UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





[X]  QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934


For
the quarterly period ended March 31, 2008, 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 ofincorporation
      or organization)
            
            (I.R.S.
      EmployerIdentification
      No.)





5300
      South 360 West, Suite 250, Salt Lake City, Utah
            
            84123(Address
      of principal executive office)
            
            (Zip
      Code)Registrant’s
      telephone number, including area code:
            
            (801)
      264-1060





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





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





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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition
of  "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Securities Exchange Act of 1934.  (Check one)





Large
      accelerate filer
            [  ]
            Accelerated
      filer
            [  ]
            Non-accelerated
      filer
            [X]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of 1934):Yes__No  [X]





Indicate
the number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date.




Class A Common Stock, $2.00 par
      value
            
            7,889,280Title of Class
            
            Number of Shares Outstanding as of April 30,
      2008Class C Common Stock, $.20 par
      value
            
            8,492,392Title of Class
            
            Number of Shares Outstanding as of April 30,
      2008




1


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


FORM
10-Q





QUARTER
ENDED MARCH 31, 2008





TABLE
OF CONTENTS








PART
      I - FINANCIAL INFORMATIONItem 1
            Financial
      Statements
            Page
  No.Condensed
      Consolidated Balance Sheets – March 31, 2008 and December 31, 2007,
      (unaudited)
            3-4Condensed
      Consolidated Statements of Earnings for the Three Months Ended March 31,
      2008 and 2007 (unaudited)
            5-6Condensed
      Consolidated Statements of Cash Flows for the Three Months ended March 31,
      2008 and 2007 (unaudited)
            7Notes
      to Condensed Consolidated Financial Statements (unaudited)
            8-17Item 2
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            17-24Item 3
            Quantitative
      and Qualitative Disclosures about Market Risk
            24Item 4
            Controls
      and Procedures
            24PART
      II - OTHER INFORMATIONOther
      Information
            24-30Signature
      Page
            31Certifications
            32-34








2


SECURITY
NATIONAL FINANCIAL CORPORATION


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)





March
      31,
              
              
              December
      31,Assets
              
              2008
              
              
              2007Investments:Fixed
      maturity securities, held to maturity, at amortized cost
              
              $
              106,703,814
              
              
              $
              116,896,016Fixed
      maturity securities, available for sale, at estimated fair
      value
              
              
              2,291,599
              
              
              
              2,880,920Equity
      securities, available for sale, at estimated fair value
              
              
              5,405,055
              
              
              
              5,900,292Mortgage
      loans on real estate and construction loans, net of allowances for
      losses
              
              
              104,163,863
              
              
              
              92,884,055Real
      estate, net of accumulated depreciation
              
              
              8,928,517
              
              
              
              7,946,304Policy,
      student and other loans net, of allowances for doubtful
      accounts
              
              
              18,393,319
              
              
              
              16,860,874Short-term
      investments
              
              
              5,455,591
              
              
              
              5,337,367Accrued
      investment income
              
              
              3,104,847
              
              
              
              3,032,285Total
      investments
              
              
              254,446,605
              
              
              
              251,738,113Cash
      and cash equivalents
              
              
              10,753,823
              
              
              
              5,203,060Mortgage
      loans sold to investors
              
              
              53,626,541
              
              
              
              66,700,694Receivables,
      net
              
              
              13,702,885
              
              
              
              13,743,682Restricted
      assets of cemeteries and mortuaries
              
              
              5,790,136
              
              
              
              5,711,054Cemetery
      perpetual care trust investments
              
              
              1,599,883
              
              
              
              1,604,600Receivable
      from reinsurers
              
              
              754,718
              
              
              
              746,336Cemetery
      land and improvements
              
              
              9,923,733
              
              
              
              9,760,041Deferred
      policy and pre-need contract acquisition costs
              
              
              31,602,869
              
              
              
              30,786,229Property
      and equipment, net
              
              
              14,538,822
              
              
              
              14,828,699Value
      of business acquired
              
              
              11,487,591
              
              
              
              11,686,080Goodwill
              
              
              1,028,026
              
              
              
              1,075,039Other
              
              
              8,041,189
              
              
              
              4,579,018Total
      assets
              
              $
              417,296,821
              
              
              $
              418,162,645






See
accompanying notes to condensed consolidated financial
statements.


3


SECURITY
NATIONAL FINANCIAL CORPORATION


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)


(Unaudited)


March
      31,
              
              
              December
      31,2008
              
              
              2007Liabilities
      and Stockholder's EquityLiabilitiesFuture
      life, annuity, and other benefits
              
              $
              297,100,042
              
              
              $
              296,068,767Unearned
      premium reserve
              
              
              5,147,723
              
              
              
              4,995,664Bank
      loans payable
              
              
              5,449,951
              
              
              
              12,552,666Notes
      and contracts payable
              
              
              685,357
              
              
              
              818,810Deferred
      pre-need cemetery and mortuary contract revenues
              
              
              12,863,377
              
              
              
              12,643,199Accounts
      payable
              
              
              1,977,407
              
              
              
              1,833,188Other
      liabilities and accrued expenses
              
              
              15,277,074
              
              
              
              14,812,845Income
      taxes
              
              
              17,664,492
              
              
              
              16,179,596Total
      liabilities
              
              
              356,165,423
              
              
              
              359,904,735Non-Controlling
      Interest in Perpetual Care Trusts
              
              
              2,517,958
              
              
              
              2,473,758Stockholders'
      EquityCommon
      Stock:Class
      A:  Common Stock - $2.00 par value, 20,000,000 sharesauthorized; issued 7,889,268 shares in 2008 and 7,885,268 shares in
      2007
              
              
              15,778,536
              
              
              
              15,770,458Class
      B: non-voting common stock - $1.00 par value;5,000,000 shares
      authorized; none issued or outstanding
              
              
              -
              
              
              
              -Class
      C:  convertible common stock - $0.20 par value;15,000,000 shares authorized; issued 8,492,510 shares in 2008 and
      8,530,699 in 2007
              
              
              1,698,502
              
              
              
              1,706,140Additional
      paid-in capital
              
              
              17,757,676
              
              
              
              17,737,172Accumulated
      other comprehensive income and other items, net of taxes
              
              
              3,013,041
              
              
              
              1,596,791Retained
      earnings
              
              
              22,478,787
              
              
              
              21,104,156Treasury
      stock at cost - 1,099,590 Class A shares in 2008 and1,104,484
      Class A shares in 2007
              
              
              (2,113,102
              )
              
              
              (2,130,565
              )Total
      stockholders' equity
              
              
              58,613,440
              
              
              
              55,748,152Total
      Liability and Stockholder's Equity
              
              $
              417,296,821
              
              
              $
              418,162,645





See
accompanying notes to condensed consolidated financial
statements.


4


SECURITY
NATIONAL FINANCIAL CORPORATION


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS


(Unaudited)




Three
      Months Ended March 31,2008
              
              
              2007Revenues:Insurance
      premiums and other considerations
              
              $
              8,735,598
              
              
              $
              7,962,275Net
      investment income
              
              
              7,204,250
              
              
              
              7,943,458Net
      mortuary and cemetery sales
              
              
              3,589,995
              
              
              
              3,510,937Realized
      gains (losses) on investments and other assets
              
              
              22,917
              
              
              
              (21,531
              )Mortgage
      fee income
              
              
              33,489,290
              
              
              
              29,521,887Other
              
              
              179,450
              
              
              
              129,126Total
      revenues
              
              
              53,221,500
              
              
              
              49,046,152Benefits
      and expensesDeath
      benefits
              
              
              4,796,863
              
              
              
              4,092,279Surrenders
      and other policy benefits
              
              
              621,271
              
              
              
              608,622Increase
      in future policy benefits
              
              
              3,076,857
              
              
              
              2,743,468Amortization
      of deferred policy and pre-needacquisition costs and value of
      business acquired
              
              
              1,148,371
              
              
              
              1,360,840Selling
      general and administrative expenses:Commissions
              
              
              22,736,386
              
              
              
              22,439,724Salaries
              
              
              6,265,829
              
              
              
              5,784,898Other
              
              
              9,762,690
              
              
              
              7,207,882Interest
      expense
              
              
              2,191,485
              
              
              
              3,099,321Cost
      of goods and services sold -mortuaries and
    cemeteries
              
              
              676,813
              
              
              
              651,740Total
      benefits and expenses
              
              
              51,276,565
              
              
              
              47,988,774Earning
      before income taxes
              
              
              1,944,935
              
              
              
              1,057,378Income
      tax expense
              
              
              (569,479
              )
              
              
              (312,837
              )Net
      earnings
              
              $
              1,375,456
              
              
              $
              744,541Net
      earnings per Class A Equivalentcommon share (1)
              
              $
              0.18
              
              
              $
              0.10Net
      earnings per Class A equivalentcommon share-assuming dilution
      (1)
              
              $
              0.18
              
              
              $
              0.10
 Weighted-average
      Class A equivalent commonshare outstanding (1)
                
                
                7,636,372
                
                
                
                7,459,970Weighted-average
      Class A equivalent commonshares outstanding assuming-dilution
      (1)
                
                
                7,731,996
                
                
                
                7,731,546





See
accompanying notes to condensed financial statements.




5


SECURITY
NATIONAL FINANCIAL CORPORATION


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS (Continued)


(Unaudited)





(1)   Earnings
per share amounts have been adjusted retroactively for the effect of annual
stock dividends.  The weighted-average shares outstanding includes the
weighted-average Class A common shares and the weighted-average Class C common
shares determined on an equivalent Class A common stock basis.  Net
earnings per common share represent net earnings per equivalent Class A common
share.  Net earnings per Class C common share is equal to one-tenth
(1/10) of such amount.





