611) (737)
Minority interest taxes 47,376 13,469 7,429
Other, net (50,247) (49,254) (8,631)
-------- ---------- ----------
Tax expense $651,536 $2,890,669 $1,565,393
======== ========== ==========

A portion of the life insurance income earned prior to 1984 was not subject to
current taxation but was accumulated for tax purposes, in a "policyholders'
surplus account." Under provisions of the Internal Revenue Code, the
policyholders' surplus account was frozen at its December 31, 1983 balance and
will be taxed generally only when distributed. As of December 31, 2004, the
policyholders' surplus accounts approximated $4,500,000. Management does not
intend to take actions nor does management expect any events to occur that would
cause federal income taxes to become payable on that amount. However, if such
taxes were accrued, the amount of taxes payable would be approximately
$1,500,000.

The Company has a net operating loss carry forward of approximately $3,024,000,
as of December 31, 2004. These carry forward amounts begin expiring in ten years
and range up to 20 years.

9) Reinsurance, Commitments and Contingencies

The Company follows the procedure of reinsuring risks in excess of a specified
limit, which ranged from $30,000 to $75,000 during the years 2004 and 2003. 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 having insurance in force amounting to $815,445,000 at December
31, 2004 and $940,050,000 at December 31, 2003.

As part of the acquisition of Southern Security, the Company has a co-insurance
agreement with The Mega Life and Health Insurance Company ("MEGA"). On December
31, 1992 Southern Security ceded to MEGA 18% of all universal life policies in
force at that date. MEGA is entitled to 18% of all future premiums, claims,
policyholder loans and surrenders relating to the ceded policies. In addition,
Southern Security receives certain commission and expense reimbursement.

Mortgage loans originated and sold to unaffiliated investors are sold subject to
certain recourse provisions.

On December 26, 2003, the Company entered into a partially Coinsurance and a
partially Modified Coinsurance Agreement (CoModco Agreement) with Guaranty
Income Life Insurance Company (Guaranty) effective September 30, 2003. The
Company has reinsured 100% of certain blocks of Guaranty's traditional life,
universal life and annuity businesses. The total liabilities reinsured for these
blocks of businesses on October 1, 2003 were $60,527,887. The Company paid a
ceding commission to Guaranty of $3,400,000 and will receive from Guaranty a
risk charge of 1% of the outstanding Coinsurance per calendar quarter. Guaranty
put into a bank trust investment grade bonds, which equal the outstanding
liabilities assumed by the Company. The Company is named as a beneficiary of the
trust and the terms of the trust are such that Guaranty will maintain investment
grade bonds in the trust to equal the outstanding liabilities assumed by the
Company. Under the CoModco Agreement the Coinsurance and the increase in
reserves are equal. Under U. S. GAAP the Coinsurance and the reserve increases

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

9) Reinsurance, Commitments and Contingencies (Continued)

are netted since these are non-cash items, and the Company expects to recapture
the Coinsurance from future profits of the reinsured business. Guaranty has the
right to recapture the business at any time after December 31, 2004 upon 90 days
advance notice. As of December 31, 2004 and 2003, the outstanding Coinsurance
amount was $2,545,763 and $3,345,765, respectively. The Company recorded as
income the risk charge for the years ended December 31, 2004 and 2003, of
$121,831 and $34,000, respectively. In the event that the Company believes it
will not recover the Coinsurance it will have to record as an expense and a
future liability for the amount of such impairment. Effective January 1, 2005,
Guaranty recaptured the reinsurance under this agreement and the agreement was
cancelled between the Company and Guaranty. The recapture did not result in
recognition of a gain or loss in the consolidated financial statements.

The Company leases office space and equipment under various non-cancelable
agreements, with remaining terms up to five years. Minimum lease payments under
these non-cancelable operating leases as of December 31, 2004, are approximately
as follows:

Years Ending December 31:
2005 $ 588,000
2006 381,000
2007 97,000
2008 90,000
2009 49,000
----------
Total $1,205,000
==========

Total rent expense related to these non-cancelable operating leases for the
years ended December 31, 2004, 2003 and 2002 was approximately $734,000,
$396,000, and $200,000, respectively.

An action was brought against the Company in May 2001 by Glenna Brown Thomas,
individually and as personal representative of the Estate of Lynn W. Brown, in
the Third Judicial Court, Salt Lake County, Utah. The action asserts that
Memorial Estates, Inc. delivered to Lynn W. Brown six stock certificates
totaling 2,000 shares of its common stock in 1970 and 1971. Mr. Brown died in
1972. It is also asserted that at the time the 2,000 shares were issued and
outstanding, the shares represented a 2% ownership of Memorial Estates. It is
further alleged that Mr. Brown was entitled to preemptive rights and, after the
issuance of the stock to Mr. Brown, there were further issuances of stock
without providing written notice to Mr. Brown or his estate of his right to
purchase more stock.

It is further asserted that Thomas has the right to the transfer of Brown's
shares on the books of Security National Financial Corporation as well as
Memorial Estates, and to the restoration of Brown's proportion of share
ownership in Memorial Estates at the time of his death by issuance and delivery
to Thomas of sufficient shares of the Company's publicly traded and unrestricted
stock in exchange for the 2,000 shares of Memorial Estates stock, including
payment of all dividends from the date of Thomas's demand. The formal discovery
cutoff was January 15, 2004. The Company has been verbally informed that Thomas
will dismiss the case but such dismissal has not been communicated in writing.
Until the case is actually dismissed, the Company intends to vigorously defend
the matter, including the assertion that the statute of limitations bars the
claims in their entirety.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

9) Reinsurance, Commitments and Contingencies (Continued)

The Company received a letter dated November 9, 2004 on behalf of Charles Hood,
who worked at Singing Hills Memorial Park in El Cajon, California. He was hired
in April 2003 as a groundskeeper with his work concluding on October 30, 2003.
Mr. Hood claims that he wrote a letter to the Company outlining his concerns
regarding the operation of the cemetery, and that the next day he was
terminated. Even though he recognizes his relationship was as an at-will
employee. Mr. Hood's claims against the Company also include, but are not
limited to, violation of labor laws, whistleblower retaliation and inflection of
emotional distress. The letter proposes a settlement in the amount of $275,000.

No lawsuit has been filed in the matter. The Company has been engaged in a
review of the claims made in the letter. Based on its investigation, the Company
believes that Mr. Hood voluntarily quit and was not terminated. Counsel for the
Company and counsel for Mr. Hood have been in discussion concerning the matter.
At this stage of the investigation, the Company does not believe there is any
justification for the claims being made. If a resolution of the dispute is not
achieved and litigation ensues, the Company is prepared to vigorously defend the
action.

The Company also received a letter dated November 29, 2004 on behalf of Roger
Gornichec, who the Company recognizes as having been an independent contractor.
The attorney who wrote the letter on behalf of Mr. Hood also wrote the letter on
behalf of Mr. Gornichec. Mr. Gornichec concluded his services as an agent
selling insurance in the spring of 2003 and his license to sell cemetery plots
was not renewed in the summer of 2004. Mr. Gornichec asserts that he was an
employee contrary to the Company's position.

The claims made on behalf of Mr. Gornichec include, but are not limited to,
wrongful termination in violation of public policy, misrepresentation, age
discrimination, whistle-blower retaliation, interference with economic
advantage, breach of contract, breach of the covenant of good faith and fair
dealing, and infliction of emotional distress. Mr. Gornichec also claims that he
is owed a certain amount from a retirement plan. The letter proposes a
settlement in the amount of $420,000. Based on its investigation, the Company
believes that Mr. Gornichec was an independent contractor, not an employee, and
that the claims and the settlement amount sought are not justified. If the
matter is not resolved and litigation ensues, the Company is prepared to
vigorously defend the action.

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 financial position or results of
operations. Based on management's assessment and legal counsel's representations
concerning the likelihood of unfavorable outcomes, no amounts have been accrued
for the above claims in the consolidated financial statements.

10) Retirement Plans

The Company and its subsidiaries have a noncontributory Employee Stock Ownership
Plan (ESOP) for all eligible employees. Eligible employees are primarily those
with more than one year of service, who work in excess of 1,040 hours per year.
Contributions, which may be in cash or stock of the Company, are determined
annually by the Board of Directors. The Company's contributions are allocated to
eligible employees based on the ratio of each eligible

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

10) Retirement Plans (Continued)

employee's compensation to total compensation for all eligible employees during
each year. ESOP contribution expense totaled $105,196, $98,588, and $99,612 for
2004, 2003, and 2002, respectively. At December 31, 2004 the ESOP held 577,183
shares of Class A and 1,553,041 shares of Class C common stock of the Company.
All shares held by the ESOP have been allocated to the participating employees
and all shares held by the ESOP are considered outstanding for purposes of
computing earnings per share.

The Company has a 401(k) savings plan covering all eligible employees, as
defined above, which includes employer participation in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The plan allows
participants to make pretax contributions up to the lesser of 15% of total
annual compensation or the statutory limits.

The Company may match up to 50% of each employee's investment in Company stock,
up to 1/2% of 1% of the employee's total annual compensation. The Company's
match will be Company stock and the amount of the match will be at the
discretion of the Company's Board of Directors. The Company's matching 401(k)
contributions for 2004, 2003, and 2002 were $5,746, $4,493, and $7,975,
respectively. Also, the Company may contribute, at the discretion of the
Company's Board of Directors, an Employer Profit Sharing Contribution to the
401(k) savings plan. The Employer Profit Sharing Contribution shall be divided
among three different classes of participants in the plan based upon the
participant's title in the Company. The Company contributions for 2004, 2003 and
2002 were $128,949, $110,081, and $142,218, respectively. All amounts
contributed to the plan are deposited into a trust fund administered by an
independent trustee.

In 2001, the Company's Board of Directors adopted a Deferred Compensation Plan.
Under the terms of the Plan, the Company will provide deferred compensation for
a select group of management or highly compensated employees, within the meaning
of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended. The Board has appointed a Committee of the
Company to be the Plan Administrator and to determine the employees who are
eligible to participate in the plan. The employees who participate may elect to
defer a portion of their compensation into the plan. The Company may contribute
into the plan at the discretion of the Company's Board of Directors. The
Company's contributions for 2004, 2003 and 2002 were $123,249, $95,485, and
$100,577, respectively.

The Company has Deferred Compensation Agreements with its Chief Executive
Officer and its past Senior Vice President. The Deferred Compensation is payable
on the retirement or death of these individuals either in annual installments
(10 years) or in a lump sum settlement, if approved by the Board of Directors.
The amount payable is $65,839 per year with cost of living adjustments each
anniversary. The Compensation Agreements also provides that any remaining
balance will be payable to their heirs in the event of their death. In addition
the Agreement provides that the Company will pay the Group Health coverages for
these individuals and/or their spouses. In 2004 and 2003, the Company increased
its liability for these future obligations by $10,000 and $2,000, respectively.
The current balance as of December 31, 2004 is $714,000.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

10) Retirement Plans (Continued)

On July 16, 2004, the Company entered into an employment agreement with Scott M.
Quist, its President and Chief Operating Officer. The agreement is effective as
of December 4, 2003 and has a five-year term, but the Company has agreed to
renew the agreement on December 4, 2008 and 2013 for additional five-year terms,
provided Mr. Quist performs his duties with usual and customary care and
diligence. Under the terms of the agreement, Mr. Quist is to devote his full
time to the Company serving as its President, General Counsel and Chief
Operating Officer at not less than his current salary and benefits. The Company
also agrees to maintain a group term life insurance policy of not less than
$1,000,000 on Mr. Quist's life and a whole life insurance policy in the amount
of $500,000 on Mr. Quist's life. In the event of disability, Mr. Quist's salary
would be continued for up to five years at 75% of its current level.

In the event of a sale or merger of the Company and Mr. Quist is not retained in
his current position, the Company would be obligated to continue Mr. Quist's
current compensation and benefits for seven years following the merger or sale.
The agreement further provides that Mr. Quist is entitled to receive annual
retirement benefits beginning (i) one month from the date of his retirement (to
commence no sooner than age 65), (ii) five years following complete disability,
or (iii) upon termination of his employment without cause. These retirement
benefits are to be paid for a period of ten years in annual installments in the
amount equal to 75% of his then current rate of compensation. However, in the
event that Mr. Quist dies prior to receiving all retirement benefits thereunder,
the remaining benefits are to be paid to his heirs. The Company expensed $31,500
and $328,000 in fiscal 2004 and 2003, respectively, to cover the present value
of anticipated retirement benefits under the employment agreement. The liability
accrued is $359,500 and $328,000 as of December 31, 2004 and 2003, respectively.

On December 4, 2003, the Company, through its subsidiary SecurityNational
Mortgage Company, entered into an employment agreement with J. Lynn Beckstead,
Jr., Vice President of Mortgage Operations and President of SecurityNational
Mortgage Company. The agreement has a five-year term, but the Company has agreed
to renew the agreement on December 4, 2008 and 2013 for additional five-year
terms, provided Mr. Beckstead performs his duties with usual and customary care
and diligence. Under the terms of the agreement, Mr. Beckstead is to devote his
full time to the Company serving as President of SecurityNational Mortgage
Company at not less than his current salary and benefits, and to include
$350,000 of life insurance protection. In the event of disability, Mr.
Beckstead's salary would be continued for up to five years at 50% of its current
level.

