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, 2001, or

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

                          Commission File Number 0-9341

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

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


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

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

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

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

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

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

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

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

                                                     Yes [X]  No___

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of March 28, 2002 was approximately $10,335,000.

As of March 31, 2002,  registrant had issued and outstanding 4,068,875 shares of
Class A Common Stock and 6,045,098 shares of Class C Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  definitive  Proxy  Statement for the  registrant's  2002 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.




<PAGE>



                                     PART I

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 34 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 design and  structure  of the Company is that each segment is related to the
others  and  contributes  to the  profitability  of the  other  segments  of the
Company.  Because of the  increasing  cemetery and mortuary  operations in Utah,
California  and Arizona,  the Company  enjoys a level of public  awareness  that
assists in the sales and  marketing  of  insurance  and  pre-need  cemetery  and
funeral products.  Security National Life Insurance Company ("Security  National
Life")  invests  its assets  (representing  in part the  pre-paid  funerals)  in
investments authorized by the Insurance Departments of the States of Florida and
Utah.  One such  investment  authorized  by the  Insurance  Departments  is high
quality  mortgage  loans.  Thus,  while  each  segment  is a profit  center on a
stand-alone  basis,  this  horizontal  integration  of each segment will lead to
improved  profitability  of the  Company.  The Company is also  pursuing  growth
through  acquisitions  of both  life  insurance  companies  and  cemeteries  and
mortuaries.  The  Company's  acquisition  business  plan is  based  on  reducing
overhead  cost  of  the  acquired  company  by  utilizing  existing   personnel,
management,  and  technology  while  still  providing  quality  service  to  the
customers and policyholders.

The Company was organized as a holding  company in 1979 when  Security  National
Life became a wholly owned subsidiary of the Company and the former stockholders
of Security National Life became stockholders of the Company.  Security National
Life was formed in 1965 and has grown through the direct sale of life  insurance
and  annuities  and  through  the  acquisition  of  other  insurance  companies,
including  the  acquisitions  of Capital  Investors  Life  Insurance  Company in
December 1994, Civil Service  Employees Life Insurance  Company in December 1995
and Southern Security Life Insurance Company in December 1998. Memorial Estates,
Inc. and Memorial Mortuary became direct subsidiaries of the Company in the 1979
when the  Company was  organized  as a holding  company.  These  companies  were
acquired by Security National Life in 1973. The cemetery and mortuary operations
have  also  grown  through  the  acquisition  of  other  cemetery  and  mortuary
companies,  including the  acquisitions of Paradise Chapel Funeral Home, Inc. in
1989,  Holladay  Memorial  Park,  Inc.,  Cottonwood  Mortuary,  Inc. and Deseret
Memorial,  Inc.  in 1991,  Sunset  Funeral  Home in January  1994,  Greer-Wilson
Funeral Home, Inc. in April 1995 and Crystal Rose Funeral Home in February 1997.
In July 1993, the Company formed Security National  Mortgage Company  ("Security
National  Mortgage")  to originate and refinance  mortgage  loans.  See Notes to
Consolidated  Financial  Statements  for  additional  disclosure  and discussion
regarding segments of the business.

Life Insurance

         Products

The Company,  through its  insurance  subsidiaries,  Security  National Life and
Southern Security Life Insurance Company,  issues and distributes selected lines
of life insurance and annuities.  The Company's life insurance business includes
funeral  plans and  interest-sensitive  whole life  insurance,  as well as other
traditional life and accident and health insurance  products but places specific
marketing emphasis on funeral plans.

                                                         1

<PAGE>



A funeral plan is a small face value life insurance  policy that generally has a
face coverage of up to $5,000. The Company believes that funeral plans represent
a marketing niche that has lower competition  since most insurance  companies do
not offer  similar  coverages.  The purpose of the funeral plan policy is to pay
the  costs and  expenses  incurred  at the time of a  person's  death.  On a per
thousand  dollar cost of insurance  basis,  these policies are 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 due to the  simplified  underwriting  practices  resulting in
higher mortality costs.

         Markets and Distribution

The  Company is  licensed  to sell  insurance  in 34  states.  The  Company,  in
marketing  its life  insurance  products,  seeks to locate,  develop and service
specific "niche" markets.  A "niche" market is an identifiable  market which the
Company believes is not emphasized by most insurers. The Company generally sells
its life insurance  products to people of all ages who have a need for insurance
to protect the income of the wage earner of the family,  to pay off debts at the
time of death and for other estate planning purposes.  Funeral plan policies are
sold  primarily to persons who range in age from 45 to 75. Even though people of
all ages and income levels purchase funeral plans, the Company believes that the
highest percentage of funeral plan purchasers are individuals who are older than
45 and have low to moderate  income.  A majority of the  Company's  funeral plan
premiums come from the states of Arizona,  Colorado,  Idaho,  Nevada,  Oklahoma,
Texas and Utah, and 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 90% of first year premiums. In those cases where the Company utilizes its
direct  agents in  selling  such  policies,  those  agents  customarily  receive
advances against future commissions.

In some  instances,  funeral plan insurance is marketed in conjunction  with the
Company's  cemetery and mortuary sales force. When it is marketed by that group,
the beneficiary is usually the Company. 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, 2001:
<TABLE>
<CAPTION>

                              2001           2000             1999            1998             1997
                              ----           ----             ----            ----             ----
Life Insurance
Policy/Cert
    Count as of
<S>                         <C>             <C>             <C>             <C>             <C>
    December 31             74,335(1)       71,178(1)       75,808(1)       69,895(1)       43,213
Insurance
    in force
    as of December 31
    (omitted 000)       $2,425,557(1)   $2,049,789(1)   $2,113,893(1)   $2,123,734(1)     $648,906
Premiums
    Collected
    (omitted 000)          $14,860(1)      $14,959(1)      $15,261(1)       $5,718          $5,732

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

                                                         2

<PAGE>



    Underwriting

Factors  considered in evaluating an application for insurance  coverage (except
final expense insurance) 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 that is based on its
medical  limits  and  requirements  on a basis  satisfactory  to the  reinsuring
company (or  companies,  if submitted  facultatively),  subject to the following
general non-medical limits:

                 Age Nearest                     Non-Medical
                   Birthday                         Limits

                 0-50                                $75,000
                51-up                          Exam Required

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

The Company also sells final expense  insurance.  This insurance is a small face
amount,  with a maximum issue of $10,000.  It is written on a simplified medical
application with  underwriting  requirements  being a completed  application,  a
phone  inspection on each applicant and a Medical  Information  Bureau  inquiry.
There are several  underwriting  classes in which an applicant can be placed. If
the Company  receives  conflicting or incomplete  underwriting  information,  an
attending physician's statement can be ordered to insure the applicant is placed
in the correct underwriting class.

Annuities

       Products

The Company's  annuity  business  includes  single premium  deferred  annuities,
flexible premium deferred  annuities and immediate  annuities.  A single premium
deferred annuity is a contract where the individual remits a sum of money to the
Company, which is retained on deposit until such time as the individual may wish
to purchase an immediate  annuity or surrender the contract for cash. A flexible
premium  deferred  annuity  gives the contract  holder the right to make premium
payments of varying  amounts or to make no further  premium  payments  after his
initial 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.  These types of
annuities have guaranteed  interest rates of 4% 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 4% to 6 1/2%.

                                        3

<PAGE>



     Markets and Distribution

The general  market for all of 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 Company currently markets its
annuities primarily in the states of Arizona,  New Mexico,  Oklahoma,  Texas and
Utah.

The major source of annuity  considerations comes from direct agents.  Annuities
can be sold as a by-product of other insurance sales.  This is particularly true
in the funeral  planning  area. If an individual  does not qualify for a funeral
plan due to health considerations,  the agent will often sell that individual an
annuity to take care of those final expenses.  The commission rates on annuities
range from 2% to 10%.

The following  table  summarizes  the annuity  business for the five years ended
December 31, 2001:

                       2001         2000        1999       1998       1997
                       ----         ----        ----       ----       ----
Annuities
Policy/Cert
    Count as of
    December 31       8,012(1)    8,443(1)    8,369(1)    7,890(1)    7,434
Deposits Collected
(omitted 000)        $2,550(1)   $3,039(1)   $3,906(1)   $2,770      $2,521

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

Accident and Health

    Products

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

    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, 2001:

                           2001          2000        1999        1998     1997
                           ----          ----        ----        ----     ----
Accident
  and Health
Policy/Cert. Count
    as of December 31    19,343(1)  21,454(1)    24,078(1)    27,201(1) 30,250
Premiums Collected
(omitted 000)              $413(1)    $464(1)      $549(1)      $375      $430

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

                                        4

<PAGE>



Reinsurance

The Company  reinsures  with other  companies  portions 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.  No other
liabilities  or  guarantees  by the  Company  exist on  business  ceded  through
reinsurance  treaties;  however, the Company remains obligated for amounts ceded
in the event the reinsurers do not meet their obligations. There is no assurance
that the reinsurer will be able to meet the obligations  assumed by it under the
reinsurance agreement.

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,  2001,   reinsured   by  other   companies   aggregated
$216,369,000, representing approximately 9.8% of the Company's life insurance in
force on that date.

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

Investments

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

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

Cemetery and Mortuary

    Products

The  Company  has  six   wholly-owned   cemeteries  and  thirteen   wholly-owned
mortuaries.  The  cemeteries  are  non-denominational.  Through its cemetery and
mortuary operations, the Company markets a variety of products and services both
on a pre-  need  basis  (prior to death)  and an  at-need  basis (at the time of
death).  The products include grave spaces,  interment vaults,  mausoleum crypts
and niches, markers,  caskets,  flowers and other related products. The services
include  professional  services  of funeral  directors,  opening  and closing of
graves,  use of chapels and viewing rooms,  and use of automobiles and clothing.
The Company has a funeral chapel at each of its  cemeteries  other than Holladay
Memorial Park and Singing Hills  Memorial Park and has ten separate  stand-alone
mortuary facilities. The Company's cemetery and mortuary business increased with
the acquisition of Holladay Memorial Park, Inc.,  Cottonwood Mortuary,  Inc. and
Deseret  Memorial,  Inc. in September  1991,  the  acquisition of Sunset Funeral
Home, Inc. in January 1994, the  acquisition of Greer-Wilson  Funeral Home, Inc.
in April 1995,  and the  acquisition  of Crystal  Rose  Funeral Home in February
1997.

                                        5

<PAGE>



    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 90% 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 an
approved government  guaranteed and conventional lender and processes government
guaranteed  and  conventional  loans.  Most of the  loans are sold  directly  to
investors.  The Company has available  warehouse lines of credit with affiliated
companies and unaffiliated  financial  institutions to fund mortgage loans prior
to the purchase by investors.

    Markets and Distribution

The Company's  mortgage  lending  services are marketed  primarily to individual
homeowners  and  businesses  who are  located in the area known as the  "Wasatch
Front,"  covering  approximately  100 miles  between  Provo,  Salt Lake City and
Ogden, Utah, with the greatest  concentration of sales being in the greater Salt
Lake City area and in Valencia and  Sacramento,  California,  Orlando,  Florida,
Colorado Springs,  Colorado,  Phoenix,  Arizona and Houston,  Texas. The typical
loan size for  residential  loans  ranges  from  $40,000  to  $300,000,  and for
commercial loans from $200,000 to $1,500,000.

The  Company's  mortgage loan  originations  are through full time mortgage loan
officers and wholesale  brokers who are paid a sales commission  ranging between
..70% to 3.0% of the loan  amount.  Prospective  customers  are  located  through
contacts with builders, real estate agents, and door-to-door canvassing.

Recent Acquisitions and Other Business Activities

    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.

                                        6

<PAGE>



    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, 2001,  SSLIC Holding
owns  approximately  75% of the  outstanding  shares of common stock of Southern
Security Life Insurance Company, a Florida  corporation  ("Southern  Security").
Southern Security is a Florida domiciled  insurance company with total assets as
of December 31, 2001,  of  approximately  $77.5  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, 2001, which was filed with the Securities Exchange Commission
on March 29, 2002, Commission File No. 2-35669.

    Crystal Rose Funeral Home

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

Regulation

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

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

The  Company's  cemetery  and mortuary  subsidiaries  are subject to the Federal
Trade Commission's comprehensive funeral industry rules and are subject to state
regulations  in the various  states where such  operations  are  domiciled.  The
morticians must be licensed by the respective  state in which they provide their
services. Similarly, the mortuaries are governed by state statutes and city

                                        7

<PAGE>



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. These regulations among other things specify 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 before the loans can be sold to the investors.

Income Taxes

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

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

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

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

Competition

The life insurance industry is highly competitive. There are approximately 2,000
legal reserve life insurance  companies in business in the United States.  These
insurance  companies  differentiate  themselves  through  marketing  techniques,
product  features,   price  and  customer  service.   The  Company's   insurance
subsidiaries compete with a large number of insurance  companies,  many of which
have  greater  financial  resources,  a  longer  business  history,  and a  more
diversified  line of  insurance  coverage  than the Company.  In addition,  such
companies  generally have a larger sales force.  Further,  many of the companies
with  which  the  Company  competes  are  mutual  companies  which  may  have  a
competitive  advantage because all profits accrue to policyholders.  Because the
Company is

                                        8

<PAGE>



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 several mortgage companies
and banks in the same  geographic  area in which the Company is operating  which
have longer business histories and more established  positions in the community.
The refinancing market is particularly vulnerable to changes in interest rates.

Employees

As of December 31, 2001,  the Company  employed 270  full-time  and 53 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
Salt Lake City, UT    Headquarters        Owned(1)          33,000

1603 Thirteenth St.   District
Lubbock, TX           Sales Office        Owned(2)          10,000

755 Rinehart Rd.      Subsidiary
Lake Mary, FL         Headquarters        Owned(3)          27,000

     (1)  The Company leases an additional  8,858 square feet of the facility to
          unrelated  third parties for  approximately  $142,000 per year,  under
          leases which expire at various dates after 2001.

     (2)  The Company leases an additional  8,459 square feet of the facility to
          unrelated  third  parties for  approximately  $33,000 per year,  under
          leases which expire at various dates after 2001.

     (3)  The Company leases an additional 12,245 square feet of the facility to
          unrelated  third parties for  approximately  $165,000 per year,  under
          leases which expire at various dates after 2001.

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 business in the foreseeable future.

                                        9

<PAGE>

<TABLE>
<CAPTION>


The following table summarizes the location and acreage of the six Company owned
cemeteries:

                                                                     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, UT          1973        7        40            7               33
 Mountain View
 Cemetery(3)      3115 E. 7800 So.
                  Salt Lake City, UT     1973       26        54           17               37

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

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

 Lakehills
 Cemetery(4)      10055 So. State
                  Sandy, UT              1991       12        44            6               38

 Singing Hills
 Memorial Park(6) 2798 Dehesa Rd.
                  El Cajon, CA           1995        6        35            2               33

                                       10
</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, 2001, there were mortgages of approximately $52,000
          collateralized  by the property  and  facilities  at Memorial  Estates
          Lakeview, Mountain View and Redwood Cemeteries.
     (4)  As of  December  31,  2001,  there  were  mortgages  of  approximately
          $1,747,000  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,  2001,  there  was a  mortgage  of  approximately
          $603,000 collateralized by the property.

                                       11

<PAGE>



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
------------         -----------      ----------   --------  --------- --------
Memorial Mortuary    5850 South 900 East
                     Salt Lake City, UT     1973        3          1     20,000

Memorial Estates, Inc.:

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

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

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

Deseret Memorial, Inc.:

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

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

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

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

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

                                       12

<PAGE>



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

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

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

                                       13

<PAGE>



     (1)  As of December 31, 2001 there were mortgages of approximately $255,000
          collateralized  by the property  and  facilities  of Camelback  Sunset
          Funeral  Home.
     (2)  As of  December  31,  2001,  there  were  mortgages  of  approximately
          $1,747,000  collateralized  by the property and  facilities at Deseret
          Mortuary,  Cottonwood  Mortuary,  Holladay  Memorial  Park,  Lakehills
          Cemetery and Colonial Mortuary.
     (3)  As of  December  31,  2001,  there  was a  mortgage  of  approximately
          $209,000,  collateralized  by the property and  facilities  of Crystal
          Rose Funeral Home.

Item 3.  Legal Proceedings

          An action was brought against the Company in July 1999 by Dorothy Ruth
          Campbell in the Circuit Court of Escambia County,  Alabama. The action
          arises out of a denial of coverage under a $10,000  insurance  policy.
          The  claims  are for  breach of  contract,  bad  faith and  fraudulent
          misrepresentation.  In the action,  Campbell  seeks  compensatory  and
          punitive damages plus interest.  The Company has filed its response to
          the  complaint  and certain  discovery  has taken  place.  The Company
          intends to vigorously defend the matter.

          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 (Third Judicial Court, Salt Lake County,  State of Utah,
          010904432). The action asserts that Memorial Estates delivered to Lynn
          W. Brown three stock  certificates  representing  2,000 shares in 1970
          and 1971.  Mr. Brown died in 1972. It is asserted that at the time the
          2,000  shares  were  issued and  outstanding,  such  represented  a 2%
          ownership of Memorial Estates. It is alleged Mr. Brown was entitled to
          preemptive  rights  and that  after the  issuance  of the stock to Mr.
          Brown there were further  issuances of stock without providing written
          notice to Mr.  Brown or his estate with respect to an  opportunity  to
          purchase  more stock.  It is asserted  among the other things that the
          plaintiff  "has the right to a transfer of Brown's shares to Thomas on
          Defendants' (which includes Security National Financial Corporation as
          well as Memorial  Estates,  Inc.) books and to  restoration of Brown's
          proportion of share  ownership in Memorial at the time of his death by
          issuance and delivery to Thomas of  sufficient  shares of  Defendant's
          publicly  traded  and  unrestricted  stock in  exchange  for the 2,000
          shares of Memorial stock and payment of all dividends from the date of
          Thomas's  demand,  as  required  by  Article  XV of  the  Articles  of
          Incorporation."  Based on present information,  the Company intends to
          vigorously defend the matter,  including an assertion that the statute
          of limitations bars the claims.

