Washington, D.C. 20549

                                   Form 10-K/A

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                 For the fiscal year ended December 31, 2002, 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                              87-034594
--------------------------------          --------------
(State or other jurisdiction           (I.R.S. Employer Identification Number)
of incorporation or organization)

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

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

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

Title of each Class                Name of each exchange on which registered
-------------------                ------------------------------------------
      None                                         None

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

Class A Common Stock, $2.00 Par Value     Class C Common Stock, $0.20 Par Value
-------------------------------------     -------------------------------------
       (Title of Class)                             (Title of Class)

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. [X]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of March 31, 2003, was approximately $30,734,548.

As of March 31, 2003,  registrant had issued and outstanding 4,705,586 shares of
Class A Common Stock and 6,105,726 shares of Class C Stock.

DOCUMENTS  INCORPORATED BY REFERENCE  Portions of the definitive Proxy Statement
for the  registrant's  2003 Annual Meeting of Stockholders  are  incorporated by
reference into Part III hereof.

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

<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 35 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 five in the state of
Arizona.  The Company also engages in pre-need selling of funeral,  cemetery and
cremation  services  through its Utah  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 ten
offices in six states.

The design and  structure  of the Company is that each segment is related to the
others and contributes to the  profitability  of the other segments.  Because of
the  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.  Security
National  Life  Insurance  Company,  a Utah  domiciled  life  insurance  company
("Security National Life") invests its assets (representing in part the pre-paid
funerals) in investments  authorized by the Insurance  Departments of the States
of Florida and Utah. One such investment authorized by the Insurance Departments
is high quality mortgage loans. Thus, while each 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 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
December 1994, Civil Service  Employees Life Insurance Company in December 1995,
Southern  Security Life  Insurance  Company in December  1998.  Most recently on
December 23, 2002,  the Company  completed an asset  purchase  transaction  with
Acadian Life Insurance  Company,  a Louisiana  domiciled life insurance  company
("Acadian"),  from which it acquired  $75,000,000  in assets and  $75,000,000 in
insurance  reserves.  On January 1, 2003, the Company entered into an assumption
reinsurance agreement in which Acadian agreed to transfer and assign to Security
National Life all of its right,  title and interest in the  reinsured  policies.
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
January 1994,  Greer-Wilson  Funeral  Home,  Inc. in April 1995 and Crystal Rose
Funeral  Home in  February  1997.  In July 1993,  the  Company  formed  Security
National  Mortgage  Company  ("Security  National  Mortgage")  to originate  and
refinance  mortgage loans.  Since 1993 Security  National  Mortgage  Company has
opened  ten  branches  in  six  states.  See  Notes  to  Consolidated  Financial
Statements for additional  disclosure and discussion  regarding  segments of the
business.

Life Insurance

         Products

The Company,  through its  insurance  subsidiaries,  Security  National Life and
Southern Security Life 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.


<PAGE>


A funeral plan is a small face value life insurance  policy that generally has a
face coverage of up to $5,000. 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 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 the funding of a child's education.  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 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
fund the cost of their children's  higher  education.  The product is offered to
parents who have children generally under the age of 16.

         Markets and Distribution

The  Company is  licensed  to sell  insurance  in 35  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. The Company generally sells
its  life  insurance  products  to  people  of  middle  age who  have a need for
insurance  to protect the income of the wage  earner of the  family,  to pay off
debts at the time of death and for other estate planning purposes.

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
("HEA")  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 claims they pay to lenders.  The
federal guaranty on a FFEL replaces the security  (collateral)  usually required
for a long-term consumer loan. These government programs have numerous rules for
qualification  and have limits on how much you can borrow.  The Company's  whole
life  product has an Annuity  Rider that can provide a way for  families to save
additional funds for their children's education.  The Company has a student loan
resource  department,  which is available to  policyholders  to help parents and
students apply for various scholarships, grants and loans.

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

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


<PAGE>


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. 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, 2002:

<TABLE>
<CAPTION>

                                      2002         2001      2000        1999            1998
                                      ----         ----      ----        ----            ----
Life Insurance
Policy/Cert
<S>                            <C>          <C>        <C>          <C>             <C>
    Count as of December 31      341,909(2)     74,335    71,178        75,808          69,895(1)
Insurance
    in force as of December 31
    (omitted 000)             $2,635,436(2) $2,425,557 $2,049,789   $2,113,893      $2,123,734(1)
Premiums Collected
    (omitted 000)                $14,699      $14,860     $14,959      $15,261(1)       $5,718

</TABLE>

(1)  Includes  acquisition  of  Southern  Security  Life  Insurance  Company  on
     December 17, 1998.

(2)  Includes asset purchase  transaction with Acadian Life Insurance Company on
     December 23, 2002.

    Underwriting

Factors  considered  in  evaluating an  application  for insurance  coverage can
include the applicant's  age,  occupation,  general health and medical  history.
Upon receipt of a satisfactory  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                      Exam Required

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 $10,000.  It is written on a  simplified
medical   application   with   underwriting   requirements   being  a  completed
application,  a phone  inspection on each  applicant  and a Medical  Information
Bureau inquiry. There are several underwriting classes in which an applicant can
be placed.  If the  Company  receives  conflicting  or  incomplete  underwriting
information, an attending physician's statement can be ordered.

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 purchase an immediate  annuity 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

<PAGE>


payment.  These single and flexible premium deferred  annuities can have initial
surrender  charges.  The surrender charges act as a deterrent to individuals who
may  wish to  surrender  their  annuity  contracts.  Annuities  have  guaranteed
interest rates of 3% to 4 1/2% per annum. Above that, the interest rate credited
is  periodically  determined by the Board of Directors at their  discretion.  An
immediate  annuity is a contract in which the individual remits to the Company a
sum of money in return for the Company's  obligation to pay a series of payments
on a periodic basis over a designated  period of time,  such as an  individual's
life, or for such other period as may be designated.

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

       Markets and Distribution

The  general  market  for  the  Company's  annuities  is  middle  to  older  age
individuals   who  wish  to  save  or  invest  their  money  in  a  tax-deferred
environment,  having  relatively  high  yields.  The  major  source  of  annuity
considerations comes from direct agents.  Annuities are also sold in conjunction
with other insurance sales. This is true in both the funeral planning and higher
education  planning  areas. If an individual does not qualify for a funeral plan
due to health  considerations,  the agent  will often  sell that  individual  an
annuity to fund those final  expenses.  In the higher  education  planning area,
most life insurance  sales have as part of the transaction an annuity piece 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, 2002:

                           2002      2001        2000       1999        1998
                           ----      ----        ----       ----        ----
Annuities
Policy/Cert.
    Count as of
    December 31            7,711     8,021       8,443      8,369       7,890(1)
Deposits Collected
   omitted 000)           $3,215    $2,550      $3,039   $3,906(1)     $2,770

(1)  Includes  acquisition  of  Southern  Security  Life  Insurance  Company  on
     December 17, 1998.

Accident and Health

    Products

Prior to the acquisition of Capital Investors Life in December 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 and a limited cancer
benefit  policy.  The diver's  policy  provides  worldwide  coverage for medical
expense  reimbursement  in the event of diving or water  sports  accidents.  The
cancer policy provides a lump sum payment for the occurrence of cancer.


<PAGE>


    Markets and Distribution

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

The following  table  summarizes  the accident and health  business for the five
years ended December 31, 2002:

                        2002       2001       2000        1999        1998
                        ----       ----       ----        ----        ----
Accident
  and Health
Policy/Cert. Count
    as of December 31    18,921    19,343     21,454     24,078      27,201(1)
Premiums Collected
  (omitted 000)            $365      $413       $464       $549(1)     $375

(1)  Includes  acquisition  of  Southern  Security  Life  Insurance  Company  on
     December 17, 1998.

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,  2002,   reinsured   by  other   companies   aggregated
$220,749,000, representing approximately 9.1% of the Company's life insurance in
force on that date.

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

Investments

The   investments   that  support  the  Company's  life  insurance  and  annuity
obligations are determined by the Investment Committee of the Board of Directors
of the various  subsidiaries  and ratified by the full Board of Directors of the
respective  subsidiaries.  A significant  portion of the  investments  must meet
statutory requirements governing the nature and quality of permitted investments
by  insurance  companies.   The  Company's   interest-sensitive  type  products,
primarily  annuities  and  interest-sensitive  whole  life,  compete  with other
financial  products such as bank  certificates of deposit,  brokerage  sponsored
money market funds as well as competing life insurance company  products.  While
it is not the Company's  policy to offer the highest  yield in this climate,  in
order  to  offer  what the  Company  considers  to be a  competitive  yield,  it
maintains a diversified portfolio consisting of common stocks, preferred stocks,
municipal bonds,  investment and non-investment grade bonds including high-yield
issues,  mortgage  loans,  real  estate,  short-term  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.


<PAGE>


Cemetery and Mortuary

    Products

The Company has six wholly-owned cemeteries and 13 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 ten 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 10% to 22%
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

The  Company,  through  its  mortgage  subsidiary,  Security  National  Mortgage
Company,  originates and underwrites  residential  and commercial  loans for new
construction  and  existing  homes and real  estate  projects.  The  Company  is
approved to underwrite and process government guaranteed and conventional loans.
Most of the loans are sold  directly to  investors.  The  Company has  available
warehouse lines of credit with affiliated  companies and unaffiliated  financial
institutions to fund mortgage loans prior to the purchase by investors.

    Markets and Distribution

The Company's  mortgage  lending  services are marketed  primarily to individual
homeowners and has branch offices in Salt Lake City and Orem, Utah; Valencia and
Sacramento,  California;  Orlando, Florida; Colorado Springs, Colorado; Phoenix,
Arizona and  Houston,  Texas.  The average  loan size for  residential  loans is
$150,000.

The  Company's  mortgage loan  originations  are through full time mortgage loan
officers and wholesale  brokers who are paid a sales commission  ranging between
..7% to 3.0% of the  loan  amount.  Prospective  customers  are  located  through
contacts with builders, real estate agents and regional sales representatives..

Recent Acquisitions and Other Business Activities

    Acadian Life Insurance Company

On December  23,  2002,  the Company  completed  an asset  purchase  transaction
through its wholly owned  subsidiary,  Security  National Life with Acadian 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 ("GNLIC") on June
6, 2001, which, at that time consisted of all of GNLIC's  insurance  policies 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,  subsequent  to Acadian's  recapture of the
insurance in force from its  reinsurer  Scottish Re (U.S.) Inc. on September 30,
2002.

Under the terms of the Coinsurance  Agreement,  Security National Life agreed to
assume all of the risks (including deaths,  surrenders,  disability,  accidental
deaths and  dismemberment) on the reinsurance  policies as of the effective date
of the Agreement.  Acadian  represented and warranted that each of the reinsured
policies was in force as of the effective date (including  policies which may be
lapsed  subject  to the  right of  reinstatement,  policies  not  lapsed  but in
arrears,  and  policies  in force  and in effect  as paid up and  extended  term
policies)  with  premiums  paid  and its face  amount,  insured,  and all  other
characteristics accurately reflected.  Security National Life accepted liability
for all the  risks  under  the  reinsured  policies  on  eligible  lives for all
benefits  occurring  on or  after  the  effective  date  of the  agreement.  The
liability of Security  National  Life under the  coinsurance  treaty began as of
September 30, 2002.

The Coinsurance  Agreement  further provided Security National Life the right to
assume all right, title and interest to the reinsured policies, as well as other
similar  policies  written by Acadian under similar terms and  conditions in the
state of  Mississippi  from  September  30,  2002,  through  termination  of the
Coinsurance Agreement, with an Assumption Reinsurance Agreement, at any time but
in any event not later than nine months subsequent to December 16, 2002, subject
to all  regulatory  approvals  as required by law. In the event  Acadian were to
come under any  supervision by a state regulator or in the event Acadian were to
apply for or consent in the  appointment  of, or the taking of possession  by, a
receiver,  custodian,  regulator, trustee or liquidator of itself or of all or a
substantial part of its assets, make a general assignment for the benefit of its
creditors,  commence a voluntary case under the Federal  Bankruptcy Code, file a
petition  seeking to take  advantage  of any other law  relating to  bankruptcy,
insolvency,  reorganization  or winding up,  Security  National Life and Acadian
were to be deemed to have converted the  Coinsurance  Agreement to an Assumption
Reinsurance  Agreement  one day prior to such  insolvency  or other  actions and
Security National Life was to be deemed to have assumed the reinsurance policies
as of one day prior to the date thereof.

The  Coinsurance  Agreement  further  provided  that Acadian was 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>


Subsequent to the coinsurance agreement,  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.

The  Assumption  Agreement  also  requires  Security  National  Life to  issue a
certificate  of  assumption  for each policy in force  included in the Reinsured
Business, reinsuring such policies according to the terms thereof, provided that
Security  National  Life may be subrogated  to and  substituted  for all rights,
privileges and interests accruing under such policies, and provided further that
all obligations and  liabilities  assumed by Security  National Life are assumed
subject to the terms,  limitations  and  conditions  of the  insurance  policies
included in the Reinsured Business and all defenses,  counterclaims and off-sets
that are or might thereafter become available to Security National Life.

Under the  Assumption  Agreement  Security  National  Life agreed to assume only
those insurance risks in contractual  obligations  included within the Reinsured
Business of Acadian.  Security  National  Life did not agree to assume any extra
contractual or other liability or obligations of Acadian. In addition,  Security
National  Life did not agree to assume  any policy  issued to an  insured  whose
death  occurred  prior to January 1, 2003,  and for which a death claim had been
received by Acadian  prior to that date.  However,  Security  National  Life did
agree to assume any valid  claim of an insured  whose  death  occurred  prior to
January 1, 2003,  and for which a death claim was not received by Acadian  prior
to that date.

The Assumption  Agreement  further provided that as of January 1, 2003,  Acadian
was to transfer and assign to Security National Life all of its right, title and
interest  in the  reinsured  policies,  including  policies  which may be lapsed
subject to the right of  reinstatement,  and  policies in force and in effect as
paid up and  extended  term  policies.  Acadian  further  agreed to turn over to
Security  National  Life,  as of  January 1, 2003,  all  policy  owner  service,
underwriting  and other  files on hand that may be needed by  Security  National
Life in the continuation of the Reinsured  Business,  and Acadian further agreed
to turn over all such records and record books as may be necessary  for carrying
on the  Reinsured  Business,  including  all such  permanent  records of Acadian
necessary  for  Security  National  Life to  continue  in  force in  effect  the
reinsured policies.

On December 23, 2002, Security National Life also entered into an Asset Purchase
Agreement  with  Acadian,  in which  Acadian  agreed to  transfer  and convey to
Security National Life all of Acadian's right,  title and interest in and to the
certain  assets of Acadian.  The assets  included  the  following:  (i) computer
hardware;  (ii) licensed software from  International  Business  Machines,  Inc.
("'IBM") for certain software  utilized in the maintenance of Acadian's  general
ledger  accounting  records,  for use on Acadian's AS400  computer;  (iii) owned
software  developed by employees or contractors of Acadian or Gulf National Life
Insurance  Company and utilized by Acadian in accounting for premiums  received,
reserve  computations,  and for  other  purposes;  (iv)  certain  furniture  and
equipment;  (v) the use of the name "Gulf National Life Insurance Company" alone
or as part of any other tradename,  as well as the logo "GNL"; (vi) the sublease
of  certain  real  property  located  in  Jackson,  Mississippi;  and  (vii) the
assignment and assumption of certain agreements and arrangements.  Following the
closing of the asset purchase  transaction with Acadian,  Security National Life
intends to  continue to operate the  business  it acquired  from  Acadian in the
state of Mississippi.


<PAGE>


    Menlo Life Insurance Company

On June 30, 1999 the Company entered into a Coinsurance and Assumption Agreement
(the "Agreement") with Menlo Life Insurance Company ("Menlo Life"),  wherein the
Company has assumed 100% of the policies in force of Menlo Life.  The  Agreement
was not in effect  until it was  approved  by Menlo  Life's  domiciled  state of
Arizona and the state of California.  These approvals were obtained on September
9, 1999 for the Arizona  Insurance  Department,  and on December 9, 1999 for the
California Insurance Department.

    SSLIC Holding Company

On December 17, 1998,  the Company  completed the  acquisition  of SSLIC Holding
Company, (formerly Consolidare Enterprises, Inc.), a Florida corporation ("SSLIC
Holding")  pursuant to the terms of the Acquisition  Agreement which the Company
entered into on April 17, 1998 with SSLIC  Holding and certain  shareholders  of
SSLIC Holding for the purchase of all of the outstanding  shares of common stock
of SSLIC Holding and all of the outstanding shares of stock of Insuradyne Corp.,
a Florida  Corporation  ("Insuradyne").  As of December 31, 2002,  SSLIC Holding
owns  approximately  75% of the  outstanding  shares of common stock of Southern
Security Life Insurance Company, a Florida  corporation  ("Southern  Security").
Southern Security is a Florida domiciled  insurance company with total assets as
of December 31, 2002,  of  approximately  $77.3  million.  Southern  Security is
currently licensed to transact business in 14 states.  Southern Security is also
a reporting  company  under Section 13 of the  Securities  Exchange Act of 1934.
Reference is made to Southern  Security's  annual  report on Form 10-K-A for the
year ended  December  31,  2002,  which was filed with the  Securities  Exchange
Commission on March 31, 2003, Commission File No. 2-35669.

    Crystal Rose Funeral Home

In February 1997, the Company purchased all of the outstanding  shares of common
stock  of  Crystal  Rose  Funeral  Home,  Inc.   ("Crystal  Rose"),  an  Arizona
corporation.  In  connection  with this  transaction,  the Company also acquired
certain  real estate and other  assets  related to the  business of Crystal Rose
from the sole  stockholder  of Crystal  Rose.  The Company  continues to operate
Crystal  Rose,  which is located in  Tolleson,  Arizona,  as a funeral  home and
mortuary.

Regulation

The  Company's  insurance  subsidiaries,  Security  National  Life and  Southern
Security, 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 and  Florida  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.


<PAGE>


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

Income Taxes

The  Company's  insurance  subsidiaries,  Security  National  Life and  Southern
Security,  are taxed under the Life Insurance Company Tax Act of 1984.  Pursuant
thereto,  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
significant decrease in life reserves will result in taxable income.

Security National Life and Southern Security 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 and Southern  Security 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 a  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

<PAGE>


may have a competitive  advantage  because all profits accrue to  policyholders.
Because   the  Company  is  small  by   industry   standards   and  lacks  broad
diversification  of risk,  it may be more  vulnerable  to  losses  than  larger,
better-established  companies.  The Company believes that its policies and rates
for the markets it serves are generally competitive.

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

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

Employees

As of December 31, 2002,  the Company  employed 328  full-time  and 45 part-time
employees.

Item 2.  Properties

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

                                                               Approximate
                                                    Owned        Square
   Location                       Function          Leased      Footage
   --------                       --------          ------      -------
5300 So. 360 West          Corporate Headquarters   Owned (1)    33,000
Salt Lake City, UT

1603 Thirteenth St         Insurance Sales          Owned (2)    10,000
Lubbock, TX

755 Rinehart Rd            Insurance Operations/    Owned (3)    27,000
Lake Mary, FL              Mortgage Sales

6522 Dogwood View Parkway  Insurance Operations     Leased (4)    5,300
Jackson, MS

1236 No. Spencer, Ste. 2
Mesa, AZ                   Mortgage Sales           Leased (5)    3,700

27201 Tourney Rd., Ste. 121
Valencia, CA               Mortgage Sales           Leased (6)    1,600

12150 Tributary Pnt. Dr.,
   Ste. 160
Gold River, CA             Mortgage Sales           Leased (7)    2,000

1901 No. Union, Ste. 104
Colorado Springs, CO       Mortgage Sales           Leased (8)    2,200


<PAGE>



Item 2.  Properties (Continued)
--------------------
                                                         Approximate
                                              Owned        Square
   Location                   Function        Leased      Footage
   --------                   --------        ------      -------
10850 Richmond Ave.,
  Ste 270
Houston, TX                 Mortgage Sales   Leased (9)    1,600

595 West 800 North
Orem, UT                    Mortgage Sales   Leased (10)   2,000

970 East Holladay Rd
Murray, UT                  Mortgage Sales   Leased (11)   6,600


(1)  The Company  leases an  additional  7,484  square  feet of the  facility to
     unrelated third parties for  approximately  $70,300 per year,  under leases
     expiring at various dates after 2002.

(2)  The Company  leases an  additional  7,265  square  feet of the  facility to
     unrelated third parties for  approximately  $33,000 per year,  under leases
     expiring at various dates after 2002.

(3)  The Company  leases an  additional  13,301  square feet of the  facility to
     unrelated third parties for  approximately  $232,600 per year, under leases
     expiring at various dates after 2002.

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

(5)  The Company leases this facility for $47,400 per year. The lease expires in
     August 2004.

(6)  The Company leases this facility for $39,600 per year. The lease expires in
     November 2005.

(7)  The Company leases this facility for $43,800 per year. The lease expires in
     July 2004.

(8)  The Company leases this facility for $28,200 per year. The lease expires in
     July 2003.

(9)  The Company leases this facility for $37,200 per year. The lease expires in
     November 2004.

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

(11) The Company  leases this facility for $103,800 per year.  The lease expires
     in December 2003.

The Company  believes the office  facilities  it occupies are in good  operating
condition,  are  adequate  for  current  operations  and has no plan to build or
acquire additional office facilities. The Company believes its office facilities
are adequate for handling its business in the foreseeable future.


<PAGE>

The following table summarizes the location and acreage of the six Company owned
cemeteries:
<TABLE>
<CAPTION>

                                                                                     Net Saleable Acreage

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

<S>                    <C>                     <C>         <C>                <C>       <C>      <C>
Lakeview
   Cemetery(3)        1700 E. Lakeview Dr.
                      Bountiful, UT             1973         7                40         7        33
Mountain View
   Cemetery(3)        3115 E. 7800 So.
                      Salt Lake City, UT        1973        26                54        17        37

Redwood
   Cemetery(3)(5)     6500 So. Redwood Rd.
                      West Jordan, UT           1973        40                78        35        43

Holladay Memorial
   Park(4)(5)         4800 So. Memory Lane
                      Holladay, UT              1991         6                14         6         8

Lakehills
   Cemetery(4)        10055 So. State
                      Sandy, UT                 1991        12                41         6        35

Singing Hills
   Memorial
   Park(6)            2798 Dehesa Rd.
                      El Cajon, CA              1995         6                35         3        32
</TABLE>

<PAGE>


     (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, 2002, there were mortgages of approximately $45,000
          collateralized  by the property  and  facilities  at Memorial  Estates
          Lakeview, Mountain View and Redwood Cemeteries.

     (4)  As of  December  31,  2002,  there  were  mortgages  of  approximately
          $1,600,000  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,  2002,  there  was a  mortgage  of  approximately
          $534,000 collateralized by the property.

<PAGE>




<TABLE>
<CAPTION>

The following  table  summarizes the location,  square footage and the number of
viewing rooms and chapels of the thirteen 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
                     Salt Lake City, UT          1973               3            1         20,000

Memorial Estates, Inc.:

  Redwood Mortuary   6500 South Redwood Rd.
                     West Jordan, UT             1973               2            1         10,000

  Mountain View
     Mortuary        3115 East 7800 South
                     Salt Lake City, UT          1973               2            1         16,000
  Lakeview
     Mortuary        1700 East Lakeview Dr.
                     Bountiful, UT               1973               0            1          5,500

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

Deseret Memorial, Inc.:
  Colonial
     Mortuary(2)     2128 South State St.
                     Salt Lake City, UT          1991               1            1         14,500

  Deseret
     Mortuary(2)     36 East 700 South
                     Salt Lake City, UT          1991               2            2         36,300
  Lakehills
     Mortuary        10055 South State St.
                     Sandy, UT                   1991               2            1         18,000

  Cottonwood
     Mortuary(2)     4670 South Highland Dr.
                     Salt Lake City, UT          1991               2            1         14,500

Camelback Sunset
  Funeral Home(1)    301 West Camelback Rd.
                     Phoenix, AZ                 1994               2            1         11,000
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

 Name of                                                      Date      Viewing     Square
 Mortuary               Location                Acquired     Room(s)    Chapel(s)   Footage
 --------               --------                --------     -------    ---------   -------
Greer-Wilson:
<S>                    <C>                        <C>         <C>          <C>      <C>

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

  Avondale
     Funeral Home      218 North Central
                       Avondale, AZ                1995         1           1         1,850
Crystal Rose
  Funeral Home(3)      9155 W. VanBuren
                       Tolleson, AZ                1997         0           1         9,000
</TABLE>

<PAGE>



     (1)  As of December 31, 2002 there were mortgages of approximately $150,000
          collateralized  by the property  and  facilities  of Camelback  Sunset
          Funeral Home.

     (2)  As of  December  31,  2002,  there  were  mortgages  of  approximately
          $1,600,000  collateralized  by the property and  facilities at Deseret
          Mortuary,  Cottonwood  Mortuary,  Holladay  Memorial  Park,  Lakehills
          Cemetery and Colonial Mortuary.

     (3)  As of  December  31,  2002,  there  was a  mortgage  of  approximately
          $200,000,  collateralized  by the property and  facilities  of Crystal
          Rose Funeral Home.

Item 3.  Legal Proceedings

An action was brought against Southern  Security Life Insurance  Company in July
1999 by Dorothy Ruth Campbell in the Circuit Court of Escambia County,  Alabama.
The action arose out of a denial of coverage under a $10,000  insurance  policy.
The   claims   were  for   breach  of   contract,   bad  faith  and   fraudulent
misrepresentation.  In the action,  Campbell  sought  compensatory  and punitive
damages plus  interest.  The case was dismissed by order of summary  judgment on
January 21, 2003. The appeal time, if appeal is taken, is 42 days.

An action was brought  against the Company in May 2001,  by Glenna  Brown Thomas
individually  and as personal  representative  of the Estate of Lynn W. Brown in
the Third  Judicial  Court,  Salt Lake  County,  Utah.  The action  asserts that
Memorial Estates delivered to Lynn W. Brown six stock certificates  representing
2,000 shares in 1970 and 1971.  Mr. Brown died in 1972.  It is asserted  that at
the time the 2,000 shares were issued and  outstanding,  such  represented  a 2%
ownership  of  Memorial  Estates.  It is  alleged  Mr.  Brown  was  entitled  to
preemptive  rights and that after the  issuance of the stock to Mr.  Brown there
were further issuances of stock without providing written notice to Mr. Brown or
his estate with respect to an opportunity to purchase more stock. It is asserted
among other  things that the  plaintiff  "has the right to a transfer of Brown's
shares to Thomas on defendants'  (which  includes  Security  National  Financial
Corporation  as well as  Memorial  Estates,  Inc.) books and to  restoration  of
Brown's  proportion  of share  ownership in Memorial at the time of his death by
issuance and delivery to Thomas of  sufficient  shares of  defendant's  publicly
traded and unrestricted stock in exchange for the 2,000 shares of Memorial stock
and payment of all dividends  from the date of Thomas's  demand,  as required by
Article XV of the Articles of Incorporation." Based on present information,  the
Company intends to vigorously defend the matter, including an assertion that the
statute of limitations bars the claims.