In the event of a sale or merger of the Company, and Mr. Beckstead were not
retained in his current position, the Company would be obligated to continue Mr.
Beckstead's current compensation and benefits for five years following the
merger or sale. The agreement further provides that Mr. Beckstead is entitled to
receive annual retirement benefits beginning (i) one month from the date of his
retirement (to commence no sooner than age 62 1/2) (ii) five years following
complete disability, or (iii) upon termination of his employment without cause.
These retirement benefits are to be paid for a period of ten years in annual
installments in the amount equal to one-half of his then current annual salary.
However, in the event that Mr. Beckstead dies prior to receiving all retirement
benefits thereunder, the remaining benefits are to be paid to his heirs. The
Company expensed in 2004 and 2003 approximately $18,500 and $172,000,
respectively, to cover the present value of the retirement benefit of the
agreement. The liability accrued is $190,500 and $172,000, as of December 31,
2004 and 2003, respectively.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

11) Capital Stock

The following table summarizes the activity in shares of capital stock for the
three-year period ended December 31, 2004:

Class A Class C
Balance at January 1, 2002 5,363,591 6,113,430

Exercise of stock options 132,371 --
Stock Dividends 276,012 294,419
Conversion of Class C to Class A 22,518 (225,180)
---------- ----------
Balance at December 31, 2002 5,794,492 6,182,669
---------- ----------

Exercise of stock options 176,725 --
Stock Dividends 301,774 308,086
Conversion of Class C to Class A 2,113 (21,117)
---------- ----------
Balance at December 31, 2003 6,275,104 6,469,638
---------- ----------

Exercise of stock options 127,888 --
Stock Dividends 321,932 308,007
Conversion of Class C to Class A 30,946 (309,446)
---------- ----------
Balance at December 31, 2004 6,755,870 6,468,199
========== ==========

The Company has two classes of common stock with shares outstanding, Class A and
Class C. Class C shares vote share for share with the Class A shares on all
matters except election of one-third of the directors who are elected solely by
the Class A shares, but generally are entitled to a lower dividend participation
rate. Class C shares are convertible into Class A shares at any time on a ten to
one ratio.

Stockholders of both classes of common stock have received 5% stock dividends in
the years 1990 through 2004, as authorized by the Company's Board of Directors.

The Company has Class B Common Stock of $1.00 par value, 5,000,000 shares
authorized, of which none are issued. Class B shares are non-voting stock except
to any proposed amendment to the Articles of Incorporation which would affect
Class B Common Stock.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

11) Capital Stock (Continued)

Earnings per share amounts have been adjusted for the effect of annual stock
dividends.

In accordance with SFAS 128, the basic and diluted earnings per share amounts
were calculated as follows:

2004 2003 2002
---- ---- ----
Numerator:
Net income $2,122,272 $6,596,497 $3,991,280
========== ========== ==========

Denominator:
Denominator for basic earnings
per share-weighted-average shares 6,001,861 5,851,814 5,572,783
---------- ---------- ----------

Effect of dilutive securities:
Employee stock options 214,462 149,952 169,543
Stock appreciation rights 1,628 2,007 1,828
---------- ---------- ----------
Dilutive potential common shares 216,090 151,959 171,371
---------- ---------- ----------

Denominator for diluted earnings per
share-adjusted weighted-average
shares and assumed conversions 6,217,951 6,003,773 5,744,154
========== ========== ==========

Basic earnings per share $.35 $1.13 $.72
==== ===== ====
Diluted earnings per share $.34 $1.10 $.69
==== ===== ====

12) Stock Compensation Plans

In 1987, the Company adopted the 1987 Incentive Stock Option Plan (the 1987
Plan). The 1987 Plan provides that shares of the Class A Common Stock of the
Company may be optioned to certain officers and key employees of the Company.
The 1987 Plan establishes a Stock Option Plan Committee which selects the
employees to whom the options will be granted and determines the price of the
stock. The 1987 Plan establishes the minimum purchase price of the stock at an
amount which is not less than 100% of the fair market value of the stock (110%
for employees owning more than 10% of the total combined voting power of all
classes of stock).

The 1987 Plan provides that if additional shares of Class A Common Stock are
issued pursuant to a stock split or a stock dividend, the number of shares of
Class A Common Stock then covered by each outstanding option granted hereunder
shall be increased proportionately with no increase in the total purchase price
of the shares then covered, and the number of shares of Class A Common Stock
reserved for the purpose of the 1987 Plan shall be increased by the same
proportion.

In the event that the shares of Class A Common Stock of the Company from time to
time issued and outstanding are reduced by a combination of shares, the number
of shares of Class A Common Stock then covered by each outstanding option
granted hereunder shall be reduced proportionately with no reduction in the
total price of the shares then so covered, and the number of shares of Class A
Common Stock reserved for the purposes of the 1987 Plan shall be reduced by the
same proportion.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

12) Stock Compensation Plans (Continued)

The 1987 Plan terminated in 1997 and options granted are non-transferable.
Options granted and outstanding under the 1987 Plan include Stock Appreciation
Rights which permit the holder of the option to elect to receive cash, amounting
to the difference between the option price and the fair market value of the
stock at the time of the exercise, or a lesser amount of stock without payment,
upon exercise of the option.

Activity of the 1987 Plan is summarized as follows:

Number of
Class A Shares Option Price
-------------- --------------
Outstanding at January 1, 2002 188,890 $3.53 - $3.88

Dividend 576
Exercised (119,974)
Expired (58,773)
---------

Outstanding at December 31, 2002 10,719 $3.36
---------

Dividend 201
Exercised (6,700)
--------

Outstanding at December 31, 2003 4,220 $3.20
--------

Dividend 158
Exercised (1,055)
--------

Outstanding at December 31, 2004 3,323 $3.05
========

Exercisable at end of year 3,323 $3.05
========

Available options for future grant
1987 Stock Incentive Plan --
=======

On June 21, 1993, the Company adopted the Security National Financial
Corporation 1993 Stock Incentive Plan (the "1993 Plan"), which reserved 300,000
shares of Class A Common Stock for issuance thereunder.

The 1993 Plan allows the Company to grant options and issue shares as a means of
providing equity incentives to key personnel, giving them a proprietary interest
in the Company and its success and progress.

The 1993 Plan provides for the grant of options and the award or sale of stock
to officers, directors, and employees of the Company. Both "incentive stock
options," as defined under Section 422A of the Internal Revenue Code of 1986
(the "Code"), and "non-qualified options" may be granted pursuant to the 1993
Plan. Options intended as incentive stock options may be issued only to
employees, and must meet certain conditions imposed by the Code,

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

12) Stock Compensation Plans (Continued)

including a requirement that the option exercise price be not less than the fair
market value of the option shares on the date of grant. The 1993 Plan provides
that the exercise price for non-qualified options will be not less than at least
50% of the fair market value of the stock subject to such option as of the date
of grant of such options, as determined by the Company's Board of Directors.

The options were granted to reward certain officers and key employees who have
been employed by the Company for a number of years and to help the Company
retain these officers by providing them with an additional incentive to
contribute to the success of the Company.

The 1993 Plan is administered by the Board of Directors or by a committee
designated by the Board. The 1993 Plan provides that if the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of options shall be increased or decreased proportionately,
and appropriate adjustments shall be made in the purchase price per share to
reflect such subdivision, combination or stock dividend. No options may be
exercised for a term of more than ten years from the date of grant.

On November 7, 1996, the Company amended the Plan as follows: (i) to increase
the number of shares of Class A Common Stock reserved for issuance under the
plan from 300,000 Class A shares to 600,000 Class A shares; and (ii) to provide
that the stock subject to options, awards and purchases may include Class C
common stock.

On October 14, 1999, the Company amended the 1993 Plan to increase the number of
shares of Class A Common Stock reserved for issuance under the plan from 746,126
Class A shares to 1,046,126 Class A shares. The Plan had a term of ten years and
was terminated in 2003 and options granted thereunder are non-transferable.

Activity of the 1993 Plan is summarized as follows:

Number of Class
A Shares Option Price
--------------- --------------
Outstanding at January 1, 2002 772,063 $2.02 - $3.59
Dividend 21,077
Granted 185,250
Cancelled (190,018)
Exercised (283,703)
---------

Outstanding at December 31, 2002 504,669 $2.02 - $4.46
Dividend 30,609
Granted 371,000
Exercised (263,496)
---------

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

12) Stock Compensation Plans (Continued)

Number of
Class A Shares Option Price

Outstanding at December 31, 2003 642,782 $2.07 - $6.18

Dividend 16,176
Granted --
Exercised (310,341)
Cancelled (8,925)
---------

Outstanding at December 31, 2004 339,692 $1.97 - $5.35
=========

Exercisable at end of year 339,692 $1.97 - $5.35
=========

Available options for future grant
1993 Stock Incentive Plan --
=========

On October 16, 2000, the Company adopted the Security National Financial
Corporation 2000 Director Stock Option Plan (the "2000 Plan"), which reserved
50,000 shares of Class A Common Stock for issuance thereunder. Effective
November 1, 2000, and on each anniversary date thereof during the term of the
2000 Plan, each outside Director who shall first join the Board after the
effective date shall be granted an option to purchase 1,000 shares upon the date
which such person first becomes an outside Director and an annual grant of an
option to purchase 1,000 shares on each anniversary date thereof during the term
of the 2000 Plan. The options granted to outside Directors shall vest in their
entirety on the first anniversary date of the grant.

The primary purposes of the 2000 Plan are to enhance the Company's ability to
attract and retain well-qualified persons for service as directors and to
provide incentives to such directors to continue their association with the
Company.

The 2000 Plan provides that if the shares of Common Stock shall be subdivided or
combined into a greater or smaller number of shares or if the Company shall
issue any shares of Common Stock as a stock dividend on its outstanding Common
Stock, the number of shares of Common Stock deliverable upon the exercise of
options shall be increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivisions, combination or stock dividend.

The term of the 2000 Plan is five years.

Activity of the 2000 Plan is summarized as follows:

Number of
Class A Shares Option Price
--------------
Outstanding at January 1, 2002 8,610 $2.04 - $2.43
Dividend 631
Granted 4,000
-------

Outstanding at December 31, 2002 13,241 $1.94 - $2.86
Dividend 697
Granted 4,000
Exercised (3,311)
-------

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

12) Stock Compensation Plans (Continued)

Number of
Class A Shares Option Price
-------------- ------------
Outstanding at December 31, 2003 14,627 $1.85 - $5.72

Dividend 931
Granted 4,000
Exercised --
--------

Outstanding at December 31, 2004 19,558 $1.76 - $5.45
========

Exercisable at end of year 15,358 $1.76 - $5.45
========

Available options for future
grant 2000 Director Plan 40,606
========

On July 11, 2003, the Company adopted the Security National Financial
Corporation 2003 Stock Option Plan (the "2003 Plan"), which reserved 500,000
shares of Class A Common Stock and 1,000,000 shares of Class C Common Stock for
issuance thereunder. The 2003 Plan allows the Company to grant options and issue
shares as a means of providing equity incentives to key personnel, giving them a
proprietary interest in the Company and its success and progress.

The 2003 Plan provides for the grant of options and the award or sale of stock
to officers, directors, and employees of the Company. Both "incentive stock
options", as defined under Section 422A of the Internal Revenue Code of 1986
(the "Code") and "non-qualified options" may be granted under the 2003 Plan.

The 2003 Plan is to be administered by the Board of Directors or by a committee
designated by the Board. The terms of options granted or stock awards or sales
affected under the 2003 Plan are to be determined by the Board of Directors or
its committee. No options may be exercised for a term of more than ten years
from the date of the grant. Options intended as incentive stock options may be
issued only to employees, and must meet certain conditions imposed by the code,
including a requirement that the option exercise price be no less than the fair
market value of the option shares on the date of grant. The 2003 Plan provides
that the exercise price for non-qualified options will not be less than at least
50% of the fair market value of the stock subject to such option as of the date
of grant of such options, as determined by the Company's Board of Directors.

The 2003 Plan has a term of ten years. The Board of Directors may amend or
terminate the 2003 Plan at any time, from time to time, subject to approval of
certain modifications to the 2003 Plan by the shareholders of the Company as may
be required by law or the 2003 Plan.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

12) Stock Compensation Plans (Continued)

Activity of the 2003 Plan is summarized as follows:

Number of Number of Option
Class A Shares Class C Shares(1) Price(1)
Outstanding at December 31, 2003 -0- -0-
-- --

Outstanding at January 1, 2004 -0- -0-

Dividend 7,675 50,000
Granted 153,500 1,000,000
Exercised -0- -0-
-------- ----------

Outstanding at December 31, 2004 161,175 1,050,000 $3.77 - $3.08
======== ==========

Exercisable at end of year 161,175 1,050,000 $3.77 - $3.08
======== ==========

Available options for future grant
2003 Stock Incentive Plan 390,075 52,500
======== =========

(1) Class "C" shares are converted to Class "A" shares on a 10 to 1 ratio. The
Option Price is based on Class A Common shares.