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

          NGU  alleges  that it "has been  damaged  far in excess of the $75,000
          minimum   jurisdictional   limits  of  this  Court."  NGU  also  seeks
          attorney's  fees and  costs as well as  prejudgment  and  postjudgment
          interest.  A second amended  complaint and a third amended  complaint,
          which  included a fraud claim,  were filed.  A motion was filed by the
          Company to dismiss

                                       14

<PAGE>



          the third  amended  complaint,  including  the fraud claim.  The court
          denied the motion.  The Company has  counterclaimed for what it claims
          to be  aparties  with the  counterclaim  seeking  an  amount in excess
          of$411,000 (said amount  potentially  subject to reduction as premiums
          are received).  The Company is also seeking to recover attorney's fees
          and costs,  as well  punitive  damages on two of its causes of action.
          NGU has filed a motion to dismiss certain claims in the  counterclaim,
          which the court  granted  in part and  denied  in part.  Discovery  is
          currently taking place.  The Company intends to vigorously  defend the
          matter as well as prosecute its counterclaim.

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

At the annual  stockholders  meeting  held on October  4,  2001,  the  following
matters  were acted upon:  (i) seven  directors  consisting  of George R. Quist,
William C. Sargent, Scott M. Quist, Charles L. Crittenden, Dr. Robert G. Hunter,
H. Craig Moody and Norman G. Wilbur were  elected to serve until the next annual
stockholders  meeting or until  their  respective  successors  are  elected  and
qualified (for George R. Quist, Class A and Class C shares, 8,171,518 votes were
cast in favor of election,  26,349  votes were cast  against  election and there
were no  abstentions;  for  William  C.  Sargent,  Class A and  Class C  shares,
8,173,339  votes were cast in favor of election,  24,528 votes were cast against
election and there were no abstentions; for Scott M. Quist, Class A shares only,
2,937,835  votes were cast in favor of election,  23,179 votes were cast against
election and there were no abstentions;  for Charles L. Crittenden,  Class A and
Class C shares,  8,185,497 votes were cast in favor of election and 12,370 votes
were cast against  election  and there were no  abstentions;  for Dr.  Robert G.
Hunter,  Class A and  Class C  shares,  8,187,539  votes  were  cast in favor of
election, 10,328 votes cast against election and there were no abstentions;  for
H.  Craig  Moody,  Class A shares  only,  2,951,294  votes were cast in favor of
election,  9,720 votes cast against election and there were no abstentions;  for
Norman G. Wilbur, Class A and Class C shares, 8,187,497 votes were cast in favor
of  election,  10,367  votes  were  cast  against  election  and  there  were no
abstentions;  and  (ii)  the  appointment  of  Tanner  + Co.,  as the  Company's
independent  accountants  for the  fiscal  year ended  December  31,  2001,  was
ratified  (with  8,195,172  votes cast for  appointment,  10,800  votes  against
appointment and 74 abstentions).

                                     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.  During  recent  years there has been
occasional trading of Class A and Class C Common Stock by brokerage firms in the
over-the-counter  market.  The  following  are the high and low sales prices for
Class A Common Stock as reported by Nasdaq:

Period (Calendar Year)                                     Price Range
----------------------                                   -----------------
                                                         High         Low
                                                        ------       -----
     2000
          First Quarter...............................$4.29            $2.74
          Second Quarter...............................3.33             2.56
          Third Quarter................................3.10             2.41
          Fourth Quarter...............................2.86             2.02

     2001
          First Quarter................................2.44             1.91
          Second Quarter...............................2.38             1.91
          Third Quarter................................2.76             2.10
          Fourth Quarter...............................2.76             2.19

      2002
          First Quarter................................2.95             2.31

                                       15

<PAGE>


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

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

The  Company  has never  paid a cash  dividend  on its Class A or Class C Common
Stock.  The  Company  currently  anticipates  that all of its  earnings  will be
retained  for use in the  operation  and  expansion of its business and does not
intend to pay any cash  dividends  on its Class A or Class C Common Stock in the
foreseeable  future.  Any future  determination as to cash dividends will depend
upon the earnings and  financial  position of the Company and such other factors
as the Board of Directors may deem  appropriate.  A 5% stock dividend on Class A
and Class C Common Stock has been paid each year from 1989 through 2001.

As of December 31, 2001, there were 4,629 record holders of Class A Common Stock
and 143 record holders of Class C Common Stock.

                                       16

<PAGE>


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, 2001,  are derived from the audited  consolidated  financial
statements.  The data as of December 31, 2001 and 2000,  and for the three years
ended  December 31, 2001,  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,
                            ----------------------------------------------------------------------

                                          2001           2000(3)            1999(2)(3)    1998(3)         1997(1)(3)
                                          ----           ----               ----          ----             ----
<S>                                    <C>             <C>             <C>              <C>             <C>
Revenue
Premiums                               $13,151,000     $12,876,000     $13,176,000      $5,916,000      $6,141,000
Net investment income                   12,947,000      12,136,000      10,631,000       7,459,000       7,140,000
Net mortuary and cemetery income        10,603,000       9,417,000      10,178,000       9,226,000       9,231,000
Realized gains on investments               10,000         424,000         313,000          74,000         253,000
Mortgage fee income                     40,086,000      22,922,000      14,503,000      10,082,000       5,662,000
Other                                      152,000         305,000         856,000          63,000          48,000
                                      ------------    ------------    ------------    ------------    ------------
Total revenue                           76,949,000      58,080,000      49,657,000      32,820,000      28,475,000
                                      ------------    ------------    ------------    ------------    ------------

Expenses
Policyholder benefits                   11,775,000      12,931,000      11,976,000       6,932,000       6,669,000
Amortization of deferred
  policy acquisition costs               3,870,000       3,189,000       4,858,000       1,274,000       1,132,000
General and administrative expenses     52,247,000      35,959,000      26,959,000      19,649,000      15,361,000
Interest expense                         2,791,000       2,126,000       1,119,000         999,000         948,000
Cost of goods & services of
  the mortuaries & cemeteries            2,494,000       2,628,000       3,295,000       2,940,000       2,696,000
                                      ------------    ------------    ------------    ------------    ------------
Total benefits & expenses               73,177,000      56,833,000      48,207,000      31,794,000      26,806,000
                                      ------------    ------------    ------------    ------------    ------------
Income before
  income tax expense                     3,772,000       1,247,000       1,450,000       1,026,000       1,669,000
Income tax expense                        (913,000)       (305,000)       (230,000)       (255,000)       (360,000)
Minority interest in (income)
   loss of subsidiary                      (18,000)        (46,000)       (244,000)             --              --
                                      ------------    ------------    ------------    ------------    ------------
Net earnings                            $2,841,000        $896,000        $976,000        $771,000      $1,309,000
                                      ============    ============    ============    ============    ============

Net earnings per common share(3)              $.63            $.21            $.22            $.18            $.33
                                      ============    ============    ============    ============    ============
Weighted average outstanding
   common shares                         4,506,000       4,318,000       4,397,000       4,273,000       3,988,000
Net earnings per common
   share-assuming dilution(3)                 $.63            $.21            $.22            $.18            $.32
                                      ============    ============    ============    ============    ============
Weighted average outstanding
   common shares-assuming dilution       4,507,000       4,335,000       4,397,000       4,273,000       4,093,000

</TABLE>
                                       18

<PAGE>




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

Balance Sheet Data:

                                                     Year Ended December 31,
                       --------------------------------------------------------------------------
                                         2001          2000(3)        1999(3)      1998(2)(3)      1997(1)(3)
                                         ----          ----           ----         ----            ----

<S>                                  <C>           <C>            <C>            <C>             <C>
Assets
Investments and restricted assets    $94,514,000   $108,810,000   $113,208,000   $126,332,000    $81,039,000
Cash                                   8,757,000     11,275,000     12,423,000      6,671,000      3,408,000
Receivables                           58,701,000     36,413,000     38,074,000     28,309,000     15,224,000
Other assets                          51,088,000     52,249,000     50,593,000     51,953,000     25,781,000
                                    ------------   ------------   ------------   ------------   ------------
Total assets                        $213,060,000   $208,747,000   $214,298,000   $213,265,000   $125,452,000
                                    ============   ============   ============   ============   ============

Liabilities
Policyholder benefits               $142,291,000   $141,755,000   $140,368,000    137,466,000    $77,890,000
Notes & contracts payable             12,098,000     14,046,000     23,341,000     22,887,000      9,981,000
Cemetery & mortuary liabilities        9,344,000      8,659,000      6,638,000      6,917,000      6,116,000
Other liabilities                     15,121,000     12,921,000     11,415,000     12,536,000      6,070,000
                                    ------------   ------------   ------------   ------------   ------------
Total liabilities                    178,854,000    177,381,000    181,762,000    179,806,000    100,057,000
                                    ------------   ------------   ------------   ------------   ------------

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

Stockholders' equity                  29,969,000     26,741,000     26,490,000     26,680,000     25,395,000
                                    ------------   ------------   ------------   ------------   ------------
Total liabilities and
  stockholders' equity              $213,060,000   $208,747,000   $214,298,000   $213,265,000   $125,452,000
                                    ============   ============   ============   ============   ============
</TABLE>


     (1)  Reflects the  acquisition  of Crystal Rose Funeral Home as of February
          1997.

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

     (3)  Reflects  the  implementation  on  January  1,  2000 of SAB  No.  101,
          "Revenue  recognition  in  Financial  Statements"  which  changes  the
          Company's  accounting  policies  regarding  the  manner  in which  the
          Company records pre-need sales. The  implementation of SAB No. 101 did
          not have a material effect on the  consolidated  financial  condition,
          results of operation  or cash flows of the Company.  The change in the
          Company's accounting policies resulting from implementation of SAB No.
          101 has been treated as a change in accounting  principle effective as
          of January 1, 2000.  The cumulative  effect of the  accounting  change
          through  December 31, 1999 was  negligible.  The following table shows
          the unaudited  proforma effects of retroactive  application  using the
          newly adopted  accounting  policies compared to historical results for
          the years ended December 31, 1999 and 1998. It was impractical for the
          Company to obtain  the  amounts on a  pro-forma  basis  prior to 1998.
          There were no changes in net earnings or net earnings per common share
          for those periods since the Company's previous accounting practice did
          not recognize any significant profits on pre-need sales. The Company's
          previous  accounting  practice  recorded pre-need sales as revenue but
          also recorded  approximately an equal amount for the sum of the future
          merchandise cost and sales expense.  Implementing SAB 101 changed this
          practice  to  defer  these  pre-need  sales  and  costs  to  when  the
          merchandise  is delivered or the  services  are  performed.

                                1999                      1998
                              -------                   ---------
                         Proforma   Historical     Proforma       Historical
                      ------------ -----------   -----------    ------------
  Revenues            $48,632,0000 $49,657,000   $31,939,000    $32,820,000

   Total benefits
     and expenses        47,181,000  48,207,000    30,912,000     31,794,000

                                       19

<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
interest  sensitive  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, 2001 and 2000,  Security  National Mortgage
Company (SNMC) experienced increases in revenue and expenses due to the increase
in loan volume of its operations.  SNMC is a mortgage lender  incorporated under
the laws of the State of Utah.  SNMC is approved  and  regulated  by the Federal
Housing Administration (FHA), a department of the U.S. Department of Housing and
Urban Development (HUD), to originate mortgage loans that qualify for government
insurance in the event of default by the borrower.  SNMC obtains loans primarily
from independent brokers and correspondents.  SNMC funds the loans from internal
cash flows and lines of credit from financial  institutions.  SNMC receives fees
from  origination  points paid by the borrowers and service and release premiums
received from third party investors who purchase the loans from SNMC. SNMC sales
all of its loans to third party investors and does not retain servicing to these
loans. SNMC pays the brokers and  correspondents a commission for loans that are
brokered through SNMC. In 1999 SNMC opened new wholesale branches in Sacramento,
California and Valencia,  California. In 2000 SNMC opened new wholesale branches
in Orlando,  Florida,  Colorado Springs, Colorado and Provo, Utah. In 2001, SNMC
opened two  wholesale  branches in Phoenix,  Arizona and  Houston,  Texas.  SNMC
originated  and sold  8,738  ($1,268,000,000),  4,845  ($652,000,000)  and 3,526
($453,000,000) loans, respectively, in 2001, 2000 and 1999.

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, 2001, SSLIC Holding held approximately 75% of
the  outstanding  shares of common  stock of Southern  Security  Life  Insurance
Company ("Southern Security").

Results of Operations

2001 Compared to 2000

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

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

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

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

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

                                       20

<PAGE>



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

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

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

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

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

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

2000 Compared to 1999

Total revenues  increased by $8,422,000,  or 17.0%,  from $49,657,000 for fiscal
year 1999 to $58,079,000 for fiscal year 2000.  Contributing to this increase in
total revenues was a $1,505,000 increase in net investment income, an $8,418,000
increase in mortgage fee income,  and a $111,000  increase in realized  gains on
investments and other assets.

Insurance  premiums  and  other  considerations   decreased  by  $300,000,  from
$13,176,000  in 1999 to  $12,876,000  in 2000.  This reduction was primarily the
result  of a change  in the sales  mix of the  Company's  insurance  subsidiary,
Southern  Security.  Since March  1998,  Southern  Security  has sold more final
expense policies,  which have lower face amounts,  than universal life products,
which have larger face amounts.  Consequently, the insurance revenues from final
expense products were less than those from universal life products.

Net  investment  income  increased by  $1,505,000  from  $10,631,000  in 1999 to
$12,136,000  in 2000.  This  increase was  primarily  attributable  to more loan
originations  made by the  Company's  mortgage  subsidiary  in  2000  due to the
expansion of business activities in new geographic markets.

Net mortuary and cemetery sales  decreased by $761,000 from  $10,178,000 in 1999
to  $9,417,000  in 2000.  This  decrease  was  primarily  due to the  change  in
accounting  principles for pre-need funeral and cemetery contract revenues.  See
Note 1 "Recent Accounting Pronouncements".

Mortgage  fee  income  increased  by  $8,418,000,  from  $14,504,000  in 1999 to
$22,922,000  in 2000.  This  increase was  primarily  the result of an increased
number of loan originations made by the Company's mortgage subsidiary in 2000.

Other revenue decreased by $551,000,  from $856,000 in 1999 to $305,000 in 2000.
This reduction was primarily the result of having received proceeds in 1999 from
insurance  claims filed for the recovery of the costs to litigate a case against
a former officer of the Company's insurance subsidiary, Southern Security.

Total benefits and expenses were $56,833,000 for 2000, which  constituted  97.9%
of the Company's  total revenues,  as compared to  $48,207,000,  or 97.1% of the
Company's total revenues for 1999.

                                       21

<PAGE>



During 2000,  there was a net increase of $955,000 in death benefits,  surrender
and other  policy  benefits,  and an increase  in future  policy  benefits  from
$11,976,000 in 1999 to  $12,931,000 in 2000.  This increase was primarily due to
additional  interest  credited on annuities and reserve increases on traditional
products.  This  increase  was  reasonable  based  on the  underlying  actuarial
assumptions.

Amortization  of  deferred  policy and  pre-need  acquisition  costs and cost of
insurance acquired decreased by $1,669,000 from $4,858,000 in 1999 to $3,189,000
in 2000. This decrease was primarily due to adjusting the  amortization  rate to
current assumptions at the Company's insurance subsidiary, Southern Security.

General and administrative expenses increased by $9,000,000, from $26,959,000 in
1999 to  $35,959,000  in 2000.  Contributing  to this  increase was a $6,550,000
increase in commission expenses from $11,851,000 in 1999 to $18,401,000 in 2000.
Salaries increased $258,000 from $7,409,000 in 1999 to $7,667,000 in 2000. Other
expenses  increased  $2,191,000,  from $7,699,000 in 1999 to $9,890,000 in 2000.
These  increases  were  primarily  the  result  of an  increased  number of loan
originations made by the Company's mortgage subsidiary in 2000.

Interest expense increased by $1,007,000,  from $1,119,000 in 1999 to $2,126,000
in 2000.  This  increase was primarily  due to more loan  originations  from the
Company's mortgage subsidiary being funded by third parties in 2000.

Cost of the mortuary and cemetery goods and services sold decreased by $667,000,
from  $3,295,000 in 1999 to $2,628,000 in 2000.  This decrease was primarily due
to the  change in  accounting  principles  for  pre-need  funeral  and  cemetery
contract revenues. See Note 1, "Recent Accounting Pronouncements".

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  $49,271,000  as of  December  31,  2001  compared to
$62,889,000 as of December 31, 2000.  This represents 55% of the total insurance
related  investments  in 2001 as compared to 60% in 2000.  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, 2001, 5.0% ($2,438,000) and at
December 31, 2000, .68% ($429,000) of the Company's total bond  investments were
invested in bonds in rating  categories  three through six which are  considered
non-investment grade.

                                       22

<PAGE>



If market conditions were to cause interest rates to change, the market value of
the fixed  income  portfolio  (approximately  $65,676,000)  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)  $3,655         $2,413        $(3,194)          $(7,558)

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, 2001
and 2000, the life subsidiaries exceeded the regulatory criteria.

The Company's total  capitalization  of  stockholders'  equity and bank debt and
notes payable was  $42,067,000 and $40,787,000 as of December 31, 2001 and 2000,
respectively.  Stockholders' equity as a percent of total capitalization was 71%
and 66% as of December 31, 2001 and 2000, respectively.

Lapse  rates  measure the amount of  insurance  terminated  during a  particular
period.  The  Company's  lapse rate for life  insurance  in 2001 was  13.2%,  as
compared to a rate of 15% in 2000.

In February 1997, the Company purchased all of the outstanding  shares of common
stock of Crystal Rose Funeral Home, Inc. for a total  consideration of $382,000,
which included a note to the former owner in the amount of $297,000.

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

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

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

                                       23

<PAGE>



The administrative services fee may be increased,  beginning on January 1, 2001,
to reflect  increases in the Consumer  Price Index,  over the index amount as of
January 1, 2000. The  Administrative  Services  Agreement shall remain in effect
for an initial term expiring on December 16, 2003. The term of the agreement may
be  automatically  extended for  additional  one-year  terms  unless  either the
Company or SSLIC shall deliver a written notice on or before September 30 of any
year  stating to the other its  desire not to extend the term of the  agreement.
However, in no event can the agreement be terminated prior to December 16, 2003.

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

At December 31, 2001,  $24,776,305 of the Company's  consolidated  stockholders'
equity represents the statutory  stockholders' equity of the Company's insurance
subsidiaries.  The life  insurance  subsidiaries  cannot pay a  dividend  to its
parent company without the approval of insurance regulatory authorities.

