SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                FORM 10-K/A NO. 2

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

FOR FISCAL YEAR ENDED DECEMBER 31, 2000

AMENDMENT NO. 2 TO ANNUAL REPORT ON FORM 10-K FOR THE ANNUAL PERIOD ENDED
DECEMBER 31, 2000

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

Commission file number:  811-6268

                             SBM CERTIFICATE COMPANY
           (Formerly SBM Certificate Company, a Minnesota corporation)
             (Exact name of registrant as specified in its charter)

            MARYLAND                                          52-2250397
(State or other Jurisdiction of                            (I.R.S. Employer
Incorporation or Organization)                            Identification No.)

        5101 RIVER ROAD, SUITE 101, BETHESDA, MARYLAND 20816
               (Address ofprincipal executive offices) (Zip Code)
                                  301-656-4200
              (Registrant's telephone number, including area code)

The undersigned registrant hereby includes the following portions of its Annual
Report on Form 10-K for the year ended December 31, 2000, as set forth in the
pages attached hereto:

         Part II.   Item 6.  Selected Financial Data

                    Item 7.  Management's Discussion and Analysis of Financial
                             Condition and Results of Operations

                    Item 8.  Financial Statements and Supplementary Data

         Part III.  Item 13. Certain Relationships and Related Transactions

         Part IV.   Item 14. Exhibits, Financial Statement Schedules and Reports
                             On Form 8-K

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date:  October 29, 2002                              SBM Certificate Company
                                                     By: /s/ Trey Stafford
                                                        ------------------------
                                                        Chief Financial and
                                                        Accounting Officer


<PAGE>

                             SBM Certificate Company
                  AMENDMENT NO. 2 TO ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2000

Reference is made to Exhibit 99.1 (Current Report on Form 8-K dated October 3,
2002) to this Amendment No. 2 to the Annual Report on Form 10-K for the year
ended December 31, 2000, of SBM Certificate Company (the "Company"). Because of
the transactions described in Exhibit 99.1, the Company has restated its
financial statements for the years ended December 31, 2001, and December 31,
2000, and has revised and added certain narrative disclosures, as indicated in
this Amendment.

PART II

ITEM 6. SELECTED FINANCIAL DATA

      The following table contains selected financial data of the Company for
the five years ended December 31, 2000. The financial data was derived from the
Company's audited financial statements. The reports of Reznick, Fedder &
Silverman, independent auditors, with respect to the year ended December 31,
2000, and of Ernst & Young LLP, independent auditors, with respect to the two
years ended December 31, 1999, appear at page F-2, F-3 and F-4 of this Annual
Report. The data should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements, related notes, and other financial information
included in this Annual Report.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                              ----------------------------------------------------------------
                                                2000          1999          1998          1997          1996
                                              --------      --------      --------      --------      --------
                                                               (In thousands, except per share data)
<S>                                           <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA
Total investment income                       $  1,618      $  2,292      $  2,827      $  3,922      $  4,290
Interest credited on certificate reserves       (1,523)       (1,615)       (2,063)       (2,795)       (2,822)
Net investment spread                               95           677           763         1,138         1,468
Total investment and other expenses               (870)         (370)         (576)         (755)         (815)
Federal income tax (expense) benefit               621           102           (54)         (124)         (238)
Net investment income (loss)                      (154)          409           134           259           415
Net realized investment gains (losses)            (429)         (373)         (103)         (164)          317
Net income (loss)                                 (583)           36            31            95           732
Earnings (loss) per share*                       (2.33)         0.14          0.12          0.38          2.93

BALANCE SHEET DATA (END OF PERIOD)
Total assets                                  $ 21,967      $ 34,285      $ 39,354      $ 60,270      $ 55,726
Total liabilities                               21,527        30,117        34,068        45,127        50,186
Shareholder's equity                               440         4,168         5,028         4,982         5,064
</TABLE>

----------
* Earnings (loss) per share based on 250,000 shares issued and outstanding.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

      General

      The Company's predecessor, SBN MN, was incorporated in June 1990 to assume
the face-amount certificate business of SBM Company ("SBM") which began in 1914.
ARM purchased most of the assets of SBM in June 1995 and continued the issuance
of face-amount certificates through SBM MN, then a wholly-owned subsidiary of
ARM. As a result of the Acquisition, the Company has assumed the obligations of
SBM MN's outstanding face-amount certificates and currently offers four series
of single-


                                       2
<PAGE>

payment face-amount certificates. The Company's sole business is issuing fixed
rate face-amount certificates, and servicing those certificates and the
outstanding certificates issued by SMB MN, as described in more detail under
"Item 1. Business," above, and providing related services to holders of the
certificates. The Company manages its mortgage note portfolio through ACFC,
which performs underwriting and closing services for the Company, as well as
other such services to outside brokers and bankers.

      The discussion and analysis of financial condition and results of
operations for 1999 compared with 1998, set forth below is based on the
discussion and analysis of management prior to the Acquisition as included in
SBM MN's Annual Report on Form 10-K for the year ended December 31, 1999. The
term "Company" should be read as SBM MN as the context and time period requires.

Results Of Operations

2000 compared with 1999

      The Company's earnings are derived primarily from the after tax-yield on
invested assets less investment expenses and interest credited on certificate
reserve liabilities. Changes in earnings' trends occur largely due to changes in
the rates of return on investments and the rates of interest credited to the
accounts of certificate holder. Likewise, changes in the make-up of taxable and
tax-advantaged investments will impact the Company's investment portfolio.

      During 2000, total assets decreased $12,317,777, while certificate
liability decreased $9,190,058 and the deferred tax liability increased
$305,209. The decrease in total assets and the certificate liability is
primarily due to maturities, redemptions, early surrenders of certificates
exceeding certificate sales, and the certificate liability release. (See the
discussion in the last paragraph of this discussion of the results of operation
for 2000 compared to 1999 in this connection and Note B to the consolidating
financial statements of SBM Certificate Company and Subsidiary.) The $6,513,805
of dividends paid by SBM MN and SBM MD, resulting primarily from the
Acquisition, also significantly impacted total assets. The increase in the
deferred tax liability was mainly attributable to the new methodology for
calculating the certificate liability subsequent to the Acquisition offset by
the net operating loss carryforward deferred tax asset.

      The Company had net income (loss) of ($582,879) and $36,143 for the years
ended December 31, 2000 and 1999 respectively. Net loss for 2000 stemmed from
the net investment loss of $154,297 and net realized investment loss of
$428,582. Net income for 1999 consisted of net investment income of $408,673 and
net realized investment losses of $372,530.

      Net investment loss (excluding net realized investment gains and losses)
in 2000 was $154,297 compared to net investment income of $408,673 for 1999. The
net investment loss in 2000 of $154,297 is comprised of net investment losses
before income taxes of $775,352 and a deferred income tax benefit of $621,055.
The net investment income in 1999 of $408,673 consists of net investment income
before income taxes of $306,660 and an income tax benefit of $102,013. The
decrease in net investment income before income taxes was a result of materially
diminished certificate sales and a decrease in investments held as a result of
redemptions of certain investments. Certificate sales generate the funds needed
to purchase various investments that can generate excess investment income over
expenses, as well as to serve as qualified investments. In addition, a reserve
for losses on a shareholder receivable was recognized for 2000 in the amount of
$342,236. This reserve relates to a discovery by members of management of the
Company in 2002 of several transactions that raised concerns that John J.
Lawbaugh, the Company's Chairman of the Board and Chief Executive Officer,
failed to comply with provisions of the Investment Company Act of 1940 (the
"1940 Act") prohibiting transactions with affiliated persons of registered
investment companies, caused the Company to fail to comply with disclosure
requirements of the Securities Act of 1933 (the "1933 Act") and the Securities
Exchange Act of 1934 (the "1934 Act"), and diverted cash assets of the Company
to himself directly or indirectly in 2000 in the amount of $342,236. As a
result, on August 16, 2002, the Company's Board of Directors removed Mr.
Lawbaugh from his position as Chairman of the Board and Chief Executive Officer
and suspended his authority to act for or bind the Company with respect to any


                                       3
<PAGE>

transactions (See Note L to the Consolidating Financial Statements for the year
ended December 31, 2000). Since the collectibility of this shareholder
receivable is doubtful, a reserve allowance has been recorded in the full amount
due from shareholder of $342,236. Upon collection of any amount of this
shareholder receivable, income will be recognized in the period in which the
cash is collected.

      Net investment spread, which is the difference between investment income
and interest credited on certificate liability, decreased to $94,760 during 2000
from $676,485 in 1999. These amounts reflect net investment spread of 0.37% and
1.20% during 2000 and 1999, respectively, between the Company's investment yield
on average cash and investments and the average rate credited on certificate
reserves.

      The Company's investment income decreased to $1.6 million from $2.3
million for 2000 and 1999, respectively. These amounts represent investment
yields of 4.30% and 6.20% on average cash and investments of $27.6 million and
$36.9 million for 2000 and 1999, respectively. The decrease in investment income
is primarily attributable to a lower amount of securities investments in 2000 as
compared to 1999.

      Interest credited on certificate liability was $1.5 million and $1.6
million for 2000 and 1999, respectively. These amounts represent average rates
of 5.97% and 5.00% on average certificate liability of $25.5 million and $32.3
million for 2000 and 1999, respectively. The majority of the Company's
outstanding face-amount certificates are fixed-rate three-year contracts.

      The Company monitors credited interest rates for new and renewal issues
against competitive products, mainly bank certificates of deposit. Credited
interest rate adjustments (up or down) on new certificates are made as the
Company deems necessary. New and renewal contracts issued during 2000 have
crediting rates that are generally lower than contracts that matured during that
period, resulting in the overall decrease in the average crediting rate.

      Investment and other expenses were $870,112 and $369,825 for 2000 and
1999, respectively. The increase in investment and other expenses is primarily
attributable to the costs relating to the Acquisition and the reserve for losses
on the shareholder receivable. See Note J and Note L of the Notes to the
Consolidating Financial Statements.

      Net realized investment losses (net of gains) were $428,582 and $372,530
for 2000 and 1999, respectively. Realized investment losses for 2000 are due to
the sale of securities as required of SBM MN in the Acquisition transaction.
Other realized investment gains and losses were primarily interest-rate related
and attributable to the asset/liability management strategies of the Company.
Fixed maturities and equity securities (i.e., non-redeemable preferred stock)
classified as available-for-sale are sold during rising and falling interest
rate environments which can result in period-to-period swings in interest-rate
related realized investment gains and losses as well.

      In the event that the Company experiences higher than historical levels of
certificate surrenders, the Company might need to liquidate investments other
than in accordance with its normal asset/liability management strategy and, as a
result, the Company could experience substantial realized investment losses.