13) Statutory-Basis Financial Information

The Company's life insurance subsidiaries are domiciled in Utah, Florida and
Louisiana and prepare their statutory-basis financial statements in accordance
with accounting practices prescribed or permitted by the Utah, Florida and
Louisiana Insurance Departments. "Prescribed" or "Permitted" statutory
accounting practices are interspersed throughout state insurance laws and
regulations. The National Association of Insurance Commissioners ("NAIC")
Accounting Practices and Procedures Manual version effective January 1, 2001,
has been adopted as permitted practices by the States of Utah, Florida and
Louisiana.

Statutory net income and statutory stockholder's equity for the life
subsidiaries as reported to state regulatory authorities, are presented below:

Statutory Net Income (Loss)
for the year ended December 31,

2004 2003 2002
---- ---- ----
Security National Life $65,724 $(5,404,687) $1,547,253
Southern Security Life (525,237) 2,431,499 (427,439)
Security National Life of Louisiana 50,341 N/A N/A

Statutory Stockholders' Equity
December 31,
2004 2003 2002
---- ---- ----
Security National Life $15,183,712 $15,069,057 $14,381,257
Southern Security Life 10,877,112 11,443,488 8,582,968
Security National Life of Louisiana 1,147,492 N/A N/A

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

13) Statutory-Basis Financial Information (Continued)

Generally, the net assets of the life insurance subsidiaries available for
transfer to the Company are limited to the amounts that the life insurance
subsidiaries net assets, as determined in accordance with statutory accounting
practices, exceed minimum statutory capital requirements; however, payments of
such amounts as dividends are subject to approval by regulatory authorities.

The Utah, Florida and Louisiana Insurance Departments impose minimum risk-based
capital requirements, that were developed by the NAIC, on insurance enterprises.
The formulas for determining the risk-based capital ("RBC") specify various
factors that are applied to financial balances or various levels of activity
based on the perceived degree of risk. Regulatory compliance is determined by a
ratio (the "Ratio") of the enterprise's regulatory total adjusted capital, as
defined by the NAIC, to its authorized control level, as defined by the NAIC.
Enterprises below specific trigger points or ratios are classified within
certain levels, each of which requires specified corrective action. The life
insurance subsidiaries have a combined weighted Ratio that is greater than 432%
of the first level of regulatory action.

14) Business Segment Information

Description of Products and Services by Segment

The Company has three reportable business segments: life insurance, cemetery and
mortuary, and mortgage loans. The Company's life insurance segment consists of
life insurance premiums and operating expenses from the sale of insurance
products sold by the Company's independent agency force and net investment
income derived from investing policyholder and segment surplus funds. The
Company's cemetery and mortuary segment consists of revenues and operating
expenses from the sale of at-need cemetery and mortuary merchandise and services
at its mortuaries and cemeteries, pre-need sales of cemetery spaces after
collection of 10% or more of the purchase price and the net investment income
from investing segment surplus funds. The Company's mortgage loan segment
consists of loan originations fee income and expenses from the originations of
residential mortgage loans and interest earned and interest expenses from
warehousing pre-sold loans before the funds are received from financial
institutional investors.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

14) Business Segment Information (Continued)

Measurement of Segment Profit or Loss and Segment Assets

The accounting policies of the reportable segments are the same as those
described in the Significant Accounting Principles. Intersegment revenues are
recorded at cost plus an agreed upon intercompany profit.

Factors Management Used to Identify the Enterprise's Reportable Segments

The Company's reportable segments are business units that offer different
products and are managed separately due to the different products and the need
to report to the various regulatory jurisdictions.

2004
Life Cemetery/ Reconciling
Insurance Mortuary Mortgage Items Consolidated
------------ ------------ --------- ----------- ------------
Revenues:
From external sources:

Revenue from customers $ 25,979,341 $11,661,053 $62,689,391 $ -- $100,329,785
Net investment income 9,062,991 812,659 6,063,526 -- 15,939,176
Realized gains on
Investments and
other assets 7,523 66,908 -- -- 74,431
Other revenues 311,316 184,712 358,397 -- 854,425

Intersegment revenues:
Net investment income 7,478,350 85,337 265,470 (7,829,157) --
----------- ----------- ----------- ----------- ------------
42,839,521 12,810,669 69,376,784 (7,829,157) 117,197,817
----------- ----------- ----------- ----------- ------------
Expenses:
Death and other policy benefits 14,540,581 -- -- -- 14,540,581
Increase in future policy benefits 8,821,497 -- -- -- 8,821,497
Amortization of deferred policy
and pre-need acquisition
costs and cost of insurance
acquired 4,349,371 252,701 -- -- 4,602,072
Depreciation 426,432 768,882 469,703 -- 1,665,017
General, administration and
other costs:
Intersegment -- 36,672 284,982 (321,654) --
Other 11,771,056 9,963,065 61,002,224 -- 82,736,345
Interest expense:
Intersegment 348,797 163,297 6,995,409 (7,507,503) --
Other 647,823 339,182 1,186,773 -- 2,173,778
----------- ----------- ------------ ------------ ------------
40,905,557 11,523,799 69,939,091 (7,829,157) 114,539,290
----------- ----------- ------------ ------------ ------------
Earnings (losses)
before income taxes $ 1,933,964 $ 1,286,870 $ (562,307) $ -- $ 2,658,527
============ =========== =========== ============ ============

Identifiable assets $305,970,161 $47,358,587 $14,236,837 $(51,091,825) $316,473,760
============ =========== =========== ============ ============

Expenditures for
long-lived assets $ 283,655 $ 487,118 $ 471,125 $ -- $ 1,241,898
============ =========== =========== ============ ============

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

14) Business Segment Information (Continued)

2003
Life Cemetery/ Reconciling
Insurance Mortuary Mortgage Items Consolidated
----------- ------------ --------- ----------- -------------
Revenues:

From external sources:
Revenue from customers $ 23,294,373 $10,944,365 $ 92,955,165 $ -- $127,193,903
Net investment income 6,571,404 936,118 9,795,075 -- 17,302,597
Realized gains (losses)
on investments and other
assets (2,155) -- -- -- (2,155)
Other revenues 254,974 94,907 200,183 -- 550,064

Intersegment revenues:
Net investment income 10,028,748 47,651 -- (10,076,399) --
------------ ----------- ------------ ------------ ------------
40,147,344 12,023,041 102,950,423 (10,076,399) 145,044,409
------------ ----------- ------------ ------------- ------------
Expenses:
Death and other policy
benefits 15,041,541 -- -- -- 15,041,541
Increase in future policy
benefits 6,712,961 -- -- -- 6,712,961
Amortization of deferred policy
acquisition costs and
cost of insurance acquired 4,683,556 245,450 -- -- 4,929,006
Depreciation 464,844 760,091 310,595 -- 1,535,530
General, administrative
and other costs:
Intersegment -- 84,323 208,362 (292,685) --
Other 10,398,872 9,807,357 83,512,224 -- 103,718,453
Interest expense:
Intersegment 90,001 179,803 9,513,910 (9,783,714) --
Other 743,884 436,828 2,461,334 -- 3,642,046
------------ ----------- ------------ ------------- -------------
38,135,659 11,513,852 96,006,425 (10,076,399) 135,579,537
------------ ----------- ----------- ------------ ------------
Earnings (losses)
before income taxes $ 2,011,685 $ 509,189 $ 6,943,998 $ -- $ 9,464,872
============ =========== ============ ============ ============

Identifiable assets $302,319,614 $44,018,131 $ 16,938,151 $(49,792,560) $313,483,336
============ =========== ============ ============ ============

Expenditures for
long-lived assets $ 235,631 $ 559,435 $ 828,244 $ -- $ 1,623,310
============ =========== ============ ============= ============

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

14) Business Segment Information (Continued)
2002

Life Cemetery/ Reconciling
Insurance Mortuary Mortgage Items Consolidated
------------ -------------- ---------- ------------- --------------
Revenues:

From external sources:
Revenue from
customers $ 14,076,652 $10,638,754 $57,008,283 $ -- $ 81,723,689
Net investment income 6,065,652 1,011,786 5,461,992 -- 12,539,430
Realized gains on
investments and other
assets 311,365 709,455 -- -- 1,020,820
Other revenues 69,741 85,146 324,537 -- 479,424

Intersegment revenues:
Net investment income 4,741,338 -- -- (4,741,338) --
------------ ----------- ----------- ------------ ------------
25,264,748 12,445,141 62,794,812 (4,741,338) 95,763,363
------------ ----------- ----------- ------------ ------------
Expenses:
Death and other policy
benefits 7,724,046 -- -- -- 7,724,046
Increase in future
policy benefits 6,031,685 -- -- -- 6,031,685
Amortization of deferred
Policy acquisition costs
and cost of insurance
acquired 3,718,627 274,766 -- -- 3,993,393
Depreciation 383,139 678,851 167,513 -- 1,229,503
General, administrative
and other costs:
Intersegment (900,000) 486,672 623,872 (210,544) --
Other 6,570,217 9,537,374 53,167,818 -- 69,275,409
Interest expense:
Intersegment 90,000 201,118 4,239,676 (4,530,794) --
Other 321,896 428,498 1,219,948 -- 1,970,342
------------ ----------- ----------- -------------- ------------
23,939,610 11,607,279 59,418,827 (4,741,338) 90,224,378
------------ ----------- ----------- ------------- ------------
Earnings (losses)
before income taxes $ 1,325,138 $ 837,862 $ 3,375,985 $ -- $ 5,538,985
============ =========== =========== ============== =============

Identifiable assets $295,177,565 $42,255,381 $14,960,638 $ (44,331,241) $308,062,343
============ =========== =========== ============= ============

Expenditures for long-
lived assets $ 189,156 $ 677,561 $ 482,035 $ -- $ 1,348,752
============ =========== =========== ============= ============

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

15) Related Party Transactions

On December 19, 2001, the Company entered into an option agreement with Monument
Title, LLC, a Utah limited liability company ("Monument Title") in which the
Company made available a $100,000 line of credit to Monument Title at an
interest rate of 8% per annum. The line of credit is secured by the assets of
Monument Title. From December 28, 2001 to June 14, 2002, the Company advanced
Monument Title a total of $77,953 under the line of credit. The amount advanced
under the line of credit plus accrued interest are payable upon demand. This
receivable was fully allowed for in 2003. The owners of Monument Title are
brothers-in-law of the President and Chief Operating Officer of the Company. The
Company has the right under the option agreement for a period of five years from
the date thereof to acquire 100% of the outstanding common shares of Monument
Title for the sum of $10. The purpose of the transaction, which was approved by
the Company's board of directors, is to insure that the title and escrow work
performed for SecurityNational Mortgage Company in connection with its mortgage
loans are completed as accurately as possible by Monument Title to avoid any
economic losses to the Company.

On November 1, 2004, the Company entered into an Agreement to Repay Indebtedness
and to Convey Option with Monument Title and its principal owner. Under the
terms of the agreement, Monument Title agreed to pay the Company a total of
$94,177, representing the total of $77,953 that the Company advanced to Monument
Title under the line of credit, plus interest thereon, within seven days from
the date of the agreement. Monument Title paid the $94,177 to the Company
pursuant to the agreement. In addition, the Company agreed to release its
interest in the option agreement to acquire 100% of the outstanding common
shares of Monument Title, in consideration for the payment of an additional
$94,177. Monument Title is to pay the additional $94,177 to the Company in
minimum payments of $500 per month for the first twelve months following the
date of the agreement, with additional payments of $1,000 per month for the
second twelve months following the date of the agreement. After the 24th month
following the date of the agreement, the outstanding balance is to bear interest
at the three year treasury rate plus one percent. The minimum payment for the
third year is $1,500 per month, the minimum payment for the fourth year is
$2,000 per month and the minimum payment for the fifth year is $2,500 per month.
Any remaining unpaid balance, including interest, shall be due and payable at
the conclusion of the 60th month from the date of the agreement.

The Company has a non-interest bearing note receivable from the Chairman of the
Board and Chief Executive Officer. No installment payments are required under
the terms of the note, but the note must be paid in full as of December 31,
2007. The outstanding balance of the note was approximately $1,500 and $38,000
at December 31, 2004 and 2003, respectively.

16) Disclosure about Fair Value of Financial Instruments

The fair values of investments in fixed maturity and equity securities along
with methods used to estimate such values are disclosed in Note 2. The following
methods and assumptions were used by the Company in estimating the "fair value"
disclosures related to other significant financial instruments:

Cash, Receivables, Short-term Investments, and Restricted Assets of the
Cemeteries and Mortuaries: The carrying amounts reported in the accompanying
consolidated balance sheet for these financial instruments approximate their
fair values.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

16) Disclosure about Fair Value of Financial Instruments

Mortgage, Policy, Student, and Collateral Loans: The fair values are estimated
using interest rates currently being offered for similar loans to borrowers with
similar credit ratings. Loans with similar characteristics are aggregated for
purposes of the calculations. The carrying amounts reported in the accompanying
consolidated balance sheet for these financial instruments approximate their
fair values.

