SECURITIES & EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                 For the fiscal year ended December 31, 2003, or

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

                          Commission File Number 0-9341

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

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

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

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

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

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

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

Class C Common Stock, $0.20 Par Value                         None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                                     Yes [X]  No___

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of the last business day of Registrant's  most recently  completed
second fiscal quarter was $29,890,000, based upon the closing price on that date
on the Nasdaq  National  Market.  There were 5,054,906  shares of Class A Common
Stock and 6,260,793 shares of Class C Stock outstanding at March 25, 2004.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  definitive  Proxy  Statement for the  registrant's  2004 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 36 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 17
offices in seven 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. The Company's
insurance  subsidiaries  invest their assets  (representing in part the pre-paid
funerals) in investments  authorized by the respective insurance  departments of
their  states of  domicile.  One such  investment  authorized  by the  Insurance
Departments is high quality mortgage loans. Thus, while each segment is a profit
center on a stand-alone  basis,  this horizontal  integration of each segment is
planned to lead to improved  profitability  of the  Company.  The  Company  also
pursues  growth  through  acquisitions  of both  life  insurance  companies  and
cemeteries and mortuaries.  The Company's acquisition business strategy is based
on reducing the  overhead  cost of the  acquired  company by utilizing  existing
personnel,  management,  and technology while still providing quality service to
customers and policyholders.

The Company was organized as a holding company in 1979,  when Security  National
Life  Insurance  Company  ("Security  National  Life")  became  a  wholly  owned
subsidiary of the Company and the former  stockholders of Security National Life
became  stockholders of the Company.  Security  National Life was formed in 1965
and has grown  through  the direct  sale of life  insurance  and  annuities  and
through the acquisition of other insurance companies, including the acquisitions
of Capital  Investors Life Insurance  Company in 1994,  Civil Service  Employees
Life Insurance Company in 1995, Southern Security Life Insurance Company in 1998
and an asset  purchase  transaction  with  Acadian  Life  Insurance  Company  in
December 2002.  Most recently,  on March 16, 2004, the Company  purchased all of
the outstanding  common stock of Paramount  Security Life Insurance  Company,  a
Louisiana domiciled life insurance company  ("Paramount") for the purchase price
of  $4,398,000.  The purchase was effective  January 26, 2004.  The cemetery and
mortuary  operations  have also grown through the  acquisition of other cemetery
and mortuary  companies,  including the  acquisitions of Paradise Chapel Funeral
Home, Inc. in 1989, Holladay Memorial Park, Inc., Cottonwood Mortuary,  Inc. and
Deseret  Memorial,  Inc.  in 1991,  Sunset  Funeral  Home in 1994,  Greer-Wilson
Funeral Home,  Inc. in 1995 and Crystal Rose Funeral Home in 1997. In 1993,  the
Company formed Security National Mortgage Company ("Security National Mortgage")
to originate and refinance mortgage loans. Since 1993 Security National Mortgage
Company  has  opened 17  branches  in seven  states.  See Notes to  Consolidated
Financial Statements for additional disclosure and discussion regarding segments
of the business.

Life Insurance

         Products

The  Company,  through  its  insurance  subsidiaries,  Security  National  Life,
Southern Security Life Insurance Company, and Paramount,  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  $15,000.  The  Company  believes  that  funeral  plans
represent  a marketing  niche that has lower  competition  since most  insurance
companies do not offer similar coverages. The purpose of the funeral plan policy
is to pay the costs and expenses  incurred at the time of a person's death. On a
per  thousand  dollar  cost  of  insurance  basis,  these  policies  can be more
expensive to the  policyholder  than many types of  non-burial  insurance due to
their low face amount,  requiring the fixed cost of the policy 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 25.

   Markets and Distribution

The  Company is  licensed  to sell  insurance  in 36  states.  The  Company,  in
marketing  its life  insurance  products,  seeks to locate,  develop and service
specific "niche" markets. A "niche" market is an identifiable  market, which the
Company believes is not emphasized by most insurers.

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

Higher  education  funding is for  families  that  desire to  prepare  for their
children's  higher  education  needs.  Such preparation can include searches for
scholarships, grant applications,  guaranteed student loan applications, and the
purchase of life  insurance and  annuities.  In 1965,  the Higher  Education Act
("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  loans they pay to lenders.  The
federal guaranty on a FFEL replaces the security  (collateral)  usually required
for a long-term consumer loan. These government programs have numerous rules for
qualification  and have limits on how much you can borrow.  The Company's  whole
life  product has an Annuity  Rider that can provide a way for  families to save
additional funds for their children's education.  The Company has a student loan
resource  department,  which is available to  policyholders  to help parents and
students apply for various scholarships, grants and loans.

A  majority  of the  Company's  funeral  plan  premiums  come from the states of
Arizona,  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's cemeteries and mortuaries.  Thus, death
benefits that become payable under the policy are paid to the Company's cemetery
and  mortuary  subsidiaries  to the extent of services  performed  and  products
purchased.

In  marketing  the funeral  plan  insurance,  the Company also seeks and obtains
third-party  endorsements  from  other  cemeteries  and  mortuaries  within  its
marketing areas. Typically, these cemeteries and mortuaries will provide letters
of endorsement  and may share in mailing and other  lead-generating  costs.  The
incentive for such  businesses to share the costs is that these  businesses  are
usually made the beneficiary of the policy.  The following table  summarizes the
life insurance business for the five years ended December 31, 2003:
<TABLE>
<CAPTION>

                                         2003              2002             2001               2000               1999
                                         ----              ----             ----               ----               ----
Life Insurance
<S>                              <C>               <C>                 <C>               <C>              <C>
Policy/Cert.
    Count as of December 31         353,017(1)(2)     341,909(1)            74,335            71,178             75,808
Insurance
    in force as of December 31
    (omitted 000)                $3,164,744(1)(2)  $2,635,436(1)        $2,425,557        $2,049,789         $2,113,893
Premiums Collected
    (omitted 000)                   $32,255(1)(2)        $14,699           $14,860           $14,959         $15,261(1)

</TABLE>
(1) Includes asset purchase  transaction with Acadian Life Insurance  Company on
December 23,  2002.  (2)  Includes  reinsurance  assumed  under  agreement  with
Guaranty Income Life Insurance Company on October 1, 2003.

    Underwriting

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

                 Age Nearest                     Non-Medical
                   Birthday                           Limits

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

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

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

Annuities

       Products

The Company's  annuity  business  includes  single premium  deferred  annuities,
flexible premium deferred  annuities and immediate  annuities.  A single premium
deferred annuity is a contract where the individual remits a sum of money to the
Company, which is retained on deposit until such time as the individual may wish
to  annuitize or surrender  the contract for cash. A flexible  premium  deferred
annuity gives the contract holder the right to make premium  payments of varying
amounts or to make no further premium payments after his initial

<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  portion
that is used to accumulate  funds.  The commission  rates on annuities are up to
10%.

The following  table  summarizes  the annuity  business for the five years ended
December 31, 2003:

                                2003         2002      2001      2000     1999
                                ----         ----      ----      ----     ----
Annuities
Policy/Cert
    Count as of
    December 31                26,871(1)     7,711     8,021     8,443     8,369
Deposits Collected
(omitted 000)                  $2,026       $3,215    $2,550    $3,039    $3,906

     (1)  Includes  increase  of  19,477  in  reinsurance  assumed  mainly  from
          Guaranty Income Life Insurance Company Reinsurance Agreement.

Accident and Health

    Products

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


<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, 2003:

                                  2003     2002       2001      2000      1999
                                  ----     ----       ----      ----      ----
Accident
  and Health
Policy/Cert. Count
    as of December 31             17,391    18,921    19,343    21,454    24,078
Premiums Collected
(omitted 000)                       $352      $365      $413      $464      $549

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,  2003,   reinsured   by  other   companies   aggregated
$213,515,000,  representing  approximately 14.7% 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 nine 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.  The Company has branch offices in Salt Lake City (3), Bountiful and
Orem,  Utah;   Valencia,   San  Diego  and  Sacramento,   California;   Orlando,
Jacksonville and Tampa, Florida; Colorado Springs and Denver, Colorado; Phoenix,
Arizona; Las Vegas, Nevada; and Dallas and Houston, Texas. The average loan size
for residential loans is $150,000.


<PAGE>


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

    Paramount Security Life Insurance Company

On March 16, 2004,  with the approval of the Louisiana  Department of Insurance,
Security National Life Insurance Company completed a stock purchase  transaction
with Paramount Security Life Insurance Company, a Louisiana  domiciled insurance
company located in Shreveport,  Louisiana, to purchase all outstanding shares of
common stock of Paramount. As of December 31, 2003, Paramount had 9,383 policies
in force and 29  agents.  The  purchase  consideration  was  $4,398,000  and was
effective January 26, 2004. For the year ended December 31, 2003,  Paramount had
revenues  of  $614,000  and net income of  $76,000.  As of  December  31,  2003,
statutory  assets and  capital  and  surplus  were  $6,073,000  and  $4,100,000,
respectively.

Paramount  is licensed in the State of  Louisiana  and is  permitted  to appoint
agents who do not have a full life insurance  license.  These agents are limited
to selling  small life  insurance  policies  in the final  expense  market.  The
Company believes that with this license it will be able to expand its operations
in Louisiana.  The Company anticipates servicing the Paramount policyholders out
of its Jackson, Mississippi office and has closed the Shreveport office.

    Acadian Life Insurance Company

On December  23,  2002,  the Company  completed  an asset  purchase  transaction
through its wholly owned  subsidiary,  Security  National Life with Acadian 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  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>


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,  subject to all
regulatory  approvals  as  required by law,  including  Security  National  Life
becoming an admitted  insurer in the State of Mississippi.  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.

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 and 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

<PAGE>


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.

    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, 2003,  SSLIC Holding
owns  approximately  77% 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, 2003,  of  approximately  $77.7  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 for the year
ended December 31, 2003, which was filed with the Securities Exchange Commission
on March 29, 2004, Commission File No. 2-35669.

Regulation

The Company's insurance subsidiaries, Security National Life, Southern Security,
and Paramount are subject to  comprehensive  regulation in the  jurisdictions in
which they do business  under  statutes and  regulations  administered  by state
insurance  commissioners.  Such regulation relates to, among other things, prior
approval of the acquisition of a controlling  interest in an insurance  company;
standards of solvency  which must be met and  maintained;  licensing of insurers
and  their  agents;  nature  of and  limitations  on  investments;  deposits  of
securities  for the  benefit  of  policyholders;  approval  of policy  forms and
premium  rates;  periodic  examinations  of the affairs of insurance  companies;
annual and other  reports  required to be filed on the  financial  condition  of
insurers or for other purposes;  and requirements  regarding  aggregate reserves
for life policies and annuity contracts,  policy claims,  unearned premiums, and
other matters. The Company's insurance  subsidiaries are subject to this type of
regulation  in any  state  in which  they  are  licensed  to do  business.  Such
regulation  could  involve  additional  costs,   restrict  operations  or  delay
implementation of the Company's business plans.

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


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

Since 1990,  Security  National  Life,  Southern  Security  and  Paramount  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

<PAGE>


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

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

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

Employees

As of December 31, 2003,  the Company  employed 407  full-time  and 38 part-time
employees.

Item 2.  Properties

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

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

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

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

410 North 44th Street,
Ste 190                        Mortgage Sales           Leased (4)       3,700
Phoenix, Arizona

12150 Tributary Point Dr.
Ste.160                        Mortgage Sales           Leased (5)       1,800
Gold River, California

7676 Hazard Center Drive
 Ste. 625                      Mortgage Sales           Leased (6)       1,300
San Diego, California

27201 Tourney Road Ste. 125    Mortgage Sales           Leased (7)       1,600
Valencia, California

<PAGE>



Item 2.  Properties (Continued)
--------------------
                                                                   Approximate
                                                     Owned           Square
Location                           Function          Leased          Footage
--------                           --------          ------          -------
6208 Lehman Drive Ste. 201       Mortgage Sales     Leased (8)          2,200
Colorado Springs, Colorado

14001 East Lliff Ave.
 Ste. 120                        Mortgage Sales     Leased (9)          1,800
Aurora, Colorado

7785 Baymeadows Way, Ste. 101    Mortgage Sales     Leased (10)         1,800
Jacksonville, Florida

5620 Tara Blvd. Ste. 103         Mortgage Sales     Leased (11)         1,200
Bradenton, Florida

6655 W. Sahara Ste. A-214        Mortgage Sales     Leased (12)         2,300
Las Vegas, Nevada

12750 Merit Drive, Ste. 1212     Mortgage Sales     Leased (13)         2,100
Dallas, Texas

10850 Richmond Ave., Ste. 270    Mortgage Sales     Leased (14)         2,400
Houston, Texas

535 West 500 South, Ste. 1       Mortgage Sales     Leased (15)         1,500
Bountiful, Utah

5258 Pinemont Dr. Ste. B280      Mortgage Sales     Owned (16)          2,900
Murray, Utah

970 East Murray-Holladay Rd.     Mortgage Sales     Leased (17)         6,600
Ste. 4A
Salt Lake City, Utah

474 West 800 North, Ste. 102     Mortgage Sales     Leased (18)         2,000
Orem, Utah

     (1)  The Company leases an additional  5,576 square feet of the facility to
          unrelated  third  parties for  approximately  $96,500 per year,  under
          leases expiring at various dates after 2003.

     (2)  The Company leases an additional  9,903 square feet of the facility to
          unrelated  third parties for  approximately  $160,400 per year,  under
          leases expiring at various dates after 2003.

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

     (4)  The Company  leases  this  facility  for  $35,300 per year.  The lease
          expires in August 2004.

     (5)  The Company  leases  this  facility  for  $48,100 per year.  The lease
          expires in July 2004.

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


<PAGE>



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

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

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

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

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

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

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

     (14) The Company  leases  this  facility  for  $37,400 per year.  The lease
          expires in November 2004.

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

     (16) The Company  leases an additional  113,839 square feet of the facility
          to unrelated third parties for approximately  $931,600 per year, under
          leases expiring at various dates after 2003.