An action was  brought  against  Southern  Security  Life  Insurance  Company by
National Group Underwriters,  Inc. ("NGU") in state court in the State of Texas.
The case was removed by the Company to the United States  District Court for the
Northern District of Texas, Fort Worth Division,  with Civil No.  4:01-CV-403-E.
An Amended  Complaint was filed on or about July 18, 2001. The Amended Complaint
asserts  that NGU had a  contract  with the  Company  wherein  NGU would  submit
applications for certain  policies of insurance to be issued by the Company.  It
is alleged that disputes have arisen  between NGU and the Company with regard to
the calculation and payment of certain  advanced  commissions as well as certain
production bonuses.

NGU  alleged  that it has been  damaged  far in  excess of the  $75,000  minimum
jurisdictional limits of this Court. NGU also seeks attorney's fees and costs as
well as prejudgment and postjudgment  interest. A second amended complaint and a
third amended  complaint  which  included a fraud claim were filed. A motion was
filed by the Company to dismiss the third amended complaint, including the fraud
claim. The court denied the motion.  The Company has  counterclaimed for what it
claims to be a debit  balance owing to it pursuant to the  relationship  between
the parties with said  counterclaim  seeking a substantial  amount from NGU (the
amount  subject to  reduction  as premiums  are  received).  The Company is also
seeking to recover  attorney's  fees and costs,  as well as punitive  damages on
three of its causes of action.  The change of venue  motion of the  Company  was
denied.  Certain  discovery has taken place.  The federal case was dismissed per
stipulation.  The matter was refiled in Texas state court,  Tarrant County, Case
No. 348 195490 02. The claims of the respective parties are essentially the

<PAGE>


same as set forth above which claims include fraudulent  inducement  relative to
entering  into a contract,  fraud,  breach of  contract,  breach of duty of good
faith and fair dealing, attorneys' fees and exemplary damages. Further discovery
involving the parties is anticipated.  The Company intends to vigorously  defend
the matter as well as prosecute its counterclaim.

An action  was  brought  by  Bernice  Johnson  against  Southern  Security  Life
Insurance  Company  in May,  2002 in the  Circuit  Court  of  Jefferson  County,
Alabama,  Civil  Action No. CV02 2963.  The face  amount of  coverage  under the
policy  is  $15,000.  The  insured  died in  July  2001.  Claims  are  made  for
non-payment   of  the   policy   amount.   The   claims   for   relief   include
misrepresentation, mental anguish and emotional distress, fraud, intentional and
bad faith non  payment  of the  benefit,  intentional  and bad faith  failure to
investigate  the claim for  benefits,  reckless and  negligent and wanton action
relative to  misrepresentation  and/or concealment of facts,  negligence and the
wanton  hiring,  training and  supervision of agent.  Compensatory  and punitive
damages are sought along with  interest  and costs.  An answer has been filed by
the Company and discovery is in process.

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

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
  None
                                     PART II

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

The Company's  Class A Common Stock trades on the Nasdaq  National  Market under
the symbol "SNFCA." Prior to August 13, 1987,  there was no active public market
for the Class A and Class C Common  Stock.  As of March 31,  2003,  the  closing
sales price of the Class A Common Stock was $6.62 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, 2001:

Period (Calendar Year)                     Price Range
----------------------                     -----------
                                      High       Low
                                     ------      ----
   2001
     First Quarter                   $2.32      $1.81
     Second Quartr                    2.27       1.82
     Third Quarter                    2.63       2.00
     Fourth Quartr                    2.63       2.09

   2002
     First Quarter                    2.81       2.20
     Second Quarter                   6.48       2.38
     Third Quarter                    6.10       2.74
     Fourth Quartr                    6.43       2.48
   2003
     First Quarte                     7.26       4.75

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.)


<PAGE>


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 1989 through 2002.

As of December 31, 2002, there were 4,583 record holders of Class A Common Stock
and 143 record holders of Class C Common Stock.

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

The following  selected  financial data for each of the five years in the period
ended  December 31, 2002,  are derived from the audited  consolidated  financial
statements.  The data as of December 31, 2002 and 2001,  and for the three years
ended  December 31, 2002,  should be read in conjunction  with the  consolidated
financial  statements,  related notes and other financial  information  included
herein.

Consolidated Statement of Earnings Data:
<TABLE>
<CAPTION>

                                                                Year Ended December 31,

                                           2002          2001              2000         1999(1)            1998
                                           ----          ----              ----         -------            ----
Revenue
<S>                                    <C>             <C>             <C>             <C>              <C>
Premiums                               $14,077,000     $13,151,000     $12,876,000     $13,176,000      $5,916,000
Net investment income                   12,540,000      12,947,000      12,136,000      10,631,000       7,459,000
Net mortuary and cemetery income        11,256,000      10,603,000       9,417,000      10,178,000       9,226,000
Realized gains on investments            1,021,000          10,000         424,000         313,000          74,000
Mortgage fee income                     57,008,000      40,086,000      22,922,000      14,503,000      10,082,000
Other                                      479,000         152,000         305,000         856,000          63,000
                                      ------------    ------------    ------------    ------------    ------------
Total revenue                           96,381,000      76,949,000      58,080,000      49,657,000      32,820,000
                                      ------------    ------------    ------------    ------------    ------------

Expenses
Policyholder benefits                   13,756,000      11,775,000      12,931,000      11,976,000       6,932,000
Amortization of deferred
  policy acquisition costs               3,994,000       3,870,000       3,189,000       4,858,000       1,274,000
General and administrative expenses     68,459,000      52,247,000      35,959,000      26,959,000      19,649,000
Interest expense                         1,970,000       2,791,000       2,126,000       1,119,000         999,000
Cost of goods & services of
  the mortuaries & cemeteries            2,663,000       2,494,000       2,628,000       3,295,000       2,940,000
                                      ------------    ------------    ------------    ------------    ------------
Total benefits & expenses               90,842,000      73,177,000      56,833,000      48,207,000      31,794,000
                                      ------------    ------------    ------------    ------------    ------------
Income before
  income tax expense                     5,539,000       3,772,000       1,247,000       1,450,000       1,026,000
Income tax expense                      (1,565,000)       (913,000)       (305,000)       (230,000)       (255,000)
Minority interest in (income)
   loss of subsidiary                       18,000         (18,000)        (46,000)       (244,000)             --
                                      ------------    ------------    ------------    ------------    ------------
Net earnings                            $3,992,000      $2,841,000        $896,000        $976,000        $771,000
                                      ============    ============    ============    ============    ============

Net earnings per common share(3)              $.83            $.63            $.21            $.22            $.18
                                      ============    ============    ============    ============    ============
Weighted average outstanding
   common shares                         4,824,000       4,506,000       4,318,000       4,397,000       4,273,000
Net earnings per common
   share-assuming dilution(3)                 $.80            $.63            $.21            $.22            $.18
                                      ============    ============    ============    ============    ============
Weighted average outstanding
   common shares-assuming dilution       4,995,000       4,507,000       4,335,000       4,397,000       4,273,000

</TABLE>

<PAGE>



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

Balance Sheet Data:
<TABLE>
<CAPTION>

                                                             Year Ended December 31,
                                       2002(2)          2001           2000          1999         1998(1)
                                       -------          ----           ----          ----         -------
Assets
<S>                                 <C>             <C>           <C>            <C>            <C>
Investments and restricted assets   $106,162,000    $94,514,000   $108,810,000   $113,208,000   $126,332,000
Cash                                  38,199,000      8,757,000     11,275,000     12,423,000      6,671,000
Receivables                          101,684,000     58,701,000     36,413,000     38,074,000     28,309,000
Other assets                          61,112,000     51,088,000     52,249,000     50,593,000     51,953,000
                                    ------------   ------------   ------------   ------------   ------------
Total assets                        $307,157,000   $213,060,000   $208,747,000   $214,298,000   $213,265,000
                                    ============   ============   ============   ============   ============

Liabilities
Policyholder benefits               $217,895,000   $142,291,000   $141,755,000   $140,368,000   $137,466,000
Notes & contracts payable             19,273,000     12,098,000     14,046,000     23,341,000     22,887,000
Cemetery & mortuary liabilities       10,076,000      9,344,000      8,659,000      6,638,000      6,917,000
Other liabilities                     21,102,000     15,121,000     12,921,000     11,415,000     12,536,000
                                    ------------   ------------   ------------   ------------   ------------
Total liabilities                    268,346,000    178,854,000    177,381,000    181,762,000    179,806,000
                                    ------------   ------------   ------------   ------------   ------------

Minority interest                      4,298,000      4,237,000      4,625,000      6,046,000      6,779,000

Stockholders' equity                  34,513,000     29,969,000     26,741,000     26,490,000     26,680,000
                                    ------------   ------------   ------------   ------------   ------------
Total liabilities and
  stockholders' equity              $307,157,000   $213,060,000   $208,747,000   $214,298,000   $213,265,000
                                    ============   ============   ============   ============   ============
</TABLE>


     (1)  Reflects the acquisition of SSLIC Holding Company and  subsidiaries as
          of December 17, 1998.

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


<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.

During the years ending December 31, 2002 and 2001,  Security  National Mortgage
Company (SNMC) experienced increases in revenue and expenses due to the increase
in loan volume of its operations.  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.  SNMC receives fees
from the  borrowers  and other  secondary  fees from third party  investors  who
purchase  the loans  from  SNMC.  SNMC  sells  all of its  loans to third  party
investors  and does not retain  servicing to these loans.  SNMC pays the brokers
and  correspondents  a commission  for loans that are brokered  through SNMC. In
1999, SNMC opened new wholesale branches in Sacramento, California and Valencia,
California.  In 2000,  SNMC opened new wholesale  branches in Orlando,  Florida;
Colorado  Springs,  Colorado and Provo,  Utah.  In 2001,  SNMC opened  wholesale
branches in Phoenix, Arizona and Houston, Texas. SNMC originated and sold 11,737
($1,721,000,000  loan amount),  8,738  ($1,268,000,000  loan amount),  and 4,845
($652,000,000 loan amount) loans in 2002, 2001 and 2000, respectively.

On December 17, 1998,  the Company  purchased all of the  outstanding  shares of
common stock of SSLIC Holding Company ("SSLIC Holding")  (formerly  "Consolidare
Enterprises,  Inc.") and Insuradyne Corporation  ("Insuradyne") for a total cost
of $12,248,194. As of December 31, 2002, SSLIC Holding held approximately 75% of
the  outstanding  shares of common  stock of Southern  Security  Life  Insurance
Company ("Southern Security").

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

Significant Accounting Policies and Estimates

The following is a brief summary of our  significant  accounting  policies and a
review of our most critical accounting estimates.  For a complete description of
our significant accounting policies, see Note 1 to our 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



<PAGE>


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
financial statements.

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

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

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

Cemetery and Mortuary Operations

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

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"
(FAS No. 66). Under FAS 66,  recognition  of revenue and  associated  costs from
constructed cemetery property must be deferred until a minimum percentage of the
sales  price  has been  collected.  Revenues  related  to the  pre-need  sale of
unconstructed  cemetery  property  will  be  deferred  until  such  property  is
constructed and meets the criteria of FAS No. 66 described above.

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

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

Prearranged  funeral and  pre-need  cemetery  customer  obtaining  costs - costs
incurred  related to obtaining  new pre-need  cemetery and  prearranged  funeral
business are accounted for under the guidance of the provisions of Statement


<PAGE>


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.

Cemetery  merchandise  and  services  trust  investment  earnings  -  investment
earnings  generated by assets  included in merchandise  and services  trusts are
deferred until the associated merchandise is delivered or services performed.

The  Company is  required  to place  specified  amounts  into  restricted  asset
accounts for products  sold on a pre-need  basis.  Income from assets  placed in
these  restricted  asset accounts are used to offset  required  increases to the
estimated future liability.

Revenues and costs for at-need sales are recorded when the services are
performed.

Mortgage Operations

Mortgage fee income is generated  through the  origination  and  refinancing  of
mortgage  loans and is deferred  until such loans are  determined  to be sold in
accordance with FAS No. 140.

All loans are sold to third  party  investors  and the  Company  does not retain
servicing  rights.  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 the reported amounts of
assets,  liabilities,  revenues and expenses and the  disclosure  of  contingent
assets and liabilities.  It is reasonably  possible that actual experience could
differ from the estimates and  assumptions  utilized which could have a material
impact  on  the  financial  statements.  The  following  is  a  summary  of  our
significant accounting estimates, and critical issues that impact them:

Fixed Maturities Available for Sale

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

The Company uses fair market values based on National  Association  of Insurance
Commissioners  (NAIC) values,  versus values  associated  with normal  marketing
pricing services. The Company considers the difference to be immaterial.

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

<PAGE>


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.

These estimates, which are revised periodically, are based on historical results
and our best estimate of future expenses.

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 the  Company's
cemetery and mortuary operations and mortgage loan operations.  The allowance is
based upon the Company's  experience.  The critical issues that would impact the
cemetery and mortuary operations is the overall economy. The critical issues for
the mortgage loan operations would be interest rate risk and loan underwriting.

Future Policy Benefits

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

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

Unearned Revenue

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

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

The revenue and cost associated with the sales of pre-need cemetery  merchandise
and funeral  services are deferred  until the  merchandise  is delivered.  Also,
trust  investment  earnings  from any pre-need  sales placed into trust are also
deferred until the merchandise is delivered.

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.


<PAGE>


Results of Operations

2002 Compared to 2001

Total revenues  increased by $19,432,000,  or 25.3%, from $76,949,000 for fiscal
year 2001 to $96,381,000 for fiscal year 2002.  Contributing to this increase in
total  revenues was a  $16,922,000  increase in mortgage fee income,  a $653,000
increase in net mortuary and cemetery sales and a $926,000 increase in insurance
premiums and other considerations.

Insurance  premiums  and  other  considerations   increased  by  $926,000,  from
$13,151,000 in 2001 to  $14,077,000 in 2002.  This increase was primarily due to
the additional  premiums from increased sales of the Company's  traditional life
products.

Net  investment  income  decreased  by  $407,000,  from  $12,947,000  in 2001 to
$12,540,000  in 2002.  This  decrease  was  primarily  attributable  to  reduced
interest earned as a result of lower interest rates during 2002.

Net mortuary and cemetery sales increased by $653,000,  from $10,603,000 in 2001
to  $11,256,000 in 2002.  This increase was primarily due to additional  at-need
cemetery and mortuary sales.

Mortgage  fee income  increased  by  $16,922,000,  from  $40,086,000  in 2001 to
$57,008,000  in 2002.  This  increase was  primarily  attributable  to a greater
number of loan originations during 2002 due to lower interest rates.

Total benefits and expenses were $90,842,000 for 2002, which  constituted  94.3%
of the Company's  total revenues,  as compared to  $73,177,000,  or 95.1% of the
Company's total revenues for 2001.

During 2002, there was a net increase of $902,000 in death benefits,  surrenders
and other  policy  benefits,  and an increase  of  $1,079,000  in future  policy
benefits from  $11,775,000 in 2001 to $13,756,000 in 2002. This net increase was
primarily the result of an increase in traditional life reserves.

Amortization  of  deferred  policy and  pre-need  acquisition  costs and cost of
insurance acquired increased by $124,000,  from $3,870,000 in 2001 to $3,994,000
in 2002.  This  increase  was  reasonable  based  on the  underlying  nature  of
assumptions.

General and administrative  expenses increased by $16,212,000,  from $52,247,000
in 2001 to $68,459,000 in 2002.  Contributing to this increase was a $12,255,000
increase in commission  expenses,  from  $29,859,000  in 2001 to  $42,114,000 in
2002. Salaries increased  $1,386,000,  from $9,028,000 in 2001 to $10,414,000 in
2002.  Other  expenses  increased  $2,571,000,   from  $13,360,000  in  2001  to
$15,931,000  in 2002.  These  increases  were primarily the result of additional
expenses due to increased  numbers of loan  originations  made by the  Company's
mortgage subsidiary in 2002.

Interest expense decreased by $821,000, from $2,791,000 in 2001 to $1,970,000 in
2002.  This  decrease  was due to more  loan  originations  from  the  Company's
mortgage  subsidiary  being  funded  from  internal  sources  of funds and lower
interest rates from borrowings from third parties.

Cost of the mortuary and cemetery goods and services sold increased by $169,000,
from  $2,494,000 in 2001 to $2,663,000 in 2002.  This increase was primarily due
to greater at-need cemetery and mortuary sales.


<PAGE>


2001 Compared to 2000

Total revenues  increased by $18,870,000,  or 32.5%, from $58,079,000 for fiscal
year 2000 to $76,949,000, for fiscal year 2001. Contributing to this increase in
total  revenues was a $17,165,000  increase in mortgage fee income,  an $810,000
increase in net  investment  income,  a $1,187,000  increase in net mortuary and
cemetery  sales  and  a  $275,000  increase  in  insurance  premiums  and  other
considerations.

Insurance  premiums  and  other  considerations   increased  by  $275,000,  from
$12,876,000 in 2000 to  $13,151,000 in 2001.  This increase was primarily due to
the additional  premiums from increased sales of the Company's  traditional life
products.

Net  investment  income  increased  by  $810,000,  from  $12,136,000  in 2000 to
$12,946,000  in 2001.  This  increase was primarily  attributable  to additional
interest  earned  as a result of a greater  number of loan  originations  during
2001.

Net mortuary and cemetery sales increased by $1,187,000, from $9,417,000 in 2000
to  $10,603,000 in 2001.  This increase was primarily due to additional  at-need
cemetery and mortuary sales.

Mortgage  fee income  increased  by  $17,165,000,  from  $22,921,000  in 2000 to
$40,086,000  in 2001.  This  increase was  primarily  attributable  to a greater
number of loan originations  during 2001 due to lower interest rates,  resulting
in more borrowers refinancing their mortgage loans.

Total benefits and expenses were $73,177,000 for 2001, which  constituted  95.1%
of the Company's  total revenues,  as compared to  $56,832,000,  or 97.9% of the
Company's total revenues for 2000.

During  2001,  there  was  a net  increase  of  $1,160,000  in  death  benefits,
surrenders  and other policy  benefits,  and a decrease of  $2,316,000 in future
policy  benefits  from  $12,931,000  in 2000 to  $11,775,000  in 2001.  This net
decrease was primarily the result of a decrease in traditional life reserves.

Amortization  of  deferred  policy and  pre-need  acquisition  costs and cost of
insurance acquired increased by $681,000,  from $3,189,000 in 2000 to $3,870,000
in  2001.  This  increase  was  reasonable  based  on the  underlying  actuarial
assumptions.

General and administrative  expenses increased by $16,288,000,  from $35,959,000
in 2000 to $52,247,000 in 2001. Contributing to this increase was an $11,458,000
increase in commission  expenses,  from  $18,401,000  in 2000 to  $29,859,000 in
2001.  Salaries increased  $1,360,000,  from $7,667,000 in 2000 to $9,028,000 in
2001.  Other  expenses  increased   $3,470,000,   from  $9,890,000  in  2000  to
$13,360,000  in 2001.  These  increases  were primarily the result of additional
expenses due to increased  numbers of loan  originations  made by the  Company's
mortgage subsidiary in 2001.

Interest expense increased by $665,000, from $2,126,000 in 2000 to $2,791,000 in
2001.  This  increase  was  primarily  due to more  loan  originations  from the
Company's mortgage subsidiary being funded by third parties in 2001.

Cost of the mortuary and cemetery goods and services sold decreased by $134,000,
from  $2,628,000 in 2000 to $2,494,000 in 2001.  This decrease was primarily due
to additional  sales of cemetery burial  properties in 2001,  which have a lower
cost of goods sold than other funeral products.

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

<PAGE>


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 warehouse  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  $51,530,000  as of  December  31,  2002  compared to
$49,271,000 as of December 31, 2001.  This represents 51% of the total insurance
related  investments  in 2002 as compared to 55% in 2001.  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, 2002, 4% ($1,903,000)  and at
December 31, 2001, 5% ($2,534,000) of the Company's total bond  investments were
invested in bonds in rating  categories  three through six which are  considered
non-investment grade.

If market conditions were to cause interest rates to change, the market value of
the fixed  income  portfolio  (approximately  $73,458,000)  could  change by the
following  amounts based on the respective  basis point swing (the change in the
market values were calculated using a modeling technique):

                      -200 bps      -100 bps         +100 bps       +200 bps
                      --------      --------         --------       --------
Change in
   Market Value
   (in thousands)      $4,960        $3,275          $(4,335)       $(10,258)

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, 2002
and 2001, the life subsidiaries exceeded the regulatory criteria.

The Company's total  capitalization  of  stockholders'  equity and bank debt and
notes payable was  $53,787,000 and $42,067,000 as of December 31, 2002 and 2001,
respectively.  Stockholders' equity as a percent of total capitalization was 64%
and 71% as of December 31, 2002 and 2001, respectively.

Lapse  rates  measure the amount of  insurance  terminated  during a  particular
period.  The  Company's  lapse rate for life  insurance  in 2002 was  10.7%,  as
compared to a rate of 13.2% in 2001.


<PAGE>


On December 17, 1998,  the Company  completed  the  acquisition  of  Consolidare
Enterprises,  Inc., a Florida corporation  ("Consolidare") pursuant to the terms
of the  Acquisition  Agreement  which the Company entered into on April 17, 1998
with Consolidare and certain shareholders of Consolidare for the purchase of all
of the  outstanding  shares of common  stock of  Consolidare.  Consolidare  owns
approximately 75% of the outstanding shares of common stock of Southern Security
Life  Insurance  Company,  a  Florida  corporation  ("SSLIC"),  and  all  of the
outstanding  shares  of  stock  of  Insuradyne  Corp.,  a  Florida   corporation
("Insuradyne").

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

In connection with the  acquisition of Consolidare,  the Company entered into an
Administrative  Services Agreement dated December 17, 1998 with SSLIC. Under the
terms of the  agreement,  the Company has agreed to provide  SSLIC with  certain
defined  administrative and financial services,  including  accounting services,
financial   reports   and   statements,    actuarial,   policyholder   services,
underwriting,  data processing,  legal, building management,  marketing advisory
services  and  investment  services.  In  consideration  for the  services to be
provided by the Company, SSLIC shall pay the Company an administrative  services
fee of $250,000 per month, provided,  however, that such fee shall be reduced to
zero for so long as the  capital  and  surplus of SSLIC is less than or equal to
$6,000,000,  unless  SSLIC and the Company  otherwise  agree in writing and such
agreement is approved by the Florida Department of Insurance.

The administrative services fee may be increased,  beginning on January 1, 2002,
to reflect  increases in the Consumer  Price Index,  over the index amount as of
January 1, 2001. The  Administrative  Services  Agreement shall remain in effect
for an initial term expiring on December 16, 2003. The term of the agreement may
be  automatically  extended for  additional  one-year  terms  unless  either the
Company or SSLIC shall deliver a written notice on or before September 30 of any
year  stating to the other its  desire not to extend the term of the  agreement.
However, in no event can the agreement be terminated prior to December 16, 2003.

On June 30, 1999 the Company entered into a Coinsurance and Assumption Agreement
(the "Agreement") with Menlo Life Insurance Company ("Menlo Life"),  wherein the
Company has assumed 100% of the policies in force of Menlo Life.  The  Agreement
was not in effect  until it was  approved  by Menlo  Life's  domiciled  state of
Arizona and the state of California.  These approvals were obtained on September
9, 1999 for the Arizona  Insurance  Department,  and on December 9, 1999 for the
California Insurance Department. Menlo Life paid consideration to the Company in
the form of  statutory  admitted  assets to equal the  liabilities  assumed.  On
September 25, 2001,  Menlo Life paid to the Company $308,978 in policy loans and
$2,269,403 in cash.

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 ("GNLIC") on June
6, 2001, which, at that time consisted of all of GNLIC's  insurance  policies 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,  subsequent  to Acadian's  recapture of the
insurance in force from its  reinsurer  Scottish Re (U.S.) Inc. on September 30,
2002.


<PAGE>


Under the terms of the Coinsurance  Agreement,  Security National Life agreed to
assume all of the risks (including deaths,  surrenders,  disability,  accidental
deaths and  dismemberment) on the reinsurance  policies as of the effective date
of the Agreement.  Acadian  represented and warranted that each of the reinsured
policies was in force as of the effective date (including  policies which may be
lapsed  subject  to the  right of  reinstatement,  policies  not  lapsed  but in
arrears,  and  policies  in force  and in effect  as paid up and  extended  term
policies)  with  premiums  paid  and its face  amount,  insured,  and all  other
characteristics accurately reflected.  Security National Life accepted liability
for all the  risks  under  the  reinsured  policies  on  eligible  lives for all
benefits  occurring  on or  after  the  effective  date  of the  agreement.  The
liability of Security  National  Life under the  coinsurance  treaty began as of
September 30, 2002.

The Coinsurance  Agreement  further provided Security National Life the right to
assume all right, title and interest to the reinsured policies, as well as other
similar  policies  written by Acadian under similar terms and  conditions in the
state of  Mississippi  from  September  30,  2002,  through  termination  of the
Coinsurance Agreement, with an Assumption Reinsurance Agreement, at any time but
in any event not later than nine months subsequent to December 16, 2002, subject
to all  regulatory  approvals  as required by law. In the event  Acadian were to
come under any  supervision by a state regulator or in the event Acadian were to
apply for or consent in the  appointment  of, or the taking of possession  by, a
receiver,  custodian,  regulator, trustee or liquidator of itself or of all or a
substantial part of its assets, make a general assignment for the benefit of its
creditors,  commence a voluntary case under the Federal  Bankruptcy Code, file a
petition  seeking to take  advantage  of any other law  relating to  bankruptcy,
insolvency,  reorganization  or winding up,  Security  National Life and Acadian
were to be deemed to have converted the  Coinsurance  Agreement to an Assumption
Reinsurance  Agreement  one day prior to such  insolvency  or other  actions and
Security National Life was to be deemed to have assumed the reinsurance policies
as of one day prior to the date thereof.

The  Coinsurance  Agreement  further  provided  that Acadian was 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.

Subsequent to the coinsurance agreement,  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.

The  Assumption  Agreement  also  requires  Security  National  Life to  issue a
certificate  of  assumption  for each policy in force  included in the Reinsured
Business, reinsuring such policies according to the terms thereof, provided that
Security  National  Life may be subrogated  to and  substituted  for all rights,
privileges and interests accruing under such policies, and provided further that
all obligations and  liabilities  assumed by Security  National Life are assumed
subject to the terms,  limitations  and  conditions  of the  insurance  policies
included in the Reinsured Business and all defenses,  counterclaims and off-sets
that are or might thereafter become available to Security National Life.

Under the  Assumption  Agreement  Security  National  Life agreed to assume only
those insurance risks in contractual  obligations  included within the Reinsured
Business of Acadian.  Security  National  Life did not agree to assume any extra
contractual or other liability or obligations of Acadian. In addition,  Security
National  Life did not agree to assume  any policy  issued to an  insured  whose
death  occurred  prior to January 1, 2003,  and for which a death claim had been
received by Acadian  prior to that date.  However,  Security  National  Life did
agree to assume any valid  claim of an insured  whose  death  occurred  prior to
January 1, 2003,  and for which a death claim was not received by Acadian  prior
to that date.


<PAGE>


The Assumption  Agreement  further provided that as of January 1, 2003,  Acadian
was to transfer and assign to Security National Life all of its right, title and
interest  in the  reinsured  policies,  including  policies  which may be lapsed
subject to the right of  reinstatement,  and  policies in force and in effect as
paid up and  extended  term  policies.  Acadian  further  agreed to turn over to
Security  National  Life,  as of  January 1, 2003,  all  policy  owner  service,
underwriting  and other  files on hand that may be needed by  Security  National
Life in the continuation of the Reinsured  Business,  and Acadian further agreed
to turn over all such records and record books as may be necessary  for carrying
on the  Reinsured  Business,  including  all such  permanent  records of Acadian
necessary  for  Security  National  Life to  continue  in  force in  effect  the
reinsured policies.

