UNITED STATES SECURITIES AND 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, 2005, 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 of                   (I.R.S. Employer
 incorporation or organization)                  Identification No.)

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. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in the Exchange Act Rule 12b-2). Yes    No [X]

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

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 $17,049,000, based upon the closing price on that date
on the Nasdaq National Market.

As of March 31, 2006, there were 5,847,249 shares of Class A Common Stock, $2.00
par value per share, and 6,642,929 shares of Class C Common Stock, $.20 par
value per share, outstanding.

Documents  Incorporated by Reference  Portions of the definitive Proxy Statement
for the  registrant's  2006 Annual Meeting of Stockholders  are  incorporated by
reference into Part III of this Form 10-K.

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


<PAGE>



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 21 wholesale and retail offices in ten states,  and is
an approved mortgage lender in several 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 and Civil Service Employees
Life  Insurance  Company in 1995, a stock  purchase  transaction  with  Southern
Security Life Insurance  Company  ("Southern  Security Life") in 1998 (involving
the  purchase of 57.4% of the  outstanding  common  shares of Southern  Security
Life),  an asset  purchase  transaction  with  Acadian  Life  Insurance  Company
("Acadian")  in December  2002,  the  acquisition  of  Paramount  Security  Life
Insurance Company ("Paramount"), now Security National Life Insurance Company of
Louisiana  ("Security  National  Life of  Louisiana")  in March  2004,  a merger
transaction  involving  the  purchase  of the  remaining  outstanding  shares of
Southern Security Life in January 2005, which resulted in Southern Security Life
Insurance Company becoming a wholly-owned  subsidiary of Security National Life,
and  the  acquisition  of  Memorial  Insurance  Company  of  America  ("Memorial
Insurance Company") in December 2005.

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 21 branches  in ten states.  See Notes to
Consolidated  Financial  Statements  for  additional  disclosure  and discussion
regarding segments of the business.


<PAGE>



Life Insurance

   Products

The  Company,  through  its  insurance  subsidiaries,  Security  National  Life,
Southern  Security  Life,  Security  National  Life of  Louisiana  and  Memorial
Insurance Company,  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.


<PAGE>



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, 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, 2005:

<TABLE>
<CAPTION>

                                     2005                  2004             2003                2002              2001
                                     ----                  ----             ----                ----              ----
Life Insurance
<S>                           <C>                      <C>                  <C>                 <C>            <C>
Policy/Cert.  Count
    as of December 31          417,957(1((3)(4)        357,767(1)(2)(3)      353,017(1)(2)       341,909(1)      74,335
Insurance in force as of
     December 31
    (omitted 000)           $3,350,140(1)(3)(4)     $2,914,135(1)(2)(3)   $2,914,438(1)(2)    $2,635,436(1)  $2,425,557
Premiums Collected
    (omitted 000)         $     27,275(1)(2)(3)(4) $    30,560(1)(2)(3)   $   28,598(1)(2)    $   14,699     $   14,860

</TABLE>

(1)  Includes  the purchase of assets from  Acadian  Life  Insurance  Company on
     December 23, 2002.
(2)  Includes  reinsurance  assumed on October 1,  2003,  under  agreement  with
     Guaranty  Income Life  Insurance  Company.  This agreement was cancelled on
     January 1, 2005.
(3)  Includes the purchase of Paramount  Security Life  Insurance  Company,  now
     known as Security  National Life Insurance  Company of Louisiana,  on March
     16, 2004.
(4)  Includes the purchase of Memorial  Insurance Company of America on December
     29, 2005.

    Underwriting

The 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)

<PAGE>



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 6.5% 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 6.5%.

   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, 2005:

                                    2005     2004     2003      2002     2001
                                    ----     ----     ----      ----     ----
Annuities
Policy/Cert.
  Count as of December 31         20,119(1)   7,365   7,206     7,711    8,021
Deposits Collected (omitted 000   $2,416     $1,972  $2,026    $3,215   $2,550

(1)  Includes the purchase of Memorial  Insurance Company of America on December
     29, 2005.


<PAGE>



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 web marketing.

The following  table  summarizes  the accident and health  business for the five
years ended December 31, 2005:

                                     2005     2004    2003     2002      2001
                                     ----     ----    ----     ----      ----
Accident and Health
Policy/Cert.
  Count as of December 31           14,934   15,778  17,391   18,921    19,343
Premiums Collected (omitted 000)      $285     $308    $352     $365      $413

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,  2005,   reinsured   by  other   companies   aggregated
$185,364,000, 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

<PAGE>



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,  interment 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 25%
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

<PAGE>



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
mortgage  originators.  SecurityNational  Mortgage  Company  maintains  a retail
origination  presence in the Salt Lake City  market in addition to 21  wholesale
and retail branch offices  located in Arizona,  California,  Colorado,  Florida,
Hawaii, Nevada, Oregon, Texas, Utah and Virginia,  with sales representatives in
other states.

Recent Acquisitions and Other Business Activities

    Memorial Insurance Company of America

On  December  29,  2005,  Security  National  Life and  Southern  Security  Life
completed  a stock  purchase  transaction  with  Memorial  Insurance  Company of
America, an Arkansas domiciled insurance company ("Memorial Insurance Company"),
to purchase all of the outstanding  shares of common stock of Memorial Insurance
Company.  Under the  terms of the  transaction,  the  shareholders  of  Memorial
Insurance Company received a total purchase consideration of $13,500,000 for all
of the  outstanding  common  shares of  Memorial  Insurance  Company,  with each
shareholder having received a pro rata share of the total amount of the purchase
consideration based upon the number of shares such shareholder owns.

The shareholders of Memorial Insurance Company received payment for their shares
by means of  distributions,  with Security  National Life and Southern  Security
Life  simultaneously  contributing  sufficient  capital  and surplus to Memorial
Insurance Company to maintain its status as an admitted insurer in good standing
in the state of  Arkansas.  The  transaction  is to be treated,  for federal and
state tax purposes,  as a part sale, part  redemption of the Memorial  Insurance
Company stock. At the closing of the  transaction,  the shareholders of Memorial
Insurance  Company sold all of their shares of Memorial  Insurance Company stock
to  Southern  Security  Life,  such  shares  representing  all of the issued and
outstanding stock of Memorial Insurance Company. As a result, Memorial Insurance
Company became a wholly owned subsidiary of Southern Security Life.

As of December  31, 2005,  Memorial  Insurance  Company had 116,116  policies in
force and  approximately  50  agents.  For the year  ended  December  31,  2005,
Memorial  Insurance  Company  had  revenues  of  $3,659,000  and net  income  of
$837,000.  As of December  31,  2005,  the assets and the capital and surplus of
Memorial Insurance Company were $65,909,000 and $2,505,000, respectively.

Under the terms of the transaction, as set forth in the Stock Purchase Agreement
dated September 23, 2005 among Security  National Life,  Southern Security Life,
and  Memorial  Insurance  Company,  the  shareholders  agree,  where  applicable
following the closing of the transaction, to maintain any existing policies from
Memorial  Insurance Company that were previously sold through such shareholders'
funeral and mortuary businesses and to avoid replacing any of such policies with
the policies of other insurance companies. The shareholders further agree to use
their reasonable best efforts to support the business and operations of Memorial
Insurance  Company,   including,   where  applicable,  to  maintain  a  business
relationship  with  Memorial  Insurance  Company to the  extent  such a business
relationship existed prior to such closing.




<PAGE>



Moreover,  Security National Life and Southern Security Life agree,  pursuant to
the terms of the Stock Purchase Agreement,  to maintain the corporate offices of
Memorial  Insurance  Company at its current  location in Blytheville,  Arkansas.
Furthermore,  Security  National  Life and Southern  Security  Life agree to use
their best efforts, following the closing of the transaction, to assist Memorial
Insurance  Company in retaining the sales agents and brokers in its business and
operations.  The  obligations to complete the  transaction  were contingent upon
approval of the transaction by the Arkansas Insurance Department.  A hearing was
held on  December  9,  2005  with the  Commissioner  of the  Arkansas  Insurance
Department  to  consider  the  request  to  approve  the  transaction,  and  the
Commissioner issued an order dated December 21, 2005 approving the transaction.

At the closing of the transaction, Security National Life and Memorial Insurance
Company entered into a reinsurance  agreement to reinsure the majority of the in
force  business of Memorial  Insurance  Company to Security  National  Life,  as
reinsurer,  to the extent permitted by the Arkansas  Insurance  Department.  The
assets and  liabilities  to be reinsured  under the  reinsurance  agreement were
deposited into a trust account, in which Zions First National Bank agrees to act
as trustee.  Under the terms of the reinsurance  agreement,  in the event of the
insolvency of Security  National Life  Insurance  Company,  Zions First National
Bank  agrees to hold the assets and  liabilities  in trust for  purposes  of the
administration of the assets and liabilities with respect to such insolvency.

As a result of the execution of the  reinsurance  agreement,  certain  insurance
business and  operations of Memorial  Insurance  Company will be  transferred to
Security National Life, including all policies in force as of the effective date
thereof,  except for certain  policies  to be  retained  by  Memorial  Insurance
Company.  Any future insurance  business by Memorial  Insurance  Company will be
covered by this  reinsurance  agreement.  All of the business and  operations of
Memorial  Insurance  Company was transferred to Security National Life under the
terms  of  the  reinsurance  agreement,   except  for  capital  and  surplus  of
approximately  $1,000,000.  Thus,  $30,025,777  in assets  and  liabilities  was
transferred from Memorial  Insurance  Company to Security National Life pursuant
to the reinsurance agreement.

At the closing of the stock purchase  transaction,  Memorial  Insurance  Company
issued a  $30,025,777  note to Security  National  Life  payable,  together with
accrued  interest,  within 30 days from the date of issuance.  The note is to be
repaid in cash or in assets to be  transferred  to Security  National  Life. The
note is secured by the assets owned by Memorial Insurance Company.  In addition,
Southern  Security Life  contributed  $2,200,000  in cash to Memorial  Insurance
Company at closing in  consideration  for the surplus note.  Memorial  Insurance
Company  repaid the surplus note in early 2006 using the proceeds  from the sale
of the  investments  in common stock that it currently  holds in its  investment
portfolio.

On December 31, 2005,  Memorial  Insurance  Company  entered into a  reinsurance
agreement with Security  National Life for certain accident and health insurance
policies  of  Security  National  Life.  Under  the  terms  of  the  reinsurance
agreement,  Memorial  Insurance Company assumed 100% of the liabilities of these
policies.  In  addition,  pursuant  to the  agreement,  Security  National  Life
transferred  $96,345 in  statutory  reserves  and assets to  Memorial  Insurance
Company as of December 31, 2005. There was no additional  consideration paid for
these policies under the agreement.

    Southern Security Life Insurance Company

On 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.  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, which

<PAGE>



resulted in (i) Southern Security Life Insurance Company becoming a wholly owned
subsidiary of Security National Life, and (ii) the unaffiliated  stockholders of
Southern Security Life,  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, 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 became the surviving corporation of the merger.
Southern  Security  Life  continues  to be  governed by the laws of the State of
Florida, and its separate corporate existence and operations continue 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.
The Company,  through its affiliates,  Security  National Life and SSLIC Holding
Company,  owned 76.7% of the  Company's  outstanding  common shares prior to the
merger.

The purpose of the merger was to terminate the  registration of the common stock
of Southern Security Life 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 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 31, 2005,  Southern Security Life and Security National Life entered
into a  reinsurance  agreement  to reinsure the  remaining in force  business of
Southern  Security Life to Security National Life to the extent permitted by the
Florida Office of Insurance  Regulation.  The assets and  liabilities  reinsured
under the reinsurance agreement will be deposited into a trust account, in which
Zions  First  National  Bank  agrees to act as  trustee.  Under the terms of the
reinsurance agreement, in the event of the insolvency of Security National Life,
Zions  First  National  Bank will hold the assets and  liabilities  in trust for
purposes of  administration  of the assets and liabilities  with respect to such
insolvency.

The Florida Office of Insurance Regulation approved the reinsurance agreement on
December 28, 2005.  As a result of the execution of the  reinsurance  agreement,
all of the insurance  business and operations of Southern  Security Life will be
transferred to Security  National  Life, as reinsurer,  as of December 31, 2005,
the effective date of the agreement.  Any future insurance  business by Southern
Security  Life  will  be  covered  by  this  reinsurance  agreement.  All of the
insurance  business and  operations  of Southern  Security  Life,  including its
assets and liabilities,  will be transferred to Security National Life under the
terms of the reinsurance agreement, except for $3,500,000 in capital and surplus
that Southern  Security Life will continue to hold in order to remain  qualified
as a life insurance company for federal income tax purposes. Thus, approximately
$48,528,000 in assets and liabilities will be transferred from Southern Security
Life to Security National Life pursuant to the reinsurance agreement.

In addition, on December 31, 2005, Southern Security Life declared a dividend to
Security National Life in the amount of $7,181,000. Following the payment of the
dividend,  the remaining  capital and surplus of Southern  Security Life will be
$3,500,000,  which is a sufficient amount in order for Southern Security Life to
maintain  its status as an  admitted  insurer in good  standing  in the state of
Florida.  On December  28,  2005,  the Florida  Office of  Insurance  Regulation
approved the request by Security  National Life  Insurance  Company and Southern
Security Life for the dividend payment.

Security  National Life anticipates  that Southern  Security Life will either be
sold to an  unrelated  business  entity or merged with  Security  National  Life
during fiscal 2006. On December 12, 2005, a plan of liquidation  was approved by
the Board of  Directors of the Company in  anticipation  of such sale or merger.
The Company  expects the sale or merger to be  completed  prior to December  31,
2006.


<PAGE>




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

On March 16, 2004,  Security  National  Life  completed  the purchase of all 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 total purchase  consideration
was $4,398,000 and the transaction was effective on 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 anticipates that with this license it will be able to expand
its  operations in  Louisiana.  The Company is servicing  the  policyholders  of
Security National Life of Louisiana out of its Jackson,  Mississippi  office and
has closed the Shreveport office.

Regulation

The Company's insurance subsidiaries,  Security National Life, Southern Security
Life,  Security National Life of Louisiana,  and Memorial  Insurance Company 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,  Louisiana and
Arkansas 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


<PAGE>



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
Life,  Security  National Life of Louisiana and Memorial  Insurance  Company 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  Life,  Security  National Life of
Louisiana and Memorial  Insurance Company 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 Life,  Security National
Life of  Louisiana  and Memorial  Insurance  Company  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

<PAGE>



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.  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, 2005,  the Company  employed 426  full-time  and 74 part-time
employees.


<PAGE>
<TABLE>
<CAPTION>



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
        --------                                    --------             ------          -------
      <S>                                     <C>                      <C>                <C>
      5300 So. 360 West                      Corporate Headquarters    Owned (1)         33,200
      Salt Lake City, Utah

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

      3935 I-55 South, Frontage Road         Insurance Operations      Owned (3)         12,000
      Jackson, Mississippi

      2800 Youree Drive Bld. 1, Suite 207    Insurance Operations      Leased (4)           200
      Shreveport, Louisiana

      634 West Main Street                   Insurance Operations      Owned              3,000
      Blytheville, Arkansas

      410 North 44th Street, Suite 190       Mortgage Sales            Leased (5)         1,800
      Phoenix, Arizona

      12150 Tributary Point Dr., Suite160    Mortgage Sales            Leased (6)         2,000
      Gold River, California

      7676 Hazard Center Drive, Suite 625    Mortgage Sales            Leased (7)         1,300
      San Diego, California

      27433 Tourney Road, Suite 220          Mortgage Sales            Leased (8)         2,500
      Santa Clarita, California

      6208 Lehman Drive, Suite 201           Mortgage Sales            Leased (9)         2,200
      Colorado Springs, Colorado

      14001 East Lliff Ave., Suite 120       Mortgage Sales            Leased (10)        1,800
      Aurora, Colorado

      7785 Baymeadows Way, Suite 101         Mortgage Sales            Leased (11)        1,800
      Jacksonville, Florida

      1617 Santa Barbara Blvd                Mortgage Sales            Leased (12)          700
      Cape Coral, Florida

      5620 Tara Blvd., Suite 103             Mortgage Sales            Leased (13)        1,200
      Bradenton, Florida

      30 Aulike Street, Suite 308            Mortgage Sales            Leased (14)        4,300
      Kailua, Hawaii
</TABLE>




<PAGE>
<TABLE>
<CAPTION>



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

                                                                                       Approximate
                                                                         Owned           Square
        Location                                Function                 Leased          Footage
        --------                                --------                 ------          -------
     <S>                                    <C>                       <C>                 <C>
      6655 W. Sahara, Suite B-110            Mortgage Sales            Leased (15)        1,400
      Las Vegas, Nevada

      999 Southwest Disk Drive, Suite 104    Mortgage Sales            Leased (16)        1,800
      Bend, Oregon

      12750 Merit Drive, Suite 1212          Mortgage Sales            Leased (17)        2,600
      Dallas, Texas

      820 Gessner, Suite 800                 Mortgage Sales            Leased (18)        2,400
      Houston, Texas

      613 Northwest Loop 410, Suite 685      Mortgage Sales            Leased (19)        1,100
      San Antonio, Texas

      6975 South Union Park, Suite 150       Mortgage Sales            Leased (20)        4,300
      Midvale, Utah

      5219 & 5249 Greenpine Drive            Insurance Operations      Owned (21)         6,600
      Murray, Utah

      5258 Pinemont Dr., Suite B230          Peace Mausoleum           Owned                800
      Murray, Utah

      5251 Green Street, Suite 350           Mortgage Sales            Owned (22)         5,000
      Salt Lake City, Utah

      970 East Murray-Holladay Rd.,          Mortgage Sales            Leased (23)        6,400
      Suite 4A
      Salt Lake City, Utah

      474 West 800 North, Suite 102          Mortgage Sales            Leased (24)        2,000
      Orem, Utah

      6767 Forrest Hill Avenue,              Mortgage Sales            Leased (25)          500
      Third Floor
      Richmond, Virginia
</TABLE>

     (1)  The Company leases an additional  5,376 square feet of the facility to
          unrelated  third  parties for  approximately  $83,000 per year,  under
          leases expiring at various date after 2005.