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting  Standards No. 141, "Business  Combinations" (SFAS No. 141)
and No.  142,  "Goodwill  and Other  Intangibles  SFAS No.  142).  SFAS No.  141
requires  that the  purchase  method  of  accounting  be used  for all  business
combinations  initiated  after June 30, 2001.  The  statement  also  establishes
specific  criteria for recognition of intangible assets separately from goodwill
and requires  unallocated  negative goodwill to be written off immediately as an
extraordinary gain. SFAS No. 142 primarily addresses the accounting for goodwill
and intangible assets subsequent to their  acquisition.  The statement  requires
that goodwill and indefinite lived intangible  assets no longer be amortized and
be  tested  for  impairment  at  least  annually.  The  amortization  period  of
intangible assets with finite lives will no longer be limited to forty years.

In August 2001, the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No. 144,  "Accounting  for the  Impairment  of
Long-Lived Assets".  This Statement addresses financial accounting and reporting
for the  impairment  of long-  lived  assets  and for  long-lived  assets  to be
disposed of. This  Statement  supersedes  FASB Statement 121 and APB Opinion No.
30. However, this Statement retains certain fundamental  provisions of Statement
121, namely;  recognition and measurement of the impairment of long-lived assets
to be held and used, and  measurement of long-lived  assets to be disposed of by
sale.  The  Statement  also  retains  the  requirement  of  Opinion 30 to report
discontinued  operations separately from continuing  operations.  This Statement
also  Amends  ARB No. 51 to  eliminate  the  exception  of  consolidation  for a
temporarily  controlled  subsidiary.   The  provisions  of  this  statement  are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001.

In June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations".  This Statement addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset  retirement  costs.  This Statement is effective for financial
statement issued for fiscal years beginning after June 15, 2002.

The Company is evaluating the possible  effects the adoption of these statements
may have on the Company's consolidated financial statements.

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 140,
Accounting for Transfers and Servicing of Financing  Assets and  Extinguishments
of  Liabilities - a replacement  of FASB Statement No. 125 (FAS 140) on April 1,
2001. This standard revises the standards for accounting for securitizations and
other  transfers  of  financial  assets  and  collateral  and  requires  certain
disclosures,   but   carries   over  most  of  FAS  125's   provisions   without
reconsideration.    This   Statement   is   effective   for    recognition   and
reclassification  of collateral and for disclosures  relative to  securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
adoption of FAS 140 did not have a material  impact on the  Company's  financial
position or results of operations.

                                       24

<PAGE>



Item 8.  Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

                                                                 Page No.
Financial Statements:

    Report of Independent Auditors.................................26

    Consolidated Balance Sheet, December 31,
    2001 and 2000..................................................27

    Consolidated Statement of Earnings,
    Years Ended December 31, 2001, 2000,
    and 1999.......................................................29

    Consolidated Statement of Stockholders'
    Equity, Years Ended December 31, 2001, 2000
    and 1999. .....................................................30

    Consolidated Statement of Cash Flows,
    Years Ended December 31, 2001, 2000 and
    1999    .......................................................31

    Notes to Consolidated Financial
    Statements.....................................................33

Financial Statement Schedules:

  I.  Summary of Investments -- Other than
      Investments in Related Parties...............................63

 II.  Condensed Financial Information of
      Registrant...................................................64

 IV.  Reinsurance..................................................70

  V.  Valuation and Qualifying Accounts............................71


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.

                                       25

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS















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

We have audited the accompanying consolidated balance sheet of Security National
Financial Corporation and subsidiaries as of December 31, 2001 and 2000, and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for the three years in the period ended  December 31, 2001.  In connection
with our audits of the consolidated  financial statements,  we have also audited
the amounts included in the consolidated financial statement schedules as listed
in the accompanying index under Item 8. These consolidated  financial statements
and  schedules  are  the  responsibility  of  the  Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements and schedules based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Security  National  Financial  Corporation and subsidiaries at December 31, 2001
and 2000, and the consolidated  results of their operations and their cash flows
for the three years in the period ended  December 31, 2001, 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.





TANNER + CO.

Salt Lake City, Utah
March 26, 2002

                                       26

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                                             December 31,
Assets:                                                 2001             2000
-------                                                 ----             ----
Insurance-related investments:
Fixed maturity securities
  held to maturity, at amortized cost (market
  $28,697,986 and $39,283,266 for 2001 and 2000)     $27,799,909   $39,384,168
Fixed maturity securities available
  for sale, at market (cost $20,565,833 in 2001
  and 23,556,864 in 2000)                             21,470,729    23,504,989
Equity securities available for sale,
  at market (cost $1,605,980 and $1,617,363
  for 2001 and 2000)                                   2,641,549     2,774,077
Mortgage loans on real estate                         15,479,305    17,435,178
Real estate, net of accumulated
  depreciation and allowances for
  losses of $3,523,913 and $3,088,761
  for 2001 and 2000                                    9,051,691     8,564,395
Policy, student and other loans                       11,277,975    11,277,742
Short-term investments                                 1,453,644     1,027,927
                                                   -------------  ------------
     Total insurance-related investments              89,174,802   103,968,476
Restricted assets of cemeteries and mortuaries         5,339,436     4,841,819
Cash                                                   8,757,246    11,275,030
Receivables:
  Trade contracts                                      6,945,274     5,342,380
 Mortgage loans sold to investors                     50,695,073    26,886,162
  Receivable from agents                               2,061,541     2,225,784
  Receivable from officers                               102,200       111,500
  Other                                                1,183,927     3,503,320
                                                   ------------- -------------
     Total receivables                                60,988,015    38,069,146
  Allowance for doubtful accounts                     (2,287,241)   (1,656,223)
                                                   ------------- -------------
  Net receivables                                     58,700,774    36,412,923
Policyholder accounts on deposit
  with reinsurer                                       7,148,068     7,434,750
Land and improvements held for sale                    8,346,448     8,485,523
Accrued investment income                              1,059,789     1,302,552
Deferred policy and pre-need
  acquisition costs                                   14,453,023    13,603,182
Property, plant and equipment, net                    10,802,387    10,824,700
Cost of insurance acquired                             7,615,348     8,729,264
Excess of cost over net assets
  of acquired subsidiaries                             1,065,045     1,172,599
Other                                                    597,209       695,683
                                                   ------------- -------------
     Total assets                                   $213,059,575  $208,746,501
                                                   ============= =============



See accompanying notes to consolidated financial statements.

                                       27

<PAGE>



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

                                                            December 31,
                                                            ------------
                                                       2001             2000
                                                       ----             ----

Liabilities:
------------
Future life, annuity, and other
  policy benefits                                 $140,504,866     $140,000,344
Unearned premium reserve                             1,785,977        1,754,980
Bank loans payable                                   8,461,900        9,805,118
Notes and contracts payable                          3,635,776        4,240,830
Deferred pre-need cemetery and funeral
  contracts revenues and estimated
  future cost of pre-need sales                      9,338,353        8,679,199
Accounts payable                                     1,319,319        1,242,407
Funds held under reinsurance treaties                1,379,640        1,417,216
Other liabilities and accrued expenses               5,552,799        4,115,920
Income taxes                                         6,874,597        6,124,512
                                                 -------------    -------------
     Total liabilities                             178,853,227      177,380,526

Commitments and contingencies                               --               --

Minority interest                                    4,237,030        4,624,614

Stockholders' Equity:
--------------------
Common stock:
     Class A: $2 par value, authorized
         10,000,000 shares, issued 5,363,591
         shares in 2001 and 5,107,631 shares
         in 2000                                    10,727,182       10,215,262
     Class C: $0.20 par value, authorized
         7,500,000 shares, issued 6,113,430
         shares in 2001 and 5,827,805 shares
         in 2000                                     1,222,686        1,165,561
                                                 -------------    -------------
Total common stock                                  11,949,868       11,380,823
Additional paid-in capital                          10,168,523       10,054,714
Accumulated other comprehensive income, net of
  deferred taxes (benefit) of $212,734 and
  $(66,043) for 2001 and 2000                        1,223,930          836,751
Retained earnings                                    9,989,230        7,831,306
Treasury stock at cost (1,294,716 Class
     A shares and 68,332 Class C shares in
     2001; 1,233,064 Class A shares and
     65,078 Class C shares in 2000, held
     by affiliated companies)                       (3,362,233)      (3,362,233)
                                                 -------------    -------------
Total stockholders' equity                          29,969,318       26,741,361
                                                 -------------    -------------
  Total liabilities and stockholders' equity      $213,059,575     $208,746,501
                                                 =============    =============

See accompanying notes to consolidated financial statements.

                                       28

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES

                       Consolidated Statement of Earnings


                                                Years Ended December 31,
                                        2001            2000           1999
                                        ----            ----           ----
Revenues:
--------
Insurance premiums and
  other considerations               $13,150,875     $12,875,585    $13,175,825
Net investment income                 12,946,499      12,136,072     10,631,302
Net mortuary and cemetery sales       10,603,451       9,416,927     10,178,246
Realized gains on
  investments and other assets            10,428         423,805        313,013
Mortgage fee income                   40,086,097      22,921,585     14,503,388
Other                                    151,945         304,886        855,604
                                    ------------    ------------   ------------
  Total revenue                       76,949,295      58,078,860     49,657,378

Benefits and expenses:
---------------------
Death benefits                         5,354,522       3,959,811      4,780,063
Surrenders and other
  policy benefits                      1,467,323       1,702,251      1,494,863
Increase in future policy benefits     4,953,008       7,268,720      5,700,784
Amortization of deferred
  policy and pre-need acquisition
  costs and cost of insurance acquired 3,870,158       3,188,752      4,857,662
General and administrative expenses:
  Commissions                         29,859,295      18,401,314     11,850,763
  Salaries                             9,027,523       7,667,263      7,409,298
  Other                               13,360,362       9,890,197      7,698,779
Interest expense                       2,790,627       2,126,169      1,119,402
Cost of goods and services
  sold of the mortuaries
  and cemeteries                       2,494,367       2,628,260      3,294,983
                                    ------------    ------------   ------------

  Total benefits and expenses         73,177,185      56,832,737     48,206,597
                                    ------------    ------------   ------------

Earnings before income taxes           3,772,110       1,246,123      1,450,781
Income tax expense                      (913,539)       (304,640)      (230,516)
Minority income                          (17,791)        (45,754)      (244,370)
                                    ------------    ------------   ------------
  Net earnings                        $2,840,780        $895,729       $975,895
                                    ============    ============   ============

Net earnings per common share               $.63            $.21           $.22
                                    ============    ============   ============

  Weighted average
    outstanding common shares          4,506,476       4,317,779      4,397,141

Net earnings per common share-
  assuming dilution                         $.63            $.21           $.22
                                    ============    ============   ============

  Weighted average
    outstanding common shares
    assuming-dilution                  4,506,858       4,335,044      4,397,141

See accompanying notes to consolidated financial statements.

                                       29

<PAGE>
<TABLE>
<CAPTION>



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

                                                                      Accumulated
                                                       Additional        Other
                               Class         Class      Paid-in      Comprehensive   Retained      Treasury
                                 A             C        Capital          Income      Earnings       Stock         Total
                             --------       -------     ---------         ------     --------       ------        -----
<S>                         <C>           <C>          <C>           <C>          <C>             <C>            <C>
Balance at
  December 31, 1998         $9,234,660    $1,089,319   $9,596,444    $1,081,113    $7,474,783     $(1,796,060)  $26,680,259

Comprehensive income:
  Net earnings                      --            --           --            --       975,895              --       975,895
  Unrealized gain on securities     --            --           --      (415,422)           --              --      (415,422)
                                                                                                               ------------
Total comprehensive income          --            --           --            --            --              --       560,473
                                                                                                               ------------
Stock dividends                463,344        52,910      419,456            --      (935,710)             --         --
Conversion Class C
  to Class A                    31,160       (31,159)          (1)           --            --              --         --
Stock issued (canceled)         (1,702)           --           43            --         1,672              --            13
Purchase of treasury stock          --            --           --            --            --        (751,052)     (751,052)
                          ------------  ------------ ------------  ------------   -----------    ------------  ------------

Balance at
  December 31, 1999          9,727,462     1,111,070   10,015,942       665,691     7,516,640      (2,547,112)   26,489,693
                          ------------  ------------ ------------  ------------   -----------    ------------  ------------

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

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

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

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

See accompanying notes to consolidated financial statements.

                                       30

<PAGE>
<TABLE>
<CAPTION>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statement of Cash Flows


                                                                 Year Ended December 31,
                                                        2001             2000            1999
                                                        ----             ----            ----
<S>                                                  <C>               <C>             <C>
Cash flows from operating activities:
     Net earnings                                    $2,840,780        $895,729        $975,895
     Adjustments to reconcile net earnings
       to net cash provided by
            operating activities:
          Realized gains on investments
            and other assets                            (10,428)       (423,805)       (313,013)
          Depreciation                                1,350,372       1,202,158       1,187,426
          Provision for losses on real estate
            accounts and loans receivable               793,194         219,269         150,981
          Amortization of goodwill, premiums,
            and discounts                               197,793         214,355         263,572
          Provision for deferred income taxes           522,047         259,952        228,464
          Policy and pre-need acquisition
            costs deferred                           (3,834,432)     (5,365,417)     (3,886,279)
          Policy and pre-need acquisition costs
            amortized                                 3,045,996       2,320,710       3,992,522
          Cost of insurance acquired amortized          824,162         868,042         865,140
     Change in assets and liabilities net of
       effects from purchases and disposals of
          subsidiaries:
          Land and improvements held for sale           139,075          37,164        (116,962)
          Future life and other benefits              5,734,205       7,023,493       5,012,923
          Receivables for mortgage loans sold       (24,786,179)      2,185,751      (7,890,885)
          Other operating assets and liabilities      2,400,265       1,028,892        (959,832)
                                                   ------------    ------------    ------------
              Net cash provided by (used in)
                operating activities                (10,783,150)     10,466,293        (490,048)
Cash flows from investing activities:
     Securities held to maturity:
          Purchase - fixed maturity securities         (402,995)     (4,801,309)     (1,207,177)
          Calls and maturities - fixed
            maturity securities                      12,086,818       5,137,323       6,658,968
     Securities available for sale:
          Purchases - equity securities                      --        (418,365)       (507,404)
          Sales - equity securities                   2,826,094       4,797,396       2,906,278
     Purchases of short-term investments            (14,301,717)     (7,523,432)     (9,131,204)
     Sales of short-term investments                 13,876,000       7,785,815      19,384,434
     Purchases of restricted assets                    (497,617)       (604,345)       (119,479)
     Mortgage, policy, and other loans made          (3,114,060)     (3,016,125)    (10,891,562)
     Payments received for mortgage,
       policy, and other loans                        5,626,747       4,782,778       4,770,423
     Purchases of property, plant, and equipment     (1,006,824)     (1,719,120)       (767,383)
     Disposal of property and equipment                      --         625,507         190,000
     Purchases of real estate                          (784,677)     (1,329,347)       (421,230)
     Sale of real estate                                195,562              --         334,500
                                                   ------------    ------------    ------------
              Net cash provided by
                investing activities                 14,503,331       3,716,776      11,199,164

</TABLE>
                                       31

<PAGE>

<TABLE>
<CAPTION>


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


                                                               Year Ended December 31,
                                                      2001            2000            1999
                                                      ----            ----            ----

<S>                                               <C>             <C>             <C>
Cash flows from financing activities:
     Annuity and pre-need contract receipts         9,707,844       8,714,642      10,522,726
     Annuity and pre-need contract withdrawals    (13,997,537)    (13,935,567)    (15,183,240)
     Repayment of bank loans and
          notes and contracts payable              (2,698,272)     (1,652,036)     (1,545,957)
     Proceeds from borrowings on bank
          loans and notes and contracts
             payable                                  750,000       1,044,202         890,500
     Purchase of treasury stock                            --        (815,121)       (751,052)
     Net change in line of credit
          for financing of mortgage loans                  --      (8,687,023)      1,109,775
                                                 ------------    ------------    ------------
     Net cash used in financing activities         (6,237,965)    (15,330,903)     (4,957,248)
                                                 ------------    ------------    ------------
Net change in cash                                 (2,517,784)     (1,147,834)      5,751,868

Cash at beginning of year                          11,275,030      12,422,864       6,670,996
                                                 ------------    ------------    ------------

Cash at end of year                                $8,757,246     $11,275,030     $12,422,864
                                                 ============    ============    ============
</TABLE>


See accompanying notes to the consolidated financial statements.

                                       32

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999



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,  Oklahoma, and Texas. The cemetery and
mortuary  segment  of the  Company  consists  of five  cemeteries  in Utah,  one
cemetery in California, eight mortuaries in Utah and five mortuaries in Arizona.
The mortgage loan segment is an approved  governmental and  conventional  lender
that  originates  and  underwrites  residential  and  commercial  loans  for new
construction,  existing homes and real estate projects  primarily in California,
Colorado, Florida, Utah, Arizona and Texas.

Basis of Presentation

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

Risks

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

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

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

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.

                                       33

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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, 2001, are
as follows:

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

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

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

                                       34

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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  - consists of  certificates  of deposit and  commercial
paper with maturities of up to one year.

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

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

Cash and Cash Equivalents

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

Property, Plant and Equipment

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

Recognition of Insurance Premiums and Other Considerations

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

                                       35

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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.

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 10.0% in 2001,  2000,  and  1999.
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% in 2001, 2000 and
1999.

Participating Insurance

Participating  business  constitutes  6%, 6%, and 5% of  insurance  in force for
2001, 2000 and 1999,  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.

                                       36

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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

Cemetery and Mortuary Operations

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

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

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

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

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

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

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

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

The Company, through its mortuary and cemetery operations, provides a guaranteed
funeral arrangement wherein a prospective  customer can receive future goods and
services at guaranteed prices. To accomplish this, the Company, through its life
insurance operations, sells to the customer an increasing benefit life insurance
policy  that is  assigned  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.

                                       37

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

Mortgage Operations

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

All loans are sold to third  party  investors  and the  Company  does not retain
servicing  rights.  The amounts sold to investors are shown on the balance sheet
as mortgage loans sold to investors and are shown on the basis of the amount due
from the each investor. Any impairment to sold loans or possible loan losses are
included in the provision for doubtful  accounts.  At December 31, 2001 and 2000
the provision for doubtful loan losses was not significant.