At December 31, 2002,  $22,964,225 of the Company's  consolidated  stockholders'
equity represents the statutory  stockholders' equity of the Company's insurance
subsidiaries.  The life  insurance  subsidiaries  cannot pay a  dividend  to its
parent company without the approval of insurance regulatory authorities.

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  142,  "Goodwill  and  Other
Intangible Assets".  Under SFAS No. 142,  amortization of goodwill is precluded,
however,  its  recoverability  must be periodically (at least annually) reviewed
and tested for  impairment.  Goodwill must be tested at the reporting unit level
for  impairment  in the year of adoption,  including  an initial test  performed
within six  months of  adoption.  If the  initial  test  indicates  a  potential
impairment,  then a more detailed analysis to determine the extent of impairment
must be completed  within twelve months of adoption.  SFAS No. 142 also requires
that  useful  lives for  intangibles  other  than  goodwill  be  reassessed  and
remaining amortization periods be adjusted accordingly. The adoption of SFAS No.
142 did not have a  material  impact on the  Company's  financial  condition  or
results of operations.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 establishes an accounting model for
long-lived  assets to be  disposed  of by sale that  applies  to all  long-lived
assets,  including  discontinued  operations.  SFAS No. 144 requires  that those
long-lived assets be measured at the lower of carrying amount or fair value less
cost to sell,  whether  reported in  continuing  operations  or in  discontinued
operations.  The  provisions  of  SFAS  No.  144  are  effective  for  financial
statements  issued for fiscal years beginning after December 15, 2001.  Adoption
of SFAS No.  144 did not  have a  material  impact  on the  Company's  financial
condition or results of operations.

In April 2002,  FASB issued SFAS No. 145,  "Rescission of FASB Statements No. 4,
44, and 64,  Amendment of FASB  Statement  No. 13, and  Technical  Corrections".
Under   historical   guidance,   all  gains  and  losses   resulting   from  the
extinguishment  of  debt  were  required  to be  aggregated  and,  if  material,
classified as an extraordinary  item, net of related income tax effect. SFAS No.
145  rescinds   that   guidance   and  requires   that  gains  and  losses  from
extinguishments  of debt be classified as  extraordinary  items only if they are
both unusual and infrequent in occurrence. SFAS No. 145 also amends SFAS No. 13,
"Accounting for Leases" for the required  accounting  treatment of certain lease
modifications that have economic effects similar to sale-leaseback transactions.
SFAS No. 145 requires  that those lease  modifications  be accounted  for in the
same  manner as  sale-leaseback  transactions.  The  provisions  of SFAS No. 145
related to SFAS No. 13 are effective for  transactions  occurring  after May 15,
2002.  Adoption of the provisions of SFAS No. 145 related to SFAS No. 13 did not
have a  material  impact on the  Company's  financial  condition  or  results of
operations.  In June 2002, the FASB issued SFAS No. 146,  "Accounting  for Costs
Associated  with  Exit  or  Disposal  Activities",   which  addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies EITF Issue No. 94-3,  "Liability  Recognition for Certain Employee
Termination  Benefits and Other Costs to Exit an Action (including Certain Costs
Incurred in a Restructuring)"  ("Issue 94-3"). The principal  difference between
SFAS No. 146 and Issue 94-3 is that SFAS No. 146 requires that a liability for a
cost  associated  with an exit or  disposal  activity  be  recognized  when  the
liability is incurred,  rather than at the date of an entity's  commitment to an
exit plan.  SFAS No. 146 is  effective  for exit or  disposal  activities  after
December 31, 2002.  Based upon a  preliminary  review,  adoption of SFAS No. 146
would not have a material impact on the Company's financial condition or results
of operations.


<PAGE>


In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness  of Others" ("FIN 45").  FIN 45 requires  certain  guarantees to be
recorded at fair value and also  requires a guarantor  to make new  disclosures,
even when the likelihood of making  payments  under the guarantee is remote.  In
general, the Interpretation  applies to contracts or indemnification  agreements
that contingently require the guarantor to make payments to the guaranteed party
based on changes in an underlying that is related to an asset,  liability, or an
equity security of the guaranteed  party.  The recognition  provisions of FIN 45
are effective on a prospective  basis for  guarantees  issued or modified  after
December 31, 2002.  The  disclosure  requirements  are  effective  for financial
statements of interim and annual periods  ending after December 15, 2002.  Based
upon a preliminary  review,  adoption of FIN 45 would not have a material impact
on the Company's financial condition or results of operations.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation -- Transition and Disclosure and Amendment to FASB No. 123",  which
provides  three  optional   transition  methods  for  entities  that  decide  to
voluntarily  adopt  the fair  value  recognition  principles  of SFAS  No.  123,
"Accounting  for  Stock  Issued  to  Employees",  and  modifies  the  disclosure
requirements  of that  Statement.  Under  the  prospective  method,  stock-based
compensation expense is recognized for awards granted after the beginning of the
fiscal  year in which  the  change  is made.  The  modified  prospective  method
recognizes  stock-based  compensation expense related to new and unvested awards
in the year of change  equal to that which would have been  recognized  had SFAS
No. 123 been adopted as of its  effective  date,  fiscal years  beginning  after
December  15,  1994.  The  retrospective  restatement  method  recognizes  stock
compensation costs for the year of change and restates financial  statements for
all prior periods presented as though the fair value  recognition  provisions of
SFAS No. 123 had been adopted as of its effective  date.  Since the Company does
not  intend to  voluntarily  adopt  the fair  value  presentation  for FASB 123,
adoption of SFAS 148 would not have a material effect on the financial condition
or results of operations of the Company. However, pro forma disclosures required
by  SFAS  148  will  be  included  in the  Company's  future  interim  financial
statements when necessary.

In January 2003, the FASB issued  Interpretation 46,  "Consolidation of Variable
Interest  Entities"  ("FIN  46"),  which  requires  an  enterprise  to assess if
consolidation  of an entity is  appropriate  based  upon its  variable  economic
interests in a variable  interest  entity (VIE).  The initial  determination  of
whether  an  entity  is a VIE  shall be made on the date at which an  enterprise
becomes  involved  with the  entity.  A VIE is an  entity  in which  the  equity
investors do not have the characteristics of a controlling financial interest or
do not have  sufficient  equity at risk for the entity to finance its activities
without  additional  subordinated  financial  support  from  other  parties.  An
enterprise  shall  consolidate  a VIE if it has a  variable  interest  that will
absorb a majority of the VIE's expected losses if they occur, receive a majority
of the  entity's  expected  residual  returns if they occur or both. A direct or
indirect ability to make decisions that significantly  affect the results of the
activities of a VIE is a strong indication that an enterprise has one or both of
the characteristics that would require consolidation of the VIE.

FIN 46 is effective for new VIE's established subsequent to January 31, 2003 and
for existing  VIE's as of July 1, 2003.  Based upon a  preliminary  review,  the
adoption of FIN 46 would not have a material  impact on the Company's  financial
condition or results of  operations as there were no material  VIE's  identified
which would require  consolidation.  FIN 46 further  requires the  disclosure of
certain  information  related to VIE's in which the Company  holds a significant
variable interest.  The Company does not believe that it owns any such interests
that require disclosure at this time.




<PAGE>


Item 8.  Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

                                                                    Page No.

Financial Statements:

    Report of Independent Auditors....................................34

    Consolidated Balance Sheet, December 31,
    2002 and 2001.....................................................35

    Consolidated Statement of Earnings,
    Years Ended December 31, 2002, 2001,
    and 2000..........................................................37

    Consolidated Statement of Stockholders'
    Equity, Years Ended December 31, 2002, 2001
    and 2000. ........................................................38

    Consolidated Statement of Cash Flows,
    Years Ended December 31, 2002, 2001 and
    2000    ..........................................................39

    Notes to Consolidated Financial
    Statements........................................................41


Financial Statement Schedules:

 I.   Summary of Investments -- Other than
      Investments in Related Parties..................................75

II.   Condensed Financial Information of
      Registrant......................................................77

IV.   Reinsurance.....................................................83

 V.   Valuation and Qualifying Accounts...............................84


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.


<PAGE>


                         REPORT OF INDEPENDENT AUDITORS'















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

We have audited the accompanying consolidated balance sheet of Security National
Financial Corporation and subsidiaries as of December 31, 2002 and 2001, and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for the three years in the period ended  December 31, 2002.  In connection
with our audits of the consolidated  financial statements,  we have also audited
the amounts included in the consolidated financial statement schedules as listed
in the accompanying index under Item 8. These consolidated  financial statements
and  schedules  are  the  responsibility  of  the  Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements and schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit 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 at December 31, 2002
and 2001, and the consolidated  results of their operations and their cash flows
for the three years in the period ended  December 31, 2002, in  conformity  with
accounting principles generally accepted in the United States of America.  Also,
in our opinion,  the related consolidated  financial statement  schedules,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  present  fairly,  in all material  respects,  the  information set forth
therein.





/S/   TANNER + CO

Salt Lake City, Utah
March 28, 2003


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                                               December 31,
Assets:                                                 2002              2001
-------                                                 ----              ----
Insurance-related investments:
Fixed maturity securities
  held to maturity, at amortized cost (market
  $33,927,051 and $28,697,986 for 2002 and 2001)     $33,015,097    $27,799,909
Fixed maturity securities available
  for sale, at market (cost $17,153,223 in 2002
  and $20,565,833 in 2001)                            18,514,943     21,470,729
Equity securities available for sale,
  at market (cost $1,929,540 and $1,605,980
  for 2002 and 2001)                                   2,642,093      2,641,549
Mortgage loans on real estate                         21,016,008     15,479,305
Real estate, net of accumulated
  depreciation and allowances for
  losses of $3,728,539 and $3,523,912
  for 2002 and 2001                                    9,331,248      9,051,691
Policy, student and other loans                       10,974,165     11,277,975
Short-term investments                                 5,335,478      1,453,644
                                                   -------------  -------------
     Total insurance-related investments             100,829,032     89,174,802
Restricted assets of cemeteries and mortuaries         5,332,736      5,339,436
Cash                                                  38,199,041      8,757,246
Receivables:
  Trade contracts                                     11,358,027      6,945,274
  Mortgage loans sold to investors                    89,455,105     50,695,073
  Receivable from agents                               2,054,071      2,061,541
  Receivable from officers                                70,290        102,200
  Other                                                1,131,977      1,183,927
                                                   -------------  -------------
     Total receivables                               104,069,470     60,988,015
  Allowance for doubtful accounts                     (2,385,309)    (2,287,241)
                                                   -------------  -------------
  Net receivables                                    101,684,161     58,700,774
Policyholder accounts on deposit
  with reinsurer                                       6,955,691      7,148,068
Land and improvements held for sale                    8,429,215      8,346,448
Accrued investment income                                928,287      1,059,789
Deferred policy and pre-need
  acquisition costs                                   15,917,257     14,453,023
Property, plant and equipment, net                    10,921,635     10,802,387
Cost of insurance acquired                            15,984,340      7,615,348
Excess of cost over net assets
  of acquired subsidiaries                             1,029,562      1,065,045
Other                                                    945,805        597,209
                                                   -------------  -------------
     Total assets                                   $307,156,762   $213,059,575
                                                   =============  =============



See accompanying notes to consolidated financial statements.


<PAGE>


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

                                                         December 31,
                                                         ------------
                                                     2002               2001
                                                     ----               ----

Liabilities:
------------
Future life, annuity, and other
  policy benefits                               $215,980,207     $140,504,866
Unearned premium reserve                           1,914,700        1,785,977
Bank loans payable                                16,113,227        8,461,900
Notes and contracts payable                        3,160,009        3,635,776
Deferred pre-need cemetery and funeral
  contracts revenues and estimated
  future cost of pre-need sales                   10,002,396        9,338,353
Accounts payable                                   1,553,777        1,319,319
Funds held under reinsurance treaties              1,334,964        1,379,640
Other liabilities and accrued expenses            10,182,382        5,552,799
Income taxes                                       8,103,882        6,874,597
                                               -------------    -------------
     Total liabilities                           268,345,544      178,853,227

Commitments and contingencies                         --               --

Minority interest                                  4,297,807        4,237,030

Stockholders' Equity:
---------------------
Common stock:
     Class A: $2 par value, authorized
         10,000,000 shares, issued 5,794,492
         shares in 2002 and 5,363,591 shares
         in 2001                                  11,588,984       10,727,182
     Class C: $0.20 par value, authorized
         7,500,000 shares, issued 6,182,669
         shares in 2002 and 6,113,430 shares
         in 2001                                   1,236,533        1,222,686
                                               -------------    -------------
Total common stock                                12,825,517       11,949,868
Additional paid-in capital                        11,280,842       10,168,523
Accumulated other comprehensive income, net of
  deferred taxes of $293,519 and
  $212,734 for 2002 and 2001                       1,191,863        1,223,930
Retained earnings                                 11,992,542        9,989,230
Treasury stock at cost (1,151,811 Class
     A shares and 71,749 Class C shares in 2002;
     1,294,716 Class A shares and
     68,332 Class C shares in 2001, held
     by affiliated companies)                     (2,777,353)      (3,362,233)
                                               -------------    -------------
Total stockholders' equity                        34,513,411       29,969,318
                                               -------------    -------------
  Total liabilities and stockholders' equity    $307,156,762     $213,059,575
                                               =============    =============

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                       Consolidated Statement of Earnings


                                                              Year Ended December 31,
                                                              -----------------------
                                                     2002            2001             2000
                                                     ----            ----             ----
Revenues:
--------
<S>                                               <C>             <C>             <C>
Insurance premiums and other considerations       $14,076,652     $13,150,875     $12,875,585
Net investment income                              12,539,430      12,946,499      12,136,072
Net mortuary and cemetery sales                    11,256,069      10,603,451       9,416,927
Realized gains on investments and other assets      1,020,820          10,428         423,805
Mortgage fee income                                57,008,283      40,086,097      22,921,585
Other                                                 479,424         151,945         304,886
                                                 ------------    ------------    ------------
  Total revenue                                    96,380,678      76,949,295      58,078,860

Benefits and expenses:
---------------------
Death benefits                                      5,637,217       5,354,522       3,959,811
Surrenders and other  policy benefits               2,086,829       1,467,323       1,702,251
Increase in future policy benefits                  6,031,685       4,953,008       7,268,720
Amortization of deferred
  policy and pre-need acquisition
  costs and cost of insurance acquired              3,993,393       3,870,158       3,188,752
General and administrative expenses:
  Commissions                                      42,114,240      29,859,295      18,401,314
  Salaries                                         10,414,392       9,027,523       7,667,263
  Other                                            15,930,804      13,360,362       9,890,197
Interest expense                                    1,970,342       2,790,627       2,126,169
Cost of goods and services sold of the
  mortuaries and cemeteries                         2,662,791       2,494,367       2,628,260
                                                 ------------    ------------    ------------

  Total benefits and expenses                      90,841,693      73,177,185      56,832,737
                                                 ------------    ------------    ------------

Earnings before income taxes                        5,538,985       3,772,110       1,246,123
Income tax expense                                 (1,565,393)       (913,539)       (304,640)
Minority interest                                      17,688         (17,791)        (45,754)
                                                 ------------    ------------    ------------
  Net earnings                                     $3,991,280      $2,840,780        $895,729
                                                 ============    ============    ============

Net earnings per common share                            $.83            $.63            $.21
                                                 ============    ============    ============

  Weighted average
    outstanding common shares                       4,823,914       4,506,476       4,317,779

Net earnings per common share-
  assuming dilution                                      $.80            $.63            $.21
                                                 ============    ============    ============

  Weighted average outstanding common
    shares assuming-dilution                        4,995,285       4,506,858       4,335,044

</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>




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

                                                                             Accumulated
                                                             Additional        Other
                                 Class          Class         Paid-in       Comprehensive  Retained       Treasury
                                   A              C           Capital         Income       Earnings         Stock        Total
                                --------        -------        ---------    -------------  --------      --------       -----
<S>                          <C>              <C>           <C>             <C>          <C>          <C>            <C>
Balance at January 1, 2000     $9,727,462     $1,111,070     $10,015,942     $665,691     $7,516,640   $(2,547,112)    $26,489,693
                            ------------     ----------    ------------      --------     ----------   -----------     -----------

Comprehensive income:
  Net earnings                     --             --              --              --         895,729           --         895,729
  Unrealized gain on securities    --             --              --          171,060          --              --         171,060
                                                                                                                       ----------
Total comprehensive income         --             --              --              --           --              --       1,066,789
                                                                                                                       -----------
Stock dividends                   486,786         55,503          38,774          --        (581,063)          --           --
Conversion Class C to Class A       1,014         (1,012)             (2)         --           --              --           --
Purchase of treasury stock          --             --              --             --           --         (815,121)      (815,121)
                              ------------   ------------    ------------  -----------   -----------    ----------    ------------

Balance at December 31, 2000   $10,215,262    $1,165,561     $10,054,714     $836,751     $7,831,306   $(3,362,233)    $26,741,361
                               ------------   ----------    ------------   ----------    ------------  ------------    ------------

Comprehensive income:
  Net earnings                 $     --       $     --      $       --     $    --        $2,840,780    $     --      $2,840,780
 Unrealized gain on securities      --             --              --        387,179         --               --         387,179
                                                                                                                      ------------
Total comprehensive income           --             --              --          --            --              --       3,227,959
                                                                                                                      ------------
Stock dividends                    510,826         58,221         113,809       --          (682,856)         --           --
Conversion Class C to Class A        1,094         (1,096)          --          --            --              --              (2)
                              ------------   ------------    ------------  ----------    ------------   ------------  ------------

Balance at December 31, 2001   $10,727,182     $1,222,686     $10,168,523  $1,223,930     $9,989,230   $(3,362,233)    $29,969,318
                              ------------   ------------    ------------  ----------    ------------    ------------  ------------

Comprehensive income:
  Net earnings                $      --  $          -- $            --    $   --          $3,991,280   $      --        $3,991,280
  Unrealized gain on securities      --             --              --        (32,067)        --              --           (32,067)
                                                                                                                       ------------
Total comprehensive income           --             --              --        --              --              --         3,959,213
                                                                                                                       ------------
Stock dividends                    552,024         58,883           --        --            (610,907)         --            --
Conversion Class C to Class A       45,036        (45,036)          --        --              --              --            --
Exercise of stock options          264,742          --       1,112,319        --          (1,377,061)         --            --
Sale of treasury stock               --             --              --        --              --           584,880         584,880
                               -----------    ------------   ---------    -----------    -----------    -----------    -----------

Balance at December 31, 2002   $11,588,984     $1,236,533  $11,280,842     $1,191,863    $11,992,542   $(2,777,353)    $34,513,411
                               ===========   ============  ===========     ===========   ============  ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>




                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statement of Cash Flows

                                                                             Year Ended December 31,
                                                                             -----------------------
                                                                               2002             2001            2000
                                                                               ----             ----            ----
Cash flows from operating activities:
<S>                                                                         <C>             <C>               <C>
     Net earnings                                                           $3,991,280      $2,840,780        $895,729
     Adjustments to reconcile net earnings
       to net cash provided by (used in) operating activities:
          Realized gains on investments and other assets                    (1,020,820)        (10,428)       (423,805)
          Depreciation                                                       1,553,399       1,350,372       1,202,158
          Provision for losses on real estate
            accounts and loans receivable                                       96,520         793,194         219,269
          Amortization of goodwill, premiums, and discounts                    121,329         197,793         214,355
          Provision for deferred income taxes                                  970,139         522,047         259,952
          Policy and pre-need acquisition costs deferred                    (4,462,624)     (3,834,432)     (5,365,417)
          Policy and pre-need acquisition costs amortized                    3,256,076       3,045,996       2,320,710
          Cost of insurance acquired amortized                                 737,317         824,162         868,042
     Change in assets and liabilities net of effects from purchases and
       disposals of subsidiaries:
          Land and improvements held for sale                                  626,688         139,075          37,164
          Future life and other benefits                                     5,349,152       5,734,205       7,023,493
          Receivables for mortgage loans sold                              (38,760,032)    (24,786,179)      2,185,751
          Other operating assets and liabilities                               578,750       2,400,265       1,028,892
                                                                          ------------    ------------    ------------
              Net cash provided by (used in) operating activities          (26,962,826)    (10,783,150)     10,466,293
                                                                          ------------    ------------    ------------
Cash flows from investing activities:
     Securities held to maturity:
          Purchase - fixed maturity securities                              (4,147,878)       (402,995)     (4,801,309)
          Calls and maturities - fixed maturity securities                   8,025,610      12,086,818       5,137,323
     Securities available for sale:
          Purchases - equity securities                                       (327,726)             --        (418,365)
          Sales - equity securities                                          3,303,095       2,826,094       4,797,396
     Purchases of short-term investments                                   (13,819,476)    (14,301,717)     (7,523,432)
     Sales of short-term investments                                         9,937,642      13,876,000       7,785,815
     Purchases of restricted assets                                            (56,899)       (497,617)       (604,345)
     Mortgage, policy, and other loans made                                (10,129,993)     (3,114,060)     (3,016,125)
     Payments received for mortgage, policy, and other loans                 4,939,374       5,626,747       4,782,778
     Purchases of property, plant, and equipment                            (1,348,752)     (1,006,824)     (1,719,120)
     Disposal of property and equipment                                             --              --         625,507
     Purchases of real estate                                               (3,153,299)       (784,677)     (1,329,347)
     Sale of real estate                                                     2,825,666         195,562              --
     Cash received in assumed reinsurance                                   55,827,793              --              --
                                                                                          ------------    ------------
          Net cash provided by investing activities                         51,875,157      14,503,331       3,716,776
                                                                          ------------    ------------    ------------

</TABLE>







See accompanying notes to the consolidated financial statements.




<PAGE>
<TABLE>
<CAPTION>


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


                                                                             Year Ended December 31,
                                                                             -----------------------
                                                                       2002              2001               2000
                                                                       ----              ----               ----
Cash flows from financing activities:
<S>                                                                 <C>             <C>             <C>
     Annuity and pre-need contract receipts                            7,635,422       9,707,844       8,714,642
     Annuity and pre-need contract withdrawals                       (10,866,398)    (13,997,537)    (13,935,567)
     Repayment of bank loans and notes and contracts payable          (1,824,440)     (2,698,272)     (1,652,036)
     Proceeds from borrowings on bank loans and notes and
          contracts payable                                            9,000,000         750,000       1,044,202
     Sale (purchase) of treasury stock                                   584,880              --        (815,121)
     Net change in line of credit for financing of mortgage loans             --              --      (8,687,023)
                                                                    ------------    ------------    ------------
     Net cash provided by (used in) financing activities               4,529,464      (6,237,965)    (15,330,903)
                                                                    ------------    ------------    ------------
Net change in cash                                                    29,441,795      (2,517,784)     (1,147,834)
Cash at beginning of year                                              8,757,246      11,275,030      12,422,864
                                                                    ------------    ------------    ------------
Cash at end of year                                                  $38,199,041      $8,757,246     $11,275,030
                                                                    ============    ============    ============
</TABLE>


Supplemental Schedule of Cash Flow Information:

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

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



















See accompanying notes to the consolidated financial statements.


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000



1)  Significant Accounting Principles

General Overview of Business

Security National  Financial  Corporation and its wholly owned subsidiaries (the
"Company")  operates in three main business segments;  life insurance,  cemetery
and mortuary,  and mortgage loans. The life insurance  segment is engaged in the
business of selling and  servicing  selected  lines of life  insurance,  annuity
products  and  accident  and  health   insurance   marketed   primarily  in  the
intermountain west, California,  Florida,  Mississippi,  Oklahoma and Texas. The
cemetery  and mortuary  segment of the Company  consists of five  cemeteries  in
Utah, one cemetery in California,  eight  mortuaries in Utah and five 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
California, Colorado, Florida, Utah, Arizona and Texas.

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.

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  or
mortgagors of mortgage loans on real estate owned by the Company 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, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ----------------------------------

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

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

Estimates  The  preparation  of financial  statements  in  conformity  with U.S.
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the 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,  and those  used in
determining  the  estimated  future  costs for  pre-need  sales.  Although  some
variability  is inherent in these  estimates,  management  believes  the amounts
provided are adequate.

Principles of Consolidation

The  accompanying  consolidated  financial  statements  include the accounts and
operations of the Company. The Company's  subsidiaries at December 31, 2002, are
as follows:

Security National Life Insurance Company
Security National Mortgage Company
Memorial Estates, Inc.
Memorial Mortuary
Paradise Chapel Funeral Home
Singing Hills Memorial Park
Cottonwood Mortuary, Inc.
Deseret Memorial, Inc.
Holladay Cottonwood Memorial Foundation
Holladay Memorial Park
Camelback Sunset Funeral Home, Inc.
Greer-Wilson Funeral Home
Crystal Rose Funeral Home
Hawaiian Land Holdings
SSLIC Holding Company
Insuradyne Corporation
Southern Security Life Insurance Company (75%)


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ---------------------------------

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

On December 17, 1998,  the Company  purchased all of the  outstanding  shares of
common stock of SSLIC Holding Company (formerly Consolidare Enterprises,  Inc.),
(SSLIC  Holding) and  Insuradyne  Corporation  (Insuradyne)  for a total cost of
$12,248,194.  SSLIC Holding owns  approximately 75% of the outstanding shares of
common stock of Southern Security Life Insurance  Company  (Southern  Security).
The acquisition was accounted for using the purchase method.

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

The unaudited consolidated pro forma results of operations assuming consummation
of the purchase as of January 1, 2001 are summarized as follows:

                                                Pro Forma
                                           2002          2001
                                           ----          ----
                                    (In thousands except earnings per share)

Total revenues                           $109,678      $90,518
Net earnings                                5,397        3,543
Earnings per share                           1.12          .77

Investments

Investments are shown on the following basis:

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

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

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ---------------------------------

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

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

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

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

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

Cash and Cash Equivalents

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

Property, Plant 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 thirty  years.  Leasehold  improvements  are
amortized over the lesser of the useful life or remaining lease terms.

Recognition of Insurance Premiums and Other Considerations

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

Deferred Policy Acquisition Costs and Cost of Insurance Acquired

Commissions  and other  costs,  net of  commission  and expense  allowances  for
reinsurance ceded, that vary with and are primarily related to the production of
new insurance business have been deferred. Deferred policy acquisition costs for
traditional life insurance are amortized over the  premium-paying  period of the
related  policies  using  assumptions  consistent  with those used in  computing
policy benefit reserves.  For  interest-sensitive  insurance products,  deferred
policy  acquisition  costs are amortized  generally in proportion to the present
value of expected

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ---------------------------------

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.

Future Life, Annuity and Other Policy Benefits

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

Future policy benefit  reserves for  interest-sensitive  insurance  products are
computed  under a  retrospective  deposit  method and represent  policy  account
balances before applicable  surrender  charges.  Policy benefits and claims that
are charged to expense  include  benefit claims incurred in the period in excess
of   related   policy   account   balances.   Interest   crediting   rates   for
interest-sensitive insurance products ranged from 4% to 6.5%.

Participating Insurance

Participating  business  constitutes  2%, 2%, and 2% of  insurance  in force for
2002, 2001 and 2000,  respectively.  The provision for policyholders'  dividends
included in policyholder  obligations is based on dividend scales anticipated by
management. Amounts to be paid are determined by the Board of Directors.