     (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 2005.

     (3)  The building is located on 104 undeveloped acres.


<PAGE>



     (4)  The  Company  leases  this  facility  for $1,900  per year.  The lease
          expires April 2006.

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

     (6)  The Company  leases  this  facility  for  $47,000 per year.  The lease
          expires in July 2009.

     (7)  The Company  leases  this  facility  for  $45,300 per year.  The lease
          expires in June 2008.

     (8)  The Company  leases  this  facility  for  $78,000 per year.  The lease
          expires in February 2009.

     (9)  The Company  leases  this  facility  for  $28,800 per year.  The lease
          expires in June 2006.

     (10) The Company  leases  this  facility  for  $28,800 per year.  The lease
          expires in June 2006.

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

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

     (13) The Company  leases  this  facility  for  $17,800 per year.  The lease
          expires in July 2006.

     (14) The  Company  leases  this  facility  for $6,200  per year.  The lease
          expires in July 2006.

     (15) The Company  leases  this  facility  for  $49,100 per year.  The lease
          expires in April 2007.

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

     (17) The Company  leases  this  facility  for  $40,500 per year.  The lease
          expires in January 2009.

     (18) The Company  leases  this  facility  for  $51,300 per year.  The lease
          expires in January 2011.

     (19) The  Company   leases  this  facility  for  $7,200  per  year  with  a
          month-to-month lease.

     (20) The Company  leases  this  facility  for  $98,000 per year.  The lease
          expires in January 2010.

     (21) The Company  leases an additional  128,300 square feet of the facility
          to unrelated third parties for approximately  $825,000 per year, under
          leases expiring at various dates after 2005.

     (22) 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 2005.

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

     (24) The Company  leases  this  facility  for  $31,000 per year.  The lease
          expires in February 2007.

     (25) The Company  leases  this  facility  for  $13,200 per year.  The lease
          expires in July 2006.

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.


<PAGE>
<TABLE>
<CAPTION>



The following table summarizes the location and acreage of the six Company owned
cemeteries, each of which includes 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)
------------                 --------               --------      ----------     ----------      ---------     ----------
<S>                      <C>                         <C>             <C>             <C>           <C>            <C>
Memorial Estates, Inc.:

  Lakeview
     Cemetery(3)         1640 East Lakeview Dr.
                         Bountiful, Utah                1973           7             40               6            34
  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              27            51

  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,  2005,  there  were  mortgages  of  approximately
          $16,000,  collateralized  by the property and  facilities  at Memorial
          Estates Lakeview, Mountain View and Redwood Cemeteries.
     (4)  As of  December  31,  2005,  there  were  mortgages  of  approximately
          $1,465,000,  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,  2005,  there  was a  mortgage  of  approximately
          $307,000, collateralized by the property
</TABLE>


<PAGE>
<TABLE>
<CAPTION>



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
-------------                           ----------              ---------    --------      ---------       --------
<S>                                  <C>                           <C>         <C>          <C>            <C>
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(4)                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

</TABLE>




<PAGE>



     (1)  As of  December  31,  2005,  there  were  mortgages  of  approximately
          $1,465,000,  collateralized  by the property and facilities at Deseret
          Mortuary,  Cottonwood  Mortuary,  Holladay  Memorial  Park,  Lakehills
          Cemetery and Colonial Mortuary.

     (2)  As of  December  31,  2005,  there  was a  mortgage  of  approximately
          $109,000,  collateralized  by the property and  facilities  of Crystal
          Rose Funeral Home.

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

     (4)  As of  December  31,  2005,  there  was a  mortgage  of  approximately
          $134,000,  collateralized  by the  property  and  facilities  of Adobe
          Chapel Funeral Home.

Item 3.  Legal Proceedings

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.
Hood  claims  that he wrote a letter  to the  Company  expressing  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.  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 proposed a settlement in the amount of $275,000.

On November 23, 2005,  Hood filed a complaint in the Superior Court of the State
of California for the County for San Diego (Case No. GIE 028978) against Singing
Hills  Memorial  Park  and  California  Memorial  Estates,   Inc,  wholly  owned
subsidiaries  of the  Company.  The  claims in the  complaint  include  wrongful
termination  in violation of public  policy,  retaliation in violation of public
policy,  race  discrimination in violation of the California Fair Employment and
Housing Act,  retaliation  in violation of the  California  Fair  Employment and
Housing  Act,  intentional  infliction  of  emotional  distress,  plus  punitive
damages, attorney's fees and costs of the lawsuit. There are no specific amounts
requested in the complaint,  but damages are in an amount to be proven at a jury
trial.  The Company  contends that Hood voluntarily quit and was not terminated.
The Company intends to vigorously  defend the action.  An answer was filed.  The
case is in the discovery stage.

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 Gornichec  also wrote the letter
on  behalf  of Hood.  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.  Gornichec  asserts  that he was an  employee
contrary to the Company's position.

The claims made on behalf of 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.  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
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, 2005.


<PAGE>




                                     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 29,  2006,  the  closing
sales price of the Class A Common Stock was $4.35 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, 2004:

Period (Calendar Year)                     Price Range
                                       High          Low
         2004
              First Quarter           $8.06         $6.06
              Second Quarter           6.20          3.54
               Third Quarter           3.70          2.93
              Fourth Quarter           3.63          2.76

         2005
              First Quarter           $4.09         $2.85
              Second Quarter           3.52          2.86
               Third Quarter           3.15          2.92
              Fourth Quarter           3.82          2.96

         2006
              First Quarter           $4.79         $3.30

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 2005.

As of December 31, 2005, there were 4,385 record holders of Class A Common Stock
and 129 record holders of Class C Common Stock.


<PAGE>
<TABLE>
<CAPTION>



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, 2005,  are derived from the audited  consolidated  financial
statements.  The data as of December 31, 2005 and 2004,  and for the three years
ended  December 31, 2005,  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,

                                              2005              2004            2003(3)           2002              2001
                                              ----              ----            -------           ----              ----
Revenue
<S>                                        <C>              <C>              <C>              <C>              <C>
Premiums                                   $27,170,000      $25,979,000      $23,295,000      $14,077,000      $13,151,000
Net investment income                       19,387,000       15,939,000       17,303,000       12,540,000       12,947,000
Net mortuary and cemetery sales             10,839,000       11,661,000       10,944,000       10,638,000        9,881,000
Realized (losses) gains on investments          74,000           74,000           (2,000)       1,021,000           10,000
Mortgage fee income                         71,859,000       62,690,000       92,955,000       57,008,000       40,086,000
Other                                          621,000          855,000          550,000          479,000          152,000
                                         -------------    -------------    -------------    -------------    -------------
Total revenue                              129,950,000      117,198,000      145,045,000       95,763,000       76,227,000
                                         -------------    -------------    -------------    -------------    -------------

Expenses
Policyholder benefits                       24,477,000       23,362,000       21,755,000       13,756,000       11,775,000
Amortization of deferred
  policy acquisition costs                   3,031,000        4,602,000        4,929,000        3,994,000        3,870,000
General and administrative expenses         90,690,000       82,097,000      102,926,000       68,459,000       52,247,000
Interest expense                             4,921,000        2,174,000        3,642,000        1,970,000        2,791,000
Cost of goods and services of
  the mortuaries and cemeteries              2,103,000        2,304,000        2,328,000        2,045,000        1,772,000
                                         -------------    -------------    -------------    -------------    -------------
Total benefits and expenses                125,222,000      114,539,000      135,580,000       90,224,000       72,455,000
                                         -------------    -------------    -------------    -------------    -------------
Income before income tax expense             4,728,000        2,659,000        9,465,000        5,539,000        3,772,000
Income tax expense                          (1,240,000)        (652,000)      (2,891,000)      (1,565,000)        (913,000)
Minority interest in (income)
   loss of subsidiary                               --          115,000           22,000           18,000          (18,000)
                                         -------------    -------------    -------------    -------------    -------------
Net earnings                                $3,488,000       $2,122,000       $6,596,000       $3,992,000       $2,841,000
                                         =============    =============    =============    =============    =============

Net earnings per common share(4)                  $.54             $.34            $1.07             $.68             $.49
                                                  ====             ====            =====             ====             ====
Weighted average outstanding
   common shares (4)                         6,450,000        6,312,000        6,162,000        5,883,000        5,795,000
Net earnings per common
   share-assuming dilution(4)                     $.54             $.32            $1.04             $.66             $.49
                                                  ====             ====            =====             ====             ====
Weighted average outstanding
   common shares-assuming dilution (4)       6,480,000        6,539,000        6,321,000        6,062,000        5,796,000

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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

Balance Sheet Data:
                                                                          December 31,

                                          2005(1)            2004(2)            2003            2002(3)            2001
                                          -------            -------            ----            -------            ----
Assets
<S>                                   <C>                <C>              <C>               <C>              <C>
Investments and restricted assets     $212,922,000       $183,876,000     $112,006,000      $106,161,000     $ 94,514,000
Cash                                    16,633,000         15,334,000       19,704,000        38,199,000        8,757,000
Receivables                             61,464,000         53,737,000      120,698,000       102,590,000       59,210,000
Other assets                            68,626,000         64,516,000       62,033,000        61,907,000       51,903,000
                                      ------------       ------------     ------------      ------------     ------------
Total assets                          $359,645,000       $317,463,000     $314,441,000      $308,857,000     $214,384,000
                                      ============       ============     ============      ============     ============

Liabilities
Policyholder benefits                 $263,981,000        226,785,000     $220,739,000      $217,895,000     $142,291,000
Notes & contracts payable               10,273,000         12,263,000       16,909,000        18,321,000       11,236,000
Cemetery & mortuary liabilities         10,829,000         10,762,000       10,562,000        10,076,000        9,344,000
Other liabilities                       26,691,000         20,091,000       21,146,000        21,934,000       15,625,000
                                      ------------       ------------    -------------     -------------     ------------
Total liabilities                      311,774,000        269,901,000      269,356,000       268,226,000      178,496,000
                                      ------------       ------------    -------------     -------------     ------------

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

Non-controlling interest
    perpetual care trusts                2,173,000          2,084,000        1,953,000         1,820,000        1,682,000

Stockholders' equity                    45,698,000         41,665,000       39,175,000        34,513,000       29,969,000
                                      ------------       ------------     ------------      ------------     ------------
Total liabilities and
  stockholders' equity                $359,645,000       $317,463,000     $314,441,000      $308,857,000     $214,384,000
                                      ============       ============     ============      ============     ============
</TABLE>


     (1)  Includes  the  purchase  of Memorial  Insurance  Company of America on
          December 29, 2005.
     (2)  Includes the purchase of Paramount  Security Life  Insurance  Company,
          now Security  National Life Insurance  Company of Louisiana,  on March
          16, 2004.
     (3)  Includes the purchase of assets from Acadian Life Insurance Company on
          December 23, 2002.  (4) Earnings per share  amounts have been adjusted
          for the effect of annual stock dividends.
     (4)  Earnings per share amounts have been adjusted for the effect of annual
          stock dividends.


<PAGE>



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,  2005,  SNMC had 21 branches  in ten states.  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 in
Cape Coral,  Florida.  In 2005,  SNMC opened  offices in Kailua,  Hawaii;  Bend,
Oregon;  Midvale, Utah; and Richmond,  Virginia. SNMC originated and sold 12,786
loans  ($2,085,000,000 loan amount),  11,567 loans ($1,781,000,000 loan amount),
and  17,494  loans   ($2,560,000,000  loan  amount)  in  2005,  2004  and  2003,
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 common shares
of SSLIC Holding Company, formerly Consolidare Enterprises, Inc., and Insuradyne
Corporation  for a total cost of  $12,248,194.  At the time the  transaction was
completed,  Consolidare  owned  57.4%  of the  outstanding  shares  of  Southern
Security Life. Following the acquisition of Consolidare,  Security National Life
and  its  wholly  owned  subsidiary,  SSLIC  Holding  Company,  increased  their
ownership  of the  outstanding  shares of  Southern  Security  Life  through the
purchase  of shares  traded on the Nasdaq  SmallCap  Market  and stock  purchase
transactions  with then current  stockholders  of Southern  Security Life. As of
December 31, 2004,  Security  National Life and SSLIC Holding Company held 76.7%
of the outstanding common shares of Southern Security Life.

On January 1, 2005, Security National Life and SSLIC Holding Company completed a
merger  transaction  with Southern  Security Life in which SSLIC Holding Company
was merged with Southern Security Life, which resulted in Southern Security Life
becoming  a  wholly  owned   subsidiary  of  Security   National  Life  and  the
unaffiliated stockholders of Southern Security Life 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,
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 the insurance policies
of Gulf National Life Insurance Company in force and in effect on June 1, 2001.

On March 16, 2004,  Security  National  Life  purchased  all of the  outstanding
common  shares  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

<PAGE>



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 the transaction 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.

On  December  29,  2005,  Security  National  Life and  Southern  Security  Life
purchased all of the outstanding  common shares of Memorial Insurance Company of
America,  an  Arkansas  domiciled  insurance  company  located  in  Blytheville,
Arkansas.  As of  December  31,  2005,  Memorial  Insurance  Company had 116,116
policies in force and approximately 50 agents.  The purchased  consideration was
$13,500,000.

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.


<PAGE>



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,  including  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 interment rights (cemetery burial property) - revenue
and costs  associated with the sales of pre-need  cemetery  interment 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:


<PAGE>



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.


<PAGE>



Unearned Revenue

The universal life products the Company sells have 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 (ten 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

2005 Compared to 2004

Total revenues increased by $12,752,000,  or 10.9%, from $117,198,000 for fiscal
year 2004 to $129,950,000 for fiscal year 2005. Contributing to this increase in
total  revenues was a $9,169,000  increase in mortgage fee income,  a $1,191,000
increase  in  insurance  premium  and  other  considerations,  and a  $3,448,000
increase in net  investment  income.  This  increase was  partially  offset by a
$822,000  decrease in mortuary and cemetery  sales,  and a $234,000  decrease in
other revenues.


<PAGE>



Insurance  premiums  and other  considerations  increased  by  $1,191,000,  from
$25,979,000 in 2004 to  $27,170,000 in 2005.  This increase was primarily due to
the additional insurance premiums that were realized on new insurance sales.

Net  investment  income  increased by  $3,448,000,  from  $15,939,000 in 2004 to
$19,387,000  in 2005.  This  increase was primarily  attributable  to additional
borrower  interest  income from increased  long-term bond purchases and mortgage
loans over the comparable period in 2005.

Net mortuary and cemetery sales decreased by $822,000,  from $11,661,000 in 2004
to $10,839,000 in 2005.  This reduction in mortuary sales was primarily due to a
reduction in pre-need  property  sales and the loss of sales from the  Camelback
Funeral Home as a result of the city of Phoenix  having  commenced  condemnation
proceedings  for purposes of  constructing  a light rail facility on the funeral
home property.

Other revenues decreased by $234,000, from $855,000 in 2004 to $621,000 in 2005.
Other revenue  decreased in 2005 due in part to a one-time  recovery of funds in
2004  from  a  member  of  management  who  made   restitution  of  $111,000  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  increased  by  $9,169,000,  from  $62,690,000  in 2004 to
$71,859,000 in 2005. This increase was primarily  attributable to an increase in
the number of loan  originations  during  2005 due to the opening of new offices
and increased  production from existing  offices,  which resulted in financing a
greater number of mortgage loans.

Total benefits and expenses were  $125,222,000 for 2005, which constituted 96.4%
of the Company's total revenues,  as compared to  $114,539,000,  or 97.7% of the
Company's total revenues for 2004.

During  2005,  there  was  a net  increase  of  $1,115,000  in  death  benefits,
surrenders  and other policy  benefits,  and increase in future policy  benefits
from $23,362,000 in 2004 to $24,477,000 in 2005. This net increase was primarily
the result of an increase in reserves for policyholders.

Amortization  of  deferred  policy and  pre-need  acquisition  costs and cost of
insurance acquired decreased by $1,571,000 from $4,602,000 in 2004 to $3,031,000
in 2005.  This decrease was  primarily due to  recognition  of  improvements  in
persistency.

General and administrative expenses increased by $8,593,000, from $82,097,000 in
2004 to  $90,690,000  in 2005.  Contributing  to this  increase was a $5,117,000
increase in commission expenses, from $48,690,000 in 2004 to $53,807,000 in 2005
due to higher  mortgage  loan  originations  made by  SecurityNational  Mortgage
Company during 2005.  Salaries  increased by $1,325,000 from $14,392,000 in 2004
to  $15,717,000  in 2005,  primarily  due to merit  increases in the salaries of
existing  employees and an increase in the number of employees.  Other  expenses
increased by  $2,151,000,  from  $19,015,000 in 2004 to $21,166,000 in 2005. The
increase   in  other   expenses   primarily   resulted   from   loan   costs  at
SecurityNational  Mortgage  Company  during 2005 due to a greater number of loan
originations.

Interest expense  increased by $2,747,000,  from $2,174,000 in 2004 to $4,921,00
in 2005. This increase was primarily due to the increased use of warehouse lines
of  credit  required  for the  funding  of  mortgage  loans by  SecurityNational
Mortgage Company during 2005.