Investment Contracts: The fair values for the Company's liabilities under
investment-type insurance contracts are estimated based on the contracts' cash
surrender values. The carrying amount and fair value as of December 31, 2004 and
December 31, 2003, were approximately $82,592,000 and $86,389,000, respectively.

The fair values for the 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 overall management of interest rate risk, such that the Company's
exposure to changing interest rates is minimized through the matching of
investment maturities with amounts due under insurance contracts.

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2004, 2003, and 2002

17) Accumulated Other Comprehensive Income (Loss), and Other Items

The following summarizes accumulated other comprehensive income:

December 31,
2004 2003 2002
---- ---- ----
Unrealized gains
on available for-sale securities $226,464 $ 638,540 $ 84,263
Reclassification
adjustment for net realized
gains (losses) in net income 7,524 (2,155) (35,544)
-------- ---------- --------
Net unrealized gains (losses) 233,988 636,385 48,719
Potential unrealized gains (losses) for
derivative bank loans
(interest rate swaps) 266,219 (303,029) --
Tax (expense) benefit on net unrealized
gain (losses) (73,586) 19,428 (80,786)
-------- ---------- --------
Other comprehensive income (loss) $426,621 $ 352,784 $(32,067)
======== ========= ========

Other items:
Acquisition of Company Stock
held in escrow $ -- (1,982,620) $ --
======== ========== ========

The "Acquisition of Company Stock held in Escrow" above is held in escrow and
voted by trustee until the balances shown under Note 6 "Notes and Contracts
Payable" in the amounts of $100,000 and $321,747, as of December 31, 2004 and
2003, respectively, are paid per terms of the agreement and promissory note.

The Company considers its interest rate swap instruments (swaps) effective cash
flow hedges against the variable interest rates of certain bank loans. The swaps
expire on the maturity dates of the bank loans they hedge. In the event a swap
is terminated, any resulting gain or loss would be deferred and amortized to
interest expense over the remaining life of the bank loan it hedged. In the
event of early extinguishment of a hedged bank loan, any realized or unrealized
gain or loss from the hedging swap would be recognized in income coincident with
the extinguishment.

Information regarding the swaps is as follows as of December 31, 2004:

Weighted average variable interest rate of
the hedged bank loans (prime less .5%) 4.75%
Weighted average fixed interest rate of the swaps 6.1%
Market value of the swaps- potential unrealized
loss position $(36,810)

The respective market values of the swaps are derived from proprietary models of
the financial institution with whom the Company purchased the swaps and from
whom the Company obtained the hedged bank loans.

Schedule I

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Summary of Investments
Other than Investments in Related Parties

As of December 31, 2004
Amount at
Which Shown
Estimated in the
Type of Investment Amortized Cost Fair Value Balance Sheet
Fixed maturity securities held to maturity:
Bonds:

U.S. Treasury securities and obligations
of U.S. Government agencies $ 15,033,673 $15,185,077 $ 15,033,673
Obligations of states and political subdivisions 492,290 519,799 492,290
Corporate securities
including public utilities 50,572,235 52,800,693 50,572,236
Mortgage backed securities 3,865,680 3,784,176 3,865,679
Redeemable preferred stocks 20,883 41,133 20,883
------------ ----------- ------------

Total fixed securities held to maturity 69,984,761 72,330,878 69,984,761
------------ ----------- ------------

Securities available for sale:
Bonds:
U.S. Treasury securities and obligations
of U.S. Government agencies 596,898 656,524 656,524
Corporate securities
including public utilities 9,889,411 10,409,501 10,409,501
Nonredeemable preferred stock 56,031 101,663 101,663
Common stock:
Public utilities 323,719 547,608 547,608
Banks, trusts and insurance companies 520,683 1,200,586 1,200,586
Industrial, miscellaneous and all other 1,136,816 2,316,912 2,316,912
------------ ----------- ------------

Total securities available for sale 12,523,558 15,232,794 15,232,794
------------ ----------- ------------

Mortgage loans on real estate:
Residential 24,203,576 24,203,576
Commercial 21,872,148 21,872,148
Residential construction 19,755,862 19,755,862
Real estate 9,709,129 9,709,129
Policy, student and other loans 13,312,471 13,312,471
Other short-term investments 4,628,999 4,628,999
------------ ------------

Total investments $175,990,504 $178,699,740
============ ============

Schedule I (Continued)

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES
Summary of Investments
Other than Investments in Related Parties

As of December 31, 2003:
Amount at
Which Shown
Estimated in the
Type of Investment Amortized Cost Fair Value Balance Sheet
Fixed maturity securities held to maturity:
Bonds:

U.S. Treasury securities and obligations
of U.S. Government agencies $ 3,080,471 $ 3,260,596 $ 3,080,471
Obligations of states and political subdivisions 261,360 285,758 261,360
Corporate securities
including public utilities 30,289,401 31,355,505 30,289,401
Mortgage backed securities 3,634,752 3,684,761 3,634,752
Redeemable preferred stocks 28,005 38,358 28,005
------------ ----------- ------------

Total fixed securities held to maturity 37,293,989 38,624,978 37,293,989
------------ ----------- ------------

Securities available for sale:
Bonds:
U.S. Treasury securities and
obligations of U.S. Government agencies 595,177 676,781 676,781
Corporate securities
including public utilities 12,618,880 13,593,256 13,593,256
Non-redeemable preferred stock 56,031 94,712 94,712
Common stock:
Public utilities 314,014 447,172 447,172
Banks, trusts and insurance companies 520,683 989,305 989,305
Industrial, miscellaneous and all other 1,090,733 1,922,255 1,922,255
------------ ----------- ------------

Total securities available for sale 15,195,518 17,723,481 17,723,481
------------ ----------- ------------

Mortgage loans on real estate:
Residential 6,119,912 6,119,912
Commercial 12,894,894 12,894,894
Residential construction 10,899,939 10,899,939
Real estate 8,519,680 8,519,680
Policy, student and other loans 11,753,617 11,753,617
Short-term investments 2,054,248 2,054,248
------------ ------------

Total investments $104,731,797 $107,259,760
============ ============

Schedule II

SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)

Condensed Balance Sheet

December 31,
2004 2003
---- ----
Assets
Cash $ (635,394) $ (791,521)

Investment in subsidiaries
(equity method) 57,988,720 56,188,527

Receivables:
Receivable from
Affiliates 9,147,416 10,734,307
Allowance for doubtful accounts (16,528) (161,528)
----------- -----------
Total receivables 9,130,888 10,572,779
----------- -----------

Property and equipment, at cost,
net of accumulated depreciation
of $896,060 for 2004 and $730,230
for 2003 142,170 300,744

Other assets 66,828 79,504
----------- -----------
Total assets $66,693,212 $66,350,033
=========== ===========

See accompanying notes to parent company only financial statements.

Schedule II (Continued)

SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)

Condensed Balance Sheet (Continued)

December 31,
2004 2003
---- ----
Liabilities:
- -----------
Bank loans payable:
Current installments $ 1,886,570 $ 2,995,831
Long-term 6,059,926 8,641,418

Notes and contracts payable:
Current installments 261,834 261,835
Long-term 160,873 421,746

Advances from affiliated companies 10,227,106 8,868,497

Other liabilities and accrued expenses 955,832 1,060,083

Income taxes 5,476,231 4,925,192
----------- -----------
Total liabilities 25,028,372 27,174,602
----------- -----------
Stockholders' equity:
Common Stock:
Class A: $2 par value, authorized
10,000,000 shares, issued 6,755,870
shares in 2004 and 6,275,104 shares
in 2003 13,511,740 12,550,208
Class C: convertible, $0.20 par value,
authorized 7,500,000 shares, issued
6,468,199 shares in 2004 and 6,469,638
shares in 2003 1,293,641 1,293,927
------------ -----------
Total common stock 14,805,381 13,844,135

Additional paid-in capital 14,922,851 13,569,582
Accumulated other comprehensive
income (loss), and other items (11,352) (437,973)
Retained earnings 15,365,259 15,414,681
Treasury stock at cost
(1,315,075 Class A shares and 79,103
Class C shares in 2004; 1,276,518
Class A shares and 75,336 Class C shares
in 2003, held by affiliated companies) (3,417,299) (3,214,994)
----------- -----------
Total stockholders' equity 41,664,840 39,175,431
----------- -----------
Total liabilities and
stockholders' equity $66,693,212 $66,350,033
=========== ===========

See accompanying notes to parent company only financial statements.

Schedule II (Continued)

SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)

Condensed Statements of Earnings

Year Ended December 31,
-----------------------
2004 2003 2002
---- ---- ----

Revenue:
Net investment income $ 35 $ 52 $ 34,053
Fees from affiliates 4,249,430 4,200,683 3,772,293
---------- ---------- ----------
Total revenue 4,249,465 4,200,735 3,806,346
---------- ---------- ----------

Expenses:
General and administrative
Expenses 2,277,933 2,326,526 3,174,550
Interest expense 634,783 719,894 278,013
Expenses to affiliates 180,446 156,327 186,719
---------- ----------- ----------
Total expenses 3,093,162 3,202,747 3,639,282
---------- ----------- ----------

Earnings before income
taxes, and earnings of
subsidiaries 1,156,303 997,988 167,064

Income tax expense (606,355) (2,841,738) (1,045,791)

Equity in earnings
(loss) of subsidiaries 1,572,324 8,440,247 4,870,007
---------- ---------- ----------
Net earnings $2,122,272 $6,596,497 $3,991,280
========== ========== ==========

See accompanying notes to parent company only financial statements.

Schedule II (Continued)

SECURITY NATIONAL FINANCIAL CORPORATION
(Parent Company Only)

Condensed Statements of Cash Flow

Year Ended December 31,
2004 2003 2002
---- ---- ----
Cash flows from operating activities:
Net earnings $2,122,272 $6,596,497 $3,991,280
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 165,830 154,506 118,386
Undistributed (earnings) losses
of affiliates (1,572,324) (8,440,247) (4,870,007)
Provision for income taxes 606,355 2,841,738 1,045,791
Change in assets and liabilities:
Accounts receivable 36,000 (128,778) 31,909
Other assets 12,676 (12,589) (45,549)
Other liabilities (230,824) 94,529 (30,673)
---------- ---------- ----------
Net cash provided by operating activities 1,139,985 1,105,656 241,137
---------- ---------- ----------

Cash flows from investing activities:
Dividends received from subsidiaries -- 1,150,000 2,381,687
Purchase of equipment (7,256) (40,106) (106,185)
Investment in subsidiaries -- -- (900,000)
---------- ---------- ----------
Net cash (used in) provided by
investing activities (7,256) 1,109,894 1,375,502
---------- ---------- ----------

Cash flows from financing activities:
Advances from (to) affiliates 2,764,500 (1,019,660) (9,396,773)
Payments of notes and contracts payable (3,741,102) (2,116,541) (1,224,801)
Stock options exercised -- 133,000 --
Proceeds from borrowings on notes and
contracts payable -- -- 9,000,000
---------- ---------- ----------
Net cash used in financing activities (976,602) (3,003,201) (1,621,574)
---------- ----------- ----------
Net change in cash 156,127 (787,651) (4,935)
Cash at beginning of year (791,521) (3,870) 1,065
---------- ---------- ----------
Cash at end of year $ (635,394) $ (791,521) $ (3,870)
========== ========== ==========

See accompanying notes to parent company only financial statements.

Schedule II (Continued)

SECURITY NATIONAL FINANCIAL CORPORATION
Notes to Parent Company Only Condensed Financial Statements

1) Bank Loans Payable

Bank loans payable are summarized as follows:
December 31,
2004 2003
$1,153,572 in 2004 and $2,230,016 in 2003
revolving line of credit at 6.15%,
interest payable monthly and a reduction
in principal due in semi-annual installments,
collateralized by 15,000 shares of Security
National Life Insurance Company stock,
due December 2005. $ 445,811 $2,178,075

6.59% note payable in monthly installments of
$34,680 including principal and interest,
collateralized by 15,000 shares of Security
National Life stock, due December 2004. -- 391,363

7.35% note payable in monthly installments of
$14,975 including principal and interest,
collateralized by 15,000 shares of Security
National Life Insurance Company stock,
due December 2006. 333,145 482,394

5.87% note payable interest only to July 1, 2003,
thereafter, interest plus monthly principal
payment of $134,000, collateralized by 15,000
shares of Security National Life
Insurance Company stock, due January 2010. 7,206,641 8,413,993

Mark-to-market adjustment (39,101) 171,424
---------- ----------

Total bank loans 7,946,496 11,637,249

Less current installments 1,886,570 2,995,831
---------- ----------
Bank loans, excluding current
Installments $6,059,926 $8,641,418
========== ==========

2) Notes and Contracts Payable

Notes and contracts are summarized as follows:
December 31,
2004 2003
Due to shareholders of Security National
Financial Corporation, 6.0% note
payable in annual installments of
$100,000 including principal and
interest, due July 2005, secured
by Company stock held in escrow $ 100,000 $ 200,000

Due to shareholders of Security National
Financial Corporation, 4.0% note
payable in annual installments of $160,873
including principal and interest, due
January 2006, secured by Company stock
held in escrow 321,747 482,620

Schedule II (Continued)

SECURITY NATIONAL FINANCIAL CORPORATION
Notes to Parent Company Only Condensed Financial Statements

2) Notes and Contracts Payable (Continued)
December 31,
2004 2003
---- ----

Other 960 961
-------- --------

Total notes and contracts 422,707 683,581
Less current installments 261,834 261,835
-------- --------
Notes and contracts, excluding current installments $160,873 $421,746
======== ========

The following tabulation shows the combined maturities of bank loans payable and
notes and contracts payable:

2005 $2,148,404
2006 1,651,684
2007 1,439,220
2008 1,526,011
2009 1,603,884
Thereafter --
----------
Total $8,369,203
==========

3) Advances from Affiliated Companies

December 31,
2004 2003
Non-interest bearing advances from affiliates:
Cemetery and Mortuary
subsidiary $ 1,459,841 $1,366,930
Life Insurance subsidiary 8,723,282 7,491,567
Mortgage subsidiary 43,983 10,000
------------ ----------
$10,227,106 $8,868,497

4) Dividends

In 2004, 2003 and 2002, Security National Life Insurance Company, a wholly owned
subsidiary of the Registrant, paid to the registrant cash dividends of $-0-,
$1,150,000, and $2,381,687, respectively.