See
accompanying notes to condensed consolidated financial
statements.


6


SECURITY
NATIONAL FINANCIAL CORPORATION


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




Three
      Months Ended March 31,2008
              
              
              2007Cash
      flows from operating activities:Net
      cash provided by operating activities
              
              $
              19,338,399
              
              
              $
              10,321,204Cash
      flows from investing activities:Securities
      held to maturity:Purchase-fixed
      maturity securities
              
              
              -
              
              
              
              (1,501,387
              )Calls
      and maturities - fixed maturity securities
              
              
              10,249,116
              
              
              
              1,056,489Securities
      available for sale:Purchase-fixed
      maturity securities
              
              
              (7,364
              )
              
              
              -Sales-equity
      securities
              
              
              603,222
              
              
              
              -Purchase
      of short-term investments
              
              
              (12,241,316
              )
              
              
              (3,773,896
              )Sales
      of short-term investments
              
              
              12,123,092
              
              
              
              5,463,354Purchase
      of restricted assets
              
              
              (41,310
              )
              
              
              (150,702
              )Changes
      in assets for perpetual care trusts
              
              
              44,200
              
              
              
              31,029Amount
      received for perpetual care trusts
              
              
              (106,378
              )
              
              
              (32,471
              )Mortgage,
      policy, and other loans made
              
              
              (25,130,252
              )
              
              
              (18,046,138
              )Payments
      received for mortgage, policy and other loans
              
              
              11,925,761
              
              
              
              18,056,810Purchase
      of property and equipment
              
              
              (211,481
              )
              
              
              (941,364
              )Disposal
      of property and equipment
              
              
              -
              
              
              
              -Purchase
      of real estate
              
              
              (1,104,757
              )
              
              
              (607,420
              )Sale
      of real estate
              
              
              15,000
              
              
              
              451,633Net
      cash provided by (used in) investing activities
              
              
              (3,882,467
              )
              
              
              5,937Cash
      flows from financing activities:Annuity
      contract receipts
              
              
              1,896,861
              
              
              
              1,454,087Annuity
      contract withdrawals
              
              
              (4,483,827
              )
              
              
              (3,116,326
              )Sale
      of treasury stock
              
              
              17,463
              
              
              
              -Repayment
      of bank loans on notes and contracts
              
              
              (9,883,726
              )
              
              
              (364,817
              )Proceeds
      from borrowing on bank loans
              
              
              2,548,060
              
              
              
              -Net
      cash used in financing activities
              
              
              (9,905,169
              )
              
              
              (2,027,056
              )Net
      cash in cash and cash equivalents
              
              
              5,550,763
              
              
              
              8,300,085Cash
      and cash equivalents at beginning of period
              
              
              5,203,060
              
              
              
              10,376,585Cash
      and cash equivalents at end of period
              
              $
              10,753,823
              
              
              $
              18,676,670





See
accompanying notes to condensed consolidated financial
statements.


7





SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)





1.       Basis of
Presentation





The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by accounting principles generally accepted
in the United States of America for complete financial statements. These
financial statements should be read in conjunction with the consolidated
financial statements of the Company and notes thereto for the year ended
December 31, 2007, included in the Company’s Annual Report on Form 10-K (file
number 0-9341). In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2008 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2008.





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 fairly stated in all material respects.





Certain
2007 amounts have been reclassified to bring them into conformity with the 2008
presentation.





2.      Recent Accounting
Pronouncements





In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles and expands disclosures about fair
value measurements. SFAS No. 157 was effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. In February
2008, the FASB issued FASB Staff Position (FSP FIN) No. 157-2 which extended the
effective date for certain nonfinancial assets and nonfinancial liabilities to
fiscal years beginning after November 15, 2008.  The adoption of SFAS
No. 157 did not have a material effect on the Company’s consolidated financial
statements.  (See note 7)





In
February 2007 the FASB issued SFAS No 159, The Fair Value Option for Financial
Assets and Financial Liabilities – including an amendment of FASB Statement No
115(“SFAS 159”) SFAS 159 allows measurement at fair value of eligible
financial assets and liabilities that are not otherwise measured at fair
value.  If the fair value option for an eligible item is elected,
unrealized gains and losses for that item shall be reported in current earnings
at each subsequent reporting date.  SFAS 159 also establishes
presentation and disclosure requirements designed to draw comparison between the
different measurement attributes the Company elects for similar types of assets
and liabilities.  This statement is effective for fiscal years
beginning after November 15, 2007.  The Company did not apply the fair
value option to any existing financial assets or liabilities as of January 1,
2008.  Consequently, the initial adoption of SFAS No. 159 had no
impact on the Company’s consolidated financial statements.


8


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)





2.      Recent Accounting
Pronouncements (Continued)





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Non-controlling
Interests in Consolidated Financial Statements. SFAS No. 141(R) requires
an acquirer to measure the identifiable assets acquired, the liabilities assumed
and any non-controlling interest in the acquire at their fair values on the
acquisition date, with goodwill being the excess value over the net identifiable
assets acquired. SAFS No. 160 clarifies that a non-controlling interest in a
subsidiary should be reported as equity in the consolidated financial
statements, consolidated net income shall be adjusted to include the net income
attributed to the non-controlling interest and consolidated comprehensive income
shall be adjusted to include the comprehensive income attributed to the
non-controlling interest. The calculation of earnings per share will continue to
be based on income amounts attributable to the parent. SFAS No. 141(R) and SFAS
No. 160 are effective for financial statements issued for fiscal years beginning
after December 15, 2008. Early adoption is prohibited. The Company has not yet
determined the effect on our consolidated financial statements upon adoption of
SFAS No. 141(R) or SFAS No. 160.





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities.  SFAS No. 161 amends SFAS
No. 133, Accounting for
Derivative Instruments and Hedging Activities to require enhanced
disclosures concerning the manner in which an entity uses derivatives (and the
reasons it uses them),  the manner in which derivatives and related
hedged items are accounted for under SFAS No. 133 and interpretations thereof,
and the effects that derivatives and related hedged items have on an entity's
financial position, financial performance, and cash flows.  SFAS No.
161 is effective for financial statements of fiscal years and interim periods
beginning after November 15, 2008.  The Company has not yet determined
the effects on its consolidated financial statements, if any, that may result
upon the adoption of SFAS 161.





3.       Comprehensive
Income





For the
three months ended March 31, 2008 and 2007, total comprehensive income amounted
to $2,791,706 and $1,306,059, respectively. This increase of $1,485,647 was
primarily the result of a increase in net income of $630,915, an increase in
derivatives of $2,469,362, and a decrease in unrealized gains and losses in
securities available for sale of $1,614,630.





4.       Stock-Based
Compensation





The
Company has four fixed option plans (the “1993 Plan,” the “2000 Plan”, the “2003
Plan” and the “2006 Plan”). Compensation cost of $-0- has been recognized for
these plans for the quarters ended March 31, 2007
and  2008.





Options
to purchase 211,000 shares of the Company’s common stock were granted March 31,
2008.  The fair value relating to stock-based compensation is $453,650
and will be expensed as options become available to exercise at the rate of 25%
at the end of each quarter over the next twelve months.





The
weighted-average fair value of each option granted during the quarter ended
March 31, 2008 under the 2003 Plan and 2006 Plan is estimated at $2.15 per share
as of the grant date using the Black-Scholes Option Pricing Model with the
following assumptions: dividend yield of  5%, volatility of 40%,
risk-free interest of  3.4%, and an expected life of ten
years.





The
weighted-average fair value of each option granted in 2007 under the 2006 Plan
is estimated at $2.35 per share as of the grant date using the Black-Scholes
Option Pricing Model with the following assumptions: dividend yield of 5%,
volatility of 47%, risk-free interest rate of 3.4%, and an expected life of ten
years. For the year ended December 31, 2007, the Company calculated compensation
expense of $12,440 related to stock options.





9


The
weighted-average fair value of each option granted in 2006 under the 2006 Plan
is estimated at $3.11 as of the grant date using the Black Scholes Option
Pricing Model with the following assumptions: dividend yield of 5%, volatility
of 42%, risk-free interest rate of 3.4%, and an expected life of ten years. For
the year ended December 31, 2006, the Company calculated compensation expense of
$7,680 related to stock options.





The
Company generally estimates the expected life of the options based upon the
contractual term of the options.  Future volatility is estimated based
upon the historical volatility of the Company’s Class A common stock over a
period equal to the estimated life of the options.  Common stock
issued upon exercise of stock options are generally new share issuances rather
than from treasury shares.





The
Company's Board of Directors granted stock options in 2004 to Scott M. Quist,
the Company's President and Chief Operating Officer, to purchase up to 1,000,000
shares of Class C common stock at exercise prices of $.323 and $.36 per
share.  On May 31, 2007, Mr. Quist made a cashless exercise of such
options to purchase a total of 1,157,625 shares of Class C common stock that he
was entitled to receive, after adjustments for 5% stock dividends issued in
2005, 2006 and 2007.





In
connection with the exercise of such options on a cashless basis, Mr. Quist
delivered and the Company indirectly repurchased a total of 58,376 shares of
Class A common stock from Mr. Quist in exchange for all the Class C shares he
would be entitled to receive for exercising the options.  Inasmuch as
there were 6,966,849 shares of Class C common stock outstanding as of May
31, 2007 out of a total of 7,500,000 authorized shares of Class C common stock,
the Company could legally issue only 533,151 shares of Class C common stock to
Mr. Quist, leaving a balance of 624,474 Class C common shares owing to
him.