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 their fair values. The excess
of cost over net assets of acquired  businesses is being  amortized over a range
of  fifteen  to  twenty  years  using  the  straight-line  method.  The  Company
periodically  evaluates  the  recoverability  of amounts  recorded.  Accumulated
amortization  was  $1,269,816  and  $1,162,262  at  December  31, 2001 and 2000,
respectively.

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 $3,143, $0, and $203,000 in 2001, 2000, and 1999, respectively. As
a result,  basic and diluted  earnings  per share would have been reduced by $0,
$0, and $0.05 in 2001, 2000, and 1999 respectively.

                                       38

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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
0%, volatility of 31.8%,  risk-free interest rate of 5.14%, and an expected life
of five to ten years.

The weighted  average fair value of options  granted in 2000 under the 1993 Plan
and the 2000 Plan is  estimated  at $1.50 as of the grant  date  using the Black
Scholes Option Pricing Model with the following  assumptions:  dividend yield of
0%, volatility of 30.8%,  risk-free  interest rate of 6.6%, and an expected life
of five to ten years.

The weighted  average  fair value of each option  granted in 1999 under the 1993
Plan is  estimated  at  $1.61 as of the  grant  date  using  the  Black  Scholes
option-pricing  model  with the  following  assumptions:  dividend  yield of 0%,
volatility of 28.83%,  risk-free  interest rate of 6.0%, and an expected life of
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.

Recent Accounting Pronouncement

The Company adopted Staff Accounting  Bulletin No. 101, "Revenue  Recognition in
Financial  Statements" (SAB 101) which changes the Company's accounting policies
regarding the manner in which the Company records pre-need sales activities. The
implementation of SAB No. 101 did not have a material effect on the consolidated
financial condition, results of operations or cash flows of the Company.

The change in the Company's accounting policies resulting from implementation of
SAB No. 101 has been treated as a change in accounting principle effective as of
January 1, 2000. The cumulative effect of the accounting change through December
31,  1999 was  negligible.  The  following  table shows the  unaudited  proforma
effects of retroactive  application using the newly adopted accounting  policies
compared to historical  results for the year ended December 31, 1999. There were
no changes in net  earnings  or net  earnings  per common  share for this period
since  the  Company's  previous   accounting  practice  did  not  recognize  any
significant  profits  on  pre-need  sales.  The  Company's  previous  accounting
practice recorded  pre-need sales as revenue but also recorded  approximately an
equal  amount  for the sum of the  future  merchandise  cost and sales  expense.
Implementing  SAB 101 changed this  practice to defer these  pre-need  sales and
costs to when the  merchandise is delivered or the services are performed.


                                              1999
                                             -----
                               Proforma                     Historical
                              ---------                    -----------
      Revenues               $48,632,000                   $49,657,000
   Total benefits
      and expenses            47,181,000                    48,207,000

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting  Standards No. 141, "Business  Combinations" (SFAS No. 141)
and No. 142, "Goodwill and Other Intangibles SFAS No. 142). SFAS No. 141 and No.
142 are  effective  for the Company on July 1, 2001.  SFAS No. 141 requires that
the  purchase  method  of  accounting  be  used  for all  business  combinations
initiated after June 30, 2001. The statement also establishes  specific criteria
for  recognition  of  intangible  assets  separately  from goodwill and requires
unallocated  negative goodwill to be written off immediately as an extraordinary
gain.  SFAS  No.  142  primarily  addresses  the  accounting  for  goodwill  and
intangible assets subsequent to their  acquisition.  The statement requires that
goodwill and indefinite  lived  intangible  assets no longer be amortized and be
tested for impairment at least annually.  The amortization  period of intangible
assets with finite lives will no longer be limited to forty years.

                                       39

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


In August 2001, the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No. 144,  "Accounting  for the  Impairment  of
Long-Lived Assets".  This Statement addresses financial accounting and reporting
for the impairment of long-lived assets and for long-lived assets to be disposed
of.  This  Statement  supersedes  FASB  Statement  121 and APB  Opinion  No. 30.
However, this Statement retains certain fundamental provisions of Statement 121,
namely; recognition and measurement of the impairment of long-lived assets to be
held and used, and  measurement of long-lived  assets to be disposed of by sale.
The Statement also retains the requirement of Opinion 30 to report  discontinued
operations separately from continuing operations. This Statement also Amends ARB
No. 51 to eliminate the exception of consolidation for a temporarily  controlled
subsidiary.  The  provisions  of this  statement  are  effective  for  financial
statements issued for fiscal years beginning after December 15, 2001.

In June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations".  This Statement addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated  asset  retirement  costs.  This Statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002.

The Company is evaluating the possible  effects the adoption of these statements
may have on the Company's consolidated financial statements.

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 140,
Accounting for Transfers and Servicing of Financing  Assets and  Extinguishments
of  Liabilities - a replacement  of FASB Statement No. 125 (FAS 140) on April 1,
2001. This standard revises the standards for accounting for securitizations and
other  transfers  of  financial  assets  and  collateral  and  requires  certain
disclosures,   but   carries   over  most  of  FAS  125's   provisions   without
reconsideration.    This   Statement   is   effective   for    recognition   and
reclassification  of collateral and for disclosures  relative to  securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
adoption of FAS 140 did not have a material  impact on the  Company's  financial
position or results of operations.

                                       40

<PAGE>
<TABLE>
<CAPTION>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999

2)  Investments

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

                                                              Gross        Gross        Estimated
                                             Amortized     Unrealized    Unrealized        Fair
                                               Cost          Gains         Losses         Value
                                             --------      ---------     ----------     ---------
December 31, 2001:
Fixed maturity securities held to maturity:
   Bonds:
<S>                                        <C>              <C>            <C>        <C>
     U.S. Treasury securities
     and obligations of U.S.
     Government agencies                    $4,212,280      $227,447       $    --     $4,439,726

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

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

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

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

           Total fixed maturity
           securities held to maturity     $27,799,909    $1,081,545     $(183,467)   $28,697,986
                                           ===========   ===========   ===========    ===========

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

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

   Nonredeemable preferred stock                56,031        32,150        (6,931)        81,250

   Common stock                              1,549,949     1,523,382      (513,032)     2,560,299
                                           -----------   -----------   -----------    -----------

           Total securities
           available for sale              $22,171,813    $2,460,428     $(519,963)   $24,112,278
                                           ===========   ===========   ===========    ===========

   Restricted equity securities (note 7)      $172,391      $275,920       $(5,602)      $442,709
                                           ===========   ===========   ===========    ===========
</TABLE>

                                       41

<PAGE>
<TABLE>
<CAPTION>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999

2)  Investments

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

                                                           Gross          Gross         Estimated
                                           Amortized     Unrealized     Unrealized         Fair
                                             Cost          Gains         Losses          Value
                                           --------      ---------     ----------      ---------
December 31, 2000:
Fixed maturity securities held to maturity:
<S>                                        <C>              <C>            <C>        <C>
   Bonds:
     U.S. Treasury securities
     and obligations of U.S.
     Government agencies                   $12,900,371      $182,637       $(4,809)   $13,078,199

     Obligations of states and
     political subdivisions                    183,399        12,829        (7,903)       188,325

     Corporate securities
     including public utilities             20,951,532       322,660      (584,886)    20,689,306

     Mortgage-backed securities              5,320,861        30,737       (55,620)     5,295,978

   Redeemable preferred stock                   28,005        10,500        (7,047)        31,458
                                           -----------   -----------   -----------    -----------

           Total fixed maturity
           securities held to maturity     $39,384,168      $559,363     $(660,265)   $39,283,266
                                           ===========   ===========   ===========    ===========

Securities available for sale:
   Bonds
     U.S. Treasury securities
     and obligations of U.S.
     Government agencies                    $3,367,096       $45,003         $(648)    $3,411,451

     Corporate securities
           including public utilities       20,124,932        91,913      (188,214)    20,028,631

     Mortgage-backed securities                 64,836            71            --         64,907

   Nonredeemable preferred stock                56,031        29,750        (9,044)        76,737

   Common stock                              1,561,332     1,596,254      (460,246)     2,697,340
                                           -----------   -----------   -----------    -----------

           Total securities
           available for sale              $25,174,227    $1,762,991     $(658,152)   $26,279,066
                                           ===========   ===========   ===========    ===========

   Restricted equity securities (note 7)      $172,391      $215,410       $(3,019)      $384,782
                                           ===========   ===========   ===========    ===========
</TABLE>

                                       42

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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,  2001,  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.

                                              Estimated
                               Amortized        Fair
Held to Maturity:                Cost          Value
                              ----------     ---------

Due in 2002                   $5,524,410    $5,631,885
Due in 2003 through 2006      13,401,476    14,024,814
Due in 2007 through 2011       3,745,930     3,699,128
Due after 2011                   927,162     1,043,301
Mortgage-backed securities     4,172,926     4,270,550
Redeemable preferred stock        28,005        28,308
                             -----------   -----------
                             $27,799,909   $28,697,986
                             ===========   ===========


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

Due in 2002                   $3,333,806    $3,371,856
Due in 2003 through 2006      13,382,582    14,043,241
Due in 2007 through 2011       3,751,727     3,949,820
Due after 2011                    97,718       105,812
Mortgage-backed securities            --            --
                             -----------   -----------
                             $20,565,833   $21,470,729
                             ===========   ===========


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

                                2001         2000        1999
                                ----         ----        ----
Fixed maturity securities
held to maturity:
Gross realized gains          $20,228       $3,125      $87,859
Gross realized losses            (565)         (53)      (1,895)

Securities available
    for sale:
Gross realized gains                6      884,199       14,138
Gross realized losses            (111)    (463,466)         (12)

Other assets                   (9,130)          --      212,923
                            ---------    ---------    ---------
        Total                 $10,428     $423,805     $313,013
                            =========    =========    =========

                                       43

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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

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 65% 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, 2001,  other than  investments  issued or  guaranteed by the United
States Government, are as follows:

                                                      Carrying Amount
                                                      ---------------
   Dean Witter Discover                                 $4,352,714
   Philip Morris, Inc.                                   6,013,232

Major categories of net investment income are as follows:

                            2001            2000            1999
                            ----            ----            ----

Fixed maturity
  securities            $3,776,132      $4,629,916      $4,720,838
Equity securities           49,281         235,491         226,857
Mortgage loans
  on real estate         1,570,478       1,735,590       1,451,214
Real estate              1,548,507       1,507,239       1,711,771
Policy loans               630,352         641,272         725,383
Short-term
  investments              379,562         402,350         650,035
Other                    5,973,092       3,962,362       2,142,527
                      ------------    ------------    ------------
  Gross investment
    income              13,927,404      13,114,220      11,628,625
Investment expenses       (980,905)       (978,148)       (997,323)
                      ------------    ------------    ------------
Net investment
  income               $12,946,499     $12,136,072     $10,631,302
                      ============    ============    ============

Net investment  income  includes net investment  income earned by the restricted
assets of the cemeteries and mortuaries of approximately $872,000,  $717,000 and
$733,000 for 2001, 2000, and 1999, 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
$8,829,559 at December 31, 2001 and $8,815,733 at December 31, 2000.

                                       44

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


3)  Cost of Insurance Acquired

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

                              2001            2000            1999
                              ----            ----            ----
Balance at
  beginning of year        $8,729,264      $9,597,306     $10,462,446
Cost of insurance
  acquired                   (289,754)             --              --

Imputed interest at 7%        572,061         641,325         732,371
Amortization               (1,396,223)     (1,509,367)     (1,597,511)
                         ------------    ------------    ------------
Net amortization
  charged to income          (824,162)       (868,042)       (865,140)
                         ------------    ------------    ------------
Balance at end
  of year                  $7,615,348      $8,729,264      $9,597,306
                         ============    ============    ============

Presuming no  additional  acquisitions,  net  amortization  charged to income is
expected to approximate $737,000, $679,000, $626,000, $572,000, and $520,000 for
the years 2002 through 2006.  Actual  amortization  may vary based on changes in
assumptions or experience.

4) Property, Plant and Equipment

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

                                    December 31,
                                    ------------
                                2001           2000
                                ----           ----

Land and Buildings         $10,930,790     $10,828,916
Furniture and equipment      7,557,210       6,694,925
                          ------------    ------------
                            18,488,000      17,523,841
Less accumulated
     depreciation           (7,685,613)     (6,699,141)
                          ------------    ------------
     Total                 $10,802,387     $10,824,700
                          ============    ============


5)   Bank Loans Payable and Lines of Credit

Bank loans payable are summarized as follows:

                                                     December 31,
                                                     ------------
                                                 2001            2000
                                                 ----            ----
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                             $1,101,543   $1,425,967

10% note payable in monthly installments
  of $8,444 including principal and
  interest, collateralized by real property,
 which book value is approximately
  $1,013,000, due January 2013                    680,020      711,608

                                       45

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


5)  Bank Loans Payable and Lines of Credit (Continued)
    --------------------------------------

                                                             December 31,
                                                            ------------
                                                        2001         2000
                                                        ----         ----
One year treasury constant
 maturity plus 2.75% (8.03%
 at December 31, 2001) note
 payable in monthly installments
 of $6,000, including principal
 and interest, collateralized by
 real property, which book value
 is approximately $332,000, due October 2002           $48,971     $120,824

6.93% note payable in monthly
 installments of $20,836, including
 principal and interest, collateralized
 by real property, which book value is
 approximately $991,000, due November 2007           1,590,487    1,662,768

$4,171,803 revolving line of credit at
 6.15% interest payable monthly and a
 reduction in principal due in semi-annual
 installments collateralized by
 15,000 shares of Security National
 Life Insurance Company stock,
 due December 2005                                   3,703,767    4,904,426

Bank prime rate plus 1/2% (5.25%
 at December 31, 2001) note payable in
 monthly installments of $7,235
 including principal and interest,
 collateralized by real property,
 which book value is approximately
 $812,000, due August 2004                             235,450      301,516

Bank prime rate less 1.35% (3.40%
 at December 31, 2001) 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                      156,549      180,893

7.35% note payable in monthly
 installments of $14,975 including
 principal and interest collaterized
 by 15,000 shares of Security National
 Life Insurance Company stock, due December 2006       750,000           --

Other collateralized bank loans payable                195,113      497,116
                                                    ----------   ----------
  Total bank loans                                   8,461,900    9,805,118

Less current installments                            1,677,683    1,596,600
                                                    ----------   ----------
  Bank loans, excluding
  current installments                              $6,784,217   $8,208,518
                                                    ==========   ==========

                                       46

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


5)  Bank Loans Payable and Lines of Credit (Continued)
    --------------------------------------

In  addition  to the lines of credit  described  above,  the Company has line of
credit  agreements with banks for $2,000,000 and $5,000,000,  of which none were
outstanding  at December  31, 2001 or 2000.  The lines of credit are for general
operating  purposes.  The $2,000,000 line of credit bears interest at the bank's
prime rate and must be repaid every 30 days. The $5,000,000 line of credit bears
interest at a variable rate with interest payable monthly and is  collateralized
by student loans equaling 115% of the unpaid principal balance.

See Note 6 for summary of maturities in subsequent years.

6)  Notes and Contracts Payable

Notes and contracts payable are summarized as follows:

                                                      December 31,
                                                     ------------
                                                 2001        2000
                                                 ----        ----
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    $604,265   $628,802

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     232,259    289,865

Due to former stockholders of Civil Service
 Employees Life Insurance Company
 resulting from the acquisition of such
 entity. 7% note payable in seven annual
 installments with principal
 payments of $151,857, due December 2002        151,857    303,714

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 $5,350
 due February 2007                               35,420     62,892

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                      602,653    665,318

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
  $937,000 due March 2030                       861,748    899,500

                                       47

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


6)  Notes and Contracts Payable (Continued)
    ---------------------------

                                                    December 31,
                                                   ------------
                                                 2001       2000
                                                 ----       ----

Due to former shareholders of
  Southern Security Life Insurance
  Company resulting from the acquisition
  of such entity. 6.5% note payable in
  five annual installments with principal
  payments of $158,840 due April 2005         $635,361     $794,202

Other notes payable                            512,213      596,537
                                            ----------   ----------
Total notes and contracts payable            3,635,776    4,240,830
Less current installments                      600,894      615,291
                                            ----------   ----------

Notes and contracts, excluding
current installments                        $3,034,882   $3,625,539
                                            ==========   ==========

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

       2002                              $ 2,278,577
       2003                                2,199,069
       2004                                2,333,860
       2005                                1,427,640
       2006                                  652,806
    Thereafter                             3,205,724
                                         -----------
       Total                             $12,097,676
                                         ===========

Interest paid approximated interest expense in 2001, 2000 and 1999.

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

The Company owns and operates several  endowment care  cemeteries,  for which it
has  established  and maintains an endowment  care fund.  The Company  records a
liability  to the fund for each  space  sold at  current  statutory  rates.  The
Company  is not  required  to  transfer  assets to the fund until the spaces are
fully paid for. As of December 31, 2000 the Company had  transferred  $20,373 in
excess of the required  contribution  to the fund,  and as of December 31, 2001,
owed the fund $5,586.

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 balance sheet.