<PAGE>



Cost of goods and services sold of the mortuaries  and  cemeteries  decreased by
$201,000,  from  $2,304,000 in 2004 to $2,103,000 in 2005. This reduction in the
cost of goods and services sold of the  mortuaries and cemeteries was due to the
reduced costs of at-need merchandise at the Company's  mortuaries and cemeteries
and the loss of sales from the Camelback Funeral Home as a result of the City of
Phoenix having commenced condemnation proceedings for purposes of constructing a
light rail facility on the funeral home property.

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
the inclusion of 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 revenues increased by $305,000, from $550,000 in 2003 to $855,000 in 2004.
Other  revenues  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.


<PAGE>



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  in the  salaries  of
existing  employees and the increase in the number of employees.  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.

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  $96,378,000  as of December  31, 2005
compared to  $81,051,000  as of December 31, 2004.  This  represents  46% of the
total  insurance  related  investments  in  2005  as  compared  to 45% in  2004.
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, 2005, 4%
(or  $3,431,000)  and at December 31, 2004, 2% (or  $1,659,000) 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 (of approximately  $170,845,000)  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        $20,593        $9,444         $(9,982)     $(18,134)
   (in thousands)


<PAGE>



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, 2005
and 2004, the life subsidiaries exceeded the regulatory criteria.

The Company's total  capitalization  of  stockholders'  equity and bank debt and
notes payable was  $55,971,000 and $53,928,000 as of December 31, 2005 and 2004,
respectively.  Stockholders' equity as a percent of total capitalization was 82%
and 77% as of December 31, 2005 and 2004, respectively.

Lapse  rates  measure the amount of  insurance  terminated  during a  particular
period.  The  Company's  lapse  rate for life  insurance  in 2005 was  7.9%,  as
compared to a rate of 9.0% in 2004.

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. Prior to completion of
the  acquisition,  Consolidare  owned 52.4% of the outstanding  shares of common
stock  of  Southern  Security  Life.  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 Southern Security Life to pay, on the closing date, $1,050,000 to
George Pihakis,  the President and Chief Executive  Officer of Southern Security
Life prior to closing,  as a lump sum  settlement of the executive  compensation
agreement between Southern Security Life and Mr. Pihakis.

In connection  with the acquiring of  Consolidare,  the Company  entered into an
Administrative Services Agreement dated December 17, 1998 with Southern Security
Life.  Under the terms of the agreement,  the Company agreed to provide Southern
Security  Life 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,  Southern Security
Life 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  Southern  Security  Life is less than or equal to
$6,000,000,  unless  Southern  Security Life 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 additional  one-year terms expiring December 16, 2004 and 2005. The
agreement may be  automatically  extended for  additional  one-year terms unless
either the Company or Southern  Security Life 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  Southern  Security  Life
provided  written  notice prior to September  30, 2005,  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, 2006.


<PAGE>



On 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.  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,  which resulted in (i) Southern  Security Life
becoming a  wholly-owned  subsidiary  of Security  National  Life,  and (ii) the
unaffiliated  stockholders  of Southern  Security Life,  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, 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 became the surviving corporation of the merger.
Southern  Security  Life  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.  The
Company,  through  its  affiliates,  Security  National  Life and SSLIC  Holding
Company,  owned 76.7% of the  Company's  outstanding  common shares prior to the
merger.

The purpose of the merger was to terminate the  registration of the common stock
of Southern Security Life 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 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.


<PAGE>



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 of the  number of agents  between
December 31, 2003 and March 16, 2004. The purchase  consideration was $4,398,000
and the transaction 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.

On  December  29,  2005,  Security  National  Life and  Southern  Security  Life
purchased all of the outstanding  common shares of Memorial Insurance Company of
America,  an  Arkansas  domiciled  insurance  company  located  in  Blytheville,
Arkansas.  As of  December  31,  2005,  Memorial  Insurance  Company had 116,116
policies in force and  approximately 50 agents.  The purchase  consideration was
$13,500,000.

At December 31, 2005,  $21,818,751 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,


<PAGE>



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, 2005, are approximately
as follows:

                           Years Ending December 31:
                          2006               $580,000
                          2007                296,000
                          2008                225,000
                          2009                130,000
                          2010                 60,000
                                           ----------
                             Total         $1,291,000
                                           ==========

Total rent  expense  related to these  non-cancelable  operating  leases for the
years  ended  December  31,  2005,  2004 and 2003  was  approximately  $828,000,
$734,000 and $396,000, respectively.

Recent Accounting Pronouncements

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 Company will adopt
SFAS  123(R)  using the  modified  prospective  application  approach  effective
January 1,  2006.  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.

In December 2004, the FASB issued SFAS No. 153, Exchange of Non-monetary Assets.
SFAS  No.  153  amends  APB  Opinion  No.  29,   Accounting   for   Non-monetary
Transactions,  to eliminate the exception for non-monetary  exchanges of similar
productive  assets.  The Company  will be required  to apply this  statement  to
non-monetary exchanges after December 31, 2005. The adoption of this standard is
not expected to have a material  effect on the Company's  financial  position or
results of operations.


<PAGE>



In June  2005,  the FASB  issued  SFAS No.  154,  Accounting  Changes  and Error
Corrections,  a replacement of APB Opinion No. 20, Accounting Changes,  and FASB
No. 3, Reporting Accounting Changes in Interim Financial  Statements.  Statement
154 applies to all voluntary  changes in accounting  principle,  and changes the
requirements  for  accounting  for  and  reporting  of a  change  in  accounting
principle.  Statement 154 requires  retrospective  application to prior periods'
financial  statements of a voluntary change in accounting principle unless it is
impracticable.  It is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005.  Earlier  application is
permitted for  accounting  changes and  corrections  of errors made occurring in
fiscal years beginning after June 1, 2005. The Company expects that the adoption
of SFAS 154 will not have a material impact on its financial statements.

In June 2005, the FASB Emerging  Issues Task Force ("EITF")  reached a consensus
on  Issue  No.  05-6,   Determining  the   Amortization   Period  for  Leasehold
Improvements.  The guidance requires that leasehold  improvements  acquired in a
business  combination  or purchased  subsequent  to the  inception of a lease be
amortized  over the  lesser  of the  useful  life of the  assets  or a term that
includes  renewals  that are  reasonably  assured  at the  date of the  business
combination or purchase.  The guidance is effective for periods  beginning after
June 29, 2005.  The adoption of EITF No. 05-6 is not expected to have a material
effect on the Company's financial position or results of operations.

In September  2005, the AICPA issued  Statement of Position 05-1,  Accounting by
Insurance  Enterprises for Deferred Acquisition Costs ("DAC") in Connection with
Modifications  or Exchanges  of  Insurance  Contracts,  ("SOP  05-1").  SOP 05-1
provides  guidance on  accounting by insurance  enterprises  for DAC on internal
replacements of insurance and investment contracts. An internal replacement is a
modification in product benefits,  features,  rights or coverages that occurs by
the exchange of a contract for a new contract, or by amendment,  endorsement, or
rider to a  contract,  or by the  election  of a feature  or  coverage  within a
contract.   Modifications  that  result  in  a  replacement   contract  that  is
substantially  changed from the replaced  contract should be accounted for as an
extinguishment  of the replaced  contract.  Unamortized  DAC,  unearned  revenue
liabilities and deferred sales  inducements  from the replaced  contract must be
written-off.  Modifications  that  result in a  contract  that is  substantially
unchanged from the replaced  contract  should be accounted for as a continuation
of the  replaced  contract.  SOP 05-1 is  effective  for  internal  replacements
occurring  in fiscal years  beginning  after  December  15,  2006,  with earlier
adoption  encouraged.  Initial  application  of  SOP  05-1  should  be as of the
beginning of the entity's fiscal year. The Company is expected to adopt SOP 05-1
effective  January 1, 2007.  Adoption of this  statement  is expected to have an
impact on the Company's consolidated  financial statements;  however, the impact
has not yet been determined.

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 10-K.
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.


<PAGE>
<TABLE>
<CAPTION>



Item 8.  Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                       Page No.

Financial Statements:

<S>                                                                     <C>
    Report of Independent Registered Public Accounting Firm
    Hansen, Barnett & Maxwell.............................................37

    Report of Independent Registered Public Accounting Firm
    Tanner LC.............................................................38

    Consolidated Balance Sheets, December 31,
    2005 and 2004.........................................................39

    Consolidated Statements of Earnings,
    Years Ended December 31, 2005, 2004,
    and 2003..............................................................41

    Consolidated Statements of Stockholders'
    Equity, Years Ended December 31, 2005, 2004
    and 2003. ............................................................42

    Consolidated Statements of Cash Flows,
    Years Ended December 31, 2005, 2004 and
    2003    ..............................................................43

    Notes to Consolidated Financial Statements............................45


<PAGE>
</TABLE>



        HANSEN, BARNETT & MAXWELL          Registered with the Public Company
       A Professional Corporation             Accounting Oversight Board
       CERTIFIED PUBLIC ACCOUNTANTS
                   AND
           BUSINESS CONSULTANTS
         5 Triad Center, Suite 750
       Salt Lake City, UT 84180-1128
           Phone: (801) 532-2200
            Fax: (801) 532-7944
              www.hbmcpas.com


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Security National Financial Corporation

We have audited the accompanying consolidated balance sheet of Security National
Financial  Corporation and subsidiaries as of December 31, 2005, and the related
consolidated  statements of earnings,  stockholders'  equity, and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  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 financial statement presentation.
We believe that our audit provides 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,
2005, and the consolidated  results of their operations and their cash flows for
the year in the period ended  December 31, 2005, 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.


                            HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah
March 23, 2006


<PAGE>


                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM






To the Board of Directors and Stockholders
Security National Financial Corporation
Salt Lake City, Utah

We have audited the accompanying consolidated balance sheet of Security National
Financial  Corporation and subsidiaries as of December 31, 2004, and the related
consolidated  statements of earnings,  stockholders'  equity, and cash flows for
the years ended December 31, 2004 and 2003. In connection with our audits of the
consolidated  financial  statements,  we have  also  audited  the  2004 and 2003
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 the consolidated  results of their operations and their cash flows for
the years  ended  December  31, 2004 and 2003,  in  conformity  with  accounting
principles  generally  accepted in the United  States of America.  Also,  in our
opinion,  the related  consolidated  financial  statement schedules for 2004 and
2003, 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


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                                                             December 31,
Assets:                                                  2005           2004
-------                                                  ----           ----
Insurance-related investments:
Fixed maturity securities
  held to maturity, at amortized cost                $89,780,942    $69,984,761
Fixed maturity securities, available
  for sale, at estimated fair value                    6,597,161     11,066,025
Equity securities, available for sale,
  at estimated fair value                             12,346,939      4,166,769
Mortgage loans on real estate and construction
  loans, net of allowances for losses of
  $240,000 and $254,893 for 2005 and 2004             72,793,811     65,831,586
Real estate, net of accumulated
  depreciation and allowances for
  losses of $4,784,979 and $4,408,030
  for 2005 and 2004                                   10,559,887      9,709,129
Policy, student and other loans net of allowance
  for doubtful accounts of $339,218
  and $140,580 for 2005 and 2004                      12,391,569     13,312,471
Short-term investments                                 3,211,590      4,628,999
                                                     -----------   ------------
     Total insurance-related investments             207,681,899    178,699,740
                                                    ------------   ------------
Restricted assets of cemeteries and mortuaries         5,240,099      5,176,463
                                                    ------------   ------------
Cash and cash equivalents                             16,632,966     15,333,668
                                                    ------------   ------------
Receivables:
  Trade contracts                                      5,733,142      5,333,891
  Mortgage loans sold to investors                    53,970,231     47,167,150
  Receivable from agents                               1,992,877      1,416,211
  Receivable from officers                                 --             1,540
  Other                                                  958,851      1,120,157
                                                    ------------    -----------
     Total receivables                                62,655,101     55,038,949
  Allowance for loan losses and
     doubtful accounts                                (1,191,106)    (1,302,368)
                                                    ------------   -------------
  Net receivables                                     61,463,995     53,736,581
                                                    ------------   -------------
Policyholder accounts on deposit
  with reinsurer                                       6,572,756      6,689,422
Cemetery land and improvements held for sale           8,498,227      8,547,764
Accrued investment income                              2,197,576      1,743,721
Deferred policy and pre-need
  contract acquisition costs                          24,048,638     20,181,818
Property and equipment, net                           11,199,788     10,520,665
Cost of insurance acquired                            12,663,221     14,053,497
Cemetery perpetual care trust investments              1,152,493        989,239
Goodwill                                                 683,191        683,191
Other                                                  1,610,624      1,107,230
                                                    ------------   ------------
     Total assets                                   $359,645,473   $317,462,999
                                                    =============  =============

See accompanying notes to consolidated financial statements.


<PAGE>


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

                                                            December 31,
                                                        2005           2004
                                                        ----           ----
Liabilities:
Future life, annuity, and other benefits          $260,822,803     $224,529,539
Unearned premium reserve                             3,157,918        2,254,991
Bank loans payable                                   8,946,321       10,442,106
Notes and contracts payable                          1,326,284        1,820,615
Deferred pre-need cemetery and mortuary
  contract revenues                                 10,828,994       10,762,357
Accounts payable                                     1,533,065        1,064,269
Funds held under reinsurance treaties                1,129,747        1,184,463
Other liabilities and accrued expenses               9,427,644        6,344,756
Income taxes                                        14,601,029       11,497,967
                                                  ------------     ------------
     Total liabilities                             311,773,805      269,901,063
                                                  ------------     ------------

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

Minority interest                                      --             3,813,346
                                                  ------------     ------------
Non-controlling interest in
   perpetual care trusts                            2,173,250         2,083,750
                                                  -----------      ------------

Stockholders' Equity:
Common stock:
  Class A: $2.00 par value, authorized
     10,000,000 shares, issued 7,098,363
     shares in 2005 and 6,755,870 shares
     in 2004                                       14,196,726       13,511,740
  Class C:  convertible, $0.20 par value,
     authorized 7,500,000 shares, issued
     6,781,060 shares in 2005 and 6,468,199
     shares in 2004                                 1,356,212        1,293,641
                                                 ------------     ------------
     Total common stock                            15,552,938       14,805,381
Additional paid-in capital                         15,650,344       14,922,851
Accumulated other comprehensive income
  (loss) and other items, net of deferred
   taxes of $411,286 and $369,879 for 2005
   and 2004, respectively                             117,647          (11,352)
Retained earnings                                  17,460,024       15,365,259
Treasury stock at cost (1,251,104
   Class A shares and 138,138 Class C
   shares in 2005; 1,315,075 Class A
   shares and 79,103 Class C shares in 2004,
   held by affiliated companies)                   (3,082,535)      (3,417,299)
                                                 ------------     ------------
     Total stockholders' equity                    45,698,418       41,664,840
                                                 ------------     ------------
         Total liabilities and
           stockholders' equity                  $359,645,473     $317,462,999
                                                 ============     ============

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                       Consolidated Statements of Earnings


                                                           Years Ended December 31,
                                                           ------------------------
                                                    2005            2004              2003
                                                    ----            ----              ----
Revenues:
<S>                                             <C>              <C>              <C>
Insurance premiums and other considerations    $ 27,170,109     $ 25,979,341     $ 23,294,373
Net investment income                            19,386,571       15,939,176       17,302,597
Net cemetery and mortuary sales                  10,838,878       11,661,053       10,944,365
Realized gains (losses) on investments
  and other assets                                   74,246           74,431           (2,155)
Mortgage fee income                              71,859,272       62,689,391       92,955,165
Other                                               620,751          854,425          550,064
                                               ------------     ------------     ------------
  Total revenues                                129,949,827      117,197,817      145,044,409
                                               ------------     ------------     ------------

Benefits and expenses:
Death benefits                                   13,250,080       13,248,960       13,315,266
Surrenders and other policy benefits              1,484,284        1,291,621        1,726,275
Increase in future policy benefits                9,742,218        8,821,497        6,712,961
Amortization of deferred
  policy and pre-need acquisition
  costs and cost of insurance acquired            3,030,734        4,602,072        4,929,006
General and administrative expenses:
  Commissions                                    53,807,368       48,690,807       67,536,703
  Salaries                                       15,716,813       14,391,958       14,079,908
  Other                                          21,166,024       19,014,776       21,309,897
Interest expense                                  4,921,238        2,173,778        3,642,046
Cost of goods and services sold of the
  mortuaries and cemeteries                       2,103,432        2,303,821        2,327,475
                                               ------------     ------------     ------------

  Total benefits and expenses                   125,222,191      114,539,290      135,579,537
                                               ------------     ------------     ------------

Earnings before income taxes                      4,727,636        2,658,527        9,464,872
Income tax expense                               (1,239,756)        (651,536)      (2,890,669)
Minority interest                                        --          115,281           22,294
                                               ------------     ------------     ------------
  Net earnings                                 $  3,487,880     $  2,122,272     $  6,596,497
                                               ============     ============     ============

Net basic earnings per common share (1)                $.54             $.34            $1.07
                                                       ====             ====            =====

  Weighted average
    outstanding common shares (1)                 6,450,057        6,311,974        6,161,927

Net earnings per common share
  assuming dilution (1)                                $.54             $.32            $1.04
                                                       ====             ====            =====

  Weighted average outstanding common
    shares assuming dilution (1)                  6,480,016        6,538,869        6,321,484
</TABLE>