     (17) The Company  leases this  facility for  $103,800  per year.  The lease
          expires in December 2004.

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

The Company  believes the office  facilities  it occupies are in good  operating
condition,  are  adequate  for  current  operations  and has no 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>                      <S>                       <C>         <C>             <C>              <C>              <C>
  Lakeview
     Cemetery(3)         1700 E. Lakeview Dr.
                         Bountiful, Utah           1973           7             40                7               33
  Mountain View
     Cemetery(3)         3115 E. 7800 So.
                         Salt Lake City, Utah      1973          26             54               17               37

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

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

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

  Singing Hills Memorial
     Park(6)             2798 Dehesa Rd.
                         El Cajon, California      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, 2003, there were mortgages of approximately $36,000
          collateralized  by the property  and  facilities  at Memorial  Estates
          Lakeview, Mountain View and Redwood Cemeteries.
     (4)  As of  December  31,  2003,  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,  2003,  there  was a  mortgage  of  approximately
          $459,000 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>                          <S>                          <C>                <C>             <C>              <C>
Memorial Mortuary            5850 South 900 East
                             Salt Lake City, Utah          1973               3               1                20,000

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

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

  Lakeview Mortuary          1700 East Lakeview Dr.
                             Bountiful, Utah               1973               0               1                 5,500

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

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

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

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

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

Camelback Sunset
  Funeral Home(1)            301 West Camelback Rd.
                             Phoenix, Arizona              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>                            <S>                         <C>               <C>             <C>          <C>

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

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

  Crystal Rose Funeral Home(3) 9155 W. VanBuren
                               Tolleson, Arizona            1997              0               1             9,000
</TABLE>

<PAGE>





     (1)  As of December 31, 2003 there were mortgages of approximately  $61,000
          collateralized  by the property  and  facilities  of Camelback  Sunset
          Funeral Home.
     (2)  As of  December  31,  2003,  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,  2003,  there  was a  mortgage  of  approximately
          $195,000,  collateralized  by the property and  facilities  of Crystal
          Rose Funeral Home.

Item 3.  Legal Proceedings

An action was brought  against the Company in May 2001,  by Glenna  Brown Thomas
individually  and as personal  representative  of the Estate of Lynn W. Brown in
the Third  Judicial  Court,  Salt Lake  County,  Utah.  The action  asserts that
Memorial Estates 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 also asserted  among other things that Thomas "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."  The formal discovery
cutoff was January 15, 2004. The Company has been verbally  informed that Thomas
will dismiss the case but such has not been  communicated in writing.  Until the
foregoing actually happens, 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
asserted  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 commissions as well as certain production
bonuses.

NGU  alleged  that it had been  damaged  far in  excess of the  $75,000  minimum
jurisdictional  limits of the federal court. NGU also sought 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
counterclaimed for what it claimed to be a debit balance owing to it pursuant to
the  relationship  between  the  parties  (the amount  subject to  reduction  as
premiums are received).  The Company also sought to recover  attorney's fees and
costs, as well as punitive damages on three of its causes of action.

Certain discovery took place. The federal case was dismissed by 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 same as those in
federal court, which claims include fraudulent  inducement  relative to entering
into a contract,  fraud,  breach of  contract,  breach of duty of good faith and
fair  dealing,  attorney's  fees and  exemplary  damages  as well as  seeking an
accounting and contesting the interest  charges.  Certain  depositions have been
taken  since  the  filing  again  in  state  court  and  further   discovery  is
anticipated. The court has yet to rule on the motion. The Company filed a motion
for partial summary judgment with respect to certain items. A trial is presently
set for October 2004.  The Company  intends to  vigorously  defend the matter as
well as prosecute its counterclaim.


<PAGE>



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
------------------------------------------------------------

No matters were  submitted to a vote of the  Company's  shareholders  during the
quarter ended December 31, 2003.

                                     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 25,  2004,  the  closing
sales price of the Class A Common Stock was $7.00 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, 2002:

Period (Calendar Year)                     Price Range
                                    High               Low
 2002
    First Quarter                   2.81              2.20
    Second Quarter                  6.48              2.38
    Third Quarter                   6.10              2.74
    Fourth Quarter                  6.43              2.48
 2003
    First Quarter                   7.75              4.57
    Second Quarter                  6.48              5.15
    Third Quarter                   7.00              5.11
    Fourth Quarter                  7.49              5.75
 2004
    First Quarter (through
     March 25, 2004)                8.46              6.51

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 1990 through 2003.

As of December 31, 2003, there were 4,518 record holders of Class A Common Stock
and 131 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, 2003,  are derived from the audited  consolidated  financial
statements.  The data as of December 31, 2003 and 2002,  and for the three years
ended  December 31, 2003,  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,

                                          2003(1)             2002              2001             2000              1999
                                          -------             ----              ----             ----              ----
Revenue
<S>                                    <C>                <C>              <C>               <C>             <C>
Premiums                               $23,295,000        $14,077,000      $13,151,000       $12,876,000     $13,176,000
Net investment income                   17,303,000         12,540,000       12,947,000        12,136,000      10,631,000
Net mortuary and cemetery sales         10,944,000         10,638,000        9,881,000         8,741,000       9,566,000
Realized (losses) gains on investments      (2,000)         1,021,000           10,000           424,000         313,000
Mortgage fee income                     92,955,000         57,008,000       40,086,000        22,922,000      14,503,000
Other                                      550,000            479,000          152,000           305,000         856,000
                                  ----------------      -------------    -------------     -------------   -------------
Total revenue                          145,045,000         95,763,000       76,227,000        57,404,000      49,045,000
                                     -------------        -----------      -----------      ------------     -----------

Expenses
Policyholder benefits                   21,755,000         13,756,000       11,775,000        12,931,000      11,976,000
Amortization of deferred
  policy acquisition costs               4,929,000          3,994,000        3,870,000         3,189,000       4,858,000
General and administrative expenses    102,926,000         68,459,000       52,247,000        35,959,000      26,959,000
Interest expense                         3,642,000          1,970,000        2,791,000         2,126,000       1,119,000
Cost of goods and services of
  the mortuaries and cemeteries          2,328,000          2,045,000        1,772,000         1,952,000       2,683,000
                                   ---------------      -------------     ------------       -----------   -------------
Total benefits and expenses            135,580,000         90,224,000       72,455,000        56,157,000      47,595,000
                                     -------------       ------------      -----------       -----------    ------------
Income before
  income tax expense                     9,465,000          5,539,000        3,772,000         1,247,000       1,450,000
Income tax expense                      (2,891,000)        (1,565,000)        (913,000)         (305,000)       (230,000)
Minority interest in (income)
   loss of subsidiary                       22,000             18,000          (18,000)          (46,000)       (244,000)
                                   ---------------      -------------   --------------     -------------    ------------
Net earnings                           $ 6,596,000         $3,992,000      $ 2,841,000       $   896,000     $   976,000
                                       ===========         ==========      ===========       ===========     ===========

Net earnings per common share(3)             $1.23              $.83              $.63              $.21            $.22
                                             =====              ====              ====              ====            ====
Weighted average outstanding
   common shares                         5,359,000          4,824,000        4,506,000         4,318,000       4,397,000
Net earnings per common
   share-assuming dilution(3)                $1.20               $.80             $.63              $.21            $.22
                                             =====               ====             ====              ====            ====
Weighted average outstanding
   common shares-assuming dilution       5,510,000          4,995,000        4,507,000         4,335,000       4,397,000
</TABLE>


<PAGE>



Item 6. Selected  Financial Data - The Company and  Subsidiaries  (Consolidated)
(Continued)
<TABLE>
<CAPTION>

Balance Sheet Data:

                                                                         Year Ended December 31,
                                                2003(2)           2002(1)           2001              2000              1999
                                                -------           -------           ----              ----              ----
Assets
<S>                                        <C>               <C>              <C>               <C>              <C>
Investments and restricted assets          $112,006,000      $106,161,000     $ 94,514,000      $108,810,000     $ 113,208,000
Cash                                         19,704,000        38,199,000        8,757,000        11,275,000        12,423,000
Receivables                                 124,125,000       102,590,000       59,210,000        36,413,000        38,074,000
Other assets                                 61,075,000        61,112,000       51,088,000        52,249,000        50,593,000
                                         --------------    --------------   --------------    --------------    --------------
Total assets                               $316,910,000      $308,062,000     $213,569,000      $208,747,000      $214,298,000
                                           ============      ============     ============      ============      ============

Liabilities
Policyholder benefits                      $220,739,000      $217,895,000     $142,291,000      $141,755,000      $140,368,000
Notes & contracts payable                    17,863,000        19,273,000       12,098,000        14,046,000        23,341,000
Cemetery & mortuary liabilities              10,562,000        10,076,000        9,344,000         8,659,000         6,638,000
Other liabilities                            24,614,000        22,007,000       15,630,000        12,921,000        11,415,000
                                        ---------------     -------------     ------------      ------------      ------------
Total liabilities                           273,778,000       269,251,000      179,363,000       177,381,000       181,762,000
                                         --------------     -------------     ------------      ------------      ------------

Minority interest                             3,957,000         4,298,000        4,237,000         4,625,000         6,046,000

Stockholders' equity                         39,175,000        34,513,000       29,969,000        26,741,000        26,490,000
                                          -------------      ------------     ------------      ------------      ------------
Total liabilities and
  stockholders' equity                     $316,910,000      $308,062,000     $213,569,000      $208,747,000      $214,298,000
                                           ============      ============     ============      ============      ============
</TABLE>


     (1)  Reflects the asset  purchase  transaction  with Acadian Life Insurance
          Company on December 23, 2002.
     (2)  Includes reinsurance assumed under agreement with Guaranty Income Life
          Insurance Company on October 1, 2003.


<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, 2003 and 2002,  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,  including  the
Company's  insurance  subsidiaries.  SNMC  receives  fees from the borrowers and
other  secondary  fees from third party  investors  who  purchase the loans from
SNMC. SNMC pays the brokers and  correspondents  a commission for loans that are
brokered  through  SNMC.  In 2001,  SNMC opened  wholesale  branches in Phoenix,
Arizona  and  Houston,  Texas.  In 2002 SNMC  opened  an  office  in San  Diego,
California. In 2003 SNMC opened offices in Tampa and Jacksonville,  Florida; Las
Vegas,  Nevada;  Denver,  Colorado;  Bountiful,  Utah; and Dallas,  Texas.  SNMC
originated and sold 17,494 ($2,560,000,000 loan amount),  11,737 ($1,721,000,000
loan amount),  and 8,738  ($1,268,000,000  loan amount) loans in 2003,  2002 and
2001, 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, 2003, SSLIC Holding held approximately 77% 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 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.


<PAGE>



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

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

Death and other  policyholder  benefits  reflect  exposure to mortality risk and
fluctuate  from  year to year on the level of claims  incurred  under  insurance
retention  limits.  The  profitability  of the Company is primarily  affected by
fluctuations in mortality, other policyholder benefits, expense levels, interest
spreads  (i.e.,  the  difference  between  interest  earned on  investments  and
interest credited to policyholders) and persistency. The Company has the ability
to mitigate adverse experience  through  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 of
Financial  Accounting  Standards No. 60  "Accounting  and Reporting by Insurance
Enterprises" (FAS No. 60).  Obtaining costs,  which include only costs that vary
with and are primarily  related to the acquisition of new pre-need  cemetery and
prearranged funeral business, are deferred until the merchandise is delivered or
services are performed.

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


<PAGE>



Mortgage Operations

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

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

Use of Significant Accounting Estimates

The  preparation  of  financial  statements  in  conformity  with GAAP  requires
management to make estimates and assumptions that affect 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 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.


<PAGE>



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.

Mortgage Loan Loss Reserve

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


<PAGE>


Results of Operations

2003 Compared to 2002

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

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

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

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

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

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

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

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

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

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

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


<PAGE>

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

2002 Compared to 2001

Total revenues  increased by $19,536,000,  or 25.6%, from $76,227,000 for fiscal
year 2001 to $95,763,000 for fiscal year 2002.  Contributing to this increase in
total  revenues was a  $16,922,000  increase in mortgage fee income,  a $757,000
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 $757,000,  from $9,881,000 in 2001
to  $10,638,000 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 $90,224,000 for 2002, which  constituted  94.2%
of the Company's  total revenues,  as compared to  $72,455,000,  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 $1,772,000 in 2001 to 2,045,000 in 2002. This increase was primarily due to
greater at-need cemetery and mortuary sales.


<PAGE>

Liquidity and Capital Resources

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

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

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

The Company's  investment  policy is to invest  predominately  in fixed maturity
securities,  mortgage loans, and 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  $51,564,000  as of  December  31,  2003  compared to
$51,530,000 as of December 31, 2002.  This represents 48% of the total insurance
related  investments  in 2003 as compared to 51% in 2002.  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, 2003, 3% ($1,739,000)  and at
December 31, 2002, 4% ($1,903,000) 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  $82,  810,000)  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)     $8,263        $5,456        $(7,221)       $(17,089)

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, 2003
and 2002, the life subsidiaries exceeded the regulatory criteria.


<PAGE>




The Company's total  capitalization  of  stockholders'  equity and bank debt and
notes payable was  $57,039,000 and $53,787,000 as of December 31, 2003 and 2002,
respectively.  Stockholders' equity as a percent of total capitalization was 69%
and 64% as of December 31, 2003 and 2002, respectively.

Lapse  rates  measure the amount of  insurance  terminated  during a  particular
period.  The  Company's  lapse  rate for life  insurance  in 2003 was  8.6%,  as
compared to a rate of 10.7% in 2002.

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

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

The Company has 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.
The agreement was automatically extended for an additional year.

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").


<PAGE>



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.

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

<PAGE>


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.

At December 31, 2003,  $26,512,545 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.