Reinsurance

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

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ---------------------------------

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

Cemetery and Mortuary Operations

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

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"
(FAS No. 66). Under FAS 66,  recognition  of revenue and  associated  costs from
constructed cemetery property must be deferred until a minimum percentage of the
sales  price  has been  collected.  Revenues  related  to the  pre-need  sale of
unconstructed  cemetery  property  will  be  deferred  until  such  property  is
constructed and meets the criteria of FAS No. 66 described above.

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

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

Prearranged  funeral and  pre-need  cemetery  customer  obtaining  costs - costs
incurred  related to obtaining  new pre-need  cemetery and  prearranged  funeral
business are accounted for under the guidance of the  provisions of Statement of
Financial  Accounting  Standards No. 60  "Accounting  and Reporting by Insurance
Enterprises" (FAS No. 60).  Obtaining costs,  which include only costs that vary
with and are primarily  related to the acquisition of new pre-need  cemetery and
prearranged funeral business, are deferred until the merchandise is delivered or
services are performed.

Cemetery  merchandise  and  services  trust  investment  earnings  -  investment
earnings  generated by assets  included in merchandise  and services  trusts are
deferred until the associated merchandise is delivered or services performed.

The  Company is  required  to place  specified  amounts  into  restricted  asset
accounts for products  sold on a pre-need  basis.  Income from assets  placed in
these  restricted  asset accounts are used to offset  required  increases to the
estimated future liability.

Revenues and costs for at-need sales are recorded when the services are
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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ---------------------------------

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 is generated  through the  origination  and  refinancing  of
mortgage  loans and is deferred  until such loans are  determined  to be sold in
accordance with FAS No. 140.

Substantially  all loans are sold to third party  investors and the Company does
not retain  servicing  rights.  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.  Any impairment to sold loans or possible
loan losses are included in a separate  provision  for loan losses.  At December
31, 2002 and 2001 the  provision  for loan  losses was  $906,000  and  $509,000,
respectively.

Excess of Cost Over Net Assets of Acquired Businesses

Previous  acquisitions  have been accounted for as purchases  under which assets
acquired and liabilities  assumed were recorded at the fair values.  The Company
periodically  evaluates the  recoverability of amounts  recorded.  In accordance
with FAS 142 the Company no longer  amortizes  excess of cost over net assets of
acquired  business   ("goodwill").   Pro  forma   information   related  to  the
amortization of goodwill has not been presented since it is not material.

Income Taxes

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

Earnings Per Common Share

The  Company  computes  earnings  per  share in  accordance  with  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings Per Share".  This
Standard  requires  presentation of two new amounts,  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, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ---------------------------------

Stock Compensation

The Company has adopted SFAS No. 123, "Accounting for Stock-Based 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 two fixed option plans (the "1993 Plan" and the "2000 Plan"). In
accordance with APB Opinion No. 25, no compensation cost has been recognized for
these plans.  Had  compensation  cost for these plans been determined based upon
the fair  value at the grant date  consistent  with the  methodology  prescribed
under  SFAS No.  123,  the  Company's  net  income  would  have been  reduced by
approximately $533,520, $3,143, and $0 in 2002, 2001, and 2000, respectively. As
a result,  basic and diluted earnings per share would have been reduced by $.07,
$0, and $0 in 2002, 2001 and 2000, respectively.

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

The weighted  average fair value of options  granted in 2001 under the 1993 Plan
and the 2000 Plan is  estimated  at $1.25 as of the grant  date  using the Black
Scholes Option Pricing Model with the following  assumptions:  dividend yield of
5%, volatility of 31.8%,  risk-free interest rate of 5.14%, and an expected life
of five to ten years.

The weighted  average fair value of options  granted in 2000 under the 1993 Plan
and the 2000 Plan is  estimated  at $1.50 as of the grant  date  using the Black
Scholes Option Pricing Model with the following  assumptions:  dividend yield of
5%, volatility of 30.8%,  risk-free  interest rate of 6.6%, and an expected life
of five to ten years.

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

Concentration of Credit Risk

The Company  maintains  its cash in bank  deposit  accounts,  which at times may
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 June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  142,  "Goodwill  and  Other
Intangible Assets".  Under SFAS No. 142,  amortization of goodwill is precluded,
however,  its  recoverability  must be periodically (at least annually) reviewed
and tested for

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


1)       Significant Accounting Principles (Continued)
         ---------------------------------

impairment.  Goodwill must be tested at the reporting  unit level for impairment
in the year of adoption,  including an initial test performed  within six months
of adoption. If the initial test indicates a potential  impairment,  then a more
detailed analysis to determine the extent of impairment must be completed within
twelve  months of  adoption.  SFAS No. 142 also  requires  that useful lives for
intangibles other than goodwill be reassessed and remaining amortization periods
be adjusted  accordingly.  The  adoption of SFAS No. 142 did not have a material
impact on the Company's financial condition or results of operations.  In August
2001, the FASB issued SFAS No. 144,  "Accounting  for the Impairment or Disposal
of  Long-Lived  Assets".  SFAS No.  144  establishes  an  accounting  model  for
long-lived  assets to be  disposed  of by sale that  applies  to all  long-lived
assets,  including  discontinued  operations.  SFAS No. 144 requires  that those
long-lived assets be measured at the lower of carrying amount or fair value less
cost to sell,  whether  reported in  continuing  operations  or in  discontinued
operations.  The  provisions  of  SFAS  No.  144  are  effective  for  financial
statements  issued for fiscal years beginning after December 15, 2001.  Adoption
of SFAS No.  144 did not  have a  material  impact  on the  Company's  financial
condition or results of operations.

In April 2002,  FASB issued SFAS No. 145,  "Rescission of FASB Statements No. 4,
44, and 64,  Amendment of FASB  Statement  No. 13, and  Technical  Corrections".
Under   historical   guidance,   all  gains  and  losses   resulting   from  the
extinguishment  of  debt  were  required  to be  aggregated  and,  if  material,
classified as an extraordinary  item, net of related income tax effect. SFAS No.
145  rescinds   that   guidance   and  requires   that  gains  and  losses  from
extinguishments  of debt be classified as  extraordinary  items only if they are
both unusual and infrequent in occurrence. SFAS No. 145 also amends SFAS No. 13,
"Accounting for Leases" for the required  accounting  treatment of certain lease
modifications that have economic effects similar to sale-leaseback transactions.
SFAS No. 145 requires  that those lease  modifications  be accounted  for in the
same  manner as  sale-leaseback  transactions.  The  provisions  of SFAS No. 145
related to SFAS No. 13 are effective for  transactions  occurring  after May 15,
2002.  Adoption of the provisions of SFAS No. 145 related to SFAS No. 13 did not
have a  material  impact on the  Company's  financial  condition  or  results of
operations.  In June 2002, the FASB issued SFAS No. 146,  "Accounting  for Costs
Associated  with  Exit  or  Disposal  Activities",   which  addresses  financial
accounting and reporting for costs  associated with exit or disposal  activities
and nullifies EITF Issue No. 94-3,  "Liability  Recognition for Certain Employee
Termination  Benefits and Other Costs to Exit an Action (including Certain Costs
Incurred in a Restructuring)"  ("Issue 94-3"). The principal  difference between
SFAS No. 146 and Issue 94-3 is that SFAS No. 146 requires that a liability for a
cost  associated  with an exit or  disposal  activity  be  recognized  when  the
liability is incurred,  rather than at the date of an entity's  commitment to an
exit plan.  SFAS No. 146 is  effective  for exit or  disposal  activities  after
December 31, 2002.  Based upon a  preliminary  review,  adoption of SFAS No. 146
would not have a material impact on the Company's financial condition or results
of operations.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


1)  Significant Accounting Principles (Continued)
    ---------------------------------

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness  of Others" ("FIN 45").  FIN 45 requires  certain  guarantees to be
recorded at fair value and also  requires a guarantor  to make new  disclosures,
even when the likelihood of making  payments  under the guarantee is remote.  In
general, the Interpretation  applies to contracts or indemnification  agreements
that contingently require the guarantor to make payments to the guaranteed party
based on changes in an underlying that is related to an asset,  liability, or an
equity security of the guaranteed  party.  The recognition  provisions of FIN 45
are effective on a prospective  basis for  guarantees  issued or modified  after
December 31, 2002.  The  disclosure  requirements  are  effective  for financial
statements of interim and annual periods  ending after December 15, 2002.  Based
upon a preliminary  review,  adoption of FIN 45 would not have a material impact
on the Company's financial condition or results of operations.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation -- Transition and Disclosure and Amendment to FASB No. 123",  which
provides  three  optional   transition  methods  for  entities  that  decide  to
voluntarily  adopt  the fair  value  recognition  principles  of SFAS  No.  123,
"Accounting  for  Stock  Issued  to  Employees",  and  modifies  the  disclosure
requirements  of  that  Statement.  Under  the  prospective  method  stock-based
compensation expense is recognized for awards granted after the beginning of the
fiscal  year in which  the  change  is made.  The  modified  prospective  method
recognizes  stock-based  compensation expense related to new and unvested awards
in the year of change  equal to that which would have been  recognized  had SFAS
No. 123 been adopted as of its  effective  date,  fiscal years  beginning  after
December  15,  1994.  The  retrospective  restatement  method  recognizes  stock
compensation costs for the year of change and restates financial  statements for
all prior periods presented as though the fair value  recognition  provisions of
SFAS No. 123 had been adopted as of its effective  date.  Since the Company does
not  intend to  voluntarily  adopt  the fair  value  presentation  for FASB 123,
adoption of SFAS 148 would not have a material effect on the financial condition
or results of operations of the Company.  However, pro forma disclosures by SFAS
148 will be included in the Company's future interim  financial  statements when
necessary.

In January 2003, the FASB issued  Interpretation 46,  "Consolidation of Variable
Interest  Entities"  ("FIN  46"),  which  requires  an  enterprise  to assess if
consolidation  of an entity is  appropriate  based  upon its  variable  economic
interests in a variable  interest  entity (VIE).  The initial  determination  of
whether  an  entity  is a VIE  shall be made on the date at which an  enterprise
becomes  involved  with the  entity.  A VIE is an  entity  in which  the  equity
investors do not have the characteristics of a controlling financial interest or
do not have  sufficient  equity at risk for the entity to finance its activities
without  additional  subordinated  financial  support  from  other  parties.  An
enterprise  shall  consolidate  a VIE if it has a  variable  interest  that will
absorb a majority of the VIE's expected losses if they occur, receive a majority
of the  entity's  expected  residual  returns if they occur or both. A direct or
indirect ability to make decisions that significantly  affect the results of the
activities of a VIE is a strong indication that an enterprise has one or both of
the characteristics that would require consolidation of the VIE.

FIN 46 is effective for new VIE's established subsequent to January 31, 2003 and
for existing  VIE's as of July 1, 2003.  Based upon a  preliminary  review,  the
adoption of FIN 46 would not have a material  impact on the Company's  financial
condition or results of  operations as there were no material  VIE's  identified
which would require  consolidation.  FIN 46 further  requires the  disclosure of
certain  information  related to VIE's in which the Company  holds a significant
variable interest.  The Company does not believe that it owns any such interests
that require disclosure at this time.


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


2)  Investments
    ------------

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

                                                       Gross            Gross           Estimated
                                        Amortized    Unrealized       Unrealized           Fair
                                          Cost          Gains           Losses            Value
                                        --------      ---------       ----------        ---------
December 31, 2002:
-----------------
Fixed maturity securities held to maturity:
<S>                                   <C>              <C>              <C>           <C>
   Bonds:
     U.S. Treasury securities
           and obligations of U.S
           Government agencies         $2,835,420       $214,146         $(1,964)     $3,047,602

     Obligations of states and
           political subdivisions         188,303         21,805           (725)        209,383

     Corporate securities including
           public utilities            21,106,651        806,023       (254,369)     21,658,305

     Mortgage-backed securities         8,856,718        125,310             --       8,982,028

   Redeemable preferred stock              28,005          8,775         (7,047)         29,733
                                     ------------     ----------    ------------    ------------

     Total fixed maturity
     securities held to maturity      $33,015,097     $1,176,059      $(264,105)    $33,927,051
                                     ============     ==========    ============    ============

Securities available for sale:
   Bonds
     U.S. Treasury securities
           and  obligations of U.S.
           Government agencies           $594,439      $ 103,697     $     --        $698,136

     Corporate securities including
           public utilities            16,558,784      1,258,023             --      17,816,807

   Non-redeemable preferred stock          56,031         33,810         (7,256)         82,585

   Common stock                         1,873,509      1,281,528       (595,529)      2,559,508
                                     ------------      ---------    ------------    ------------
       Total securities available
         for sale                     $19,082,763     $2,677,058      $(602,785)    $21,157,036
                                     ============     ==========    ============    ============
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


2)       Investments (Continued)
         -----------------------

                                                                           Gross          Gross         Estimated
                                                          Amortized     Unrealized     Unrealized        Fair
                                                            Cost           Gains         Losses          Value
                                                          --------       ---------     ----------      ---------
December 31, 2001:
-----------------
Fixed maturity securities held to maturity:
<S>                                                     <C>             <C>            <C>         <C>
   Bonds:
     U.S. Treasury securities and obligations
           of U.S. Government agencies                   $4,212,280      $227,446       $    --     $4,439,726

     Obligations of states and political subdivisions       180,660        12,507        (7,684)       185,484

     Corporate securities including public utilities     19,206,038       736,038      (168,158)    19,773,918

     Mortgage-backed securities                           4,172,926        98,203          (578)     4,270,550

   Redeemable preferred stock                                28,005         7,350        (7,047)        28,308
                                                        -----------   -----------   -----------    -----------

           Total fixed maturity securities
            held to maturity                            $27,799,909    $1,081,544     $(183,467)   $28,697,986
                                                        ===========   ===========   ===========    ===========

Securities available for sale:
   Bonds
     U.S. Treasury securities and obligations
           of U.S. Government agencies                     $594,568       $58,415      $     --       $652,983

     Corporate securities including public utilities     19,971,265       846,481            --     20,817,746

   Non-redeemable preferred stock                            56,031        32,150        (6,931)        81,250

   Common stock                                           1,549,949     1,523,382      (513,032)     2,560,299
                                                        -----------   -----------   -----------    -----------
           Total securities available for sale          $22,171,813    $2,460,428     $(519,963)   $24,112,278
                                                        ===========   ===========   ===========    ===========
</TABLE>




<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


2)   Investments (Continued)
     -----------------------

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

The amortized  cost and  estimated  fair value of fixed  maturity  securities at
December 31, 2002, 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 2003                   $8,026,827    $8,166,873
Due in 2004 through 2007       8,077,359     8,578,724
Due in 2008 through 2012 `     7,048,229     7,150,450
Due after 2012                   977,959     1,019,243
Mortgage-backed securities     8,856,718     8,982,028
Redeemable preferred stock        28,005        29,733
                             -----------   -----------
                             $33,015,097   $33,927,051
                             ===========   ===========

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

Due in 2003                   $3,852,677    $3,969,924
Due in 2004 through 2007       9,973,676    10,829,215
Due in 2008 through 2012       3,229,099     3,598,364
Due after 2012                    97,771       117,440
Mortgage-backed securities            --            --
                             -----------   -----------
                             $17,153,223   $18,514,943
                             ===========   ===========


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


2)  Investments (Continued)
    -----------------------

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

                                           2002          2001         2000
                                           ----          ----         ----
Fixed maturity securities
   held to maturity:
Gross realized gains                     $37,172        $20,228         $3,125
Gross realized losses                       (557)          (565)           (53)

Securities available for sale:
Gross realized gains                         354              6        884,199
Gross realized losses                     (1,424)          (111)      (463,466)
Other assets                             985,275         (9,130)            --
                                     -----------    -----------    -----------
        Total                         $1,020,820        $10,428       $423,805
                                     ===========    ===========    ===========

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 7% to 15%,  maturity  dates range from one to 29
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  and  commercial  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 68% of its
mortgage loans in the state of Utah.

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, 2002,  other than  investments  issued or  guaranteed by the United
States Government, are as follows:

                                 Carrying Amount
        Dean Witter Discover                                   $4,457,852
        Philip Morris, Inc.                                    $5,834,031


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


Major categories of net investment income are as follows:

                                     2002            2001            2000
                                     ----            ----            ----
Fixed maturity  securities        $3,228,042      $3,776,132      $4,629,916
Equity securities                     53,889          49,281         235,491
Mortgage loans on real estate      1,350,882       1,570,478       1,735,590
Real estate                        1,501,534       1,548,507       1,507,239
Policy loans                         663,554         630,352         641,272
Short-term investments               189,894         379,562         402,350
Other                              6,501,763       5,973,092       3,962,362
                                ------------    ------------    ------------
  Gross investment income         13,489,558      13,927,404      13,114,220
Investment expenses                 (950,128)       (980,905)       (978,148)
                                ------------    ------------    ------------
Net investment income            $12,539,430     $12,946,499     $12,136,072
                                ============    ============    ============


Net investment  income  includes net investment  income earned by the restricted
assets of the cemeteries and mortuaries of approximately $924,000,  $872,000 and
$717,000 for 2002, 2001, and 2000, 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
$7,819,262 at December 31, 2002 and $8,829,559 at December 31, 2001.

3)  Cost of Insurance Acquired

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

                              2002           2001            2000
                              ----           ----            ----
Balance at
  beginning of year        $7,615,348      $8,729,264      $9,597,306
Cost of insurance
  acquired                  9,106,309        (289,754)         --

Imputed interest at 7%        507,268         572,061         641,325
Amortization               (1,244,585)     (1,396,223)     (1,509,367)
                         ------------    ------------    ------------
Net amortization
  charged to income          (737,317)       (824,162)       (868,042)
                         ------------    ------------    ------------
Balance at end
  of year                 $15,984,340      $7,615,348      $8,729,264
                         ============    ============    ============

Presuming no  additional  acquisitions,  net  amortization  charged to income is
expected  to  approximate  $1,281,286,  $1,177,041,  $1,081,769,  $983,719,  and
$915,240 for the years 2003 through 2007. 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, 2002, 2001, and 2000


4) Property, Plant and Equipment

The cost of property, plant and equipment is summarized below:

                                        December 31,
                                        ------------
                                     2002           2001
                                ------------    ------------
Land and Buildings               $11,098,907     $10,930,790
Furniture and equipment            8,725,925       7,557,210
                                ------------    ------------
                                  19,824,832      18,488,000
Less accumulated depreciation     (8,903,197)     (7,685,613)
                                ------------    ------------
     Total                       $10,921,635     $10,802,387
                                ============    ============

5)   Bank Loans Payable and Lines of Credit

Bank loans payable are summarized as follows:
<TABLE>
<CAPTION>

                                                                                           December 31,
                                                                                           ------------
                                                                                  2002                          2001
                                                                                  ----                          ----
<S>                                                                           <C>                            <C>
6.59% note payable in monthly installments of $34,680 including
    principal and interest, collateralized by 15,000
    shares of Security National Life stock,  due December 2004.                 $727,524                      $1,101,543

10% note payable in monthly installments of $8,444 including
    principal and interest, collateralized by real property,
    which book value is approximately $982,000, due January 2013.                645,124                         680,020

One-year treasury constant maturity plus 2.75% (8.03% at December 31, 2001) note
    payable in monthly installments of $6,000, including principal and interest,
    collateralized by real property, which book value is approximately
    $332,000, paid in full October 2002.                                        --                                48,971

6.93% note payable in monthly installments of $20,836, including principal and
    interest, collateralized by real property, which book value is approximately
    $952,537,
    due November 2007.                                                         1,472,560                       1,590,487

$4,171,803 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.                  3,144,673                       3,703,767

Bank prime rate plus 1/2% (4.75% at December 31, 2002) note payable in monthly
    installments of $7,235 including principal and interest, collateralized by
    real property, which book value is approximately $771,061,
    due August 2004.                                                             150,564                         235,450

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


5)   Bank Loans Payable and Lines of Credit (Continued)
     ---------------------------------------
                                                                                           December 31,
                                                                                           ------------
                                                                               2002                            2001
                                                                               ----                            ----

<S>                                                                           <C>                            <C>
Bank prime rate less 1.35% (3.40% at December 31, 2002) note payable in monthly
    installments of $2,736 including principal and interest, collateralized by
    15,000 shares of Security National Life Insurance Company stock, due
    December 2005.                                                               128,738                         156,549

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.                                                           610,170                         750,000

Bank prime rate less .28% (4.22% at December 31, 2002) Note payable interest
  only to July 1, 2003, thereafter interest plus monthly principal payments of
  $116,883, collateralized By 15,000 shares of Security National Life
  Insurance Company Stock, due January 2010.                                    9,000,000                      --

Other collateralized bank loans payable                                           233,874                       195,113
                                                                          ---------------                  ------------
  Total bank loans                                                             16,113,227                     8,461,900

Less current installments                                                       2,282,575                     1,677,683
                                                                           --------------                  ------------
  Bank loans, excluding
  current installments                                                       $ 13,830,652                   $ 6,784,217
                                                                             ============                   ===========
</TABLE>


In  addition  to the lines of credit  described  above,  the Company has line of
credit  agreements with banks for $2,000,000 and $5,000,000,  of which none were
outstanding  at December  31, 2002 or 2001.  The lines of credit are for general
operating  purposes.  The $2,000,000 line of credit bears interest at the bank's
prime rate and must be repaid every 30 days. The $5,000,000 line of credit bears
interest at a variable rate with interest payable monthly and is  collateralized
by student loans equaling 115% of the unpaid principal balance.

See Note 6 for summary of maturities in subsequent years.

6)  Notes and Contracts Payable

Notes and contracts payable are summarized as follows:
<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                              ------------
                                                                                   2002                          2001
                                                                                   ----                          ----
<S>                                                                              <C>                         <C>
Due to former stockholders of Deseret Memorial, Inc. resulting from the
  acquisition of such entity. Amount represents the present value discounted at
  8% of monthly annuity payments ranging from $4,600 to $5,000 plus an index
  adjustment in the 7th through the
  12th years, due September 2011.                                                $574,526                      $604,265

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000

6)       Notes and Contracts Payable (Continued)
         ----------------------------
                                                                                              December 31,
                                                                                              ------------
                                                                                   2002                          2001
                                                                                   ----                          ----
<S>                                                                               <C>                           <C>
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.                                             168,621                       232,259

Due to former stockholders of Civil Service Employees Life Insurance Company
  resulting from the acquisition of such entity. 7% note payable in seven annual
  installments with principal
  payments of $151,857, paid in full December 2002.                            --                               151,857

Due to former stockholders of Crystal Rose Funeral Home resulting from the
  acquisition of such entity. Amount represents the present value discounted at
  9% of monthly annuity
  payments of $2,675 due February 2007.                                             5,296                        35,420

9% note payable in monthly installments of $10,000 including principal and
  interest collateralized by real property, which book value is approximately
  $2,908,000, due July 2008.                                                      534,111                       602,653

Due to Memorial Estates Endowment Care Trust Fund for the remodel of the
  Cottonwood Funeral Home. 6% note payable in monthly installments of $5,339
  including principal and interest collateralized by the Funeral Home, which
  book value is approximately
  $881,631 due March 2030.                                                         951,807                      861,748

Due to former shareholders 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                                                                       476,520                      635,361

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000

6)       Notes and Contracts Payable (Continued)
         ----------------------------
                                                                                              December 31,
                                                                                              ------------
                                                                                   2002                          2001
                                                                                   ----                          ----

<S>                                                                          <C>                          <C>
Other notes payable                                                                449,128                      512,213
                                                                             -------------                   ----------
Total notes and contracts payable                                                3,160,009                    3,635,776
Less current installments                                                          447,569                      600,894
                                                                            --------------                   ----------

Notes and contracts, excluding
current installments                                                            $2,712,440                   $3,034,882
                                                                                ==========                   ==========

</TABLE>

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

             2003                    $2,730,144
             2004                     3,801,840
             2005                     3,325,101
             2006                     2,145,441
             2007                     1,929,913
       Thereafter                     5,340,797
                                    -----------
            Total                   $19,273,236
                                    ===========

Interest paid approximated interest expense in 2002, 2001 and 2000.

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

The Company owns and operates several  endowment care  cemeteries,  for which it
has  established  and maintains an endowment  care fund.  The Company  records a
liability  to the fund for each  space  sold at  current  statutory  rates.  The
Company  is not  required  to  transfer  assets to the fund until the spaces are
fully paid for. As of December  31, 2001 the Company had  transferred  $5,586 in
excess of the required  contribution  to the fund,  and as of December 31, 2002,
the Company owed the fund $73,151.

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

Assets in the restricted asset account are summarized as follows:

                                        December 31,
                                        ------------
                                      2002         2001
                                      ----         ----
Cash and cash equivalents           $378,388     $475,712
Mutual funds                         188,732      188,732
Fixed maturity securities            301,928      348,737
Equity securities                     77,778       77,778
Participation in mortgage loans
 with Security National Life       4,352,214    4,214,781
Time certificate of deposit           33,696       33,696
                                  ----------   ----------
   Total                          $5,332,736   $5,339,436
                                  ==========   ==========


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


8)  Income Taxes

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

                    December 31,
                    ------------
                2002           2001
                ----           ----
Current        $45,702      $(86,569)
Deferred     8,058,180     6,961,166
           -----------   -----------
Total       $8,103,882    $6,874,597
           ===========   ===========


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

                                                2002            2001
                                                ----            ----
Assets
Future policy benefits                      $(1,849,395)    $(1,727,742)
Unearned premium                             (1,717,492)     (1,829,505)
Difference between book
   and tax basis of bonds                       (34,178)        (43,176)
Net operating loss carryforwards
 expiring in the years 2003 through 2011     (1,132,874)        (84,350)
Other                                          (575,788)       (631,375)
                                           ------------    ------------
Total deferred tax assets                    (5,309,727)     (4,316,148)
                                           ------------    ------------

Liabilities
Deferred policy acquisition costs             5,235,909       5,140,228
Cost of insurance acquired                    2,643,596       1,553,301
Installment sales                             1,997,256       1,838,465
Depreciation                                    883,667         643,243
Trusts                                        1,184,382       1,162,077
Tax on unrealized appreciation                  644,148         583,213
Other                                           778,949         356,789
                                           ------------    ------------
Total deferred tax liabilities               13,367,907      11,277,316
                                           ------------    ------------
Net deferred tax liability                   $8,058,180      $6,961,166
                                           ============    ============


The Company paid $462,983,  $564,327 and $94,365 in income taxes for 2002,  2001
and 2000, respectively. The Company's income tax expense (benefit) is summarized
as follows:

               2002         2001         2000
               ----         ----         ----
Current      $595,254     $391,492      $44,688
Deferred      970,139      522,047      259,952
           ----------   ----------   ----------
Total      $1,565,393     $913,539     $304,640
           ==========   ==========   ==========

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


8)  Income Taxes (Continued)
    -------------

                                          2002          2001            2000
                                          ----          ----            ----
Computed expense at statutory rate    $1,883,255     $1,282,517       $423,682
Special deductions allowed
   small life insurance companies       (315,923)      (356,734)       (68,769)
Dividends received deduction                (737)        (6,405)       (24,418)
Minority interest taxes                    7,429         (7,466)       (19,222)
Other, net                                (8,631)         1,627         (6,633)
                                     -----------    -----------    -----------
   Tax expense                        $1,565,393       $913,539       $304,640
                                     ===========    ===========    ===========

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, 2002,  the
policyholders'  surplus accounts  approximated  $4,500,000.  Management does not
intend to take actions nor does management expect any events to occur that would
cause federal  income taxes to become payable on that amount.  However,  if such
taxes  were  accrued,  the  amount  of  taxes  payable  would  be  approximately
$1,500,000.