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

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


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

                                                                            Accumulated
                                                                               Other
                                                             Additional    Comprehensive
                                    Class         Class      Paid-in      Income (loss), Retained     Treasury
                                      A             C        Capital    and Other Items  Earnings       Stock         Total
                                  -------        -------    ----------  ---------------  --------    ---------        -----
<S>                            <C>            <C>          <C>           <C>            <C>         <C>           <C>
Balance as of January 1, 2003  $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 gai ns                 --            --            --            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
                               -----------   ----------    -----------   ------------  -----------   ----------    ----------

Comprehensive income:
  Net earnings                     --            --              --            --         3,487,880       --         3,487,880
  Unrealized gains                 --            --              --           128,999         --          --           128,999
                                                                                                                   -----------
Total comprehensive income         --            --              --            --             --          --         3,616,879
                                                                                                                    ----------
Exercise of stock options            6,892       --             3,926          --            (8,084)      --             2,734
Purchase of Treasury stock         --            --              --            --             --          --             --
Sale of Treasury stock             --            --            79,201          --             --        334,764        413,965
Stock dividends                    676,084       64,581       644,366          --        (1,385,031)      --              --
Conversion Class C to Class A        2,010       (2,010)         --            --             --          --              --
                               -----------   ----------   -----------       --------    ----------- -----------    -----------
Balance at December 31, 2005   $14,196,726   $1,356,212   $15,650,344       $117,647    $17,460,024 $(3,082,535)   $45,698,418
                               ===========   ==========   ===========       ========    =========== ===========    ===========
</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

                                                                        Years Ended December 31,
                                                                        ------------------------
                                                                   2005            2004           2003
                                                                   ----            ----           ----
Cash flows from operating activities:
<S>                                                             <C>             <C>             <C>
     Net earnings                                               $3,487,880      $2,122,272      $6,596,497
     Adjustments to reconcile net earnings
       to net cash provided by (used in) operating
      activities:
          Realized (gains) losses on investments
               and other assets                                     (74,246)        (74,431)          2,155
          Depreciation                                            2,094,022       2,013,113       1,866,924
          Provision for losses on real estate
              accounts and loans receivable                          87,376        (165,781)        225,072
          Amortization of premiums and discounts                     36,637          (2,489)         44,092
          Provision for deferred income taxes                       862,024         636,430       2,862,343
          Policy and pre-need acquisition costs deferred         (6,499,180)     (6,051,793)     (4,527,546)
          Policy and pre-need acquisition costs amortized         1,667,813       3,370,763       3,611,674
          Cost of insurance acquired amortized                    1,097,609       1,231,308       1,317,332
     Change in assets and liabilities net of effects
       from purchases and disposals of subsidiaries:
          Land and improvements held for sale                        49,537        (160,703)         42,154
          Future life and other benefits                         10,824,347       9,000,715       7,426,761
          Receivables for mortgage loans sold                    (6,803,081)     67,621,035     (25,333,080)
          Other operating assets and liabilities                  1,771,798      (2,609,762)      3,434,187
                                                                -----------    ------------    ------------
              Net cash provided by (used in)
              operating activities                                8,602,536      76,930,677      (2,431,435)
                                                                -----------    ------------    ------------
Cash flows from investing activities:
     Securities held to maturity:
          Purchase - fixed maturity securities                   (5,984,347)    (37,371,166)    (15,396,993)
          Calls and maturities - fixed maturity securities        7,781,126       6,293,614      11,147,744
     Securities available for sale:
          Purchases - equity securities                            (139,383)        (21,993)        (51,921)
          Sales - equity securities                               4,183,108       2,675,301       3,860,000
     Purchases of short-term investments                        (13,700,353)    (29,893,323)    (19,065,874)
     Sales of short-term investments                             15,117,762      26,731,711      22,347,104
     Purchases of restricted assets                                 (57,453)       (262,195)        610,155
     Purchase of assets for perpetual care trusts                  (163,254)        (31,959)       (161,898)
     Amount received for perpetual care trusts                       89,500         130,660         132,750
     Mortgage, policy, and other loans made                     (76,034,805)    (78,437,965)    (30,192,467)
     Payments received for mortgage, policy, and
          other loans                                            69,804,347      41,116,662      20,479,056
     Purchases of propert and equipment                          (2,236,732)     (1,241,898)     (1,623,310)
     Cash received from sale of property and equipment                --         149,040              --
     Purchases of real estate                                    (5,138,795)     (1,856,931)     (1,807,658)
     Cash (paid) received for purchase of subsidiary              1,722,238        (304,042)          --
     Sale of real estate                                          3,898,980         352,054       2,287,831
                                                               ------------    ------------    ------------
         Net cash used in investing activities                     (858,061)    (71,972,430)     (7,435,481)
                                                               ------------    ------------    ------------
</TABLE>





See accompanying notes to the consolidated financial statements.




<PAGE>
<TABLE>
<CAPTION>


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

                                                                        Years Ended December 31,
                                                                        ------------------------
                                                                   2005            2004           2003
                                                                   ----            ----           ----
<S>                                                         <C>              <C>              <C>
Cash flows from financing activities:
     Annuity contract receipts                                 5,547,795       5,387,393       5,785,310
     Annuity contract withdrawals                             (9,655,951)    (10,276,576)    (10,410,247)
     Repayment of bank loans and notes and
        contracts payable                                     (2,463,116)     (4,379,949)     (3,698,189)
     Proceeds from borrowing on notes and contracts              672,439              --              --
     Purchase of minority shareholder stock of subsidiary       (960,309)             --              --
     Stock options exercised                                          --              --         133,000
     Purchase of treasury stock                                       --        (422,946)       (437,641)
     Sale of treasury stock                                      413,965         363,141              --
                                                            ------------    ------------    ------------
     Net cash used in financing activities                    (6,445,177)     (9,328,937)     (8,627,767)
                                                            ------------    ------------    ------------
Net change in cash and cash equivalents                        1,299,298      (4,370,690)    (18,494,683)
                                                            ------------    ------------    ------------
Cash and cash equivalents at beginning of year                15,333,668      19,704,358      38,199,041
                                                            ------------    ------------    ------------
Cash and cash equivalents at end of year                     $16,632,966     $15,333,668     $19,704,358
                                                            ============    ============    ============
</TABLE>

Supplemental Schedule of Cash Flow Information:

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 and Memorial Insurance Company of America on December 29, 2005:

                                                  2005            2004
                                                  ----            ----
  Liabilities assumed:
      Future life, annuity and other
        policy benefits                       $30,326,086      $1,865,038
      Policy and contract claims                  171,526           --
      Unearned premiums                            61,901           --
      Other liabilities                           184,390           --
      Deferred income taxes                     1,928,137           --
  Less non-cash items
      Cost of insurance acquired                 (251,086)       (304,042)
      Bonds received                          (20,865,718)     (1,537,801)
      Common stock received                    (8,130,046)       (326,325)
      Redeemable preferred stock                 (821,077)          --
      Mortgage loans received                       --           (471,593)
      Real estate received                          --            (32,668)
      Policy loans received                       (34,575)        (28,180)
      Short-term investments                        --            586,601
      Receivables                                (388,374)        (13,589)
      Accrued investment income                  (302,923)        (24,983)
      Property, plant and equipment              (156,003)        (16,500)
                                              -----------     -----------
      Cash (paid) received                    $ 1,722,238     $  (304,042)
                                              ===========     ===========

See accompanying notes to the consolidated financial statements.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003



1)  Significant Accounting Policies

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, Alabama, Arkansas, California,  Florida, Georgia, Louisiana,
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,  Hawaii,
Nevada, Oregon, Texas, Utah, and Virginia.

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 2005 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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


1) Significant Accounting Policies (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

These  consolidated  financial  statements  include the  financial  statement of
Security National Financial Corporation and its majority owned subsidiaries. All
intercompany  transactions  and accounts have been  eliminated in  consolidation
except for restricted  assets of cemeteries and mortuaries  that are invested in
participations  in mortgage  loans payable by Security  National  Life, a wholly
owned subsidiary.

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

Investments

The  Company's   management   determines  the  appropriate   classifications  of
investments  in  fixed  maturity   securities  and  equity   securities  at  the
acquisition  date and  re-evaluates  the  classifications  at each balance sheet
date.

Held-to-maturity  investments  are carried at  amortized  cost,  reflecting  the
Company's   intent   and   ability   to  hold  the   securities   to   maturity.
Available-for-sale  securities  are  stated at  estimated  fair  value  with net
unrealized  gains  or  losses  reported  as a  component  of  accumulated  other
comprehensive income.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

1) Significant Accounting Policies (Continued)

Investment  gains and losses arise when investments are sold (as determined on a
specific  identification  basis) or are  other-than-temporarily  impaired. If in
management's  judgment  a decline  in the value of an  investment  below cost is
other than  temporary,  the cost of the investment is written down to fair value
with a corresponding  charge to earnings.  Factors considered in judging whether
an impairment is other than temporary include: the financial condition, business
prospects and creditworthiness of the issuer, the length of time that fair value
has been less than cost, the relative  amount of the decline,  and the Company's
ability and intent to hold the investment until the fair value recovers.

Fixed  maturity  securities  held to maturity are carried 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 are carried 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 are carried at unpaid principal balances, adjusted
for  amortization  of premium or  accretion  of  discount,  less  allowance  for
possible losses.

Real  estate is carried at cost,  less  accumulated  depreciation  provided on a
straight-line  basis over the estimated  useful lives of the  properties,  or is
adjusted to a new basis from impairment in value, if any.

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

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

Restricted  assets of  cemeteries  and  mortuaries  are  assets  held in a 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 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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


1) Significant Accounting Policies (Continued)

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) are recognized when earned and 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  impact  recovery  of the  cemetery  and
mortuary  receivables is the overall  economy.  The critical  issues that impact
recovery  of  mortgage  loan  operations  would be  interest  rate risk and loan
underwriting.

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

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


1) Significant Accounting Policies (Continued)

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.  Increases  in future  policy  benefits are charged to
expense.

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  constituted  3%, 2%, and 2% of  insurance  in force for
2005, 2004 and 2003,  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 to 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  contract  sales of funeral  services  and  caskets - revenue and costs
associated with the sales of pre-need  funeral services and caskets are deferred
until the services are performed or the caskets are delivered.
<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

1) Significant Accounting Policies (Continued)

Sales of cemetery  interment  rights  (cemetery  burial  property) - revenue and
costs  associated with the sale of cemetery  interment  rights are recognized in
accordance  with the retail land sales  provisions  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 sale of  unconstructed  cemetery
property is deferred  until such  property  has been  constructed  and meets the
criteria of FAS No. 66 described above.

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

Pre-need contract sales of cemetery services  (primarily  merchandise  delivery,
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  acquisition costs - costs
incurred  related to obtaining new pre-need  contract  cemetery and  prearranged
funeral  services  are  accounted  for under the guidance of the  provisions  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 services, are deferred until the merchandise is
delivered or services are performed.

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

The Company,  through its mortuary and cemetery operations,  provides guaranteed
funeral arrangements 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  origination  of mortgages.  For mortgages  sold to
third party  investors,  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.   Certain  loans  funded  are   transferred  to  unrelated   financial
institutions  under purchase  commitments.  All rights and title to the mortgage
loans are  assigned  to the  unrelated  financial  institutions,  including  any
investor commitments for these loans prior to their purchasing these loans under
the  purchase  commitments.  These are sold with  recourse to the  Company.  The
Company has commitment agreements from these financial  institutions whereby the
financial  institutions  have agreed to purchase  mortgage  loans and hold up to
$180,000,000 of mortgage  loans, as of December 31, 2005,  until these loans are
purchased by third party  investors.  As of December 31,  2005,  mortgage  loans
totaling   $122,762,000   have  been  sold  and  were  outstanding  under  these
commitments.

<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


1) Significant Accounting Policies (Continued)

The majority of loans originated are sold to third party investors.  Receivables
for mortgages 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  allowance for loan losses.  The estimates are
based upon historical experience and best estimate of future losses. At December
31,  2005 and 2004 the  reserve  for loan  losses  was  $538,000  and  $557,000,
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. At
December 31, 2005 and 2004 the reserve for future loan losses was $2,183,000 and
$1,432,000, respectively.

Goodwill

Previous  acquisitions  have been accounted for as purchases  under which assets
acquired and  liabilities  assumed  were  recorded at their fair values with the
excess purchase price recognized as goodwill.  The Company evaluates annually or
when  changes in  circumstances  warrant the  recoverability  of goodwill and if
there is a decrease in value the related  impairment  is  recognized as a charge
against income.

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.  Deferred tax
assets  and  liabilities   are  recognized  for  the  future  tax   consequences
attributable to the temporary  differences in the financial  reporting basis and
tax basis of assets and liabilities and operating loss carry-forwards.  Deferred
tax assets are  measured  using  enacted tax rates  expected to apply to taxable
income in the years in which  these  temporary  differences  are  expected to be
recovered or settled.

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 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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


1) Significant Accounting Policies (Continued)

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 earning and basic
and diluted earnings per share would have been reduced as follows:

                                                Years Ended December 31,
                                           2005         2004            2003
                                           ----         ----            ----

Net earnings, as reported              $3,487,880    $2,122,272    $6,596,497
Total stock-based employee
  compensation recognized                  --            --            --
Total stock-based employee compensation
  expense determined under fair value
  based method for all awards            (676,920)   (1,090,458)     (490,145)
                                       ----------   -----------   -----------

Pro forma net earnings                 $2,810,960    $1,031,814    $6,106,352
                                       ==========    ==========    ==========

Basic earnings per share, as reported       $0.54         $0.34         $1.07
Diluted earnings per share as reported      $0.54         $0.32         $1.04

Basic earnings per share, pro forma         $0.44         $0.16         $0.99
Diluted earnings per share, pro forma       $0.44         $0.14         $0.96

The weighted  average fair value of options  granted in 2005 under the 2003 Plan
is  estimated   at  $1.92  as  of  the  grant  date  using  the  Black   Scholes
option-pricing  model  with the  following  assumptions:  dividend  yield of 5%,
volatility of 39%, risk-free interest rate of 3.4%, and an expected life of five
to ten years.

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 36%,  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 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 this plan 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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


1) Significant Accounting Policies (Continued)

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.

Recent Accounting Pronouncements

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 Company will adopt
SFAS  123(R)  using the  modified  prospective  application  approach  effective
January 1, 2006.  Implementation  of SFAS 123(R) will likely have a  significant
impact on the Company's  consolidated financial statements in future periods and
any  future  stock  options  granted  could  have a  significant  impact  on the
Company's consolidated financial statements.

In December 2004, the FASB issued SFAS No. 153, Exchange of Non-monetary Assets.
SFAS  No.  153  amends  APB  Opinion  No.  29,   Accounting   for   Non-monetary
Transactions,  to eliminate the exception for non-monetary  exchanges of similar
productive  assets.  The Company  will be required  to apply this  statement  to
non-monetary exchanges after December 31, 2005. The adoption of this standard is
not expected to have a material  effect on the Company's  financial  position or
results of operations.

In June  2005,  the FASB  issued  SFAS No.  154,  Accounting  Changes  and Error
Corrections,  a replacement of APB Opinion No. 20, Accounting Changes,  and FASB
No. 3, Reporting Accounting Changes in Interim Financial  Statements.  Statement
154 applies to all voluntary  changes in accounting  principle,  and changes the
requirements  for  accounting  for  and  reporting  of a  change  in  accounting
principle.  Statement 154 requires  retrospective  application to prior periods'
financial  statements of a voluntary change in accounting principle unless it is
impracticable.  It is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005.  Earlier  application is
permitted for  accounting  changes and  corrections  of errors made occurring in
fiscal years beginning after June 1, 2005. The Company expects that the adoption
of SFAS 154 will not have a material impact on its financial statements.

In June 2005, the FASB Emerging  Issues Task Force ("EITF")  reached a consensus
on  Issue  No.  05-6,   Determining  the   Amortization   Period  for  Leasehold
Improvements.  The guidance requires that leasehold  improvements  acquired in a
business  combination  or purchased  subsequent  to the  inception of a lease be
amortized  over the  lesser  of the  useful  life of the  assets  or a term that
includes  renewals  that are  reasonably  assured  at the  date of the  business
combination or purchase.  The guidance is effective for periods  beginning after
June 29, 2005.  The adoption of EITF No. 05-6 is not expected to have a material
effect on the Company's financial position or results of operations.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


1) Significant Accounting Policies (Continued)

In September  2005, the AICPA issued  Statement of Position 05-1,  Accounting by
Insurance  Enterprises for Deferred Acquisition Costs ("DAC") in Connection with
Modifications  or Exchanges  of  Insurance  Contracts,  ("SOP  05-1").  SOP 05-1
provides  guidance on  accounting by insurance  enterprises  for DAC on internal
replacements of insurance and investment contracts. An internal replacement is a
modification in product benefits,  features,  rights or coverages that occurs by
the exchange of a contract for a new contract, or by amendment,  endorsement, or
rider to a  contract,  or by the  election  of a feature  or  coverage  within a
contract.   Modifications  that  result  in  a  replacement   contract  that  is
substantially  changed from the replaced  contract should be accounted for as an
extinguishment  of the replaced  contract.  Unamortized  DAC,  unearned  revenue
liabilities and deferred sales  inducements  from the replaced  contract must be
written-off.  Modifications  that  result in a  contract  that is  substantially
unchanged from the replaced  contract  should be accounted for as a continuation
of the  replaced  contract.  SOP 05-1 is  effective  for  internal  replacements
occurring  in fiscal years  beginning  after  December  15,  2006,  with earlier
adoption  encouraged.  Initial  application  of  SOP  05-1  should  be as of the
beginning of the entity's fiscal year. The Company is expected to adopt SOP 05-1
effective  January 1, 2007.  Adoption of this  statement  is expected to have an
impact on the Company's consolidated  financial statements;  however, the impact
has not yet been determined.