      Certificate liabilities decreased $9.2 million or 30.5% during 2000, as
maturities and surrenders exceeded sales and renewals. The decrease is
attributable to SBM MD's policy not to renew outstanding Certificates and its
inability to sell new Certificates after April 30, 2000. This was due to SBM
MN's decision not to update its prospectus for use in continuing the offer and
sale of Certificates after that date. The Acquisition did not close until July
19, 2000, after which the Company filed amendments to the registration statement
that required review by the SEC. The Company began the resumption of certificate
sales in early 2001. For certificates reaching their maturity date during 2000
and 1999, 34% and 66%, respectively, were renewed.

      1999 Compared With 1998


                                       4
<PAGE>

      During 1999, net income was $36,143 compared to $30,643 in 1998. The
increase was primarily attributable to an increase in net investment income
partially offset by an increase in net realized investment losses. Net
investment income (net income excluding net realized investment gains and
losses) was $408,673 and $133,733 for 1999 and 1998, respectively. The increase
in net investment income was primarily attributable to a decrease in real estate
expenses (due to the sale of real estate in 1998), and lower investment and
other expenses.

      Net investment spread, which is the difference between investment income
and interest credited on certificate liability, decreased to $0.7 million during
1999 from $0.8 million in 1998. These amounts reflect net investment spread of
1.20% and 1.12% during 1999 and 1998, respectively, between the Company's
investment yield on average cash and investments and the average rate credited
on certificate liability.

      The Company's investment income decreased to $2.3 million from $2.8
million for 1999 and 1998, respectively. These amounts represent investment
yields of 6.20% and 6.46% on average cash and investments of $36.9 million and
$43.8 million for 1999 and 1998, respectively. This decrease in annualized
investment yield on cash and investments was primarily attributable to the
Company investing in lower yielding securities during 1999 compared to 1998.

      Interest credited on certificate liability was $1.6 million and $2.1
million for 1999 and 1998, respectively. These amounts represent average rates
of interest credited of 5.00% and 5.30% on average certificate liability of
$32.3 million and $38.7 million for 1999 and 1998, respectively. The majority of
the Company's outstanding face-amount certificates are fixed-rate three year
contracts. The Company monitors credited interest rates for new and renewal
issues against competitive products, mainly bank certificates of deposit.
Credited interest rate adjustments (up or down) on new certificates are made as
the Company deems necessary. New and renewal contracts issued during 1999 have
crediting rates that are generally lower than contracts that matured during that
period, resulting in the overall decrease in the average crediting rate.

      Investment and other expenses were $369,825 and $575,823 for 1999 and
1998, respectively. The decrease in investment and other expenses is primarily
attributable to a decrease in management and investment advisory fees, deferred
acquisition cost amortization and renewal commissions, and real estate expenses
in 1999 of $53,093, $85,316 and $87,813, respectively, compared to 1998.

      Realized investment losses (net of gains) were $470,507 and $152,977 for
1999 and 1998, respectively. Realized investment losses for 1998 include a loss
of $178,795 related to the write-down to fair value and subsequent sale of the
Company's real estate investment. Other realized investment gains and losses
were primarily interest-rate related and attributable to the asset/liability
management strategies of the Company. Fixed maturities and equity securities
(i.e., non-redeemable preferred stock) classified as available-for-sale are sold
during rising and falling interest rate environments which can result in
period-to-period swings in interest-rate related realized investment gains and
losses.

      In the event that the Company experiences higher than historical levels of
certificate surrenders, the Company might need to liquidate investments other
than in accordance with its normal asset/liability management strategy and, as a
result, the Company could experience substantial realized investment losses.

      Certificate reserves decreased $4.0 million or 11.6% during 1999, as
maturities and surrenders exceeded sales and renewals. The Company believes a
factor leading to the decrease was the modest increase in intermediate-term
market interest rates in 1999, which enhanced the attractiveness of competing
products, such as money market funds and bank certificates of deposit. For
certificates reaching their maturity date during 1999 and 1998, 66% and 61%,
respectively, were renewed.

      Asset Portfolio Review

      The Company invests in securities with fixed maturities with the objective
of providing reasonable returns while limiting liquidity and credit risks. The
Company's investments in fixed maturity securities were 100% investment grade as
of


                                       5
<PAGE>

December 31, 2000 and 1999, respectively. Investment grade securities are those
classified as 1 or 2 by the National Association of Insurance Commissioners, or
where such classifications are not available, securities are classified by a
nationally recognized statistical rating organization (i.e., Standard & Poor
Corporation's rating of BBB- or above). Additionally, the Company's investment
portfolio includes mortgage loans and equity securities. As of December 31,
2000, the Company held no securities that had defaulted on principal or interest
payments, but had two mortgage notes receivable that were in default of
scheduled payment. Each of these mortgage notes is secured by improved real
estate with a market value that, in the Company's opinion, exceeds the amounts
due under the notes.

      Fixed maturities include mortgage-backed and asset-backed securities,
corporate securities, U.S. Treasury securities and other government obligations.
Mortgage-backed securities ("MBSs"), which include pass-through securities and
collateralized mortgage obligations ("CMOs"), totaled $8.8 million at December
31, 2000, representing 41.6% of total qualified assets (30.1% at December 31,
1999). MBSs, including CMOs, are subject to risks associated with prepayments of
the underlying mortgage loans. Prepayments cause these securities to have actual
maturities different from those expected at the time of purchase. The degree to
which a security is susceptible to either an increase or decrease in yield due
to prepayment speed adjustments is influenced by the difference between its
amortized cost and par, the relative sensitivity of the underlying mortgages
backing the assets to prepayments in a changing interest rate environment and
the repayment priority of the securities in the overall securitization
structure. Prepayment sensitivity is evaluated and monitored, giving full
consideration to the collateral characteristics, such as weighted average coupon
rate, weighted average maturity and the prepayment history of the specific loan
pool. Additionally, the Company routinely projects the various terms of its
liabilities and assets cash flows to monitor the level of liquidity for maturing
face-amount certificates.

      Based on the provisions of Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," the Company currently classifies its fixed maturity and equity
securities as available-for-sale. Such securities are carried at fair value and
changes in fair value, net of related deferred income taxes, are charged or
credited directly to shareholder's equity. Fluctuations in interest rates during
2000 and the Acquisition, which created a new amortized cost for SBM-MD equal to
the fair market value at the Acquisition date, resulted in unrealized gains, net
of tax, of $212,791 at December 31, 2000 compared to unrealized losses of
$825,522 at December 31, 1999. Volatility in reported shareholder's equity
occurs as a result of the application of SFAS No. 115, which requires some
assets to be carried at fair value while other assets and all liabilities are
carried at historical values. As a result, adjusting the shareholder's equity
for changes in the fair value of the Company's fixed maturities and equity
securities without reflecting offsetting changes in the value of the Company's
liabilities or other assets creates volatility in reported shareholder's equity
but does not reflect the underlying economics of the Company's business.

      Liquidity and Financial Resources

      As of December 31, 2000, the Company had $.5 million of qualified assets
in excess of the minimum amount required by the 1940 Act and the rules and
regulations promulgated thereunder by the SEC, as computed in accordance with
Section 28(a) and Section 28(b) of the 1940 Act.

      The primary liquidity requirement of the Company relates to its payment of
certificate maturities and surrenders. The principal sources of cash to meet
such liquidity requirements are investment income and proceeds from maturities
and redemptions of investments.

      At December 31, 2000, cash and cash equivalents totaled $3.7 million, a
decrease of $10.7 million from December 31, 1999. The Company's aim is to manage
its cash and cash equivalents position so as to satisfy short-term liquidity
needs. In connection with this management of cash and cash equivalents, the
Company may invest idle cash in short duration fixed maturities to capture
additional yield when short-term liquidity requirements permit.


                                       6
<PAGE>

      Cash flows of $1.6 million, $2.1 million and $2.2 million were generated
from (used in) operating activities in 2000, 1999 and 1998, respectively. These
cash flows resulted principally from investment income, less management and
investment advisory fees and commissions paid. Proceeds from sales, redemptions
and maturities of investments generated $6.4 million, $37.0 million, and $50.1
million in cash flows during 2000, 1999 and 1998, respectively, which were
offset by purchases of investments of $3.5 million, $22.5 million and $49.3
million, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The Company's financial statements begin on page F-2. Reference is made to
the Index to Financial Statements on page F-1 of this Annual Report. No
supplementary financial information is required to be filed in this Annual
Report.

PART III

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      State Bond provides the Company with management, marketing and
administrative services pursuant to an Administrative Services Agreement dated
as of July 19, 2000 between the Company and its parent, State Bond. Under the
terms of that Agreement, State Bond makes available certain of its property,
equipment and facilities to the Company for use in its business operations.
State Bond also provides the Company with certain special services, including
personnel, and furnishes or otherwise makes available accounting, auditing and
legal services to the Company. The Company's officers also are officers of State
Bond. The annual charge to the Company for the services and facilities provided
by State Bond is 2% of the Company's average certificate liability balances. At
no time, however, may the charge cause the Company to have assets of less than
the total of the qualified investments and capital stock required under the 1940
Act. SBM waived its fee under the Administrative Services Agreement through
September 30, 2000. During the fourth quarter of 2000, a fee of $112,223 was
charged to the Company, of which $40,289 remained payable to State Board of
December 31, 2000. As indicated earlier, State Bond's parent, 1st Atlantic is
wholly owned by John J. Lawbaugh and Brian P. Smith, officers and Directors of
the Company.

      In connection with the Acquisition, certain dividend payments were made by
the Company to its former, and to its current, parent. See Note A of the Notes
to Consolidating Financial Statements. Also, from time-to-time the Company makes
dividend payments to its parent, State Bond, which, in turn may make dividend
payments to 1st Atlantic, State Bond's parent.

      Recently, the Company confirmed facts that came to its attention regarding
several transactions involving Mr. Lawbaugh, the Company's former Chairman of
the Board and Chief Executive Officer. These transactions failed to comply with
provisions of the 1940 Act prohibiting transactions with affiliated persons of
registered investment companies, caused the Company to fail to comply with
disclosure requirements of the 1933 Act and the 1934 Act, and diverted cash
assets of the Company to himself, directly or indirectly, in 2000 in the amount
of $342,236. See Exhibit 99.1 to this Form 10-K/A No. 2.

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) DOCUMENTS FILED AS PART OF THIS REPORT

1.    FINANCIAL STATEMENTS.

      See financial statements index on page F-1 for a listing of financial
statements and related reports of independent auditors included in this report.

2.    FINANCIAL STATEMENT SCHEDULES


                                       7
<PAGE>

      The following financial statement schedules of the Company and the related
Report of Independent Auditors are incorporated herein as follows:

      Report of Independent Auditors

      Schedule I        Investment in Securities of Unaffiliated
                        Issuers-December 31, 2000

      Schedule III      Mortgage loans on real estate and interest earned on
                        mortgages - December 31, 2000

      Schedule V        Qualified Assets on Deposit-December 31, 2000

      Schedule VI       Certificate Reserves-Year Ended December 31, 2000

      Schedule VIII     Supplementary profit and loss information

      Schedule XII      Valuation and Qualifying Accounts-December 31, 2000

Schedules required by Article 6 of Regulation S-X for face-amount certificate
investment companies other than those listed are omitted because they are not
required, are not applicable, or equivalent information has been included in the
financial statements and notes thereto, or elsewhere herein.