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

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

Factors that may cause the Company's  actual results to differ  materially  from
those contemplated or projected, forecast, estimated or budgeted in such forward
looking  statements  include among  others,  the  following  possibilities:  (i)
heightened competition,  including the intensification of price competition, the
entry  of new  competitors,  and the  introduction  of new  products  by new and
existing competitors;  (ii) adverse state and federal legislation or regulation,
including  decreases  in rates,  limitations  on premium  levels,  increases  in
minimum capital and reserve requirements,  benefit mandates and tax treatment of
insurance products;  (iii) fluctuations in interest rates causing a reduction of
investment  income or increase in  interest  expense and in the market  value of
interest rate sensitive investment;  (iv) failure to obtain new customer, retain
existing customers or reductions in policies in force by existing customers; (v)
higher  service,  administrative,  or  general  expense  due  to  the  need  for
additional  advertising,  marketing,  administrative  or management  information
systems  expenditures;  (vi) loss or retirement of key  executives or employees;
(vii) increases in medical costs;  (viii) changes in the Company's liquidity due
to changes in asset and

<PAGE>


liability matching; (ix) restrictions on insurance underwriting based on genetic
testing  and other  criteria;  (x) adverse  changes in the  ratings  obtained by
independent  rating  agencies;  (xi) failure to maintain  adequate  reinsurance;
(xii) possible  claims  relating to sales  practices for insurance  products and
claim denials and (xiii) adverse trends in mortality and morbidity.

Off-Balance Sheet Agreements

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

The Company  leases  office space and  equipment  under  various  non-cancelable
agreements,  with remaining terms up to four years. Minimum lease payments under
these non-cancelable operating leases as of December 31, 2003, are approximately
as follows:

                   Years Ending December 31:
                          2004                                 $570,000
                          2005                                  460,000
                          2006                                  236,000
                          2007                                    6,000
                                                         --------------
                                                             $1,272,000

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

Recent Accounting Pronouncements

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.  The adoption of SFAS No. 146 did not have a material  impact
on the Company's financial condition or results of operations. 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

<PAGE>


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.  The  adoption of FIN 45 did 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 are included in the Company's  interim  financial  statements,  when
necessary.

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

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
requires that certain financial  instruments,  which under previous guidance may
have been accounted for as equity,  must now be accounted for as liabilities (or
an asset in some  circumstances).  The financial  instruments  affected  include
mandatory  redeemable stock,  certain financial  instruments that require or may
require the issuer to buy back some of its shares in exchange  for cash or other
assets and certain  obligations  that can be settled with shares of stock.  This
Statement  is  effective  for all such  financial  instruments  entered  into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Company entered into an
agreement with a stockholder in August 2003, wherein it purchased 124,000 shares
of Class A Common Stock from this  stockholder for $6.00 per share. The purchase
of these shares is reflected in treasury  stock.  Also,  under the terms of this
agreement,  the stockholder  has agreed not to purchase or control,  directly or
indirectly,  any  additional  shares of Class A or Class C Common Stock  through
August  2007,  and on August 27,  2004,  2005,  and 2006,  the  stockholder  may
request,  but is not obligated to request, the Company to purchase an additional
100,000  shares of Class A Common Stock held by this  stockholder  for $6.00 per
share.  At December 31, 2003,  the Company's  stock had a closing price of $7.45
per share,  which exceeds the  stockholder's  option and under SFAS No. 150 does
not require the recording of a liability as of December 31, 2003.

Effective  December 31,  2003,  the Company  adopted  EITF Issue No.  03-1,  The
Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain
Investments  ("EITF  03-1").  EITF  03-1  provides  guidance  on the  disclosure
requirements for other-than-temporary  Impairments of debt and marketable equity
investments  that are  accounted  for under  Statement of  Financial  Accounting
Standards  ("SFAS")  No. 115,  Accounting  for Certain  Investments  in Debt and
Equity Securities. The adoption of EITF 03-1 requires the Company to include

<PAGE>


certain quantitative and qualitative  disclosures for debt and marketable equity
securities classified as  available-for-sale or held-to-maturity  under SFAS 115
that   are   impaired   at  the   balance   sheet   date   but  for   which   an
other-than-temporary  impairment has not been  recognized.  The adoption of EITF
03-1 did not have a  material  impact on the  Company's  financial  position  or
results of operations.

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

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

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

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



<PAGE>


Item 8.  Financial Statements and Supplementary Data

     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

                                                                   Page No.

Financial Statements:

    Report of Independent Auditors....................................37

    Consolidated Balance Sheet, December 31,
    2003 and 2002.....................................................38

    Consolidated Statement of Earnings,
    Years Ended December 31, 2003, 2002,
    and 2001..........................................................40

    Consolidated Statement of Stockholders'
    Equity, Years Ended December 31, 2003, 2002
    and 2001. ........................................................41

    Consolidated Statement of Cash Flows,
    Years Ended December 31, 2003, 2002 and
    2001    ..........................................................42

    Notes to Consolidated Financial
    Statements........................................................44


Financial Statement Schedules:

 I. Summary of Investments -- Other than
      Investments in Related Parties..................................81

II.   Condensed Financial Information of
      Registrant......................................................83

IV.   Reinsurance.....................................................89

 V.   Valuation and Qualifying Accounts...............................90


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, 2003 and 2002, and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for the three years in the period ended  December 31, 2003.  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 audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall  consolidated  financial  statement  presentation.  We believe  that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Security National Financial Corporation and subsidiaries as of December 31, 2003
and 2002, and the consolidated  results of their operations and their cash flows
for the three years in the period ended  December 31, 2003, 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 19, 2004


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                                              December 31,
Assets:                                                 2003            2002
-------                                                 ----            ----
Insurance-related investments:
Fixed maturity securities
  held to maturity, at amortized cost (market
  $38,624,978 and $33,927,051 for 2003 and 2002)     $37,293,989   $33,015,097
Fixed maturity securities available
  for sale, at market (cost $13,214,057 in 2003
  and $17,153, 223 in 2002)                           14,270,037    18,514,943
Equity securities available for sale,
  at market (cost $1,981,461 and $1,929,540
  for 2003 and 2002)                                   3,453,444     2,642,093
Mortgage loans on real estate                         29,914,745    21,016,008
Real estate, net of accumulated
  depreciation and allowances for
  losses of $4,059,934 and $3,728,539
  for 2003 and 2002                                    8,519,680     9,331,248
Policy, student and other loans                       11,753,617    10,974,165
Short-term investments                                 2,054,248     5,335,478
                                                   -------------  ------------
     Total insurance-related investments             107,259,760   100,829,032
                                                   -------------  ------------
Restricted assets of cemeteries and mortuaries         4,745,709     5,332,736
                                                   -------------  ------------
Cash                                                  19,704,358    38,199,041
                                                   -------------  ------------
Receivables:
  Trade contracts                                      8,600,212    11,358,027
  Mortgage loans sold to investors                   114,788,185    89,455,105
  Receivable from agents                               1,318,958     2,054,071
  Receivable from officers                                37,540        70,290
  Other                                                1,086,523     1,131,977
                                                   -------------  ------------
     Total receivables                               125,831,418   104,069,470
  Allowance for doubtful accounts                     (1,706,678)   (1,479,728)
                                                   -------------  ------------
  Net receivables                                    124,124,740   102,589,742
                                                   -------------  ------------
Policyholder accounts on deposit
  with reinsurer                                       6,795,983     6,955,691
Land and improvements held for sale                    8,387,061     8,429,215
Accrued investment income                              1,142,690       928,287
Deferred policy and pre-need
  acquisition costs                                   17,202,489    15,839,119
Property, plant and equipment, net                    11,009,416    10,921,635
Cost of insurance acquired                            14,980,763    16,408,849
Excess of cost over net assets
  of acquired subsidiaries                               683,191       683,191
Other                                                    873,424       945,805
                                                   -------------  ------------
     Total assets                                   $316,909,584  $308,062,343
                                                   =============  ============



See accompanying notes to consolidated financial statements.


<PAGE>


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

                                                          December 31,
                                                    2003               2002
                                                    ----               ----

Liabilities:
------------
Future life, annuity, and other
  policy benefits                               $218,793,693     $215,980,207
Unearned premium reserve                           1,945,203        1,914,700
Bank loans payable                                14,422,670       16,113,227
Notes and contracts payable                        3,440,694        3,160,009
Deferred pre-need cemetery and funeral
  contracts revenues and estimated
  future cost of pre-need sales                   10,520,280       10,002,396
Accounts payable                                   1,274,183        1,553,777
Funds held under reinsurance treaties              1,294,589        1,334,964
Other liabilities and accrued expenses            11,171,368       11,089,763
Income taxes                                      10,914,845        8,103,882
                                               -------------    -------------
     Total liabilities                           273,777,525      269,251,125
                                               -------------    -------------

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

Minority interest                                  3,956,628        4,297,807
                                               -------------    -------------

Stockholders' Equity:
Common stock:
  Class A: $2 par value, authorized
         10,000,000 shares, issued 6,275,104
         shares in 2003 and 5,794,492 shares
         in 2002                                  12,550,208       11,588,984
  Class C: $0.20 par value, authorized
         7,500,000 shares, issued 6,469,638
         shares in 2003 and 6,182,669 shares
         in 2002                                   1,293,927        1,236,533
                                               -------------    -------------
     Total common stock                           13,844,135       12,825,517
Additional paid-in capital                        13,569,582       11,280,842
Accumulated other comprehensive income (loss)
  and other items, net of deferred taxes of
  $274,091 and $293,519 for 2003 and 2002           (437,973)       1,191,863
Retained earnings                                 15,414,681       11,992,542
Treasury stock at cost (1,276,518 Class
  A shares and 75,336 Class C shares in
  2003; 1,151,811 Class A shares and
  71,749 Class C shares in 2002, held
  by affiliated companies)                        (3,214,994)      (2,777,353)
                                               -------------    -------------
     Total stockholders' equity                   39,175,431       34,513,411
                                               -------------    -------------
         Total liabilities and stockholders'
            equity                              $316,909,584     $308,062,343
                                               =============    =============

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                       Consolidated Statement of Earnings


                                                       Year Ended December 31,
                                                       -----------------------
                                                   2003             2002             2001
                                                   ----             ----             ----
Revenues:
<S>                                             <C>              <C>              <C>
Insurance premiums and other considerations     $23,294,373      $14,076,652      $13,150,875
Net investment income                            17,302,597       12,539,430       12,946,499
Net mortuary and cemetery sales                  10,944,365       10,638,754        9,881,248
Realized gains (losses) on investments
  and other assets                                   (2,155)       1,020,820           10,428
Mortgage fee income                              92,955,165       57,008,283       40,086,097
Other                                               550,064          479,424          151,945
                                              -------------    -------------    -------------
  Total revenue                                 145,044,409       95,763,363       76,227,092
                                              -------------    -------------    -------------

Benefits and expenses:
Death benefits                                   13,315,266        5,637,217        5,354,522
Surrenders and other  policy benefits             1,726,275        2,086,829        1,467,323
Increase in future policy benefits                6,712,961        6,031,685        4,953,008
Amortization of deferred
  policy and pre-need acquisition
  costs and cost of insurance acquired            4,929,006        3,993,393        3,870,158
General and administrative expenses:
  Commissions                                    67,536,703       42,114,240       29,859,295
  Salaries                                       14,079,908       10,414,392        9,027,523
  Other                                          21,309,897       15,930,804       13,360,362
Interest expense                                  3,642,046        1,970,342        2,790,627
Cost of goods and services sold of the
  mortuaries and cemeteries                       2,327,475        2,045,476        1,772,164
                                              -------------    -------------    -------------

  Total benefits and expenses                   135,579,537       90,224,378       72,454,982
                                              -------------    -------------    -------------

Earnings before income taxes                      9,464,872        5,538,985        3,772,110
Income tax expense                               (2,890,669)      (1,565,393)        (913,539)
Minority interest                                    22,294           17,688          (17,791)
                                              -------------    -------------    -------------
  Net earnings                                   $6,596,497       $3,991,280       $2,840,780
                                              =============    =============    =============

Net earnings per common share                         $1.23             $.83             $.63
                                              =============    =============    =============

  Weighted average
    outstanding common shares                     5,358,503        4,823,914        4,506,476

Net earnings per common share
  assuming dilution                                   $1.20             $.80             $.63
                                              =============    =============    =============

  Weighted average outstanding common
    shares assuming dilution                      5,510,462        4,995,285        4,506,858

</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>




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

                                                                            Accumulated
                                                                               Other
                                                             Additional     Comprehensive
                                   Class         Class        Paid-in       Income (loss),   Retained    Treasury
                                     A             C          Capital       and Other Items  Earnings      Stock         Total
                                  --------      -------      ---------      -----------     --------      -----          -----
<S>                             <C>            <C>          <C>             <C>           <C>         <C>           <C>
Balance at January 1, 2001      $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 loss on securities      --             --            --          (32,067)          --          --            (32,067)
                                                                                                                       -----------
Total comprehensive income           --             --            --            --              --          --          3,959,213
                                                                                                                     ------------
Stock dividends                     552,024       58,883       690,316          --         (1,301,223)      --              --
Conversion Class C to Class A        45,036      (45,036)         --            --              --          --              --
Exercise of stock options           264,742         --         422,003          --           (686,745)      --              --
Sale of treasury stock                --            --            --            --              --         584,880        584,880
                               ------------  ------------  -----------     ----------     -----------  -----------    -----------
Balance at December 31, 2002    $11,588,984    $1,236,533  $11,280,842     $1,191,863     $11,992,542  $(2,777,353)   $34,513,411
                               ------------  ------------  -----------     ----------     -----------  -----------    -----------