Assets in the restricted asset account are summarized as follows:

                                       December 31,
                                      ------------
                                   2001        2000
                                   ----        ----

Cash and cash equivalents       $475,712     $385,659
Mutual funds                     188,732      169,865
Fixed maturity securities        348,737      297,331
Equity securities                 77,778       77,778
Participation in mortgage
   loans with Security
   National Life               4,214,781    3,877,490
Time certificate of deposit       33,696       33,696
                              ----------   ----------
   Total                      $5,339,436   $4,841,819
                              ==========   ==========

                                       48

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


8)  Income Taxes

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

                     December 31,
                     ------------
                2001           2000
                ----           ----
Current       $(86,569)       $57,471
Deferred     6,961,166      6,067,041
           -----------    -----------
Total       $6,874,597     $6,124,512
           ===========    ===========

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


                                  2001            2000
                                  ----            ----
Assets
Future policy benefits        $(1,727,742)    $(2,021,798)
Unearned premium               (1,829,505)     (1,939,023)
Difference between book
   and tax basis of bonds         (43,176)        (49,498)
Net operating loss
   carryforwards expiring
   in the years
   2002 through 2010              (84,350)       (210,848)
Other                            (631,375)       (633,007)
                             ------------    ------------
Total deferred
   tax assets                  (4,316,148)     (4,854,174)

Liabilities
Deferred policy
   acquisition costs           $5,140,228      $5,213,517
Cost of insurance acquired      1,553,301       1,714,724
Installment sales               1,838,465       1,658,016
Depreciation                      643,243         653,192
Trusts                          1,162,077       1,051,602
Tax on unrealized
   appreciation                   583,213         214,337
Other                             356,789         415,827
                             ------------    ------------
Total deferred
   tax liabilities             11,277,316      10,921,215
                             ------------    ------------
Net deferred tax liability     $6,961,166      $6,067,041
                             ============    ============

The  Company  paid  $564,327  and  $94,365  in  income  taxes for 2001 and 2000,
respectively,  and did not pay any income taxes for 1999.  The Company's  income
tax expense (benefit) is summarized as follows:

               2001       2000          1999
               ----       ----          ----
Current     $391,492    $ 44,688       $2,052
Deferred     522,047     259,952      228,464
           ---------   ---------    ---------
Total       $913,539    $304,640     $230,516
           =========   =========    =========

                                       49

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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

                                         2001           2000           1999
                                         ----           ----           ----
Computed expense at
   statutory rate                    $1,282,517       $423,682       $493,266
Special deductions allowed
   small life insurance companies      (356,734)       (68,769)      (122,204)
Dividends received deduction             (6,405)       (24,418)       (24,401)
Minority interest taxes                  (7,466)       (19,222)      (102,828)
Other, net                                1,627         (6,633)       (13,317)
                                    -----------    -----------    -----------
   Tax expense                         $913,539       $304,640       $230,516
                                    ===========    ===========    ===========

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, 2001,  the
policyholders'  surplus accounts  approximated  $4,500,000.  Management does not
intend to take actions nor does management expect any events to occur that would
cause federal  income taxes to become payable on that amount.  However,  if such
taxes  were  accrued,  the  amount  of  taxes  payable  would  be  approximately
$1,500,000.

The insurance  companies have  remaining  loss carry  forwards of  approximately
$620,000,  approximately $286,000 of which is subject to an annual limitation of
approximately $300,000.

9)       Reinsurance, Commitments and Contingencies

The Company  follows the procedure of reinsuring  risks in excess of a specified
limit,  which ranged from $30,000 to $75,000 at December 31, 2001 and 2000.  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 $838,421,000 at December
31, 2001 and $580,287,000 at December 31, 2000.

As part of the acquisition of Southern Security,  the Company has a co-insurance
agreement with The Mega Life and Health Insurance Company ("MEGA").  On December
31, 1992 Southern  Security  ceded to MEGA 18% of all universal life policies in
force at that date.  MEGA is  entitled  to 18% of all future  premiums,  claims,
policyholder loans and surrenders  relating to the ceded policies.  In addition,
Southern Security receives certain  commission and expense  reimbursements.  The
funds held related to  reinsurance  treaties of  $1,379,640  and  policyholders'
account balances on deposit with reinsurer of $7,148,068 represent the 18% share
of policy loans and  policyholder  account balances ceded to MEGA as of December
31, 2001.

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

The  Company is a defendant  in various  other legal  actions  arising  from the
normal  conduct of business.  Management  believes that none of the actions will
have a  material  effect on the  Company's  financial  position  or  results  of
operations.

                                       50

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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 $191,557, $0, and $56,277 for 2001, 2000, and 1999,
respectively.  At December 31, 2001 the ESOP held 577,402  shares of Class A and
1,341,575 shares of Class C common stock of the Company.  All shares held by the
ESOP have been allocated to the  participating  employees and all shares held by
the ESOP are  considered  outstanding  for  purposes of  computing  earnings per
share.

The Company has a 401(k)  savings  plan  covering  all  eligible  employees,  as
defined above,  which includes  employer  participation  in accordance  with the
provisions  of Section  401(k) of the  Internal  Revenue  Code.  The plan allows
participants  to make  pretax  contributions  up to the  lesser  of 15% of total
annual  compensation or the statutory limits. The Company may match up to 50% of
each employee's  investment in Company stock, up to 1/2% of the employee's total
annual compensation. The Company's match will be Company stock and the amount of
the match will be at the  discretion  of the Company's  Board of Directors.  The
Company's   matching  401(k)   contributions  for  2001,  2000,  and  1999  were
approximately  $18,458,  $0, and $3,858  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  contribution  for 2001, 2000 and 1999 were $260,350,  $0, and $130,958,
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 2001 was $220,038.

The  Company  has  Deferred  Compensation  Agreements  with its Chief  Executive
Officer and its recent  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  $60,000  per year  with cost of living
adjustments each anniversary. The Compensation Agreements also provides that any
remaining balance will be payable to their heirs in the event of their death. In
addition  the  Agreement  provides  that the Company  will pay the Group  Health
coverages  for these  individuals  and/or  their  spouses.  In 2001 the  Company
increased its liability for these future  obligations  by $483,080.  The current
balance as of December 31, 2001 is $671,000.

                                       51

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999

11)  Capital Stock

The following  table  summarizes the activity in shares of capital stock for the
three year period ended December 31, 2001:

                                      Class A      Class C
                                      -------      -------
Balance at December 31, 1998        4,617,330     5,446,595

Stock Dividends                       231,672       264,550
Conversion of Class C to Class A       15,580      (155,795)
Stock Issued (canceled)                  (851)           --
                                   ----------    ----------

Balance at December 31, 1999        4,863,731     5,555,350

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

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

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

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

                                       52

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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.  Also Class A shares can be  converted  into Class C shares,  but the
conversion rights have numerous restrictions.

Stockholders of both classes of common stock have received 5% stock dividends in
the years 1989 through 2001, as authorized by the Company's Board of Directors.

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

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

                                    2001         2000        1999
                                    ----         ----        ----

Numerator:
   Net income                   $2,840,780     $895,729     $975,895
                                ==========   ==========   ==========

Denominator:
   Denominator for basic
     earnings per share-
     weighted-average
     shares                      4,506,476    4,317,779    4,397,141

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

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

   Denominator
     for diluted earnings per
     share-adjusted
     weighted-average
     shares and assumed
     conversions                 4,506,858    4,335,044    4,397,141
                                ==========   ==========   ==========
   Basic earnings per share           $.63         $.21         $.22
                                ==========   ==========   ==========
   Diluted earnings per share         $.63         $.21         $.22
                                ==========   ==========   ==========

There are no dilutive effects on net income for purpose of this calculation.

                                       53

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


12)  Deferred Compensation Plans

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

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

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

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 December 31, 1998     163,170   $4.08 - $4.49

   Dividend                            8,159
   Exercised                              --
                                -------------

Outstanding at December 31, 1999     171,329   $3.89 - $4.28

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

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

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

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

Exercisable at end of year           188,890
                               =============

Available options for future grant
   1987 Stock Incentive Plan             -0-
                               =============

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.

                                       54

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

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.

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  Articles  of  Incorporation  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.

                                       55

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

Activity of the 1993 Plan is summarized as follows:

                                      Number        Option
                                     of Shares      Price
                                    -----------  -------------
Outstanding at December 31, 1998      407,339    $2.34 - $4.16

   Dividend                            24,762
   Granted                            190,000
   Expired                           (102,103)
                                -------------

Outstanding at December 31, 1999      519,998    $2.22 - $3.96

   Dividend                            27,313
   Granted                             26,000
                                -------------

Outstanding at December 31, 2000      573,311    $2.12 - $3.77

   Dividend                            36,765
   Granted                            172,500
   Expired                            (10,513)
                                -------------

Outstanding at December 31, 2001      772,063    $2.02 - $3.59
                                =============

Exercisable at end of year            573,298
                                =============

Available options for future grant
   1993 Stock Incentive Plan          365,099
                                =============

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.

                                       56

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


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

The term of the 2000 Plan will be five years.

Activity of the 2000 Plan is summarized as follows:

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

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

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

Exercisable at
   end of year           4,412
                         =====

Available options for
   future grant 2000
   Director Plan        46,515
                        ======

13)  Statutory-Basis Financial Information

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

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

                                  Statutory Net Income (Loss)
                                          December 31,
                             2001            2000          1999
                             ----            ----          ----

Security National Life    $1,732,018       $796,047      $628,538
Southern Security Life      (429,143)        80,477       533,233

                                  Statutory Stockholders' Equity
                                          December 31,
                             2001          2000          1999
                             ----          ----          ----

Security National Life   $16,316,605   $14,309,515   $12,089,618
Southern Security Life     8,459,700     8,405,211     8,976,516

                                       57

<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999


13)  Statutory-Basis Financial Information (Continued)
     -------------------------------------

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

The Utah 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 690% 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.

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.

                                       58

<PAGE>
<TABLE>
<CAPTION>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999

14)  Business Segment Information

                                                           2001

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

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

Intersegment revenues:
   Net investment income       3,679,133             --             --      (3,679,133)             --
                            ------------   ------------   ------------    ------------    ------------

                              23,911,536     11,605,462     45,111,430      (3,679,133)     76,949,295
                            ------------   ------------   ------------    ------------    ------------
Expenses:
Death and other
   policy benefits             6,821,845             --             --              --       6,821,845
Increase in future
   policy benefits             4,953,008             --             --              --       4,953,008
Amortization of
   deferred policy
   and pre-need
   acquisition costs
   and cost of
   insurance acquired          3,561,895        308,263             --              --       3,870,158
Depreciation                     330,892        595,082        103,162              --       1,029,136
General, administrative
      and other costs:
   Intersegment                       --         36,672        136,867        (173,539)             --
   Other                       7,035,455      9,396,691     37,280,266              --      53,712,412
Interest expense:
   Intersegment                   98,095        243,732      3,163,767      (3,505,594)             --
   Other                         317,988        418,489      2,054,150              --       2,790,627
                            ------------   ------------   ------------    ------------    ------------
                              23,119,178     10,998,929     42,738,212      (3,679,133)     73,177,186
                            ------------   ============   ------------    ------------    ------------
Earnings (losses)
   before income taxes          $792,358       $606,533     $2,373,218         $    --      $3,772,109
                            ============   ============   ============    ============    ============

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

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

                                       59

<PAGE>
<TABLE>
<CAPTION>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999

14)  Business Segment Information

                                                           2000

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

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

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

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

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

                                       60

<PAGE>
<TABLE>
<CAPTION>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999

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

                                                           1999

                                 Life          Cemetery/                      Reconciling
                               Insurance       Mortuary       Mortgage           Items       Consolidated
                               ---------       --------       --------           -----       ------------
<S>                          <C>             <C>             <C>              <C>          <C>
Revenues:
From external sources:
   Revenue from customers    $13,175,825    $10,178,246     $14,503,388       $      --     $37,857,459
   Net investment income       8,339,759        733,377       1,558,166              --      10,631,302
   Realized gains
      on investments             313,013             --              --              --         313,013
   Other revenues                818,631         22,856          14,117              --         855,604

Intersegment revenues:
   Net investment income       1,789,089             --              --      (1,789,089)             --
                            ------------   ------------    ------------    ------------    ------------

                              24,436,317     10,934,479      16,075,671      (1,789,089)     49,657,378
                            ------------   ------------    ------------    ------------    ------------
Expenses:
Death and other
   policy benefits             6,274,926             --              --              --       6,274,926
Increase in future
   policy benefits             5,700,784             --              --              --       5,700,784
Amortization of
   deferred policy
   acquisition costs
   and cost of
   insurance acquired          4,857,662             --              --              --       4,857,662
Depreciation                     321,012        452,224          44,633              --         817,869
General, administrative
      and other costs:
   Intersegment                       --         36,672          85,719        (122,391)             --
   Other                       5,341,843      9,886,188      14,207,923              --      29,435,954
Interest expense:
   Intersegment                       --        181,972       1,484,726      (1,666,698)             --
   Other                         377,375        540,051         201,976              --       1,119,402
                            ------------   ------------    ------------    ------------    ------------
                              22,873,602     11,097,107      16,024,977      (1,789,089)     48,206,597
                            ------------   ------------    ------------    ------------    ------------
Earnings (losses)
   before income taxes        $1,562,715      $(162,628)        $50,694       $      --      $1,450,781
                            ============   ============    ============    ============    ============

Identifiable
   assets                   $198,772,156    $34,013,032     $11,020,380    $(29,507,131)   $214,298,437
                            ============   ============    ============    ============    ============

Expenditures for
   long-lived assets             $11,268       $527,658         $90,819       $      --        $629,745
                            ============   ============    ============    ============    ============
</TABLE>

                                       61

<PAGE>

                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                  Years Ended December 31, 2001, 2000, and 1999



15)  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, 2001
were approximately $86,544,000 and $83,021,000, 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.

16)  Other Comprehensive Income

The following summarizes other comprehensive income:

                                        2001        2000         1999
                                        ----        ----         ----
Unrealized gains (losses)
     on available for-sale
     securities                      $769,684     $736,803    $(696,162)
Less:  reclassification
     adjustment for net realized
     gains in net income              (10,428)    (420,739)     (14,126)
                                    ---------    ---------    ---------
Net unrealized gains (losses)         759,256      316,064     (710,288)
Tax expense on net unrealized
     gain (losses)                   (372,077)    (145,004)     294,866
                                    ---------    ---------    ---------
Other comprehensive income (loss)    $387,179     $171,060    $(415,422)
                                    =========    =========    =========

                                       62

<PAGE>


                                                                Schedule I

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



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

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

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

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

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

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

                                       63

<PAGE>



                                                             Schedule II

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                                 Balance Sheets


                                                        December 31,
                                                        ------------
                                                  2001               2000
                                                  ----               ----
Assets
Cash$                                             1,065            $(29,690)

Investment in subsidiaries
    (equity method)                          46,128,864          40,954,743

Receivables:
    Receivable from
        affiliates                            1,664,955           1,731,480
    Other                                       (42,743)             18,008
                                           ------------        ------------
       Total receivables                      1,622,212           1,749,488

Property, plant and
    equipment, at cost,
    net of accumulated
    depreciation of $457,338
    for 2001 and $344,296
    for 2000                                    427,345             537,433

Other assets                                     21,366              47,004
                                           ------------        ------------
    Total assets                            $48,200,852         $43,258,978
                                           ============        ============





See accompanying notes to parent company only financial statements.

                                       64

<PAGE>



                                                        Schedule II Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                           Balance Sheets (Continued)



                                                           December 31,
                                                           ------------
                                                       2001             2000
                                                       ----             ----
Liabilities:
------------
Bank loans payable:
    Current installments                         $  1,386,857      $  1,035,585
    Long-term                                       4,168,453         5,294,808

Notes and contracts payable:
    Current installments                              152,818           152,818
    Long-term                                              --           151,857

Advances from affiliated companies                 10,431,231         8,603,996

Other liabilities and
    accrued expenses                                  996,228           513,877

Income taxes                                        1,095,947           764,676
                                                 ------------      ------------
    Total liabilities                              18,231,534        16,517,617
                                                 ------------      ------------

Stockholders' equity:
Common Stock:
    Class A:  $2 par value, authorized
        10,000,000 shares, issued
        5,363,591 shares in 2001 and
        5,107,631 shares in 2000                   10,727,182        10,215,262
    Class C:  $0.20 par value,
        authorized 7,500,000 shares,
        issued 6,113,430 shares in 2001
        and 5,827,805 shares in 2000                1,222,686         1,165,561
                                                 ------------      ------------
Total common stock                                 11,949,868        11,380,823

Additional paid-in capital                         10,168,523        10,054,714
Accumulated other
    comprehensive income                            1,223,930           836,751
Retained earnings                                   9,989,230         7,831,306
Treasury stock at cost
    (1,294,716 Class A shares
    and 68,332 Class C shares
    in 2001; 1,233,064 Class A shares
    and 65,078 Class C shares in 2000,
    held by affiliated companies)                  (3,362,233)       (3,362,233)
                                                 ------------      ------------
Total stockholders' equity                         29,969,318        26,741,361
                                                 ------------      ------------
    Total liabilities and
        stockholders' equity                     $ 48,200,852      $ 43,258,978
                                                 ============      ============


See accompanying notes to parent company only financial statements.

                                       65

<PAGE>



                                                       Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                              (Parent Company Only)

                             Statements of Earnings




                                                Year Ended December 31,
                                                -----------------------
                                         2001           2000             1999
                                         ----           ----             ----

Revenue:
    Net investment
        income                      $       188     $        96     $    39,694
    Fees from
        affiliates                    3,824,259       3,878,458       3,838,704
                                    -----------     -----------     -----------
        Total revenue                 3,824,447       3,878,554       3,878,398
                                    -----------     -----------     -----------

Expenses:
    General and
        administrative
        expenses                      4,082,438       1,873,323       2,396,015
    Interest expense                    373,815         593,228         641,282
                                    -----------     -----------     -----------
        Total expenses                4,456,253       2,466,551       3,037,297
                                    -----------     -----------     -----------

Earnings (loss)
    before income
    taxes, and
    earnings of
    subsidiaries                       (631,806)      1,412,003         841,101

Income tax expense                     (531,271)       (373,075)       (277,810)

Equity in earnings
    (loss) of subsidiaries            4,003,856        (143,199)        412,604
                                    -----------     -----------     -----------
Net earnings                        $ 2,840,779     $   895,729     $   975,895
                                    ===========     ===========     ===========


























See accompanying notes to parent company only financial statements.

                                       66

<PAGE>

<TABLE>
<CAPTION>


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


                                                         Year Ended December 31,
                                                         -----------------------
                                                  2001            2000           1999
                                                  ----            ----           ----
<S>                                           <C>            <C>           <C>
Cash flows from operating activities:
    Net earnings                              $ 2,840,779    $   895,729    $   975,895
Adjustments to reconcile net earnings
      to net cash provided by
      (used in) operating activities:
      Depreciation and amortization               113,042         29,904            533
      Undistributed (earnings) losses
         of affiliates                         (4,003,856)       143,199       (412,604)
      Provision for income taxes                  531,271        373,075        277,810
    Change in assets and liabilities:
      Accounts receivable                          60,751            558         57,802
      Other assets                                 25,638         25,637        (72,245)
      Other liabilities                           282,350          1,836         17,687
                                              -----------    -----------    -----------
Net cash provided by operating activities        (150,025)     1,469,938        844,878

Cash flows from investing activities:
    Purchase of short-term investments                 --             --        (11,045)
    Proceeds from sale of short term
      investments                                      --             --        305,972
    Purchase of equipment                          (2,954)      (556,802)       (11,002)
    Investment in subsidiaries                         --             --     (6,388,198)
                                              -----------    -----------    -----------
Net cash used in investing activities              (2,954)      (556,802)    (6,104,273)

Cash flows from financing activities:
    Proceeds from advances from affiliates      1,922,758        303,299      6,388,198
    Payments of advances to affiliates            (28,998)      (101,514)      (169,023)
    Payments of notes and contracts payable    (1,676,940)    (1,128,972)    (1,094,150)
    Purchase of treasury stock                   (783,086)            --             --
    Proceeds from borrowings on notes and
      contracts payable                           750,000             --             --
                                              -----------    -----------    -----------
Net cash provided (used) by
      financing activities                        183,734       (927,187)     5,125,025
                                              -----------    -----------    -----------
Net change in cash                                 30,755        (14,051)      (134,370)
Cash at beginning of year                         (29,690)       (15,639)       118,731
                                              -----------    -----------    -----------
Cash at end of year                           $     1,065    $   (29,690)   $   (15,639)
                                              ===========    ===========    ===========
</TABLE>

See accompanying notes to parent company only financial statements.