2)  Acquisitions

Southern Security Life

As of December  31,  2004,  the  Company's  wholly  owned  subsidiary,  Security
National Life Insurance Company ("Security National Life"), and its wholly owned
subsidiary,  SSLIC Holding, owned approximately 77% of the outstanding shares of
common stock of Southern Security Life.

On January 1, 2005, Security National Life and SSLIC Holding Company completed a
merger  transaction  with Southern  Security Life. 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,  ("Southern
Security Life"),  which resulted in (i) Southern Security Life becoming a wholly
owned   subsidiary  of  Security   National  Life,  and  (ii)  the  unaffiliated
stockholders of Southern  Security Life,  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,  or an
aggregate  of  $1,884,733,  which  was  primarily  paid  to  those  unaffiliated
stockholders during 2005.

As a result of the merger,  the  separate  existence  of SSLIC  Holding  Company
ceased as Southern Security Life became the surviving corporation of the merger.
Southern  Security  Life  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.

The purpose of the merger was 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

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

2)  Acquisitions (Continued)

with such registration and listing,  and provide the stockholders an opportunity
to sell their shares in an illiquid trading market without  incurring  brokerage
commissions.

Paramount Security Life Insurance Company

On March 16, 2004,  Security  National Life completed the purchase of 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 total purchase  consideration
was $4,398,000 and the transaction 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.

Memorial Insurance Company of America

On  December  29,  2005,  Security  National  Life and  Southern  Security  Life
completed  a stock  purchase  transaction  with  Memorial  Insurance  Company of
America, an Arkansas domiciled insurance company ("Memorial Insurance Company"),
to purchase all of the outstanding  shares of common stock of Memorial Insurance
Company.  Under the  terms of the  transaction,  the  shareholders  of  Memorial
Insurance Company received a total purchase consideration of $13,500,000 for all
of the  outstanding  common  shares of  Memorial  Insurance  Company,  with each
shareholder having received a pro rata share of the total amount of the purchase
consideration based upon the number of shares such shareholder owns.

The shareholders of Memorial Insurance Company received payment for their shares
by means of  distributions,  with Security  National Life and Southern  Security
Life  simultaneously  contributing  sufficient  capital  and surplus to Memorial
Insurance Company to maintain its status as an admitted insurer in good standing
in the state of  Arkansas.  The  transaction  is to be treated,  for federal and
state tax purposes,  as a part sale, part  redemption of the Memorial  Insurance
Company stock. At the closing of the  transaction,  the shareholders of Memorial
Insurance  Company sold all of their shares of Memorial  Insurance Company stock
to  Southern  Security  Life,  such  shares  representing  all of the issued and
outstanding stock of Memorial Insurance Company. As a result, Memorial Insurance
Company became a wholly owned subsidiary of Southern Security Life.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


2)  Acquisitions (Continued)

The unaudited consolidated pro forma results of operations assuming consummation
of the  purchase  of  Memorial  Insurance  Company as of  January  1, 2004,  are
summarized as follows:

                                        Unaudited Pro Forma
                                      Years Ended December 31,
                                       2005             2004
                                       ----             ----
                               in thousands except earnings per share
         Total revenue              $133,609          $122,000
         Net earnings                  4,325             4,283
         Basic earnings per share       $.67              $.68
         Diluted earnings per share     $.67              $.66

The following  table  summarizes the estimated fair value of the assets acquired
and  liabilities  assumed at the date of acquisition  of Security  National Life
Insurance Company of Louisiana on March 16, 2004 and Memorial  Insurance Company
of America on December 29, 2005:

                                                     2005           2004
                                                     ----           ----
Assets:
  Cash received                                  $1,722,238    $     --
  Cost of insurance acquired                        251,086         304,042
  Investments                                    29,816,841       1,864,126
  Mortgage loans                                      --            471,593
  Real estate                                         --             32,668
  Policy loans                                       34,575          28,180
  Receivables                                       388,374          13,589
  Accrued investment income                         302,923          24,983
  Property and equipment                            156,003          16,500
                                                -----------     -----------
    Total assets acquired                        32,672,040       2,755,681
                                                -----------     -----------

Liabilities:
  Future life, annuity and other benefits        30,326,086       1,865,038
  Other liabilities                                 417,817         586,601
  Deferred income taxes                           1,928,137              --
                                                -----------     -----------
    Total liabilities assumed                    32,672,040       2,451,639
                                                -----------     -----------

Net assets acquired                             $   --          $   304,042
                                                ===========     ===========



<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

3)  Investments

The Company's  investments  in fixed  maturity  securities  held to maturity and
equity  securities  available for sale as of December 31, 2005 are summarized as
follows:
<TABLE>
<CAPTION>


                                                                    Gross             Gross          Estimated
                                                 Amortized        Unrealized        Unrealized          Fair
                                                   Cost              Gains            Losses           Value
                                                 --------          ---------        ----------       ---------
December 31, 2005:
Fixed maturity securities held to maturity
   carried at amortized cost:
   Bonds:
<S>                                            <C>                   <C>            <C>              <C>
     U.S. Treasury securities
           and obligations of U.S
           Government agencies                  $15,135,496          $161,384       $(185,916)         $15,110,964

     Obligations of states and
           political subdivisions                 1,276,511            24,143          (3,335)           1,297,319

     Corporate securities including
           public utilities                      70,022,086         1,945,973        (420,407)          71,547,652

     Mortgage-backed securities                   2,497,872            24,543        (136,089)           2,386,326

   Redeemable preferred stock                       848,977            22,688          --                  871,665
                                               ------------        ----------       ---------          -----------
     Total fixed maturity
         securities held to maturity           $ 89,780,942        $2,178,731       $(745,747)         $91,213,926
                                               ============        ==========       =========          ===========

Securities available for sale carried
   at estimated fair value:
   Fixed maturity securities available
     for sale:
       U.S. Treasury securities and
          obligations of U.S. Government
          agencies                            $    597,399       $    35,315     $      --            $   632,714

     Corporate securities including
           public utilities                      5,846,721           122,715          (4,989)           5,964,447
                                              ------------        ----------      ----------          -----------
     Total fixed maturity securities
         available for sale                    $ 6,444,120        $  158,030      $   (4,989)         $ 6,597,161
                                               ===========        ==========      ==========          ===========
</TABLE>


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

3)  Investments (Continued)
<TABLE>
<CAPTION>

                                                                            Gross             Gross         Estimated
                                                          Amortized      Unrealized        Unrealized         Fair
                                                            Cost            Gains            Losses          Value
                                                          --------       ----------        ----------      ---------
December 31, 2005:

Equity securities available for sale:

<S>                                                      <C>              <C>            <C>            <C>
   Non-redeemable preferred stock                        $   37,781       $  21,125      $   (3,436)    $    55,470

   Common stock:

     Public utilities                                      1,533,349         262,451        (15,357)      1,780,443
     Banks, trusts and insurance companies                   520,684         604,681        (12,915)      1,112,450
     Industrial, miscellaneous and all other               8,080,838       1,801,463       (483,725)      9,398,576
                                                         -----------      ----------     ----------     -----------

Total equity securities available for sale               $10,172,652      $2,689,720     $ (515,433)    $12,346,939
                                                         ===========      ==========     ==========     ===========

      Total securities available for sale
            carried at estimated fair value              $16,616,772      $2,847,750     $ (520,422)    $18,944,100
                                                         ===========      ==========     ==========     ===========

Mortgage loans on real estate and construction loans:
   Residential                                           $11,121,810
   Residential construction                               17,278,209
   Commercial                                             43,504,500
   Commercial construction                                 1,129,292
   Allowance for bad debts                                  (240,000)
                                                         -----------
Total mortgage loans on real estate
     and construction loans                              $72,793,811
                                                         ===========

Real estate                                              $10,559,887
                                                         ===========
Policy, student and other loans                          $12,391,569
                                                         ===========

Short-term investments                                    $3,211,590
                                                         ===========
</TABLE>






<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

3)  Investments (Continued)
<TABLE>
<CAPTION>

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
   at amortized cost:
   Bonds:
<S>                                              <C>             <C>                <C>         <C>
     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 carried
   at estimated fair value:
   Fixed maturity securities available
     for sale:
     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
                                                  -----------     ----------       ---------    ------------

     Total fixed maturity securities
           available for sale:                    $10,486,309     $  579,716      $      --     $11,066,025
                                                  ===========     ==========      ==========    ============
</TABLE>



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


3)  Investments (Continued)
<TABLE>
<CAPTION>

                                                                        Gross        Gross       Estimated
                                                       Amortized      Unrealized   Unrealized      Fair
                                                        Cost            Gains        Losses        Value
                                                      --------       ---------    ----------    ----------

December 31, 2004:

<S>                                                 <C>           <C>            <C>          <C>
   Equity securities available for sale:
     Non-redeemable preferred stock                 $   56,031    $   49,063     $  (3,431)   $   101,663

     Common stock:
         Public utilities                              323,719       245,841       (21,952)       547,608
         Banks, trusts, and insurance companies        520,683       680,569          (666)     1,200,586
         Industrial, miscellaneous and all other     1,136,816     1,638,582      (458,486)     2,316,912
                                                   -----------    ----------     ---------    -----------
    Total equity securities available for sale     $ 2,037,249    $2,614,055     $(484,535)   $ 4,166,769
                                                   ===========    ==========     =========    ===========

    Total securities available for sale
         carried at estimated fair value           $12,523,558    $3,193,771     $(484,535)   $15,232,794
                                                   ===========   ===========     =========    ===========

   Mortgage loans on real estate:
      Residential                                   24,203,576
      Commercial                                    21,872,148
      Residential construction                      19,755,862
                                                   -----------
      Total mortgage loans on real estate
          and construction loans                   $65,831,586
                                                   ===========
Real estate                                         $9,709,129
                                                   ===========
Policy, student and other loans                    $13,312,471
                                                   ===========
Other short-term investments                        $4,628,999
                                                   ===========
</TABLE>



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


3)   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, 2005, 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 2006                    $1,527,503    $1,524,206
            Due in 2007 through 2010        6,691,927     6,761,022
            Due in 2011 through 2015       19,307,189    19,408,343
            Due after 2015                 54,710,943    56,180,317
            Mortgage-backed securities      6,694,403     6,468,373
            Redeemable preferred stock        848,977       871,665
                                          -----------   -----------
                 Total held to maturity   $89,780,942   $91,213,926
                                          ===========   ===========

                                           Amortized   Estimated Fair
Available for Sale:                          Cost          Value
                                          ----------      -------

           Due in 2006                       $2,700,645    $2,707,038
           Due in 2007 through 2010           3,645,476     3,770,709
           Due in 2011 through 2015               --            --
           Due after 2015                        97,999       119,414
           Non-redeemable preferred stock        37,781        55,470
           Common stock                      10,134,871    12,291,469
                                            -----------   -----------
                Total available for sale    $16,616,772   $18,944,100
                                            ===========   ===========


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


3)  Investments (Continued)

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

                                           2005        2004       2003
                                           ----        ----       ----
       Fixed maturity securities held
         to maturity:
           Gross realized gains          $ 2,593     $36,933     $ 3,549
           Gross realized losses              --     (26,355)     (5,665)

       Securities available for sale:
           Gross realized gains           56,651       3,310           1
           Gross realized losses            (561)     (6,364)        (40)
           Other assets                   15,563      66,907        --
                                         -------     -------     -------
               Total                     $74,246     $74,431     $(2,155)
                                         =======     =======     =======

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 3.25% to 21.0%,  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
$240,000 and $254,893 at December 31, 2005 and 2004, 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,  2005,  other  than  investments  issued or
guaranteed by the United States Government.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


3)  Investments (Continued)

Major categories of net investment income are as follows:

                                            2005         2004             2003
                                            ----         ----             ----
Fixed maturity  securities             $ 4,602,518   $ 4,438,808   $ 3,407,177
Equity securities                           84,611        67,120        54,481
Mortgage loans on real estate            5,267,027     3,403,110     1,931,358
Real estate                              1,636,413     1,322,796     1,509,932
Policy loans                               674,826       673,404       676,201
Short-term investments, principally
  gains on sale of mortgage loans
  and other                              8,642,669     7,276,009    10,918,563
                                       -----------   -----------   -----------
  Gross investment income               20,908,064    17,181,247    18,497,712
Investment expenses                     (1,521,493)   (1,242,071)   (1,195,115)
                                       -----------   -----------   -----------
Net investment income                  $19,386,571   $15,939,176   $17,302,597
                                       ===========   ===========   ===========

Net investment  income  includes net investment  income earned by the restricted
assets of the cemeteries and mortuaries of approximately $904,000,  $781,000 and
$848,000 for 2005, 2004, and 2003, 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
$9,439,648 at December 31, 2005 and $9,710,534 at December 31, 2004.

4)  Cost of Insurance Acquired

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

                                        2005           2004            2003
                                        ----           ----            ----
Balance at
  beginning of year                 $14,053,497     $14,980,763     $16,408,849
                                   ------------    ------------    ------------
Cost of insurance acquired             (292,667)        304,042        (110,754)
                                   ------------    ------------    ------------

Imputed interest at 7%                  935,085       1,016,199       1,098,636
Amortization                         (2,032,694)     (2,247,507)     (2,415,968)
                                   ------------    ------------    ------------
Net amortization
  charged to income                  (1,097,609)     (1,231,308)     (1,317,332)
                                   ------------    ------------    ------------
Balance at end
  of year                           $12,663,221     $14,053,497     $14,980,763
                                   ============    ============    ============

Presuming no  additional  acquisitions,  net  amortization  charged to income is
expected to approximate $1,003,000,  $935,000,  $875,000, $839,000, and $805,000
for the years 2006 through 2010.  Actual  amortization may vary based on changes
in assumptions or experience.



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


5) Property and Equipment

The cost of property and equipment is summarized below:

                                                           December 31,
                                                     2005               2004
                                                     ----               ----
Land and buildings                               $11,276,393        $11,310,114
Furniture and equipment                           12,142,351         11,066,917
                                                ------------       ------------
                                                  23,418,744         22,377,031
Less accumulated depreciation                    (12,897,855)       (11,856,366)
                                                ------------       ------------
     Subtotal                                     10,520,889         10,520,665
Land and buildings held for sale                     678,899                 --
                                                ------------       ------------
Total                                            $11,199,788        $10,520,665
                                                ============       ============

6)   Bank Loans Payable

Bank loans payable are summarized as follows:
                                                             December 31,
                                                         2005          2004
                                                         ----          ----
6% note payable in monthly installments
   of $5,693 including principal and
   interest, collateralized by real property,
   with a book value of approximately
   $831,000, due September 2010.                    $   597,221    $   633,596

6.93% note payable in monthly installments
   of $14,175 including principal and
   interest, collateralized by real property
   with a book value of approximately
   $850,000, due November 2007.                       1,426,515      1,476,813

$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

Bank prime rate less 1.35% (5.90% at December 31, 2005)
   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 2006.                     38,589         68,562



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


6) Bank Loans Payable (Continued)
                                                             December 31,
                                                         2005          2004
                                                         ----          ----

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.                                  172,549       333,145

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.                                   5,926,478    7,206,641

Mark to market adjustment (see note 17)                (162,629)      36,810

Other collateralized bank loans payable                 947,598      240,728
                                                     ----------   ----------
  Total bank loans                                    8,946,321   10,442,106

Less current installments                             2,291,439    2,136,957
                                                    -----------  -----------
Bank loans, excluding current installments          $ 6,654,882  $ 8,305,149
                                                    ===========  ============

The Company has line of credit  agreements with a bank for $2,500,000,  of which
$350,000 and $-0- were outstanding at December 31, 2005 and 2004,  respectively.
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 7 for summary of maturities in subsequent years.

7)  Notes and Contracts Payable

Notes and contracts payable are summarized as follows:
                                                                December 31,
                                                             2005       2004
                                                             ----       ----
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 of $5,900, due September 2011.     $    501,598  $   520,477


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


7) Notes and Contracts Payable (Continued)
                                                            December 31,
                                                       2005             2004
                                                       ----             ----
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

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.                          307,434         397,133

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

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

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

Other notes payable                                 356,379           301,763
                                                 ----------        ----------
Total notes and contracts payable                 1,326,284         1,820,615
Less current installments                           449,878           700,321
                                                 ----------        ----------

Notes and contracts, excluding
current installments                             $  876,406        $1,120,294
                                                 ==========        ==========


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


7) Notes and Contracts Payable (Continued)

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

                    2006                 $ 2,724,284
                    2007                   3,076,448
                    2008                   1,803,841
                    2009                   1,776,199
                    2010                     575,868
                    Thereafter               315,965
                                         -----------
Total                                    $10,272,605
                                         ===========

Interest paid approximated interest expense in 2005, 2004 and 2003.

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

The Company has, historically,  presented its perpetual care trusts,  associated
with  its  pre-need  funeral  and  cemetery  activities,  on a net  basis in the
consolidated  financial statements.  In accordance with its adoption of FIN 46R,
the assets and liabilities of the perpetual care trusts have been presented on a
gross basis.  Although FIN 46R requires the consolidation of the merchandise and
service trusts, it does not change the legal relationships among the trusts, the
Company and its customers.  The customers are the legal  beneficiaries  of these
merchandise  and service trusts,  and therefore,  their interest in these trusts
has been represented as non-controlling interest in perpetual care trusts in the
accompanying consolidated financial statements.