Comprehensive income:
  Net earnings                  $     --       $     --    $      --    $       --         $6,596,497  $    --         $6,596,497
  Unrealized gain on securities       --             --           --         352,784            --          --            352,784
                                                                                                                     ------------
Total comprehensive income            --             --           --            --              --          --          6,949,281
                                                                                                                     ------------
Acquisition of Company Stock held
  in escrow (see note 18)             --             --           --      (1,982,620)           --          --         (1,982,620)
Stock dividends                    603,549         61,617     1,529,240         --         (2,194,406)      --              --
Conversion Class C to Class A        4,225         (4,223)           (2)        --             --           --              --
Exercise of stock options          353,450           --         759,502         --           (979,952)      --            133,000
Purchase of treasury stock           --              --           --            --             --         (437,641)      (437,641)
                               -----------    ------------  -----------    ---------      -----------   ----------    ------------
Balance at December 31, 2003   $12,550,208     $1,293,927   $13,569,582   $(437,973)      $15,414,681   (3,214,994)   $39,175,431
                              ============   ============   ============   ==========    ============   ==========    ===========
</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,
                                                                                      -----------------------
                                                                               2003             2002                2001
                                                                               ----             ----                ----
<S>                                                                        <C>              <C>            <C>
Cash flows from operating activities:
     Net earnings                                                           $6,596,497      $3,991,280      $2,840,780
     Adjustments to reconcile net earnings
       to net cash provided by (used in) operating
      activities:
          Realized (gains) losses on investments
               and other assets                                                  2,155      (1,020,820)        (10,428)
          Depreciation                                                       1,866,924       1,553,399       1,350,372
          Provision for losses on real estate
              accounts and loans receivable                                    225,072        (300,412)        284,545
          Amortization of goodwill, premiums,
              and discounts                                                     44,092         121,329         197,793
          Provision for deferred income taxes                                2,862,343         970,139         522,047
          Policy and pre-need acquisition costs deferred                    (4,527,546)     (4,462,624)     (3,834,432)
          Policy and pre-need acquisition costs amortized                    3,611,674       3,214,710       3,004,188
          Cost of insurance acquired amortized                               1,317,332         778,683         865,970
     Change in assets and liabilities net of effects from purchases and
       disposals of subsidiaries:
          Land and improvements held for sale                                   42,154         626,688         139,075
          Future life and other benefits                                     7,426,761       5,349,152       5,734,205
          Receivables for mortgage loans sold                              (25,333,080)    (38,760,032)    (24,786,179)
          Other operating assets and liabilities                             3,402,371         975,682       2,908,914
                                                                          ------------    ------------    ------------
              Net cash used in operating activities                         (2,463,251)    (26,962,826)    (10,783,150)
                                                                          ------------    ------------    ------------
Cash flows from investing activities:
     Securities held to maturity:
          Purchase - fixed maturity securities                             (15,396,993)     (4,147,878)       (402,995)
          Calls and maturities - fixed maturity securities                  11,147,744       8,025,610      12,086,818
     Securities available for sale:
          Purchases - equity securities                                        (51,921)       (327,726)             --
          Sales - equity securities                                          3,860,000       3,303,095       2,826,094
     Purchases of short-term investments                                   (19,065,874)    (13,819,476)    (14,301,717)
     Sales of short-term investments                                        22,347,104       9,937,642      13,876,000
     Purchases of restricted assets                                            610,155         (56,899)       (497,617)
     Mortgage, policy, and other loans made                                (30,192,467)    (10,129,993)     (3,114,060)
     Payments received for mortgage, policy, and
          other loans                                                       20,479,056       4,939,374       5,626,747
     Purchases of property, plant, and equipment                            (1,623,310)     (1,348,752)     (1,006,824)
     Purchases of real estate                                               (1,807,658)     (3,153,299)       (784,677)
     Sale of real estate                                                     2,287,831       2,825,666         195,562
     Cash received in assumed reinsurance                                           --      55,827,793              --
                                                                          ------------    ------------    ------------
         Net cash (used in) provided by investing activities                (7,406,333)     51,875,157      14,503,331
                                                                          ------------    ------------    ------------
</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,
                                                                       -----------------------
                                                                2003              2002          2001
                                                                ----              ----          ----
<S>                                                        <C>             <C>             <C>
Cash flows from financing activities:
     Annuity and pre-need contract receipts                   5,785,310       7,635,422       9,707,844
     Annuity and pre-need contract withdrawals              (10,410,247)    (10,866,398)    (13,997,537)
     Repayment of bank loans and notes and
        contracts payable                                    (3,695,521)     (1,824,440)     (2,698,272)
     Proceeds from borrowings on bank loans and notes
        and contracts payable                                        --       9,000,000         750,000
     Stock options exercised                                    133,000              --              --
     Sale (purchase) of treasury stock                         (437,641)        584,880              --
                                                           ------------    ------------    ------------
     Net cash provided by (used in) financing activities     (8,625,099)      4,529,464      (6,237,965)
                                                           ------------    ------------    ------------
Net change in cash                                          (18,494,683)     29,441,795      (2,517,784)
                                                           ------------    ------------    ------------
Cash at beginning of year                                    38,199,041       8,757,246      11,275,030
                                                           ------------    ------------    ------------
Cash at end of year                                         $19,704,358     $38,199,041      $8,757,246
                                                           ============    ============    ============
</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, 2003, 2002, and 2001



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
Arizona, California, Colorado, Florida, Nevada, Texas and Utah.

Basis of Presentation

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with U.S.  generally  accepted  accounting  principles which, for the
life  insurance  subsidiaries,   differ  from  statutory  accounting  principles
prescribed or permitted by regulatory authorities.

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, 2003, 2002, and 2001


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, 2003, 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 (77%)


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


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 77% 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
during 2002.

Investments

Investments are shown on the following basis:

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

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

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

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

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

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



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


1) Significant Accounting Principles (Continued)

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 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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


1) Significant Accounting Principles (Continued)

Future Life, Annuity and Other Policy Benefits

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

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

Participating Insurance

Participating  business  constitutes  2%, 2%, and 2% of  insurance  in force for
2003, 2002 and 2001,  respectively.  The provision for policyholders'  dividends
included in policyholder  obligations is based on dividend scales anticipated by
management. Amounts to be paid are determined by the Board of Directors.

Reinsurance

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

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

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

Cemetery and Mortuary Operations

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


1) Significant Accounting Principles (Continued)

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.

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

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

Mortgage Operations

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

The majority of loans originated are sold to third party investors.  The amounts
sold to investors are shown on the balance sheet as due from sale of loans,  and
are  shown on the  basis of the  amount  of fees  due  from the  investors.  Any
impairment  to sold loans or  possible  loan  losses are  included in a separate
provision for loan losses.  At December 31, 2003 and 2002 the provision for loan
losses was $1,919,000 and $906,000, respectively.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


1) Significant Accounting Principles (Continued)

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.

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   $490,145,   $533,520   and  $3,143  in  2003,   2002  and  2001,
respectively.  As a result, basic and diluted earnings per share would have been
reduced by $.09, $.11, and $0 in 2003, 2002 and 2001, respectively.

The weighted  average fair value of options  granted in 2003 under the 1993 Plan
and the 2000 Plan is  estimated  at $2.63 as of the grant  date  using the Black
Scholes Option Pricing Model with the following  assumptions:  dividend yield of
5%, volatility of 73%,  risk-free interest rate of 3.4%, and an expected life of
two years.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


1) Significant Accounting Principles (Continued)

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

The 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 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 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.  The  adoption  of SFAS No.  146 did 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, 2003, 2002, and 2001


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  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.  The  adoption of FIN 45 did 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 are included in the Company's interim financial statements, when necessary.

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

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
requires that certain financial  instruments,  which under previous guidance may
have been accounted for as equity,  must now be accounted for as liabilities (or
an asset in some  circumstances).  The financial  instruments  affected  include
mandatory  redeemable stock,  certain financial  instruments that require or may
require the issuer to buy back some of its shares in exchange  for cash or other
assets and certain  obligations  that can be settled with shares of stock.  This
Statement  is  effective  for all such  financial  instruments  entered  into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Company entered into an
agreement with a stockholder in August


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


1) Significant Accounting Principles (Continued)

2003,  wherein it  purchased  124,000  shares of Class A Common  Stock from this
stockholder  for $6.00 per share.  The  purchase of these shares is reflected in
treasury stock.  Also,  under the terms of this agreement,  this stockholder has
agreed not to purchase or control, directly or indirectly, any additional shares
of Class A or Class C Common Stock through  August 2007, and on August 27, 2004,
2005, and 2006, this  stockholder may request,  but is not obligated to request,
the Company to purchase an  additional  100,000  shares of Class A Common  Stock
held by this  stockholder  for  $6.00 per  share.  At  December  31,  2003,  the
Company's  stock  had a closing  price of $7.45 per  share,  which  exceeds  the
stockholder's  option and under SFAS No. 150 does not require the recording of a
liability as of December 31, 2003.

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

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

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



<PAGE>

<TABLE>
<CAPTION>

                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


2)  Investments

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


                                                                Gross          Gross         Estimated
                                                Amortized     Unrealized     Unrealized        Fair
                                                  Cost          Gains          Losses          Value
                                                --------      ---------      ----------      ---------
December 31, 2003:
Fixed maturity securities held to maturity:
   Bonds:
<S>                                           <C>             <C>           <C>          <C>
     U.S. Treasury securities
           and obligations of U.S
           Government age                      $3,080,471      $180,125     $   --        $3,260,596

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

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

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

   Redeemable preferred stock                      28,005        17,400        (7,047)        38,358
                                              -----------   -----------    -----------   -----------

     Total fixed maturity
     securities held to maturity              $37,293,989    $1,477,897     $(146,908)   $38,624,978
                                              ===========   ===========    ===========   ===========

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

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

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

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


<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


2)  Investments (Continued)

The Company's  investments  in fixed  maturity  securities  held to maturity and
equity  securities  available for sale as of December 31, 2002 are summarized as
follows:


                                                              Gross            Gross          Estimated
                                               Amortized    Unrealized       Unrealized         Fair
                                                 Cost         Gains           Losses           Value
                                               --------     ---------       ----------       ---------
December 31, 2002:
<S>                                           <C>            <C>            <C>        <C>
Fixed maturity securities held to maturity:
   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>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


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, 2003, 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 2004                         $ 2,048,933            $ 2,066,458
    Due in 2005 through 2008              6,556,028              7,123,868
    Due in 2009 through 2013              8,968,018              9,478,788
    Due after 2013                       12,336,094             12,424,625
    Mortgage-backed securities            7,356,911              7,492,881
    Redeemable preferred stock               28,005                 38,358
                                       ------------           ------------
                                        $37,293,989            $38,624,978
                                        ===========           ===========

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

    Due in 2004                         $2,681,414             $2,747,175
    Due in 2005 through 2008             9,249,570             10,051,451
    Due in 2009 through 2013             1,185,251              1,357,501
    Due after 2013                          97,822                113,910
    Mortgage-backed securities              --                     --
                                       -----------           ------------
                                       $13,214,057            $14,270,037
                                      ===========             ===========


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


2)  Investments (Continued)

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

                                       2003          2002             2001
                                       ----          ----             ----
Fixed maturity securities
 held to maturity:

Gross realized gains                  $3,549        $37,172        $20,228
Gross realized losses                 (5,665)          (557)          (565)
Securities available for sale:
Gross realized gains                       1            354              6
Gross realized losses                    (40)        (1,424)          (111)
Other assets                              --        985,275         (9,130)
                                 -----------    -----------    -----------
        Total                        $(2,155)    $1,020,820        $10,428
                                 ===========    ===========    ===========

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 4.25% to 15%,  maturity  dates range from three
months to 30 years and are secured by real estate. Concentrations of credit risk
arise  when  a  number  of  mortgage   loan  debtors   have   similar   economic
characteristics  that would cause their ability to meet contractual  obligations
to be similarly affected by changes in economic conditions. Although the Company
has  a  diversified  mortgage  loan  portfolio  consisting  of  residential  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, 2003,  other than  investments  issued or  guaranteed by the United
States Government, are as follows:

                                Carrying Amount
        Dean Witter Discover      $4,023,115


<PAGE>


                    SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


Major categories of net investment income are as follows:

                                      2003           2002            2001
                                      ----           ----            ----
Fixed maturity  securities        $3,407,177      $3,228,042      $3,776,132
Equity securities                     54,481          53,889          49,281
Mortgage loans on real estate      1,931,358       1,350,882       1,570,478
Real estate                        1,509,932       1,501,534       1,548,507
Policy loans                         676,201         663,554         630,352
Short-term investments               105,094         189,894         379,562
Other                             10,813,469       6,501,763       5,973,092
                                ------------    ------------    ------------
  Gross investment income         18,497,712      13,489,558      13,927,404
Investment expenses               (1,195,115)       (950,128)       (980,905)
                                ------------    ------------    ------------
Net investment income            $17,302,597     $12,539,430     $12,946,499
                                ============    ============    ============


Net investment  income  includes net investment  income earned by the restricted
assets of the cemeteries and mortuaries of approximately $848,000,  $924,000 and
$872,000 for 2003, 2002, and 2001, 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
$8,850,755 at December 31, 2003 and $7,819,262 at December 31, 2002.