In order
to issue the additional shares of Class C common shares owing to Mr. Quist, the
Board of Directors approved on July 13, 2007 an amendment to the Company's
Articles of Incorporation to increase the number of Class C common shares from
7,500,000 shares to 15,000,000 shares.  Because stockholder approval
was also required to amend the Company's Articles of Incorporation, the Company
scheduled a special stockholders meeting on September 21, 2007 to approve the
amendment to the Articles of Incorporation to increase the number of authorized
shares of Class C common stock from 7,500,000 shares to 15,000,000
shares.





On
September 21, 2007 the stockholders approved the amendment to the Articles of
Incorporation at the special stockholders meeting that increased the number of
Class C common shares to 15,000,000 shares, and, as a result, the Company was
able to issue Mr. Quist the additional 624,474 shares of Class C common stock
that were owed pursuant to his exercise of stock options.





5.       Earnings Per
Share





The basic
and diluted earnings per share amounts were calculated as follows:


Three
      Months Ended March 31,2008
              
              
              2007Numerator:Net
      earnings
              
              $
              1,375,456
              
              
              $
              744,541Denominator:Basic
      weighted-average shares outstanding
              
              
              7,636,372
              
              
              
              7,459,970Effect
      of dilutive securities:Employee
      stock options
              
              
              95,624
              
              
              
              269,822Stock
      appreciation rights
              
              
              -
              
              
              
              1,754Dilutive
      potential common shares
              
              
              95,624
              
              
              
              271,576Diluted
      weighted-average shares outstanding
              
              
              7,731,996
              
              
              
              7,731,546Basic
      earnings per share
              
              $
              0.18
              
              
              $
              0.10Diluted
      earnings per share
              
              $
              0.18
              
              
              $
              0.10




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


10


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)





6.          Business Segment




Cemetery/
              
              
              
              
              
              ReconcilingLife
      Insurance
              
              
              Mortuary
              
              
              Mortgage
              
              
              Items
              
              
              ConsolidatedFor
      the Three Months EndedMarch 31,
      2008Revenues
      fromexternal customers
              
              $
              12,829,392
              
              
              $
              3,867,872
              
              
              $
              36,524,236
              
              
              $
              -
              
              
              $
              53,221,500Intersegment
      revenues
              
              
              1,627,829
              
              
              
              23,001
              
              
              
              97,990
              
              
              
              (1,748,820
              )
              
              
              -Segment
      profit (loss)Before income taxes
              
              
              415,222
              
              
              
              379,407
              
              
              
              1,150,306
              
              
              
              -
              
              
              
              1,944,935Identifiable
      Assets
              
              
              391,121,312
              
              
              
              62,370,578
              
              
              
              29,215,409
              
              
              
              (65,410,478
              )
              
              
              417,296,821For
      the Three Months EndedMarch 31, 2007Revenues
      fromexternal customers
              
              $
              11,799,182
              
              
              $
              3,779,216
              
              
              $
              33,467,754
              
              
              $
              -
              
              
              $
              49,046,152Intersegment
      revenues
              
              
              1,337,357
              
              
              
              23,001
              
              
              
              120,160
              
              
              
              (1,480,518
              )
              
              
              -Segment
      profit (loss)Before income taxes
              
              
              605,645
              
              
              
              430,577
              
              
              
              21,156
              
              
              
              -
              
              
              
              1,057,378Identifiable
      Assets
              
              
              355,402,102
              
              
              
              56,375,977
              
              
              
              24,214,000
              
              
              
              (53,850,000
              )
              
              
              382,142,073
  11




SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008, (Unaudited)




7.      Fair Value of Financial
Assets and Financial Liabilities





Financial
Accounting Standards Board (“FASB”) Statement No. 157, Fair Value Measurements(“SFAS No. 157”) is effective for fiscal years beginning after
November 15, 2007. The Company adopted the provisions of SFAS No. 157
as of January 1, 2008 for financial assets and financial liabilities that
are measured at fair value. SFAS No. 157:




·
            Defines
      fair value as the price that would be received to sell an asset or paid to
      transfer a liability in an orderly transaction between market participants
      at the measurement date, and establishes a framework for measuring fair
      value;





·
            Establishes
      a three-level hierarchy for fair value measurements based upon the
      transparency of inputs to the valuation as of the measurement
      date;





·
            Expands
      disclosures about financial instruments measured at fair
      value.




Financial
assets and financial liabilities recorded on the Condensed Consolidated Balance
Sheet at fair value are categorized based on the reliability of inputs to the
valuation techniques as follows:




Level 1:Financial
assets and financial liabilities whose values are based on unadjusted quoted
prices for identical assets or liabilities in an active market that we can
access.






Level 2:Financial
assets and financial liabilities whose values are based on the
following:




a)
            Quoted
      prices for similar assets or liabilities in active
  markets;


b)
            Quoted
      prices for identical or similar assets or liabilities in non-active
      markets; or


c)
            Valuation
      models whose inputs are observable, directly or indirectly, for
      substantially the full  term  of the asset or
      liability





Level 3:Financial
assets and financial liabilities whose values are based on prices or valuation
techniques that require inputs that are both unobservable and significant to the
overall fair value measurement. These inputs may reflect our estimates of the
assumptions that market participants would use in valuing the financial assets
and financial liabilities.




We utilize a combination of
third party valuation service providers, brokers, and internal valuation models
to determine fair value.




The
following tables summarize Level 1, 2 and 3 financial assets and financial
liabilities by their classification in the Condensed Consolidated Statement of
Balance Sheet at March 31, 2008.










12


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)





7.      Fair Value of Financial
Assets and FinancialLiabilities
(Continued)




Valued
      at cost,
              
              Balance
      as ofamortized
              
              March
      31,Level
      1
              
              
              Level
      2
              
              
              Level
      3
              
              
              cost
              
              2008Financial
      AssetsFixed
      maturity securities
              $
              2,291,599
              
              $
              -
              
              $
              -
              
              $
              106,703,814
              
              $
              108,995,413Equity
      securities
              
              5,405,055
              
              
              -
              
              
              -
              
              
              -
              
              
              5,405,055Mortgage
      loans
              
              -
              
              
              -
              
              
              6,117,099
              
              
              98,046,764
              
              
              104,163,863Short-term
      investments
              
              5,455,591
              
              
              -
              
              
              -
              
              
              -
              
              
              5,455,591Total
      Investments
              
              13,152,245
              
              
              -
              
              
              6,117,099
              
              
              204,750,578
              
              
              224,019,922Mortgage
      loans sold to investors
              
              -
              
              
              -
              
              
              53,626,541
              
              
              -
              
              
              53,626,541Other
      assets
              
              -
              
              
              0
              
              
              3,381,864
              
              
              4,659,325
              
              
              8,041,189Total
      Financial Assets
              $
              13,152,245
              
              $
              -
              
              $
              63,125,504
              
              $
              209,409,903
              
              $
              285,687,652Financial
      LiabilitiesOther
      liabilities
              $
              -
              
              $
              -
              
              $
              (2,266,472)
              
              $
              (13,010,602)
              
              $
              (15,277,074)Total
      Financial Liabilities
              $
              -
              
              $
              -
              
              $
              (2,266,472)
              
              $
              (13,010,602)
              
              $
              (15,277,074)





Following
is a summary of changes in the condensed consolidated balance sheet line items
measured using level 3 inputs:




MortgageLoansMortgage
              
              
              Sold
      to
              
              
              Other
              
              
              OtherLoans
              
              
              Investors
              
              
              Assets
              
              
              LiabilitiesBalance
      - December 31, 2007
              
              $
              4,152,985
              
              
              $
              66,700,694
              
              
              $
              1,319,703
              
              
              $
              (2,155,216
              )Total
      Gains (Losses):
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Included
      in earnings
              
              
              (362,360
              )
              
              
              -
              
              
              
              -
              
              
              
              -Included
      in othercomprehensive income
              
              
              -
              
              
              
              -
              
              
              
              2,062,161
              
              
              
              (111,256
              )Purchases,
      issuances, andsettlements
              
              
              2,326,474
              
              
              
              (13,074,153
              )
              
              
              -
              
              
              
              -Transfers
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Balance
      - March 31, 2008
              
              $
              6,117,099
              
              
              $
              53,626,541
              
              
              $
              3,381,864
              
              
              $
              (2,266,472
              )




13


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)





7.      Fair Value of Financial
Assets and FinancialLiabilities
(Continued)





The items
shown under level three are valued as follows:





Mortgage loans.  Mortgage loans have been adjusted to the realizable market
value based upon appraisals from third party appraisers.


Mortgage loans sold to
investors.Through the Company’s Mortgage Banking
operations loans have been sold to third party investors.  The value
shown is the amount due from these investors based upon the market values at the
time of the sale.


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





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





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





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





14


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)





7.      Fair Value of Financial
Assets and FinancialLiabilities
(Continued)





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





8.Other Business
Activity





On
December 29, 2006, the Company, through its wholly owned subsidiary, Security
National Life, entered into an agreement to sell Southern Security Life to
American Network Insurance Company ("American Network"), a Pennsylvania
corporation and wholly owned subsidiary of Penn Treaty America Corporation, a
Pennsylvania corporation. The transaction was subject to and conditioned upon
the subsequent approval of the transaction by the Florida Office of Insurance
Regulation, the Florida Department of Financial Services, and the Pennsylvania
Department of Insurance by an agreed upon date.





The
transaction to sell Southern Security Life was rescinded because the regulatory
authorities did not approve the transaction as required. As a result of the
rescission of the transaction, Articles of Dissolution of Security National Life
were filed with the Florida Division of Corporations on December 24, 2007. The
filing of the Articles of Dissolution completed the liquidation of Southern
Security Life in accordance with the terms of the Agreement and Plan of Complete
Liquidation of Southern Security Life into Security National Life, which had
been approved on December 12, 2005.