The components of the non-controlling  interests in perpetual care trusts are as
follows:

                                                             December 31,
                                                         2005           2004
                                                         ----           ----
Trust investments, at market value                   $1,152,493       $989,239
Note receivables from Cottonwood Mortuary
     and Singing Hills Cemetery eliminated
      in consolidation                                1,051,978      1,067,924
Other                                                   (31,221)        26,587
                                                     ----------     ----------
Non-controlling interest                             $2,173,250     $2,083,750
                                                     ==========     ==========

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

<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


8)   Cemetery  and  Mortuary  Endowment  Care  and  Pre-need  Merchandise  Funds
     (Continued)

Assets in the restricted asset account are summarized as follows:

                                                             December 31,
                                                        2005            2004
                                                        ----            ----
Cash and cash equivalents                            $  747,281     $  776,997
Mutual funds                                            332,960        273,258
Fixed maturity securities                                 8,775           --
Equity securities                                        77,778         86,555
Participation in mortgage loans
 with Security National Life                          4,039,609      4,005,957
Time certificate of deposit                              33,696         33,696
                                                     ----------     ----------
   Total                                             $5,240,099     $5,176,463
                                                     ==========     ==========

9)  Income Taxes

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

                                           December 31,
                                      2005            2004
                                      ----            ----
Current                            $   358,357       $    18,585
Deferred                            14,242,672        11,479,382
                                   -----------       -----------
Total                              $14,601,029       $11,497,967
                                   ===========       ===========

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

                                           December 31,
                                      2005            2004
                                      ----            ----

Assets
Future policy benefits           $(1,424,759)      $(1,917,789)
Unearned premium                  (1,736,217)       (1,524,191)
Other                               (299,209)         (565,440)
                                 -----------       -----------
Total deferred tax assets         (3,460,185)       (4,007,420)
                                 -----------       -----------

Liabilities
Deferred policy acquisition costs  6,694,963         5,056,822
Cost of insurance acquired         2,150,799         2,317,477
Installment sales                  3,262,577         2,940,268
Depreciation                         602,875           824,718
Trusts                             1,766,590         1,155,566
Tax on unrealized appreciation       584,879           689,478
Reinsurance                        1,416,283         2,084,117
Difference between book and
   tax basis of other
   assets and liabilities          1,221,394           418,356
Other                                  2,497             --
                                 -----------       -----------
Total deferred tax liabilities    17,702,857        15,486,802
                                 -----------       -----------
Net deferred tax liability       $14,242,672       $11,479,382
                                 ===========       ===========



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

9)  Income Taxes (Continued)

The Company paid  $37,960,  $126,894 and $55,442 in income taxes for 2005,  2004
and 2003, respectively. The Company's income tax expense (benefit) is summarized
as follows:

                                    2005                2004             2003
                                    ----                ----             ----
Current                         $  377,732           $ 15,106         $   28,326
Deferred                           862,024            636,430          2,862,343
                                ----------           --------         ----------
Total                           $1,239,756           $651,536         $2,890,669
                                ==========           ========         ==========

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

                                           2005          2004           2003
                                           ----          ----           ----
Computed expense at statutory rate     $1,607,396       $903,899     $3,218,056
Special deductions allowed
   small life insurance companies        (399,820)      (243,873)      (285,991)
Dividends received deduction               (5,780)        (5,619)        (5,611)
Minority interest taxes                        --         47,376         13,469
Other, net                                 37,960        (50,247)       (49,254)
                                      -----------    -----------    -----------
   Tax expense                         $1,239,756       $651,536     $2,890,669
                                      ===========    ===========    ===========

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, 2005,  the
policyholders'  surplus  accounts  approximated  $4,152,000.  Congress  recently
passed  changes to the tax code,  which exempts  distributions  from tax if such
distributions  are made in the years 2005 through  2007.  Management  expects to
take action  during this  period to use this recent  change in the tax code.  If
Management does not make the distributions  during this period the amount of tax
that would accrue and become payable in the advent of any distributions would be
approximately $1,412,000.

The Company has a net operating loss carry forward of approximately  $1,333,000,
as of December 31, 2005. These carry forward amounts begin expiring in ten years
and range up to 20 years.

10)   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 2005 and 2004. 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 $942,080,000 at December
31, 2005 and $815,445,000 at December 31, 2004.

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


10)   Reinsurance, Commitments and Contingencies (Continued)

expense reimbursement. Effective January 1, 2006, Southern Security entered into
a Reinsurance Recapture Agreement with MEGA wherein the policies reinsured under
the Reinsurance  Agreement between the Company and MEGA dated December 31, 1992,
as amended was  recaptured.  During  February 2006 MEGA  transferred  assets and
liabilities of approximately $6,582,000 to Southern Security. Consideration paid
by Southern Security to MEGA was $200,000.

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
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, 2005 and 2004, the  outstanding  Coinsurance
amount was $-0- and $2,545,763, respectively. The Company recorded as income the
risk  charge for the years  ended  December  31,  2005 and 2004,  of $10,000 and
$121,831,  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 City of  Phoenix,  Arizona has  commenced  condemnation  proceedings  on the
property  where  the  Camelback   Funeral  Home  was  located  for  purposes  of
constructing a light rail facility.  The city has placed $1,200,000 in escrow to
pay the Company for the property that was condemned. The carrying amount for the
land and building of the Camelback Funeral Home at December 31, 2005 is $678,889
and has been  shown  separately  in Note 4.  Currently  the  Company  has had an
independent appraisal and is negotiating the sales price with the city.

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, 2005, are approximately
as follows:

                     Years Ending
                      December 31:
                         2006          $  580,000
                         2007             296,000
                         2008             225,000
                         2009             130,000
                         2010              60,000
                                       ----------
                         Total         $1,291,000
                                       ==========

<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


10)       Reinsurance, Commitments and Contingencies (Continued)

Total rent  expense  related to these  non-cancelable  operating  leases for the
years ended  December  31,  2005,  2004,  and 2003 was  approximately  $828,000,
$734,000 and $396,000, respectively.

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.
Hood  claims  that he wrote a letter  to the  Company  expressing  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.  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 proposed a settlement in the amount of $275,000.

On November 23, 2005,  Hood filed a complaint in the Superior Court of the State
of  California  for the County for San Diego  (Case No 028978)  against  Singing
Hills  Memorial  Park  and  California  Memorial  Estates,   Inc,  wholly  owned
subsidiaries  of the  Company.  The  claims in the  complaint  include  wrongful
termination  in violation of public  policy,  retaliation in violation of public
policy,  race  discrimination in violation of the California Fair Employment and
Housing Act,  retaliation  in violation of the  California  Fair  Employment and
Housing Act; intentional infliction of emotional distress plus punitive damages,
attorney's  fees and  costs of the law  suits.  There  are no  specific  amounts
requested in the complaint,  but damages are in an amount to be proven at trial,
a jury trial having been requested.  The Company  contends that Hood voluntarily
quit and was not  terminated.  The  Company  intends  to  vigorously  defend the
action. An answer was filed. The case is in the discovery stage.

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 Gornichec  also wrote the letter
on  behalf  of Hood.  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.  Gornichec  asserts  that he was an  employee
contrary to the Company's position.

The claims made on behalf of 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.  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
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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


11)   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  employee's  compensation
to  total  compensation  for all  eligible  employees  during  each  year.  ESOP
contribution expense totaled $131,524,  $105,196, and $98,588 for 2005, 2004 and
2003, respectively. At December 31, 2005 the ESOP held 592,120 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  2005,  2004,  and 2003  were  $5,142,  $5,746,  and  $4,493,
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 2005, 2004,
and 2003 were  $135,589,  $128,949,  and  $110,081,  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 2005, 2004 and 2003 were $141,710,  $123,249,  and
$95,485, 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
over  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 provide that any
remaining balance will be payable to their heirs in the event of their death. In
addition,  the  agreements  provide  that the Company  will pay the Group Health
coverages for these  individuals  and/or their  spouses.  In 2005 and 2004,  the
Company  increased  its liability  for these future  obligations  by $10,000 and
$10,000, respectively. The current balance as of December 31, 2005 is $724,000.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


11)   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 $37,800
and $31,500 in fiscal 2005 and 2004, respectively, to cover the present value of
anticipated  retirement benefits under the employment  agreement.  The liability
accrued is $397,300 and $359,500 as of December 31, 2005 and 2004, 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  2005  and  2004   approximately   $46,300  and  $18,500,
respectively,  to cover  the  present  value of the  retirement  benefit  of the
agreement.  The liability  accrued is $236,800 and $190,500,  as of December 31,
2005 and 2004, respectively.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


12)  Capital Stock

The following  table  summarizes the activity in shares of capital stock for the
three-year period ended December 31, 2005:

                                                        Class A         Class C
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
                                                     ----------     ----------

      New shares issued                                     896          --
      Exercise of stock options                           2,550          --
      Stock Dividends                                   338,042        322,908
      Conversion of Class C to Class A                    1,005        (10,047)
                                                     ----------     ----------
Balance at December 31, 2005                          7,098,363      6,781,060
                                                     ==========     ==========

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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


12)  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:

                                               2005         2004         2003
                                               ----         ----         ----
Numerator:
   Net income                               $3,487,880   $2,122,272   $6,596,497
                                            ==========   ==========   ==========

Denominator:
   Denominator for basic earnings
    per share-weighted-average shares        6,450,057    6,311,974    6,161,927
                                            ----------   ----------   ----------

   Effect of dilutive securities:
     Employee stock options                     29,388      225,185      157,450
     Stock appreciation rights                     571        1,710        2,107
                                            ----------   ----------   ----------
Dilutive potential common shares                29,959      226,895      159,557
                                            ----------   ----------   ----------

   Denominator for diluted earnings per
     share-adjusted weighted-average
     shares and assumed conversions          6,480,016    6,538,869    6,321,484
                                            ==========   ==========   ==========

Basic earnings per share                          $.54         $.34        $1.07
                                            ==========   ==========   ==========
Diluted earnings per share                        $.54         $.32        $1.04
                                            ==========   ==========   ==========

13)  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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


13) 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 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
                                             -----

   Dividend                                    166
   Exercised                                   --
                                             -----

Outstanding at December 31, 2005             3,489             $2.90
                                             =====

Exercisable at end of year                   3,489             $2.90
                                             =====

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,

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

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

Outstanding at December 31, 2003                642,782           $2.07 - $6.18
   Dividend                                      16,176
   Granted                                        --
   Exercised                                   (310,341)
   Cancelled                                     (8,925)
                                               --------

Outstanding at December, 2004                   339,692           $1.97 - $5.35
   Dividend                                      16,664
   Granted                                        --
   Exercised                                     (2,980)
   Cancelled                                     (3,421)
                                               --------
Outstanding at December 31, 2005                349,955           $1.88 - $5.10
                                               ========


<PAGE>




                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


13) Stock Compensation Plans (Continued)

                                   Number of Class A Shares      Option Price
Exercisable at end of year                  349,955              $1.88 - $5.10
                                            =======

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


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

13) 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
   Dividend                                        986
   Granted                                       4,000
   Exercised                                    (3,828)
                                               -------

Outstanding at December 31, 2005                20,716          $2.00 - $5.19
                                               =======

Exercisable at end of year                      16,516          $2.00 - $5.19
                                               =======

Available options for future                    38,437
                                               =======
    grant 2000 Director Plan

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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


13) 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          --               --
                                       -------         ----------

Outstanding at January 1, 2004            --                 --

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

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

   Dividend                             25,404           52,500
   Granted                             349,000            --
   Exercised                             --               --
   Cancelled                            (2,100)           --
                                     ---------      -----------

Outstanding at December 31, 2005       533,479        1,102,500   $2.93 - $3.68
                                      ========      ===========

Exercisable at end of year             533,479        1,102,500   $2.93 - $3.68
                                      ========       ==========

Available options for future grant
   2003 Stock Incentive Plan            45,334           55,125
                                      ========       ==========

(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.

14)  Statutory-Basis Financial Information

The  Company's  life  insurance  subsidiaries  are  domiciled in Utah,  Florida,
Louisiana and Arkansas and prepare their statutory-basis financial statements in
accordance  with  accounting  practices  prescribed  or  permitted  by the Utah,
Florida,   Louisiana  and  Arkansas  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, Louisiana and Arkansas.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


14)  Statutory-Basis Financial Information (Continued)

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

<TABLE>
<CAPTION>
                                                                   Statutory Net Income (Loss)
                                                                 for the year ended December 31,
                                                   2005                      2004                       2003
                                                   ----                      ----                       ----
<S>                                              <C>                 <C>                           <C>
Security National Life                           $1,205,668          $        65,724               $(5,404,687)
Southern Security Life                             (583,633)                (525,237)                2,431,499
Security National Life of Louisiana                  29,257                   50,341                     N/A
Memorial Insurance Company of America                 N/A                     N/A                        N/A
</TABLE>

<TABLE>
<CAPTION>
                                                                 Statutory Stockholders' Equity
                                                                          December 31,
                                                   2005                      2004                       2003
                                                   ----                      ----                       ----
<S>                                             <C>                       <C>                      <C>
Security National Life                          $14,938,685               $15,183,712              $15,069,057
Southern Security Life                            3,500,000                10,877,112               11,443,488
Security National Life of Louisiana               1,242,185                 1,147,492                N/A
Memorial Insurance Company of America             2,137,881                   N/A                     N/A
</TABLE>


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,  Louisiana and Arkansas 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.

15)  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.


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

15)  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.
<TABLE>
<CAPTION>


                                                                     2005
                                      Life              Cemetery/                            Reconciling
Revenues:                           Insurance           Mortuary          Mortgage              Items        Consolidated
                                    ---------           --------          --------              -----        ------------
From external sources:
<S>                                 <C>                 <C>                <C>               <C>             <C>
   Revenue from customers           $ 27,170,109        $10,838,878        $71,859,272       $ --            $109,868,259
   Net investment income              11,080,324            967,740          7,338,507         --              19,386,571
   Realized gains on investments
      and other assets                    74,246            --                 --              --                  74,246
   Other revenues                        293,151            162,078            165,522         --                 620,751

Intersegment revenues:
   Net investment income               5,015,356             92,004            349,027        (5,456,387)           --
                                    ------------        -----------        -----------      ------------     ------------
                                      43,633,186         12,060,700         79,712,328        (5,456,387)     129,949,827
                                    ------------        -----------        -----------      ------------     ------------
Expenses:
Death and other policy benefits       14,734,364            --                 --                --            14,734,364
Increase in future policy benefits     9,742,218            --                 --                --             9,742,218
Amortization of deferred policy
   acquisition costs and cost of
    insurance acquired                 2,765,422            265,312             --               --             3,030,734
Depreciation                             438,423            699,236            566,495           --             1,704,154
General, administrative and
   other costs:
   Intersegment                           --                 36,672            296,664          (333,336)         --
   Other                              12,278,778         10,147,421         68,663,284           --            91,089,483
Interest expense:
   Intersegment                          422,199            172,557          4,528,295        (5,123,051)       --
   Other                                 460,708            317,292          4,143,238            --            4,921,238
                                    ------------        -----------        -----------      -----------      ------------
                                      40,842,112         11,638,490         78,197,976        (5,456,387)     125,222,191
                                    -----------         -----------        -----------      ------------     ------------
Earnings before
   income taxes                     $  2,791,074        $   422,210        $ 1,514,352      $      --        $  4,727,636
                                    ============        ===========        ===========      ============     ============

Identifiable assets                 $345,029,159        $51,281,466        $18,193,773      $(54,858,925)    $359,645,473
                                    ============        ===========        ===========      ============     ============

Expenditures for
   long-lived assets                $   758,688         $ 1,155,673        $   322,371      $     --         $ 2,236,732
                                    ===========        ===========      ==============      =============    ===========
</TABLE>


<PAGE>
<TABLE>
<CAPTION>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

15)      Business Segment Information (Continued)

                                                                     2004
                                      Life              Cemetery/                        Reconciling
                                    Insurance           Mortuary          Mortgage          Items        Consolidated
                                    ---------           --------          --------          -----        ------------
Revenues:
From external sources:
<S>                              <C>                  <C>                <C>              <C>            <C>
   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         $48,347,826        $ 14,236,837    $(51,091,825)    $317,462,999
                                 ============         ===========        ============    ============     ============

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


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


15) Business Segment Information (Continued)

                                                                        2003
                                      Life              Cemetery/                        Reconciling
                                    Insurance           Mortuary          Mortgage          Items        Consolidated
                                    ---------           --------          --------          -----        ------------
Revenues:
From external sources:
<S>                                   <C>              <C>                <C>           <C>              <C>
   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 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 before
    income taxes                     $  2,011,685      $   509,189        $  6,943,998    $    --         $  9,464,872
                                     ============      ===========        ============    ============    ============

Identifiable assets                  $302,319,614      $44,975,411        $ 16,938,151    $(49,792,560)   $314,440,616
                                     ============      ===========        ============    ============    ============

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

<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


16)      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.  During 2005
Monument  Title paid $7,000 and the balance on the note at December 31, 2005 was
$87,177.

The Company had a non-interest  bearing note receivable from the Chairman of the
Board and  Chief  Executive  Officer  which was paid in full  during  2005.  The
outstanding balance of the note was $1,500 at December 31, 2004.

17)  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:



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


17) Disclosure about Fair Value of Financial Instruments (Continued)

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.

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, 2005 and
December 31, 2004, were approximately $93,859,000 and $82,592,000, 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.