                                       67

<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,
                                                           ------------
                                                         2001         2000
                                                         ----         ----
$4,171,803 revolving line of
  credit at 6.15% interest payable
  monthly and a reduction in principal
  due in semi-annual installments
  collateralized by 15,000
  shares of Security National Life
  Insurance Company stock, due December 2005          $3,703,767   $4,904,426

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                                    1,101,543    1,425,967

7.35% note payable in monthly installments
  of $14,975 including principal and
  interest collaterized by 15,000 shares
  of Security National Life Insurance
  Company stock, due December 2006                       750,000           --
                                                      ----------   ----------

        Total bank loans                               5,555,310    6,330,393

      Less current installments                        1,386,857    1,035,585
                                                      ----------   ----------
      Bank loans, excluding current
      installments                                    $4,168,453   $5,294,808
                                                      ==========   ==========

2)  Notes and Contracts Payable

    Notes and contracts are summarized as follows:

                                                  December 31,
                                                  ------------
                                                2001        2000
                                                ----        ----
10 year notes due April 16, 1999,
  1% over U.S. Treasury 6 month
  bill rate                                  $    536   $    536

Due to former stockholders of Civil
  Service Employees Life Insurance Company
  resulting from the acquisition of such
  entity. 7% note payable in seven
  annual principal payments of
  $151,857 due December 2002                  151,857    303,714

Other                                             425        425
                                             --------   --------

Total notes and contracts                     152,818    304,675
                                             --------   --------
Less current installments                     152,818    152,818
                                             --------   --------
Notes and contracts, excluding current
  installments                               $     --   $151,857
                                             ========   ========

                                       68

<PAGE>



                                                      Schedule II (Continued)

                     SECURITY NATIONAL FINANCIAL CORPORATION
                Notes to Parent Company Only Financial Statements


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

         2002                     $1,539,675
         2003                      1,504,827
         2004                      1,632,508
         2005                        845,186
         2006                        185,932
         Thereafter                   --
                                  ----------
         Total                    $5,708,128
                                  ==========

3)  Advances from Affiliated Companies
                                                           December 31,
                                                       2001           2000
         Non-interest bearing advances                -----           -----
           from affiliates:
         Cemetery and Mortuary
            subsidiary                            $ 1,366,930    $ 1,366,930
         Life Insurance subsidiary                  9,054,301      7,227,066
         Mortgage subsidiary                           10,000         10,000
                                                  -----------    -----------
                                                  $10,431,231    $ 8,603,996
                                                  ===========    ===========

4)     Dividends

No dividends  have been paid to the  registrant for each of the last three years
by any subsidiaries.

                                       69

<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
                       ------      ---------       ---------    ------      ------

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

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

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

Premiums:
Life Insurance      $12,934,701   $ 1,151,262   $   634,899   $12,418,338      5.11%
Accident and
 Health Insurance       454,656           427         3,018       457,247       .66%
                    -----------   -----------   -----------   -----------   -------
   Total premiums   $13,389,357   $ 1,151,689   $   637,917   $12,875,585      4.95%
                    ===========   ===========   ===========   ===========   =======

1999
----
Life Insurance
 in force ($000)    $ 1,532,597   $   296,936   $   581,296   $ 1,816,957     32.00%
                    ===========   ===========   ===========   ===========   =======

Premiums:
Life Insurance      $12,983,927   $ 1,063,696   $   722,080   $12,642,311      5.71%
Accident and
 Health Insurance       563,592        34,643         4,565       533,514       .85%
                    -----------   -----------   -----------   -----------   -------
   Total premiums   $13,547,519   $ 1,098,339   $   726,645   $13,175,825      5.51%
                    ===========   ===========   ===========   ===========   =======
</TABLE>





                                       70

<PAGE>

<TABLE>
<CAPTION>


                                                                    Schedule V

                     SECURITY NATIONAL FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                        Valuation and Qualifying Accounts


                                        Balance       Additions     Deductions,  Balance
                                          at           Charged       Disposals    at
                                       Beginning      to Costs          and      End of
                                        of Year     and Expenses    Write-offs    Year
                                       ---------    ------------    ----------  --------
For the Year Ended December 31, 2001
<S>                                    <C>            <C>            <C>       <C>
Accumulated depreciation
   on real estate                      $3,088,761      321,235       (5,352)   $3,404,644

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

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

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

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

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

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

For the Year Ended December 31, 1999
Accumulated depreciation
   on real estate                      $2,380,874   $  369,557   $  (28,407)   $2,722,024

Accumulated depreciation on
   property, plant and equipment        5,312,791      817,869     (141,017)    5,989,643

Allowance for doubtful accounts         1,576,668      150,981     (259,695)    1,467,954

</TABLE>

                                       71

<PAGE>



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

None
                                    PART III

Item 10. Directors and Executive Officers

The Company's Board of Directors consists of eight 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             81         Chairman of the Board, President
                                       and Chief Executive Officer

Scott M. Quist              48         First Vice President, General Counsel,
                                       Chief Operating Officer and Director

Stephen M. Sill             56         Vice President, Treasurer and
                                       Chief Financial Officer

G. Robert Quist             50         Vice President and Secretary

J. Lynn Beckstead, Jr.      48         Vice President and Director

Charles L. Crittenden       82         Director

Robert G. Hunter            42         Director

H. Craig Moody              48         Director

Norman G. Wilbur            63         Director

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

Directors

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

George R. Quist has been Chairman of the Board,  President  and Chief  Executive
Officer of the Company since October 1979. Mr. Quist has also served as Chairman
of the Board,  President and Chief Executive  Officer of Southern  Security Life
Insurance  Company since December 1998. 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 First Vice President,  General Counsel and a director of
the Company since May 1986 and its Chief  Operating  Officer since October 2001.
Mr.  Quist has also  served  as First  Vice  President,  General  Counsel  and a
director of Southern Security Life Insurance Company since December 1998 and its
Chief Operating Officer since

                                       72

<PAGE>



October  2001.  From 1980 to 1982,  Mr.  Quist was a tax  specialist  with Peat,
Marwick,  Mitchell,  & Co.,  in  Dallas,  Texas.  From  1986 to  1991,  he was a
treasurer and director of The National  Association of Life  Companies,  a trade
association  of 642  insurance  companies  until its  merger  with the  American
Council of Life Companies. Mr. Quist has been a member of the Board of Governors
of the  Forum  500  Section  (representing  small  insurance  companies)  of the
American  Council  of Life  Insurance.  Mr.  Quist has also  served as  regional
director  of Key Bank of Utah since  November  1993.  Mr.  Quist is  currently a
director  and  immediate  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 15,  2002.  Mr.  Beckstead  has also served as Vice  President  and
director of Southern  Security Life  Insurance  Company since March 15, 2002. In
addition, he is President of Security National Mortgage Company, an affiliate of
the Company, and has served in this position since July 1993. From 1980 to 1993,
Mr.   Beckstead  was  Vice  President  and  a  director  of  Republic   Mortgage
Corporation. From 1983 to 1990, Mr. Beckstead was Vice President and director of
Richards  Woodbury Mortgage  Corporation.  From 1980 to 1983, he was a principal
broker  for  Boardwalk  Properties.  From  1978 to  1980,  Mr.  Beckstead  was a
residential loan officer for Medallion  Mortgage Company.  From 1977 to 1978, he
was a residential construction loan manager of Citizens Bank.

Charles L. Crittenden has been a director of the Company since October 1979. Mr.
Crittenden is also a director of Southern  Security Life  Insurance  Company and
has served in this position since  December  1998. Mr.  Crittenden has been sole
stockholder of Crittenden  Paint & Glass Company since 1958. He is also an owner
of Crittenden Enterprises, a real estate development company and Chairman of the
Board of Linco, Inc.

Robert G. Hunter,  M.D. has been a director of the Company  since  October 1998.
Dr. Hunter is also a director of Southern  Security Life  Insurance  Company and
has served in this  position  since  December  1998.  Dr.  Hunter is currently a
practicing  physician in private  practice.  Dr.  Hunter  created the State Wide
E.N.T. Organization (Rocky Mountain E.N.T., Inc.) where he is currently a member
of the Executive Committee.  He is Chairman of Surgery at Cottonwood Hospital, a
delegate to the Utah Medical Association and a delegate representing 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.

                                       73

<PAGE>



Executive Officers

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

Stephen M. Sill has been Vice President,  Treasurer and Chief Financial  Officer
of the Company since March 15, 2002. He has been a Vice President, Treasurer and
Chief Financial  Officer of Southern Security Life Insurance Company since March
15, 2002.  From 1997 to 2002,  Mr. Sill was Vice President and Controller of the
Company.  From  1998 to  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. 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  of
Northwest Pipeline Corporation. From 1970 to 1974, he was an auditor with Arthur
Andersen & Co. Mr. Sill is 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 Vice President and Secretary of the Company since March
15,  2002.  Mr.  Quist is also a director of Southern  Security  Life  Insurance
Company since April 1999 and has been Vice  President and Secretary  since March
15, 2002.  He has served as President and a director of Big Willow Water Company
since 1987 and as a director of  Associated  Investors  Company of Hawaii  since
1987.  He has also  served as a  director  and  Secretary-Treasurer  of the Utah
Cemetery Association since 1987.

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

No director,  officer or 5% stockholder of the Company or its  subsidiaries,  or
any  affiliate  thereof  has  had  any  transactions  with  the  Company  or its
subsidiaries during 2001 or 2000.

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

                                       74

<PAGE>



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,  2001  whose  salary  and bonus for all
services in all  capacities  exceed  $100,000 for the fiscal year ended December
31, 2001.

                           Summary Compensation Table
<TABLE>
<CAPTION>

                                                                     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)        2001   148,737    20,200     2,400         0          50,000         0            36,795
  Chairman of the Board,   2000   147,204    20,200     2,400         0          50,000         0             5,281
  President and Chief      1999   147,204    20,200     2,400         0          50,000         0            20,247
  Executive Officer

William C. Sargent         2001   137,643    17,325     4,500         0          45,000         0            38,148
  Senior Vice President,   2000   147,798    17,325     4,500         0          45,000         0               637
  Secretary and            1999   148,058    17,325     4,500         0          45,000         0            16,879
  Director

Scott M. Quist (1)         2001   152,525    20,000     7,200         0          35,000         0            34,727
 First Vice President,     2000   140,400    18,770     7,200         0          35,000         0               637
  General Counsel          1999   129,400    18,770     7,200         0          35,000         0            15,201
  Treasurer and Director
</TABLE>

                                       75

<PAGE>



     (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  Non-qualified  Deferred  Compensation  Plan (for
fiscal 2001,  such amounts were George R. Quist,  $32,077;  William C.  Sargent,
$37,523;  and Scott M.  Quist,  $34,102);  (b)  insurance  premiums  paid by the
Company with respect to a group life insurance plan for the benefit of the Named
Executive  Officers  (for fiscal 2001,  $1,911 was paid for all Named  Executive
Officers as a group,  or $637 each for George R. Quist,  William C.  Sargent and
Scott M. Quist);  and (c) life  insurance  premiums  paid by the Company for the
benefit of the family of George R. Quist ($4,644).  The amounts under "All Other
Compensation" do not include the no interest loan in the amount of $172,000 that
the  Company  made to  George R.  Quist on April 29,  1998,  to  exercise  stock
options. See "Item 13 Certain Relationships and Related Transactions".

The following table sets forth information concerning the exercise of options to
acquire  shares of the Company's  Common Stock by the Named  Executive  Officers
during the fiscal year ended December 31, 2001, as well as the aggregate  number
and  value of  unexercised  options  held by the  Named  Executive  Officers  on
December 31, 2001.

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

<TABLE>
<CAPTION>

                                                 Number of
                                                Securities
                                                 Underlying                     Value of
                                                Unexercised                   Unexercised
                                                Options/SARs                  In-the-Money
                    Shares                           at                      Options/SARs at
                  Acquired on                    December 31,                  December 31,
                   Exercise     Value              2001(#)                        2001
Name                 (#)      Realized  Exercisable       Unexercisable  Exercisable   Unexercisable
----               --------   --------  -----------       -------------  -----------   -------------
<S>                  <C>       <C>       <C>                <C>           <C>          <C>
George R
  Quist              -0-        $0       182,471             42,000        $0           $   408
William C
  Sargent            -0-        $0       261,292             42,000        $0           $10,008
Scott M
  Quist              -0-        $0       139,306             42,000        $0           $10,008

</TABLE>

Retirement Plans

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

The  Compensation  Agreement  further  provides  that the Board of Directors may
elect to pay the entire amount of deferred  compensation in the form of a single
lump-sum  payment  or other  installment  payments,  so long as the term of such
payments do not exceed 10 years.  However,  in the event Mr. Quist's  employment
with the Company is terminated  for any reason other than  retirement,  death or
disability,  the entire  deferred  compensation  shall be  forfeited by him. The
Company has accrued a liability for the  Compensation  Agreement at December 31,
2001 of $276,441.

                                       76

<PAGE>



William C. Sargent,  recently deceased, who was the former Senior Vice President
and Secretary of the Company, had a Deferred Compensation  Agreement dated April
15, 1994, with the Company (the  "Compensation  Agreement").  This  Compensation
Agreement  was  amended  effective  January 2, 2001,  to reflect  the  following
benefits. The employment agreement between the Company and William C. Sargent be
amended to adjust for  inflation in accordance  with the United States  Consumer
Index  commencing  January 2, 2002, and for each year  thereafter of the term of
the agreement and that for the year 2001 the  adjustment  for his  retirement is
$60,000  per year  instead of $50,000  per year.  The  agreements  shall also be
amended to provide his spouse, in the event of his pre-mature death, with health
insurance  coverage  equivalent to that carried on executive  personnel with the
coverage  for the  entire  period  of the  agreement.  In the  event of death of
William C.  Sargent and his spouse prior to the  expiration  of the terms of the
agreement,  payments shall be paid to his estate or as otherwise directed by him
in writing.

The  Compensation  Agreement  further  provides  that the Board of Directors may
elect to pay the entire amount of deferred  compensation in the form of a single
lump-sum  payment  or other  installment  payments,  so long as the term of such
payments do not exceed 10 years.  The  Company  has accrued a liability  for the
Compensation  Agreement  at December  31, 2001 in the amount of $394,639 and has
begun making payments to Mr. Sargent's spouse.

Employment Agreement

The  Company  maintains  an  employment  agreement  with  Scott  M.  Quist.  The
agreement,  which has a five year term, was entered into in 1996, and renewed in
1997. Under the terms of the agreement,  Mr. Quist is to devote his full time to
the  Company  serving as its First Vice  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 5 years at 50% of its current level.
In the event of a sale or merger of the Company, and Mr. Quist were not retained
in his current position,  the Company would be obligated to continue Mr. Quist's
current compensation and benefits for seven years following the merger or sale.

Director Compensation

Directors of the Company (but not  including  directors who are  employees)  are
paid a director's  fee of $10,200 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 2001,  2000,  and 1999 were
approximately  $18,458,  $0, and $3,858  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 2001, 2000 and
1999, were $260,350, $0 and $130,958, respectively.

                                       77

<PAGE>



Employee Stock Ownership Plan

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

Under  the  Ownership  Plan,  the  Company  has  discretionary   power  to  make
contributions on behalf of all eligible employees into a trust created under the
Ownership Plan.  Employees  become eligible to participate in the Ownership Plan
when they have attained the age of 19 and have  completed one year of service (a
twelve-month  period in which the  Employee  completes  at least  1,040 hours of
service). The Company's  contributions under the Ownership Plan are allocated to
eligible employees on the same ratio that each eligible employee's  compensation
bears to total  compensation  for all eligible  employees  during each year.  To
date, the Ownership Plan has  approximately  107  participants  and had $191,557
contributions  payable to the Plan in 2001.  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  trustee  of the  trust  fund  under the
Ownership Plan is Mr. George R. Quist, who serves 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 2001 was $220,038.

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.

                                       78

<PAGE>



1993 Stock Option Plan

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

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

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

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

The 1993  Plan has a term of ten  years.  The  Board of  Directors  may amend or
terminate   the  1993  Plan  at  any  time,   subject  to  approval  of  certain
modifications  to the 1993 Plan by the  shareholders  of the  Company  as may be
required by law or the 1993 Plan. On November 7, 1996,  the Company  amended the
Articles of  Incorporation  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.

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.

                                       79

<PAGE>



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

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

                                       80

<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 22,  2002,  (i) for persons who own
beneficially more than 5% of the Company's outstanding Class A or Class C Common
Stock, (ii) each director of the Company,  and (iii) for all executive  officers
and directors of the Company as a group.