3.    EXHIBITS


              NUMBER            DESCRIPTION

              (2)               Stock Purchase Agreement dated March 28, 2000 by
                                and among 1st Atlantic Guaranty Corporation, SBM
                                Certificate Company, and ARM Financial Group
                                (Exhibits omitted), incorporated by reference to
                                Exhibit (2) to Form 8-K dated March 28, 2000 of
                                1st Atlantic Guaranty Corporation (File No.
                                333-41361).

              (3)(a)            Articles of Incorporation of the Company,
                                incorporated by reference to Exhibit (3)(a) of
                                Post-effective Amendment No. 11 to Registration
                                Statement No. 33-38066 filed on September 28,
                                2000.

              (3)(a)(i)         Certificate of Correction of Articles of
                                Incorporation of the Company incorporated by
                                reference to Exhibit (3)(a)(i) of Post-effective
                                Amendment No. 13 to Registration Statement No.
                                33-38066 filed on January 2, 2001.

              (3)(b)            By-Laws of the Company incorporated by reference
                                to Exhibit (3)(b) of Post-effective Amendment
                                No. 11 to Registration Statement No. 33-38066
                                filed on September 28, 2000.

              (4)(a)            Form of Application, incorporated by reference
                                to Exhibit (4)(a) of Post-effective Amendment
                                No. 11 to Registration Statement No. 33-38066
                                filed on September 28, 2000.


                                       8
<PAGE>

              (4)(b)            Form of Account Statement, incorporated by
                                reference to Exhibit (4)(b) of Post-effective
                                Amendment No. 11 to Registration Statement No.
                                33-38066 filed on September 28, 2000.

              (10)(a)           Administrative Services Agreement dated July 19,
                                2000 by and between the Company and State Bond &
                                Mortgage Company, L.L.C., incorporated by
                                reference to Exhibit (10)(a) of Post-effective
                                Amendment No. 13 to Registration Statement No.
                                33-38066 filed on January 2, 2001.

              (10)(b)           Custody Agreement, as amended and supplemented,
                                between the Company (as successor to SBM
                                Certificate Company (Minnesota)) and First Trust
                                National Association (now U.S. Bank Trust N.A.)
                                dated December 20, 1990, incorporated by
                                reference to Exhibit (10)(b) to Form S-1
                                Registration Statement No. 33-38066) filed on
                                January 2, 1991.

              (21)              Subsidiary of the Company.

              (24)              Powers of Attorney, incorporated by reference to
                                Exhibit (24) to Form 10-K filed on April 17,
                                2001.

              (99.1)            Form 8-K Current Report of the Company,
                                incorporated by reference to Form 8-K dated
                                October 3, 2002 (File No. 811-06268).

              (99.2)            Written Statement of the Chief Executive
                                Officer.

              (99.3)            Written Statement of the Chief Financial
                                Officer.

----------
(b)   REPORTS ON FORM 8-K

      No Current Report on Form 8-K was filed by the Company covering an event
during the fourth quarter of 2000. No amendments to previously filed Form 8-K
were filed during the fourth quarter of 2000.



                                       9
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

                                                                           PAGE

Independent Auditors' Report                                                F-2
Report of Independent Auditors                                              F-3
Financial Statements
     Consolidating Balance Sheets as of December 31, 2000                   F-5
     Balance Sheet as of December 31, 1999                                  F-6
     Consolidating Statement of Operations and Comprehensive
        Income (Loss) for year ended December 31, 2000                      F-7
     Statements of Operations and Comprehensive Income (Loss)
        for years ended December 31, 1999 and 1998                          F-8
     Consolidating Statement of Shareholder's Equity for year ended
        December 31, 2000                                                   F-9
     Statement of Shareholder's Equity for years ended December 31,
        1999 and 1998                                                       F-10
     Consolidating Statement of Cash Flows for year ended December 31,
        2000                                                                F-11
     Statements of Cash Flows for years ended December 31, 1999
        and 1998                                                            F-13
     Notes to Consolidating Financial Statements for year ended
        December 31, 2000                                                   F-14

Supplemental Schedules
     Schedule I - Investments in Securities of Unaffiliated Issuers         S-1
     Schedule III - Mortgage Loans on Real Estate and Interest
        Earned on Mortgages                                                 S-4
     Schedule V - Qualified Assets on Deposit                               S-5
     Schedule VI - Certificate Reserves                                     S-6
     Schedule VIII - Supplementary Profit and Loss Information              S-12
     Schedule XII - Valuation and Qualifying Accounts                       S-13


                                      F-1

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Shareholder and Board of Directors
SBM Certificate Company

      We have audited the accompanying consolidating balance sheet of SBM
Certificate Company and Subsidiary as of December 31, 2000, and the related
consolidating statements of operations and comprehensive income (loss),
shareholder's equity, and cash flows for the year then ended. These
consolidating financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidating
financial statements based on our audit. The financial statements of SBM
Certificate Company (formerly SBM Certificate Company, a Minnesota Corporation)
as of December 31, 1999 and for each of the years in the two-year period ended
December 31, 1999, were audited by other auditors whose report, dated March 31,
2000, except for the last paragraph of Note A, as to which the date is July 19,
2000, expressed an unqualified opinion.

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

      In our opinion, the consolidating financial statements referred to above
present fairly, in all material respects, the financial position of SBM
Certificate Company and Subsidiary at December 31, 2000, and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, the supplemental financial statement schedules, when considered
in relation to the basic consolidating financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

As discussed in Note L to the financial statements, certain errors resulting in
an understatement of previously reported cash and overstatement of certain
qualified assets as of December 31, 2000, exclusion of a deferred tax liability
and a deferred income tax benefit, and a reclassification of certain amounts
within the components of shareholder's equity as of December 31, 2000, were
discovered by the management of the Company during the current year.
Accordingly, the 2000 financial statements have been restated to correct the
error.

/s/ Reznick Fedder & Silverman

Bethesda, Maryland
March 22, 2001, except for
Notes H,J,K and L, as to which the date
is October 4, 2002

                                       F-2


<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
SBM Certificate Company (Minnesota)

We have audited the accompanying balance sheet of SBM Certificate Company
(Minnesota) as of December 31, 1999, and the related statements of operations,
shareholder's equity, and cash flows for each of the two years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SBM Certificate Company
(Minnesota) at December 31, 1999, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.


                                            /s/ Ernst & Young LLP

Louisville, Kentucky
March 31, 2000
Except for the second paragraph of Note A, as to which the date is
July 19, 2000


                                      F-3

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
SBM Certificate Company (Minnesota)

We have audited the financial statements of SBM Certificate Company (Minnesota)
as of December 31, 1999, and for each of the two years in the period ended
December 31, 1999, and have issued our report thereon dated March 31, 2000,
except for the second paragraph of Note A, as to which the date is July 19,
2000. Our audit also included the financial statement schedules listed in Item
14(a) of this Annual Report. These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.

In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic statements taken as a whole, present fairly
in all material respects the information set forth herein.


                                            /s/ Ernst & Young LLP

Louisville, Kentucky
March 31, 2000


                                       F-4

<PAGE>

                     SBM Certificate Company and Subsidiary

                           CONSOLIDATING BALANCE SHEET

                                December 31, 2000
<TABLE>
<CAPTION>

                                                            SBM Certificate   Atlantic Capital    Eliminating
                                                                Company         Funding Corp.       Entries            Totals
                                                            ---------------   ----------------    ------------      ------------
<S>                                                           <C>               <C>               <C>               <C>
Qualified assets
  Cash and investments
    Investments in securities of unaffiliated issuers
      Fixed maturities, available-for-sale, at fair value
        (amortized cost: $12,654,435)                         $ 13,001,000      $         --      $         --      $ 13,001,000
      Equity securities, at fair value (cost: $200,663)            200,663                --                --           200,663
    Mortgage notes held for sale                                 2,786,369           273,883                --         3,060,252
    Mortgage notes held for investment                             363,130           352,732                --           715,862
    Certificate loans                                              110,069                --                --           110,069
    Cash and cash equivalents                                    2,715,502         1,000,891                --         3,716,393
                                                              ------------      ------------      ------------      ------------
      Total cash and investments                                19,176,733         1,627,506                --        20,804,239
                                                              ------------      ------------      ------------      ------------
  Receivables

    Dividends and interest                                          99,421                --                --            99,421
    Escrow receivable                                              266,482                --                --           266,482
                                                              ------------      ------------      ------------      ------------
      Total receivables                                            365,903                --                --           365,903
                                                              ------------      ------------      ------------      ------------
      Total qualified assets                                    19,542,636         1,627,506                --        21,170,142

Other assets
  Related party receivable                                              --             1,000            (1,000)               --
  Computer software                                                 68,003                69                --            68,072
  Investment in subsidiary                                       1,572,958                --        (1,572,958)               --
  Goodwill, net of accumulated amortization of $18,143             635,006                --                --           635,006
  Deferred acquisition costs                                        80,436                --                --            80,436
  Due from shareholder                                             342,236                --                --           342,236
  Allowance - due from shareholder                                (342,236)               --                --          (342,236)
  Other assets                                                      13,466                --                --            13,466
                                                              ------------      ------------      ------------      ------------
      Total assets                                            $ 21,912,505      $  1,628,575      $ (1,573,958)     $ 21,967,122
                                                              ============      ============      ============      ============
Liabilities
  Certificate liability                                       $ 20,926,628      $         --      $         --      $ 20,926,628
  Accounts payable and other liabilities                           239,743             2,197                --           241,940
  Related party payable                                              1,000            53,420            (1,000)           53,420
  Deferred tax liability                                           305,209                --                 --          305,209
                                                              ------------      ------------      ------------      ------------
      Total Liabilities                                         21,472,580            55,617            (1,000)       21,527,197
                                                              ------------      ------------      ------------      ------------
Shareholder's equity
  Common stock, $1 par value; 1,000,000 shares
    authorized; 250,000 shares issued and outstanding              250,000                --                --           250,000
  Common stock, $2 par value; 10,000 shares
    authorized; 10,000 shares issued and outstanding                    --            20,000           (20,000)               --
  Additional paid-in capital                                     1,676,457         1,553,957        (1,553,957)        1,676,457
  Accumulated comprehensive income, net of taxes                   212,791                --                --           212,791
  Retained earnings (deficit)                                   (1,699,323)             (999)              999        (1,699,323)
                                                              ------------      ------------      ------------      ------------
      Total shareholder's equity                                   439,925         1,572,958        (1,572,958)          439,925
                                                              ------------      ------------      ------------      ------------
      Total liabilities and shareholder's equity              $ 21,912,505      $  1,628,575      $ (1,573,958)     $ 21,967,122
                                                              ============      ============      ============      ============
</TABLE>