Schedule IV

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES

Reinsurance

Percentage
Ceded to Assumed of Amount
Direct Other from other Net Assumed
Amount Companies Companies Amount to Net
2004

Life Insurance
in force ($000) $2,098,690 $188,542 $815,445 $2,725,593 29.9%
=========== ======== =========== =========== ====

Premiums:
Life Insurance $25,554,908 $916,511 $1,031,961 $25,670,358 4.0%
Accident and
Health Insurance 308,049 12 946 308,983 .3%
----------- -------- ---------- ----------- ----
Total premiums $25,862,957 $916,523 $1,032,907 $25,979,341 4.0%
=========== ======== ========== =========== ====

2003
Life Insurance
in force ($000) $1,974,388 $213,515 $ 940,050 $ 2,700,923 34.8%
=========== ======== ========== =========== ====

Premiums:
Life Insurance $22,944,221 $973,632 $972,174 $22,942,763 4.2%
Accident and
Health Insurance 350,371 -- 1,239 351,610 .4%
----------- -------- ---------- ----------- ----
Total premiums $23,294,592 $973,632 $ 973,413 $23,294,373 4.2%
=========== ======== ========== =========== ====

2002
Life Insurance
in force ($000) $1,460,832 $220,749 $1,174,604 $ 2,414,687 48.6%
=========== ======== =========== =========== ====

Premiums:
Life Insurance $13,678,397 $889,401 $ 922,158 $13,711,154 6.7%
Accident and
Health Insurance 364,275 380 1,603 365,498 .4%
----------- -------- ---------- ----------- ----
Total premiums $14,042,672 $889,781 $ 923,761 $14,076,652 6.6%
=========== ======== ========== =========== ====

Schedule V

SECURITY NATIONAL FINANCIAL CORPORATION
AND SUBSIDIARIES

Valuation and Qualifying Accounts

Balance at Additions Charged Deductions Balance
Beginning to Costs Disposals and at End of
of Year and Expenses Write-offs Year
--------- ------------ ---------- --------

For the Year Ended December 31, 2004
Accumulated depreciation
on real estate $ 4,059,934 $ 348,096 $ -- $ 4,408,030

Allowance for losses on mortgage loans
on real estate and construction loans 14,893 240,000 -- 254,893

Accumulated depreciation
on property and equipment 10,419,573 1,665,018 (228,225) 11,856,366

Allowance for doubtful accounts 1,706,678 24,000 (428,310) 1,302,368

For the Year Ended December 31, 2003
Accumulated depreciation
on real estate $3,728,539 $331,395 $ -- $ 4,059,934

Allowance for losses on mortgage loans
on real estate and construction loans 14,893 -- -- 14,893

Accumulated depreciation
on property and equipment 8,903,197 1,535,529 (19,153) 10,419,573

Allowance for doubtful accounts 1,479,728 472,897 (245,947) 1,706,678

For the Year Ended December 31, 2002
Accumulated depreciation
on real estate $ 3,404,644 $323,895 $ -- $ 3,728,539

Allowance for losses on mortgage loans
on real estate and construction loans 14,893 -- -- 14,893

Accumulated depreciation
on property and equipment 7,685,613 1,229,504 (11,920) 8,903,197

Allowance for doubtful accounts 1,778,592 90,357 (389,221) 1,479,728

Allowance for real estate losses 119,269 -- (119,269) --

Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

None

Item 9A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures - The Company's
principal executive officer and principal financial officer have reviewed and
evaluated the effectiveness of the Company's disclosure controls and procedures
(as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act") as of the end of the period covered by this annual
report. Based on that evaluation, the principal executive officer and the
principal financial officer have concluded that the Company's disclosure
controls and procedures are effective, providing them with material information
relating to the Company as required to be disclosed in the reports the Company
files or submits under the Exchange Act on a timely basis.

(b) Changes in internal controls - There were no significant changes in the
Company's internal controls over financial reporting or in other factors that
could significantly affect the Company's internal controls and procedures
subsequent to the date of their most recent evaluation, nor were there any
significant deficiencies or material weaknesses in the Company's internal
controls. As a result, no corrective actions were required or undertaken.

PART III

Item 10. Directors and Executive Officers

The Company's Board of Directors consists of seven persons, four of whom are not
employees of the Company. There are no family relationships between or among any
of the directors and executive officers, except that Scott M. Quist and G.
Robert Quist are the sons of George R. Quist and Christie Q. Overbaugh is the
daughter of George R. Quist. The following table sets forth certain information
with respect to the directors and executive officers of the Company.

Name Age Position with the Company
- ---------------- ------
George R. Quist 84 Chairman of the Board and Chief Executive
Officer

Scott M. Quist 51 President, Chief Operating Officer and
Director

Stephen M. Sill 59 Vice President, Treasurer and Chief
Financial Officer

G. Robert Quist 53 First Vice President and Secretary

J. Lynn Beckstead, Jr. 51 Vice President Mortgage Operations and
Director

Christie Q. Overbaugh 56 Senior Vice President of Internal
Operations of Southern Security Life
Insurance Company

Charles L. Crittenden 84 Director

Robert G. Hunter 45 Director

H. Craig Moody 53 Director

Norman G. Wilbur 66 Director

Committees of the Board of Directors include an executive committee, on which
Messrs. George Quist, Scott Quist, and Moody serve; an audit committee, on which
Messrs. Crittenden, Moody, and Wilbur serve; and a compensation committee, on
which Messrs. Crittenden, Wilbur, and George Quist serve.

The audit committee is composed of directors who are, in the opinion of the
Board of Directors, free from any relationship which would interfere with the
exercise of independent judgment and who possess an understanding of financial
statements and generally accepted accounting principles. Thus, each member is an
"independent" director as that term is defined by the regulations of the
Securities Exchange Act of 1934. The Board of Directors has determined that
Norman G. Wilbur, who currently serves as a director and a member of the audit
committee, is an independent financial expert of the audit committee.

Directors

The following is a description of the business experience of each of the
Company's directors.

George R. Quist has been Chairman of the Board and Chief Executive Officer of
the Company since October 1979. Mr. Quist served as President of the Company
from 1979 until July 2002. From 1960 to 1964, Mr. Quist was Executive Vice
President and Treasurer of Pacific Guardian Life Insurance Company. From 1946 to
1960, he was an agent, District Manager and Associate General Agent for various
insurance companies. Mr. Quist also served from 1981 to 1982 as the President of
The National Association of Life Companies, a trade association of 642 life
insurance companies, and from 1982 to 1983 as its Chairman of the Board.

Scott M. Quist has been President of the Company since July 2002, its Chief
Operating Officer since October 2001, and a director since May 1986. Mr. Quist
served as First Vice President of the Company from May 1986 to July 2002. From
1980 to 1982, Mr. Quist was a tax specialist with Peat, Marwick, Mitchell, &
Co., in Dallas, Texas. From 1986 to 1991, he was Treasurer and a director of The
National Association of Life Companies, a trade association of 642 insurance
companies until its merger with the American Council of Life Companies. Mr.
Quist has been a member of the Board of Governors of the Forum 500 Section
(representing small insurance companies) of the American Council of Life
Insurance. He has also served as a regional director of Key Bank of Utah since
November 1993. Mr. Quist is currently a director and past president of the
National Alliance of Life Companies, a trade association of over 200 life
companies.

J. Lynn Beckstead Jr. has been Vice President of Mortgage Operations and a
director of the Company since March 2002. In addition, Mr. Beckstead is
President of SecurityNational Mortgage Company, an affiliate of the Company,
having served in this position since July 1993. From 1980 to 1993, Mr. Beckstead
was Vice President and a director of Republic Mortgage Corporation. From 1983 to
1990, Mr. Beckstead was Vice President and a director of Richards Woodbury
Mortgage Corporation. From 1980 to 1983, he was a principal broker for Boardwalk
Properties. From 1978 to 1980, Mr. Beckstead was a residential loan officer for
Medallion Mortgage Company. From 1977 to 1978, he was a residential construction
loan manager of Citizens Bank.

Charles L. Crittenden has been a director of the Company since October 1979. Mr.
Crittenden has been sole stockholder of Crittenden Paint & Glass Company since
1958. He is also an owner of Crittenden Enterprises, a real estate development
company, and Chairman of the Board of Linco, Inc.

Robert G. Hunter, M.D. has been a director of the Company since October 1998.
Dr. Hunter is currently a practicing physician in private practice. Dr. Hunter
created the statewide E.N.T. Organization (Rocky Mountain E.N.T., Inc.) where he
is currently a member of the Executive Committee. He is also Chairman of Surgery
at Cottonwood Hospital, a delegate to the Utah Medical Association and a
delegate representing the State of Utah to the American Medical Association, and
a member of several medical advisory boards.

H. Craig Moody has been a director of the Company since September 1995. Mr.
Moody is owner of Moody & Associates, a political consulting and real estate
company. He is a former Speaker and House Majority Leader of the House of
Representatives of the State of Utah.

Norman G. Wilbur has been a director of the Company since October 1998. Mr.
Wilbur worked for J.C. Penny's regional offices in budget and analysis. His
final position was Manager of Planning and Reporting for J.C. Penney's stores.
After 36 years with J.C. Penny's, he took an option of an early retirement in
1997. Mr. Wilbur is a past board member of a homeless organization in Plano,
Texas.

Executive Officers

Stephen M. Sill has been Vice President, Treasurer and Chief Financial Officer
of the Company since March 2002. From 1997 to March 2002, Mr. Sill was Vice
President and Controller of the Company. From 1994 to 1997, Mr. Sill was Vice
President and Controller of Security National Life Insurance Company. From 1989
to 1993, he was Controller of Flying J. Inc. From 1978 to 1989, Mr. Sill was
Senior Vice President and Controller of Surety Life Insurance Company. From 1975
to 1978, he was Vice President and Controller of Sambo's Restaurant, Inc. From
1974 to 1975, Mr. Sill was Director of Reporting for Northwest Pipeline
Corporation. From 1970 to 1974, he was an auditor with Arthur Andersen & Co. Mr.
Sill is the Immediate Past President and a director of the Insurance Accounting
and Systems Association (IASA), a national association of over 1,300 insurance
companies and associate members.

G. Robert Quist has been First Vice President and Secretary of the Company since
March 2002. Mr. Quist has also served as First Vice President of Singing Hills
Memorial Park since 1996. Mr. Quist has served as Vice President of Memorial
Estates since 1982; he began working for Memorial Estates in 1978. Also since
1987, Mr. Quist has served as President and a director of Big Willow Water
Company and as Secretary-Treasurer and a director of the Utah Cemetery
Association. From 1987 to 1988, he was a director of Investors Equity Life
Insurance Company of Hawaii.

Christie Q. Overbaugh has been Senior Vice President of Internal Operations for
Southern Security Life Insurance Company since June 2002, and Vice President of
Underwriting of Security National Life Insurance Company since October 1998. Ms.
Overbaugh has also served as Vice President of the Company from October 1999 to
June 2002, and as Vice President of Underwriting for Southern Security Life
Insurance Company from October 1998 to June 2002. From 1985 to 1990, she was
Chief Underwriter for Investors Equity Life Insurance Company of Hawaii and
Security National Life Insurance Company. From 1990 to 1991, Ms. Overbaugh was
President of the Utah Home Office Underwriters Association. Ms. Overbaugh is
currently a member of the Utah Home Office Underwriters Association and an
Associate Member of LOMA (Life Office Management Association).

The Board of Directors of the Company has a written procedure, which requires
disclosure to the board of any material interest or any affiliation on the part
of any of its officers, directors or employees that is in conflict or may be in
conflict with the interests of the Company.

No director, officer or 5% stockholder of the Company or any subsidiary or
affiliate thereof has had any transactions with the Company or its subsidiaries
during 2004 or 2003.

All directors of the Company hold office until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified.

Pursuant to Item 406 of Regulation S-K under the Securities Exchange Act of
1934, the Company has not yet adopted a code of ethics that applies to its
principal executive officer, principal financial officer, controller or persons
performing similar functions. The Company is still in the process of studying
this issue and may adopt a code of ethics in the near future.