The insurance  companies have  remaining  loss carry  forwards of  approximately
$8,300,000,  approximately  $286,000 of which is subject to an annual limitation
of approximately $300,000.

9)       Reinsurance, Commitments and Contingencies

The Company  follows the procedure of reinsuring  risks in excess of a specified
limit,  which ranged from $30,000 to $75,000 at December 31, 2002 and 2001.  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  $1,174,604,000  at
December 31, 2002 and $838,421,000 at December 31, 2001.

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

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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


10)   Retirement Plans

The Company and its subsidiaries have a noncontributory Employee Stock Ownership
Plan (ESOP) for all eligible  employees.  Eligible employees are primarily those
with more than one year of service,  who work in excess of 1,040 hours per year.
Contributions,  which  may be in cash or stock of the  Company,  are  determined
annually by the Board of Directors. The Company's contributions are allocated to
eligible employees based on the ratio of each eligible  employee's  compensation
to  total  compensation  for all  eligible  employees  during  each  year.  ESOP
contribution expense totaled $99,612, $191,557, and $0 for 2002, 2001, and 2000,
respectively.  At December 31, 2002 the ESOP held 507,490  shares of Class A and
1,408,653 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 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 2002, 2001, and 2000 were $7,975,
$18,458, and $0 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 2002, 2001 and
2000 were $142,218,  $260,350, and $0, 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   contribution   for  2002  and  2001  was  $100,577   and   $220,038,
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 monthly  installments
(120 months) or in a lump sum settlement, if approved by the Board of Directors.
The amount payable


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


10)   Retirement Plans (Continued)
      -----------------

is  $60,000  per year with  cost of living  adjustments  each  anniversary.  The
Compensation Agreements also provides that any remaining balance will be payable
to their heirs in the event of their death.  In addition the Agreement  provides
that the  Company  will pay the Group  Health  coverages  for these  individuals
and/or their  spouses.  In 2002 the Company  increased  its  liability for these
future  obligations by $31,000.  The current  balance as of December 31, 2002 is
$702,000.

11)  Capital Stock

The following  table  summarizes the activity in shares of capital stock for the
three-year period ended December 31, 2002:

                                      Class A     Class C
                                      --------    -------
Balance at January 1, 2000          4,863,731    5,555,350

Stock Dividends                       243,393      277,515
Conversion of Class C to Class A          507       (5,060)
                                   ----------   ----------

Balance at December 31, 2000        5,107,631    5,827,805

Stock Dividends                       255,413      291,104
Conversion of Class C to Class A          547       (5,479)
                                   ----------   ----------

Balance at December 31, 2001        5,363,591    6,113,430

Exercise of stock options             132,371           --
Stock Dividends                       276,012      294,419
Conversion of Class C to Class A       22,518     (225,180)
                                   ----------   ----------

Balance at December 31, 2002        5,794,492    6,182,669
                                   ==========   ==========

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 1989 through 2002, 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, 2002, 2001, and 2000



11)  Capital Stock (Continued)
     -------------

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

                                              2002        2001          2000
                                              ----        ----          ----
Numerator:
   Net income                             $3,991,280   $2,840,780     $895,729
                                          ==========   ==========   ==========

Denominator:
   Denominator for basic earnings
    per share-weighted-average
     shares                                4,823,914    4,506,476    4,317,779

   Effect of dilutive securities:
     Employee stock options                  169,543          382       17,265
     Stock appreciation rights                 1,828           --           --
                                          ----------   ----------   ----------

   Dilutive potential common shares          171,371          382       17,265
                                          ----------   ----------   ----------

   Denominator for diluted earnings per
     share-adjusted weighted-average
     shares and assumed conversions        4,995,285    4,506,858    4,335,044
                                          ==========   ==========   ==========
   Basic earnings per share                     $.83         $.63         $.21
                                          ==========   ==========   ==========
   Diluted earnings per share                   $.80         $.63         $.21
                                          ==========   ==========   ==========

12)  Deferred 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, 2002, 2001, and 2000


12)  Deferred 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       Option
                                      of Shares     Price
                                      ----------  ----------
Outstanding at January 1, 2000        171,329    $3.89 - $4.28

   Dividend                             8,566
   Exercised                               --
                                      -------

Outstanding at December 31, 2000      179,895    $3.70 - $4.07
                                      -------

   Dividend                             8,995
   Exercised                               --
                                     --------

Outstanding at December 31, 2001      188,890    $3.53 - $3.88
                                    ---------

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

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

Exercisable at end of year             10,719             $3.36
                                    =========

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,  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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


12)  Deferred Compensation Plans (Continued)
     ---------------------------

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.

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 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.

Activity of the 1993 Plan is summarized as follows:


                                  Number of Shares  Option Price
                                  ----------------  ------------
Outstanding at January 1, 2000        519,998       $2.22 - $3.96
   Dividend                            27,313
   Granted                             26,000
                                     --------

Outstanding at December 31, 2000      573,311       $2.12 - $3.77
   Dividend                            36,765
   Granted                            172,500
   Expired                            (10,513)
                                    ---------

Outstanding at December 31, 2001      772,063    $2.02 - $3.59
   Dividend                            21,077
   Granted                            185,250
   Expired                           (190,018)
   Exercised                         (283,703)
                                   ----------

Outstanding at December 31, 2002      504,669    $2.02 - $4.46
                                    =========

Exercisable at end of year            358,588    $2.02 - $4.46
                                    =========
Available options for future grant
   1993 Stock Incentive Plan          388,361
                                    =========


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000

12)  Deferred Compensation Plans (Continued)
     ---------------------------

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 will be five years.

Activity of the 2000 Plan is summarized as follows:

                                            Number                  Option
                                           of Shares                 Price
Outstanding at
December 31, 1999                              0
   Dividend                                  200
   Granted                                 4,000
                                         -------

Outstanding at
December 31, 2000                          4,200                $2.14
   Dividend                                  410
   Granted                                 4,000
                                         -------

Outstanding at
December 31, 2001                          8,610                $2.04 - $2.43
                                         -------

   Dividend                                  631
   Granted                                 4,000
                                         -------

Outstanding at
December 31, 2002                         13,241                $1.94 - $2.86
                                          ======

Exercisable at end of year                 9,041                $1.94 - $2.31
                                         =======

Available options for future
    grant 2000 Director Plan              44,641
                                          ======


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


13)  Statutory-Basis Financial Information

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

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

                                             Statutory Net Income (Loss)
                                                   December 31,
                                        2002          2001            2000
                                        ----          ----            ----

Security National Life               1,547,253     $1,732,018       $796,047
Southern Security Life                (427,439)      (429,143)        80,477

                                              Statutory Stockholders' Equity
                                                    December 31,
                                        2002           2001           2000
                                        ----           ----           ----

Security National Life             $14,381,257    $16,316,605    $14,309,515
Southern Security Life               8,582,968      8,459,700      8,405,211

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 and Florida 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 Ratio that is greater than 569% of the first level
of regulatory action.




<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


14)  Business Segment Information

Description of Products and Services by Segment

The  Company  has  three  reportable  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 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.

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.


<PAGE>
<TABLE>
<CAPTION>




                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


14)  Business Segment Information (Continued)
     -----------------------------
                                                                                  2002

                                      Life           Cemetery/                     Reconciling
                                    Insurance        Mortuary         Mortgage       Items       Consolidated
                                    ---------        --------         --------       -----       ------------
Revenues:
From external sources:
<S>                                <C>             <C>             <C>             <C>               <C>
   Revenue from customers          $14,076,652     $11,256,069     $57,008,283     $         --      $82,341,004
   Net investment income             6,065,652       1,011,786       5,461,992               --       12,539,430
   Realized gains on investments       311,365         709,455              --               --        1,020,820
   Other revenues                       69,741          85,146         324,537               --          479,424

Intersegment revenues:
   Net investment income             4,741,338              --              --       (4,741,338)              --
                                 -------------   -------------    -------------    -------------    -------------
                                    25,264,748      13,062,456       62,794,812      (4,741,338)      96,380,678
                                 -------------   -------------    -------------    -------------    -------------
Expenses:
Death and other policy benefits      7,724,046              --              --               --        7,724,046
Increase in future policy benefits   6,031,685              --              --               --        6,031,685
Amortization of deferred policy
   acquisition costs and cost of
   insurance acquired                3,718,627         274,766              --               --        3,993,393
Depreciation                           383,139         678,851         167,513               --        1,229,503
General, administrative and
  other costs:
   Intersegment                          --             36,672         173,872         (210,544)              --
   Other                             5,670,217      10,604,689      53,617,818               --       69,892,724
Interest expense:
   Intersegment                         90,000         201,118       4,239,676       (4,530,794)              --
   Other                               321,896         428,498       1,219,948               --        1,970,342
                                  ------------   -------------    -------------    -------------    -------------
                                    23,939,610      12,224,594       59,418,827       (4,741,338)      90,841,693
                                  ------------   -------------    -------------    -------------    -------------
Earnings (losses)
   before income taxes              $1,325,138        $837,862      $ 3,375,985     $        --        $5,538,985
                                  ============    =============    =============    =============

Identifiable assets               $295,177,565     $42,255,381     $14,055,057     $(44,331,241)     $307,156,762
                                  ============   =============    =============    =============     =============

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

<PAGE>
<TABLE>
<CAPTION>




                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000

14)  Business Segment Information (Continued)
     ----------------------------
                                                                           2001

                                         Life          Cemetery/                      Reconciling
Revenues:                              Insurance       Mortuary       Mortgage           Items      Consolidated
                                       ---------       --------       --------           -----      ------------
From external sources:
<S>                                   <C>            <C>            <C>                <C>          <C>
   Revenue from customers             $13,150,875    $10,603,451    $40,086,097        $     --     $63,840,423
   Net investment income                7,018,047        959,655      4,968,797              --      12,946,499
   Realized gains on investments           10,428             --             --              --          10,428
   Other revenues                          53,053         42,356         56,536              --         151,945

Intersegment revenues:
   Net investment income                3,679,133             --             --      (3,679,133)             --
                                     ------------   ------------   ------------    ------------    ------------
                                       23,911,536     11,605,462     45,111,430      (3,679,133)     76,949,295
                                     ------------   ------------   ------------    ------------    ------------
Expenses:
Death and other policy benefits         6,821,845             --             --              --       6,821,845
Increase in future policy benefits      4,953,008             --             --              --       4,953,008
Amortization of deferred policy
   and pre-need acquisition costs
   and cost of insurance acquired       3,561,895        308,263             --              --       3,870,158
Depreciation                              330,892        595,082        103,162              --       1,029,136
General, administrative
      and other costs:
   Intersegment                                --         36,672        136,867        (173,539)             --
   Other                                7,035,455      9,396,691     37,280,266              --      53,712,412
Interest expense:
   Intersegment                            98,095        243,732      3,163,767      (3,505,594)             --
Other                                     317,988        418,488      2,054,150              --       2,790,626
                                     ------------   ------------   ------------    ------------    ------------
                                       23,119,178     10,998,928     42,738,212      (3,679,133)     73,177,185
                                     ------------   ------------   ------------    ------------    ------------
Earnings (losses)
   before income taxes                   $792,358       $606,534     $2,373,218 $            --       3,772,110
                                     ============   ============   ============    ============    ============

Identifiable assets                  $201,193,249    $38,915,291     $6,411,222    $(33,460,187)   $213,059,575
                                     ============   ============   ============    ============    ============

Expenditures for
   long-lived assets                     $219,762       $505,045       $323,014 $            --      $1,047,821
                                     ============   ============   ============    ============    ============
</TABLE>

<PAGE>
<TABLE>
<CAPTION>





                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000

14)  Business Segment Information (Continued)
     ----------------------------

                                                                             2000

                                        Life          Cemetery/                       Reconciling
                                     Insurance        Mortuary         Mortgage         Items         Consolidated
                                     ---------        --------         --------        ----------     ------------
Revenues:
From external sources:
<S>                                   <C>             <C>            <C>         <C>                 <C>
   Revenue from customers             $12,875,585     $9,416,927     $22,921,585 $            --     $45,214,097
   Net investment income                8,222,688        716,813       3,196,571              --      12,136,072
   Realized gains on investments          423,805             --              --              --         423,805
   Other revenues                          85,927         23,479         195,480              --         304,886

Intersegment revenues:
   Net investment income                2,551,644             --              --      (2,551,644)             --
                                     ------------   ------------    ------------    ------------    ------------

                                       24,159,649     10,157,219      26,313,636      (2,551,644)     58,078,860
                                     ------------   ------------    ------------    ------------    ------------
Expenses:
Death and other policy benefits         5,662,062             --              --              --       5,662,062
Increase in future policy benefits      7,268,720             --              --              --       7,268,720
Amortization of deferred policy
   acquisition costs and cost of
   insurance acquired                   3,188,752             --              --              --       3,188,752
Depreciation                              322,418        451,259          61,744              --         835,421
General, administrative
      and other costs:
   Intersegment                                --         36,672         101,288        (137,960)             --
   Other                                5,585,178      9,369,839      22,796,596              --      37,751,613
Interest expense:
   Intersegment                                --        210,984       2,202,700      (2,413,684)             --
   Other                                  394,868        518,845       1,212,456              --       2,126,169
                                     ------------   ------------    ------------    ------------    ------------
                                       22,421,998     10,587,599      26,374,784      (2,551,644)     56,832,737
                                     ------------   ------------    ------------    ------------    ------------
Earnings (losses)
   before income taxes                 $1,737,651      $(430,380)       $(61,148$             --      $1,246,123
                                     ============   ============    ============    ============    ============

Identifiable assets                  $199,694,971    $36,704,436      $3,495,907    $(31,148,813)   $208,746,501
                                     ============   ============    ============    ============    ============

Expenditures for
   long-lived assets                     $260,836       $680,626        $220,856$             --      $1,162,318
                                     ============   ============    ============    ============    ============

</TABLE>

<PAGE>

                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000

15)      Related Party Transactions

On December 19, 2001, the Company entered into an option agreement with Monument
Title,  LLC, a Utah limited liability  company  ("Monument  Title") in which the
Company  made  available  a  $100,000  line of  credit to  Monument  Title at an
interest  rate of 8% per  annum.  The line of credit is secured by the assets of
Monument  Title.  From December 28, 2001 to June 14, 2002, the Company  advanced
Monument Title a total of $77,953 under the line of credit.  The amount advanced
under the line of credit plus accrued  interest  are payable  upon  demand.  The
owners  of  Monument  Title  are  brother-in-laws  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 Company
believes that it is currently  prohibited  from directly  owning shares of stock
representing control of a title company.  The purpose of the transaction,  which
was approved by the Company's  board of  directors,  is to insure that the title
and escrow work performed for Security  National  Mortgage Company in connection
with its  mortgage  loans are  completed as  accurately  as possible by Monument
Title to avoid any economic losses to the Company.

The Company has a non-interest  bearing note receivable from the Chairman of the
Board and Chief Executive  Officer.  No installment  payments are required under
the terms of the  note,  but the note  must be paid in full as of  December  31,
2007. The outstanding balance of the note was approximately $70,000 and $102,000
at December 31, 2002 and 2001, respectively.

16)  Disclosure about Fair Value of Financial Instruments

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

Cash,  Receivables,   Short-term  Investments,  and  Restricted  Assets  of  the
Cemeteries and Mortuaries:  The carrying  amounts  reported in the  accompanying
balance sheets 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
balance sheets 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, 2002 and
December 31, 2001, were approximately $87,351,000 and $86,544,000, 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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2002, 2001, and 2000


17)  Other Comprehensive Income

The following summarizes other comprehensive income:

                                            2002         2001        2000
                                            ----         ----        ----
Unrealized gains (losses)
     on available for-sale securities     $84,263     $769,684     $736,803
Less:  reclassification
     adjustment for net realized
     gains in net income                  (35,544)     (10,428)    (420,739)
                                        ---------    ---------    ---------
Net unrealized gains (losses)              48,719      759,256      316,064
Tax expense on net unrealized
     gain (losses)                        (80,786)    (372,077)    (145,004)
                                        ---------    ---------    ---------
Other comprehensive income (loss)        $(32,067)    $387,179     $171,060
                                        =========    =========    =========


<PAGE>


                                                                    Schedule I

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



As of December 31, 2002:
                                                                      Amount at
                                                                        Which
                                                                        Shown
                                                    Estimated          in the
Type of Investment                        Amortized    Fair             Balance
------------------                          Cost       Value             Sheet
                                          --------   ---------         ---------
Fixed maturity securities held to maturity:
Bonds:
   U.S. Treasury securities and obligations
     of U.S. Government agencies        $2,835,420    $3,047,602     $2,835,420
   Obligations of states and
     political subdivisions                188,303       209,383        188,303
   Corporate securities
     including public utilities         21,106,651    21,658,305     21,106,651
   Mortgage backed securities            8,856,718     8,982,028      8,856,718
Redeemable preferred stocks                 28,005        29,733         28,005
                                      ------------  ------------   ------------

   Total Fixed Securities held
      to maturity                       33,015,097    33,927,051     33,015,097
                                      ------------  ------------   ------------

Securities available for sale:
Bonds:
   U.S. Treasury securities and obligations
     of U.S. Government agencies           594,439       698,136        698,136
   Corporate securities
     including public utilities         16,558,784    17,816,807     17,816,807
   Mortgage-backed securities                --            --             --
Nonredeemable preferred stock               56,031        82,585         82,585
Common stock:
   Public utilities                        314,014       375,570        375,570
   Banks, trusts and insurance companies   520,683       818,146        818,146
   Industrial, miscellaneous
      and all other                      1,038,812     1,365,792      1,365,792
                                      ------------  ------------   ------------

     Total Securities available
       for sale                         19,082,763    21,157,036     21,157,036
                                      ------------  ------------   ------------



Mortgage loans on real estate           21,016,008    21,016,008
Real estate                              9,331,248     9,331,248
Policy loans                            10,974,165    10,974,165
Other investments                        5,335,478     5,335,478
                                      ------------  ------------

   Total investments                   $98,754,759  $100,829,032
                                      ============  ============


<PAGE>

                                                         Schedule I (Continued)

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



As of December 31, 2001:
                                                                    Amount at
                                                                      Which
                                                                     Shown
                                                       Estimated     in the
Type of Investment                        Amortized      Fair        Balance
------------------                          Cost         Value        Sheet
                                          --------     ---------    ---------
Fixed maturity securities held to maturity:
Bonds:
   U.S. Treasury securities and
     obligations of U.S. Government
     agencies                             $4,212,280    $4,439,726   $4,212,280
   Obligations of states and political
       subdivisions                          180,660       185,484      180,660
   Corporate securities
     including public utilities           19,206,038    19,773,918   19,206,038
   Mortgage backed securities              4,172,926     4,270,550    4,172,926
Redeemable preferred stocks                   28,005        28,308       28,005
                                         -----------   -----------  -----------

   Total Fixed Securities held
      to maturity                         27,799,909    28,697,986   27,799,909
                                         -----------   -----------  -----------

Securities available for sale:
Bonds:
   U.S. Treasury  securities and
   obligations of U.S. Government
     agencies                                594,568       652,983      652,983
   Corporate securities
     including public utilities           19,971,265    20,817,746   20,817,746
   Mortgage-backed securities                 --            --           --
Nonredeemable preferred stock                 56,031        81,250       81,250
Common stock:
   Public utilities                          315,068       504,243      504,243
   Banks, trusts and insurance companies     195,983       389,210      389,210
   Industrial, miscellaneous and all other 1,038,898     1,666,846    1,666,846
                                         -----------   -----------  -----------

     Total Securities available for sale  22,171,813    24,112,278   24,112,278
                                         -----------   -----------  -----------

Mortgage loans on real estate             15,479,305    15,479,305
Real estate                                9,051,691     9,051,691
Policy loans                              11,277,975    11,277,975
Other investments                          1,453,644     1,453,644
                                         -----------   -----------

   Total investments                     $87,234,337   $89,174,802
                                         ===========   ===========


                                                                  Schedule II

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                                 Balance Sheets


                                          December 31,
                                      2002            2001
Assets
Cash                                $(3,870)         $1,065

Investment in subsidiaries
    (equity method)              50,069,998      46,128,864

Receivables:
    Receivable from
        affiliates               10,662,465       1,664,955
    Other                           (74,653)        (42,743)
                               ------------    ------------
       Total receivables         10,587,812       1,622,212
                               ------------    ------------

Property, plant and
    equipment, at cost,
    net of accumulated
    depreciation of $575,724
    for 2002 and $457,338
    for 2001                        415,144         427,345

Other assets                         66,915          21,366
                               ------------    ------------
    Total assets                $61,135,999     $48,200,852
                               ============    ============




















See accompanying notes to parent company only financial statements.


<PAGE>


                                                        Schedule II (Continued)


                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                           Balance Sheets (Continued)

                                                              December 31,
                                                        2002             2001

Liabilities:
Bank loans payable:
    Current installments                             $2,082,175      $1,386,857
    Long-term                                        11,400,191       4,168,453

Notes and contracts payable:
    Current installments                                    961         152,818
    Long-term                                                --              --

Advances from affiliated companies                   10,031,968      10,431,231

Other liabilities and accrued expenses                  965,555         996,228

Income taxes                                          2,141,738       1,095,947
                                                   ------------    ------------
    Total liabilities                                26,622,588      18,231,534
                                                   ------------    ------------
Stockholders' equity:
Common Stock:
    Class A:  $2 par value, authorized
        10,000,000 shares, issued 5,794,492
        shares in 2002 and 5,363,591 shares
        in 2001                                      11,588,984      10,727,182
    Class C:  $0.20 par value,
        authorized 7,500,000 shares, issued
        6,182,669 shares in 2002 and 6,113,430
         shares in 2001                               1,236,533       1,222,686
                                                    -----------     -----------
Total common stock                                   12,825,517      11,949,868

Additional paid-in capital                           11,280,842      10,168,523
Accumulated other comprehensive income                1,191,863       1,223,930
Retained earnings                                    11,992,542       9,989,230
Treasury stock at cost
    (1,151,811 Class A shares and
     71,749 Class C shares in 2002;
     1,294,716 Class A shares and 68,332
     Class C shares in 2001, held by
     affiliated companies)                           (2,777,353)     (3,362,233)
                                                   ------------    ------------
Total stockholders' equity                           34,513,411      29,969,318
                                                   ------------    ------------
    Total liabilities and
        stockholders' equity                        $61,135,999     $48,200,852
                                                   ============    ============


See accompanying notes to parent company only financial statements.


<PAGE>



                                                       Schedule II (Continued)


                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                             Statements of Earnings




                                               Year Ended December 31,
                                               -----------------------
                                          2002          2001            2000
                                          ----          ----            ----

Revenue:
    Net investment income                 $34,053           $188            $96
    Fees from affiliates                3,772,293      3,824,259      3,878,458
                                      -----------    -----------    -----------
        Total revenue                  $3,806,346      3,824,447      3,878,554
                                      -----------    -----------    -----------

Expenses:
    General and administrative
        Expenses                        3,287,683      4,082,438      1,873,323
    Interest expense                      351,599        373,815        593,228
                                      -----------    -----------    -----------
        Total expenses                  3,639,282      4,456,253      2,466,551
                                      -----------    -----------    -----------

    Earnings (loss)before income
        taxes, and earnings of
        subsidiaries                      167,064       (631,806)     1,412,003

    Income tax expense                 (1,045,791)      (531,270)      (373,075)

    Equity in earnings
        (loss) of subsidiaries          4,870,007      4,003,856       (143,199)
                                      -----------    -----------    -----------
    Net earnings                       $3,991,280     $2,840,780       $895,729
                                      ===========    ===========    ===========










See accompanying notes to parent company only financial statements.


<PAGE>


                                                        Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)
                             Statements of Cash Flow


                                                    Year Ended December 31,
                                                    -----------------------
                                               2002        2001           2000
Cash flows from operating activities:
    Net earnings                           $3,991,280   $2,840,780    $895,729
Adjustments to reconcile net earnings
      to net cash provided by
      operating activities:
      Depreciation and amortization           118,386      113,042      29,904
      Undistributed (earnings) losses
         of affiliates                     (4,870,007)  (4,003,856)    143,199
      Provision for income taxes            1,045,791      531,271     373,075
    Change in assets and liabilities:
      Accounts receivable                      31,909       60,751         558
      Other assets                            (45,549)      25,638      25,637
      Other liabilities                       (30,673)     282,349       1,836
                                          -----------   ----------  ----------
Net cash provided by operating activities     241,137     (150,025)  1,469,938
                                          -----------  -----------  ----------

Cash flows from investing activities:
    Dividends received from subsidiaries    2,381,687           --          --
    Purchase of equipment                    (106,185)      (2,954)   (556,802)
    Investment in subsidiaries               (900,000)          --          --
                                          -----------  -----------  ----------
Net cash used in investing activities       1,375,502       (2,954)   (556,802)
                                          -----------  -----------  ----------

Cash flows from financing activities:
    Proceeds from advances from affiliates (9,396,773)   1,922,758     303,299
    Payments of advances to affiliates             --      (28,998)   (101,514)
    Payments of notes and contracts payable (1,224,801)  (1,676,940) (1,128,972)
    Purchase of treasury stock                     --     (783,086)         --
    Proceeds from borrowings on notes and
     contracts payable                     9,000,000      750,000          --
                                           ----------  ----------- -----------
Net cash provided (used) by
      financing activities                 (1,621,574)     183,734    (927,187)
                                          -----------  ----------- -----------
Net change in cash                             (4,935)      30,755     (14,051)
Cash at beginning of year                       1,065      (29,690)    (15,639)
                                          -----------  ----------- -----------
Cash at end of year                           $(3,870)      $1,065    $(29,690)
                                          ===========  =========== ===========










See accompanying notes to parent company only financial statements.


<PAGE>
<TABLE>
<CAPTION>

                                                     Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                Notes to Parent Company Only Financial Statements


1) Bank Loans Payable

  Bank loans payable are summarized as follows:
                                                                                            December 31,
                                                                                        2002            2001
<S>                                                                                <C>                      <C>
$4,171,803 revolving line of credit at 6.15% interest payable monthly and a
    reduction in principal due due in semi-annual installments collateralized by
    15,000 shares of Security National Life Insurance Company
    stock,  due December 2005.                                                  $ 3,144,672              $ 3,703,767

6.59% note payable in monthly installments of $34,680 including principal and
    interest, collateralized by 15,000 shares of Security National Life stock,
    due December 2004.                                                              727,524                1,101,543

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.                                               610,170                  750,000

Bank prime rate less .28% (4.22% at December 31, 2002) Note payable interest
    only to July 2, 2003, thereafter interest plus monthly principal payment of
    $116,883, collateralized by 15,000 shares of Security National Life
    Insurance Company stock, due January 2010.                                    9,000,000                    --
                                                                                -----------           ---------------

        Total bank loans                                                         13,482,366                5,555,310

      Less current installments                                                   2,082,175                1,386,857
                                                                                -----------              -----------
      Bank loans, excluding current
      installments                                                              $11,400,191               $4,168,453
                                                                                ===========               ==========
</TABLE>
<TABLE>
<CAPTION>

2)  Notes and Contracts Payable
                                                                                            December 31,
                                                                                        2002            2001
<S>                                                                             <C>                      <C>
    Notes and contracts are summarized as follows:

    Due to former stockholders of Civil Service Employees Life Insurance Company
      resulting from the acquisition of such entity. 7% note payable in seven
      annual principal payments
      of $151,857 paid in full December 2002                                    $     --                   $   151,857

    Other                                                                                961                       961
                                                                                -------------              -----------
    Total notes and contracts                                                            961                   152,818
                                                                                ---------------            -----------
    Less current installments                                                            961                   152,818
                                                                               ----------------            -----------
    Notes and contracts, excluding current installments                         $      --                  $    --
                                                                                ===============            ===========

</TABLE>

<PAGE>


                                                       Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                Notes to Parent Company Only Financial Statements


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

              2003                    $ 2,083,136
              2004                      3,019,075
              2005                      2,715,818
              2006                      1,574,384
              2007                      1,402,596
              Thereafter                2,688,318
                                    -------------
              Total                   $13,483,327
                                      ===========

3)  Advances from Affiliated Companies

                                                           December 31,
                                                       2002             2001
         Non-interest bearing advances
           from affiliates:
         Cemetery and Mortuary
              subsidiary                            $ 1,366,930    $  1,366,930
         Life Insurance subsidiary                    8,655,038       9,054,301
         Mortgage subsidiary                             10,000          10,000
                                                    -----------     -----------
                                                    $10,031,968     $10,431,231
                                                    -----------     -----------
4)  Dividends

In 2002 Security National Life Insurance  Company,  a wholly owned subsidiary of
the Registrant, paid to the registrant cash dividends of $2,381,687.  There were
no dividends paid for years 2001 and 2000 by any subsidiaries.