                 See notes to consolidating financial statements


                                       F-5


<PAGE>

                             SBM Certificate Company

                                  BALANCE SHEET

                                December 31, 1999

Qualified assets
  Cash and investments
    Investments in securities of unaffiliated issuers
      Fixed maturities, available-for-sale, at fair value
        (amortized cost: $19,886,594)                              $ 18,998,215
      Equity securities, at fair value (cost: $290,688)                 353,545
    Certificate loans                                                   124,933
    Cash and cash equivalents                                        14,407,479
                                                                   ------------
      Total cash and investments                                     33,884,172
                                                                   ------------
  Receivables
    Dividends and interest                                              180,962
    Receivable for investment securities sold                            53,997
                                                                   ------------
      Total receivables                                                 234,959
                                                                   ------------
      Total qualified assets                                         34,119,131
                                                                   ------------
Other assets
  Deferred acquisition costs                                            150,400
  Other assets                                                           15,368
                                                                   ------------
      Total assets                                                 $ 34,284,899
                                                                   ============
Liabilities
  Certificate liability                                            $ 30,116,686
                                                                   ------------
      Total liabilities                                              30,116,686
                                                                   ------------
Shareholder's equity
  Common stock, $1 par value; 1,000,000 shares authorized;
    250,000 shares issued and outstanding                               250,000
  Additional paid-in capital                                          3,050,000
  Accumulated other comprehensive loss from net
    unrealized gains and losses on available-for-sale securities       (825,522)
  Retained earnings                                                   1,693,735
                                                                   ------------
      Total shareholder's equity                                      4,168,213
                                                                   ------------
      Total liabilities and shareholder's equity                   $ 34,284,899
                                                                   ============

                 See notes to consolidating financial statements


                                      F-6
<PAGE>


                     SBM Certificate Company and Subsidiary

      CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                                    SBM Certificate   Atlantic Capital    Eliminating
                                                       Company         Funding Corp.        Entries          Totals
                                                    ---------------   ----------------    -----------      -----------
<S>                                                   <C>               <C>               <C>              <C>
Investment income
  Interest and dividend income from securities        $ 1,474,281       $           --    $        --      $ 1,474,281
  Other investment income                                 106,673                   --             --          106,673
  Loss from investment in subsidiary                         (999)                  --            999               --
  Mortgage interest income                                 36,975                   --             --           36,975
                                                      -----------       --------------    -----------      -----------
     Total investment income                            1,616,930                   --            999        1,617,929
                                                      -----------       --------------    -----------      -----------
Investment and other expenses
  Management and investment advisory fees                 180,923                   --             --          180,923
  Deferred acquisition cost amortization and
    renewal commissions                                   150,445                   --             --          150,445
  Amortization of goodwill                                 18,143                   --             --           18,143
  Reserve for losses - shareholder receivable             342,236                   --             --          342,236
  Other expenses                                          177,366                  999             --          178,365
                                                      -----------       --------------    -----------      -----------
      Total investment and other expenses                 869,113                  999             --          870,112
                                                      -----------       --------------    -----------      -----------
Interest credited on certificate liability              1,523,169                   --             --        1,523,169
                                                      -----------       --------------    -----------      -----------
      Net investment loss before income taxes            (775,352)                (999)           999         (775,352)
                                                      -----------       --------------    -----------      -----------
Deferred income tax benefit                               621,055                   --             --          621,055
                                                      -----------       --------------    -----------      -----------
      Net investment income (loss)                       (154,297)                (999)           999         (154,297)
                                                      -----------       --------------    -----------      -----------
Realized investment losses                               (428,582)                  --             --         (428,582)
Income tax expense on realized investment losses               --                   --             --               --
                                                      -----------       --------------    -----------      -----------
      Net realized investment losses                     (428,582)                  --             --         (428,582)
                                                      -----------       --------------    -----------      -----------
      Net loss                                           (582,879)                (999)           999         (582,879)
                                                      -----------       --------------    -----------      -----------
Other comprehensive income (loss):
  Unrealized gains on available-for-sale
    Securities, net of taxes

      Net unrealized gain, net of taxes                   502,906                   --             --          502,906
                                                      -----------       --------------    -----------      -----------
Net comprehensive income (loss)                       $   (79,973)       $        (999)   $       999      $   (79,973)
                                                      ===========       ==============    ===========      ===========
</TABLE>

                 See notes to consolidating financial statements

                                       F-7


<PAGE>

                             SBM Certificate Company

            STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

                             Year ended December 31,

<TABLE>
<CAPTION>
                                                                          1999              1998
                                                                      -----------       -----------
<S>                                                                   <C>               <C>
Investment income
  Interest income from securities                                     $ 2,261,957       $ 2,699,491
  Other investment income                                                  29,602           127,006
                                                                      -----------       -----------
      Total investment income                                           2,291,559         2,826,497
                                                                      -----------       -----------
Investment and other expenses
  Management and investment advisory fees                                 154,042           207,135
  Deferred acquisition cost amortization and renewal commissions          193,973           279,289
  Real estate expenses                                                      2,610            90,423
  Other expenses (income)                                                  19,200            (1,024)
                                                                      -----------       -----------
      Total investment and other expenses                                 369,825           575,823
                                                                      -----------       -----------
Interest credited on certificate liability                              1,615,074         2,063,311
                                                                      -----------       -----------
      Net investment income before income taxes                           306,660           187,363

Income tax benefit (expense)                                              102,013           (53,630)
                                                                      -----------       -----------
      Net investment income                                               408,673           133,733
                                                                      -----------       -----------
Realized investment losses                                               (470,507)         (152,977)
Income tax benefit on realized investment losses                           97,977            49,887
                                                                      -----------       -----------
      Net realized investment losses                                     (372,530)         (103,090)
                                                                      -----------       -----------
      Net income                                                      $    36,143       $    30,643
                                                                      ===========       ===========
Other comprehensive income (loss):
  Unrealized gain (loss) on available-for-sale securities
    Unrealized holding gain (loss) in current year                    $  (895,970)      $    24,192
    Income tax                                                                 --            (8,467)
                                                                      -----------       -----------
      Net unrealized gain (loss) during period                           (895,970)           15,725
                                                                      -----------       -----------
Net other comprehensive income (loss)                                 $  (859,827)      $    46,368
                                                                      ===========       ===========
</TABLE>

                 See notes to consolidating financial statements


                                       F-8

<PAGE>

                     SBM Certificate Company and Subsidiary

                 CONSOLIDATING STATEMENT OF SHAREHOLDER'S EQUITY

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                                                                  SBM CERTIFICATE COMPANY
                                                    --------------------------------------------------------------------------------
                                                     Common                    Additional   Accumulated   Retained        Total
                                                     Stock                     Paid-in     Comprehensive  Earnings     Shareholder's
                                                     Shares      Amount        Capital     Income (Loss)  (Deficit)       Equity
                                                     ------      ------        -------     -------------  ---------    -------------
Balance at December 31, 1999                         250,000    $ 250,000    $ 3,050,000    $(825,522)   $ 1,693,735    $ 4,168,213
                                                    --------------------------------------------------------------------------------
<S>                                                 <C>          <C>          <C>             <C>          <C>             <C>
Net loss SBM-MN                                           --           --             --           --       (429,447)      (429,447)

Changes in net unrealized gains(losses)
   On available-for-sale securities,
   Net of tax                                             --           --             --      290,115             --        290,115

Dividends paid                                            --           --             --           --     (3,708,384)    (3,708,384)

Sale of SBM-MN as a reverse merger
   Transaction (July 19, 2000)                      (250,000)    (250,000)    (3,050,000)     535,407      2,444,096       (320,497)
                                                    --------------------------------------------------------------------------------


Balance at July 9, 2000                                   --    $      --    $        --    $      --    $        --    $        --
                                                    --------------------------------------------------------------------------------

Issuance of Common Stock                             250,000      250,000             --           --             --        250,000

Additional paid-in capital                                --           --      1,102,500           --             --      1,102,500

Additional paid-in capital-non cash                       --           --        573,957           --             --        573,957

Changes in net unrealized gains
  (losses) on available-for-sale
  securities, net of tax                                  --           --             --      212,791             --        212,791

Retained earnings (deficit):
  Dividends paid, net                                     --           --             --           --     (2,805,421)            --

  Certificate liability release, net of tax               --           --             --           --      1,259,530             --

  Net loss since acquisition                              --           --             --           --       (153,432)            --
                                                    --------------------------------------------------------------------------------
  Consolidated retained
    earnings (deficit)                                    --           --             --           --             --     (1,699,323)
                                                    --------    ---------    -----------    ---------    -----------    -----------
Balance at December 31, 2000                         250,000    $ 250,000    $ 1,676,457    $ 212,791    $(1,699,323)   $   439,925
                                                    ========    =========    ===========    =========    ===========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                                   ATLANTIC CAPITAL FUNDING CORPORATION
                                         -------------------------------------------------------------                   Total
                                         Common               Additional     Retained       Total                     Consolidating
                                         Stock                 Paid-in       Earnings    Shareholder's  Eliminating   Shareholder's
                                         Shares    Amount      Capital       (Deficit)      Equity        Entries        Equity
                                         ------    ------      -------       ---------      ------        -------        ------
<S>                                      <C>      <C>        <C>            <C>          <C>            <C>            <C>
Balance at July 9, 2000                      --   $     --   $        --    $      --    $        --    $        --    $       --

Issuance of Common Stock                     --         --            --           --             --             --       250,000

Additional paid-in capital                   --         --     1,000,000           --      1,000,000     (1,000,000)    1,102,500

Additional paid-in capital-non cash      10,000     20,000       553,957           --        573,957       (573,957)      573,957

Changes in net unrealized gains
  (losses) on available-for-sale
  securities, net of tax                     --         --            --           --             --             --       212,791

Retained earnings (deficit):
  Dividends paid, net                        --         --            --           --                            --            --

  Certificate liability release,
    net of tax                               --         --            --           --                            --            --

  Net loss since acquisition                 --         --            --         (999)
  Consolidated retained
    earnings (deficit)                       --         --                                      (999)           999    (1,699,323)
                                         ------  ---------   -----------    ---------    -----------    ----------     ----------
Balance at December 31, 2000             10,000   $ 20,000   $ 1,553,957    $    (999)   $ 1,572,958    $(1,572,958)   $  439,925
                                         ======   ========   ===========    =========    ===========    ===========    ==========
</TABLE>

                 See notes to consolidating financial statements


                                       F-9

<PAGE>

                             SBM Certificate Company

                       STATEMENTS OF SHAREHOLDER'S EQUITY

                             Year ended December 31,

<TABLE>
<CAPTION>
                                                                            Accumulated
                                                           Additional         Other                               Total
                                            Common           Paid-in       Comprehensive       Retained        Shareholder's
                                            Stock            Capital       Income (loss)       Earnings           Equity
                                         -----------       -----------     -------------      -----------      -------------
<S>                                      <C>               <C>              <C>               <C>              <C>
Balance, December 31, 1997               $   250,000       $ 3,050,000      $    54,723       $ 1,626,949      $ 4,981,672