Item 11. Executive Officer Compensation

The following table sets forth, for each of the last three fiscal years, the
compensation received by George R. Quist, the Company's Chairman of the Board
and Chief Executive Officer, and all other executive officers (collectively, the
"Named Executive Officers") at December 31, 2004 whose salary and bonus for all
services in all capacities exceed $100,000 for the fiscal year ended December
31, 2004.

Summary Compensation Table
Annual Compensation Long-Term Compensation
Other
Annual Restricted Securities Long-Term All Other
Name and Compen- Stock Underlying Incentive Compen-
Principal Position Year Salary($) Bonus($) sation($)(2) Awards($) Options/SARs(#) Payout($) sation($)(3)
- ------------------ ---- --------- -------- ------------ --------- --------------------------- ------------

George R. Quist (1) 2004 $165,600 $ 50,000 $2,400 $0 100,000 $0 $26,002
Chairman of the 2003 165,600 50,000 2,400 0 100,000 0 23,273
Board and Chief 2002 165,600 25,000 2,400 0 80,000 0 31,186
Executive Officer

Scott M. Quist (1) 2004 $215,900 $ 75,000 $7,200 $0 1,000,000(4) $0 $34,773
President, Chief 2003 205,400 60,000 7,200 0 70,000 0 29,531
Operating Officer 2002 179,400 35,000 7,200 0 40,000 0 24,066
and Director

J. Lynn Beckstead, Jr. 2004 $195,796 $ 85,000 $0 $0 5,000 $0 $25,750
Vice President of 2003 158,500 255,675 0 0 15,000 0 16,104
Mortgage Operations 2002 150,000 120,401 0 0 10,000 0 15,101
and Director

G. Robert Quist (1) 2004 $104,814$ 0 $2,400 $0 10,000 $0 $10,711
First Vice President
and Secretary 2003 87,175 16,599 2,400 0 35,000 0 9,748

Stephen M. Sill 2004 $102,855 $ 6,000 $3,600 $0 5,000 $0 $11,684
Vice President,
Treasurer and Chief
Financial Officer

(1) George R. Quist is the father of Scott M. Quist and G. Robert Quist.

(2) The amounts indicated under "Other Annual Compensation" consist of
payments related to the operation of automobiles by the Named
Executive Officers. However, such payments do not include the
furnishing of an automobile by the Company to George R. Quist, Scott
M. Quist, J. Lynn Beckstead Jr., and G. Robert Quist, nor the payment
of insurance and property taxes with respect to the automobiles
operated by the Named Executive Officers.

(3) The amounts indicated under "All Other Compensation" consist of (a)
amounts contributed by the Company into a trust for the benefit of the
Named Executive Officers under the Security National Financial
Corporation Deferred Compensation Plan (for the years 2004, 2003, and
2002, such amounts were George R. Quist, $21,341, $18,590 and $16,207,
respectively; and Scott M. Quist, $23,001, $23,000 and $19,219,
respectively; J. Lynn Beckstead, Jr., $21,000, $12,750 and $0,
respectively; G. Robert Quist, $10,161 and $9,394 for 2004 and 2003,

respectively; Stephen M. Sill $11,134 for 2004); (b) insurance
premiums paid by the Company with respect to a group life insurance
plan for the benefit of the Named Executive Officers (for the years
2004, 2003 and 2002, such amounts were for George R. Quist $17, $39
and $125, respectively; for Scott M. Quist, G. Robert Quist, Stephen
M. Sill and J. Lynn Beckstead, Jr., $550, $354, and $642 each,
respectively); (c) life insurance premiums paid by the Company for the
benefit of the family of George R. Quist ($4,644 for each of the years
2004, 2003 and 2002); Scott M. Quist ($11,222 for the year 2004,
$6,177 for the year 2003, $4,205 for 2002); J. Lynn Beckstead, Jr.
($4,200 for 2004); (d) compensation paid for the cashless exercise of
50,000 shares of Company stock exercised by George R. Quist ($10,210)
for the year 2002; (e) amounts contributed by the Company into a trust
for the benefit of the Named Executive Officers under the Security
National Financial Corporation's Employer Stock Ownership Plan (ESOP)
(for the years 2003 and 2002, such amounts were J. Lynn Beckstead Jr.,
$3,000 and $2,754, respectively; and (f) amounts contributed by the
Company into a trust for the benefit of the Named Executive Officers
under the Security National Financial Corporation Tax-Favored
Retirement Savings Plan (401-k) Plan) (for the years 2003 and 2002,
such amounts were J. Lynn Beckstead Jr., $0 and $11,705,
respectively). The amounts under "All Other Compensation" do not
include the no-interest loan in the amount of $172,000 that the
Company made to George R. Quist on April 29, 1998 to exercise stock
options granted to him. The loan has been fully paid as of March 31,
2005.

(4) Options to purchase 1,000,000 shares of Class C common stock. The
Class C common shares are convertible to Class A common shares on the
basis of ten shares of Class C common stock to one share of Class A
common stock.

The following table sets forth information concerning the exercise of options to
acquire shares of the Company's Common Stock by the Named Executive Officers
during the fiscal year ended December 31, 2004, as well as the aggregate number
and value of unexercised options held by the Named Executive Officers on
December 31, 2004.

Aggregated Option/SAR Exercised in Last Fiscal Year and Fiscal Year-End
Option/SAR Values:

Number of
Securities
Underlying Value of
Unexercised Unexercised
Options/SARs In-the-Money
Shares at Options/SARs at
Acquired on December 31, December 31,
Exercise Value 2004(#) 2004
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------

George R. Quist 68,298 $560,040 153,620 -0- $ 27,233 $-0-
Scott M. Quist -0- -0- 1,082,175(1) -0- -0- -0-
J. Lynn Beckstead, Jr. 8,355 62,243 21,788 -0- -0- -0-
G. Robert Quist 6,862 51,455 49,088 -0- -0- -0-
Stephen M. Sill 3,718 32,350 5,250 -0- 1,228 -0-

(1) Includes options to purchase 1,000,000 shares of Class C common stock. The
Class C common shares are convertible to Class A common shares on the basis
of ten shares of Class C common stock to one share of Class A common stock.

Retirement Plans

On December 8, 1988, the Company entered into a deferred compensation plan with
George R. Quist, the Chairman and Chief Executive officer of the Company. The
plan was later amended on three occasions with the third amendment effective
February 1, 2001. Under the terms of the plan as amended, upon the retirement of
Mr. Quist, the Company is required to pay him ten annual installments in the
amount of $60,000. Retirement is defined in the plan as the age of 70, or a
later retirement age, as specified by the Board of Directors. The $60,000 annual
payments are to be adjusted for inflation in accordance with the United States
Consumer Price Index for each year after January 1, 2002. If Mr. Quist's
employment is terminated by reason of disability or death before he reaches
retirement age, the Company is to make the ten annual payments to Mr. Quist, in
the event of disability, or to his designated beneficiary, in the event of
death.

The plan also provides that the Board of Directors may, in its discretion, pay
the amounts due under the plan in a single, lump-sum payment. In the event that
Mr. Quist dies before the ten annual payments are made, the unpaid balance will
continue to be paid to his designated beneficiary. The plan further requires the
Company to furnish an automobile for Mr. Quist's use and to pay all reasonable
expenses incurred in connection with its use for a ten year period, and to
provide Mr. Quist with a hospitalization policy with similar benefits to those
provided to him the day before his retirement or disability. However, in the
event Mr. Quist's employment with the Company is terminated for any reason other
than retirement, death, or disability, the entire amount of deferred
compensation payments under the plan shall be forfeited by him.

Employment Agreements

On July 16, 2004, the Company entered into an employment agreement with Scott M.
Quist, its President and Chief Operating Officer. The agreement is effective as
of December 4, 2003 and has a five-year term, but the Company has agreed to
renew the agreement on December 4, 2008 and 2013 for additional five-year terms,
provided Mr. Quist performs his duties with usual and customary care and
diligence. Under the terms of the agreement, Mr. Quist is to devote his full
time to the Company serving as its President, General Counsel and Chief
Operating Officer at not less than his current salary and benefits. The Company
also agrees to maintain a group term life insurance policy of not less than
$1,000,000 on Mr. Quist's life and a whole life insurance policy in the amount
of $500,000 on Mr. Quist's life. In the event of disability, Mr. Quist's salary
would be continued for up to five years at 75% of its current level.

In the event of a sale or merger of the Company and Mr. Quist is not retained in
his current position, the Company would be obligated to continue Mr. Quist's
current compensation and benefits for seven years following the merger or sale.
The agreement further provides that Mr. Quist is entitled to receive annual
retirement benefits beginning (i) one month from the date of his retirement (to
commence no sooner than age 65), (ii) five years following complete disability,
or (iii) upon termination of his employment without cause. These retirement
benefits are to be paid for a period of ten years in annual installments in the
amount equal to 75% of his then current rate of compensation. However, in the
event that Mr. Quist dies prior to receiving all retirement benefits thereunder,
the remaining benefits are to be paid to his heirs. The Company accrued $31,500
and $328,000 in fiscal 2004 and 2003, respectively, to cover the present value
of anticipated retirement benefits under the employment agreement.

On December 4, 2003, the Company, through its subsidiary SecurityNational
Mortgage Company, entered into an employment agreement with J. Lynn Beckstead,
Jr., Vice President of Mortgage Operations and President of SecurityNational
Mortgage Company. The agreement has a five-year term, but the Company has agreed
to renew the agreement on December 4, 2008 and 2013 for additional five-year
terms, provided Mr. Beckstead performs his duties with usual and customary care
and diligence. Under the terms of the agreement, Mr. Beckstead is to devote his
full time to the Company serving as President of SecurityNational Mortgage
Company at not less than his current salary and benefits, and to include
$350,000 of life insurance protection. In the event of disability, Mr.
Beckstead's salary would be continued for up to five years at 50% of its current
level.

In the event of a sale or merger of the Company, and Mr. Beckstead were not
retained in his current position, the Company would be obligated to continue Mr.
Beckstead's current compensation and benefits for five years following the
merger or sale. The agreement further provides that Mr. Beckstead is entitled to
receive annual retirement benefits beginning (i) one month from the date of his
retirement (to commence no sooner than age 62 1/2) (ii) five years following
complete disability, or (iii) upon termination of his employment without cause.
These retirement benefits are to be paid for a period of ten years in annual
installments in the amount equal to one-half of his then current annual salary.
However, in the event that Mr. Beckstead dies prior to receiving all retirement
benefits thereunder, the remaining benefits are to be paid to his heirs. The
Company accrued in 2004 and 2003 approximately $18,500 and $172,000,
respectively, to cover the present value of the retirement benefit of the
agreement.

Director Compensation

Directors of the Company (but not including directors who are employees) are
paid a director's fee of $12,000 per year by the Company for their services and
are reimbursed for their expenses in attending board and committee meetings. No
additional fees are paid by the Company for committee participation or special
assignments. However, each director is provided with an annual grant of stock
options to purchase 1,000 shares of Class A Common Stock under the 2000 Director
Stock Option Plan.

Employee 401(k) Retirement Savings Plan

In 1995, the Company's Board of Directors adopted a 401(k) Retirement Savings
Plan. Under the terms of the 401(k) plan, effective as of January 1, 1995, the
Company may make discretionary employer matching contributions to its employees
who choose to participate in the plan. The plan allows the board to determine
the amount of the contribution at the end of each year. The Board adopted a
contribution formula specifying that such discretionary employer matching
contributions would equal 50% of the participating employee's contribution to
the plan to purchase Company stock up to a maximum discretionary employee
contribution of 1/2% of a participating employee's compensation, as defined by
the plan.

All persons who have completed at least one year's service with the Company and
satisfy other plan requirements are eligible to participate in the 401(k) plan.
All Company matching contributions are invested in the Company's Class A Common
Stock. The Company's matching contributions for 2004, 2003 and 2002 were
approximately $5,746, $4,493 and $7,975, respectively. Also, the Company may
contribute at the discretion of the Company's Board of Directors an Employer
Profit Sharing Contribution to the 401(k) plan. The Employer Profit Sharing
Contribution shall be divided among three different classes of participants in
the plan based upon the participant's title in the Company. All amounts
contributed to the plan are deposited into a trust fund administered by an
independent trustee. The Company's contributions to the plan for 2004, 2003 and
2002, were $128,949, $110,081 and $142,218, respectively.

Employee Stock Ownership Plan

Effective January 1, 1980, the Company adopted an employee stock ownership plan
(the "Ownership Plan") for the benefit of career employees of the Company and
its subsidiaries. The following is a description of the Ownership Plan, and is
qualified in its entirety by the Ownership Plan, a copy of which is available
for inspection at the Company's offices.

Under the Ownership Plan, the Company has discretionary power to make
contributions on behalf of all eligible employees into a trust created under the
Ownership Plan. Employees become eligible to participate in the Ownership Plan
when they have attained the age of 19 and have completed one year of service (a
twelve-month period in which the Employee completes at least 1,040 hours of
service). The Company's contributions under the Ownership Plan are allocated to
eligible employees on the same ratio that each eligible employee's compensation
bears to total compensation for all eligible employees during each year. To
date, the Ownership Plan has approximately 234 participants and had $105,196
contributions payable to the Plan in 2004. Benefits under the Ownership Plan
vest as follows: 20% after the third year of eligible service by an employee, an
additional 20% in the fourth, fifth, sixth and seventh years of eligible service
by an employee.