<TABLE>
<CAPTION>

                                                                                           Class A
                                      Class A                      Class C                and 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)
4491 Wander Lane
Salt Lake City,
  Utah 84124                  155,712          3.8%        244,613       4.1%     400,325        4.0%

George R. and Shirley C
Quist Family
  Partnership, Ltd.(6)
4491 Wander Lane
Salt Lake City,
  Utah 84124                  360,927          8.9%      2,900,049      48.0%   3,260,976       32.2%

Employee Stock
  Ownership Plan (4)
5300 S. 360 W., Suite 250
Salt Lake City,
  Utah 84123                  577,402         14.2%      1,341,575      22.2%   1,918,977       19.0%

Scott M. Quist (3)
7 Wanderwood Way
Sandy, Utah 84092             115,064         2.8%          89,200      1.5%      204,264        2.0%

Charles L. Crittenden
2334 Fillmore Avenue
Ogden, Utah 84401               1,811          *           206,997      3.4%      208,808        2.1%

H. Craig Moody
1782 East Faunsdale Dr.
Sandy, Utah 84092                 799          *             -0-      *               799         *

Norman G. Wilbur
2520 Horseman Drive
Plano, Texas 75025              1,044          *             -0-            *       1,044         *
</TABLE>

                                       81

<PAGE>
<TABLE>
<CAPTION>



Item 12 - Security Ownership of Certain Beneficial Owners and Management
                                                                                           Class A
                                      Class A                      Class C                and 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>
Robert G. Hunter, M.D.
2 Ravenwood Lane
Sandy, Utah 84092             2,192              *           -0-          *         2,192        *

Associated Investors (5)
5300 S. 360 W. Suite 250
Salt Lake City,
  Utah 84123                 80,162            2.0%       566,341        9.4%     646,503       6.4%

J. Lynn Beckstead, Jr.       20,286             *           1,658         *        21,944        *

All directors and
  executive officers
  (9 persons)               700,920           17.2%     3,503,377       58.0%   4,204,297       41.6%

 *   Less than one percent
</TABLE>

                                                            82

<PAGE>



     (1) Does not include  577,402  shares of Class A Common Stock and 1,341,575
shares of Class C Common Stock owned by the Company's  Employee Stock  Ownership
Plan (ESOP), of which George R. Quist is the trustee and accordingly,  exercises
voting and investment powers with respect to such shares.

     (2) Does not  include  80,162  shares of Class A Common  Stock and  566,341
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  117,699  shares of Class A Common  Stock owned by the
Company's 401(k) Retirement Savings Plan, of which Scott M. Quist is a member of
the  Investment  Committee  and,   accordingly,   exercises  shared  voting  and
investment powers with respect to such shares.

     (4) The trustee of the Employee  Stock  Ownership  Plan (ESOP) is George R.
Quist who exercises voting and investment powers.

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

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

The Company's officers and directors, as a group, own beneficially approximately
41.6% 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  President and 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,  2002.  Mr.
Quist has the right to make prepayments on the note at any time. As of March 31,
2002, the outstanding balance of the note was $97,000.  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.

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.

No director,  officer or 5% stockholder of the Company or its  subsidiaries,  or
any affiliate thereof, has engaged in any business transactions with the Company
or its subsidiaries during 2001 or 2000 other than as described herein.

                                       83

<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------

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

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

(a)(3)  Exhibits

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

Exhibit

    Table No              Document

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

     B.   Bylaws (1)

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

     B.   Specimen Class C Stock Certificate (1)

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

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

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

     C.   1993 Stock Option Plan (3)

     D.   2000 Director Stock Option Plan (12)

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

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

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

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

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

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

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

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

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

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

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

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

                                       84

<PAGE>



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

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

     S.   Deferred Compensation Plan

          (1)  Incorporated  by reference  from  Registration  Statement on Form
               S-1, as filed on June 29, 1987.

          (2)  Incorporated  by reference  from Annual  Report on Form 10-K,  as
               filed on March 31, 1989.

          (3)  Incorporated  by reference  from Annual  Report on Form 10-K,  as
               filed on March 31, 1994.

          (4)  Incorporated  by  reference  from Report on Form 8-K, as filed on
               February 24, 1995.

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

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

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

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

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

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

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

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

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

    21.  Subsidiaries of the Registrant

    (b)  Reports on Form 8-K:

            None

                                       85

<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:  April 3, 2002                        By: George R. Quist,
                                                ---------------
                                                Chairman of the Board,
                                                President and Chief
                                                Executive Officer

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

SIGNATURE                 TITLE                            DATE
----------            -------------------             -------------
George R. Quist          Chairman of the              April 3, 2002
                         Board, President
                         and Chief Executive
                         Officer (Principal
                         Executive Officer)

Scott M. Quist           First Vice                    April 3, 2002
                         President, General
                         Counsel, Chief
                         Operating Officer
                         and Director

Stephen M. Sill          Vice President
                         Treasurer and Chief
                         Financial Officer
                         (Principal
                         Financial and Accounting
                         Officer)                       April 3, 2002

G. Robert Quist          Vice President, Secretary
                         and Director                   April 3, 2002

J. Lynn Beckstead, Jr.   Vice President and Director    April 3, 2002

Charles L. Crittenden    Director                       April 3, 2002

H. Craig Moody           Director                       April 3, 2002

Norman G. Wilbur         Director                       April 3, 2002

Robert G. Hunter         Director                       April 3, 2002

                                       86

<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
                          Year Ended December 31, 2001

                     SECURITY NATIONAL FINANCIAL CORPORATION
                           Commission File No. 0-9341

                                 E X H I B I T S


<PAGE>



                                  Exhibit Index



Exhibit No.                  Document Name
-----------               ------------------
   21.               Subsidiaries of the Registrant


<PAGE>



                                   EXHIBIT 21

                        Subsidiaries of Security National
                              Financial Corporation
                              as of March 31, 2001


<PAGE>



                                   Exhibit 21


Subsidiaries of Security National Financial Corporation (as of March 31, 2001)

         Security National Life Insurance Company

         Security National Mortgage Company

         Memorial Estates, Inc.

         Memorial Mortuary

         Paradise Chapel Funeral Home, Inc.

         California Memorial Estates, Inc.

         Cottonwood Mortuary, Inc.

         Deseret Memorial, Inc.

         Holladay Cottonwood Memorial Foundation

         Holladay Memorial Park, Inc.

         Camelback Sunset Funeral Home, Inc.

         Greer-Wilson Funeral Home, Inc.

         Crystal Rose Funeral Home, Inc.

         Hawaiian Land Holdings

         SSLIC Holding Company

         Insuradyne Corporation

         Southern Security Life Insurance Company


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                           DEFERRED COMPENSATION PLAN

                         Effective as of January 1, 2001


<PAGE>



                     SECURITY NATIONAL FINANCIAL CORPORATION
                           DEFERRED COMPENSATION PLAN

                         Effective as of January 1, 2001

                                    ARTICLE I
                                  INTRODUCTION

1.1  Establishment  of Plan
     Security National Financial  Corporation  establishes the Security National
Financial  Corporation  Deferred  Compensation  Plan  effective as of January 1,
2001.

1.2      Purpose of Plan
     Security  National  Financial  Corporation  has  established  this  Plan to
provide  select   employees  with  the  opportunity  to  defer  the  receipt  of
compensation and a vehicle through which to do so. Security  National  Financial
Corporation  intends to maintain the Plan primarily for the purpose of providing
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 Plan will be
interpreted in a manner consistent with these intentions.

                                   ARTICLE II
                                   DEFINITIONS

     Definitions are contained in this article and throughout  other sections of
the Plan. The location of a definition is for convenience only and should not be
given any significance.  A word or term defined in this article (or in any other
article)  will have the same  meaning  throughout  the Plan  unless the  context
clearly requires a different meaning.

2.1      Base Salary
     means (i) in the case of an employee  whose  remuneration  from the Company
does not contain a commission element,  the employee's periodic base salary, and
(ii) in the case of an employee whose  compensation  from the Company contains a
commission  element,  the employee's total compensation  (i.e., base salary plus
commissions,  whether under or over target), but without regard to any Bonus(es)
or other additional amount(s) paid or payable to the employee.

2.2      Beneficiary
     means the individual(s) or entity(ies)  designated by a Participant,  or by
the Plan,  to receive any benefit  payable  upon the death of a  Participant  or
Beneficiary.  A Beneficiary  designation  must be signed by the  Participant and
delivered  to the  Committee  on a form  specified  by the  Committee  for  that
purpose.  In the absence of a valid or effective  Beneficiary  designation,  the
Beneficiary  will be the  Participant's  surviving  spouse,  or if  there  is no
surviving spouse, the Participant's estate.

2.3      Board
         means the Board of Directors of the Company.

2.4      Bonus
     means any periodic or non-periodic  payment to the Participant which is not
part of the Participant's  Base Salary and which is not otherwise  excluded from
the definition of Compensation contained in this Plan.

2.5      Code
     means the Internal Revenue Code of 1986, as amended from time to time.

2.6      Committee
     means the Plan  Committee,  the members of which are to be appointed by the
Company.  The  Committee  will serve as the "plan  administrator"  to manage and
control the  operation  and  administration  of the Plan,  within the meaning of
ERISA Section 3(16)(A).


<PAGE>



2.7      Company
     means Security National Financial Corporation and any successor of Security
National  Financial  Corporation,  and any affiliate  thereto  designated by the
Committee as a  participating  employer.  In the event one or more affiliates of
Security National Financial  Corporation become participating  employer(s) under
this Plan, all rights,  duties and  responsibilities for operation of this Plan,
including all rights  reserved to amend,  alter,  supplement  or terminate  this
Plan, shall remain exclusively with and be exercised solely by Security National
Financial  Corporation,  unless  specifically  allocated  by  Security  National
Financial Corporation to one or more participating employers.

2.8      Compensation
     means the employee's Base Salary plus Bonus(es).  Compensation excludes any
other form of  remuneration  paid or payable to an  Eligible  Employee,  such as
restricted  stock,   stock  options,   proceeds  from  stock  options  or  stock
appreciation rights,  severance payments,  moving expenses, car or other special
allowances,  and any other  amounts,  whether  or not  included  in an  Eligible
Employee's taxable income.  Deferral elections under this Plan shall be computed
before taking into account any reduction in an Eligible Employee's  Compensation
by salary reduction under Code Section 125 or 401(k), or under this Plan.

2.9      Deferral Account
     means a bookkeeping  account  established for and maintained on behalf of a
Participant  to which  Compensation  amounts  are  deferred,  and net income (or
losses) thereon, are credited under this Plan.

2.10     Deferral Compensation Agreement
     means  an  agreement  described  in  Section  3.4  and  entered  into  by a
Participant  and the  Company to reduce  the  Participant's  Compensation  for a
specified  period and  contribute  such amounts to the Plan, in accordance  with
Article III.

2.11     Disability
     means "disability" (or similar term) as defined in the Company's  long-term
disability  program and which results in payments to the Participant  under such
program.

2.12     Eligible Employee
     means a common law employee of the Company who:

     (a) has or will have Compensation for the Plan Year in excess of $85,000.

     (b) is a senior officer of the Company; and/or

     (c) is identified in writing by the Committee as eligible to participate in
the Plan;

     For  purposes of  determining  as of any given date  whether  the  Eligible
Employee's  Compensation  will satisfy (a) above,  the Committee may project the
Eligible Employee's current rate of Compensation on a Plan Year basis. Except as
otherwise  provided in Section 3.1 (concerning an individual who ceases to be an
Eligible  Employee) and Section 3.3  (concerning an individual who first becomes
an Eligible  Employee on or after the first day of a Plan Year), an individual's
status as an Eligible  Employee for a Plan Year shall be determined  immediately
prior to the first day of the Plan Year. An  individual's  status who becomes an
Eligible Employee on or after the first day of a Plan Year but prior to the next
calendar   quarter  shall  be  determined   prior  to  that  calendar   quarter.
Notwithstanding  the  foregoing,  the Committee may determine in writing that an
otherwise Eligible Employee shall not be eligible to participate in this Plan.

2.13     ERISA
         means the Employee Retirement Income Security Act of 1974, as amended.

<PAGE>



2.14     Hardship
     means an unforeseeable  and  unanticipated  emergency which is caused by an
event  beyond the control of the  Participant  or  Beneficiary,  and which would
result in severe  financial  hardship to the  Participant  or  Beneficiary  if a
distribution or revocation of a deferral  election were not permitted.  Hardship
conditions   will  be  evaluated  in  accordance  with  the  terms  of  Treasury
Regulations  Section  1.457-2(h)(4).  The Committee will have sole discretion to
determine whether a Hardship condition exists and the Committee's  determination
will be final.

     A Participant must submit a written request for a Hardship to the Committee
on the form and in the manner prescribed by the Committee.  The Hardship request
must: (i) describe and certify the Hardship  condition and the severe  financial
need; and (ii) state whether the  Participant  requests a withdrawal of all or a
portion of his vested  Deferral  Account to meet the severe  financial need. The
Committee will have sole  discretion to determine  whether a Hardship exists and
to determine the appropriate  action, if any, provided however, in no event will
the Committee  approve a Hardship  distribution  request for expenses related to
any medical  condition or expenses related to the death of any person unless the
request for  distribution  is  submitted  to the  Committee  and approved by the
Committee  for Hardship  distribution  prior to the date on which the expense is
incurred.  The  Committee,  in its sole  discretion  may make  exception  to the
foregoing rule if it determines that the circumstances  creating the expense for
which  reimbursement  is sought were not reasonably  foreseeable.  Regardless of
whether the Participant  desires to reduce or cease any Compensation  amounts to
be  deferred  after  the  Hardship  request  is made,  the  Participant  will be
precluded  from  deferring  Compensation  for the  remainder of the Plan Year in
which a Hardship is approved by the Committee.

2.15     Insolvent
     means the  Company is (i) unable to pay its debts as they  become  due,  or
(ii)  subject  to a  pending  proceeding  as a debtor  under the  United  States
Bankruptcy Code.

2.16     Investment Fund or Funds
     means the investment fund or funds designated by the Committee as the basis
for  determining  the  investment  return to be allocated  to the  Participants'
Deferral  Accounts.  The Committee may change the Investment Funds at such times
as it deems  appropriate.  An Investment  Fund may include or consist  solely of
publicly traded securities of the Company.

2.17     Participant
     means an Eligible  Employee who is eligible to  participate  in the Plan as
provided  in  Section  3.1 and who has made an  election  to defer  Compensation
pursuant to the Plan.

2.18     Plan
     means the Security National  Financial  Corporation  Deferred  Compensation
Plan, as set forth in this document, as amended from time to time.

2.19     Plan Year
     means the Company's  fiscal year,  beginning  January 1 and ending December
31.

2.20     Retirement Age
     means, while employed by the Company, attainment of age 55 with 10 Years of
Service  ("Early  Retirement  Age"),  or attainment of age 65, without regard to
Years of Service.

2.21     Year of Service
     means,  with  respect to a  Participant,  a calendar  year during which the
Eligible  Employee  was in full time  employment  with the  Company  and for the
entire year.  Full time  employment  shall be determined  according to the rules
adopted and utilized by the Company to classify full time employees.


<PAGE>



                                   ARTICLE III
                                  PARTICIPATION

3.1      Eligibility
     An Eligible  Employee of the Company shall  participate in the Plan only to
the  extent  and for  the  period  that  the  Eligible  Employee  satisfies  the
definition  of Eligible  Employee in this Plan,  is selected by the Committee to
participate and is a member of select group of management or highly  compensated
employees,  as such group is described  under  Sections  201(2),  301(a)(3)  and
401(a)(1) of ERISA.  An individual  who is an Eligible  Employee as of the first
day of the Plan Year but who ceases to be an Eligible  Employee  during the Plan
Year shall  continue to  participate  in the Plan with  respect to any  Deferred
Compensation  Agreements  in  effect  for the Plan  Year,  but  shall  terminate
participation  as of the end of the Plan  Year.  The  Participant  shall  not be
permitted  to  enter  into any new  Deferred  Compensation  Agreements  with the
Company unless and until the individual again becomes an Eligible Employee.

3.2      Participation
     An Eligible  Employee who  participates  in the Plan may elect to defer the
receipt  of  compensation  earned  by the  Eligible  Employee  by  executing  an
agreement as described  in Section  3.4.  The Eligible  Employee  shall make the
election in  accordance  with Section 3.3. The Company  shall  withhold  amounts
deferred by the Participant in accordance with this election.  The Participant's
deferred  amounts  shall be  credited  to the  Deferral  Account as  provided in
Article V and  distributed  in accordance  with Article VI. An election to defer
receipt of  Compensation  shall  continue in effect for a given Plan Year unless
the Participant separates from employment.

3.3      Election Procedure
     An election to defer Compensation  under an agreement  described in Section
3.4 is made by  executing a Deferred  Compensation  Agreement on the form and in
the  manner  prescribed  by  the  Committee.  The  Agreement  must  be  properly
completed,  signed and  delivered  to the Company  prior to the first day of the
Plan Year for which  Compensation  shall be earned,  provided  however,  that an
individual  who becomes an Eligible  Employee for the first time on or after the
first day of a Plan Year but  prior to the  first  day of any  calendar  quarter
during  the  Plan  Year  shall  be  permitted  to  make  an  election  to  defer
Compensation  that  will be  earned  on and  after  the  first  day of the  next
applicable  calendar quarter and for the remainder of the Plan Year by executing
a Deferred Compensation Agreement prior to that date.

3.4      Deferred Compensation Agreement
     A Deferred Compensation  Agreement shall remain in effect for the Plan Year
and for all subsequent Plan years until amended or revoked by the Participant or
terminated by the Company as provided in Section 3.5. The Deferred  Compensation
Agreement shall be applicable  only to Compensation  described in paragraphs (a)
through  (c) earned  after the date on which the  Agreement  is  effective.  The
Agreement shall define the amount of Compensation that shall be deferred for the
Plan Year, and for all subsequent Plan Years and may define  differing  deferral
amounts of Base Salary and  Bonus(es)  payable to the Eligible  Employee for the
Plan Year, subject to the following:

          (a) Base Salary.  A Participant  shall be permitted to defer a maximum
     of fifty  (50%) of Base  Salary  earned  in a Plan  Year.  In the case of a
     Participant   whose  Base  Salary  contains  a  commission   element,   the
     Participant shall be permitted to defer a maximum of fifty percent (50%) of
     all commissions earned in the Plan Year.

          (b) Bonus. A participant  shall be permitted to defer a maximum of one
     hundred percent (100%) of all Bonus(es) with respect to a Plan Year.

          (c) Minimum  Deferral.  The minimum  deferral  percentage which may be
     elected by an Eligible Employee,  whether applicable to Base Salary,  Bonus
     or both shall be five percent (5%). Additional deferral amounts shall be in
     five  percent  (5%)  increments.  The  Committee  may,  in its  discretion,
     establish  a greater  minimum  deferral  percentage  amount or  incremental
     deferral  percentage  applicable  to Base Salary or Bonus(es) for any given
     Plan Year.