On March
5, 2007, the Company received a proposed consent order from the Florida Office
of Insurance Regulation concerning the New Success Life Program, the higher
education product previously being marketed and sold by Southern Security Life
and now marketed and sold by Security National Life. The proposed order states
that as a result of an investigation the Florida Office of Insurance Regulation
has determined that Southern Security Life violated Florida law (i) by knowingly
making statements, sales presentations, omissions or comparisons that
misrepresented the benefits, advantages, or terms of the New Success Life
Program, and (ii) by knowingly making, advertisements, announcements, or
statements containing representations that were untrue or
misleading.





The
proposed order would require Security National Life and Southern Security Life
to immediately cease and desist from making any false or misleading
representations to Florida consumers suggesting that the New Success Life
Program would accumulate enough value to pay for college expenses in full. The
proposed order would also require Security National Life and Southern Security
Life to agree to no longer market or sell the New Success Life Program in the
State of Florida. In addition, Security National Life and Southern Security Life
would be required to send a written notice to Florida consumers who purchased
the New Success Life Program on or after January 1, 1998 stating that the higher
education program is a whole life insurance product, with a term and annuity
rider, and not a college trust fund, savings plan, or other program, and it may
not necessarily pay college expenses in full from the accumulated
value.








15


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)




8.     
Other Business
Activity (Continued)





Moreover,
the written notice is to provide an opportunity for the Florida consumers who
purchased the New Success Life Program on or after January 1, 1998 to
cancel their policy and be given a full refund, including all premiums paid,
together with interest at the agreed upon rate in the original contract. If each
of the Florida consumers who purchased the New Success Life Program after
January 1, 1998 was to cancel his or her policy and receive a refund, the cost
to the Company to refund all premiums paid, including interest, would be
approximately $8,200,000.





The
proposed consent order would also require Security National Life and Southern
Security Life to issue refunds including interest to the eleven policyholders
whose affidavits were taken in connection with the administrative complaint that
the Florida Office of Insurance Regulation had previously filed against Franz
Wallace, the former National Sales Director of Southern Security Life. Security
National Life and Southern Security Life would additionally be required to issue
refunds, including interest, to any Florida policyholder in the New Success Life
Program who had filed a complaint with the Florida Department of Financial
Services or whose coverage had lapsed. Furthermore, Security National Life and
Southern Security Life would be required to notify the state insurance
department in each state in which the New Success Life Program is marketed of
the order and any complaint that Southern Security Life received relating to the
New Success Life Program from policyholders in that state. Finally, Security
National Life and Southern Security Life would be required to pay the Florida
Office of Insurance Regulation a penalty of $100,000 and administrative costs of
$5,000.





The
Company disputes the terms of the proposed consent order. The Company is not
aware of specific concerns that the Florida Office of Insurance Regulation has
with the New Success Life Program because it has received no specific
administrative complaint from the Florida Office nor is it aware of any recent
market conduct examination that the Florida Office has conducted relative to the
program. The Company intends to vigorously oppose the proposed consent order.
The Company is currently engaged in discussions with the Florida Office of
Insurance Regulation in an effort to settle the dispute concerning the proposed
order.  If the Company is unable to reach a satisfactory resolution
with the Florida Office of Insurance Regulation with respect to the terms of the
proposed consent order and the Florida Office of Insurance Regulation issues a
similar order, the Company intends to take action necessary to protect its
rights and interests, including requesting a hearing before an administrative
law judge to oppose the order.





In June
2007, the Company completed the sale of the Colonial Funeral Home property to
the Utopia Station Development Corp. for $730,242, net of selling costs of
$44,758.  The Colonial Funeral Home ceased operations in July 2006 and
has been inactive since that date.  The carrying amount on the
Company's financial statements on June 20, 2007 was $148,777.  As a
result of the sale, including payment of selling expenses, the Company
recognized a gain of $581,465.  The Company received an initial
payment of $15,242, with the remaining amount due of $715,000 to be paid in a
lump sum within a year from the date of sale.





On June
12, 2007, Security National Life Insurance Company entered into a revolving line
of credit with a financial institution to borrow up to $40,000,000. The
revolving line of credit is secured by commercial mortgages and construction
loans.  The terms of the revolving line of credit are for a one year
term and interest is based upon the one year LIBOR rate (6.95% as of March 31,
2008).  Accrued Interest is payable on a monthly basis, with the
principal, together with any outstanding accrued interest, to be paid in full on
June 12, 2008.  Security National Life Insurance Company intends to
use this financing to provide short term liquidity for its commercial mortgage,
construction and warehouse lending operations of its affiliate SecurityNational
Mortgage.  The amount outstanding as of March 31, 2008 was
$0.





Recently,
SecurityNational Mortgage renewed its warehouse lines of credit with its
non-affiliated warehouse lenders.  The total amount available under
these lines of credit is $450,000,000.  The terms of the lines of
credit are for one year, with interest rates ranging from 1.5% to 1.75% over the
three month LIBOR (6.42% to 6.67% as of March 31, 2008).





16


SECURITY
NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES


Notes to
Condensed Consolidated Financial Statements


March 31,
2008 (Unaudited)





8. Other Business Activity
(Continued)





On July
16, 2007, the Company acquired all of the membership interests of C & J
Financial, LLC. The results of C & J Financial’s operations have been
included in the consolidated financial statements from July 16,
2007.





On
December 20, 2007, the Company, through its wholly owned subsidiary, Security
National Life, acquired all of the outstanding common stock of Capital Reserve
Life Insurance Company, a Missouri domiciled insurance company. The results of
Capital Reserve Life’s operations have been included in the consolidated
financial statements from December 17, 2007.





The
$2,100,000 of funds held in escrow by the Company’s attorney have been included
in the accompanying consolidated balance sheet at December 31, 2007 in
receivables with the $1,966,760 liability payable to the shareholders included
in other liabilities and accrued expenses.





The
following unaudited pro forma information has been prepared to present the
results of operations of the Company assuming the acquisitions of C & J
Financial and Capital Reserve Life had occurred at the beginning of the
year ended December 31, 2007. This pro forma information is supplemental
and does not necessarily present the operations of the Company that would have
occurred had the acquisitions occurred on that date and may not reflect the
operations that will occur in the future:





For
      the Three Months Ended(Unaudited)
            
            March
      31, 2007Total
      revenues
            
            $
            50,038,000Net
      earnings
            
            $
            992,000Net
      earnings per Class A equivalent common share
            
            $
            0.12Net
      earnings per Class A equivalent common share assuming
    dilution
            
            $
            0.11





Item
2.  Management’s
Discussion and Analysis of Financial Condition and Results of
Operations





Overview





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





Mortgage
Operations





During
the three months ended March 31, 2008, SecurityNational Mortgage Company
(“SecurityNational Mortgage”) experienced an increase in revenues and expenses
due to the increase in loan revenue of its mortgage
operations.  SecurityNational Mortgage is a mortgage lender
incorporated under the laws of the State of Utah. SecurityNational Mortgage 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. SecurityNational Mortgage obtains loans primarily from independent
brokers and correspondents. SecurityNational Mortgage funds the loans from
internal cash flows and lines of credit from financial institutions.
SecurityNational Mortgage receives fees from the borrowers and other secondary
fees from third party investors that purchase its
loans.  SecurityNational Mortgage sells its loans to third party
investors and does not retain servicing to these loans. SecurityNational
Mortgage pays the brokers and correspondents a commission for loans that are
brokered through SecurityNational Mortgage.  SecurityNational Mortgage
originated and sold 4,507 loans ($870,395,000 total volume) and 5,082 loans
($932,416,000 total volume), for the three months ended March 31, 2008 and 2007,
respectively.





17


The
mortgage industry is currently experiencing substantial change due to higher
than expected delinquencies from subprime loans.  The market for new
subprime loans has been substantially reduced and several mortgage companies
whose primary product was subprime mortgage originations have ceased
operations.  The Company funded $5,505,000 (0.14% of the Company’s
production) in subprime loans during the twelve months ending December 31, 2007
and has currently eliminated subprime loans from its product
offerings.  The Company believes that its potential losses from
subprime loans are minimal.





The
industry problem with subprime mortgages has created a volatile secondary market
for other products, especially alternative documentation (Alt A)
loans.  Alt A loans are typically offered to qualified borrowers who
have relatively high credit scores but are not required to provide full
documentation to support personal income and assets owned. Alt A loans can have
a loan to value ratio as high as 100%. As a result of these changes, the
Company is not offering these loans.





As of
March 31, 2008, the Company was holding a total of $16,649,000 in Alt A loans
that had not been settled by investors.  This is down from $88,581,000
as of June 30, 2007.  The market for the remaining Alt A loans is
uncertain and if the Company was unable to sell its Alt A loans it will be
required to assume the risk of holding and servicing such loans.  If
warehousing lines are not available, the Company believes it has adequate
liquidity through its life insurance operations to carry such loans until
purchased by investors.





Even
though market conditions have improved somewhat, the Company expects further
significant industry challenges to continue through the remainder of
2008.  Under these circumstances it is difficult to predict
profitability, if any.  Profitability may be impacted by volume
reduction, changes in margins, increased borrowing costs, and future loan
losses.  Management has taken and will continue to take a number of
actions in response to the changing market conditions.  These include
the elimination of high risk products, modification of underwriting guidelines,
closing unprofitable branch offices, obtaining new warehousing agreements
at  lower interest rates, and expense reduction
initiatives.