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

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

2001
Life Insurance
    in force ($000)        $1,587,136      $216,369      $838,421    $2,209,188     37.9%
                          ===========   ===========   ===========   ===========   =======

Premiums:
Life Insurance            $12,930,418    $1,035,984      $845,736   $12,740,170      6.6%
Accident and
    Health Insurance          406,393           285         4,597       410,705      1.1%
                          -----------   -----------   -----------   -----------   -------
         Total premiums   $13,336,811    $1,036,269      $850,333   $13,150,875      6.5%
                          ===========   ===========   ===========   ===========   =======

2000
Life Insurance
    in force ($000)        $1,469,502      $253,698      $580,287    $1,796,091     32.3%
                          ===========   ===========   ===========   ===========   =======

Premiums:
Life Insurance            $12,934,701    $1,151,262      $634,899   $12,418,338      5.11%
Accident and
    Health Insurance          454,656           427         3,018       457,247       .66%
                          -----------   -----------   -----------   -----------   -------
         Total premiums   $13,389,357    $1,151,689      $637,917   $12,875,585      4.95%
                          ===========   ===========   ===========   ===========   =======
</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, 2002
<S>                                   <C>            <C>          <C>             <C>
Accumulated depreciation
    on real estate                     $3,404,644     $323,895     $     --         $3,728,539

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

Allowance for doubtful accounts         2,287,241      517,299     (419,231)         2,385,309

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

For the Year Ended December 31, 2001
Accumulated depreciation
   on real estate                      $3,088,761     $321,234      $(5,352)        $3,404,643

Accumulated depreciation
   on property, plant
   and equipment                        6,699,141    1,029,137      (42,665)         7,685,613

Allowance for doubtful accounts         1,656,223      832,798     (201,780)         2,287,241

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

For the Year Ended December 31, 2000
Accumulated depreciation
   on real estate                      $2,722,024     $366,737  $        --         $3,088,761

Accumulated depreciation
   on property, plant
   and equipment                        5,989,643      835,421     (125,923)         6,699,141

Allowance for doubtful accounts         1,467,954      190,930       (2,661)         1,656,223
</TABLE>


<PAGE>


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


None
                                    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 is no family relationship  between or among any
of the directors, except that Scott M. Quist and G. Robert Quist are the sons 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          82      Chairman of the Board and Chief Executive
                                 Officer

Scott M. Quist           49      President, General Counsel, Chief Operating
                                 Officer and Director

Stephen M. Sill          57      Vice President, Treasurer and Chief Financial
                                 Officer

G. Robert Quist          51      First Vice President and Secretary

J. Lynn Beckstead, Jr.   49      Vice President and Director

Charles L. Crittenden    82      Director

Robert G. Hunter         43      Director

H. Craig Moody           51      Director

Norman G. Wilbur         64      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.

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.  In  addition,  he served as President of the
Company from October 1979 until July 2002. Mr. Quist has also served as Chairman
of the Board and Chief  Executive  Officer of Southern  Security Life  Insurance
Company since  December  1998,  and as its President  from December 1998 to July
2002.  From 1960 to 1964,  he 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.


<PAGE>


Scott M. Quist has been  President  of the  Company  since July 2002,  its Chief
Operating  Officer  since  October  2001 and its General  Counsel and a director
since May 1986. Mr. Quist served as First Vice President of the Company from May
1986 to July 2002.  Mr. Quist has also served as President of Southern  Security
Life  Insurance  Company  since July 2002,  its Chief  Operating  Officer  since
October 2001,  and its General  Counsel and a director  since December 1998. Mr.
Quist also served as First Vice  President of Southern  Security Life  Insurance
Company from December 1998 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 a treasurer  and  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. Mr. Quist has also served as 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 a Vice  President and a director of the Company
since March 2002.  Mr.  Beckstead has also served as Vice President and director
of Southern Security Life Insurance Company since March 2002. In addition, he is
President of Security National  Mortgage  Company,  an affiliate of the Company,
and has  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 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 is also a director of Southern  Security Life  Insurance  Company and
has served in this position since  December  1998. 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 also a director of Southern  Security Life  Insurance  Company and
has served in this  position  since  December  1998.  Dr.  Hunter is currently a
practicing  physician in private  practice.  Dr.  Hunter  created the State Wide
E.N.T. Organization (Rocky Mountain E.N.T., Inc.) where he is currently a member
of the Executive Committee.  He is 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 also a director of Southern  Security  Life  Insurance  Company and has
served in this  position  since  December  1998.  Mr.  Moody is owner of Moody &
Associates,  a  political  consulting  and real estate  company.  He is a former
Speaker and House Majority Leader of the House of  Representatives  of the State
of Utah.

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

Executive Officers

The following is a description of the Company's executive officers, who are not
also directors of the Company.


<PAGE>



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.  He has also served as Vice  President,
Treasurer  and Chief  Financial  Officer of  Southern  Security  Life  Insurance
Company since March 2002.  From 1998 to March 2002, Mr. Sill also served as Vice
President and Controller of Southern Security Life Insurance Company.  From 1994
to 1997, Mr. Sill was Vice  President and  Controller of Security  National Life
Insurance  Company.  From 1989 to 1993, he was Controller of Flying J. Inc. From
1978 to 1989,  Mr. Sill was Senior Vice  President and Controller of Surety Life
Insurance  Company.  From 1975 to 1978, he was Vice  President and Controller of
Sambo's  Restaurant,  Inc. From 1974 to 1975, Mr. Sill was Director of Reporting
for Northwest  Pipeline  Corporation.  From 1970 to 1974, he was an auditor with
Arthur  Andersen & Co. Mr. Sill is the President and a director of the Insurance
Accounting and Systems Association (IASA), a national  association of over 1,300
insurance companies and associate members.

G. Robert Quist has been First Vice President and Secretary of the Company since
March  2002.  Mr.  Quist also served as a director  of  Southern  Security  Life
Insurance  Company  since April 1999 and has been Vice  President  and Secretary
since March 2002.  Mr. Quist has also served as First Vice  President of Singing
Hills  Memorial Park since 1996.  Mr. Quist has also served as Vice President of
Memorial  Estates since 1982; he began working for Memorial Estates in 1978. Mr.
Quist has also served as President  and a director of Big Willow  Water  Company
since 1987 and was a director  of  Investors  Equity Life  Insurance  Company of
Hawaii in 1987. He has also served as a director and  Secretary-Treasurer of the
Utah Cemetery  Association  since 1987.  From 1976 to 1978 he worked for Wyoming
Minerals and from 1974 to 1976 for Rocky Mountain Geochemical Corp.

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 which is in conflict or may be in
conflict with the interests of the Company.

No director,  officer or 5% stockholder of the Company or its  subsidiaries,  or
any  affiliate  thereof  has  had  any  transactions  with  the  Company  or its
subsidiaries during 2002 or 2001.

Each of the  Directors of the Company are  directors of Southern  Security  Life
Insurance Company,  which has a class of equity securities  registered under the
Securities  Exchange  Act of 1934.  In  addition,  Scott M. Quist is an advisory
director of Key Bank of Utah. All directors of the Company hold office until the
next annual meeting of  stockholders  and until their  successors have been duly
elected and qualified.

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  President  and Chief
Executive Officer,  and all other executive officers  (collectively,  the "Named
Executive  Officers")  at  December  31,  2002  whose  salary  and bonus for all
services in all  capacities  exceed  $100,000 for the fiscal year ended December
31, 2002.
<TABLE>
<CAPTION>

                                                          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)  2002   $165,600     $25,000    $2,400            0            0           0         $31,186
  Chairman of the    2001    148,737      20,200     2,400            0       50,000           0          37,358
  Board and Chief    2000    147,204      20,200     2,400            0       50,000           0           5,281
  Executive Officer

Scott M. Quist (1)   2002   $179,400     $35,000    $7,200            0            0           0         $24,066
  President, Chief   2001    152,525      20,000     7,200            0       35,000           0          34,739
  Operating Officer
  and Director       2000    140,400      18,770     7,200            0       35,000           0             637
</TABLE>

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

<PAGE>

(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 and  Scott M.  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 2002, 2001, and 2000 such amounts
     were George R. Quist, $16,207,  $32,077, and $0 respectively;  and Scott M.
     Quist, $19,219, $34,102, and $0 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 2002,  2001 and 2000, such
     amounts were for George R. Quist $125,  $637,  and $637  respectively;  for
     Scott M. Quist  $642,  $637,  and $637  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 2002,  2001 and 2000);  Scott M. Quist
     ($4,205 for the year 2002, $0 for 2001 and $0 for 2000);  (d)  compensation
     paid for the cashless  exercise of 50,000 shares of Company stock exercised
     by George R. Quist ($10,210) 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.  See
     "Item 13 Certain Relationships and Related Transactions".

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, 2002, as well as the aggregate  number
and  value of  unexercised  options  held by the  Named  Executive  Officers  on
December 31, 2002.

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
                                                           at                         Options/SARs at
                   Shares                              December 31,                    December 31,
                 Acquired on                             2002(#)                          2002
                  Exercise         Value              -------------                   --------------
Name                (#)           Realized   Exercisable     Unexercisable      Exercisable    Unexercisable
----              --------        --------   -----------     -------------      -----------    -------------
<S>                <C>          <C>            <C>              <C>              <C>             <C>
George R.
  Quist            44,946       $233,719       84,000            44,100          $192,120        $192,075
Scott M.
  Quist            56,341       $292,975       42,000            44,100          $113,100        $201,675
</TABLE>

Retirement Plans

George R.  Quist,  who has been  Chairman  and Chief  Executive  Officer  of the
Company  since  1979,  and  President  from 1979 to July  2002,  has a  Deferred
Compensation   Agreement,   dated  December  8,  1988,  with  the  Company  (the
"Compensation  Agreement").  This  Compensation  Agreement was amended effective
January 2, 2001, to reflect the following  benefits.  The employment  agreements
between the Company  and George R. Quist be amended to adjust for  inflation  in
accordance with the United States Consumer Index commencing January 2, 2002, and
for each year thereafter of the term of the agreement and that for the year 2001
the  adjustment  for his  retirement  is $60,000 per year instead of $50,000 per
year. The agreements  shall also be amended to provide his spouse,  in the event
of his  pre-mature  death,  with health  insurance  coverage  equivalent to that
carried on executive  personnel  with the coverage for the entire  period of the
agreement.  In the event of death of George R. Quist and his spouse prior to the
expiration of the terms of the  agreement,  payments shall be paid to his estate
or as otherwise directed by him in writing.


<PAGE>


The  Compensation  Agreement  further  provides  that the Board of Directors may
elect to pay the entire amount of deferred  compensation in the form of a single
lump-sum  payment  or other  installment  payments,  so long as the term of such
payments do not exceed 10 years.  However,  in the event Mr. Quist's  employment
with the Company is terminated  for any reason other than  retirement,  death or
disability,  the entire  deferred  compensation  shall be  forfeited by him. The
Company has accrued a liability for the  Compensation  Agreement at December 31,
2002 of $294,000.

Employment Agreement

The  Company  maintains  an  employment  agreement  with  Scott  M.  Quist.  The
agreement,  which has a five-year term, was entered into in 1996, and renewed in
1997 and 2002. 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,  and to
include $500,000 of life insurance protection.  In the event of disability,  Mr.
Quist'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. Quist were 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.

Director Compensation

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

Employee 401(k) Retirement Savings Plan

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

All persons who have  completed at least one year's service with the Company and
satisfy other plan  requirements are eligible to participate in the 401(k) plan.
All Company matching  contributions are invested in the Company's Class A Common
Stock.  The  Company's  matching  contributions  for 2002,  2001,  and 2000 were
approximately  $7,975,  $18,458,  and 0,  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 2002, 2001 and
2000, were $142,218, $260,350, and 0, 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.


<PAGE>


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  170  participants  and had $99,612
contributions  payable to the Plan in 2002.  Benefits  under the Ownership  Plan
vest as follows: 20% after the third year of eligible service by an employee, an
additional 20% in the fourth, fifth, sixth and seventh years of eligible service
by an employee.

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

Deferred Compensation Plan

In 2001, the Company's Board of Directors adopted a Deferred  Compensation Plan.
Under the terms of the  Deferred  Compensation  Plan,  the Company  will provide
deferred  compensation  for a select group of management  or highly  compensated
employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the
Employee  Retirement  Income  Security  Act of 1974,  as amended.  The board has
appointed  a  committee  of the  Company  to be the  plan  administrator  and to
determine  the  employees  who are  eligible  to  participate  in the plan.  The
employees  who  participate  may elect to defer a portion of their  compensation
into the plan. The Company may contribute into the plan at the discretion of the
Company's Board of Directors.  The Company's  contribution for 2002 and 2001 was
$100,577 and $220,038, respectively.

1987 Incentive Stock Option Plan

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 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
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 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 so  covered,  and the  number  of  shares  of Class A Common  Stock
reserved for the purpose of the 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 Plan shall be reduced by the same
proportion.

The Plan terminated in 1997 and options granted are  non-transferable.  The Plan
permits  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.


<PAGE>


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.

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.


<PAGE>


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.


         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,  2003 (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>                <C>
George R. and Shirley C. Quist
  Family Partnership, Ltd. (2)     383,899            7.0%       3,045,052         49.9%          3,428,951          29.7%
  4491 Wander Lane
  Salt Lake City, UT 84117
Employee Stock
  Ownership Plan (ESOP) (3)        507,490            9.3%       1,408,653         23.1%          1,916,143          16.6%
George R. Quist (4)(5)(6)(7)(8)    388,728            7.1%         428,207          7.0%            816,935           7.1%
Associated Investors (9)            84,170            1.5%         594,658          9.7%            678,828           5.9%
Scott M. Quist (4)(6)(7)(10)       299,106            5.5%         233,178          3.8%            532,284           4.6%
G. Robert Quist (11)               103,794            1.9%         221,363          3.6%            325,157           2.8%
Ault Glazer & Co.  Investment
  Management LLC (12)              308,863            5.7%            --             *              308,863           2.7%
  100 Wilshire Blvd., 15th Floor
  Santa Monica, CA 80401
J. Lynn Beckstead, Jr. (13)         89,449            1.6%            --             *               89,449            *
Stephen M. Sill (14)                45,261            *               --             *               45,261            *
Robert G. Hunter, M.D (4)(6)(15)     4,563            *               --             *                4,563            *
Norman G. Wilbur (16)                3,357            *               --             *                3,357            *
Charles L. Crittenden (17)           3,321            *               --             *                3,321            *
H. Craig Moody (18)                  3,100            *               --             *                3,100            *
All directors and executive officers
  as a group (9 persons)
    (4)(5)(6)(7)                 1,324,578        24.3%          3,927,800         64.3%          5,252,378          45.4%
----------------
*   Less than 1%
</TABLE>

(1)  Unless otherwise  indicated,  the address of each listed stockholder is c/o
     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.

(4)  Does not  include  507,490  shares of Class A Common  Stock  and  1,408,653
     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  84,170 shares of Class A Common Stock and 594,658  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  voting and investment  powers with respect to such
     shares.

(6)  Does not  include  171,222  shares  of Class A  Common  Stock  owned by the
     Company's 401(k) Retirement  Savings Plan, of which George R. Quist,  Scott
     M. Quist, and Robert G. Hunter are members of the Investment Committee and,
     accordingly,  exercise shared voting and investment  powers with respect to
     such shares.

(7)  Does  not  include  76,997  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 184,000 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, 2003.

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

(10) Includes options to purchase 112,000 shares of Class A Common Stock granted
     to Scott M. Quist that are currently exercisable or will become exercisable
     within 60 days of March 31, 2003.

(11) Includes  options to purchase 40,250 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, 2003.

(12) Based on a Schedule 13D dated January 8, 2003, filed jointly by Ault Glazer
     & Company  Investment  Company LLC ("Ault  Glazer & Company") and Milton C.
     Ault, III, Managing Director and Chief Investment  Officer of Ault Glazer &
     Company.  According to the Schedule 13D, Ault Glazer & Company reported the
     beneficiary  ownership  of  308,863  shares  of  Class A Common  Stock  (as
     adjusted to reflect the 5% stock dividend issued on February 28, 2003). Mr.
     Ault has sole voting and investment powers with respect to such shares.

(13) Includes  options to purchase 58,076 shares of Class A Common Stock granted
     to Mr. Beckstead that are currently  exercisable or will become exercisable
     within 60 days of March 31, 2003.

(14) Includes  options to purchase 15,250 shares of Class A Common Stock granted
     to Mr.  Sill that are  currently  exercisable  or will  become  exercisable
     within 60 days of March 31, 2003.

(15) Includes  options to purchase  2,261 shares of Class A Common Stock granted
     to Mr. Hunter that are  currently  exercisable  or will become  exercisable
     within 60 days of March 31, 2003.

(16) Includes  options to purchase  2,261 shares of Class A Common Stock granted
     to Mr. Wilbur that are  currently  exercisable  or will become  exercisable
     within 60 days of March 31, 2003.

(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, 2003.

(18) Includes  options to purchase  2,261 shares of Class A Common Stock granted
     to Mr.  Moody that are  currently  exercisable  or will become  exercisable
     within 60 days of March 31, 2003.

The Company's officers and directors, as a group, own beneficially approximately
45.4% of the  outstanding  shares  of the  Company's  Class A and Class C Common
Stock.


<PAGE>


Item 13.  Certain Relationships and Related Transactions

The Company  has made a loan in the amount of  $172,000 to George R. Quist,  the
Company's  Chief  Executive  Officer,  without  requiring  the  payment  of  any
interest.  The loan was made under a  Promissory  Note dated  April 29,  1998 in
order for Mr. Quist to exercise  stock  options  which were granted to him under
the 1993 Stock Option Plan. No installment payments are required under the terms
of the note,  but the note must be paid in full as of  December  31,  2007.  Mr.
Quist has the right to make prepayments on the note at any time. As of March 31,
2003, the outstanding balance of the note was $62,790.  The loan was approved by
the  Company's  directors on March 12, 1999,  with Mr.  Quist  abstaining,  at a
special meeting of the Board of Directors.

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.  Ron
Motzkus  and Troy  Lashley,  who own 90% and 10% of the  outstanding  shares  of
Monument Title,  respectively are  brother-in-laws of Scott M. Quist,  President
and Chief Operating Officer of the Company.  The Company has the right under the
option  agreement  for a period of five years  from the date  thereof to acquire
100% of the outstanding  common shares of Monument Title for the sum of $10. The
Company believes that it is currently  prohibited from directly owning shares of
stock representing  control of a title company.  The purpose of the transaction,
which was approved by the Company's  board of  directors,  is to insure that the
title and escrow  work  performed  for  Security  National  Mortgage  Company in
connection  with its mortgage  loans are  completed as accurately as possible by
Monument Title to avoid any economic losses to the Company.

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.  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 Rules  240.13a-14(c)  and 15d-14(c) under the Securities and Exchange
Act of 1934 (the  "Exchange  Act") as of a date  within  ninety  days before the
filing date of 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  controls  or in other  factors  that could  significantly  affect the
Company's  disclosure  controls and  procedures  subsequent to the date of their
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.


<PAGE>


                                     PART IV

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

(a)(1)(2) Financial Statements and Schedules

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

(a)(3)  Exhibits

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

Exhibit

    Table No  Document

(a)(3)  Exhibits:
    3.A. Articles of Restatement of Articles of Incorporation (8)

      B. Bylaws (1)

    4.A. Specimen Class A Stock Certificate (1)

      B. Specimen Class C Stock Certificate (1)

      C. Specimen Preferred Stock Certificate and Certificate of Designation of
         Preferred Stock (1)

10.   A. Restated and Amended Employee Stock Ownership Plan and
         Trust Agreement (1)

      B. Deferred Compensation Agreement with George R. Quist (2)

      C. 1993 Stock Option Plan (3)

      D. 2000 Director Stock Option Plan (12)

      E. Promissory Note with Key Bank of Utah (4)

      F. Loan and Security Agreement with Key Bank of Utah (4)

      G. General Pledge Agreement with Key Bank of Utah (4)

      H. Note Secured by Purchase Price Deed of Trust and Assignment of Rents
         with the Carter  Family  Trust and the Leonard M. Smith Family Trust(5)

      I. Deed of Trust and Assignment of Rents with the Carter Family Trust and
         the Leonard M. Smith Family Trust (5)

      J. Promissory Note with Page and Patricia Greer (6)

      K. Pledge Agreement with Page and Patricia Greer (6)

      L. Promissory Note with Civil Service Employees Insurance Company (7)


<PAGE>



      M. Deferred Compensation Agreement with William C. Sargent (8)

      N. Employment Agreement with Scott M. Quist (8)

      O. Acquisition Agreement with Consolidare Enterprises, Inc., and certain
         shareholders of Consolidare (9)

      P. Agreement and Plan of Merger between Consolidare Enterprises, Inc.,
         and SSLIC Holding Company (10)

      Q. Administrative Services Agreement with Southern Security Life
         Insurance Company (11)

      R. Promissory Note with George R. Quist (13)

      S. Deferred Compensation Plan (14)

      T. Coinsurance Agreement between Security National Life and Acadian (15)

      U. Assumption Agreement among Acadian, Acadian Financial Group, Inc.,
         Security National Life and the Company (15)

      V. Asset Purchase Agreement between Acadian, Acadian Financial Group,
         Inc., Security National Life and the Company (15)

      W. Promissory Note with Key Bank of Utah (16)

      X. Loan and Security Agreement with Key Bank of Utah (16)

         (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 Report on Form 8-K, as filed on
             February 24, 1995.

         (5) Incorporated by reference from Annual Report on Form 10K, as
             filed on March 31, 1995.

         (6) Incorporated by reference from Report on Form 8-K, as filed on
             May 1, 1995.

         (7) Incorporated by reference from Report on Form 8-K, as filed on
             January 16, 1996.

         (8) Incorporated by reference from Annual Report on Form 10-K, as
             filed on March 31, 1998.

         (9) Incorporated by reference from Report on Form 8-K, as filed on
             May 11, 1998.

        (10) Incorporated by reference from Report on Form 8-K, as filed on
             January 4, 1999.

        (11) Incorporated by reference from Report on Form 8-K, as filed on
             March 4, 1999.

        (12) Incorporated  by reference from Schedule 14A Definitive Proxy
             Statement, filed August 29, 2000, relating to the Company's
             Annual Meeting of Shareholders.


<PAGE>



        (13) Incorporated by reference from Report on Form 10-K, as filed on
             April 16, 2001

        (14) Incorporated by reference from Report on Form 10-K, as filed on
             April 3, 2002

        (15) Incorporated by reference from Report on Form 8-K/A as filed on
             January 8, 2003

        (16) Incorporated by reference from Report on Form 10-K, as filed on
             April 15, 2003


    21.  Subsidiaries of the Registrant

    (b)  Reports on Form 8-K:

         Asset purchase transaction with Acadian Life Insurance Company on
         December 23, 2002:

              Form 8-K filed on January 7, 2003
              Form 8-K/A filed on January 8, 2003
              Form 8-K/A-2 filed on March 10, 2003


<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:  June 3, 2003                         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                      June 3, 2003
                         Board and Chief Executive
                         Officer (Principal
                         Executive Officer)

Scott M. Quist           President, General Counsel, Chief
                         Operating Officer  and Director      June 3, 2003

Stephen M. Sill          Vice President,
                         Treasurer and Chief
                         Financial Officer (Principal
                         Financial and Accounting
                         Officer)                             June 3, 2003

G. Robert Quist          First Vice President and Secretary   June 3, 2003

J. Lynn Beckstead, Jr.   Vice President and Director          June 3, 2003

Charles L. Crittenden    Director                             June 3, 2003

H. Craig Moody           Director                             June 3, 2003

Norman G. Wilbur         Director                             June 3, 2003

Robert G. Hunter         Director                             June 3, 2003


<PAGE>

                                 CERTIFICATIONS


I, George R. Quist, certify that:

1.   I have  reviewed  this annual  report on Form  10-K/A 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-14 and 15d-14) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures  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 in which this annual report
          is being prepared;

     (b)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  Presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  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  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: June 3, 2003

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


<PAGE>



                                 CERTIFICATIONS

I, Stephen M. Sill, certify that:

1.   I have  reviewed  this annual  report on Form  10-K/A 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-14 and 15d-14) for the registrant and have:

     (a)  Designed  such  disclosure  controls  and  procedures  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 in which this annual report
          is being prepared;

     (b)  Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  Presented   in  this   annual   report  our   conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  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  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     annual  report  whether or not there were  significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:  June 3, 2003

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

<PAGE>


                                  EXHIBIT 99.1
                            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/A for the period ending December 31, 2002, as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I, George R. Quist, 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.

George R. Quist
Chief Executive Officer
June 3, 2003

                                  EXHIBIT 99.2
                            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/A for the period ending December 31, 2002, as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
I, Stephen M. Sill, 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.

Stephen M. Sill
Chief Financial Officer
June 3, 2003


<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K/A
                          Year Ended December 31, 2003

                     SECURITY NATIONAL FINANCIAL CORPORATION
                           Commission File No. 0-9341

                                 E X H I B I T S


<PAGE>


                                  Exhibit Index



Exhibit No.                  Document Name

21                Subsidiaries of the Registrant

10                Promissory Note

10                Loan Agreement


<PAGE>


                                   EXHIBIT 21

                        Subsidiaries of Security National
                              Financial Corporation
                              as of March 31, 2003


<PAGE>


                                   Exhibit 21


Subsidiaries of Security National Financial Corporation (as of March 31, 2003)

         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.

         Camelback Sunset Funeral Home, Inc.

         Greer-Wilson Funeral Home, Inc.

         Crystal Rose Funeral Home, Inc.