3)  Cost of Insurance Acquired

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

                               2003           2002           2001
                               ----           ----           ----
Balance at
  beginning of year       $16,408,849      $8,081,223      $9,236,947
                         ------------    ------------    ------------
Cost of insurance
  acquired                   (110,754)      9,106,309        (289,754)
                         ------------    ------------    ------------

Imputed interest at 7%      1,098,636         857,153         606,136
Amortization               (2,415,968)     (1,635,836)     (1,472,106)
                         ------------    ------------    ------------
Net amortization
  charged to income        (1,317,332)       (778,683)       (865,970)
                         ------------    ------------    ------------
Balance at end
  of year                 $14,980,763     $16,408,849      $8,081,223
                         ============    ============    ============

Presuming no  additional  acquisitions,  net  amortization  charged to income is
expected  to  approximate  $1,206,546,  $1,111,526,  $1,014,348,  $946,593,  and
$884,330 for the years 2004 through 2008. 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, 2003, 2002, and 2001


4) Property, Plant and Equipment

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

                                          December 31,
                                      2003           2002
                                      ----           ----
Land and Buildings               $11,140,690     $11,098,907
Furniture and equipment           10,288,299       8,725,925
                                ------------    ------------
                                  21,428,989      19,824,832
Less accumulated depreciation    (10,419,573)     (8,903,197)
                                ------------    ------------
     Total                       $11,009,416     $10,921,635
                                ============    ============

5)   Bank Loans Payable and Lines of Credit

Bank loans payable are summarized as follows:
                                                           December 31,
                                                       2003             2002
                                                       ----             ----
6.59% note payable in monthly installments
    of $34,680 including principal and interest,
    collateralized by 15,000 shares of Security
    National Life stock, due December 2004.           $391,363        $727,524

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

6% note payable in monthly installments of $5,693
    including principal and interest,
    collateralized by real property, which
    book value is approximately $950,000
    due September 2010.                                662,944            --

6.93% note payable in monthly installments of
    $14,175 including principal and interest,
    collateralized by real property, which
    book value is approximately $915,000, due
    November 2007.                                   1,519,198       1,472,560

$2,230,016 in 2003 and $3,234,489 in 2002 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.                        2,178,075       3,144,673

Bank prime rate plus 1/2% (4.50% at December 31, 2003)
    note payable in monthly installments of $7,235
    including principal and interest, collateralized by
    real property, which book value is approximately
    $717,000, due August 2004.                          60,683         150,564


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


5) Bank Loans Payable and Lines of Credit (Continued)
                                                           December 31,
                                                       2003              2002
                                                       ----              ----
Bank prime rate less 1.35% (2.65% at December 31,
    2003) 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.                          98,880          128,738

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.                 482,394          610,170

5.87% note payable interest only to July 1, 2003,
    thereafter interest and monthly principal
    payments of $139,000, collateralized by
    15,000 shares of  Security National Life
    Insurance Company Stock, due January 2010.      8,413,993        9,000,000

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

Other collateralized bank loans payable               312,111          233,874
                                                -------------    -------------
  Total bank loans                                 14,422,670       16,113,227

Less current installments                           3,688,647        2,282,575
                                                -------------    -------------
Bank loans, excluding current installments      $  10,734,023     $ 13,830,652
                                                =============     ============

In  addition  to the lines of credit  described  above,  the Company has line of
credit  agreements with banks for $2,500,000 and $5,000,000,  of which none were
outstanding  at December  31, 2003 or 2002.  The lines of credit are for general
operating  purposes.  The $2,500,000 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:

                                                         December 31,
                                                     2003          2002
                                                     ----          ----
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.                  $545,921         $574,526


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001

6) Notes and Contracts Payable (Continued)
                                                             December 31,
                                                          2003         2002
                                                          ----         ----
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.          98,319        168,621

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.              --            5,296

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.                          459,138        534,111

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 $828,000
    due March 2030.                                     954,475        951,807

Due to former shareholder of Southern Security
    Life Insurance Company resulting
    from the acquisition of such entity.
    6.5% note payable in five annual
    installments with principal payments
    of $158,840 due April 2005                         317,680         476,520

Due to shareholder of Security National
   Financial Corporation 6.0% note payable in
   annual installments of $100,000 including
   principal and interest due July 2005                200,000            --

Due to shareholder of Security National
   Financial Corporation 4.0% note payable in
   annual installments of $160,873 including
   principal and interest due January 2006             482,620            --


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001

6) Notes and Contracts Payable (Continued)
                                                              December 31,
                                                         2003             2002
                                                         ----            ----

Other notes payable                                     382,541         449,128
                                                     ----------      ----------
Total notes and contracts payable                     3,440,694       3,160,009
Less current installments                               732,715         447,569
                                                     ----------      ----------

Notes and contracts, excluding
current installments                                 $2,707,979      $2,712,440
                                                     ==========      ==========

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

                       2004                  $4,421,362
                       2005                   3,640,897
                       2006                   2,325,645
                       2007                   1,931,906
                       2008                   1,826,064
                       Thereafter             3,717,490
                                            -----------
Total                                       $17,863,364
                                            ===========

Interest paid approximated interest expense in 2003, 2002 and 2001.

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

The Company owns and operates several  endowment care  cemeteries,  for which it
has  established  and maintains an endowment  care fund.  The Company  records a
liability  to the fund for each  space sold at current  statutory  rates.  As of
December  31, 2002 the Company  owed the fund  $73,151 in excess of the required
contribution to the fund, and as of December 31, 2003, the Company owed the fund
$41,335.

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,
                                                        2003              2002
                                                        ----              ----
Cash and cash equivalents                              $617,142        $378,388
Mutual funds                                            188,732         188,732
Fixed maturity securities                               108,554         301,928
Equity securities                                        77,778          77,778
Participation in mortgage loans
 with Security National Life                          3,719,807       4,352,214
Time certificate of deposit                              33,696          33,696
                                                     ----------      ----------
   Total                                             $4,745,709      $5,332,736
                                                     ==========      ==========


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


8)  Income Taxes

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

                                                        December 31,
                                                  2003               2002
                                                 -----               ----
Current                                           $18,585               $45,702
Deferred                                       10,896,260             8,058,180
                                              -----------           -----------
Total                                         $10,914,845            $8,103,882
                                              ===========           ===========


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

                                                    2003               2002
                                                    ----               ----
Assets
Future policy benefits                           $(1,676,881       $(1,849,395)
Unearned premium                                  (1,635,912)       (1,717,492)
Difference between book
   and tax basis of bonds                            (27,951)          (34,178)
Net operating loss carryforwards                          --        (1,132,874)
Other                                               (605,932)         (575,788)
                                                ------------      ------------
Total deferred tax assets                         (3,946,676)       (5,309,727)
                                                ------------      ------------

Liabilities
Deferred policy acquisition costs                  4,889,696         5,235,909
Cost of insurance acquired                         2,486,035         2,643,596
Installment sales                                  2,367,510         1,997,256
Depreciation                                         891,725           883,667
Trusts                                             1,054,323         1,184,382
Tax on unrealized appreciation                       568,944           644,148
Reinsurance                                        1,974,996                --
Other                                                609,707           778,949
                                                ------------      ------------
Total deferred tax liabilities                    14,842,936        13,367,907
                                                ------------      ------------
Net deferred tax liability                       $10,896,260        $8,058,180
                                                ============      ============


The Company paid $55,442,  $462,983 and $564,327 in income taxes for 2003,  2002
and 2001, respectively. The Company's income tax expense (benefit) is summarized
as follows:

                                    2003              2002               2001
                                    ----              ----               ----
Current                            $28,326           $595,254          $391,492
Deferred                         2,862,343            970,139           522,047
                                ----------         ----------        ----------
Total                           $2,890,669         $1,565,393          $913,539
                                ==========         ==========        ==========

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, 2003, 2002, and 2001


8) Income Taxes (Continued)
                                          2003            2002            2001
                                          ----            ----            ----
Computed expense at statutory rate     $3,218,056     $1,883,255    $1,282,517
Special deductions allowed
   small life insurance companies        (285,991)      (315,923)     (356,734)
Dividends received deduction               (5,611)          (737)       (6,405)
Minority interest taxes                    13,469          7,429        (7,466)
Other, net                                (49,254)        (8,631)        1,627
                                      -----------    -----------   -----------
   Tax expense                         $2,890,669     $1,565,393      $913,539
                                      ===========    ===========   ===========

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, 2003,  the
policyholders'  surplus accounts  approximated  $4,500,000.  Management does not
intend to take actions nor does management expect any events to occur that would
cause federal  income taxes to become payable on that amount.  However,  if such
taxes  were  accrued,  the  amount  of  taxes  payable  would  be  approximately
$1,500,000.

The Company does not have any loss carry forward as of December 31, 2003.

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, 2003 and 2002.  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 $940,050,000 at December
31, 2003 and $1,174,604,000 at December 31, 2002.

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.

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


are netted since these are non-cash items,  and the Company expects to recapture
the Coinsurance from future profits of the reinsured business.  Guaranty has the
right to recapture the business at any time after December 31, 2004 upon 90 days
advance notice. As of December 31, 2003 the outstanding  Coinsurance  amount was
$3,344,793.  The  Company  recorded as income the risk charge of $34,000 for the
fourth quarter.  In the event that the Company  believes it will not recover the
Coinsurance it will have to record as an expense and a future  liability for the
amount of such impairment.

The Company  leases  office space and  equipment  under  various  non-cancelable
agreements,  with remaining terms up to four years. Minimum lease payments under
these non-cancelable operating leases as of December 31, 2003, are approximately
as follows:

                   Years Ending December 31:
                          2004                                 $570,000
                          2005                                  460,000
                          2006                                  236,000
                          2007                                    6,000
                                                         --------------
                                                             $1,272,000

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

An action was brought  against the Company in May 2001,  by Glenna  Brown Thomas
individually  and as personal  representative  of the Estate of Lynn W. Brown in
the Third  Judicial  Court,  Salt Lake  County,  Utah.  The action  asserts that
Memorial Estates 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 also asserted  among other things that Thomas "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."  The formal discovery
cutoff was January 15, 2004. The Company has been verbally  informed that Thomas
will dismiss the case but such has not been  communicated in writing.  Until the
foregoing actually happens, 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
asserted  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 commissions as well as certain production
bonuses.


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001

NGU  alleged  that it had been  damaged  far in  excess of the  $75,000  minimum
jurisdictional  limits of the federal court. NGU also sought 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
counterclaimed for what it claimed to be a debit balance owing to it pursuant to
the  relationship  between  the  parties  (the amount  subject to  reduction  as
premiums are received).  The Company also sought to recover  attorney's fees and
costs, as well as punitive damages on three of its causes of action.

Certain discovery took place. The federal case was dismissed by 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 same as those in
federal count, which claims include fraudulent  inducement  relative to entering
into a contract,  fraud,  breach of  contract,  breach of duty of good faith and
fair  dealing,  attorney's  fees and  exemplary  damages  as well as  seeking an
accounting and contesting the interest  charges.  Certain  depositions have been
taken  since  the  filing  again  in  state  court  and  further   discovery  is
anticipated.  The  Company  filed a motion for  partial  summary  judgment  with
respect to certain  items.  The court has yet to rule on the motion.  A trial is
presently set for October  2004.  The Company  intends to vigorously  defend the
matter as well as prosecute its counterclaim.

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.

Subsequent to the year ended December 31, 2003, the Company entered a settlement
agreement with one of its mortgage loan investors to resolve certain commitments
under the investor agreement with the Company. The agreement requires a payment
of $350,000 to be made to the investor with an additional $100,000 to be paid if
the Company does not deliver a specified volume of loans during 2004. The amount
of the settlement has been included in management's estimate in calculating the
reserve for losses on contractual obligations.

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 $98,588,  $99,612, and $191,557 for 2003, 2002, and
2001, respectively. At December 31, 2003 the ESOP held 546,344 shares of Class A
and 1,479,087 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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


10)   Retirement Plans

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
2003, 2002, and 2001 were $4,493,  $7,975, and $18,458  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 2003,  2002 and 2001 were  $110,081,  $142,218,  and
$260,350, 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 2003,  2002 and 2001 were  $95,485,  $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 is $62,667  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 2003 the Company  increased  its
liability for these future  obligations  by $10,000.  The current  balance as of
December 31, 2003 is $712,000.

During 2003 the Company entered into an employment  agreement with the President
of Security National  Mortgage Company.  The agreement has a five-year term, but
the Company has agreed to renew the  agreement  in 2008 and 2013 for  additional
five-year terms,  provided  certain employee  performs his duties with usual and
customary care and diligence.  Under the terms of the agreement certain employee
is to devote his full time to the  Company  serving  as  President  of  Security
National Mortgage Company at not less than his current salary and benefits,  and
to include  $350,000 of life insurance  protection.  In the event of disability,
certain  employee'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  certain
employee  were not  retained  in his  current  position,  the  Company  would be
obligated to continue  certain  employee  current  compensation and benefits for
five years  following the merger or sale.  The agreement  further  provides that
certain employee is entitled to receive annual retirement benefits beginning one
month from the date of his retirement and his having obtained the age of 62 1/2,
five years following  complete  disability or upon termination of his employment
without  cause.  These  retirement  benefits  are to be paid for a period of ten
years in annual installments in the amount equal to one-half of his then current
annual salary.  However,  in the event certain  employee dies prior to receiving
all retirement benefits thereunder, the remaining benefits are to be paid to his
heirs. The Company accrued in 2003  approximately  $172,000 to cover the present
value of the retirement benefit of the agreement.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


10)   Retirement Plans (Continued)

The Company has an employment  agreement with its  President,  which was entered
into in 1996 and renewed in 1997 and 2002.  Under the agreement the President 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,  his 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 he is not
retained in his current position, the Company would be obligated to continue his
current  compensation and benefits for seven years following the merger or sale.
The Company is in the process of amending the  agreement  with its  President to
provide for retirement benefits.  The Company accrued approximately  $328,000 in
2003 to cover the present value of anticipated retirement benefits that would be
owed once the agreement is amended.

11)  Capital Stock

The following  table  summarizes the activity in shares of capital stock for the
three-year period ended December 31, 2003:

                                                      Class A         Class C
Balance at January 1, 2001                           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
                                                    ----------      ----------

Exercise of stock options                              176,725           --
Stock Dividends                                        301,774         308,086
Conversion of Class C to Class A                         2,113         (21,117)
                                                    ----------      ----------

Balance at December 31, 2003                         6,275,104       6,469,638
                                                    ==========      ==========

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 2003, as authorized by the Company's Board of Directors.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


11)  Capital Stock (Continued)

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.