During
the three months ending March 31, 2008, the Company experienced loan losses of
$753,000. This amount was charged against the provision for loan
losses.  The balance of the reserve for loan losses at March 31, 2008 was
$3,306,000.  The provision for loan losses is included in other
general and administrative expenses.  Because of the market conditions
the Company has increased its monthly loan loss to 17.5 basis points of total
production. The Company believes the loan loss reserves are sufficient to cover
reasonably foreseeable future loan losses and that its formula for determining
the provision for such reserves is adequate.





On June
12, 2007, Security National Life Insurance Company entered into a revolving line
of credit with a financial institution to borrow up to $40,000,000. The
revolving line of credit is secured by commercial mortgages and construction
loans.  The terms of the revolving line of credit are for a one year
term and interest is based upon the one year LIBOR rate (6.95% as of March 31,
2008).  Accrued interest is payable on a monthly basis, with the
principal, together with any outstanding accrued interest, to be paid in full on
June 12, 2008.  Security National Life Insurance Company intends to
use this financing to provide short term liquidity for its commercial mortgage,
construction and warehouse lending operations of its affiliate SecurityNational
Mortgage.  The amount outstanding as of March 31, 2008 was
$0.





Recently,
SecurityNational Mortgage renewed its warehouse lines of credit with its non
affiliated warehouse lenders.  The total amount available under these
lines of credit is $450,000,000.  The terms of the lines of credit are
for one year, with interest rates ranging from 1.5% to 1.75% over the three
month LIBOR rate (6.42% to 6.67% as of March 31, 2008).








18


Results
of Operations





Three
Months Ended March 31, 2008 Compared to Three Months Ended March 31,
2008





Total
revenues increased by $4,175,000, or 8.5%, to $53,221,000 for the three months
ended March 31, 2008, from $49,046,000 for the three months ended March 31,
2007.  Contributing to this increase in total revenues was a
$3,967,000 increase in mortgage fee income, a $773,000 increase in insurance
premiums and other considerations, a $79,000 increase in net mortuary and
cemetery sales, a $50,000 increase in other revenues, and a $45,000 increase in
realized gains on investments and other assets.  These increases were
partially offset by a $739,000 decrease in net investment income.





Insurance
premiums and other considerations increased by $773,000, or 9.7%, to $8,736,000
for the three months ended March 31, 2008, from $7,963,000 for the comparable
period in 2007.  This increase was primarily due to the additional
premiums realized from new insurance sales and from the acquisition of Capital
Reserve Life Insurance Company on December 20, 2007.





Net
investment income decreased by $739,000, or 9.3%, to $7,204,000 for the three
months ended March 31, 2008, from $7,943,000 for the comparable period in
2007.  This reduction was primarily attributable to decreased interest
income from mortgage loans on real estate but partially offset by an increase in
investment income from the purchase of C&J Financial and Capital Reserve
Life.





Net
mortuary and cemetery sales increased by $79,000, or 2.3%, to $3,590,000 for the
three months ended March 31, 2008, from $3,511,000 for the comparable period in
2007.  This increase was due to increased at-need sales in the
cemetery and mortuary operations and increased pre-need sales of burial spaces
in the cemetery operations.





Realized
gains on investments and other assets increased by $45,000, or 204.5% to $23,000
for the three months ended March 31, 2008 from a realized loss of $22,000 for
the comparable period in 2007.  This was due to various small gains in
the investment portfolio.





Mortgage
fee income increased by $3,967,000, or 13.4%, to $33,489,000 or the three months
ended March 31, 2008, from $29,522,000 for the comparable period in
2007.  This increase was primarily attributable to an increase in loan
fees during the first quarter of 2008 on loan production at existing mortgage
offices.





Other
revenues increased by $50,000, or 38.8%, to $179,000, for the three months ended
March 31, 2008 from $129,000 for the comparable period in 2007.  This
increase was due to increases in several small income items throughout the
Company's operations.





Total
benefits and expenses were $51,277,000, or 96.3% of total revenues, for the
three months ended March 31, 2007, as compared to $47,989,000 or 97.8% of total
revenues, for the comparable period in 2007.  This increase primarily
resulted from increase loan costs at SecurityNational Mortgage Company and
increases in the loan loss reserve and loan allowances balances.





Death
benefits, surrenders and other policy benefits, and increase in future policy
benefits increased by an aggregate of $1,051,000, or 14.1%, to $8,495,000 for
the three months ended March 31, 2008, from $7,444,000 for the comparable period
in 2007.  This increase was primarily due to increased insurance
business, increased reserves for policyholder benefits and death claims, and
from the acquisition of Capital Reserve Life on December 20, 2007.





Amortization
of deferred policy and pre-need acquisition costs and value of business acquired
decreased by $212,000, or 15.6%, to $1,148,000 for the three months ended March
31, 2008, from $1,360,000 for the comparable period in 2007. This reduction was
primarily due to a decrease in deferred acquisition cost balances associated
with interest sensitive products.





General
and administrative expenses increased by $3,332,000, or 9.4%, to $38,765,00 for
the three months ended March 31, 2008, from $35,433,000 for the comparable
period in 2007.  This increase primarily resulted from an increase in
commission expenses of $297,000, from $22,440,000 in the first quarter of 2007
to $22,737,000 in the first quarter of 2008, due to increased mortgage loan
origination costs made by SecurityNational Mortgage and increased life insurance
sales during the first quarter of 2008.  Salaries increased by
$481,000 from $5,785,000 in the first quarter of  2007 to $6,266,000
in the first quarter of 2008, primarily due to merit increases in salaries of
existing employees and an increase in the number of employees necessitated by
the Company's expanding business operations.  Other expenses increased
by $2,555,000 from $7,208,000 in the first quarter of 2007 to $9,763,000 in the
first quarter of 2008.  The increase in other expenses primarily
resulted from increased costs at SecurityNational Mortgage and increases in the
loan reserves and loan allowances balance.





19


Interest
expense decreased by $908,000, or 29.3%, to $2,191,000 for the three months
ended March 31, 2008, from $3,099,000 for the comparable period in
2007.  This reduction was primarily due to decreased warehouse lines
of credit required for a reduced number of warehoused mortgage loans by
SecurityNational Mortgage.





Cost of
goods and services sold of the mortuaries and cemeteries increased by $25,000,
or 3.8%, to $677,000 for the three months ended March 31, 2008, from $652,000
for the comparable period in 2007.  This increase was primarily due to
increased at-need cemetery sales.





Liquidity
and Capital Resources





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





During
the three months ended March 31, 2008, the Company's operations provided cash of
$19,338,000, while cash totaling $10,321,000 was provided by operations during
the three months ended March 31, 2007. This was due to a decrease of $13,074,000
in the balance of mortgage loans sold to investors, which is attributed to a
lower mortgage loan volume for the first three months of 2008 versus mortgage
loan volume during the first three months of 2007.  The decrease in
such balance resulted from a decrease in mortgage loans originated but not yet
settled by investors as of March 31, 2008.





On June
12, 2007, Security National Life Insurance Company entered into a revolving line
of credit with a financial institution to borrow up to $40,000,000. The
revolving line of credit is secured by commercial mortgages and construction
loans.  The terms of the revolving line of credit are for a one year
term and interest is based upon the one year LIBOR rate (6.95% as of March 31,
2008).  Accrued interest is payable on a monthly basis, with the
principal, together with any outstanding accrued interest, to be paid in full on
June 12, 2008.  Security National Life Insurance Company intends to
use this financing to provide short term liquidity for its commercial mortgage,
construction and warehouse lending operations of its affiliate SecurityNational
Mortgage.  The amount outstanding as of March 31, 2008 was
$0.





Recently,
SecurityNational Mortgage renewed its warehouse lines of credit with its non
affiliated warehouse lenders.  The total amount available under these
lines of credit is $450,000,000.  The terms of the lines of credit are
for one year, with interest rates ranging from 1.5% to 1.75% over the three
month LIBOR (6.42% to 6.67% as of March 31, 2008).





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 predominantly in fixed maturity
securities, mortgage loans, and warehousing of mortgage loans on a short-term
basis before selling the loans to investors in accordance with the requirements
and laws governing the life insurance subsidiaries. Bonds owned by the insurance
subsidiaries amounted to $108,995,000 as of March 31, 2008, compared to
$119,777,000 as of December 31, 2007. This represents 42.8% and 47.6% of the
total investments as of March 31, 2008, and December 31, 2007, respectively.
Generally, all bonds owned by the life insurance subsidiaries are rated by the
National Association of Insurance Commissioners. Under this rating system, there
are six categories used for rating bonds. At March 31, 2008, 3.4% (or
$3,668,000) and at December 31, 2007, 3.1% (or $3,708,000) of the Company’s
total bond investments were invested in bonds in rating categories three through
six, which are considered non-investment grade.





20


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.





Financial
Accounting Standards Board (“FASB”) Statement No. 157, Fair Value Measurements(“SFAS No. 157”) is effective for fiscal years beginning after
November 15, 2007. The Company adopted the provisions of SFAS No. 157
as of January 1, 2008 for financial assets and financial liabilities that
are measured at fair value. SFAS No. 157:




·
            Defines
      fair value as the price that would be received to sell an asset or paid to
      transfer a liability in an orderly transaction between market participants
      at the measurement date, and establishes a framework for measuring fair
      value;





·
            Establishes
      a three-level hierarchy for fair value measurements based upon the
      transparency of inputs to the valuation as of the measurement
      date;





·
            Expands
      disclosures about financial instruments measured at fair
      value.