Benefits under the Ownership Plan will be paid out in one lump sum or in
installments in the event the employee becomes disabled, reaches the age of 65,
or is terminated by the Company and demonstrates financial hardship. The
Ownership Plan Committee, however, retains discretion to determine the final
method of payment. Finally, the Company reserves the right to amend or terminate
the Ownership Plan at any time. The trustees of the trust fund under the
Ownership Plan are George R. Quist, Scott M. Quist and Robert G. Hunter, who
each serve as a director of the Company.

Deferred Compensation Plan

In 2001, the Company's Board of Directors adopted a Deferred Compensation Plan.
Under the terms of the Deferred Compensation Plan, the Company will provide
deferred compensation for a select group of management or highly compensated
employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the
Employee Retirement Income Security Act of 1974, as amended. The board has
appointed a committee of the Company to be the plan administrator and to
determine the employees who are eligible to participate in the plan. The
employees who participate may elect to defer a portion of their compensation
into the plan. The Company may contribute into the plan at the discretion of the
Company's Board of Directors. The Company's contribution for 2004, 2003 and 2002
was $123,249, $95,485 and $100,577, respectively.

1993 Stock Option Plan

On June 21, 1993, the Company adopted the Security National Financial
Corporation 1993 Stock Incentive Plan (the "1993 Plan"), which reserves shares
of Class A Common Stock for issuance thereunder. The 1993 Plan was approved at
the annual meeting of the stockholders held on June 21, 1993. The 1993 Plan
allows the Company to grant options and issue shares as a means of providing
equity incentives to key personnel, giving them a proprietary interest in the
Company and its success and progress.

The 1993 Plan provides for the grant of options and the award or sale of stock
to officers, directors, and employees of the Company. Both "incentive stock
options," as defined under Section 422A of the Internal Revenue Code of 1986
(the "Code"), and "non-qualified options" may be granted pursuant to the 1993
Plan. The exercise prices for the options granted are equal to or greater than
the fair market value of the stock subject to such options as of the date of
grant, as determined by the Company's Board of Directors. The options granted
under the 1993 Plan, were to reward certain officers and key employees who have
been employed by the Company for a number of years and to help the Company
retain these officers by providing them with an additional incentive to
contribute to the success of the Company.

The 1993 Plan is to be administered by the Board of Directors or by a committee
designated by the Board. The terms of options granted or stock awards or sales
effected under the 1993 Plan are to be determined by the Board of Directors or
its committee. The Plan provides that if the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend. In addition, the number of
shares of Common Stock reserved for purposes of the Plan shall be adjusted by
the same proportion. No options may be exercised for a term of more than ten
years from the date of grant.

Options intended as incentive stock options may be issued only to employees, and
must meet certain conditions imposed by the code, including a requirement that
the option exercise price be no less than the fair market value of the option
shares on the date of grant. The 1993 Plan provides that the exercise price for
non-qualified options will be not less than at least 50% of the fair market
value of the stock subject to such option as of the date of grant of such
options, as determined by the Company's Board of Directors.

The 1993 Plan has a term of ten years. The Board of Directors may amend or
terminate the 1993 Plan at any time, subject to approval of certain
modifications to the 1993 Plan by the shareholders of the Company as may be
required by law or the 1993 Plan. On November 7, 1996, the Company amended the
1993 Plan as follows: (i) to increase the number of shares of Class A Common
Stock reserved for issuance under the 1993 Plan from 300,000 Class A shares to
600,000 Class A shares; and (ii) to provide that the stock subject to options,
awards and purchases may include Class C common stock. On October 14, 1999, the
Company amended the 1993 Plan to increase the number of shares of Class A Common
Stock reserved for issuance under the plan from 746,126 Class A shares to
1,046,126 Class A shares. The Plan terminated in 2003 and options granted
thereunder are non-transferable.

2000 Director Stock Option Plan

On October 16, 2000, the Company adopted the 2000 Directors Stock Option Plan
(the "Director Plan") effective November 1, 2000. The Director Plan provides for
the grant by the Company of options to purchase up to an aggregate of 50,000
shares of Class A Common Stock for issuance thereunder. The Director Plan
provides that each member of the Company's Board of Directors who is not an
employee or paid consultant of the Company automatically is eligible to receive
options to purchase the Company's Class A Common Stock under the Director Plan.

Effective as of November 1, 2000, and on each anniversary date thereof during
the term of the Director Plan, each outside director shall automatically receive
an option to purchase 1,000 shares of Class A Common Stock. In addition, each
new outside director who shall first join the Board after the effective date
shall be granted an option to purchase 1,000 shares upon the date which such
person first becomes an outside director and an annual grant of an option to
purchase 1,000 shares on each anniversary date thereof during the term of the
Director Plan. The options granted to outside directors shall vest in their
entirety on the first anniversary date of the grant. The primary purposes of the
Director Plan are to enhance the Company's ability to attract and retain
well-qualified persons for service as directors and to provide incentives to
such directors to continue their association with the Company.

In the event of a merger of the Company with or into another company, or a
consolidation, acquisition of stock or assets or other change in control
transaction involving the Company, each option becomes exercisable in full,
unless such option is assumed by the successor corporation. In the event the
transaction is not approved by a majority of the "Continuing Directors" (as
defined in the Director Plan), each option becomes fully vested and exercisable
in full immediately prior to the consummation of such transaction, whether or
not assumed by the successor corporation.

2003 Stock Option Plan

On July 11, 2003, the Company adopted the Security National Financial
Corporation 2003 Stock Incentive Plan (the "2003 Plan"), which reserved 500,000
shares of Class A common stock and 1,000,000 shares of Class C common stock for
issuance thereunder. The 2003 Plan was approved by the Board of Directors on May
9, 2003, and by the stockholders at the annual meeting of the stockholders held
on July 11, 2003. The 2003 Plan allows the Company to grant options and issue
shares as a means of providing equity incentives to key personnel, giving them a
proprietary interest in the Company and its success and progress.

The 2003 Plan provides for the grant of options and the award or sale of stock
to officers, directors, and employees of the Company. Both "incentive stock
options", as defined under Section 422A of the Internal Revenue Code of 1986
(the "Code") and "non-qualified options" may be granted under the 2003 Plan. The
exercise prices for the options granted are equal to or greater than the fair
market value of the stock subject to such options as of the date of grant, as
determined by the Company's Board of Directors. The options granted under the
2003 Plan are to reward certain officers and key employees who have been
employed by the Company for a number of years and to help the Company retain
these officers by providing them with an additional incentive to contribute to
the success of the Company.

The 2003 Plan is to be administered by the Board of Directors or by a committee
designated by the board. The terms of options granted or stock awards or sales
affected under the 2003 Plan are to be determined by the Board of Directors or
its committee. The Plan provides that if the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price to reflect such
subdivision, combination or stock dividend. In addition, the number of shares of
Common Stock reserved for purposes of the Plan shall be adjusted by the same
proportion. No options may be exercised for a term of more than ten years from
the date of grant.

Options intended as incentive stock options may be issued only to employees, and
must meet certain conditions imposed by the code, including a requirement that
the option exercise price be no less than then fair market value of the option
shares on the date of grant. The 2003 Plan provides that the exercise price for
non-qualified options will not be less than at least 50% of the fair market
value of the stock subject to such option as of the date of grant of such
options, as determined by the Company's Board of Directors.

The 2003 Plan has a term of ten years. The Board of Directors may amend or
terminate the 2003 Plan at any time, subject to approval of certain
modifications to the 2003 Plan by the shareholders of the Company as may be
required by law or the 2003 Plan.

Item 12 - Security Ownership of Certain Beneficial Owners and Management

The following table sets forth security ownership information of the Company's
Class A and Class C common stock as of March 31, 2005, (i) for persons who own
beneficially more than 5% of the Company's outstanding Class A or Class C common
stock, (ii) each director of the Company, and (iii) for all executive officers,
and directors of the Company as a group.

Class A and
Class A Class C Class C
Common Stock Common Stock Common Stock
------------ ------------ ------------
Amount Amount Amount
Beneficially Percent Beneficially Percent Beneficially Percent
Name and Address (1) Owned of Class Owned of Class Owned of Class
- ----------------- ------- -------- ----- -------- ----- --------

George R. and Shirley C. Quist
Family Partnership, Ltd. (2) 426,375 7.0% 3,358,687 52.6% 3,785,062 28.1%
Employee Stock
Ownership Plan (3) 577,183 9.5% 1,553,041 24.3% 2,130,224 15.8%
George R. Quist (4)(5)(7)(8) 449,945 7.4% 470,581 7.4% 920,526 6.8%
Scott M. Quist (4)(7)(9) 347,885 5.7% 1,307,079 20.5% 1,654,964 12.3%
Associated Investors (10) 92,798 1.5% 655,610 10.3% 748,408 5.5%
G. Robert Quist (6)(11) 112,300 1.9% 244,052 3.8% 356,352 2.6%
J. Lynn Beckstead, Jr., (6)(12) 104,193 1.7% -- * 104,193 *
Stephen M. Sill (6)(13) 58,087 1.0% -- * 58,087 *
Christie Q. Overbaugh (14) 56,979 * 105,501 1.7% 162,480 1.2%
Robert G. Hunter, M.D., (4)(15) 7,296 * -- * 7,296 *
Norman G. Wilbur (16) 5,962 * -- * 5,962 *
Charles L. Crittenden (17) 5,921 * -- * 5,921 *
H. Craig Moody (18) 5,678 * -- * 5,678 *
All directors and executive
officers (10 persons)
(4)(5)(6)(7) 1,580,621 26.1% 5,485,500 86.0% 7,066,521 52.4%

* Less than 1%

(1) Unless otherwise indicated, the address of each listed stockholder is c/o
Security National Financial Corporation, 5300 South 360 West, Suite 250, Salt
Lake City, Utah 84123.

(2) This stock is owned by the George R. and Shirley C. Quist Family
Partnership, Ltd., of which George R. Quist is the general partner.

(3) The trustees of the Employee Stock Ownership Plan (ESOP) are George R.
Quist, Scott M. Quist, and Robert G. Hunter who exercise shared voting and
investment powers.

Item 12 - Security Ownership of Certain Beneficial Owners and Management
(Continued)

(4) Does not include 577,183 shares of Class A common stock and 1,553,041 shares
of Class C common stock owned by the Company's Employee Stock Ownership Plan
(ESOP), of which George R Quist, Scott M. Quist and Robert G. Hunter are the
trustees and accordingly, exercise shared voting and investment powers with
respect to such shares.

(5) Does not include 92,798 shares of Class A common stock and 655,611 shares of
Class C common stock owned by Associated Investors, a Utah general partnership,
of which George R. Quist is the managing partner and, accordingly, exercises
sole voting and investment powers with respect to such shares.

(6) Does not include 252,757 shares of Class A common stock owned by the
Company's 401(k) Retirement Savings Plan, of which G. Robert Quist, J. Lynn
Beckstead, and Stephen M. Sill are members of the Investment Committee and,
accordingly, exercise shared voting and investment powers with respect to such
shares.

(7) Does not include 140,573 shares of Class A common stock owned by the
Company's Deferred Compensation Plan, of which George R. Quist and Scott M.
Quist are members of the Investment Committee and, accordingly, exercise shared
voting and investment powers with respect to such shares.

(8) Includes options to purchase 153,620 shares of Class A common stock granted
to George R. Quist that are currently exercisable or will become exercisable
within 60 days of March 31, 2005.

(9) Includes options to purchase 77,175 shares of Class A common stock and
1,050,000 shares of Class C Common Stock granted to Scott M. Quist that are
currently exercisable or will become exercisable within 60 days of March 31,
2005.

(10) The managing partner of Associated Investors is George R. Quist, who
exercises sole voting and investment powers.

(11) Includes options to purchase 49,088 shares of Class A common stock granted
to G. Robert Quist that are currently exercisable or will become exercisable
within 60 days of March 31, 2005.

(12) Includes options to purchase 21,788 shares of Class A common stock granted
to Mr. Beckstead that are currently exercisable or will become exercisable
within 60 days of March 31, 2005.

(13) Includes options to purchase 5,250 shares of Class A common stock granted
to Mr. Sill that are currently exercisable or will become exercisable within 60
days of March 31, 2005.

(14) Includes options to purchase 7,875 shares of Class A common stock granted
to Ms. Overbaugh that are currently exercisable or will become exercisable
within 60 days of March 31, 2005.

(15) Includes options to purchase 4,753 shares of Class A common stock granted
to Mr. Hunter that are currently exercisable or will become exercisable within
60 days of March 31, 2005.

(16) Includes options to purchase 4,753 shares of Class A common stock granted
to Mr. Wilbur that are currently exercisable or will become exercisable within
60 days of March 31, 2005.