  Net income                                      --                --               --            30,643           30,643

  Change in net unrealized
    gains on available-for-sale
    securities, net of tax                        --                --           15,725                --           15,725
                                         -----------       -----------      -----------       -----------      -----------
  Comprehensive income                                                                                              46,368
                                                                                                               -----------
Balance, December 31, 1998                   250,000         3,050,000           70,448         1,657,592        5,028,040

  Net income                                      --                --               --            36,143           36,143

  Change in net unrealized
    gains (losses) on available-
    for-sale securities, net of tax               --                --         (895,970)               --         (895,970)
                                         -----------       -----------      -----------       -----------      -----------
  Comprehensive loss                                                                                              (859,827)
                                                                                                               -----------
Balance, December 31, 1999               $   250,000       $ 3,050,000      $  (825,522)      $ 1,693,735      $ 4,168,213
                                         ===========       ===========      ===========       ===========      ===========
</TABLE>

                 See notes to consolidating financial statements


                                      F-10

<PAGE>

                     SBM Certificate Company and Subsidiary

                      CONSOLIDATING STATEMENT OF CASH FLOWS

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                                       SBM Certificate   Atlantic Capital     Eliminating
                                                           Company         Funding Corp.         Entries            Totals
                                                       ---------------   ----------------     ------------       ------------
<S>                                                       <C>              <C>                <C>                  <C>
Cash flows from operating activities
  Net loss                                                $ (582,879)      $       (999)      $        999         $ (582,879)
  Adjustments to reconcile net loss to net
  cash provided by (used in) operating activities
    Loss from investment in subsidiary                           999                 --               (999)                --
    Provision for certificate liability                    1,523,169                 --                 --          1,523,169
    Reserve for losses - shareholder receivable              342,236                 --                 --            342,236
    Realized investment losses                               428,582                 --                 --            428,582
    Deferred income tax benefit                             (621,055)                                                (621,055)
    Deferral of acquisition costs                            (80,800)                --                 --            (80,800)
    Amortization of deferred acquisition costs
     and renewal commissions                                 150,445                 --                 --            150,445
    Other amortization and depreciation                       18,947                 --                 --             18,947
    Decrease in dividends and interest receivable             41,252                 --                 --             41,252
    Changes in other assets and liabilities                  375,769              1,890                 --            377,659
                                                        ------------       ------------       ------------       ------------
      Net cash provided by (used in)
        operating activities                               1,596,665               891                 --           1,597,556
                                                        ------------       ------------       ------------       ------------
Cash flows from investing activities Fixed maturity
  investments:
    Purchases                                               (263,808)                --                 --           (263,808)
    Sales and redemptions                                  6,434,532                 --                 --          6,434,532
  Purchase of mortgage notes held for sale                (2,816,735)                --                 --         (2,816,735)
  Investment in mortgage notes held for investment          (375,000)                --                 --           (375,000)
  Investment in subsidiary                                (1,000,000)                --          1,000,000                 --
  Cash paid for SBM                                       (1,350,000)                --                 --         (1,350,000)
  Purchase of computer software                              (68,003)                --                 --            (68,003)
  Repayment of certificate loans, net                         14,864                 --                 --             14,864
                                                        ------------       ------------       ------------       ------------
      Net cash provided by investing activities              575,850                 --          1,000,000          1,575,850
                                                        ------------       ------------       ------------       ------------
Cash flows from financing activities
  Amounts paid to face-amount certificate holders         (8,718,868)                --                 --         (8,718,868)
  Proceeds from issuance of common stock                     250,000                 --                 --            250,000
  Capital contributed to company                           1,102,500          1,000,000         (1,000,000)         1,102,500
  Amounts received from face-amount
    certificate holders                                       15,681                 --                 --             15,681
  Net dividends paid                                      (6,513,805)                --                 --         (6,513,805)
                                                        ------------       ------------       ------------       ------------
      Net cash provided by (used in)
        financing activities                             (13,864,492)         1,000,000         (1,000,000)       (13,864,492)
                                                        ------------       ------------       ------------       ------------
      NET INCREASE (DECREASE) IN CASH
        AND CASH EQUIVALENTS                             (11,691,977)         1,000,891                 --        (10,691,086)

Cash and cash equivalents, beginning                      14,407,479                 --                 --         14,407,479
                                                        ------------       ------------       ------------       ------------
Cash and cash equivalents, end                          $  2,715,502       $  1,000,891       $         --       $  3,716,393
                                                        ============       ============       ============       ============
</TABLE>

                                  (continued)


                                      F-11

<PAGE>

                     SBM Certificate Company and Subsidiary

                CONSOLIDATING STATEMENT OF CASH FLOWS - CONTINUED

                          Year ended December 31, 2000

Supplemental disclosure of significant non-cash
  investing and financing activities:
  Release of certificate liability,
  net of tax                                            $  1,259,530
                                                        ============
  Acquisition of SBM-MN:
    Assets acquired                                     $ 27,390,982
    Liabilities assumed                                  (26,557,263)
    Legal acquisition costs                                 (136,868)
    Goodwill                                                 653,149
                                                        ------------
      Total purchase price                              $  1,350,000
                                                        ============
Contribution of 1st Atlantic ownership
  of ACFC to SBM-MD                                     $     20,000
                                                        ============
Contribution of mortgage notes from 1st
  Atlantic to ACFC                                      $    553,957
                                                        ============

                 See notes to consolidating financial statements


                                      F-12

<PAGE>

                             SBM Certificate Company

                            STATEMENTS OF CASH FLOWS

                             Year ended December 31,

<TABLE>
<CAPTION>
                                                                       1999            1998
                                                                   ------------    ------------
<S>                                                                <C>             <C>
Cash flows from operating activities
  Net income                                                       $     36,143    $     30,643
  Adjustments to reconcile net income to net cash
  provided by operating activities
    Provision for certificate liability                               1,615,074       2,063,311
    Realized investment losses                                          470,507         152,977
    Deferral of acquisition costs                                      (140,145)       (325,523)
    Amortization of deferred acquisition costs and
      renewal commissions                                               193,973         279,289
    Other amortization and depreciation                                  23,711         110,043
    Deferred tax expense (benefit)                                       11,513         (79,525)
    Decrease in dividends and interest receivable                       115,051          32,503
    Changes in other assets and liabilities                            (247,085)        (57,214)
                                                                   ------------    ------------
      Net cash provided by operating activities                       2,078,742       2,206,504
                                                                   ------------    ------------
Cash flows from investing activities
  Fixed maturity investments:
    Purchases                                                       (22,469,407)    (49,260,045)
    Maturities and redemptions                                       26,873,872      24,117,893
    Sales                                                            10,171,240      26,000,513
  Sales, maturities and redemptions - mortgage loans
    and real estate                                                          --         260,296
  Repayment of certificate loans, net                                    39,276          22,083
                                                                   ------------    ------------
      Net cash provided by investing activities                      14,614,981       1,140,740
                                                                   ------------    ------------
Cash flows from financing activities
  Amounts paid to face-amount certificate holders                    (5,737,826)    (13,423,346)
  Amounts received from face-amount certificate holders                 171,612         301,208
                                                                   ------------    ------------
      Net cash used in financing activities                          (5,566,214)    (13,122,138)
                                                                   ------------    ------------
      NET INCREASE (DECREASE) IN CASH
        AND CASH EQUIVALENTS                                         11,127,509      (9,774,894)
Cash and cash equivalents, beginning                                  3,279,970      13,054,864
                                                                   ------------    ------------
Cash and cash equivalents, end                                     $ 14,407,479    $  3,279,970
                                                                   ============    ============
</TABLE>

                 See notes to consolidating financial statements


                                      F-13

<PAGE>

                     SBM Certificate Company and Subsidiary

                   NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

                        December 31, 2000, 1999 and 1998

NOTE A - ORGANIZATION AND BUSINESS

      ORGANIZATION AND ACQUISITIONS

      SBM Certificate Company and Subsidiary (the "Company") consists of SBM
      Certificate Company, a Maryland Corporation ("SBM-MD") and Atlantic
      Capital Funding Corporation ("ACFC"). SBM-MD was formed on May 24, 2000
      under the laws of the State of Maryland. SBM-MD is a wholly owned
      subsidiary of State Bond and Mortgage Company, LLC ("State Bond"). 1st
      Atlantic Guaranty Corporation ("1st Atlantic"), a Maryland Corporation, is
      the sole member of State Bond. SBM-MD is an issuer of face-amount
      certificates and is registered under the Investment Company Act of 1940
      (the "1940 Act").

      On July 19, 2000, State Bond completed the purchase of 100% of the issued
      and outstanding shares of common stock of SBM Certificate Company, a
      Minnesota Corporation ("SBM-MN") (the "Acquisition"), from ARM Financial
      Group, Inc., ("ARM"), a Delaware corporation, which was under bankruptcy
      proceedings at the time of the Acquisition. SBM-MN was a wholly-owned
      subsidiary of ARM and an issuer of face-amount certificates under the
      Investment Company Act of 1940.

      State Bond effected the Acquisition as assignee under a Stock Purchase
      Agreement, dated March 28, 2000, by and among 1st Atlantic, SBM-MN and
      ARM. State Bond is a 100% owned subsidiary of 1st Atlantic.

      The Stock Purchase Agreement provided for a purchase price of $1,400,000,
      which allowed for an adjustment to the purchase price based on actual
      asset values at the date of the Acquisition. As a result, the purchase
      price was reduced to $1,350,000, of which $950,000 was paid directly to
      ARM and $400,000 is being held by an escrow agent for 18 months as
      security for certain post-closing obligations and liabilities of ARM under
      the Stock Purchase Agreement. The transaction was accounted for as a
      reverse merger using the purchase method of accounting, whereby SBM-MD
      became the surviving corporation.

      The Acquisition was financed by a short-term bank loan made to State Bond,
      in the amount of $1,500,000. The loan provided for a floating and
      fluctuating rate of interest equal to the prime rate. State Bond's
      President, his wife and other officers also personally guaranteed this
      loan.


                                      F-14

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE A - ORGANIZATION AND BUSINESS (Continued)

      ORGANIZATION AND ACQUISITIONS (Continued)

      On July 19, 2000, upon completion of the Acquisition, SBM-MD declared and
      paid a cash dividend in the amount of $1,500,000 to its parent, State
      Bond, which used these proceeds to repay the bank borrowing described
      above. Immediately prior to the closing of the sale, SBM-MN paid a
      dividend to ARM in an amount equal to SBM-MN's shareholders' equity less
      (i) $450,000 and(ii) estimated deferred acquisition cost net of income
      taxes. The dividend, totaling $3,708,384 was in the form of a transfer of
      certain securities, in-kind, and the balance, in cash and cash
      equivalents. The transaction was approved by the Bankruptcy Court on
      behalf of ARM on April 27, 2000.