Financial
assets and financial liabilities recorded on the Condensed Consolidated Balance
Sheet at fair value are categorized based on the reliability of inputs to the
valuation techniques as follows:




Level 1:Financial
assets and financial liabilities whose values are based on unadjusted quoted
prices for identical assets or liabilities in an active market that we can
access.






Level 2:Financial assets and financial liabilities whose values are based on the
following:




a)
            Quoted
      prices for similar assets or liabilities in active
  markets;


b)
            Quoted
      prices for identical or similar assets or liabilities in non-active
      markets; or


c)
            Valuation
      models whose inputs are observable, directly or indirectly, for
      substantially the full term of the asset or
  liability






Level 3:Financial
assets and financial liabilities whose values are based on prices or valuation
techniques that require inputs that are both unobservable and significant to the
overall fair value measurement. These inputs may reflect our estimates of the
assumptions that market participants would use in valuing the financial assets
and financial liabilities.




We utilize a combination of
third party valuation service providers, brokers, and internal valuation models
to determine fair value.




The
following tables summarize Level 1, 2 and 3 financial assets and financial
liabilities by their classification in the Condensed Consolidated Statement of
Balance Sheet at March 31, 2008.








21


Valued
      at cost,
            
            Balance
      as ofamortized
            
            March
      31,Level
      1
            
            
            Level
      2
            
            
            Level
      3
            
            
            cost
            
            2008Financial
      AssetsFixed
      maturity securities
            $
            2,291,599
            
            $
            -
            
            $
            -
            
            $
            106,703,814
            
            $
            108,995,413Equity
      securities
            
            5,405,055
            
            
            -
            
            
            -
            
            
            -
            
            
            5,405,055Mortgage
      loans
            
            -
            
            
            -
            
            
            6,117,099
            
            
            98,046,764
            
            
            104,163,863Short-term
      investments
            
            5,455,591
            
            
            -
            
            
            -
            
            
            -
            
            
            5,455,591Total
      Investments
            
            13,152,245
            
            
            -
            
            
            6,117,099
            
            
            204,750,578
            
            
            224,019,922Mortgage
      loans sold to investors
            
            -
            
            
            -
            
            
            53,626,541
            
            
            -
            
            
            53,626,541Other
      assets
            
            -
            
            
            0
            
            
            3,381,864
            
            
            4,659,325
            
            
            8,041,189Total
      Financial Assets
            $
            13,152,245
            
            $
            -
            
            $
            63,125,504
            
            $
            209,409,903
            
            $
            285,687,652Financial
      LiabilitiesOther
      liabilities
            $
            -
            
            $
            -
            
            $
            (2,266,472)
            
            $
            (13,010,602)
            
            $
            (15,277,074)Total
      Financial Liabilities
            $
            -
            
            $
            -
            
            $
            (2,266,472)
            
            $
            (13,010,602)
            
            $
            (15,277,074) 
 Following
is a summary of changes in the condensed consolidated balance sheet line items
measured using level 3 inputs:
  MortgageLoansMortgage
                
                
                Sold
      to
                
                
                Other
                
                
                OtherLoans
                
                
                Investors
                
                
                Assets
                
                
                LiabilitiesBalance
      - December 31, 2007
                
                $
                4,152,985
                
                
                $
                66,700,694
                
                
                $
                1,319,703
                
                
                $
                (2,155,216
                )Total
      Gains (Losses):
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Included
      in earnings
                
                
                (362,360
                )
                
                
                -
                
                
                
                -
                
                
                
                -Included
      in othercomprehensive income
                
                
                -
                
                
                
                -
                
                
                
                2,062,161
                
                
                
                (111,256
                )Purchases,
      issuances, andsettlements
                
                
                2,326,474
                
                
                
                (13,074,153
                )
                
                
                -
                
                
                
                -Transfers
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      - March 31, 2008
                
                $
                6,117,099
                
                
                $
                53,626,541
                
                
                $
                3,381,864
                
                
                $
                (2,266,472
                )
  The items
shown under level three are valued as follows:





Mortgage loans.  Mortgage loans have been adjusted to the realizable market
value based upon appraisals from third party appraisers.


Mortgage loans sold to
investors.Through the Company’s Mortgage Banking
operations loans have been sold to third party investors.  The value
shown is the amount due from these investors based upon the market values at the
time of the sale.


22


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





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





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





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





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





The
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 March 31, 2008,
and December 31, 2007, the life insurance subsidiary exceeded the regulatory
criteria.





The
Company’s total capitalization of stockholders’ equity, and bank debt and notes
payable was $64,749,000 as of March 31, 2008, as compared to $69,120,000 as of
December 31, 2007. Stockholders’ equity as a percent of total capitalization was
91% and 81% as of March 31, 2008 and December 31, 2007,
respectively.  Bank debt and notes payable decreased $7,236,000 for
the quarter ended March 31, 2008 when compared to December 31, 2007, thus
increasing the stockholders equity percentage.





Lapse
rates measure the amount of insurance terminated during a particular period. The
Company’s lapse rate for life insurance in 2007 was 7.9% as compared to a rate
of 8.4% for 2006. The 2008 lapse rate to date has been approximately the same as
2007.





23


At March
31, 2008, $20,762,000 of the Company’s consolidated stockholders’ equity
represents the statutory stockholders’ equity of the Company’s life insurance
subsidiaries. The life insurance subsidiaries cannot pay a


dividend
to its parent company without the approval of insurance regulatory
authorities.





Item
3.  Quantitative
and Qualitative Disclosures about Market Risk





There
have been no significant changes since the annual report Form 10-K filed for the
year ended December 31, 2007.





Item
4.  Controls and
Procedures





(a)         Evaluation of disclosure controls
and procedures – The Company’s principal executive officer and principal
financial officer have reviewed and evaluated the effectiveness of the Company’s
disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e)
under the Securities Exchange Act of 1934 (the “Exchange Act”) as of March 31,
2008. Based on that evaluation, the principal executive officer and the
principal financial officer have concluded that the Company’s disclosure
controls and procedures are effective, providing them with material information
relating to the Company as required to be disclosed in the reports the Company
files or submits under the Exchange Act on a timely basis.





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





Part
II  Other Information





Item
1.  Legal Proceedings





On March
5, 2007, the Company received a proposed consent order from the Florida Office
of Insurance Regulation concerning the New Success Life Program, the higher
education product previously marketed and sold by Southern Security Life and now
marketed and sold by Security National Life. The proposed order states that as a
result of an investigation the Florida Office of Insurance Regulation has
determined that Southern Security Life violated Florida law (i) by knowingly
making statements, sales presentations, omissions or comparisons that
misrepresented the benefits, advantages, or terms of the New Success Life
Program, and (ii) by knowingly making advertisements, announcements, or
statements containing representations that were untrue or
misleading.





The
proposed order would require Security National Life and Southern Security Life
to immediately cease and desist from making any false or misleading
representations to Florida consumers suggesting that the New Success Life
Program would accumulate enough value to pay for college expenses in full. The
proposed order would also require Security National Life and Southern Security
Life to agree to no longer market or sell the New Success Life Program in the
State of Florida. In addition, Security National Life and Southern Security Life
would be required to send a written notice to Florida consumers who purchased
the New Success Life Program on or after January 1, 1998 stating that the higher
education program is a whole life insurance product, with a term and annuity
rider, and not a college trust fund, savings plan, or other program, and it may
not necessarily pay college expenses in full from the accumulated
value.





Moreover,
the written notice is to provide an opportunity for the Florida consumers who
purchased the New Success Life Program on or after January 1, 1998 to
cancel their policy and be given a full refund, including all premiums paid,
together with interest at the agreed upon rate in the original contract. If each
of the Florida consumers who purchased the New Success Life Program after
January 1, 1998 was to cancel his or her policy and receive a refund, the cost
to the Company to refund all premiums paid, including interest, would be
approximately $8,200,000.





24


The
proposed consent order would also require Security National Life and Southern
Security Life to issue refunds including interest to the eleven policyholders
whose affidavits were taken in connection with the administrative complaint that
the Florida Office of the Insurance Regulation had previously filed against
Franz Wallace, the former National Sales Director of Southern Security Life.
Security National Life and Southern Security Life would additionally be required
to issue refunds, including interest, to any Florida policyholder in the New
Success Life Program who had filed a complaint with the Florida Department of
Financial Services or whose coverage had lapsed. Furthermore, Security National
Life and Southern Security Life would be required to notify the state insurance
department in each state in which the New Success Life Program is marketed of
the order and any complaint that Southern Security Life received relating to the
New Success Life Program from policyholders in that state. Finally, Security
National Life and Southern Security Life would be required to pay the Florida
Office of Insurance Regulation a penalty of $100,000 and administrative costs of
$5,000.





The
Company disputes the terms of the proposed consent order. The Company is not
aware of specific concerns that the Florida Office of Insurance Regulation has
with the New Success Life Program because it has received no specific
administrative complaint from the Florida Office nor is it aware of any recent
market conduct  examination that the Florida Office has conducted
relative to the program. The Company intends to vigorously oppose the proposed
consent order. The Company is currently engaged in discussions with the Florida
Office of Insurance Regulation in an effort to settle the dispute concerning the
proposed order.  If the Company is unable to reach a satisfactory
resolution with the Florida Office with respect to the terms of the proposed
consent order and the Florida Office of InsuranceRegulation
issues a similar order, the Company intends totake
actionnecessary
to protect its rights and interests, including requesting a hearing before an
administrative law judge to oppose the order.





Except
for the proposed consent order from the Florida Office of Insurance Regulation,
the Company is not a party to any material proceedings outside the ordinary
course of business or to any other legal proceedings, which if adversely
determined, would have a material adverse effect on its financial condition or
results of operation.