18)    Accumulated Other Comprehensive Income and Other Items

The following summarizes accumulated other comprehensive income:

                                                      December 31,
                                                2005      2004        2003
                                                ----      ----        ----
Unrealized gains (losses)
     on available for-sale securities      $(343,234)   $226,464   $  638,540
Reclassification
     adjustment for net realized
     gains (losses) in net income             56,508       7,524       (2,155)
                                           ---------    --------   ----------
Net unrealized gains (losses)               (286,726)    233,988      636,385
Potential unrealized gains (losses) for
     derivative bank loans
     (interest rate swaps)                   199,439     266,219     (303,029)
Potential unrealized gains for
    derivative mortgage loans               257,694        --           --
 Tax (expense) benefit on net unrealized
     gains (losses)                          (41,408)    (73,586)      19,428
                                            --------    --------   ----------
Other comprehensive income                  $128,999    $426,621   $  352,784
                                            ========    ========   ==========

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



<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003

18) Accumulated Other Comprehensive Income and Other Items (Continued)

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 $160,873  and  $421,747,  as of December 31, 2005 and
2004, 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, 2005:

     Weighted average variable interest rate of
         the hedged bank loans (prime less .5%)                         6.75%
     Weighted average fixed interest rate of the swaps                  6.10
     Market value of the swaps- potential unrealized
         gain position                                              $162,629

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.

19)      Derivative Loan Commitments

During 2005, the Company's mortgage banking activities implemented new practices
relating to mortgage loan commitments,  including interest rate lock commitments
and forward commitments to sell loans to third-party investors. The Company also
implemented  a  hedging  strategy  for  these  transactions.   A  mortgage  loan
commitment  binds  the  Company  to lend  funds  to a  qualified  borrower  at a
specified  interest rate and within a specified period of time,  generally up to
30 days  after  inception  of the  rate  lock.  Mortgage  loan  commitments  are
derivatives  under  Statement of Financial  Accounting  Standards No. 133 ("SFAS
133"), Accounting for Derivative Instruments and Hedging Activities,  as amended
by Statement of Financial Accounting  Standards No. 149 ("SFAS 149"),  Amendment
of Statement 133 on Derivative  Instruments  and Hedging  Activities and must be
recognized at fair value on the consolidated balance sheet with changes in their
fair values recorded as part of other comprehensive income from mortgage banking
operations.

The Company is exposed to price risk due to the  potential  impact of changes in
interest  rates on the  values  of  mortgage  loan  commitments  from the time a
derivative  loan  commitment  is made to an  applicant to the time the loan that
would result from the exercise of that loan commitment is funded. Managing price
risk is complicated by the fact that the ultimate  percentage of derivative loan
commitments  that will be exercised  (i.e.,  the number of loan commitments that
will be  funded)  fluctuates.  The  probability  that a loan  will not be funded
within  the  terms  of  the  commitment  is  driven  by  a  number  of  factors,
particularly  the change,  if any, in mortgage rates  following the inception of
the interest rate lock. However,  many borrowers continue to exercise derivative
loan commitments even when interest rates have fallen.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2005, 2004, and 2003


19)      Derivative Loan Commitments (Continued)

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

The Company  estimates the fair value of a mortgage loan commitment based on the
change  in  estimated  fair  valued  of the  underlying  mortgage  loan  and the
probability that the mortgage loan will fund within the terms of the commitment.
The change in fair value of the  underlying  mortgage  loan is measured from the
date the  mortgage  loan  commitment  is issued.  Therefore,  at the time of the
issuance, the estimated fair value is zero. Following the issuance, the value of
a mortgage loan commitment can be either positive or negative depending upon the
change in value of the underlying mortgage loans. Fallout rates derived from the
Company's recent historical  empirical data are used to estimate the quantity of
mortgage loans that will fund within the terms of the commitments.

The Company utilizes various  derivative  instruments to economically  hedge the
price risk associated with its outstanding mortgage loan commitments. Management
expects these  derivatives  will  experience  changes in fair value  opposite to
changes in fair  value of the  derivative  loan  commitments,  thereby  reducing
earnings  volatility  related to the  recognition  in earnings of changes in the
values of the commitments.  A forward loan sales commitment protects the Company
from losses on sales of the loans arising from exercise of the loan  commitments
by  securing  the  ultimate  sales  price and  delivery  date of the loans.  For
mortgage  loan  commitments  not protected by a forward  sales  commitment,  the
instruments  used to  economically  hedge the fair  value of the  mortgage  loan
commitments  include  other  freestanding  derivatives  such as mortgage  backed
securities,  options and U.S. Treasury  futures.  The Company takes into account
various  factors and strategies in determining  the portion of the mortgage loan
commitments it wants to hedge economically.

The significant components of other comprehensive income during the year ended
December 31, 2005 are as follows:

         Loss forward loan sale commitments              $(317,304)
         Gain on derivative loan commitments               487,382
                                                         ---------
                           Total                          $170,078
                                                          ========


<PAGE>



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          85    Chairman of the Board and Chief Executive Officer

Scott M. Quist           52    President, Chief Operating Officer and Director

Stephen M. Sill          60    Vice President, Treasurer and Chief Financial
                               Officer

G. Robert Quist          54    First Vice President and Secretary

J. Lynn Beckstead, Jr.   52    Vice President Mortgage Operations and Director

Christie Q. Overbaugh    57    Senior Vice President of Internal Operations
                               of Southern Security Life Insurance Company

Charles L. Crittenden    85    Director

Robert G. Hunter         46    Director

H. Craig Moody           54    Director

Norman G. Wilbur         67    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.


<PAGE>



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.


<PAGE>



     Norman G. Wilbur has been a director of the Company since October 1998. Mr.
Wilbur worked for J.C.  Penney'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.  Penney'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 a Past  President 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 served as President of Memorial  Estates  since
June 2005 and its Vice  President  from 1982 to June 2005;  he began working for
Memorial  Estates in 1978.  Mr. Quist has also served as First Vice President of
Singing Hills  Memorial  Park since 1996. In addition,  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 December 1998 to June 2002.  From 1986 to 1991,  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 2005 or 2004.

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

Corporate Governance

Corporate  Governance  Guidelines.  The board has adopted the Security  National
Financial Corporation Corporate Governance Guidelines.  These guidelines outline
the functions of the board, director  qualifications and  responsibilities,  and
various  processes and  procedures  designed to insure  effective and responsive
governance.  The  guidelines  are  reviewed  from  time to time in  response  to
regulatory requirements and best practices and are revised

<PAGE>



accordingly.  The full text of the  guidelines  is  published  on the  Company's
website  at  www.securitynational.com.   A  copy  of  the  Corporate  Governance
Guidelines may also be obtained at no charge by written request to the attention
of G. Robert  Quist,  First Vice  President  and  Secretary,  Security  National
Financial  Corporation,  5300 South 360 West,  Suite 250,  Salt Lake City,  Utah
84123.

Code of Business Conduct. All of the Company's officers, employees and directors
are required to comply with the Company's Code of Business Conduct and Ethics to
help  insure  that the  Company's  business  is  conducted  in  accordance  with
appropriate  standards  of ethical  behavior.  The  Company's  Code of  Business
Conduct and Ethics covers all areas of professional conduct,  including customer
relationships,  conflicts of interest,  insider trading,  financial disclosures,
intellectual  property  and  confidential  information,  as  well  as  requiring
adherence to all laws and  regulations  applicable  to the  Company's  business.
Employees are required to report any  violations or suspected  violations of the
Code. The Code includes an anti-retaliation statement. The full text of the Code
of  Business  Conduct  and  Ethics is  published  on the  Company's  website  at
www.securitynational.com.  A copy of the Code of Business Conduct and Ethics may
also be obtained at no charge by written  request to the  attention of G. Robert
Quist,   First  Vice  President  and  Secretary,   Security  National  Financial
Corporation, 5300 South 360 West, Suite 250, Salt Lake City, Utah 84123.


<PAGE>
<TABLE>
<CAPTION>



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, 2005 whose salary and bonus for all
services in all  capacities  exceed  $100,000 for the fiscal year ended December
31, 2005.

                                                                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)
------------------        ----    ---------  --------  ------------    ---------  --------------------------- ------------
<S>                       <C>     <C>        <C>         <C>            <C>         <C>             <C>              <C>
George R. Quist (1)       2005    186,300     35,000      2,400           0           70,000           0          25,993
  Chairman of the         2004    165,600     50,000      2,400           0          100,000           0          26,002
  Board and Chief         2003    165,600     50,000      2,400           0          100,000           0          23,273
  Executive Officer

Scott M. Quist (1)        2005    246,900     75,000      7,200           0           70,000           0          44,489
  President, Chief        2004    215,900     75,000      7,200           0        1,000,000(4)        0          34,773
  Operating Officer       2003    205,400     60,000      7,200           0           70,000           0          29,531
  and Director

J. Lynn Beckstead, Jr.    2005    220,306     24,000          0           0           35,000           0          26,176
  Vice President of       2004    195,796     85,000          0           0            5,000           0          25,750
  Mortgage Operations     2003    158,500    255,675          0           0           15,000           0          16,104
  and Director

G. Robert Quist (1)       2005    115,029      8,000      2,400           0           30,000           0          13,044
  First Vice President and2004    104,814          0      2,400           0           10,000           0          10,711
  Secretary               2003     87,175     16,599      2,400           0           35,000           0           9,748

Stephen M. Sill           2005    115,063      6,000      3,600           0           15,000           0          16,402
  Vice President,         2004    102,855      6,000      3,600           0            5,000           0          11,684
  Treasurer and Chief
  Financial Officer
</TABLE>

     (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 2005, 2004, and
          2003, such amounts were George R. Quist, $21,340, $21,341 and $18,590,
          respectively;   Scott  M.  Quist,   $23,978,   $23,001  and   $23,000,
          respectively;  J. Lynn Beckstead,  Jr., $21,735,  $21,000 and $12,750,
          respectively;   G.   Robert   Quist,   $10,205,   $10,161  and  $9,394
          respectively;

<PAGE>



          Stephen  M. Sill  $12,518  and  $11,134  for the years  2005 and 2004,
          respectively); (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 2005,  2004 and 2003,  such  amounts were for
          George R. Quist $9, $17 and $39, respectively;  for Scott M. Quist, G.
          Robert Quist, Stephen M. Sill and J. Lynn Beckstead,  Jr., $241, $550,
          and $354 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 2005,  2004 and 2003);  Scott M. Quist  ($20,270 for
          the year 2005,  $11,222 for the year 2004,  $6,177 for 2003);  J. Lynn
          Beckstead, Jr. ($4,200 for 2005 and $4,200 for 2004); G. Robert Quist,
          $2,598 for 2005; and Stephen M. Sill $3,643, respectively; (d) 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 year 2003,  such amount
          was J. Lynn  Beckstead  Jr.,  $3,000.  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, 2005, as well as the aggregate  number
and  value of  unexercised  options  held by the  Named  Executive  Officers  on
December 31, 2005.

Aggregated Option/SAR Exercised in Last Fiscal Year and Fiscal Year-End
Option/SAR Values:
<TABLE>
<CAPTION>

                                                              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                    2005(#)                                      2005
                                                               -------                                    ------
Name                   (#)          Realized       Exercisable          Unexercisable          Exercisable       Unexercisable
----                 --------       --------       -----------          -------------          -----------       -------------
<S>                                                  <C>                                        <C>
George R.  Quist        --             --              234,801               --                   140,795            --
Scott M. Quist          --             --            1,257,034(1)            --                     5,978            --
J. Lynn Beckstead, Jr.  --             --               59,627               --                     --               --
G. Robert Quist         --             --               83,042               --                     --               --
Stephen M. Sill         --             --               21,263               --                    11,998            --

</TABLE>

(1) Includes  options to purchase  1,102,500 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.


<PAGE>




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 $37,800
and $31,500 in fiscal 2005 and 2004, 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  2005  and  2004   approximately   $46,300  and   $18,500,
respectively,  to cover  the  present  value of the  retirement  benefit  of the
agreement.


<PAGE>



Director Compensation

Directors of the Company (but not  including  directors who are  employees)  are
currently  paid a  director's  fee of $13,200  per year by the Company for their
services and are reimbursed for their expenses in attending  board and committee
meetings.   No   additional   fees  were  paid  by  the  Company  for  committee
participation or special assignments in 2005. 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  2005,  2004 and 2003  were
approximately  $5,142,  $5,746 and $4,493,  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 2005, 2004 and
2003, were $135,589, $128,949 and $110,081, 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  297  participants  and had $131,524
contributions  payable to the Plan in 2005.  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.


<PAGE>



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 2005, 2004 and 2003
was $141,710, $123,249 and $95,485, 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.


<PAGE>



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.



<PAGE>



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,  2006,  (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.
<TABLE>
<CAPTION>

                                                                                                          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
-----------------                  -------        --------           -----          --------          -----         --------
<S>                               <C>             <C>            <C>                 <C>          <C>
George R. and Shirley C. Quist
  Family Partnership, Ltd. (2)     450,203          6.6%          3,526,622            45.5%       3,976,825        27.3%
Employee Stock
  Ownership Plan (3)               621,726          9.1%          1,630,693            21.1%       2,252,419        15.4%
George R. Quist (4)(5)(7)(8)       550,730          8.1%            494,110             6.3%       1,044,840         7.2%
Scott M. Quist (4)(7)(9)           450,385          6.6%          1,372,433            17.7%       1,822,818        12.5%
Associated Investors (10)           97,438          1.4%            688,392             8.9%         785,830         5.4%
G. Robert Quist (6)(11)            153,888          2.2%            256,256             3.3%         410,144         2.8%
J. Lynn Beckstead, Jr., (6)(12)    158,722          2.3%            --            --                 158,722         1.1%
Stephen M. Sill (6)(13)             82,004          1.2%            --                 --             82,004         1.0%
Christie Q. Overbaugh (14)          87,313         1.3%             110,776             1.4%         198,089         1.4%
Robert G. Hunter, M.D., (4)(15)      7,984           *               --                --              7,984           *
Norman G. Wilbur (16)                6,603           *               --                --              6,603           *
Charles L. Crittenden (17)           7,320           *               --                --              7,320           *
H. Craig Moody (18)                  6,314           *               --                --              6,314           *
All directors and executive officers
  (10 persons) (4)(5)(6)(7)      1,961,466         28.7%          5,760,197            74.4%       7,721,663        52.9%

*   Less than 1%
</TABLE>

(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.


<PAGE>



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


(4) Does not include 621,726 shares of Class A common stock and 1,630,693 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 97,438 shares of Class A common stock and 688,392 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  322,357  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  194,838  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 234,801 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, 2006.

(9)  Includes  options to purchase  154,534  shares of Class A common  stock and
1,102,500  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,
2006.

(10) The  managing  partner of  Associated  Investors  is George R.  Quist,  who
exercises sole voting and investment powers.

(11) Includes  options to purchase 83,042 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, 2006.

(12) Includes  options to purchase 59,627 shares of Class A common stock granted
to Mr.  Beckstead  that are  currently  exercisable  or will become  exercisable
within 60 days of March 31, 2006.

(13) Includes  options to purchase 21,263 shares of Class A common stock granted
to Mr. Sill that are currently  exercisable or will become exercisable within 60
days of March 31, 2006.

(14) Includes  options to purchase 29,629 shares of Class A common stock granted
to Ms.  Overbaugh  that are  currently  exercisable  or will become  exercisable
within 60 days of March 31, 2006.

(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, 2006.

(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, 2006.

(17) Includes  options to purchase  2,261 shares of Class A common stock granted
to Mr.  Crittenden  that are currently  exercisable  or will become  exercisable
within 60 days of March 31, 2006.


<PAGE>



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, 2006.

The Company's  executive  officers and directors,  as a group,  own beneficially
approximately 52.9% 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.  This receivable was fully
allowed for in 2003.  Ronald  Motzkus and Troy  Lashley,  who owned 90% and 10%,
respectively, of the outstanding shares of Monument Title are brothers-in-law 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 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 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 1%.
The minimum payment for the third, fourth and firth years is $1,500,  $2,000 and
$2,500  per  month,  respectively.   Any  remaining  unpaid  balance,  including
interest,  shall be due and payable at the conclusion of the 60th month from the
date of the  agreement.  During 2005 Monument Title paid a total of $7,000 under
the agreement and the balance on the note at December 31, 2005 was $87,177.

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 equals 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  in an  amount  equal to the  outstanding
liabilities ceded to Security National Life.


<PAGE>



Item 13.  Certain Relationships and Related Transactions (Continued)

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, 2005, the
outstanding  coinsurance  amount was $958,968.  Southern Security Life Insurance
Company  recorded  as an  expense  the risk  charge of  $33,121  for  2005.  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 1, 2005, Security National Life entered into a coinsurance agreement
and a modified  coinsurance  agreement  with Southern  Security  Life  Insurance
Company,  effective  October  1,  2005.  Under  the  terms of these  agreements,
Southern  Security  Life  Insurance  Company  ceded  the  remaining  25%  of its
universal  life  business  to  Security  National  Life.  The total  liabilities
reinsured  for this  business  on  October  1, 2005 were  $11,001,332.  Southern
Security  Life  Insurance  Company  received a ceding  commission  from Security
National Life of $1,000,000 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 equals 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  in an  amount  equal to 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, 2005, the
outstanding  coinsurance  amount was $911,656.  Southern Security Life Insurance
Company  recorded  as an  expense  the risk  charge of  $10,000  for  2005.  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  31,  2005,  Security  National  Life and  Southern  Security  Life
Insurance Company entered into a reinsurance agreement to reinsure the remaining
in force  business  of  Southern  Security  Life  Insurance  Company to Security
National  Life to the  extent  permitted  by the  Florida  Office  of  Insurance
Regulation. The assets and liabilities reinsured under the reinsurance agreement
will be  deposited  into a trust  account,  in which Zions First  National  Bank
agrees to act as trustee. Under the terms of the reinsurance  agreement,  in the
event of the  insolvency of Security  National  Life,  Zions First National Bank
will hold the assets and liabilities in trust for purposes of  administration of
the assets and liabilities with respect to such insolvency.