      As a result of the Acquisition transactions, SBM-MD has succeeded SBM-MN
      as the "registrant" in all filings made by SBM-MN under the Securities Act
      of 1933, Securities Exchange Act of 1934 and Investment Act of 1940 (the
      "1940 Act").

      The Stock Purchase Agreement and related transactions described above were
      part of the proceedings involved in a voluntary petition for relief under
      Chapter 11 of the Bankruptcy Code filed on December 20, 1999 in the United
      States Bankruptcy Court for the District of Delaware by ARM. The Stock
      Purchase Agreement, ultimate purchase of SBM-MN by 1st Atlantic (through
      State Bond) and dividend paid to ARM, among other transactions, were
      approved by the Bankruptcy Court.

      On December 17, 2000, 1st Atlantic contributed its 100% ownership interest
      in ACFC by assigning its 10,000 shares of ACFC common stock to SBM-MD,
      along with two mortgage notes (the "Contribution"). The Contribution
      resulted in additional paid-in capital to SBM-MD for the investment in
      ACFC, which totaled $573,957. SBM-MD also invested $1 million into ACFC on
      this date. ACFC was formed under the laws of the State of Maryland on
      March 27, 1997 and is a wholly-owned subsidiary of SBM-MD at December 31,
      2000.

      NATURE OF OPERATIONS

      SBM-MD is engaged in the business of issuing face-amount certificates. A
      face-amount certificate is an obligation of the issuer to pay a face, or
      principal amount, plus specified interest, to the holder of the
      certificate. Under the certificates, the face amount may be paid at the
      end of a certificate's Guarantee Period or at its Maturity Date. Lesser
      amounts are paid at such times if all or part of an investment in the
      Certificate is withdrawn prior to maturity or the end of any Guarantee
      Period. Interest, as described above, may be paid quarterly or annually,
      or compounded.


                                      F-15

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE A - ORGANIZATION AND BUSINESS (Continued)

      NATURE OF OPERATIONS (Continued)

      The Company currently offers four series of single-payment investment
      certificates. The Company's face-amount certificate operations include
      issuance of single-payment certificates and the servicing of outstanding
      single-payment and installment certificates, the investment of related
      funds, and other related service activities.

      The Company's gross margin is derived primarily from the margin between
      earnings on its investments and amounts paid or credited on its fixed-rate
      certificate deposits ("investment spread"). The Company's net investment
      income (loss) is determined by deducting investment and other expenses and
      income taxes. The investment spread is affected principally by general
      economic conditions, government monetary policy, the policies of
      regulatory authorities that influence market interest rates, and the
      Company's ability to respond to changes in such rates. Changes in market
      interest rates may have a negative impact on its earnings.

      ACFC is a mortgage broker that originates residential and commercial loans
      and assigns certain loans to SBM-MD at closing. SBM-MD purchases these
      loans at ACFC's cost.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      BASIS OF PRESENTATION

      The preparation of consolidating financial statements in conformity with
      generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and contingent assets and liabilities at the date of the
      financial statements and the reported amounts of income and expenses
      during the reporting period. Actual results could differ from those
      estimates.

      PRINCIPLES OF CONSOLIDATING

      The consolidating financial statements include the accounts of SBM-MD and
      its wholly-owned subsidiary, ACFC. All significant inter-company balances
      and transactions have been eliminated.


                                      F-16

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      CASH AND INVESTMENTS

      Fixed maturities and equity securities are classified as
      available-for-sale. Available-for-sale securities are stated at fair
      value, with the unrealized gains and losses, net of taxes, reported as a
      separate component of shareholder's equity in accordance with Statement of
      Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
      Investments in Debt and Equity Securities." The amortized cost of fixed
      maturities classified as available-for-sale is adjusted for amortization
      of premiums and accretion of discounts to maturity, or in the case of
      mortgage-backed securities, over the estimated life of the security. Such
      amortization or accretion is computed using the interest method and is
      included in investment income. Anticipated prepayments on mortgage-backed
      securities are considered in determining the effective yield on such
      securities. If a difference arises between anticipated and actual
      prepayments, the carrying value of the investment is adjusted with a
      corresponding charge or credit to investment income. Interest and
      dividends are included in investment income. Certificate loans are carried
      at their unpaid principal balances. Cash and cash equivalents consist of
      highly liquid investments with maturities of three months or less from the
      time of purchase. Security transactions are accounted for on the date the
      order to buy or sell is executed. Realized gains and losses on the sale of
      investments are determined based upon the specific identification method.

      MORTGAGE NOTES HELD FOR SALE

      Mortgage notes receivable held for sale are carried at the lower of cost
      or market value. The market value is determined by evaluating, on a loan
      by loan basis, the note receivable stated interest rate compared to the
      market interest rate for a similar note and adjusting for the borrower's
      credit rating.

      MORTGAGE NOTES HELD FOR INVESTMENT

      Mortgage notes receivable are carried at amortized cost. A loan loss
      reserve is recognized for management's estimate of unrecoverable amounts.
      Unrecoverable balances are determined by management based on an evaluation
      of the borrower and the value of the real estate securing the loan.


                                      F-17

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      DEFERRED ACQUISITION COSTS

      Costs of issuing new face-amount certificates, principally commissions,
      have been deferred. These costs are amortized on a straight-line basis
      over the initial maturity period of the certificates which is three years.

      CERTIFICATE LIABILITY

      Face-amount certificates issued by the Company entitle certificate
      holders, who have made either single or installment payments, to receive a
      definite sum of money at maturity. The certificate liability accrues
      interest, and cash surrender values are less than the accumulated
      certificate liability prior to maturity dates. The certificate liability
      accumulation rates, cash surrender values, certificate liability and
      certificate reserves, among other matters, are governed by the 1940 Act.

      Following the Acquisition, a methodology for calculating the certificate
      liability was adopted and implemented, whereby the certificate liability
      is carried at the certificate's face-amount plus interest accrued at a
      minimum guaranteed rate. This methodology is in accordance with Section 28
      of the Investment Company Act of 1940. Application of this method of
      calculating the liability resulted in a reduction of the certificate
      liability, net of tax of $1,259,530 at Acquisition. This amount is
      reflected as an adjustment to the retained earnings in the financial
      statements.

      INCOME TAXES

      The Company accounts for income taxes using the asset and liability
      approach, which requires the recognition of deferred tax assets and
      liabilities for the expected future tax consequences of temporary
      differences between the carrying and tax bases of assets and liabilities.
      A valuation allowance is recorded if, based upon the evidence available,
      it is more likely than not that some portion or all of the deferred tax
      assets will not be realized.

      GOODWILL

      Goodwill resulted from the Acquisition transaction and is being amortized
      over 15 years.

      COMPUTER SOFTWARE COSTS

      Computer software costs are carried at cost and depreciated using the
      straight-line method over a period of five years beginning the date placed
      in service. As of December 31, 2000, the asset is still in development and
      has not been placed in service.


                                      F-18

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE C - INVESTMENTS

      The amortized cost and estimated fair values of available-for-sale
      securities were as follows:

<TABLE>
<CAPTION>
                                                                    Gross             Gross
     December 31, 2000                             Cost        Unrealized Gain  Unrealized Loss    Fair Value
                                                -----------    ---------------  ---------------    -----------
<S>                                             <C>              <C>              <C>              <C>
       Fixed maturities
         Mortgage-backed                        $ 8,485,032      $   236,944      $     1,849      $ 8,720,127
           securities
         Corporate securities                     3,632,239           97,246            7,297        3,722,188
         U.S. Treasury securities
           and obligations of U.S.
           government agencies                      410,123            9,065               --          419,188
         Obligations of state and
           political subdivisions                   127,041           12,456               --          139,497
                                                -----------      -----------      -----------      -----------
         Total fixed maturities                  12,654,435          355,711            9,146       13,001,000
         Equity securities                          200,663               --               --          200,663
                                                -----------      -----------      -----------      -----------
       Total available-for-sale securities      $12,855,098      $   355,711      $     9,146      $13,201,663
                                                ===========      ===========      ===========      ===========
     December 31, 1999
       Fixed maturities
         Mortgage-backed                        $10,558,001      $        28      $   282,218      $10,275,811
           securities
         Corporate securities                     8,161,388            7,405          569,999        7,598,794
         U.S. Treasury securities
           and obligations of U.S.
           government agencies                      414,246              205           31,388          383,063
         Foreign governments                        450,602               --           13,220          437,382
         Asset-backed securities                    139,908               --            2,583          137,325
         Obligations of state and
           political subdivisions                   162,449            3,435               44          165,840
                                                -----------      -----------      -----------      -----------
       Total fixed maturities                    19,886,594           11,073          899,452       18,998,215
       Equity securities                            290,688           62,857               --          353,545
                                                -----------      -----------      -----------      -----------
       Total available-for-sale                 $20,177,282      $    73,930      $   899,452      $19,351,760
                                                ===========      ===========      ===========      ===========
</TABLE>


                                      F-19
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE C - INVESTMENTS (Continued)

      The amortized cost and estimated fair value of fixed maturity securities
      by contractual maturity are shown below. Expected maturities will differ
      from contractual maturities because borrowers may have the right to call
      or repay obligations with or without call or prepayment penalties and
      because mortgage-backed and asset-backed securities provide for periodic
      payments throughout their life.

<TABLE>
<CAPTION>
                                        December 31, 2000                December 31, 1999
                                   ----------------------------      ----------------------------
                                                    Estimated                         Estimated
                                      Cost          fair value          Cost          fair value
                                   -----------      -----------      -----------      -----------
<S>                                <C>              <C>              <C>              <C>
      FIXED MATURITIES
       Due in one year
         or less                   $        --      $        --      $   194,735      $   194,940
       Due after one year
         through five years            227,452          227,702          473,531          460,734
       Due after five years
         through ten years           1,786,485        1,868,662        2,780,967        2,579,918
       Due after ten years           2,155,466        2,184,509        5,739,452        5,349,487
       Asset-backed
         securities                         --               --          139,908          137,325
       Mortgage-backed
         securities                  8,485,032        8,720,127       10,558,001       10,275,811
                                   -----------      -----------      -----------      -----------
       Total fixed maturities      $12,654,435      $13,001,000      $19,886,594      $18,998,215
                                   ===========      ===========      ===========      ===========
</TABLE>

      Gains (losses) of ($443,445), ($470,507) and $3,421 were realized on sales
      of fixed maturities classified as available-for-sale for the years ended
      December 31, 2000, 1999 and 1998, respectively.

      Gains of $14,863 and $22,397 were recognized on equity securities sold
      during 2000 and 1998, respectively. There were no gains or losses
      recognized on equity securities sold for the year ended December 31, 1999.

      During 1998, the Company sold its sole investment in real estate and
      realized a loss of $178,795 associated with the transaction.


                                      F-20
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE D - COMPREHENSIVE INCOME

      Comprehensive income is the change in equity of a business enterprise
      during a period from transactions and other events and circumstances from
      non-owner sources, including net income and the change in unrealized gains
      or losses on the Company's available-for-sale securities.