Item
1A.  Risk Factors





Due to
changes in the mortgage industry from higher than expected delinquencies in
subprime loans, the Company may be unable to sell its alternative documentation
loans to investors, which would require the Company to assume the risk of
holding and servicing such loans.





The
mortgage industry is currently experiencing substantial change due to higher
than expected delinquencies from subprime loans.  The market for new
subprime loans has been substantially reduced and several mortgage companies
whose primary product was subprime mortgage originations have ceased
operations.  The Company funded $5.4 million (0.2% of the Company’s
production) in subprime loans during the twelve months ending December 31, 2007
and has currently eliminated subprime loans from its product
offerings.  The Company believes that its potential losses from
subprime loans are minimal.





The
industry problem with subprime mortgages has created a volatile secondary market
for other products, especially alternative documentation (Alt A)
loans.  Alt A loans are typically offered to qualified borrowers who
have relatively high credit scores but are not required to provide full
documentation to support personal income and assets owned. Alt A loans can have
a loan to value ratio as high as 100%. As a result of these changes, the
Company is not offering these loans.  Alt A loans represented
approximately 21% of the Company’s production for the six months ended June 30,
2007, but only 5% of the production for the third quarter and 0% for the fourth
quarter of 2007.





Even
though the market changed for Alt A loans, SecurityNational Mortgage was able to
maintain volume in the third and fourth quarters by increasing its production of
other mortgage products, primarily government and conforming loans. As of March
31, 2008, the Company had originated a total of $16,649,000 in Alt A loans that
had not been settled by investors.  This is down from $88,581,000 of
Alt A loans at June 30, 2007.  The market for the remaining Alt A
loans is uncertain and, if the Company were unable to sell its Alt A loans, it
would be required to assume the risk of holding and servicing such
loans.  If warehousing lines are not available the Company believes it
has adequate liquidity through its life insurance operations to carry such loans
until purchased by investors.





25


Item
      2.
            Changes
      in Securities and Use of Proceeds





None





Item
      3.
            Defaults
      Upon Senior Securities





None





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





None





Item
      5.
            Other
      Information




Liquidation
of Southern Security Life Insurance Company





On
December 24, 2007, the liquidation of Southern Security Live Insurance Company
(“Southern Security Life”) was completed when Articles of Dissolution of
Southern Security Life were filed with the Florida Division of
Corporations.  Southern Security Life was formerly a Florida domiciled
insurance company and wholly owned subsidiary of Security National Life
Insurance Company (“Security National Life”).  Southern Security Life
was liquated following the rescission by the Company of the transaction to sell
Southern Security Life to American Network Insurance Company, a Pennsylvania
domiciled insurance company.  The transaction was subject to approval
by the Florida Office of Insurance Regulation and other regulatory authorities
by an agreed upon date.  Because the Florida Office of Insurance
Regulation did not approve the transaction by the required date, the transaction
was rescinded.





Southern
Security Life was liquidated in accordance with the terms of the Agreement and
Plan of Complete Liquidation, which the Board of Directors of both the Company
and Security National Life approved on December 12, 2005.  Under the
terms of the agreement, Southern Security Life was liquidated into Security
National Life in essentially the same manner as the liquidation described in
Private Letter Ruling 9847027 in order to achieve the same tax treatment and
consequences under Section 332 of the Internal Revenue Code of 1986, as amended,
and other applicable provisions described in such letter
ruling.  Pursuant to the Agreement and Plan of Complete Liquidation,
all of the insurance business and operations of Southern Security National Life
including $48,528,000 in assets and liabilities, were transferred to Security
National Life on December 28, 2005, by means of a reinsurance
agreement.  Southern Security Life’s remaining assets, including its
capital and surplus, were transferred to Security National Life effective
December 29, 2006.





Acquisition
of Capital Reserve Life Insurance Company





On
December 20, 2007, the Company, through its wholly owned subsidiary, Security
National Life, completed a stock purchase transaction with Capital Reserve Life
Insurance Company, a Missouri domiciled insurance company ("Capital Reserve"),
and its shareholders to purchase all of the outstanding shares of common stock
of Capital Reserve from its shareholders.  Under the terms of the
stock purchase agreement, Security National Life paid the shareholders of
Capital Reserve at closing purchase consideration equal to the capital and
surplus of Capital Reserve as of September 30, 2007 in the amount of $1,271,327,
plus the interest maintenance reserve in the amount of $30,667 and the asset
valuation reserve in the amount of $212,393 as of September 30, 2007, plus
$1,037,967, less certain adjustments.  The adjustments consist of any
losses related to two litigation matters involving Capital Reserve and the
difference in the amount of Capital Reserve's adjusted capital and surplus at
closing compared to the amount of Capital Reserve's adjusted capital and surplus
on September 30, 2007.





At the
closing of the transaction, the shareholders of Capital Reserve deposited
$2,100,000 of the purchase consideration into an escrow account.  The
funds are to remain in escrow until a lawsuit brought by Darlene Russell
("Russell"), a former employee of Capital Reserve, is resolved.  The
litigation involves an action by Russell against Capital Reserve in the Circuit
Court of Cole County, Missouri (the "Russell Litigation") for unpaid bonuses
allegedly due her in the amount of $1,486,045.  If Capital Reserve or
any of its officers, directors, employees or agents is determined to be liable
in the Russell Litigation or if Capital Reserve settles the Russell Litigation,
the escrow agent shall pay from funds in the escrow account any amounts owing to
Russell as a result of such judgment or settlement, including interest,
attorney's fees, and related expenses.





26


Also at
the closing, an escrow agreement was entered into among Security National Life,
Capital Reserve, the shareholders of Capital Reserve, and Mackey Price Thompson
& Ostler as escrow agent.  Under the terms of the escrow
agreement, the escrow agent is instructed to pay any remaining amounts from the
$2,100,000 deposit in the escrow account to the shareholders of Capital Reserve
on a pro rata basis to the number of shares of Capital Reserve common stock held
by the shareholders, after (i) the payment of any judgment or settlement in the
Russell Litigation, (ii) the payment of the costs in defending Capital Reserve
in the Russell Litigation, including attorney's fees and related expenses, and
(iii) the payment of the amount in which Capital Reserve's adjusted capital and
surplus on September 30, 2007 exceeds Capital Reserve's adjusted capital
and surplus on the closing date of the transaction.





As of
December 31, 2006, Capital Reserve had 10,851 policies in force and
approximately 30 agents.  For the year ended December 31, 2006,
Capital Reserve had revenues of $5,663,000 and a net loss of
$244,000.  As of December 31, 2006, the statutory assets and the
capital and surplus of Capital Reserve were $24,084,000 and $1,960,000,
respectively.





Further,
at closing, Security National Life and Capital Reserve entered into a
reinsurance agreement to reinsure the majority of the in force business of
Capital Reserve, as reinsurer, to the extent permitted by the Missouri
Department of Insurance.  Under the terms of the reinsurance
agreement, Security National Life paid a ceding commission to Capital Reserve in
the amount of $1,738,000.  In addition, following the payment of the
ceding commission, Capital Reserve declared a dividend to Security National Life
in the amount of $1,738,000.  The Missouri Insurance Department
approved both the reinsurance agreement and the dividend payment.  The
dividend payment was approved subject to Capital Reserve maintaining capital and
surplus of at least $1,500,000.





As a
result of the reinsurance agreement, certain insurance business and operations
of Capital Reserve were transferred to Security National Life, including all
policies in force as of the effective date thereof.  Any future
business by Capital Reserve is covered by this reinsurance
agreement.  Consequently, except for capital and surplus of
$1,500,000, $23,500,000 in assets and liabilities were transferred from Capital
Reserve to Security National Life pursuant to the reinsurance
agreement.  Following the closing of the transaction, Capital Reserve
will continue to sell and service life insurance, annuity products, accident and
health insurance, and funeral plan insurance.





Acquisition
of C&J Financial





On July
16, 2007, the Company completed a purchase transaction with C & J Financial,
LLC, an Alabama limited liability company ("C & J Financial").  C
& J Financial operates a factoring business with offices in Rainbow City,
Alabama, with an emphasis on providing financing for funeral homes and
mortuaries.  Under the terms of the unit purchase agreement dated July
16, 2007, among the Company, C & J Financial, Henry Culp, Jr. ("Culp") and
Culp Industries, Inc. ("Culp Industries"), the Company purchased all of the
outstanding member units of C & J Financial for a purchase consideration of
(i) $1,250,000 in cash, (ii) a promissory note from the Company to Culp in the
amount of $381,500 plus interest at the rate of 5% per annum, payable over a
period of 24 months in monthly payments of $16,737, including interest, until
paid in full, and (iii) a quit claim deed from C & J Financial to Culp,
conveying ownership of the building and surrounding property located in the
Jester Commercial Park in Rainbow City, Alabama, where C & J Financial
currently maintains its business offices.  At closing, Culp Industries
entered into a lease agreement with C & J Financial to lease to C & J
Financial approximately 5,000 square feet in the building located at the Jester
Commercial Park.  The lease is for a term of three years for which C
& J Financial, as tenant, is required to make monthly payments of $1,200,
for a total lease payment of $43,200.