         Hawaiian Land Holdings

         SSLIC Holding Company

         Insuradyne Corporation

         Southern Security Life Insurance Company


<PAGE>


                                    Exhibit W
                                 Promissory Note
<PAGE>

$9,000,000                                                    December 24, 2002
                                                           Salt Lake City, Utah


                                 PROMISSORY NOTE


This  Promissory  Note is made  and  given  on the day  first  written  above by
SECURITY NATIONAL FINANCIAL  CORPORATION,  a Utah corporation  ("Borrower"),  as
maker,  to and for the  benefit  of  KEYBANK  NATIONAL  ASSOCIATION,  a national
banking  association,  and its  successors  and  assigns  ("Lender")  as  payee.
Borrower and Lender are parties to that certain "Loan and Security Agreement" of
even or recent dater herewith (the "Agreement")  pursuant to which Lender agreed
to make a loan to Borrower in the  original  principal  amount of  $9,000,000.00
(the "Loan") upon the terms and conditions  therein set forth.  This  Promissory
Note is  made in  connection  with  the  Agreement  and is the  Promissory  Note
referred to therein.  Capitalized  terms used in this  Promissory Note which are
not defined herein shall have the meanings given them in the Agreement.

1.   Promise  to Pay  Principal  and  Interest.  For  value  received,  Borrower
     promises to pay to Lender the  principal  sum of NINE  MILLION  DOLLARS AND
     NO/100  DOLLARS  ($9,000,000.00),  together  with  interest  on the  unpaid
     principal  balance at a variable  or  floating  rate equal to the sum of an
     index and a margin,  where the index is Lender's  Prime Rate and the margin
     is a minus twenty-eight (-28) basis points (i.e., -.28%) per annum, the sum
     of which is the  "Effective  Rate".  Changes to the Effective  Rate will be
     made on the same day as changes occur to Lender's  Prime Rate.  Lender need
     not give Borrower  prior notice of any changes in the Prime Rate.  Interest
     will be  calculated  on a basis of 360-day  year and charged for the actual
     number of days  elapsed.  As used  herein,  the term "Prime Rate" means the
     interest  rate  established  and  designated  as such  from time to time by
     Lender.  Such rate is an index based on certain factors  selected from time
     to time by Lender such as the prime or the base lending rates  announced by
     other financial institutions. The Prime Rate serves as the basis upon which
     effective rates of interest are calculated for variable-rate  loans made by
     Lender  which use that term as an index.  Prime  Rate does not  necessarily
     mean the lowest or best rate at which  Lender may make a loan or  otherwise
     extend credit.

2.   Repayment. Borrower shall pay accrued interest on the outstanding principal
     balance monthly commencing on February 1, 2003, and continuing on the first
     day of each month  thereafter to and including July 1, 2003.  Commencing on
     August 1, 2003, and  continuing on the first day of each month  thereafter,
     Borrower shall make monthly  payments  equal to the sum of (a)  $125,000.00
     principal  reduction,  and (b)  accrued  interest;  provided,  however,  if
     Borrower enters into an interest rate hedge or "swap" agreement with Lender
     or one of  Lender's  affiliates,  the  monthly  payment of amount  shall be
     adjusted based on such swap agreement, and Borrower and Lender shall attach
     a payment  schedule as an exhibit to this  Promissory  Note to reflect such
     monthly payment amounts.  Notwithstanding  anything in the Agreement,  this
     Promissory  Note, or the other Loan  Documents to the contrary,  the entire
     unpaid  principal  balance of the Loan and this Promissory  Note,  together
     with all accrued  interest and other unpaid charges due to Lender  pursuant
     to the Agreement, this Promissory Note, and the other Loan Documents, shall
     be due and payable on January 1, 2010. All payments shall be made in lawful
     currency of the United States of America at KeyBank  Tower,  Suite 2007, 50
     South Main Street,  Salt Lake City,  Utah 84144, or such other place as the
     holder of the Promissory Note may designate.  Payments falling due on a day
     that is a Saturday,  Sunday,  or other day on which commercial banks in the
     State of Utah are  required  or  authorized  to be closed  for the  general
     transaction  of  banking  business  shall  be due on  the  next  succeeding
     business day; provided,  however,  for purposes of determining late charges
     or other matters that are determined or calculated with respect to the date
     a payment is due, all payments shall be considered to

<PAGE>


     be due on the  originally-scheduled  payment date. All payments received by
     Lender under the Promissory Note or otherwise on account of the obligations
     or  indebtedness  evidenced  hereby,  shall  be  applied  in the  following
     priority:  First, to the payment of late charges; Second, to the payment of
     any costs and  expenses  incurred by Lender under the  Promissory  Note for
     which Borrower has agreed to pay or reimburse Lender; Third, to the payment
     of  accrued   interest;   and  Fourth,   to  the   payment  of   principal.
     Notwithstanding, the foregoing, upon the occurrence of an Event of Default,
     as  hereinafter  defined,  Lender  may, in its sole  discretion,  alter the
     priority of payments among the above-described categories.

3.   Late  Charges.  If any  payment is not paid within ten (10) days after it's
     scheduled  payment date,  Borrower agrees to pay a late charge equal to the
     greater  of $50 or  five  percent  (5%)  of the  amount  of the  delinquent
     payment.  The late charge is intended to cover,  in part, the extra expense
     of Lender in handling  such  delinquent  payment  and its loss  opportunity
     costs.  Borrower acknowledges that it would be impractical for the Borrower
     and Lender to determine the exact amount of damages  Lender will incur if a
     payment is delinquent, and that the amount set forth in this Paragraph 3 is
     a good  faith  estimate  of,  and shall be  presumed  to be,  the amount of
     damages  that will be  sustained  by  Lender  as a result  of a  delinquent
     payment.  Acceptance by Lender of any late charge shall not be construed as
     a waiver  any other  right or remedy  Lender  may have  with  respect  to a
     delinquent payment

4.   Default  Interest  Rate.  Upon the  occurrence  of an Event of Default  and
     during the  continuance  thereof,  the margin used to compute the Effective
     Rate shall,  at Lender's  sole option and without prior notice to Borrower,
     immediately  increase by an  additional  four  hundred  (400) basis  points
     (i.e., 4%) and shall continue at such rate, both before and after judgment,
     until  the  Loan  has  been  repaid  in full  and all of  Borrower's  other
     obligations to Lender under this  Promissory  Note, the Agreement,  and the
     other Loan Documents have been fully paid and discharged.

5.   Collateral.   The  obligations  and  liabilities  of  Borrower  under  this
     Promissory  Note are secured by  Collateral  described  in the Agreement.

6.   Events of Default;  Remedies.  The  occurrence of an Event of Default under
     the Agreement shall  constitute a default under this Promissory  Note. Upon
     the occurrence of an Event of Default,  Lender shall have all of the rights
     and remedies set forth in the  Agreement.  Without  limiting the foregoing,
     Lender  may  accelerate  the  entire  unpaid  principal   balance  of  this
     Promissory Note,  together with accrued interest  thereon,  and declare the
     same  to be  immediately  due  and  payable  without  presentment,  demand,
     protest,  or other notice of any kind.  Without waiving any right or remedy
     available to it, Lender may proceed  against  Borrower,  Guarantor,  or any
     Collateral simultaneously or in any order it chooses. To the fullest extent
     permitted  by law,  Borrower  waives  any  rights to  presentment,  demand,
     protest,  or  notice of any kind in  connection  with the  Agreement,  this
     Promissory  Note, or the other Loan  Documents.  No failure or delay on the
     part of Lender in exercising any right,  power, or privilege hereunder will
     preclude any other or further exercise thereof or the exercise of any other
     right, power, or privilege.

7.   Governing Law. This Promissory Note is deemed to be negotiated,  delivered,
     and to be  performed  in Salt Lake City,  Utah,  and shall be governed  and
     construed in accordance with the laws of the State of Utah.

8.   Conflicts with Loan Agreement.  In the event of a conflict or inconsistency
     between any term or  provision  contained in this  Promissory  Note and any
     term or provision  contained in the Agreement,  the terms and provisions of
     this  Promissory  Note shall have priority over the terms and provisions of
     the Agreement.


                                            SECURITY NATIONL FINANCIAL
                                            CORPORATION, a Utah corporation




                                            By:  s/s  Scott M. Quist
                                                 President
<PAGE>


                                    Exhibit W


<PAGE>


                                    Exhibit X
          Loan and Security Agreement with KeyBank National Association


                           LOAN AND SECURITY AGREEMENT


     This Loan and Security  Agreement  (this  "Agreement")  is made and entered
into in Salt Lake City,  Utah,  this 24th day of December,  2002, by and between
KEYBANK NATIONAL  ASSOCIATION,  a national banking association  ("Lender"),  and
SECURITY  NATIONAL  FINANCIAL  CORPORATION,  a  Utah  corporation  ("Borrower").
Borrower  and Lender are  sometimes  referred  to herein,  collectively,  as the
"Parties."

     In consideration of the mutual covenants and agreements  contained  herein,
the Parties agree as follows:

1. Term  Loan.  Subject  to all of the terms and  conditions  contained  in this
Agreement,  Lender  agrees  to  make a loan  (the  "Loan")  to  Borrower  in the
principal amount of NINE MILLION AND NO/100 DOLLARS ($9,000,000).  The Loan is a
non-revolving  line of  credit  that  will be  fully  disbursed  at the  time of
closing. In connection herewith,  and as further evidence of the Loan, Borrower,
as maker,  shall execute and deliver to Lender, as payee, a promissory note (the
"Promissory  Note") for the amount of Loan,  which  Promissory  Note shall be in
form and content  satisfactory to Lender. All sums advanced on the Loan pursuant
to the terms of this  Agreement  shall be deemed  advances or  disbursements  of
principal under the Promissory Note.

2.  Commercial  Purpose of Loan. The purpose of the Loan is to provide funds for
the  acquisition by Borrower or one or more of its  subsidiaries  of the capital
stock in, or the book of insurance business, of Gulf National Life. No other use
of the proceeds of this  Promissory  Note shall be made without  Lender's  prior
written consent.


3. Interest;  Default Interest.  All sums advanced or disbursed pursuant to this
Agreement and the Promissory Note shall bear interest form the date hereof until
paid in full,  both before and after  judgment,  at a variable or floating  rate
equal to the sum of an index  and a margin  (the sum of which is the  "Effective
Rate") where the index is the Prime Rate and the margin is a minus  twenty-eight
(28) basis points (i.e.,  - .28%) per annum.  Adjustments  to the Effective Rate
shall be made on and as of the same day that changes occur to the Prime Rate. As
used herein,  "Prime Rate" means the percentage rate of interest designated from
time to time by Lender as its "prime" or base  lending  rate.  The Prime Rate is
based on certain  factors  which Lender  selects from time to time,  such as the
prime or base lending rates of other financial  institutions.  The Prime Rate is
an  index  used  by  Lender  to  establish  the  effective   interest  rate  for
variable-rate  loans made by it which use that term as an index. Prime Rate does
not  necessarily  mean the lowest or best rate at which Lender may make loans or
extend  credit.  Interest  will be calculated on the basis of a 360-day year and
charged for the actual number of days elapsed.  Upon the  occurrence of an Event
of Default (as  hereinafter  defined) and during the  continuance  thereof,  the
margin used to compute the  Effective  Rate shall,  at Lender's  sole option and
without prior notice to Borrower,  immediately  increase by an  additional  four
hundred  (400) basis points  (i.e.,  4%) and shall  continue at such rate,  both
before  and after  judgment,  until the Loan and the  Promissory  Note have been
repaid in full and all of Borrower's other obligations to Lender thereunder have
been fully paid and discharged.

<PAGE>


4. Payments.  Borrower shall make payments in the amounts,  at the times, and in
the  manner set forth in the  Promissory  Note.  The  Parties  contemplate  that
Borrower will enter into an interest rate hedge, derivative, or "swap" agreement
with Lender or an affiliate of Lender in  connection  with the Loan,  upon terms
and conditions as may be mutually  satisfactory  to them. If Borrower and Lender
enter into such interest rate hedge, derivative,  or swap agreement, the monthly
payment  amount due under the  Promissory  Note shall be adjusted in  accordance
with a schedule or exhibit or be attached thereto.

5. Late  Charges.  If any  payment is not paid  within  five (5) days after it's
scheduled  payment  date,  Borrower  agrees  to pay a late  charge  equal to the
greater of $50 or five percent (5%) of the amount of the delinquent payment. The
late  charge is  intended  to cover,  in part,  the extra  expense  of Lender in
handling  such  delinquent   payment  and  loss  opportunity   costs.   Borrower
acknowledges that it would be impractical for the Parties to determine the exact
amount of damages  Lender  will incur if a payment is  delinquent,  and that the
amount set forth in this  Paragraph 5 is a good faith  estimate of, and shall be
presumed  to be,  the amount of damages  that will be  sustained  by Lender as a
result of a delinquent  payment.  Nothing herein shall be construed to waive any
other right or remedy Lender may have with respect to a delinquent payment.

6.  Loan  Fees and Other  Expenses.  Borrower  agrees to pay to Lender a loan or
commitment fee in the amount of $9,000.00 upon execution of this Agreement. Such
loan or  commitment  fee shall be deemed  fully  earned and  non-refundable.  In
addition,  Borrower agrees to pay or reimburse  Lender for all of Lender's costs
and expenses incurred by Lender in connection with the transaction  contemplated
herein,  including without limitation filing fees and reasonable attorney's fees
and expenses. Such costs and expenses shall be due and payable upon execution of
this Agreement, or if incurred thereafter, upon demand by Lender.

7. Collateral.  The obligations,  undertakings,  liabilities and indebtedness of
Borrower with respect to the Loan or in any manner arising under this Agreement,
the Promissory Note, the other Loan Documents (as hereinafter defined),  and any
obligation  or liability  that  Borrower  may now or hereafter  owe to Lender in
connection with or arising from any interest rate hedge,  derivative,  or "swap"
agreement  made  with  respect  to  the  Loan,   including  without   limitation
obligations  which may arise  pursuant to any "ISDA  Master  Agreement"  and any
schedules  thereto,  whether presently  existing or hereafter arising or entered
into, and any early termination fees  (collectively,  the "Obligation") shall be
secured by, and Borrower hereby assigns,  transfers,  and conveys to Lender, and
grants Lender a security  interest in and to, the following  (collectively,  the
"Collateral"):

(a)  All of the issued and  outstanding  capital stock (the "Pledged  Stock") of
     Security National Life Insurance Company, a Utah corporation  ("SNLIC"),  a
     wholly owned subsidiary of Borrower. Without limiting the foregoing, Lender
     shall have a security interest in that certain stock  certificate  Number 1
     representing  15,000  shares of common stock in SNLIC (the  "Pledged  Stock
     Certificate")

(b)  All shares and  associated  rights and interests  resulting or derived from
     the Pledged Stock,  including without limitation stock issued in connection
     with forward and reverse stock splits,  stock  dividends,  warrants,  stock
     appreciation  rights,  and stock and other  consideration  or distributions
     received  with  respect to or on account  of Pledged  Stock in any  merger,
     consolidation, reorganization, recapitalization, or similar transaction.

(c)  All dividends and distributions, whether in cash or kind, made with respect
     to, or on account of, the Pledged Stock.

(d)  All products and proceeds from any of the foregoing.


<PAGE>



     Borrower shall execute and deliver to Lender, or shall cause to be executed
and delivered to Lender, such assignments,  security  agreements,  UCC financing
statements  (including   continuation   statements  and  amendments),   pledges,
hypothecations,  consents, acknowledgments, and other documents and instruments,
and shall take such other  action,  as Lender may  request to further  effect or
perfect its security interest in the Collateral.  Such documents,  together with
this Agreement,  the Promissory Note, and the Guaranty (as hereinafter  defined)
are referred to as the "Loan Documents". Borrower agrees that the Pledged Stock,
together with any  additional  stock that may be issued with respect  thereto or
issued in  conversion  or exchange  thereof,  shall be  delivered to and held by
Lender or its nominee at all times,  and agrees to take all necessary  action to
effect such delivery.  Notwithstanding  the foregoing,  the Parties  acknowledge
that Lender is currently  holding the Pledge Stock Certificate in its possession
pursuant to a "Commercial Pledge and Security  Agreement" dated December 8, 1998
(the "Pledge Agreement"),  and is holding the same as security for certain other
loans and  extensions  of credit made by Lender to Borrower.  The Parties  agree
that the term  "Indebtedness"  as used in the Pledge  Agreement  shall  include,
without limitation,  the Obligations,  and that the Pledge Agreement constitutes
one of the Loan Documents.

8.  Guarantor.  The  Obligation  of Borrower to Lender shall be  absolutely  and
unconditionally  guaranteed by SECURITY NATIONAL LIFE INSURANCE  COMPANY, a Utah
corporation  ("Guarantor"),  using a form of guaranty agreement  satisfactory to
Lender (the "Guaranty").

9. Conditions  Precedent.  Lender shall not be required to make any disbursement
on the Loan or under the Promissory

Note unless and until the following  conditions  have been,  and continue to be,
met to the satisfaction of the Lender:

(a)  This  Agreement,  the  Promissory  Note,  the Guaranty,  and any other Loan
     Documents  required by Lender shall have been duly  executed by the parties
     thereto,  acknowledged (if required), and delivered to Lender, and the same
     shall be in full force and effect.

(b)  Borrower shall have provided evidence  satisfactory to Lender that Borrower
     and any other person signing any Loan Document (other than Lender) have the
     authority to do so.

(c)  The  representations  and  warranties  contained in this  Agreement and the
     other Loan Documents executed by Borrower (including without limitation the
     Pledge Agreement) shall be true and correct in all material respects.

(d)  The security  interest of Lender in and to the  Collateral  shall be valid,
     perfected,  in full force and  effect,  and shall  constitute  a first lien
     position  senior in  interest  and right to all other  liens,  claims,  and
     encumbrances.

(e)  No Event of Default shall have occurred and be continuing, and no condition
     shall exist or event shall have occurred  which,  with the giving of notice
     or the lapse of time or both, would constitute an Event of Default.

     Notwithstanding  anything in this  Agreement or the other Loan Documents to
the contrary, the foregoing conditions are solely for the benefit and protection
of Lender. Lender may, in its sole discretion, waive or defer the performance of
any condition on one or more  occasions.  Any such waiver or deferral  shall not
establish a course of dealings or otherwise  obligate  Lender to waiver or defer
any condition on other occasions.


<PAGE>


10. Representations and Warranties. In order to induce Lender to enter into this
Agreement and to make the Loan,  Borrower  represents  and warrants to Lender as
follows:

(a)  Borrower is a corporation,  duly organized,  validly existing,  and in good
     standing  under  the laws of the  State of Utah  with the  power to own its
     assets and to transact business in Utah, and in such other states where its
     business is  conducted  and it is required to be  registered  or  otherwise
     qualified to transact business.

(b)  Borrower has all requisite  authority and power to execute and deliver this
     Agreement,  the Promissory Note, and any other Loan Document to which it is
     a party,  and to perform its  obligations  thereunder  and any condition or
     obligation imposed under the terms thereof.

(c)  The execution,  delivery and performance by Borrower of this Agreement, the
     Promissory Note, and other Loan Document, and each document incident hereto
     will not violate any provision of any applicable  law,  regulation,  order,
     judgment,  decree, article of incorporation,  by-law, indenture,  contract,
     agreement,  or other  undertaking  to which  Borrower is a party,  or which
     purports to be binding on Borrower or its assets and will not result in the
     creation  or  imposition  of a lien on any of its  assets,  other  than the
     security interest granted to Lender and the Permitted Encumbrances.


(d)  There is no action, suit,  investigation,  or proceeding pending or, to the
     knowledge of Borrower,  threatened, against or affecting Borrower or any of
     its assets which, if adversely  determined,  would have a material  adverse
     affect on the  financial  condition  of  Borrower or the  operation  of its
     business.

(e)  Any financial  statements  which have heretofore been provided to Lender by
     Borrower or at Borrower's request, are correct and complete in all material
     respects,  and  truly,  fairly,  and  accurately  represent  the  financial
     position of Borrower as of the date of such financial statements. Since the
     date of such statements there have been no material adverse changes

(f)  No information or report furnished by Borrower to Lender in connection with
     its  request  or  application  for the Loan or in the  negotiation  of this
     Agreement or any other Loan Document contained any material misstatement of
     fact or omitted to state a material fact or any fact  necessary to make the
     statements contained therein not misleading.

(g)  Borrower has (1) filed all applicable federal, state, and local tax returns
     or other  statements  required to be filed in connection with its business,
     including  those for income taxes,  sales taxes,  property  taxes,  payroll
     taxes, payroll withholding amounts, FICA contributions,  and similar items;
     (2)  maintained  appropriate  reserves for the accrual of the same; and (3)
     paid when due all such taxes,  or sums or  assessments  made in  connection
     therewith. Provided, however, that (until distraint,  foreclosure, sale, or
     similar  proceedings  have been  commenced)  nothing  herein  will  require
     Borrower  to pay any sum or  assessment,  the  validity  of  which is being
     contested in good faith by proceedings  diligently  pursued and as to which
     adequate reserves have been made.

(h)  Lender's  security  interest in the  Collateral is in a first lien position
     senior in right and title to all other liens,  claims,  and encumbrances of
     any kind.


<PAGE>


(i)  Borrower is not engaged in the business of extending credit for the purpose
     of purchasing  or carrying  margin stock (as defined in Regulation U issued
     by the Board of Governors of the Federal Reserve  System),  and no proceeds
     of the Loan will be used to purchase or carry any margin stock or to extend
     credit to others for the purpose of  purchasing  or carry  margin  stock in
     violation of Regulation U.

(j)  As used in this  Agreement,  "ERISA" means the Employee  Retirement  Income
     Security Act of 1974,  as amended,  together  with all  regulations  issued
     pursuant  thereto;  "ERISA Affiliate" means each trade or business (whether
     or not incorporated)  which,  together with Borrower,  will be treated as a
     single  employer  under  ERISA;  "Plan"  means any plan  defined in Section
     4021(a) of the Internal  Revenue Code or in respect of which Borrower is an
     "employer" or a "substantial  employer" as said terms are defined in ERISA;
     and "Prohibited Transaction" means any transaction described in Section 406
     of ERISA which is not  otherwise  exempt and any  transaction  described in
     Section 4975(c) of the Internal Revenue Code which is not otherwise exempt.
     Except as has been  disclosed  to Lender in  writing  on or before the date
     hereof, neither Borrower nor any of its ERISA Affiliates nor any Plan is in
     material  violation of any provision of ERISA or any other applicable state
     or federal law, including the requirements of the Internal Revenue Code; no
     Prohibited Transaction or reportable event has occurred with respect to any
     Plan;  no notice of intent to  terminate  a Plan has been filed  within the
     twenty-four  (24) month period  preceding  the date hereof nor has any Plan
     been terminated  under Section 4041(c) of ERISA since September 2, 1974; no
     proceeding has been instituted by the Pension Benefit Guaranty  Corporation
     ("PBGC") to terminate or appoint a trustee to administer a Plan; and to the
     best of  Borrower's  knowledge,  no event has occurred or condition  exists
     which might  constitute  grounds for the termination of or appointment of a
     trustee  to  administer  any Plan;  each Plan  meets  the  minimum  funding
     requirements  of Internal  Revenue  Code Section 412 and no waiver from the
     minimum funding  requirement has been applied for or approved;  and neither
     Borrower  nor any ERISA  Affiliate  has  incurred  or  expects to incur any
     withdrawal  liability  to any  multi-employer  Plan  within the  meaning of
     Section 4001(a)(3) of ERISA.

(k)  The Pledged Stock Certificate  represents all of the issued and outstanding
     capital stock of SNLIC. The Pledged Stock has been duly authorized, validly
     issued,  fully  paid  and  is  non-assessable.  There  is no  agreement  or
     arrangement  restricting  the transfer of the Pledged Stock or the transfer
     of any  other  Collateral.  SNLIC is not a party to any  document,  option,
     warrant, or other agreement, however designated, pertaining to the issuance
     of any additional capital stock in SNLIC.

11.  Affirmative  Covenants.  So long as any of the Obligation  remains  unpaid,
     Borrower  covenants and agrees that,  except with the prior written consent
     of Lender, it shall do the following:

     (a)  Borrower shall furnish to Lender such  financial  statements as Lender
          may  from  time to  time  reasonably  request.  Without  limiting  the
          foregoing,  Borrower  shall,  at  a  minimum,  provide  the  following
          financial information to Lender:

          (i)  within  120 days  after the end of each  fiscal  year,  copies of
               Borrower's  audited  financial  statements,  including  all notes
               thereto and the opinion of Borrower's independent auditors.;

          (ii) within 45 days after the end of each  fiscal  quarter,  copies of
               Borrower's  internally prepared financial  statements,  including
               balance sheet and income statement; and

          (iii)annually,  within 30 days  after  filing,  copies  of  Borrower's
               federal income tax returns (or requests for filing extensions, if
               applicable), including all schedules and exhibits thereto.


<PAGE>


     (b)  Borrower  shall  promptly  notify  Lender in  writing  of any Event of
          Default under the terms  hereof,  or the existence of any condition or
          the  occurrence  of any event which,  with the giving of notice of the
          lapse of time or both, would constitute an Event of Default, or of any
          litigation,  proceeding,  or  development  which  may have a  material
          adverse  effect on  Borrower's  ability to perform  under the terms of
          this Agreement.  Such notice shall include a description of the matter
          requiring the notice to be given and the actions that Borrower intends
          to take with respect thereto.

     (c)  Borrower  shall  duly and  timely  observe  and  conform  to all valid
          requirements or any governmental  authority relative to the conduct of
          its business,  its properties,  or its asset.  Borrower shall maintain
          and  keep in full  force  and  effect  (1) all  licenses  and  permits
          necessary to the proper conduct of its business, and (2) its existence
          in good standing as corporation.

     (d)  Borrower  shall keep  proper  books of records  and  accounts in which
          full,  true,  and  correct  entries  will be made of all  dealings  or
          transactions relating to its business and activities.

     (e)  Borrower shall (1) file all applicable  federal,  state, and local tax
          returns or other  statements  required to be filed in connection  with
          its business,  including those for income taxes, sales taxes, property
          taxes, payroll taxes, payroll withholding amounts, FICA contributions,
          and similar items; (2) maintained appropriate reserves for the accrual
          of the  same;  and (3)  paid  when  due  all  such  taxes,  or sums or
          assessments  made in connection  therewith.  Provided,  however,  that
          (until distraint,  foreclosure, sale, or similar proceedings have been
          commenced)  nothing  herein  will  require  Borrower to pay any sum or
          assessment,  the validity of which is being contested in good faith by
          proceedings  diligently pursued and as to which adequate reserves have
          been made.

     (f)  Borrower  shall permit any person  designated  in writing by Lender to
          visit and inspect any of the corporate books and financial  records of
          Borrower  and to discuss its affairs and finances  with its  principal
          officers,  all at such reasonable  times and as often as Lender may in
          good faith request,  subject to any reasonable  conditions  imposed by
          Borrower.

     (g)  Borrower  will  materially  comply with all  applicable  provisions of
          ERISA  and,  promptly  after the  filing or  receiving  thereof,  will
          provide  copies of all reports and notices which Borrower or any ERISA
          Affiliate files with or receives from the PBGC or the U.S.  Department
          of Labor under  ERISA.  As soon as  possible,  and in any event within
          thirty (30) days after the  Borrower or any ERISA  Affiliate  knows or
          has reason to know that any reportable event or Prohibited Transaction
          has occurred  with respect to any Plan or the PBGC,  or Borrower or an
          ERISA  Affiliate has instituted or will  institute a proceeding  under
          Title IV of ERISA to  terminate  any Plan,  Borrower  will  deliver to
          Lender a  certificate  of the  Chief  Financial  Officer  of  Borrower
          setting  forth  details  as  to  such  reportable  event,   Prohibited
          Transaction  or  planned  termination  and the  action  that  Borrower
          proposes to take with respect thereto.