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

                                               2003         2002         2001
                                               ----         ----         ----
Numerator:
   Net income                               $6,596,497   $3,991,280  $2,840,780
                                            ==========   ==========  ==========

Denominator:
   Denominator for basic earnings
    per share-weighted-average shares        5,358,503    4,823,914   4,506,476

   Effect of dilutive securities:
     Employee stock options                    149,952      169,543         382
     Stock appreciation rights                   2,007        1,828       --
                                            ----------   ----------  ----------
Dilutive potential common shares               151,959      171,371         382
                                            ----------   ----------  ----------

   Denominator for diluted earnings per
     share-adjusted weighted-average
     shares and assumed conversions          5,510,462    4,995,285   4,506,858
                                            ==========   ==========  ==========

Basic earnings per share                         $1.23         $.83        $.63
                                                 =====         ====        ====
   Diluted earnings per share                    $1.20         $.80        $.63
                                                 =====         ====        ====

12)    Stock Compensation Plans

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

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

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


12)    Stock Compensation Plans (Continued)

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

Activity of the 1987 Plan is summarized as follows:

                                                Number        Option
                                              of Shares        Price
                                              ---------       -------
Outstanding at January 1, 2001                 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
                                                 -----

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

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

Exercisable at end of year                        4,220      $3.20
                                               ========      =====

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, 2003, 2002, and 2001


12)    Stock 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, 2001                      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
   Dividend                                          30,609
   Granted                                          371,000
   Exercised                                       (263,496)
                                              -------------

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

Exercisable at end of year                          642,782        $2.07 - $6.18
                                              =============

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

                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


12)    Stock 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 January 1, 2001                        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
                                                 ----------

   Dividend                                             697
   Granted                                            4,000
   Exercised                                         (3,311)
                                                 ----------
Outstanding at December 31, 2003                     14,627        $1.85 - $5.72
                                                 ==========

Exercisable at end of year                           10,627
                                                 ==========

Available options for future
    grant 2000 Director Plan                         42,673
                                                 ==========



<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


12)    Stock Compensation Plans (Continued)

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

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

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

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

Activity of the 2003 Plan is summarized as follows:

                                                  Number of       Number of
                                                Class A Shares   Class C Shares
Outstanding at December 31, 2003                    -0-              -0-
                                                    ===              ===

Available options for future grant
   2003 Stock Incentive Plan                      525,000       1,050,000
                                                  =======       =========

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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


13)  Statutory-Basis Financial Information (Continued)

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)
                                                for the year ended
                                                    December 31,

                                       2003            2002              2001
                                       ----            ----              ----
Security National Life            $(5,404,687)      $1,547,253       $1,732,018
Southern Security Life              2,431,499         (427,439)        (429,143)

                                       Statutory Stockholders' Equity
                                               December 31,

                                       2003             2002             2001
                                       ----             ----            ----

Security National Life             $15,069,057      $14,381,257      $16,316,605
Southern Security Life              11,443,488        8,582,968        8,459,700

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 73.0% of the first
level of regulatory action.

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.


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


14) Business Segment Information (Continued)

Measurement of Segment Profit or Loss and Segment Assets

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

Factors Management Used to Identify the Enterprise's Reportable Segments

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

                                                                              2003
                                          Life            Cemetery/                            Reconciling
                                        Insurance         Mortuary             Mortgage           Items          Consolidated
Revenues:
<S>                                  <C>               <C>                <C>                <C>           <C>
From external sources:
   Revenue from customers             $23,391,497      $10,944,365         $92,955,165$           --        $127,291,027
   Net investment income                6,571,404          936,118           9,795,075            --          17,302,597
   Realized gains (losses)
      on investments                       (2,155)         --                  --                 --              (2,155)
   Other revenues                         157,850           94,907             200,183            --             452,940

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

Identifiable assets                $302,319,614       $44,018,131       $  20,364,399      $(49,792,560)    $316,909,584
                                   ============       ===========       =============      ============     ============

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

<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


14) Business Segment Information (Continued)
                                                                         2002

                                      Life              Cemetery/                            Reconciling
                                    Insurance           Mortuary          Mortgage              Items        Consolidated
Revenues:
<S>                             <C>                  <C>                 <C>          <C>                   <C>
From external sources:
   Revenue from
      customers                 $ 14,076,652         $10,638,754         $57,008,283   $           --        $ 81,723,689
   Net investment income           6,065,652           1,011,786           5,461,992               --          12,539,430
   Realized gains on
      investments                    311,365             709,455                  --               --           1,020,820
   Other revenues                     69,741              85,146             324,537               --             479,424

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

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

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

<PAGE>
<TABLE>
<CAPTION>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001

14) Business Segment Information (Continued)
                                                                     2001

                                      Life              Cemetery/                           Reconciling
                                    Insurance           Mortuary          Mortgage             Items           Consolidated
Revenues:                          ----------          -----------       ----------         ------------      -------------
<S>                               <C>                  <C>               <C>             <C>                <C>
From external sources:
   Revenue from
      customers                  $ 13,150,875        $  9,881,248        $40,086,097$           --            $ 63,118,220
   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          10,883,259         45,111,430       (3,679,133)          76,227,092
                                  -----------         -----------        -----------      -----------         ------------
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           8,674,488         37,280,266            --              52,990,209
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          10,276,725          42,738,212      (3,679,133)          72,454,982
                                 ------------         -----------        ------------     -----------         ------------
Earnings (losses)
   before income taxes           $    792,358        $    606,534         $ 2,373,218   $      --             $  3,772,110
                                 ============        ============         ===========   =============         ============

Identifiable assets              $201,193,249         $38,915,291         $ 6,919,871    $(33,460,187)        $213,568,224
                                =============         ===========         ===========    ============         ============

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

<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001

15) Related Party Transactions

On December 19, 2001, the Company entered into an option agreement with Monument
Title,  LLC, a Utah limited liability  company  ("Monument  Title") in which the
Company  made  available  a  $100,000  line of  credit to  Monument  Title at an
interest  rate of 8% per  annum.  The line of credit is secured by the assets of
Monument  Title.  From December 28, 2001 to June 14, 2002, the Company  advanced
Monument Title a total of $77,953 under the line of credit.  The amount advanced
under the line of credit plus accrued  interest  are payable  upon demand.  This
receivable  was fully  allowed  for in 2003.  The owners of  Monument  Title are
brothers-in-law of the President and Chief Operating Officer of the Company. The
Company has the right under the option agreement for a period of five years from
the date thereof to acquire 100% of the  outstanding  common  shares of Monument
Title for the sum of $10. The purpose of the transaction,  which was approved by
the Company's  board of  directors,  is to insure that the title and escrow work
performed for 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  $38,000 and $70,000
at December 31, 2003 and 2002, 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, 2003 and
December 31, 2002, were approximately $86,389,000 and $87,351,000, 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, 2003, 2002, and 2001


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

The following summarizes other comprehensive income:

                                              2003           2002        2001
                                              ----           ----        ----
Unrealized gains (losses)
     on available for-sale securities      $638,540        $84,263    $769,684
Less:  reclassification
     adjustment for net realized
     gains (losses) in net income            (2,155)       (35,544)    (10,428)
                                        -----------    ----------- -----------
Net unrealized gains (losses)               636,385         48,719     759,256
Potential unrealized losses for
     derivative bank loans                 (303,029)            --        --
Tax expense on net unrealized
     gain (losses)                           19,428        (80,786)   (372,077)
                                        -----------    -----------  -----------
Other comprehensive income (loss)          $352,784       $(32,067)   $387,179
                                        ===========    =========== ===========

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

The  "Acquisition  of Company  Stock held in Escrow" above is held in escrow and
voted by trustee  until the  balances  shown  under Note 6 "Notes and  Contracts
Payable"  in the  amounts of  $200,000  and  $482,620  are paid per terms of the
agreement and promissory note.

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

Information regarding the swaps is as follows as of December 31, 2003:

     Weighted average variable interest rate of
         the hedged bank loans (prime less .5%)                         3.5%
     Weighted average fixed interest rate of the swaps                  6.1%
     Market value of the swaps- potential unrealized
         loss position                                            $(303,029)

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


<PAGE>


                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2003, 2002, and 2001


18) Subsequent Event

On March 16, 2004,  with the  approval of the  Louisiana  Insurance  Department,
Security National Life Insurance Company purchased all of the outstanding common
stock of  Paramount  Security  Life  Insurance  Company,  a Louisiana  domiciled
company (Paramount) located in Shreveport,  Louisiana.  As of December 31, 2003,
Paramount had 9,383 policies in force and approximately, 29 agents. The purchase
consideration  was $4,397,994  and was effective  January 26, 2004. For the year
ended  December 31, 2003,  Paramount  had revenues of $614,000 and net income of
$76,000. As of December 31, 2003,  statutory assets and capital and surplus were
$6,073,000 and $4,100,000, respectively.

Paramount  is licensed in the State of  Louisiana  and is  permitted  to appoint
agents who do not have a full life insurance  license.  These agents are limited
to selling  small life  insurance  policies  in the final  expense  market.  The
Company believes that with this license it will be able to expand its operations
in Louisiana.  The Company is planning on servicing Paramount  policyholders out
of its Jackson Mississippi office and has closed the Shreveport office.



<PAGE>
<TABLE>
<CAPTION>


                                                                    Schedule I

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



As of December 31, 2003:

                                                                                       Amount at
                                                                                      which shown
                                                                     Estimated          in the
Type of Investment                                     Amortized       Fair          Consolidated
                                                          Cost        Value          Balance Sheet
<S>                                                     <C>            <C>            <C>
Fixed maturity securities held to maturity:
Bonds:
   U.S. Treasury securities and obligations
     of U.S. Government agencies                        $3,080,471     $3,260,596     $3,080,471
   Obligations of states and political subdivisions        261,360        285,758        261,360
   Corporate securities
     including public utilities                         30,289,401     31,355,505     30,289,401
   Mortgage backed securities                            3,634,752      3,684,761      3,634,752
Redeemable preferred stocks                                 28,005         38,358         28,005
                                                      ------------   ------------   ------------

   Total Fixed Securities held to maturity              37,293,989     38,624,978     37,293,989
                                                      ------------   ------------   ------------

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

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

Mortgage loans on real estate                           29,914,745                    29,914,745
Real estate                                              8,519,680                     8,519,680
Policy loans                                            11,753,617                    11,753,617
Other investments                                        2,054,248                     2,054,248
                                                      ------------                  ------------

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

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                       Schedule I (Continued)

                     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 Cost  Fair Value    Balance Sheet
<S>                                                    <C>             <C>           <C>
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
                                                      ============                  ============
</TABLE>


<PAGE>


                                                                Schedule II

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                                  Balance Sheet


                                                           December 31,
                                                    2003                 2002
                                                    ----                 ----
Assets
Cash                                              $(791,521)            $(3,870)

Investment in subsidiaries
    (equity method)                              56,188,527          50,069,998

Receivables:
    Receivable from
        Affiliates                               10,680,182          10,662,465
    Other                                          (107,403)            (74,653)
                                               ------------        ------------
       Total receivables                         10,572,779          10,587,812
                                               ------------        ------------

Property, plant and
    equipment, at cost,
    net of accumulated
    depreciation of $730,230
    for 2003 and $575,724
    for 2002                                        300,744             415,144

Other assets                                         79,504              66,915
                                               ------------        ------------
    Total assets                                $66,350,033         $61,135,999
                                               ============        ============




















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,
                                                         2003           2002
                                                         ----           ----
Liabilities:
Bank loans payable:
    Current installments                             $2,995,831      $2,082,175
    Long-term                                         8,641,418      11,400,191

Notes and contracts payable:
    Current installments                                261,835             961
    Long-term                                           421,746              --

Advances from affiliated companies                    8,868,497      10,031,968

Other liabilities and accrued expenses                1,060,083         965,555

Income taxes                                          4,925,192       2,141,738
                                                   ------------    ------------
    Total liabilities                                27,174,602      26,622,588
                                                   ------------    ------------

Stockholders' equity:
Common Stock:
    Class A:  $2 par value, authorized
        10,000,000 shares, issued 6,275,104
        shares in 2003 and 5,794,492 shares
        in 2002                                      12,550,208      11,588,984
    Class C:  $0.20 par value, authorized
        7,500,000 shares, issued 6,469,638
         shares in 2003 and 6,182,669 shares
         in 2002                                      1,293,927       1,236,533
                                                   ------------    ------------
Total common stock                                   13,844,135      12,825,517

Additional paid-in capital                           13,569,582      11,280,842
Accumulated other comprehensive income,
    (loss), and other items                            (437,973)      1,191,863
Retained earnings                                    15,414,681      11,992,542
Treasury stock at cost
    (1,276,518 Class A shares and 75,336
    Class C shares in 2003; 1,151,811 Class
    A shares and 71,749 Class C shares in 2002,
    held by affiliated companies)                    (3,214,994)     (2,777,353)
                                                   ------------    ------------
Total stockholders' equity                           39,175,431      34,513,411
                                                   ------------    ------------
    Total liabilities and
        stockholders' equity                        $66,350,033     $61,135,999
                                                   ============    ============


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,
                                              -----------------------
                                           2003           2002          2001
                                           ----           ----          ----

Revenue:
    Net investment income                     $52        $34,053           $188
    Fees from affiliates                4,200,683      3,772,293      3,824,259
                                      -----------    -----------    -----------
        Total revenue                   4,200,735      3,806,346      3,824,447
                                      -----------    -----------    -----------

Expenses:
    General and administrative
        Expenses                        2,439,659      3,287,683      4,082,438
    Interest expense                      763,088        351,599        373,815
                                      -----------    -----------    -----------
        Total expenses                  3,202,747      3,639,282      4,456,253
                                      -----------    -----------    -----------

    Earnings (loss)before income
        taxes, and earnings of
        subsidiaries                      997,988        167,064       (631,806)

    Income tax expense                 (2,841,738)    (1,045,791)      (531,270)

    Equity in earnings
        (loss) of subsidiaries          8,440,247      4,870,007      4,003,856
                                      -----------    -----------    -----------
    Net earnings                       $6,596,497     $3,991,280     $2,840,780
                                      ===========    ===========    ===========










See accompanying notes to parent company only financial statements.