      The following table shows, for available-for-sale securities, a
      reconciliation of the net unrealized gain (loss) arising during the period
      and the change in net unrealized gains (losses) as reported on the
      accompanying consolidating statements of shareholder's equity. Amounts are
      reported net of related tax.

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                           ----------------------------------------------
                                              2000             1999              1998
                                           -----------      -----------       -----------
<S>                                        <C>              <C>               <C>
      Net unrealized gain (loss)
        arising during period on
        available-for-sale securities      $   221,294      $(1,162,300)      $    99,925

      Reclassification adjustment
        for net realized (gains)
        losses included in net
        income                                  (8,503)         266,330           (84,200)
                                           -----------      -----------       -----------
      Change in net unrealized gains
        (losses) on available-for-
        sale securities                    $   212,791      $  (895,970)      $    15,725
                                           ===========      ===========       ===========
</TABLE>

NOTE E - MORTGAGE NOTES HELD FOR SALE

      At December 31, 2000, the Company held residential and commercial mortgage
      notes receivable for sale. The notes accrue interest at rates ranging from
      9.99% to 16%, are secured by real property and have maturity dates through
      March 1, 2031. The Company's intention is to sell the notes to a buyer
      under certain favorable market conditions. As of December 31, 2000 none of
      these notes have been sold.


                                      F-21

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE F - MORTGAGE NOTES HELD FOR INVESTMENT

      The Company held two mortgage notes receivable as of December 31, 2000 as
      long-term investments. These notes are serviced by the Company and are
      secured by real property. The notes accrue interest at a rate of 12% with
      maturity dates through December 31, 2001.

NOTE G - CERTIFICATE LIABILITY

      The total certificate liability at December 31 is summarized as follows:

<TABLE>
<CAPTION>
                                                                             Minimum            Additional
                                            2000             1999            Interest            Interest
                                         -----------      -----------      ------------       -------------
<S>                                      <C>              <C>              <C>                <C>
      Fully-paid certificates:

      Single-payment series 503          $18,926,313      $27,085,547          2.50           2.10 to 4.60
      Installment                          1,271,625        1,958,776      2.50 to 3.50       1.50 to 2.75
      Optional settlement                    193,713          534,582      2.50 to 3.50       2.00 to 2.75
      Due to unallocated
        certificate holders                       --            3,191          None
                                         -----------      -----------
                                          20,391,651       29,582,096
      Installment certificates:
      Reserves to mature, by series
         120 and 220                         274,385          256,219          3.25           1.75 to 2.00
         315                                 115,703          120,540          3.50           1.50 to 1.75
      Advance payments                       144,889          157,831
                                         -----------      -----------
                                             534,977          534,590
                                         -----------      -----------
      Total certificate liability        $20,926,628      $30,116,686
                                         ===========      ===========
</TABLE>


                                      F-22
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE H - FAIR VALUES OF FINANCIAL INSTRUMENTS

      The following disclosure of the estimated fair values of financial
      instruments is made in accordance with the requirements of SFAS No. 107,
      "Disclosures About Fair Value of Financial Instruments." The estimated
      fair value amounts have been determined using available market information
      and appropriate valuation methodologies. However, considerable judgment
      was required to develop these estimates. Accordingly, the estimates are
      not necessarily indicative of the amounts which could be realized in a
      current market exchange. The use of different market assumptions or
      estimation methodologies may have a material effect on the estimated fair
      value amounts.

<TABLE>
<CAPTION>
                                          December 31, 2000                 December 31, 1999
                                    ----------------------------      ----------------------------
                                     Carrying         Estimated        Carrying        Estimated
                                      Value          Fair Value          Value         Fair Value
                                    -----------      -----------      -----------      -----------
<S>                                 <C>              <C>              <C>              <C>
     Assets
       Fixed maturities             $13,001,000      $13,001,000      $18,998,215      $18,998,215
       Equity securities                200,663          200,663          353,545          353,545
       Mortgage notes held
         for sale                     3,060,252        3,197,418               --               --
       Mortgage notes held
         for investment                 715,862          715,862               --               --
       Certificate loans                110,069          110,069          124,933          124,933
       Cash and cash
         equivalents                  3,716,393        3,716,393       14,407,479       14,407,479
       Liabilities
         Certificate liability       20,926,628       20,926,628       30,116,686       30,223,837
</TABLE>

      The following methods and assumptions were used in estimating fair values:

      FIXED MATURITIES AND EQUITY SECURITIES

      Fair values for investments in securities are based on quoted market
      prices, where available. For fixed maturities and equity securities for
      which a quoted market price is not available, fair values are estimated
      using internally calculated estimates or quoted market prices of
      comparable instruments.


                                      F-23
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE H - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

      CERTIFICATE LOANS

      The carrying value of certificate loans approximates their fair value.

      MORTGATE NOTES HELD FOR SALE

      Fair value is estimated by evaluating, on a loan-by-loan basis, the note
      receivable's stated interest rate compared to the market interest rate (as
      determined by the Primary Mortgage Market Survey published by Freddie Mac)
      for a similar note and adjusting for the borrower's credit rating.

      MORTGATE NOTES HELD FOR INVESTMENT

      Estimated fair value of mortgage notes held for investment approximates
      their fair value.

      CASH AND CASH EQUIVALENTS

      The carrying amounts of cash and cash equivalents approximate their fair
      value given the short-term nature of these assets.

      CERTIFICATE LIABILITY

      The fair value of the certificate liability is based on certificate
      principal plus accrued interest calculated at the guaranteed minimum
      interest rate per the applicable certificate prospectus.


                                      F-24
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE I - INCOME TAXES

      Deferred income taxes reflect the net tax effects of (i) temporary
      differences between the carrying amounts of assets and liabilities for
      financial reporting purposes and the amounts used for income tax purposes,
      and (ii) operating and capital losses. Significant components of the
      deferred tax liabilities and assets as of December 31, 2000 and 1999 were:

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                    -------------------------
                                                                      2000            1999
                                                                    ---------       ---------
<S>                                                                 <C>             <C>
      Deferred tax liabilities
        Net unrealized gains on available-for-sale securities       $ 133,774       $      --
        Certificate liability release                                 630,724              --
        Other                                                              --           1,617
                                                                    ---------       ---------

          Total deferred tax liabilities                              764,498           1,617
                                                                    ---------       ---------
      Deferred tax assets
        Net unrealized losses on available for sale securities             --         288,933
        Investments                                                   311,829          96,145
        Mortgage notes                                                 38,136              --
        Capital loss carryover                                        206,455         138,683
        Net operating loss carry forward                              109,324              --
                                                                    ---------       ---------
          Total deferred tax assets                                   665,744         523,761
      Valuation allowance for deferred tax assets                    (206,455)       (522,144)
                                                                    ---------       ---------
        Net deferred tax assets                                       459,289           1,617
                                                                    ---------       ---------
        Deferred tax liabilities shown on the accompanying
          balance sheets                                            $ 305,209       $      --
                                                                    =========       =========
</TABLE>

      The Company's net operating loss carryforward of $166,915 at December 31,
      1998 was fully utilized in 1999.

      During 2000, the Company has provided a full valuation allowance for
      deferred tax assets on capital loss carryforwards since realization of
      these future benefits cannot be reasonably assured as a result of the
      uncertainty of the Company's ability to realize such capital loss
      carryforwards. If the Company has capital gains, these capital loss
      carryforwards would be available to offset such gains, subject to certain
      limitations.

      During 1999, the Company has provided a full valuation allowance for
      deferred tax assets since realization of these future benefits cannot be
      reasonably assured as a result of recurring operating losses. If the
      Company achieves profitability, these deferred tax assets would be
      available to offset future income tax liabilities and expense, subject to
      certain limitations.


                                      F-25

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE I - INCOME TAXES (Continued)

      At December 31, 2000, the Company had net operating loss and capital loss
      carryforwards of approximately $283,223 and $534,858, respectively, for
      income tax purposes which expire in various years through 2020.

      The components of the provision for federal income tax expense consist of
      the following:

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                      -----------------------------------------
                                                         2000           1999            1998
                                                      ----------      ---------       ---------

<S>                                                   <C>             <C>             <C>
      Current                                         $       --      $(211,503)      $  83,268
      Deferred                                          (621,055)        11,513         (79,525)
                                                      ----------      ---------       ---------
      Total federal income tax expense (benefit)
        (benefit)                                     $ (621,055)     $(199,990)      $   3,743
                                                      ==========      =========       =========
</TABLE>

      Federal income tax expense differs from that computed by using the income
      tax rate of 34% for 2000 and 35% for 1999 and 1998, as shown below.

<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                                 -----------------------------------------
                                                    2000           1999            1998
                                                 ---------       ---------       ---------
 <S>                                              <C>             <C>             <C>
      Income tax expense (benefit) at
        statutory rate                           $(309,977)      $ (57,346)      $  12,035
      Unreimbursed capital loss carryover
        used by ARM                                     --              --         281,842
      State tax, net of federal tax benefit        (24,277)             --              --
      Increase (decrease) in valuation
        allowance related to capital loss
        and NOL carryovers                         206,455          66,700        (280,000)
      Decrease in contingent tax liability              --        (200,000)             --
      Dividend received deduction                       --          (7,211)         (7,749)
      Certificate liability adjustment            (615,904)             --              --
      Mortgage notes marked to market               38,136              --              --
      Tax-exempt interest                          (12,000)         (2,612)         (4,194)
      Other                                         96,512             479           1,809
                                                 ---------       ---------       ---------
      Total federal income tax expense
        (benefit)                               $ (621,055)      $(199,990)      $   3,743
                                                 =========       =========       =========
</TABLE>


                                      F-26

<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE J - RELATED PARTY TRANSACTIONS

      State Bond provides the Company with administrative services pursuant to
      an Administrative Services Agreement. This agreement stipulates that State
      Bond shall provide certain administrative and support services for the
      Company. Services include use of State Bond's property and equipment,
      facilities and personnel needed for SBM-MD's daily operations. For
      providing such services, State Bond earns an annual fee from the Company
      calculated at 2% of the average Certificate Liability balance. The fee was
      waived from Acquisition through September 30, 2000 and during the
      remainder of 2000 a fee of $112,223 was charged as an expense to SBM-MD.
      As of December 31, 2000, $40,289 was payable to State Bond.

      A director of the Company provided legal services relating to the
      Acquisition. Total costs for services provided during 2000 were $61,960
      and $18,000 remains payable as of December 31, 2000.

      The Company made a mortgage loan to a partnership in which an affiliate of
      the Company owned a 51% interest. As of December 31, 2000, the outstanding
      principal balance of the mortgage note is $363,130. In April 2002, the
      outstanding principal balance of the mortgage note and accrued interest
      was paid to the Company in the amount of $533,120.

      The controlling shareholder of 1st Atlantic, State Bond's parent, is also
      Chairman of the Board of Directors of SBM-MD.