     (h)  Borrower  shall,  on a consolidated  basis,  at all times maintain the
          following financial covenants and ratios:

     (i)  Borrower shall maintain a Net Worth of not less than  $20,000,000.  As
          used  herein,   "Net  Worth"  means   Borrower's  total  tangible  and
          intangible  assets  less Total  Debt;  and "Total  Debt"  means all of
          Borrower's liabilities,  including debt which has been subordinated to
          this Loan in a manner  approved  by Lender  on a  case-by-case  basis.
          Compliance  with the foregoing  covenant shall be tested at the end of
          each fiscal quarter.


<PAGE>


          (ii) Borrower  shall  maintain a ratio of Operating Cash Flow to Fixed
               Charges of not less than 1.25 5o 1.00. As used herein, "Operating
               Cash  Flow"  means  net  income  after  taxes  and  exclusive  of
               extraordinary  gains  and  losses,  gains  on the  sale of  fixed
               assets,  and  other  extraordinary   income,  plus  depreciation,
               amortization, interest expense, and lease expense, less dividends
               and distributions; and "Fixed Charges " means the sum of interest
               expense, lease expense, current maturities of long-term debt, and
               current  maturities  of capital  leases (all  calculated  for the
               preceding  12-month period).  Compliance with the foregoing ratio
               shall  be  tested  at the  end of  each  fiscal  quarter  for the
               preceding 12-month period.

     (f)  Borrower shall maintain a ratio of Total  Liabilities less outstanding
          balances on revolving credit lines relating to mortgage  operations to
          Net  Worth  of not  more  than  6.50  to 1.  As  used  herein,  "Total
          Liabilities"  means all  liabilities of Borrower,  and Net Worth shall
          have the meaning in clause (i) above.  Compliance  with the  foregoing
          ratio shall be tested at the end of each fiscal quarter.

     7. In addition to the  foregoing,  Guarantor  shall be required to maintain
the following ratio and covenant:

          (i)  Guarantor  shall  maintain a ratio of Total  Adjusted  Capital to
               Required Risk Based Capital of not less than 3 to 1 (i.e.  300%).
               As used herein,  "Total Adjusted  Capital" shall have the meaning
               given thereto by statutory  accounting  principles  applicable to
               insurance companies. Compliance with the foregoing ratio shall be
               tested at the end of each fiscal year.

          (ii) Guarantor  shall maintain a Net Change in Capital  Surplus of not
               less than 5%. As used  herein,  "Net  Change in Capital  Surplus"
               shall have the  meaning  given  thereto by  statutory  accounting
               principles applicable to insurance companies. Compliance with the
               foregoing  covenant  shall be tested  annually at the end of each
               fiscal year.

     12. Negative  Covenants.  So long as any of the Obligation  remains unpaid,
Borrower  covenants that,  except with the prior written  consent of Lender,  it
will not do any of the following:

     (a)  Borrower   shall  not  enter  into  any   transaction   of  merger  or
          consolidation,  or acquire all or  substantially  all of the assets or
          business of a person or other legal entity  without the prior  written
          consent of Lender.

     (b)  Borrower  shall not  create or  permit  to exist any lien,  claim,  or
          encumbrance on the  Collateral or any part thereof,  except as granted
          to Lender.  Borrower  shall not do or refrain from doing any act which
          may in any manner adversely affect Lender's interest in the Collateral
          or diminish the value thereof.

     (c)  Borrower  will not at any time  permit  any Plan  maintained  by it to
          engage in any Prohibited  Transaction;  incur any "accumulated funding
          deficiency"  as such term is defined in ERISA;  or terminate  any such
          Plan in a manner which could result in the imposition of a lien on any
          property of Borrower pursuant to ERISA.


<PAGE>



     13.  Covenants  as to the  Pledged  Stock So long as any of the  Obligation
remains unpaid, Borrower covenants and agrees as follows:

          (a)  Perfection.  Concurrently with the execution and delivery of this
               Agreement,  Borrower shall (i) deliver to Lender all certificates
               representing  the Pledged  Stock,  accompanied  by undated  stock
               powers duly executed in blank and medallion guaranteed,  and (ii)
               take all such other  actions as shall be  necessary  or as Lender
               may  reasonably  request to perfect and establish the priority of
               the  lien  in  the   Collateral   granted   by  this   Agreement.
               Notwithstanding the generality of the foregoing,  and in addition
               to  the  Lender's  physical  possession  of any  certificates  as
               provided for herein,  Borrower hereby  expressly  consents (x) to
               the  filing of any  UCC-1  financing  statement  by Lender in any
               jurisdiction  Lender deems necessary or  appropriate,  or (y) the
               delivery  to SNLIC or any  other  third  party of any  notice  or
               correspondence  deemed  appropriate by Lender in order to perfect
               the priority of the liens granted by this Agreement.

          (b)  Preservation  and  Protection  of  Security  Interests.  Borrower
               shall:

               (i)  upon the  acquisition  after the date  hereof by Borrower of
                    any Collateral,  promptly either (x) transfer and deliver to
                    Lender all such Collateral  (together with the  certificates
                    (if any) representing such Collateral duly endorsed in blank
                    or  accompanied  by updates  stock  powers duly  executed in
                    blank),  or (y) take  such  other  action  as  Lender  shall
                    reasonably  deem necessary or  appropriate  to perfect,  and
                    establish   the  priority  of,  the  lien  granted  by  this
                    Agreement in such Collateral; and


               (ii) give, execute, deliver, file or record any and all financing
                    statements,   notices,   contracts,   agreements   or  other
                    instruments,  obtain any and all governmental  approvals and
                    take any and all steps  that may be  necessary  or as Lender
                    may  reasonably  request to create,  perfect,  establish the
                    priority  of, or to preserve  the  validity,  perfection  or
                    priority of, the lien granted by this Agreement or to enable
                    Lender to exercise and enforce its rights, remedies,  powers
                    and  privileges  under this  Agreement  with respect to such
                    lien.

          (c)  Grant of Proxy; Appointment of Lender as Attorney-in-Fact.

               (i)  Borrower  hereby grants to Lender a proxy to vote all shares
                    of the  Pledged  Stock,  so long as an Event of Default  has
                    occurred and is continuing.  Such proxy,  being coupled with
                    an  interest,  is  irrevocable  until the earlier of (x) the
                    date when the Event of Default shall cease to exist,  or (y)
                    that  date  on  which  all  of  the   Obligation   has  been
                    indefeasibly paid in full.


               (ii) So  long  as  an  Event  of  Default  has  occurred  and  is
                    continuing, Borrower hereby appoints Lender and any designee
                    of  Lender as  Borrower's  attorney-in-fact  and  authorizes
                    Lender or such  designee,  at Borrower's  sole  expense,  to
                    exercise  at  any  time  in  Lender's  or  such   designee's
                    discretion all or any of the following powers (such power of
                    attorney,  being coupled with an interest, being irrevocable
                    until all of the  Obligation has been  indefeasibly  paid in
                    full);  (A) to  ask,  demand,  collect,  sue  for,  recover,
                    receive and give receipt and  discharge  for amounts due and
                    to become due under and in respect of all or any part of the
                    Collateral;  (B) to receive, endorse and collect any drafts,
                    instruments, documents and chattel paper in connection with

<PAGE>


                    clause (A) above;  (C) to file any claims or take any action
                    or  proceeding  that Lender may deem  necessary or advisable
                    for the collection of all or any part of the Collateral; (D)
                    to execute,  in connection  with any sale or  disposition of
                    the  Collateral  permitted   hereunder,   any  endorsements,
                    assignments,   bills  of  sale  or  other   instruments   of
                    conveyance  or transfer  with  respect to all or any part of
                    the Collateral; (E) to enter and remain upon the premises of
                    Borrower  and  take  possession  of all or any  part  of the
                    Collateral, with or without judicial process; (F) to use the
                    materials,  services,  and books and records of Borrower for
                    the purpose of  liquidating  or collecting  the  Collateral,
                    whether by foreclosure, auction, or otherwise; (G) to remove
                    the same to the premises of Lender or any  designated  agent
                    for such time as  Lender  may  desire  in order  effectively
                    collect or liquidated  the  Collateral;  and (H) to exercise
                    (1) all  voting,  consensual,  and other  rights  and powers
                    pertaining  to the  Collateral  (whether or not  transferred
                    into the name of Lender),  at any  meeting of  shareholders,
                    exchange, subscription, and any other rights, privileges, or
                    options  pertaining  to the  Collateral  as if it  were  the
                    absolute owner thereof.

     (d) Special Provisions Relating to Stock Collateral.


               (i)  So long as no Event of Default  shall have  occurred  and be
                    continuing,  Borrower  shall have the right to exercise  all
                    voting,  consensual and other powers of ownership pertaining
                    to the stock  Collateral  for all  purposes,  provided  that
                    Borrower  agrees that it will not vote the stock  Collateral
                    in any manner that is  inconsistent  with any covenant by it
                    in this Agreement or any other Loan Document.  Lender shall,
                    at Borrower's expense,  execute and deliver to Borrower,  or
                    cause to be executed and  delivered  to  Borrower,  all such
                    proxies,  powers of attorney,  dividend and other orders and
                    other  instruments,   without  recourse,   as  Borrower  may
                    reasonably  request for the purpose of enabling  Borrower to
                    exercise  the  rights  and powers  which it is  entitled  to
                    exercise in this Paragraph 13(d)(i).

               (ii) If  any  Event  of  Default   shall  have  occurred  and  be
                    continuing,   and  whether  or  not  Lender   exercises  any
                    available  right  to  declare  the  Obligations  or any part
                    thereof due and payable or seeks or pursues any other right,
                    remedy,  power or privilege available to it under applicable
                    law, this Agreement,  the Promissory Note, or the other Loan
                    Documents,  Lender  shall  be  entitled  to vote  the  proxy
                    granted to it pursuant to Paragraph 13 (c)(i).

               (iii)Borrower  shall  be  entitled  to  receive  and  retain  any
                    interest,  income,  cash dividends,  cash  distributions and
                    other  amounts paid or payable in respect of any  Collateral
                    (including stock Collateral);  providing,  however, that, if
                    an Event of Default shall have  occurred and be  continuing,
                    and whether or not Lender  exercises any available  right to
                    declare the  Obligation  due and payable or seeks or pursues
                    any other right,  remedy, power or privilege available to it
                    under  applicable  law,  this  Agreement  or the other  Loan
                    Documents, all interest, dividends, distributions, and other
                    amounts paid or payable in respect of the  Collateral  shall
                    be paid directly to Lender and be retained by Lender as part
                    of the Collateral (except to the extent applied upon receipt
                    to the payment of the  Obligation).  Upon the occurrence and
                    during the continuation of an Event of Default, Lender shall
                    also be  entitled  to receive  directly:  (A) all  interest,
                    income, dividends,  distributions,  or other amounts paid or
                    payable  in  cash  or  other  property  in  respect  of  any
                    Collateral in connection with the dissolution,  liquidation,
                    recapitalization or reclassification or the capital of SNLIC
                    to the extent  representing  (in the reasonable  judgment of
                    Lender) an extraordinary, liquidating, or other distribution
                    in  return  of  capital;   (B)  all  additional   membership
                    interests,   warrants,   options,  or  other  securities  or
                    property (other than cash) paid or payable or distributed or
                    distributable  in respect of any  Collateral  in  connection
                    with any noncash dividend, distribution,  return of capital,
                    spin-off,    stock   split,   split-up,    reclassification,
                    combination  of shares or interests or similar  arrangement;
                    and (C) without  affecting  any  restrictions  against  such
                    actions   otherwise   contained   herein,   all   additional
                    membership interests, warrants, options, or other securities
                    or property  (including cash) paid or payable or distributed
                    or  distributable in respect of any Collateral in connection
                    with any  consolidation,  merger,  exchange  of  securities,
                    liquidation, or other reorganization.  All interest, income,
                    dividends, distributions, or other amounts that are received
                    by Borrower  in  violation  of  provisions  hereof  shall be
                    received  in  trust  for the  benefit  of  Lender,  shall be
                    segregated  from other  property or funds of  Borrower,  and
                    shall be forthwith  delivered to Lender as Collateral in the
                    same form as so received (with any necessary endorsements).

               (iv) Borrower  shall  cause  SNLIC to not  issue  any  additional
                    capital stock,  or enter into any agreement for the issuance
                    of additional capital stock, or to grant an option, warrant,
                    or other  right to acquire  any of the  capital  stock,  and
                    Borrower shall vote against any such proposal.

     14. Events of Default.  The  occurrence  of any of the following  events or
conditions shall constitute an "Event of default" hereunder:

     (a)  Borrower  fails to make any  payment of  principal  or interest on the
          Promissory Note or under this Agreement within ten (10) days after the
          same becomes due.

     (b)  Any  representation  or warranty made by Borrower in this Agreement or
          the Promissory Note, or in any certificate,  financial  statement,  or
          other  statement  furnished  by Borrower  to Lender,  is untrue in any
          material respect at the time when made.

     (c)  Borrower  defaults  in the  observance  or  performance  of any  other
          covenant  or  agreement  contained  in this  Agreement,  other  than a
          default  constituting  a separate and distinct  Event of Default under
          this Paragraph 14,and such default  continues  unremedied for a period
          of twenty (20) days after notice thereof is given to Borrower.

     (d)  Borrower  defaults  in the  observance  or  performance  of any  other
          covenant or agreement  contained  in any other Loan  Document or other
          document  or  agreement  made  and  given  in  connection   with  this
          Agreement,  other than a default  constituting a separate and distinct
          Event of Default under this  Paragraph 14, and the  continuance of the
          same  unremedied for a period of thirty (30) days after notice thereof
          is given to Borrower.

     (e)  Any of the Loan Documents or other  instrument  executed and delivered
          in  connection  herewith for any reason  ceases to be valid or in full
          force  and  effect  or the  validity  or  enforceability  of  which is
          challenged or disputed by any signer thereof, other than Lender.

     (f)  Borrower defaults in the payment of principal or interest on any other
          obligation for borrowed money other than hereunder, or defaults in the
          payment of the deferred  purchase price of property  beyond the period
          of grace, if any,  provided with respect  thereto,  or defaults in the
          performance  or  observance  of any  obligation  or in  any  agreement
          relating thereto,  if the effect of such default is to cause or permit
          the holder or holders of such obligation (or trustee on behalf of such
          holder or holders) to cause such obligation to become due prior to the
          stated maturity.

     (g)  Borrower or Guarantor files a voluntary petition in bankruptcy seeking
          reorganization,  arrangement or  readjustment  of debts,  or any other
          relief  under  the  Bankruptcy  Code as  amended  or under  any  other
          insolvency act or law, state or federal, now or hereafter existing.


<PAGE>


     (h)  An  involuntary  petition is filed  against  Borrower or  Guarantor in
          bankruptcy  seeking  reorganization,  arrangement or  readjustment  of
          debts,  or any other relief under the Bankruptcy  Code as amended,  or
          under  any  other  insolvency  act or law,  state or  federal,  now or
          hereafter  existing,  and the continuance  thereof for sixty (60) days
          undismissed, unbonded, or undischarged.

     (i)  All or any  substantial  part of the property of Borrower or Guarantor
          shall be condemned,  seized, or otherwise appropriated,  or custody or
          control of such property is assumed by any governmental  agency or any
          court of  competent  jurisdiction,  and is  retained  for a period  of
          thirty (30) days.

     (j)  Guarantor shall default in any term, condition,  of covenant contained
          in the Guaranty or in any other agreement or undertaking it may now or
          hereafter have with Lender.

     (k)  Lender  otherwise in good faith deems  itself to be  insecure,  or the
          value of the Collateral to have  significantly  declined from the date
          hereof,  or the  prospect  of  timely  payment  or  performance  to be
          impaired,  provided, however, Lender shall have given Borrower written
          notice of the  grounds  thereof,  and  Borrower  shall have  failed to
          correct such matter or given Lender other  assurance  satisfactory  to
          Lender within twenty (20) days thereof.

15.      Remedies

     (a)  Upon the occurrence of an Event of Default,  Lender may accelerate the
          entire unpaid principal balance of the Promissory Note,  together with
          accrued interest  thereon,  and declare the same to be immediately due
          and payable without presentment,  demand,  protest, or other notice of
          any kind.  Without waiving any right or remedy available to it, Lender
          may  proceed   against   Borrower,   Guarantor,   or  any   Collateral
          simultaneously  or in any  order it  chooses.  To the  fullest  extent
          permitted by law,  Borrower waives any rights to presentment,  demand,
          protest, or notice of any kind in connection with this Agreement,  the
          Promissory  Note, or the other Loan Documents.  No failure or delay on
          the part of  Lender in  exercising  any  right,  power,  or  privilege
          hereunder will preclude any other or further  exercise  thereof or the
          exercise of any other right, power or privilege.

     (b)  The  rights  and  remedies  provided  herein  are  cumulative  and not
          exclusive  of any  other  rights  or  remedies  provided  at law or in
          equity. Without limiting the foregoing, upon the occurrence and during
          the  continuation of an Event of Default,  Lender shall have the right
          in Lender's sole and absolute  discretion  to determine  which rights,
          security,  liens,  or  remedies  Lender  shall  at  any  time  pursue,
          relinquish,  subordinate, modify or take any other action with respect
          thereto,  without in any way modifying or affecting any of them or any
          of Lender's rights hereunder or the Obligation,  and Lender, among its
          other rights and  remedies,  shall have all of the rights and remedies
          of a secured party under the Uniform  Commercial  Code of the State of
          Utah  (as  amended,  the  "UCC").  Without  in any  way  limiting  the
          generality of the  foregoing,  Lender may, upon the --- occurrence and
          during  the  continuation  of an  Event of  Default:  (A)  subject  to
          compliance with the terms of Section  70A-9a-609 of the UCC, cause the
          Collateral  to be  transferred  to  Lender's  name or in the name of a
          nominee  and,  thereafter,  exercise  all of the rights,  powers,  and
          remedies  of an  owner  thereof;  and (B)  sell,  resell,  assign  and
          deliver, in its sole discretion,  all or any of the Collateral,  in on
          or more lots or  parcels,  subject  to  applicable  federal  and state
          securities  laws,  at public or private  sale,  at any of the Lender's
          offices or elsewhere,  for cash, upon credit,  or for future delivery,
          at such time or times and at such  price or prices and upon such other
          terms as Lender may deem  satisfactory.  If any of the  Collateral  is
          sold by Lender upon credit or for future delivery, Lender shall not be
          liable for the  failure of the  purchaser  to  purchase or pay for the
          same and,  in the event of any such  failure,  Lender may resell  such
          Collateral.  In no event shall  Borrower be credited  with any part of
          the  proceeds of sale of any  Collateral  until and to the extent cash
          payment in respect thereof has actually been received by Lender.  Each
          purchaser  at any such sale shall hold the  property  sold  absolutely
          free from any  claim or right of any kind  whatsoever,  including  any
          equity or right of  redemption  of Borrower,  and  Borrower  expressly
          waives,  to the fullest extent permitted by applicable law, all rights
          of redemption,  stay or appraisal, and all rights to require Lender to
          marshal any assets in favor of Borrower or any other person or against
          or in payment of any or all of the Obligation, that it has or may have
          under any rule of law or statute now existing or hereafter adopted. No
          demand,  presentment,  protest,  advertisement,  or notice of any kind
          (except any notice  required  by law,  as  referred to below),  all of
          which are hereby  expressly  waived by Borrower,  shall be required in
          connection  with any sale or other  disposition  of all or any part of
          the Collateral.  If any notice of a proposed sale or other disposition
          of  all  or any  part  of  the  Collateral  shall  be  required  under
          applicable  law,  Lender  shall give  Borrower at least ten (10) days'
          prior  notice of the time and place of any public sale and of the time
          after which any private sale or other disposition is to be made, which
          notice Borrower agrees is commercially reasonable. Lender shall not be
          obligated to make any sale of Collateral if it shall  determine not to
          do so, regardless of the fact that notice of sale may have been given.
          Lender  may,  without  notice or  publication,  adjourn  any public or
          private  sale or cause the same to be  adjourned  from time to time by
          announcement  at the time and place fixed for sale, and such sale may,
          without  further  notice,  be made at the time and  place to which the
          same was so  adjourned.  Upon  each  public  sale and,  to the  extent
          permitted  by  applicable  law,  upon each  private  sale,  Lender may
          purchase  all or any of the  Collateral  being  sold,  free  from  any
          equity,  right of redemption,  or other claim or demand,  and may make
          payment therefore by endorsement and application (without recourse) of
          the  Obligation in lieu of cash as a credit on account of the purchase
          price for such Collateral. If, following the occurrence and during the
          continuation  of an Event of Default,  Lender seeks to take possession
          of any or all of the Collateral by judicial  process,  Borrower hereby
          irrevocably  waives:  (x) any bond and any surety or security relating
          thereto by any statute, court rule or otherwise as an incident to such
          possession; (y) any demand for possession prior to the commencement of
          any  suit  or  action  to  recover  possession  thereof;  and  (z) any
          requirement  that Lender  retain  possession of and not dispose of any
          such Collateral  until after trial or final judgment.  The enumeration
          of the  rights  and  remedies  of Lender in this  Paragraph  15 is not
          intended  to be  exhaustive  and the  exercise  of any such  rights or
          remedies  shall not  preclude  the  exercise  of any  other  rights or
          remedies, all of which shall be cumulative.

     (c)  Lender  shall incur no liability  as a result of the sale,  lease,  or
          other  disposition of all or any part of the Collateral at any private
          sale  pursuant  to  this  Paragraph  15  conducted  in a  commercially
          reasonable  manner.  Borrower  hereby waives any claims against Lender
          arising  by  reason  of the fact  that the  price at which  all or any
          portion of the  Collateral may have been sold at such private sale was
          less than the price which might have been obtained at a public sale or
          was less than the aggregate  amount of the Obligation,  even if Lender
          accepts the first offer received and does not offer such Collateral to
          ore than one offeree, provided that such sale is in all other respects
          conducted in a commercially reasonable manner.

     (d)  Borrower recognizes that, by reason of certain prohibitions  contained
          in the Securities Act of 1933, as amended (the "Securities  Act"), and
          applicable state or foreign  securities laws, Lender may be compelled,
          with  respect to any sale of all or any portion of the  Collateral  to
          limit  purchasers  to those who will  agree,  among other  things,  to
          acquire the Collateral (or any portion thereof) for their own account,
          for investment,  and not with a view to distribution or sale. Borrower
          acknowledges  that any such private sale may be at prices and on terms
          less  favorable  to Lender than those  obtained  through a public sale
          without such restrictions,  and,  notwithstanding  such circumstances,
          aggress  that any such  private sale shall be deemed to have been made
          in a  commercially  reasonable  manner and that  Lender  shall have no
          obligation to engage in public sales.  Borrower  further  acknowledges
          that SNLIC is under no legal or contractual obligation to register any
          of the Collateral under the Securities Act.


<PAGE>


     (e)  Subject to the  provisions of the  Promissory  Note, the proceeds from
          any sale or other  disposition  of Collateral by Lender shall first be
          applied to any costs and  expenses  incurred by Lender,  or any of its
          agents or  representatives  (i) in securing  possession  thereof or in
          storing, repairing, and finishing same for sale, or (ii) in connection
          with any sale thereof,  with the balance,  if any, of such proceeds to
          be applied  toward the payment of the  Obligation in any manner deemed
          appropriate  by  Lender  Party in its sole  and  absolute  discretion.
          Application  of the net proceeds as to any  particular  portion of the
          Obligation  or as to  principal  or interest  shall be in the Lender's
          sole   and   absolute   discretion,   notwithstanding   any   contrary
          instructions  which Lender may have received or receive from any other
          person.  Any deficiency will be paid to Lender  forthwith upon demand.
          Any  surplus  will be paid by  Lender,  subject to the claims of third
          persons, to Borrower.

     (f)  Borrower  agrees to pay all costs and  expenses  incurred by Lender by
          reason of the default, including court costs and reasonable attorney's
          fees  whether  incurred  prior  to,  during,   or  subsequent  to  any
          bankruptcy,   reorganization,    receivership,   liquidation,   legal,
          judicial,  appellate, or other proceeding involving Borrower or any of
          its assets.

     16. Notices.  Unless otherwise  specifically  provided herein,  all notices
required to be given shall be in writing  addressed to the  respective  party as
set forth below and shall be either personally served, sent by overnight courier
service,  or sent by registered or certified United States mail,  return receipt
requested.  Such notices shall be deemed to have been given: (a) if delivered in
person,  when  delivered;  (b) if delivered by overnight  courier,  on the first
business day after depositing the same with the overnight courier;  or (c) if by
United  States mail,  on the first date that delivery was attempted or three (3)
business days after  depositing in the United States mail,  postage  prepaid and
properly  addressed,  whichever  first  occurs.  Notices  shall be  addressed as
follows:

                  If to Lender:     KeyBank National Association
                                    Attn:  Commercial Loan Dept.
                                    KeyBank Tower, Suite 2007
                                    50 South Main Street
                                    Salt Lake City, Utah 84144

                  If to Borrower:   Security National Financial Corporation
                                    Attn:  President
                                    5300 South 360 West. Suite 310
                                    Salt Lake City, Utah 84123

     or to such other address as the party to whom such notice is intended shall
     have previously designated by written notice to the serving party.

     17. General  Provisions.  All  representations  and warranties made in this
Agreement,  the Promissory Note, any other Loan Document, and in any certificate
delivered  pursuant  thereto  shall  survive the  execution and delivery of this
Agreement and the making of the Loan  hereunder.  This Agreement will be binding
upon  and  inure  to the  benefit  of  Borrower  and  Lender,  their  respective
successors  and  assigns,  except that  Borrower  may not assign or transfer its
rights or delegate its duties  hereunder  without the prior  written  consent of
Lender. This Agreement,  the Promissory Note, the other Loan Documents,  and all
documents and instruments  associated herewith will be governed by and construed
and interpreted in accordance with the laws of the State of Utah. Time is of the
essence hereof. Lender may set off against any debt or account it owns Borrower,
now existing or hereafter arising,  in accordance with its rules and regulations
governing  deposit  accounts then in existence,  and for such purposes is hereby
granted a security interest in all such accounts.


<PAGE>


     18.  Waiver of Jury  Trial.  BORROWER  AND LENDER EACH WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR  PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR RELATING  THERETO OR ARISING FROM
THE LENDING  RELATIONSHIP  WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREE THAT
ANY SUCH  ACTION OR  PROCEEDING  SHALL BE TRIED  BEFORE A COURT AND NOT BEFORE A
JURY.

     19. Entire Agreement. This Agreement, together with the Promissory Note and
the other Loan Documents,  constitutes the entire understanding and agreement of
the Parties with respect to the general  subject  matter  hereof;  supersede all
prior  negotiations  and  agreements  with  respect  thereto;  and  may  not  be
contradicted  by evidence of any alleged oral  agreement.  This  Agreement,  the
Promissory Note, and the other Loan Documents may not be amended,  modified,  or
rescinded  in any manner  except by a written  agreement  signed by Lender which
clearly and unequivocally  expresses an intent to amend,  modify, or rescind the
same.

     EXECUTED on the day and year first written above.

                                   SECURITY NATIONAL FINANCIAL
                                   CORPORATION, a Utah corporation





                                    By:  s/s  Scott M. Quist
                                              President




                                    KEYBANK NATIONAL ASSOCIATION
                                    A national banking association




                                    By:  s/s Roger L. Ford
                                             Vice President


<PAGE>