The unit
purchase agreement additionally required Culp to deliver to the Company at
closing a promissory note in the principal amount of $1,755,236 plus interest at
the rate of 8.25% per annum from C & J Financial, as borrower, to Culp, as
lender, with such note to be cancelled and marked "paid in
full".  Moreover, the agreement provided for the possibility of
adjustments.  If the total equity on the balance sheet of C & J
Financial as of May 31, 2007, defined as total assets minus total liabilities,
is greater than the amount of the equity on the balance sheet of C & J
Financial as of the closing date, on July 16, 2007 Culp agrees to pay to the
Company the difference between the total equity on the balance sheet as of May
31, 2007 and the total equity on the balance sheet as of July 16, 2007 by
reducing the amount of the note by such difference in the amounts of the total
equity on such balance sheets.  The Company has prepared the balance
sheet of C&J Financial as of July 16, 2007 and the total equity on the
balance sheet as of that date was $47,000 less than the total equity on the
balance sheet as of May 31, 2007, which resulted in a $47,000 reduction of the
note.





27


At June
30, 2007, the total assets of C & J Financial were $3,197,000 and total
liabilities were $3,526,000, which includes the note to Culp in the amount of
$1,755,000 that was cancelled at closing.  For the seven month period
from November 1, 2006 to May 31, 2007, total revenues of C & J Financial
were $775,000 and total expenses were $764,000, resulting in net income of
$11,000.  For the fiscal year ended October 31, 2006, total revenues
of C & J Financial were $1,397,000 and total expenses were $1,351,000,
resulting in net income of $46,000.  For the fiscal year ended October
31, 2005, total revenues of C & J Financial were $1,137,000 and total
expenses were $1,114,000, resulting in net income of $23,000.  The
Company anticipates utilizing the employees and operations of C & J
Financial to expand its fast funding operations, which provide financing for
funeral homes and mortuaries.





Exercise
of Stock Options and Special Stockholders Meeting





The
Company's Board of Directors granted stock options in 2004 to Scott M. Quist,
the Company's President and Chief Operating Officer, to purchase up to 1,000,000
shares of Class C common stock at exercise prices of $.323 and $.36 per
share.  On May 31, 2007, Mr. Quist made a cashless exercise of such
options to purchase a total of 1,157,625 shares of Class C common stock that he
was entitled to receive, after adjustments for 5% stock dividends the Company
issued in 2005, 2006 and 2007.





In
connection with the exercise of such options on a cashless basis, Mr. Quist
delivered a total of 58,376 shares of Class A common stock to the Company that
he held in exchange for all the Class C shares he would be entitled to receive
for exercising the options.  Inasmuch as there were 6,966,849 shares
of Class C common stock outstanding as of May 31, 2007 out of a total of
7,500,000 authorized shares of Class C common stock, the Company could legally
issue only 533,151 shares of Class C common stock to Mr. Quist, leaving a
balance of 624,474 Class C common shares owing to him.





In order
to issue the additional shares of Class C common shares owing to Mr. Quist, the
Board of Directors approved on July 13, 2007 an amendment to the Company's
Articles of Incorporation to increase the authorized number of Class C common
shares from 7,500,000 shares to 15,000,000 shares.  Because
stockholder approval was also required to amend the Articles of Incorporation,
the Company scheduled a Special Stockholders Meeting on September 21, 2007 to
approve the amendment to the Articles of Incorporation to increase the
authorized number of shares of Class C common stock to 15,000,000
shares.  The stockholders approved the amendment to the Articles of
Incorporation at the Special Stockholders Meeting, that increased the authorized
number of Class C common shares to 15,000,000 shares, and, as a result, the
Company was able to issue Mr. Quist the additional 624,474 shares of Class C
common stock that were owed pursuant to his exercise of stock
options.





Item 6.
Exhibits, Financial Statement Schedules and Reports on Form 8-K





(a)(1)
            Financial
      Statements





See
“Table of Contents – Part I – Financial Information” under page 2
above





(a)(2)
            Financial Statement
      Schedules





None





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.





28


(3)
            Exhibits





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







3.1
            
            Articles
      of Restatement of Articles of Incorporation (4)3.2
            
            Amended
      Bylaws (6)4.1
            
            Specimen
      Class A Stock Certificate (1)4.2
            
            Specimen
      Class C Stock Certificate (1)4.3
            
            Specimen
      Preferred Stock Certificate and Certificate of Designation of Preferred
      Stock (1)10.1
            
            Restated
      and Amended Employee Stock Ownership Plan and Trust Agreement
      (1)10.2
            
            2003
      Stock Option Plan (5)10.3
            
            2006
      Director Stock Option Plan (12)10.4
            
            Deferred
      Compensation Agreement with George R. Quist (2)10.5
            
            Deferred
      Compensation Plan (3)10.6
            
            Employment
      agreement with J. Lynn Beckstead, Jr. (7)10.7
            
            Employment
      agreement with Scott M. Quist (8)10.8
            
            Stock
      Purchase Agreement among Security National Life Insurance Company,
      Southern Security Life Insurance Company, Memorial Insurance Company of
      America, and the shareholders of Memorial Insurance Company
      (9)10.9
            
            Reinsurance
      Agreement between Security National Life Insurance Company and Memorial
      Insurance Company of America (10)10.10
            
            Trust
      Agreement between Security National Life Insurance Company and Memorial
      Insurance Company of America (10)10.11
            
            Promissory
      Note between Memorial Insurance Company as Maker and Security National
      Life Insurance Company as Payee (10)10.12
            
            Security
      Agreement between Memorial Insurance Company as Debtor and Security
      National Life Insurance Company as Secured Party (10)10.13
            
            Surplus
      Contribution Note between Memorial Insurance Company of America as Maker
      and Southern Security Life Insurance Company as Payee
  (10)10.14
            
            Guaranty
      Agreement by Security National Life Insurance Company and Southern
      Security Life Insurance Company as Guarantors (10)10.15
            
            Administrative
      Services Agreement between Security National Life Insurance Company and
      Memorial Insurance Company of America (10)10.16
            
            Agreement
      and Plan of Complete Liquidation of Southern Security Life Insurance
      Company into Security National Life Insurance Company
  (11)10.17
            
            Assignment
      between Southern Security Life Insurance Company and Security National
      Life Insurance Company(11)10.18
            
            Assignment
      between Southern Security Life Insurance Company and Security National
      Life Insurance Company (12)10.19
            
            Unit
      Purchase Agreement among Security National Financial Corporation, C &
      J Financial, LLC, Henry Culp, Jr., and Culp Industries
      Inc.(13)10.20
            
            Consulting
      Agreement with Henry Culp, Jr., (13)10.21
            
            Employment
      Agreement with Kevin O. Smith (13)10.22
            
            Non-Competition
      and Confidentiality Agreement with Henry Culp, Jr.,
(13)10.23
            
            Stock
      Purchase Agreement among Security National Life Insurance Company, Capital
      Reserve Life Insurance Company, and the shareholders of Capital Reserve
      Life Insurance Company (14)10.24
            
            Indemnification
      Agreement among Security National Life Insurance Company, Capital Reserve
      Life Insurance Company, and the shareholders of Capital Reserve Life
      Insurance Company (15)10.25
            
            Escrow
      Agreement among Security National Insurance Company, Capital Reserve Life
      Insurance Company, the shareholders of Capital Reserve Life Insurance
      Company, and Mackey Price Thompson & Ostler as Escrow Agent
      (15)10.26
            
            Reinsurance
      Agreement between Security National Life Insurance Company and Capital
      Reserve Life Insurance Company (15)10.27
            
            Subsidiaries
      of the Registrant31.1
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as enacted by Section 302 of the
      Sarbanes-Oxley Act of 200231.2
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as enacted by Section 302 of the
      Sarbanes-Oxley Act of 200232.1
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002


29




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


(1)
            
            Incorporated
      by reference from Registration Statement on Form S-1, as filed on June 29,
      1987(2)
            
            Incorporated
      by reference from Annual Report on Form 10-K, as filed on March 31,
      1989(3)
            
            Incorporated
      by reference from Annual Report on Form 10-K, as filed on April 3,
      2002(4)
            
            Incorporated
      by reference from Report on Form 8-K/A as filed on January 8,
      2003(5)
            
            Incorporated
      by reference from Schedule 14A Definitive Proxy Statement, Filed on June
      5, 2003, relating to the Company’s Annual Meeting of
      Shareholders(6)
            
            Incorporated
      by reference from Report on Form 10-Q, as filed on November 14,
      2003(7)
            
            Incorporated
      by reference from Report on Form 10-K, as filed on March 30,
      2004(8)
            
            Incorporated
      by reference from Report on Form 10-Q, as filed on August 13,
      2004(9)
            
            Incorporated
      by reference from Report on Form 8-K, as filed on September 27,
      2005(10)
            
            Incorporated
      by reference from Report on Form 8-K, as filed on January 5,
      2006(11)
            
            Incorporated
      by reference from Report on Form 8-K, as filed on January 12,
      2007(12)
            
            Incorporated
      by reference from Report on Form 10-K, as filed on March 31,
      2007(13)
            
            Incorporated
      by reference from Report on Form 8-K, as filed on August 8,
      2007(14)
            
            Incorporated
      by reference from Report on Form 8-K, as filed November 2,
      2007(15)
            
            Incorporated
      by reference from Report on Form 8-K, as filed January 14,
      2008





(b)
            Reports
      on Form 8-K:




Current
report on Form 8-K, as filed on January 14, 2008





30





SIGNATURES





Pursuant
to the requirements 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.








REGISTRANT





SECURITY NATIONAL FINANCIAL
CORPORATION


Registrant








Dated:
      May 15, 2008
            
            By:/s/ George
      R. QuistGeorge
      R. QuistChairman
      of the Board and Chief Executive Officer(Principal
      Executive Officer)Dated:
      May 15, 2008
            
            By:/s/
      Stephen M. SillStephen
      M. SillVice
      President, Treasurer and Chief Financial Officer(Principal
      Financial and Accounting Officer)






31