The Florida Office of Insurance Regulation approved the reinsurance agreement on
December 28, 2005.  As a result of the execution of the  reinsurance  agreement,
all of the insurance business and operations of Southern Security Life Insurance
Company will be  transferred  to Security  National  Life, as  reinsurer,  as of
December 31, 2005,  the effective date of the  agreement.  Any future  insurance
business by Southern  Security  Life  Insurance  Company will be covered by this
reinsurance agreement.  All of the insurance business and operations of Southern
Security Life Insurance Company,  including its assets and liabilities,  will be
transferred  to  Security  National  Life  under  the  terms of the  reinsurance
agreement,  except for $3,500,000 in capital and surplus that Southern  Security
Life Insurance  Company will continue to hold in order to remain  qualified as a
life  insurance  company for federal income tax purposes.  Thus,  $48,528,000 in
assets and liabilities will be transferred from Southern Security Life Insurance
Company to Security National Life pursuant to the reinsurance agreement.


<PAGE>



Item 13.  Certain Relationships and Related Transactions( Continued)

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.  Principal Accounting Fees and Services

Fees  incurred in 2005 for annual audit  services  pertaining  to the  financial
statements  and  employee  benefit  plans and  related  quarterly  reviews  were
approximately $326,000. There were $35,000 in other fees during 2005.


<PAGE>



                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) Financial Statements

         See "Index to Consolidated Financial Statements" under Item 8 above.

(a)(2) Financial Statement Schedules

     II.  Condensed  Balance  Sheets  as of  December  31,  2005  and  2004  and
          Condensed  Statement  of  Earnings  and Cash Flows for the years ended
          2005, 2004 and 2003

     IV.  Reinsurance

     V.   Valuation and Qualifying Accounts

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.

    (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 (9)
     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 (8)
     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 Stock  Purchase  Agreement  with  Paramount  Security  Life  Insurance
          Company (10)
     10.9 Reinsurance Agreement between Security National Life Insurance Company
         and Guaranty Income Life Insurance Company(11)
     10.10 Employment agreement with J. Lynn Beckstead, Jr.(11)
     10.11 Employment agreement with Scott M. Quist (12)
     10.12 Agreement and Plan of  Reorganization  among Security  National Life
           Insurance Company,  SSLIC Holding Company,  and Southern Security
           Life Insurance Company (13)
     10.13 Agreement and Plan of Merger,  among Security National Life Insurance
           Company,  SSLIC Holding Company,  and Southern  Security Life
           Insurance  Company(14)
     10.14 Agreement to repay  indebtedness  and to convey option with Monument
           Title, LLC. (14)
     10.15 Stock  Purchase  Agreement  among  Security  National Life  Insurance
           Company, Southern Security Life Insurance Company, Memorial Insurance
           Company of America,  and the shareholders of Memorial  Insurance
           Company that have executed the Agreement by Shareholders of Memorial
           Insurance  Company of America to Sell Shares in Stock Purchase
           Transaction(15)
     10.16 Reinsurance  Agreement  between  Security  National  Life  Insurance
           Company and Memorial Insurance Company of America(16)
     10.17 Trust Agreement  between Security National Life Insurance Company and
           Memorial Insurance Company of America(16)
     10.18 Promissory  Note  between  Memorial  Insurance  Company as Maker and
           Security National Life Insurance Company as Payee(16)
     10.19 Security  Agreement between Memorial  Insurance Company as Debtor
           and Security National Life Insurance Company as Secured Party(16)
     10.20 Surplus  Contribution  Note between  Memorial  Insurance  Company of
           America as Maker and Southern Security Life Insurance Company as
           Payee(16)
     10.21 Guaranty  Agreement by Security  National Life Insurance  Company and
           Southern Security Life Insurance Company as Guarantors(16)
     10.22 Administrative  Services  Agreement  between Security  National Life
           Insurance Company and Memorial Insurance Company of America(16)
     10.23 Reinsurance  Agreement  between  Security  National  Life  Insurance
           Company and Southern Security Life Insurance Company(17)
     10.24 Trust  Agreement  among  Security  National Life  Insurance  Company,
           Southern Security Life Insurance Company and Zions First National
           Bank(17) 10.25
     10.25 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  Schedule 14A  Definitive  Proxy
               Statement,  Filed  on June 5,  2003,  relating  to the  Company's
               Annual Meeting of Shareholders
          (9)  Incorporated  by reference  from Report on Form 10-Q, as filed on
               November 14, 2003
          (10) Incorporated by reference from Report on Form 8-K, as filed March
               30, 2004
          (11) Incorporated  by reference  from Report on Form 10-K, as filed on
               March 30, 2004
          (12) Incorporated  by reference  from Report on Form 10-Q, as filed on
               August 13, 2004
          (13) Incorporated  by  reference  from Report on Form 8-K, as filed on
               August 30, 2004
          (14) Incorporated  by reference  from Report on Form 10-K, as filed on
               March 31, 2005
          (15) Incorporated  by  reference  from Report on Form 8-K, as filed on
               September 27, 2005
          (16) Incorporated  by  reference  from Report on Form 8-K, as filed on
               January 5, 2006
          (17) Incorporated  by  reference  from Report on Form 8-K, as filed on
               January 11, 2006

  (b)  Reports  on Form 8-K:
       No  reports  on Form 8-K were filed by the Company during the quarter
       ended December 31, 2005.


<PAGE>


                                   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:  March 31, 2006                     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                    March 31, 2006
                         Board and Chief Executive
                         Officer (Principal
                         Executive Officer)

Scott M. Quist           President, Chief Operating         March 31, 2006
                         Officer and Director

Stephen M. Sill          Vice President,
                         Treasurer and Chief
                         Financial Officer (Principal
                         Financial and Accounting
                         Officer)                          March 31, 2006

J. Lynn Beckstead, Jr.   Vice President and Director       March 31, 2006

Charles L. Crittenden    Director                          March 31, 2006

H. Craig Moody           Director                          March 31, 2006

Norman G. Wilbur         Director                          March 31, 2006

Robert G. Hunter         Director                          March 31, 2006


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and the Shareholders
Security National Financial Corporation:

We have  audited the  consolidated  financial  statements  of Security  National
Financial  Corporation and subsidiaries (the "Company") as of December 31, 2005,
and have issued our report  thereon  dated  March 23,  2006;  such  consolidated
financial  statements  and report are included  elsewhere in this Form 10-K. Our
audit also included the condensed financial  information as of December 31, 2005
and for the year then ended included in the financial statement schedules of the
Company listed in Item 15(a)(2).  These  financial  statement  schedules are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  based on our audit.  In our opinion,  such 2005  financial  information
included in the 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.


                                            HANSEN BARNETT & MAXWELL


Salt Lake City, Utah
March 23, 2006


<PAGE>

                                                              Schedule II


                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)
                         Condensed Financial Information

                            Condensed Balance Sheets


                                                         December 31,
                                                    2005             2004
                                                    ----             ----
Assets

Investment in subsidiaries
    (equity method)                             $61,626,274       $57,988,720

Receivables:
    Receivable from
        Affiliates                                8,390,411         9,147,416
    Allowance for doubtful accounts                 (16,528)          (16,528)
                                                 ----------       -----------
       Total receivables                          8,373,883         9,130,888
                                                 ----------       -----------

Property and equipment, at cost,
    net of accumulated depreciation
    of $1,089,580 for 2005 and $896,060
    for 2004                                        419,746           142,170

Other assets                                         61,950            66,828
                                                -----------       -----------
    Total assets                                $70,481,853       $67,328,606
                                                ===========       ===========



See accompanying notes to condensed financial statements.


<PAGE>


                                                        Schedule II (Continued)


                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)
                         Condensed Financial Information

                      Condensed Balance Sheets (Continued)

                                                              December 31,
                                                          2005          2004
                                                          ----          ----
Liabilities:
     Checks written in excess of cash in bank        $   143,165    $  635,394
     Bank loans payable:
     Current installments                              2,129,911     1,886,570
     Long-term                                         4,389,025     6,059,926

  Notes and contracts payable:
     Current installments                                161,834       261,834
     Long-term                                              --         160,873

  Advances from affiliated companies                  10,394,210    10,227,106

  Other liabilities and accrued expenses               1,095,602       955,832

  Income taxes                                         6,469,688     5,476,231
                                                     -----------   -----------
  Total liabilities                                   24,783,435    25,663,766
                                                     -----------   -----------
    Stockholders' equity:
    Common Stock:
        Class A:  $2 par value, authorized
        10,000,000 shares, issued 7,098,363
        shares in 2005 and 6,755,870 shares
        in 2004                                       14,196,726    13,511,740
        Class C:  convertible, $0.20 par value,
         authorized 7,500,000 shares, issued
         6,781,060 shares in 2005 and 6,468,199
         shares in 2004                                1,356,212     1,293,641
                                                     -----------   -----------
    Total common stock                                15,552,938    14,805,381

    Additional paid-in capital                        15,650,344    14,922,851
    Accumulated other comprehensive
        income (loss), and other items                   117,647       (11,352)
    Retained earnings                                 17,460,024    15,365,259
    Treasury stock at cost
        (1,251,104 Class A shares and 138,138
        Class C shares in 2005; 1,315,075
        Class A shares and 79,103 Class C shares
        in 2004, held by affiliated companies)        (3,082,535)   (3,417,299)
                                                     -----------   -----------
    Total stockholders' equity                        45,698,418    41,664,840
                                                     -----------   -----------
       Total liabilities and stockholders' equity    $70,481,853   $67,328,606
                                                     ===========   ===========

See accompanying notes to condensed financial statements.


<PAGE>



Schedule II (Continued)


                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)
                         Condensed Financial Information

                        Condensed Statements of Earnings


                                                 Year Ended December 31,
                                                 -----------------------
                                           2005          2004           2003
                                           ----          ----           ----

Revenue:
    Net investment income             $         7     $       35    $        52
    Fees from affiliates                4,217,198      4,249,430      4,200,683
                                      -----------    -----------    -----------
        Total revenue                   4,217,205      4,249,465      4,200,735
                                      -----------    -----------    -----------

Expenses:
    General and administrative
        expenses                        2,298,886      2,277,933      2,326,526
    Interest expense                      457,413        634,783        719,894
    Expenses to affiliates                200,516        180,446        156,327
                                      -----------    -----------    -----------
        Total expenses                  2,956,815      3,093,162      3,202,747
                                      -----------    -----------    -----------

    Earnings before income
        taxes, and earnings of
        subsidiaries                    1,260,390      1,156,303        997,988

    Income tax expense                   (960,153)      (606,355)    (2,841,738)

    Equity in earnings
        of subsidiaries                 3,187,643      1,572,324      8,440,247
                                      -----------    -----------    -----------
    Net earnings                       $3,487,880     $2,122,272     $6,596,497
                                      ===========    ===========    ===========



See accompanying notes to condensed financial statements.


<PAGE>
<TABLE>
<CAPTION>


                                                        Schedule II (Continued)


                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)
                         Condensed Financial Information

                        Condensed Statements of Cash Flow


                                                        Year Ended December 31,
                                                   2005          2004          2003
                                                  -----          -----         ----
Cash flows from operating activities:
<S>                                             <C>            <C>            <C>
    Net earnings                                $3,487,880     $2,122,272     $6,596,497
Adjustments to reconcile net earnings
      to net cash provided by operating
      activities:
      Depreciation and amortization                193,520        165,830        154,506
      Undistributed earnings
         of affiliates                          (3,187,643)    (1,572,324)    (8,440,247)
      Provision for income taxes                   960,153        606,355      2,841,738
    Change in assets and liabilities:
      Accounts receivable                            1,540         36,000       (128,778)
      Other assets                                   4,878         12,676        (12,589)
      Other liabilities                            127,871       (230,824)        94,529
                                               -----------    -----------    -----------
Net cash provided by operating activities        1,588,199      1,139,985      1,105,656
                                               -----------    -----------    -----------

Cash flows from investing activities:
    Dividends received from subsidiaries                --             --      1,150,000
    Purchase of equipment                         (471,096)        (7,256)       (40,106)
                                               -----------    -----------    -----------
Net cash (used in) provided by
    investing activities                          (471,096)        (7,256)     1,109,894
                                               -----------    -----------    -----------

Cash flows from financing activities:
    Checks written in excess of cash in bank      (492,229)      (156,127)       787,651
    Advances from (to) affiliates                  922,569      2,764,500     (1,019,660)
    Payments of notes and contracts payable     (1,897,443)    (3,741,102)    (2,116,541)
    Stock options exercised                          --             --           133,000
    Proceeds from borrowings on notes and
      contracts payable                            350,000          --             --
                                               -----------    -----------    -----------
Net cash used in financing activities           (1,117,103)    (1,132,729)    (2,215,550)
                                               -----------    -----------    -----------
Net change in cash                                  --             --             --
Cash at beginning of year                           --             --             --
Cash at end of year                            $    --        $    --        $    --
                                               ===========    ===========    ===========

</TABLE>




See accompanying notes to condensed financial statements.


<PAGE>


                                                        Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)
                         Condensed Financial Information

                     Notes to Condensed Financial Statements

1) Bank Loans Payable

   Bank loans payable are summarized as follows:
                                                               December 31,
                                                           2005          2004
                                                           ----          ----
$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

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.        172,549     333,145

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.                      5,926,478   7,206,641

Mark-to-market adjustment                                  (180,091)   (39,101)

Other collateralized bank loans payable                     600,000      --
                                                        -----------  ---------
        Total bank loans                                  6,518,936  7,946,496

      Less current installments                           2,129,911  1,886,570
                                                        ----------- ----------
      Bank loans, excluding current
      Installments                                       $4,389,025 $6,059,926
                                                         ========== ==========

2)  Notes and Contracts Payable

    Notes and contracts are summarized as follows:
                                                               December 31,
                                                           2005          2004
                                                           ----          ----
  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

  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.                               160,873        321,747


<PAGE>


                                                        Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)
                         Condensed Financial Information

                     Notes to Condensed Financial Statements


2)  Notes and Contracts Payable (Continued)
                                                            December 31,
                                                           2005          2004
                                                           ----          ----
     Other                                                   961          960
                                                          ------      -------

    Total notes and contracts                            161,834      422,707
    Less current installments                            161,834      261,834
                                                       ---------    ---------
    Notes and contracts, excluding
      current installments                             $   --        $160,873
                                                       =========     ========

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

              2006      $2,111,654
              2007       1,439,220
              2008       1,526,011
              2009       1,603,885
              Thereafter    --
                        ----------
              Total     $6,680,770
                        ==========

3)  Advances from Affiliated Companies
    ----------------------------------

                                                              December 31,
                                                           2005          2004
         Non-interest bearing advances from affiliates:
         Cemetery and Mortuary
              subsidiary                               $1,459,841   $ 1,459,841
         Life insurance subsidiaries                    8,890,386     8,723,282
         Mortgage subsidiary                               43,983        43,983
                                                      -----------   -----------
                                                      $10,394,210   $10,227,106
                                                      ===========   ===========
4)  Dividends

In 2005, 2004 and 2003, Security National Life Insurance Company, a wholly owned
subsidiary of the  Registrant,  paid to the  registrant  cash dividends of $-0-,
$-0-, and $1,150,000, respectively.


<PAGE>
<TABLE>
<CAPTION>


                                                                 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

2005
<S>                       <C>            <C>           <C>          <C>           <C>
Life Insurance
    in force ($000)        $2,571,516      $185,364      $778,624    $3,164,776     24.6%
                          ===========   ===========   ===========   ===========   ======

Premiums:
Life Insurance            $26,795,343      $853,088      $942,080   $26,884,335      3.5%
Accident and
    Health Insurance          285,190            --           584       285,774       .2%
                          -----------   -----------   -----------   -----------   ------
         Total premiums   $27,080,533      $853,088      $942,664   $27,170,109      3.5%
                          ===========   ===========   ===========   ===========   ======

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%
                          ===========   ===========   ===========   ===========   ======
</TABLE>






<PAGE>
<TABLE>
<CAPTION>


                                                                  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, 2005
------------------------------------
<S>                                         <C>             <C>                 <C>               <C>
Accumulated depreciation on real estate     $4,408,030      $389,868            $(12,919)         $4,784,979

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

Accumulated depreciation
    on property and equipment               11,856,366     1,704,154            (205,834)         13,354,686

Allowance for doubtful accounts              1,302,368        80,748            (192,010)          1,191,106

Allowance for doubtful accounts on
    collateral loans                           140,580       200,000              (1,362)            339,218


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

Allowance for doubtful accounts
   on collateral loans                         142,051            --              (1,471)            140,580

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

Allowance for doubtful accounts
on collateral loans                            143,929            --              (1,878)            142,051
</TABLE>


<PAGE>


                                                                  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: March 31, 2006

                                            By:      George R. Quist
                                                     Chairman of the Board and
                                                     Chief Executive Officer


<PAGE>



                                                                 Exhibit 31.2

                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                                  AS ENACED 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:  March 31, 2006

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


<PAGE>


                                                                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, 2005, 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
         March 31, 2006

                                                                 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, 2005, 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
         March 31, 2006


<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
                          Year Ended December 31, 2005

                     SECURITY NATIONAL FINANCIAL CORPORATION
                           Commission File No. 0-9341

                                 E X H I B I T S


<PAGE>


                                  Exhibit Index



Exhibit No.                  Document Name

     10.31 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



<PAGE>


                                  EXHIBIT 10.31

                        Subsidiaries of Security National
                              Financial Corporation
                              as of March 31, 2006


         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.

         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

         Memorial Insurance Company of America