<PAGE>
<TABLE>
<CAPTION>


                                                       Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                             Statements of Cash Flow


                                                         Year Ended December 31,
                                                  2003           2002           2001
                                                  ----           ----           ----
<S>                                           <C>             <C>           <C>
Cash flows from operating activities:
    Net earnings                               $6,596,497     $3,991,280     $2,840,780
Adjustments to reconcile net earnings
      to net cash provided by (used in)
      operating activities:
      Depreciation and amortization               154,506        118,386        113,042
      Undistributed (earnings) losses
         of affiliates                         (8,440,247)    (4,870,007)    (4,003,856)
      Provision for income taxes                2,841,738      1,045,791        531,271
    Change in assets and liabilities:
      Accounts receivable                        (128,778)        31,909         60,751
      Other assets                                (12,589)       (45,549)        25,638
      Other liabilities                            94,529        (30,673)       282,349
                                              -----------    -----------    -----------
Net cash provided by (used in)
    operating activities                        1,105,656        241,137       (150,025)
                                              -----------    -----------    -----------

Cash flows from investing activities:
    Dividends received from subsidiaries        1,150,000      2,381,687             --
    Purchase of equipment                         (40,106)      (106,185)        (2,954)
    Investment in subsidiaries                         --       (900,000)            --
                                              -----------    -----------    -----------
Net cash used in investing activities           1,109,894      1,375,502         (2,954)
                                              -----------    -----------    -----------

Cash flows from financing activities:
    Advances from (to) affiliates              (1,019,660)    (9,396,773)     1,922,758
    Payments of advances to affiliates                 --             --        (28,998)
    Payments of notes and contracts payable    (2,116,541)    (1,224,801)    (1,676,940)
    Stock options exercised                       133,000             --             --
    Purchase of treasury stock                         --             --       (783,086)
    Proceeds from borrowings on notes and
      contracts payable                                --      9,000,000        750,000
                                              -----------    -----------    -----------
Net cash provided by (used in)
      financing activities                     (3,003,201)    (1,621,574)       183,734
                                              -----------    -----------    -----------
Net change in cash                               (787,651)        (4,935)        30,755
Cash at beginning of year                          (3,870)         1,065        (29,690)
                                              -----------    -----------    -----------
Cash at end of year                             $(791,521)       $(3,870)        $1,065
                                              ===========    ===========    ===========
</TABLE>










See accompanying notes to parent company only financial statements.


<PAGE>


                                                        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,
                                                      2003             2002
$2,230,016 in 2003 and $3,234,489 in
    2002 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.                            $ 2,178,075      $ 3,144,672

6.59% note payable in monthly installments
    of $34,680 including principal and
    interest, collateralized by 15,000 shares
    of Security National Life stock,
    due December 2004.                                391,363          727,524

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.                 482,394          610,170

5.87% note payable interest only to July 2, 2003,
    thereafter interest plus monthly principal
    payment of $125,000, collateralized by 15,000
    shares of Security National Life
    Insurance Company stock, due January 2010.       8,413,993       9,000,000

Mark-to-market adjustment                              171,424           --
                                                  ------------   -------------

        Total bank loans                            11,637,249      13,482,366

      Less current installments                      2,995,831       2,082,175
                                                  ------------   -------------
      Bank loans, excluding current
      Installments                                 $ 8,641,418     $11,400,191
                                                   ===========     ===========

2)  Notes and Contracts Payable

    Notes and contracts are summarized as follows:
                                                         December 31,
                                                     2003             2002
    Due to shareholders of Security
       National Financial Corporation 6.0%
       note payable in annual installments
       of $100,000 including principal and
      interest due July 2005                      $    200,000   $      --

Due to shareholders of Security National
    Financial Corporation 4.0% note payable
    in annual installments of $160,873
    including principal and interest due
    January 2005                                       482,620          --


<PAGE>


                                                       Schedule II (Continued)


                     SECURITY NATIONAL FINANCIAL CORPORATION
                Notes to Parent Company Only Financial Statements



2)  Notes and Contracts Payable (Continued)

 Other                                                           961         961
                                                            --------    --------

Total notes and contracts                                    683,581         961
                                                            --------    --------
Less current installments                                    261,835         961
                                                            --------    --------
Notes and contracts, excluding current installments         $421,746   $      --
                                                            ========    ========

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

              2004                    $ 3,257,665
              2005                      2,803,263
              2006                      1,690,786
              2007                      1,439,220
              2008                      1,526,011
              Thereafter                1,603,885
                                    -------------
              Total                   $12,320,830
                                      ===========

3)  Advances from Affiliated Companies


                                                             December 31,
                                                        2003             2002

         Non-interest bearing advances from affiliates:
         Cemetery and Mortuary
              Subsidiary                            $1,366,930   $ 1,366,930
         Life Insurance subsidiary                   7,491,567     8,655,038
         Mortgage subsidiary                            10,000        10,000
                                                   -----------   -----------
                                                   $8,868,497    $10,031,968

4)  Dividends

In 2003, 2002 and 2001, Security National Life Insurance Company, a wholly owned
subsidiary  of  the  Registrant,  paid  to  the  registrant  cash  dividends  of
$1,150,000, $2,381,687, and $-0- respectively.


<PAGE>
<TABLE>
<CAPTION>


                                                                   Schedule IV

                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                                   Reinsurance


                                                                                 Percentage
                                          Ceded to       Assumed                  of Amount
                              Direct        Other       from Other      Net       Assumed
                              Amount      Companies     Companies      Amount     to Net
2003
<S>                       <C>            <C>           <C>          <C>           <C>
Life Insurance
    in force ($000)        $1,974,388      $213,515      $940,050    $2,700,923     44.1%
                          ===========   ===========   ===========   ===========   ======

Premiums:
Life Insurance
Accident and              $15,108,643      $973,632    $8,807,752   $22,942,763     38.4%
    Health Insurance          350,371            --         1,239       351,610       .4%
                          -----------   -----------   -----------   -----------   ------
         Total premiums   $15,459,014      $973,632    $8,808,991   $23,294,373     38.8%
                          ===========   ===========   ===========   ===========   ======

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

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

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%
                          ===========   ===========   ===========   ===========   ======
</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
                                         ---------    ------------    ----------    --------
<S>                                     <C>            <C>          <C>            <C>
For the Year Ended December 31, 2003
Accumulated depreciation
   on real estate                       $3,728,539      $331,395    $       --     $4,059,934

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

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

Allowance for real estate losses                --            --            --             --

For the Year Ended December 31, 2002
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          1,778,592        90,357      (389,221)     1,479,728

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       195,940       (73,571)     1,778,592

Allowance for real estate losses                --       119,269            --        119,269
</TABLE>


<PAGE>


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


None

Item 9A.  Controls and Procedures

     (a)  Evaluation  of  disclosure  controls and  procedures  - The  Company's
principal  executive  officer and principal  financial officer have reviewed and
evaluated the effectiveness of the Company's  disclosure controls and procedures
(as defined in Rules  240.13a-14(c) and 15d-14(c) under the Securities  Exchange
Act of 1934 (the  "Exchange  Act") as of the end of the  period  covered by this
annual report. Based on that evaluation, the principal executive officer and the
principal  financial  officer  have  concluded  that  the  Company's  disclosure
controls and procedures are effective,  providing them with material information
relating to the Company as required to be  disclosed  in the reports the Company
files or submits under the Exchange Act on a timely basis.

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

                                    PART III

Item 10. Directors and Executive Officers

The Company's Board of Directors consists of seven persons, four of whom are not
employees of the Company.  There 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            83     Chairman of the Board and Chief Executive
                                  Officer

Scott M. Quist             50     President, General Counsel, Chief Operating
                                  Officer and Director

Stephen M. Sill            58     Vice President, Treasurer and Chief
                                  Financial Officer

G. Robert Quist            52     First Vice President and Secretary

J. Lynn Beckstead, Jr.     50     Vice President and Director

Charles L. Crittenden      83     Director

Robert G. Hunter           44     Director

H. Craig Moody             52    Director

Norman G. Wilbur           65     Director

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


<PAGE>


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

Directors

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

George R. Quist has been  Chairman of the Board and Chief  Executive  Officer of
the Company  since  October  1979.  Mr. Quist served as President of the Company
from 1979 until July 2002.  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.

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  Treasurer  and a director  of The  National  Association  of Life
Companies,  a trade association of 642 insurance companies until its merger with
the American Council of Life Companies. Mr. Quist has been a member of the Board
of Governors of the Forum 500 Section  (representing small insurance  companies)
of the  American  Council of Life  Insurance.  He has also  served as a regional
director  of Key Bank of Utah since  November  1993.  Mr.  Quist is  currently a
director and past president of the National Alliance of Life Companies,  a trade
association of over 200 life companies.

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

Charles L. Crittenden has been a director of the Company since October 1979. Mr.
Crittenden 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  statewide
E.N.T. Organization (Rocky

<PAGE>


Mountain  E.N.T.,  Inc.)  where  he is  currently  a  member  of  the  Executive
Committee.  He is also Chairman of Surgery at Cottonwood Hospital, a delegate to
the Utah Medical  Association and a delegate  representing  the State of Utah to
the  American  Medical  Association,  and a member of several  medical  advisory
boards.

H. Craig Moody has been a director  of the Company  since  September  1995.  Mr.
Moody is 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

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 Immediate Past President and a director of
the Insurance  Accounting and Systems Association (IASA), a national association
of over 1,300 insurance companies and associate members.

G. Robert Quist has been First Vice President and Secretary of the Company since
March  2002.  Mr.  Quist also served as a director  of  Southern  Security  Life
Insurance Company since April 1999 and as its First Vice President and Secretary
since March 2002.  He has also served as First Vice  President of Singing  Hills
Memorial  Park since 1996.  Mr.  Quist has served as Vice  President of Memorial
Estates since 1982; he began  working for Memorial  Estates in 1978.  Also since
1987,  Mr.  Quist has served as  President  and a director  of Big Willow  Water
Company  and  as  Secretary-Treasurer  and  a  director  of  the  Utah  Cemetery
Association.  From 1987 to 1988,  he was a director  of  Investors  Equity  Life
Insurance Company of Hawaii.

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

No director,  officer or 5% stockholder of the Company or its  subsidiaries,  or
any  affiliate  thereof  has  had  any  transactions  with  the  Company  or its
subsidiaries during 2003 or 2002.

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, as amended.  In addition,  Scott M. Quist is a
regional 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 elected and qualified.

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

Item 11.  Executive Officer Compensation

The following  table sets forth,  for each of the last three fiscal  years,  the
compensation  received by George R. Quist,  the  Company's  President  and Chief
Executive Officer,  and all other executive officers  (collectively,  the "Named
Executive  Officers")  at  December  31,  2003  whose  salary  and bonus for all
services in all  capacities  exceed  $100,000 for the fiscal year ended December
31, 2003.
<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)   2003   $165,600    $50,000     $2,400          0              0              0    $23,273
  Chairman of the     2002    165,600     25,000      2,400          0              0              0     31,186
  Board and Chief     2001    148,737     20,200      2,400          0         50,000              0     37,358
  Executive Officer

Scott M. Quist (1)    2003   $205,400    $60,000     $7,200          0              0              0    $29,531
  President, Chief    2002    179,400     35,000      7,200          0              0              0     24,066
  Operating Officer   2001    152,525     20,000      7,200          0         35,000              0     34,739
  and Director
</TABLE>

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

     (2)  The amounts  indicated  under "Other Annual  Compensation"  consist of
          payments  related  to  the  operation  of  automobiles  by  the  Named
          Executive  Officers.   However,  such  payments  do  not  include  the
          furnishing  of an  automobile  by the  Company  to George R. Quist 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 2003, 2002, and
          2001, such amounts were George R. Quist, $18,590, $16,207 and $32,077,
          respectively;  and  Scott M.  Quist,  $23,000,  $19,219  and  $34,102,
          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 2003,  2002 and 2001,  such  amounts were for
          George R. Quist $39, $125 and $637, respectively;  for Scott M. Quist,
          $354, $642, 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  2003,  2002 and 2001);  Scott M. Quist
          ($6,177 for the year 2003, $4,205 for the year 2002, $0 for 2001); (d)
          compensation  paid for the  cashless  exercise  of  50,000  shares  of
          Company  stock  exercised  by George R. Quist  ($10,210)  for the year
          2002. The amounts under "All Other  Compensation" does 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, 2003, as well as the aggregate  number
and  value of  unexercised  options  held by the  Named  Executive  Officers  on
December 31, 2003.


<PAGE>
<TABLE>
<CAPTION>



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

                                                             Number of
                                                             Securities
                                                             Underlying                                  Value of
                                                             Unexercised                                Unexercised
                                                            Options/SARs                               In-the-Money
                   Shares                                        at                                   Options/SARs at
                 Acquired on                                December 31,                               December 31,
                  Exercise           Value                     2003(#)                                      2003
                                                               -------                                    ------
Name                (#)           Realized         Exercisable          Unexercisable          Exercisable       Unexercisable
----              --------        --------         -----------          -------------          -----------       -------------
<S>                <C>       <C>                     <C>                    <C>                 <C>                 <C>
George R.
  Quist                -0-   $        -0-             239,505                -0-                 $521,582           $-0-
Scott M.
  Quist             48,099        336,174              73,500                -0-                  134,575            -0-
</TABLE>

Retirement Plans

On December 8, 1988, the Company entered into a deferred  compensation plan with
George R. Quist,  the Chairman and Chief Executive  officer of the Company.  The
plan was later amended effective January 2, 2001. Under the terms of the plan as
amended,  upon the  retirement of Mr. Quist,  the Company is required to pay him
ten annual  installments in the amount of $60,000.  Retirement is defined in the
plan as the earlier or later of age 70, as specified by the Board of  Directors.
The $60,000 annual  payments are to be adjusted for inflation in accordance with
the United States  Consumer  Price Index for each year after January 1, 2002. If
Mr. Quist's  employment is terminated by reason of disability or death before he
reaches  retirement  age, the Company is to make the ten annual  payments to Mr.
Quist,  in the event of  disability,  or to his designated  beneficiary,  in the
event of death.

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

Employment Agreements

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.