<PAGE>


          (d) Hardship Withdrawal Request. All deferrals by an Eligible Employee
     for the  remainder of the Plan Year shall cease in the event the  Committee
     approves a request of the Eligible  Employee for a Hardship  withdrawal for
     that  Plan  Year.  No  cessation  of  deferrals   shall  affect  any  limit
     established  pursuant to Section 3.4(c) above,  and no deferral  amounts so
     reduced or not made shall be  required to be made in addition to any future
     deferrals that are not affected by the Hardship request.

3.5      Irrevocable Election
     A  Participant's  Deferred  Compensation  Agreement  for a given  Plan Year
cannot be amended by the  Participant  and, except as provided in Section 3.4(d)
and this Section 3.5, is irrevocable. A Participant shall be permitted, prior to
the  commencement  of each  subsequent  Plan  Year  following  execution  of the
Deferred Compensation  Agreement, to amend the deferral amount applicable to the
Participant's  Compensation  or to revoke the  Deferred  Compensation  Agreement
entirely.  The amendment or revocation  shall be effective  only as of the first
day of the next following Plan Year and shall be  accomplished by execution of a
new  Deferred  Compensation  Agreement,  which shall  supersede  all  previously
executed  Agreements.  The  Company  reserves  the right to modify any  Deferred
Compensation   Agreement  to  reflect  a  change  in  Plan   provisions  or  for
administrative convenience.

     A  Participant's   election  to  defer   Compensation  under  the  Deferred
Compensation  Agreement  shall  become  null  and void  upon  the  Participant's
termination  from employment with the Company,  and no Compensation  that may be
payable after the  Participant  terminates  from employment with the Company and
otherwise would be subject to such Agreements shall be deferred under this Plan.

3.6      Community and Marital Property
     The spouse of a  Participant  shall have a  community  or marital  property
interest in the Participant's  Deferral Account, but only to the extent required
by  applicable  law,  which the spouse may pass to a third party upon his or her
death.  If it is  intended  that a spouse  relinquish  his or her  community  or
marital property interest in the Participant's Deferral Account, the spouse must
execute a waiver in which he or she clearly  states an intention  to  relinquish
his or her rights under  community  or marital  property law with respect to the
Deferral  Account.  A  spouse's  consent  to a  Participant's  designation  of a
non-spouse Beneficiary is not sufficient to effect a waiver.

                                   ARTICLE IV
                              COMPANY CONTRIBUTIONS

4.1      Company Contributions
     The Company may, in its sole discretion,  contribute to the Plan any amount
it determines from time to time. Any Company  contribution made pursuant to this
Section  4.1  shall  be  credited  as  provided  in  Article  V to the  Deferral
Account(s) of the Participant or  Participants  designated by the Company at the
time the contribution is made and distributed in accordance with Article VI.

4.2      Vesting
     A  Participant's  interest in (i) the  Compensation  deferred to his or her
Deferral  Account  pursuant  to Sections  3.2 through 3.4 of the Plan,  (ii) any
Company  contributions  made to the  Plan  for a Plan  Year in  accordance  with
Section 4.1 of the Plan and  allocated  to his Deferral  Account,  and (iii) any
earnings credited to the Participant's  Deferral Account pursuant to Section 5.6
of the Plan, shall be at all times fully vested and nonforfeitable.

                                    ARTICLE V
                          PARTICIPANT ACCOUNT BALANCES

5.1      Establishment of Accounts
     The  Committee  may  select an  independent  record  keeper  (who may be an
affiliate of the Company) to establish and maintain a Deferral Account on behalf
of each  Participant.  Contributions and net income (or losses) will be credited
to each Deferral Account in accordance with the provision of this Article.


<PAGE>



5.2      Bookkeeping
     Deferral  Accounts  will be primarily for  accounting  purpose and will not
restrict the operation of the Plan or require  separate  earmarked  assets to be
allocated to any account.  The establishment of a Deferral Account will not give
any Participant the right to receive any asset held by the Company in connection
with the Plan or otherwise.

5.3      Crediting Deferred Compensation
     The Committee will credit to a  Participant's  Deferral  Account any amount
deferred by the  Participant as soon as practicable  following the pay period to
which  such  amount  would have been paid to the  Participant  absent a Deferred
Compensation Agreement.

5.4      Crediting Company Contributions
     As of the end of each Company payroll period, the Committee shall credit to
Participant's  Deferral Account the amount of any Company  contributions made by
the Company pursuant to Section 4.1; provided,  however, that the Committee may,
in its discretion,  credit Company  contributions less frequently,  but not less
than annually, as the Committee may deem necessary or appropriate in furtherance
of proper Plan administration.

5.5      Establishment of Investment Funds
     The  Committee,  in  its  sole  discretion,  will  establish  one  or  more
Investment  Funds which will be maintained  for the purpose of  determining  the
investment  return to be  credited  to a  Participant's  Deferral  Account.  The
Committee may change from time to time the number,  identity or  composition  of
the Investment Funds or discontinue the availability of any Investment Fund. The
Investment  Funds will reflect  investment  options  which are  available in the
marketplace for self directed  accounts in retirement plans and may be (but need
not be) the same funds available through any qualified retirement plan sponsored
by the Company.  An  Investment  Fund may also consist  exclusively  of publicly
traded securities of the Company.

     Pursuant to rules adopted by the Committee each  Participant  will indicate
the Investment Funds to which  contributions  under Section 5.3 and any existing
Deferral  Account  balance are to be  credited.  Investment  Fund  elections  by
Participants  must be made in twenty-five  percent (25%)  increments and at such
times and in such manner as the Committee will specify. A Participant may change
his or her  Investment  Fund at any time and in such manner as the Committee may
specify.  Each  Participant  shall  be  provided  from  time  to time  with  the
investment  "results" of the selected  Investment Funds. The Company's liability
to the Participant for amounts in the Deferred Compensation Account will include
gains and losses attributed to the Investment Funds selected by the Participant.

5.5      Crediting Investment Results
     A Participant's  Deferral Account balance will be increased or decreased to
reflect investment  results,  as they occur.  Deferral Accounts will be credited
with the  investment  return of the  Investment  Funds in which the  Participant
elected to be deemed to participate.  The credited investment return is intended
to reflect the actual  performance of the Investment Funds net of any investment
or management fees. Nevertheless, no provision of this Plan shall be interpreted
to require the Company to actually  invest any amounts in any  particular  fund,
whether or not such fund is one of the Investment  Funds available for selection
by Participants in the Plan.

5.6      Notification to Participants
     The Committee shall notify each  Participant  with respect to the status of
the Participant's  Deferral Account as soon as practicable after the end of each
Plan Year.  Neither  the  Company  nor the  Committee  to any  extent  warrants,
Guarantees or represents that the value of any Participant's Deferral Account at
any time will equal or exceed the amount  previously  allocated  or  contributed
thereto.

<PAGE>



                                   ARTICLE VI
                            DISTRIBUTION OF ACCOUNTS

6.1  Distribution  Due to Separation from Employment on or after Retirement Age
     A Participant  who separates from  employment  with the Company on or after
attaining  Retirement Age (or Early Retirement Age, if applicable) shall receive
his  vested  Deferral  Account  at the time  and in the  manner  elected  by the
Participant.  An election regarding the time (Retirement Age or Early Retirement
Age) and  manner  of  payment  of the  Participant's  Deferral  Account  balance
(including  all  future  years'  contributions)  shall  be made at the  time the
Participant  first  commences  participation  in the  Plan  and  may be  amended
thereafter at the election of the Participant,  provided that any amendment will
only be valid if made concurrent with the Participant's  most recent election to
defer  Compensation  under  Section  3.3 or  concurrent  with the  Participant's
amendment of his or her Deferred  Compensation  Agreement  under Section 3.5. An
election in any subsequent  Deferred  Compensation  Agreement regarding the time
and manner of payment of the Participant's Deferral Account which alters a prior
election  shall  supersede the prior  election and shall apply to all amounts in
the Participant's  Deferral Account which have accrued and continue to accrue in
the Deferral Account until altered by a later election providing for a different
time or manner of payment.

          (a) Time of Payment.  A Participant's  vested Deferral Account balance
     shall be paid (or  commence  to be paid)  on the  January  1st  immediately
     following the date of  separation  from  employment  on or after  attaining
     Retirement Age or Early Retirement Age, as elected. Payment cannot commence
     prior  to  January  1st  unless  specifically  approved  by  the  Committee
     following petition to the Committee for earlier  commencement  submitted by
     the Participant.

          (b) Manner of Payment. A Participant's vested Deferral Account will be
     paid in a lump sum cash  payment,  or if the  Participant  has  elected  to
     receive payments in substantially equal monthly  installments,  then over a
     period of five (5) or ten (10) years,  as elected.  If no election has been
     made by the Participant, the Deferral Account will be paid in substantially
     equal monthly installments over a period of five (5) years.

          (c) Value of Deferred  Account  Balance.  The value of a Participant's
     Deferral  Account to be  distributed  shall be  determined as of the date a
     payment is made, and shall be charged with  distributions  and adjusted for
     gains and losses, through such date. To the extent payment shall be made in
     installments,  the amount of the installment for a particular  month may be
     adjusted  to take  into  account  the value of the  Participant's  Deferral
     Account (as  adjusted)  and the number of  remaining  months over which the
     installment payments are to be made.

6.2 Distribution Upon Separation Prior to Death or Attaining Retirement Age

     A  Participant  who  separates  from  employment  with the Company prior to
attaining  Retirement Age for any reason other than death shall receive  amounts
credited to his Deferral Account in a lump sum cash payment only,  commencing as
soon  as  administratively  feasible  following  the  date  of  separation  from
employment,  but in no event later than one hundred  twenty (120) days after the
Participant  separates from  employment.  If the  Participant's  separation from
employment shall occur during the last quarter of any calendar year, the date of
distribution which shall be  administratively  feasible shall not occur prior to
the next following January 1st. For purposes of this Section 6.2, the value of a
Participant's  Deferral Account to be distributed  shall be determined as of the
date the payment is made, and shall be credited with earnings through that date.

6.3 Distribution Upon Death

     In the event a Participant dies prior to receiving all of his or her vested
Deferral Account, the Participant's Beneficiary shall receive the unpaid portion
of the  Participant's  Deferral  Account in the form of lump sum cash payment no
later than one  hundred  twenty  (120) days after the  Participant  dies and the
Committee  is  provided  with  written  proof of the  Participant's  death.  For
purposes of this Section 6.4, the value of a Participant's  Deferral  Account to
be distributed shall be determined as of the date the payment is made, and shall
be credited  with  earnings  through such date and, in the case of a Participant
who dies while employed with the Company,  any deferred  amounts that would have
been credited to the account if the  Participant  had continued  employment with
the Company through such date.

6.4      Unscheduled Distributions

     A  Participant  shall  be  entitled  to  receive  a  distribution  from the
Participant's  Deferral  Account  at any time (an  "Unscheduled  Distribution"),
subject to all of the following rules and limitations:

          (a) A  Participant  may  receive  no more  than  one  (1)  Unscheduled
     Distribution in any Plan Year.

          (b) The Unscheduled  Distribution amount shall not include any amounts
     deferred  by the  Participant  during  the  same  Plan  Year in  which  the
     Unscheduled Distribution occurs.

          (c) The  Unscheduled  Distribution  amount shall equal ninety  percent
     (90%) of the amount  requested by  Participant.  The  remaining ten percent
     (10%) of the  amount  requested  shall be  permanently  forfeited  from the
     Participant's Deferral Account at the time the Unscheduled  Distribution is
     made and shall no longer be available for  distribution  to the Participant
     from the Plan.

          (d) The Participant  shall not be permitted to make further  deferrals
     to the Plan nor shall the  Participant  be  entitled to any  allocation  of
     Company  contributions  to the Plan prior to the  expiration of twelve (12)
     months from the date of the Unscheduled Distribution.  Following the twelve
     month  period the  Participant  shall be treated  as newly  eligible  under
     Article III and shall be eligible to execute a new  deferral  agreement  as
     provided in Section 3.3.

6.5 Cash Payments Only
    All distributions under the Plan will be made in cash by check.

6.6 Disability
     For the purposes of Sections  6.2 and 6.3, in the event of a  Participant's
Disability, the Participant will be considered to have separated from employment
as of the first day the  Participant  first becomes  eligible for benefits under
the Company's long-term disability plan as then in effect.

6.7 Separation From Employment
     An Employee or Participant  shall incur a separation from employment due to
the voluntary or  involuntary  resignation or discharge from his or her position
with the Company, or his or her death,  retirement,  failure to return to active
work at the end of an authorized leave of absence or the authorized extension(s)
thereof,  or upon the happening of any other event or circumstance  which, under
the  then  current  policy  of  the  Company  results  in the  cessation  of the
employer-employee  relationship.  Separation from employment shall not be deemed
to occur  merely  because  of a transfer  of  employment  between  participating
employers who are affiliated with the Company.

                                   ARTICLE VII
                               PLAN ADMINISTRATION

7.1      Plan Administrator
     This Plan shall be  administered  by the Committee,  which will be the Plan
Administrator.  The  Committee  members  shall be  appointed by and serve at the
pleasure of the Board.

7.2      Amendment or Termination
     The Board may amend any provision of this Plan,  and may terminate the Plan
in its entirety,  at any time and for any reason. No amendment or termination of
the Plan will  reduce  any  Participant's  Deferral  Account  balance  as of the
effective date of such amendment or termination.  Upon  termination of the Plan,
each  Participant's  Deferral Account shall be distributed to the Participant at
the times and in accordance with the distribution rules set forth in Article VI.


<PAGE>



7.3      Administration of the Plan
     The  Committee  shall have the sole  authority  to  control  and manage the
operation  and  administration  of the Plan and have all powers,  authority  and
discretion  necessary or  appropriate to carry out the Plan  provisions,  and to
interpret and apply the terms of the Plan to particular cases or  circumstances.
All  decisions,  determinations  and  interpretations  of the Committee  will be
binding on all interested  parties,  subject to the claims and appeal  procedure
necessary  to satisfy the minimum  standard of ERISA  Section  503,  and will be
given the  maximum  deference  allowed by law.  The  Committee  may  delegate in
writing its responsibilities as it sees fit.

     Committee members who are Participants will abstain from voting on any Plan
matters that relate  primarily to  themselves  or that would cause them to be in
constructive  receipt of amounts credited to their respective  Deferral Account.
The  Board  will  identify  three or more  individuals  to serve as a  temporary
replacement  of the  Committee  members in the event that all three members must
abstain from voting.

7.4      Indemnification
     The Company  will and hereby does  indemnify  and hold  harmless any of its
employees, officers, directors or members of the Committee who have fiduciary or
administrative  responsibilities  with  respect to the Plan from and against any
and all losses, claims, damages,  expenses and liabilities (including reasonable
attorneys'  fees and amounts paid, with the approval of the Board, in settlement
of any claim) arising out of or resulting from the implementation of a duty, act
or decision with respect to the Plan, so long as such duty, act or decision does
not  involve  gross  negligence  or willful  misconduct  on the part of any such
individual.

7.5      Claims Procedure
     A Participant or his Beneficiary  (the "Claimant") may file a written claim
for benefits  under the Plan with the  Committee.  Within sixty (60) days of the
filing of the claim,  the Committee shall notify the Claimant of the Committee's
decision  whether to approve  the claim.  Such  notice  shall  include  specific
reasons  for any  denial of the  claim.  Within  sixty (60) days of the date the
Claimant  was  notified of the denial of a claim,  the  Claimant  may appeal the
Committee's  decision by making a written  submission  containing  any pertinent
information.  Any decision not appealed  within such sixty (60) day period shall
be final,  binding  and  conclusive.  The  Committee  shall  review  information
submitted  with an appeal and render a  decision  within  sixty (60) days of the
submission  of the appeal.  If it is not feasible for the  Committee to render a
decision on an appeal within the  prescribed  sixty (60) day period,  the period
may be extended to a one hundred twenty (120) day period.

                                  ARTICLE VIII
                                  MISCELLANEOUS

8.1      Funding Arrangements
     The Committee shall determine the amounts it deems necessary or appropriate
to fund the Company's obligation to pay Deferral Accounts. Such amounts shall be
held in trust by a trustee  selected by the Board, and shall be earmarked to pay
benefits  under the terms of the Plan.  The Committee will direct the Company to
make  periodic  contributions  to the trust at such times and in such amounts as
the Committee deems appropriate.

     Trust  assets  cannot  be  diverted  to, or used for,  any  purpose  except
payments to Participant and Beneficiaries under the terms of the Plan, or if the
Company  is  insolvent,  to  pay  the  Company's  creditors.   Participants  and
Beneficiaries will have no right against the Company with respect to the payment
of any  portion  of the  Participant's  Deferral  Account,  except  as a general
unsecured creditor of the Company.

8.2      Nonalienation
     No benefit or interest of any  Participant or  Beneficiary  under this Plan
will be subject  to any manner of  assignment,  alienation,  anticipation,  sale
transfer,   pledge   or   encumbrance,   whether   voluntary   or   involuntary.
Notwithstanding  the foregoing,  the Committee will honor community  property or
other  marital  property  rights,  but only to the extent  required by law. Such
rights  shall not  extend to the  recognition  of any order  which  attempts  to
divide,  alienate or otherwise execute or levy on any Deferral Account and which
is  issued  in  connection  with  or  as a  result  of  any  domestic  relations
proceeding,  no  matter  the  nature  of  or  basis  for  the  order.  Prior  to
distribution to a Participant or Beneficiary,  no Deferral  Account balance will
be in any manner subject to the debts,  contracts,  liabilities,  engagements or
torts of the Participant or Beneficiary.  Assets held in trust to fund this Plan
may,  however,  be diverted to pay the  Company's  creditors,  if the Company is
insolvent.

8.3      Limitation of Rights
     Nothing in this Plan will be construed to give a  Participant  the right to
continue in the employ of the Company at any particular position or to interfere
with the right of the Company to discharge,  lay off or discipline a Participant
at any time and for any reason,  or to give the Company the right to require any
Participant to remain in its employ or to interfere with the Participant's right
to terminate his or her employment.

8.4      Governing Law
     To the extent that state law applies,  the  provisions of this Plan will be
construed, enforced and administered in accordance with the laws of the state of
Utah, except to the extent pre-empted by ERISA.

     IN WITNESS WHEREOF, the Company by its duly authorized officer has executed
this Security National Financial  Corporation  Deferred  Compensation Plan as of
the day of , 2002.

                                    Security National Financial Corporation




                                     By:
                                     --------------------------------
                                     Title:-----------------------------


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