(17) Includes options to purchase 1,103 shares of Class A common stock granted
to Mr. Crittenden that are currently exercisable or will become exercisable
within 60 days of March 31, 2005.

Item 12 - Security Ownership of Certain Beneficial Owners and Management
(Continued)

(18) Includes options to purchase 4,753 shares of Class A common stock granted
to Mr. Moody that are currently exercisable or will become exercisable within 60
days of March 31, 2005.

The Company's executive officers and directors, as a group, own beneficially
approximately 52.4% of the outstanding shares of the Company's Class A and Class
C common stock.

Item 13. Certain Relationships and Related Transactions

On December 19, 2001, the Company entered into an option agreement with Monument
Title, LLC, a Utah limited liability company in which the Company made available
a $100,000 line of credit to Monument Title at an interest rate of 8% per annum.
The line of credit is secured by the assets of Monument Title. From December 28,
2001 to June 14, 2002, the Company advanced Monument Title a total of $77,953
under the line of credit. The amount advanced under the line of credit plus
accrued interest are payable upon demand. Ron Motzkus and Troy Lashley, who own
90% and 10% of the outstanding shares of Monument Title, respectively, are
brother-in-laws of Scott M. Quist, President and Chief Operating Officer of the
Company. The Company has the right under the option agreement for a period of
five years from the date thereof to acquire 100% of the outstanding common
shares of Monument Title for the sum of $10. The purpose of the transaction,
which was approved by the Company's Board of Directors, is to insure that the
title and escrow work performed for Security National Mortgage Company in
connection with its mortgage loans are completed as accurately as possible by
Monument Title to avoid any economic losses to the Company.

On November 1, 2004, the Company entered into an Agreement to Repay Indebtedness
and to Convey Option with Monument Title and Mr. Motzkus. Under the terms of the
agreement, Monument Title agreed to pay the Company a total of $94,177,
representing the total of $77,953 that the Company advanced to Monument Title
under the line of credit, plus interest thereon, within seven days from the date
of the agreement. Monument Title paid the $94,177 to the Company pursuant to the
agreement. In addition, the Company agreed to release its interest in the option
agreement to acquire 100% of the outstanding common shares of Monument Title, in
consideration for the payment of an additional $94,177. Monument Title is to pay
the additional $94,177 to the Company in minimum payments of $500 per month for
the first twelve months following the date of the agreement, with additional
payments of $1,000 per month for the second twelve months following the date of
the agreement. After the 24th month following the date of the agreement, the
outstanding balance is to bear interest at the three year treasury rate plus one
percent. The minimum payment for the third year is $1,500 per month, the minimum
payment for the fourth year is $2,000 per month and the minimum payment for the
fifth year is $2,500 per month. Any remaining unpaid balance, including
interest, shall be due and payable at the conclusion of the 60th month from the
date of the agreement.

On December 26, 2003, Security National Life entered into a coinsurance
agreement and a modified coinsurance agreement with Southern Security Life
Insurance Company, effective September 30, 2003. Under the terms of these
agreements, Southern Security Life Insurance Company ceded 50% of certain blocks
of its universal life business to Security National Life. The total liabilities
reinsured for this business on October 1, 2003 were $22,195,259. Southern
Security Life Insurance Company received a ceding commission from Security
National Life of $3,200,000 and will pay a risk charge to Security National Life
of 1% of the outstanding coinsurance per calendar quarter. Southern Security
Life Insurance Company placed investment grade bonds in a bank trust, the value
of which equal the outstanding liabilities ceded to Security National Life.
Security National Life is named as a beneficiary of the trust, and the terms of
the trust are such that Southern Security Life Insurance Company will maintain
investment grade bonds in the trust to equal the outstanding liabilities ceded
to Security National Life.

Under the coinsurance agreement and the modified coinsurance agreement, the
coinsurance and the decrease in reserves are equal in amount. Under U. S. GAAP
the coinsurance and the reserve decreases are netted since these are non-cash
items, and Southern Security Life Insurance Company expects to recapture the
coinsurance from future profits of the reinsured business. Southern Security
Life Insurance Company has the right to recapture the business at any time after
September 30, 2004, upon 90 days advance notice. As of December 31, 2004, the
outstanding coinsurance amount was $2,426,107. Southern Security Life Insurance
Company recorded as an expense the risk charge of $112,315 for 2004. The
coinsurance agreements have remained in effect following completion of the
merger of SSLIC Holding Company into Southern Security Life Insurance Company.
As a result, the coinsurance agreements have not been impacted or affected by
the completion of such merger.

On December 28, 2004, Security National Life entered into a coinsurance
agreement and a modified coinsurance agreement with Southern Security Life
Insurance Company, effective October 1, 2004. Under the terms of these
agreements, Southern Security Life Insurance Company ceded 25% of certain blocks
of its universal life business to Security National Life. The total liabilities
reinsured for this business on October 1, 2004 were $11,010,599. Southern
Security Life Insurance Company received a ceding commission from Security
National Life of $1,200,000 and will pay a risk charge to Security National Life
of 1% of the outstanding coinsurance per calendar quarter. Southern Security
Life Insurance Company placed investment grade bonds in a bank trust, the value
of which equal the outstanding liabilities ceded to Security National Life.
Security National Life is named as a beneficiary of the trust, and the terms of
the trust are such that Southern Security Life Insurance Company will maintain
investment grade bonds in the trust to equal the outstanding liabilities ceded
to Security National Life.

Under the coinsurance agreement and the modified coinsurance agreement, the
coinsurance and the decrease in reserves are equal in amount. Under U. S. GAAP
the coinsurance and the reserve decreases are netted since these are non-cash
items, and Southern Security Life Insurance Company expects to recapture the
coinsurance from future profits of the reinsured business. Southern Security
Life Insurance Company has the right to recapture the business at any time after
September 30, 2005, upon 120 days advance notice. As of December 31, 2004 the
outstanding coinsurance amount was $1,157,886. Southern Security Life Insurance
Company recorded as an expense the risk charge of $12,000 for 2004. The
coinsurance agreements have remained in effect following completion of the
merger of SSLIC Holding Company into Southern Security Life Insurance Company.
As a result, the coinsurance agreements have not been impacted or affected by
the completion of such merger.

The Company's Board of Directors has a written procedure, which requires
disclosure to the Board of any material interest or any affiliation on the part
of any of its officers, directors or employees which is in conflict or may be in
conflict with the interests of the Company.

Item 14. Principle Accounting Fees and Services

Fees incurred in 2004 for annual audit services pertaining to the financial
statements and employee benefit plans and related quarterly reviews were
approximately $262,000. There were $19,000 in other fees during 2004.

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1)(2) Financial Statements and Schedules

See "Index to Consolidated Financial Statements and Supplemental
Schedules" under Item 8 above.

(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 Restatement of Articles of Incorporation (7)
3.2 Amended 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)
10.1 Restated and Amended Employee Stock Ownership Plan and Trust
Agreement (1)
10.2 1993 Stock Option Plan (3)
10.3 2000 Director Stock Option Plan (4)
10.4 2003 Stock Option Plan (9)
10.5 Deferred Compensation Agreement with George R. Quist (2)
10.6 Promissory Note with George R. Quist (5)
10.7 Deferred Compensation Plan (6)
10.8 Coinsurance Agreement between Security National Life and Acadian (7)
10.9 Assumption Agreement among Acadian, Acadian Financial Group, Inc.,
Security National Life and the Company (7)
10.10 Asset Purchase Agreement between Acadian, Acadian Financial Group,
Inc., Security National Life and the Company (7)
10.11 Promissory Note with Key Bank of Utah (8)
10.12 Loan and Security Agreement with Key Bank of Utah (8)
10.13 Stock Purchase and Sale Agreement with Ault Glazer & Co. Investment
Management LLC (10)
10.14 Stock Purchase Agreement with Paramount Security Life Insurance
Company (11)
10.15 Reinsurance Agreement between Security National Life Insurance
Company and Guaranty Income Life Insurance Company(12)
10.16 Employment agreement with J. Lynn Beckstead, Jr.(12)
10.17 Employment agreement with Scott M. Quist (13)
10.18 Agreement and Plan of Reorganization among Security National Life
Insurance Company, SSLIC Holding Company, and Southern Security
Life Insurance Company (14)
10.19 Agreement and Plan of Merger, among Security National Life Insurance
Company, SSLIC Holding Company, and Southern Security Life
Insurance Company
10.20 Agreement to repay indebtedness and to convey option with Monument
Title, LLC.
10.21 Subsidiaries of the Registrant
31.1 Certification pursuant to 18 U.S.C. Section 1350, as enacted by
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as enacted by
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Incorporated by reference from Registration Statement on Form S-1, as filed
on June 29, 1987
(2) Incorporated by reference from Annual Report on Form 10-K, as filed on
March 31, 1989
(3) Incorporated by reference from Annual Report on Form 10-K, as filed on
March 31, 1994
(4) Incorporated by reference from Schedule 14A Definitive Proxy Statement,
filed August 29, 2000, relating to the Company's Annual Meeting of
Shareholders
(5) Incorporated by reference from Annual Report on Form 10-K, as filed on
April 16, 2001
(6) Incorporated by reference from Annual Report on Form 10-K, as filed on
April 3, 2002
(7) Incorporated by reference from Report on Form 8-K/A as filed on January 8,
2003
(8) Incorporated by reference from Annual Report on Form 10-K, as filed on
April 15, 2003
(9) Incorporated by reference from Schedule 14A Definitive Proxy Statement,
Filed on June 5, 2003, relating to the Company's Annual Meeting of
Shareholders
(10) Incorporated by reference from Report on Form 10-Q, as filed on November
14, 2003
(11) Incorporated by reference from Report on Form 8-K, as filed March 30, 2004
(12) Incorporated by reference from Report on Form 10-K, as filed on March 30,
2004
(13) Incorporated by reference from Report on Form 10-Q, as filed on August 13,
2004
(14) Incorporated by reference from Report on Form 8-K as filed on August 30,
2004

(b) Reports on Form 8-K:

No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 2004.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

SECURITY NATIONAL FINANCIAL CORPORATION

Dated: April 15, 2005 By: George R. Quist
---------------
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:

SIGNATURE TITLE DATE

George R. Quist Chairman of the April 15, 2005
Board and Chief Executive
Officer (Principal
Executive Officer)

Scott M. Quist President, Chief Operating April 15, 2005
Officer and Director

Stephen M. Sill Vice President,
Treasurer and Chief
Financial Officer (Principal
Financial and Accounting
Officer) April 15, 2005

J. Lynn Beckstead, Jr. Vice President and Director April 15, 2005

Charles L. Crittenden Director April 15, 2005

H. Craig Moody Director March 30, 2005

Norman G. Wilbur Director April 15, 2005

Robert G. Hunter Director April 15, 2005

Exhibit 31.1

CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ENACTED BY
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, George R. Quist, certify that:

1. I have reviewed this annual report on Form 10-K of Security National
Financial Corporation.

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant to have:

(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
covered in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.

Date: April 15, 2005

By: George R. Quist
Chairman of the Board and
Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ENACTED BY
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen M. Sill, certify that:

1. I have reviewed this annual report on Form 10-K of Security National
Financial Corporation.

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant to have:

(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period
covered in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation of internal financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.

Date: April 15, 2005

By: Stephen M. Sill
Vice President, Treasurer and
Chief Financial Officer

EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Security National Financial Corporation
(the "Company") on Form 10-K for the period ending December 31, 2004, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, George R. Quist, Chairman of the Board and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and
belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.

By: George R. Quist
Chairman of the Board and
Chief Executive Officer
April 15, 2005

EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. ss. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Security National Financial Corporation
(the "Company") on Form 10-K for the period ending December 31, 2004, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Stephen M. Sill, Vice President, Treasurer and Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and
belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.

By: Stephen M. Sill
Vice President, Treasurer
and Chief Financial Officer
April 15, 2005

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Year Ended December 31, 2004

SECURITY NATIONAL FINANCIAL CORPORATION
Commission File No. 0-9341

E X H I B I T S

Exhibit Index

Exhibit No. Document Name

10.19 Agreement Plan of Merger, among Security National Life Insurance
Company, SSLIC Holding Company and Southern Security Life Insurance
Company

10.20 Agreement to repay indebtedness and to convey option with Monument
Title, LLC.

10.21 Subsidiaries of the Registrant

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

EXHIBIT 10.21

Subsidiaries of Security National
Financial Corporation
as of March 31, 2005

Security National Life Insurance Company

Security National Mortgage Company

Memorial Estates, Inc.

Memorial Mortuary

Paradise Chapel Funeral Home, Inc.

California Memorial Estates, Inc.

Cottonwood Mortuary, Inc.

Deseret Memorial, Inc.

Holladay Cottonwood Memorial Foundation

Holladay Memorial Park, Inc.

Sunset Funeral Home, Inc.

Greer-Wilson Funeral Home, Inc.

Crystal Rose Funeral Home, Inc.

Hawaiian Land Holdings

SSLIC Holding Company

Insuradyne Corporation

Southern Security Life Insurance Company

Security National Funding Company

Security National Life Insurance Company of Louisiana (Formerly Paramount
Security Life Insurance Company)

Security National Capital, Inc.

Security National Funding