On December 4, 2003,  the  Company,  through its  subsidiary  Security  National
Mortgage Company,  entered into an employment  agreement with J. Lynn Beckstead,
Jr.,  President of Security  National  Mortgage  Company.  The  agreement  has a
five-year term, but the Company has agreed to renew the agreement on December 4,
2008 and

<PAGE>


2013 for additional five-year terms,  provided Mr. Beckstead performs his duties
with usual and customary care and  diligence.  Under the terms of the agreement,
Mr.  Beckstead is to devote his full time to the Company serving as President of
Security  National  Mortgage  Company  at not less than his  current  salary and
benefits, and to include $350,000 of life insurance protection.  In the event of
disability,  Mr.  Beckstead's  salary would be continued for up to five years at
50% of its current level.  In the event of a sale or merger of the Company,  and
Mr.  Beckstead were not retained in his current  position,  the Company would be
obligated to continue Mr. Beckstead's current compensation and benefits for five
years  following  the merger or sale.  The agreement  further  provides that Mr.
Beckstead is entitled to receive annual retirement  benefits beginning one month
from the date of his retirement and his having  obtained the age of 62 1/2, five
years  following  complete  disability,  or upon  termination  of his employment
without  cause.  These  retirement  benefits  are to be paid for a period of ten
years in annual installments in the amount equal to one-half of his then current
annual salary.  However, in the event that Mr. Beckstead dies prior to receiving
all retirement benefits thereunder, the remaining benefits are to be paid to his
heirs.

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  2003,  2002 and 2001  were
approximately  $4,493, $7,975 and $18,458,  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 2003, 2002 and
2001, were $110,081, $142,218 and $260,350, respectively.

Employee Stock Ownership Plan

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

Under  the  Ownership  Plan,  the  Company  has  discretionary   power  to  make
contributions on behalf of all eligible employees into a trust created under the
Ownership Plan.  Employees  become eligible to participate in the Ownership Plan
when they have attained the age of 19 and have  completed one year of service (a
twelve-month  period in which the  Employee  completes  at least  1,040 hours of
service). The Company's  contributions under the Ownership Plan are allocated to
eligible employees on the same ratio that each eligible employee's compensation

<PAGE>


bears to total  compensation  for all eligible  employees  during each year.  To
date,  the Ownership Plan has  approximately  235  participants  and had $98,588
contributions  payable to the Plan in 2003.  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 2003, 2002 and 2001
was $95,485, $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.

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.


<PAGE>


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

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

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

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

On October 14, 1999, the Company amended the 1993 Plan to increase the number of
shares of Class A Common Stock reserved for issuance under the plan from 746,126
Class A shares to 1,046,126 Class A shares. The Plan terminated in 2003.

2000 Director Stock Option Plan

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

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


<PAGE>



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

2003 Stock Option Plan

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

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

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

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




<PAGE>





Item 12 - Security Ownership of Certain Beneficial Owners and Management

The following table sets forth security  ownership  information of the Company's
Class A and Class C Common Stock as of March 31,  2004,  (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,  (iii) each of the  Company's  named
executive  officers,  and (iv) 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
Name and Address of                   Beneficially         Percent     Beneficially  Percent     Beneficially        Percent
Beneficial Owner                         Owned            of Class        Owned     of Class        Owned            of Class
-----------------                       -------           --------        -----     --------        -----            --------
<S>                                  <C>                   <C>            <C>        <C>          <C>                <C>
George R. Quist (1)(2)(3)(4)(5)
4491 Wander Lane
Salt Lake City, Utah 84124              455,841              8.1%         436,259     6.8%          892,100            7.4%

George R. and Shirley C
Quist Family
  Partnership, Ltd.(6)
4491 Wander Lane
Salt Lake City, Utah 84124              400,263              7.1%       3,195,860    50.0%        3,596,123           29.8%

Employee Stock
  Ownership Plan (7)
5300 S. 360 W., Suite 250
Salt Lake City, Utah 84123              546,344              9.7%       1,479,087    23.1%        2,025,431           16.8%

Scott M. Quist (1)(3)(4)(8)
7 Wanderwood Way
Sandy, Utah 84092                       323,404              5.7%         301,248     4.7%          624,652            5.2%

Associated Investors (9)
5300 S. 360 W. Suite 250
Salt Lake City, Utah 84123               88,379              1.6%         624,391     9.8%          712,770            5.9%

</TABLE>


<PAGE>
<TABLE>
<CAPTION>


Item 12 - Security Ownership of Certain Beneficial Owners and Management  (Continued)
-------------------------------------------------------------------------
                                                                                                         Class A and
                                                     Class A                      Class C                  Class C
                                                  Common Stock                 Common Stock               Common Stock
                                                   ------------                ------------               ------------
                                          Amount                         Amount                    Amount
Name and Address of                   Beneficially           Percen   Beneficially  Percent     Beneficially        Percent
Beneficial Owner                         Owned             of Class      Owned     of Class        Owned            of Class
-----------------                       -------            --------      -----     --------        -----            --------
<S>                                  <C>                   <C>            <C>        <C>          <C>                <C>
G. Robert Quist (10)
4744 Millrace Park Lane
Murray, Utah 84123                      87,903              1.6%        225,391     3.5%          313,294            2.6%

Stephen M. Sill (11)
1595 North Fort Lane
Layton, Utah 84041                      51,929                *           --         --            51,929              *

J. Lynn Beckstead, Jr. (12)
190 Matterhorn Drive
Alpine, Utah 84004                      87,196              1.5%          --         --            87,196              *

Charles L. Crittenden
2334 Fillmore Avenue
Ogden, Utah 84401                        4,589               *            --         --             4,589              *

H. Craig Moody(13)
11892 South Brookglen Drive
Sandy, Utah 84092                        4,358               *            --         --             4,358              *

Norman G. Wilbur (14)
2520 Horseman Drive
Plano, Texas 75025                       4,628               *            --         --             4,628              *

Robert G. Hunter, M.D (1)(3)(15)
2 Ravenwood Lane
Sandy, Utah 84092                        5,899               *            --          *             5,899               *

All directors and executive officers
  (9 persons)(1)(2)(3)(4)             1,426,010            25.2%      4,158,758     65.0%        5,584,768           46.3%

*Less than one percent
</TABLE>


<PAGE>


(1) Does not include 546,344 shares of Class A Common Stock and 1,479,087 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.

(2) Does not include 88,379 shares of Class A Common Stock and 624,391 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.

(3) Does not  include  192,520  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.

(4)  Does not  include  98,765  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.

(5) Includes  options to purchase 239,505 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, 2004.

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

(7) 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.

(8) Includes  options to purchase  73,500 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, 2004.

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

(10) Includes  options to purchase 42,538 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, 2004.

(11) Includes options to purchase 10,500 shares of Class A common stock granted
to Mr. Sill, that are currently exercisable or will become exercisable within 60
days of March 31, 2004.

(12) Includes  options to purchase 27,326 shares of Class A common stock granted
to Mr.  Beckstead,  that are currently  exercisable  or will become  exercisable
within 60 days of March 31, 2004.

(13) Includes  options to purchase  3,477 shares of Class A common stock granted
to Mr. Moody, that are currently  exercisable or will become  exercisable within
60 days of March 31, 2004.

(14) Includes  options to purchase  3,477 shares of Class A common stock granted
to Mr. Wilbur, that are currently  exercisable or will become exercisable within
60 days of March 31, 2004.

(15) Includes  options to purchase  3,477 shares of Class A common stock granted
to Mr. Hunter, that are currently  exercisable or will become exercisable within
60 days of March 31, 2004.



<PAGE>



The Company's officers and directors, as a group, own beneficially approximately
46.3% of the  outstanding  shares  of the  Company's  Class A and Class C Common
Stock.

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,
2004, the outstanding balance of the note was $28,000.  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
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.  Principle Accounting Fees and Services

Fees for the 2003 annual audit of the financial  statements and employee benefit
plans and related  quarterly  reviews were  approximately  $256,000.  There were
$15,000 in other fees during 2003.


<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.

    (3)  Exhibits

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

     3.1    Articles of Restatement of Articles of Incorporation (8)
     3.2    Amended Bylaws (11)
     4.1    Specimen Class A Stock Certificate (1)
     4.2    Specimen Class C Stock Certificate (1)
     4.3    Specimen Preferred Stock Certificate and Certificate of Designation
            of Preferred Stock (1)
     10.1   Restated and Amended Employee Stock Ownership Plan and  Trust
            Agreement (1)
     10.2   1993 Stock Option Plan (3)
     10.3   2000 Director Stock Option Plan (5)
     10.4   2003 Stock Option Plan (10)
     10.5   Deferred Compensation Agreement with George R. Quist (2)
     10.6   Employment Agreement with Scott M. Quist (4)
     10.7   Promissory Note with George R. Quist (6)
     10.8   Deferred Compensation Plan (7)
     10.9   Coinsurance Agreement between Security National Life and Acadian (8)
     10.10  Assumption Agreement among Acadian, Acadian Financial Group, Inc.,
            Security National Life and the Company (8)
     10.11  Asset Purchase Agreement between Acadian, Acadian Financial Group,
            Inc., Security National Life and the Company (8)
     10.12  Promissory Note with Key Bank of Utah (9)
     10.13  Loan and Security Agreement with Key Bank of Utah (9)
     10.14  Stock Purchase and Sale Agreement with Ault Glazer & Co. Investment
            Management LLC (11)
     10.15  Stock Purchase Agreement with Paramount Security Life Insurance
            Company (12)
     10.16  Reinsurance Agreement between Security National Life Insurance
            Company and Guaranty Income Life Insurance Company
     10.17  Employment agreement with J. Lynn Beckstead, Jr.
     10.21  Subsidiaries of the Registrant
     31.1   Certification pursuant to 18 U.S.C. Section 1350, as enacted by
            Section 302 of the Sarbanes-Oxley Act of 2002
     31.2   Certification pursuant to 18 U.S.C. Section 1350, as enacted by
            Section 302 of the Sarbanes-Oxley Act of 2002
     32.1   Certification pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     32.2   Certification pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


<PAGE>



            (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 Annual Report on Form 10-K, as
                  filed on March 31, 1998
            (5)   Incorporated by reference from Schedule 14A Definitive Proxy
                  Statement, filed August 29, 2000, relating to the Company's
                  Annual Meeting of Shareholders
            (6)   Incorporated by reference from Annual Report on Form 10-K,
                  as filed on April 16, 2001
            (7)   Incorporated by reference from Annual Report on Form 10-K,
                  as filed on April 3, 2002
            (8)   Incorporated by reference from Report on Form 8-K/A as filed
                  on January 8, 2003
            (9)   Incorporated by reference from Annual Report on Form 10-K,
                  as filed on April 15, 2003
            (10)  Incorporated  by reference  from Schedule 14A Definitive
                  Proxy  Statement,  Filed on June 5, 2003,  relating to the
                  Company's Annual Meeting of Shareholders
            (11)  Incorporated by reference from Report on Form 10-Q, as filed
                  on November 14, 2003
            (12)  Incorporated by reference from Report on Form 8-K, as filed
                  March 30, 2004

    (b) Reports on Form 8-K:

          No reports on Form 8-K were filed by the  Company  during the  quarter
          ended December 31, 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:  March 30, 2004 By: George R. Quist,
                           ---------------
                           Chairman of the Board and
                           Chief Executive Officer

Pursuant to the requirements of the Securities  Exchange Act of 1934 as amended,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:

SIGNATURE                      TITLE                          DATE

George R. Quist          Chairman of the                  March 30, 2004
                         Board and Chief Executive
                         Officer (Principal
                         Executive Officer)

Scott M. Quist           President, General               March 30, 2004
                         Counsel, Chief
                         Operating Officer
                         and Director                     March 30, 2004

Stephen M. Sill          Vice President,
                         Treasurer and Chief
                         Financial Officer (Principal
                         Financial and Accounting
                         Officer) March 30, 2004

J. Lynn Beckstead, Jr.   Vice President and Director      March 30, 2004

Charles L. Crittenden    Director                         March 30, 2004

H. Craig Moody           Director                         March 30, 2004

Norman G. Wilbur         Director                         March 30, 2004

Robert G. Hunter         Director                         March 30, 2004


<PAGE>


                                  Exhibit 31.1

                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                                  AS ENACTED BY
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, George R. Quist, certify that:

1. I have  reviewed  this  annual  report  on  Form  10-K of  Security  National
Financial Corporation.

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and maintaing  disclosure  controls and  procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant to have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     (b) Evaluated the effectivness of the registrant's  disclosure controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     (c)  Disclosed  in this  report  any  change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  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 over
financial reporting.

Date: March 30, 2004

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


<PAGE>



                                  Exhibit 31.2

                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                                  AS ENACED BY
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Stephen M. Sill, certify that:

1. I have  reviewed  this  annual  report  on  Form  10-K of  Security  National
Financial Corporation.

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and maintaing  disclosure  controls and  procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant to have:

     (a)  Designed  such  disclosure  controls  and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     (b) Evaluated the effectivness of the registrant's  disclosure controls and
procedures and presented in this report our conclusions  about the effectiveness
of the disclosure  controls and procedures,  as of the end of the period covered
by this report based on such evaluation; and

     (c)  Disclosed  in this  report  any  change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  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 over
financial reporting.


Date:  March 30, 2004

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


<PAGE>


                                  EXHIBIT 32.1
                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Security National Financial  Corporation
(the  "Company") on Form 10K for the period  ending  December 31, 2003, 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.

By:     George R. Quist
        Chief Executive Officer
        March 30, 2004

                                  EXHIBIT 32.2
                            CERTIFICATION PURSUANT TO
                               18 U.S.C. ss. 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Security National Financial  Corporation
(the  "Company") on Form 10K for the period  ending  December 31, 2003, 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.

By:     Stephen M. Sill
        Chief Financial Officer
        March 30, 2004


<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
                          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

10.16    Reinsurance Agreement between Security National Life Insurance Company
         and Guaranty Income Life Insurance Company

10.17    Employment Agreement with J. Lynn Beckstead, Jr.

10.21    Subsidiaries of the Registrant

31.1     Certification pursuant to 18 U.S.C. Section 1350, as enacted by
         Section 302 of the Sarbanes-Oxley Act of 2002

31.2     Certification pursuant to 18 U.S.C. Section 1350, as enacted by
         Section 302 of the Sarbanes-Oxley Act of 2002

32.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002

32.2     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002



<PAGE>


                                  EXHIBIT 10.21

                        Subsidiaries of Security National
                              Financial Corporation
                              as of March 31, 2004


         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

         Security National Funding Company

         Paramount Security Life Insurance Company