      Due from shareholder represents amounts paid to John J. Lawbaugh, the
      controlling shareholder of 1st Atlantic, during 2000 directly or through
      companies affiliated with the shareholder totaling $342,236. An allowance
      has been recorded in the full amount due from shareholder. (See note L)

NOTE K - SHAREHOLDER'S EQUITY AND REGULATORY MATTERS

      The Company is subject to restrictions relating to its regulatory capital
      requirements under the 1940 Act. The Company is required to establish and
      maintain qualified assets (as defined in Section 28(b) of the 1940 Act)
      having a value not less than the aggregate of certificate reserves (as
      calculated under Section 28(a)) plus $250,000 ($20.2 million and $30.4
      million at December 31, 2000 and 1999, respectively). The Company had
      qualified assets (at amortized cost) of $20.7 million and $34.9 million at
      those respective dates.

      For purposes of determining compliance with the foregoing provisions,
      qualified assets are valued in accordance with District of Columbia
      Insurance Laws (the "D.C. Laws") as required by the 1940 Act. Qualified
      assets for which no provision for valuation is made in the D.C. Laws are
      valued in accordance with rules, regulations, or orders prescribed by the
      SEC. These values are the same as the financial statement carrying values,
      except that for financial statement purposes, fixed maturities and equity
      securities classified as available-for-sale are carried at fair value. For
      qualified asset purposes, fixed maturities classified as
      available-for-sale are valued at amortized cost and equity securities are
      valued at cost.


                                      F-27
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2000, 1999 and 1998

NOTE K - SHAREHOLDER'S EQUITY AND REGULATORY MATTERS (Continued)

      Pursuant to the required calculations of various states, the provisions of
      the certificates, depository agreements, and the 1940 Act, qualified
      assets of the Company were deposited with independent custodians and
      invested in certain investments to meet certificate liability requirements
      as of December 31, 2000 and 1999, as shown in the following table.
      Certificate loans, secured by applicable certificate liabilities, are
      deducted from certificate reserves in computing deposit requirements.

                                                          December 31,
                                                -------------------------------
                                                    2000               1999
                                                ------------       ------------

      Qualified assets on deposit:
         Central depository                     $ 20,448,398       $ 34,214,584
         State governmental authorities              265,110            197,021
                                                ------------       ------------
            Total qualified assets on deposit   $ 20,713,508       $ 34,411,605
                                                ============       ============

      Certificate reserve under Section 28(a)   $ 20,020,189       $ 30,116,686
      Less: Certificate loans                       (110,069)          (124,933)
      Plus: Base capital requirement                 250,000            250,000
                                                ------------       ------------
      Required deposits                         $ 20,160,120       $ 30,241,753
                                                ============       ============

NOTE L - SUBSEQUENT DISCOVERY OF FACTS

      Subsequent to the issuance of the Company's financial statements for the
      year ended December 31, 2000, management became aware that cash and cash
      equivalent balances were understated and that certain components of equity
      were improperly classified within the statement of shareholder's equity.
      These errors resulted from financial institutions that hold cash or
      investments of the Company providing erroneous balances per the
      confirmation for outstanding checks of one cash account and an erroneous
      unrealized gain for the fixed maturities investments. In addition,
      management became aware of a deferred tax liability and a deferred income
      tax benefit resulting from the certificate liability release component of
      equity as a result of the implementation of a new methodology for
      calculating the certificate liability subsequent to the Acquisition. The
      inclusion of these items in the revised financial statements has the
      effect of increasing qualified assets by $245,765, increasing total
      liabilities by $305,209, decreasing shareholder's equity by $59,444 and
      decreasing excess qualified assets by $475,169.

      Subsequent to the issuance of the financial statements for the corrections
      described in the preceding paragraph, members of management of the Company
      discovered facts regarding several transactions that would have had an
      effect on those financial statements had those facts been known prior to
      the issuance of the December 31, 2000 financial statements.


                                      F-28

<PAGE>

      Those transactions raised concerns that certain conduct by the Company's
      Chairman of the Board and Chief Executive Officer, John J. Lawbaugh,
      failed to comply with provisions of the 1940 Act prohibiting transactions
      with affiliated persons of registered investment companies, caused the
      Company to fail to comply with disclosure requirements of the Securities
      Act of 1933 and the Securities Exchange Act of 1934, and diverted cash
      assets of the Company to himself directly or indirectly in the amount of
      approximately $342,000.

      As a result, on August 16, 2002, the Company's Board of Directors removed
      Mr. Lawbaugh from his position as Chairman of the Board and Chief
      Executive Officer and suspended his authority to act for or bind the
      Company with respect to any transactions. The Company filed its Form 8-K
      Current Report dated October 3, 2002, with the SEC on October 4, 2002. The
      Form 8-K summarizes the nature of the transactions and discusses various
      related matters. The financial statements for 2000 have been reissued to
      give effect to the transactions discussed below. Mr. Lawbaugh continues to
      control 100% of the Company's common stock.

      The Company has adjusted its December 31, 2000 financial statements as a
      result of certain transactions involving Mr. Lawbaugh. The following is a
      summary of the transactions requiring adjustment and their affect on the
      December 31, 2000 financial statements:

            (a)   During 2000, an escrow held by a title company in the amount
                  of $250,000 was transferred, pursuant to the instructions of
                  Mr. Lawbaugh, to a bank account controlled by Mr. Lawbaugh.
                  The amount was reflected as a qualified asset as of December
                  31, 2000 and was adjusted to record a reduction of the escrow
                  and a corresponding amount due from shareholder.

            (b)   During 2000, origination fees totaling $42,236 with respect to
                  two loans originated by the Company were diverted from the
                  Company to bank accounts controlled by Mr. Lawbaugh. The
                  amounts were previously recorded in the mortgage notes
                  receivable balance and are adjusted to record a reduction of
                  the mortgage notes held for sale and mortgage notes held for
                  investment and a corresponding amount due from shareholder.

            (c)   During 2000, extension fees of $50,000 paid by a borrower
                  related to the purchase of a mortgage loan from a third party
                  by the Company were diverted from the Company and deposited to
                  a bank account controlled by Mr. Lawbaugh. An adjustment has
                  been made to record the fees as income to the Company during
                  2000 with a corresponding amount due from shareholder.

            (d)   An allowance for uncollectible amounts due from shareholder
                  has been recorded for the full amount due from shareholder as
                  of December 31, 2000 totaling $342,236 with a corresponding
                  charge to operations during 2000.

      The net increase (decrease) in the amounts previously reported for the
      year ended December 31, 2000 is as follows:

             Qualified assets                   ($292,236)
             Shareholder's Equity               ($292,236)
             Net Income                         ($292,236)


                                      F-29

<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

         SCHEDULE I - INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS

                                December 31, 2000

<TABLE>
<CAPTION>
                                                                         PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE                                         AMOUNT         COST (a)        VALUE (a)
                                                                        ----------      ----------      ----------
<S>                                                                     <C>             <C>             <C>
FIXED MATURITIES AVAILABLE-FOR-SALE
  U.S. TREASURY SECURITIES
    U.S. Treasury Note, 5.625%, due 5/15/2008                           $  150,000      $  145,013      $  154,078
    U.S. Treasury Note, 5.625%, due 5/15/2008                               50,000          51,360          51,360
    U.S. Treasury Note, 7.25%, due 8/15/2004                               200,000         213,750         213,750
                                                                                        ----------      ----------
                                                                                           410,123         419,188
                                                                                        ----------      ----------
OBLIGATIONS OF STATE AND POLITICAL SUBDIVISIONS
  Belmont County, Ohio, Sanitary Sewer District #3 Waterworks
    Revenue Bonds, 4.25%, due 4/01/2004                                     14,000          13,702          13,952
  Douglas County, Washington, Public Utilities Districts #1, Wells
    Hydroelectric Revenue Bonds, 4%, due 9/01/2018                          55,000          49,757          52,972
  Yuba County California, Water Agency Bonds, 4%, due 3/01/2016             75,000          63,582          72,573
                                                                                        ----------      ----------
                                                                                           127,041         139,497
                                                                                        ----------      ----------
CORPORATE SECURITIES
  FINANCIAL INSTITUTIONS
    Central Fidelity Cap. I, Series A, 7.18%, due 4/15/2027                950,000         925,235         917,938
    Citigroup Inc., 7%, due 12/01/2025                                     300,000         270,000         288,420
    First Union Corp., 6.4%, due 4/1/2008                                  960,000         873,760         913,344
                                                                                        ----------      ----------
                                                                                         2,068,995       2,119,702
                                                                                        ----------      ----------
PUBLIC UTILITIES
  MCI Communications Corp., 7.75%, due 3/15/2024                           900,000         846,892         852,606
                                                                                        ----------      ----------
                                                                                           846,892         852,606
                                                                                        ----------      ----------
INDUSTRIAL:
  USX Corp., 6.65%, due 2/1/2006                                           750,000         716,352         749,880
                                                                                        ----------      ----------
                                                                                           716,352         749,880
                                                                                        ----------      ----------
    TOTAL CORPORATE SECURITIES                                                           3,632,239       3,722,188
                                                                                        ----------      ----------
</TABLE>

                                   (continued)


                                      S-1
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

   SCHEDULE I - INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS - CONTINUED

                                December 31, 2000

<TABLE>
<CAPTION>
                                                                      PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE                                      AMOUNT         COST (a)        VALUE (a)
---------------------------------                                    ----------      ----------      ----------
<S>                                                                   <C>               <C>             <C>
MORTGAGE-BACKED SECURITIES
  AMN Grantor, 7.3%, due 5/10/2002                                           --           2,134           2,134
  Countrywide Home Loans RAST, 1998-A8, A6, 6.2124%,
    due 8/25/2028                                                       900,000         848,493         868,751
  Federal Home Loan Mortgage Corporation
    6.5%, due 5/15/2028                                               1,000,000         891,224         955,780
    6.0%, due 1/15/2018                                               2,441,820       2,393,467       2,431,882
  Federal National Mortgage Association, 9%, due 4/01/2021               13,271          13,812          13,885
  Government National Mortgage Association
    11.5%, due 3/15/2015                                                    208             411             229
    11.5%, due 4/15/2013                                                    533             689             585
    11.5%, due 5/15/2015                                                    130             144             143
    11.5%, due 8/15/2013                                                    831             928             913
    6.875%, due 1/20/2026                                               210,536         211,745         214,812
Headlands Mortgage Sec. Inc., 1997-5 A17, 7.25%, due 11/25/2027       1,800,000       1,793,378       1,791,828
PNC Mortgage Securities Corp., 1998-7 1A13, 6.75%,
  due 9/25/2028                                                         469,720         452,038         470,673
PNC Mortgage Securities Corp., 1998-7 1A24, 7.25%,
  due 9/25/2028                                                         956,869         882,400         972,112
Residential Accredit Loans, 1997-QS8 A9, 7.375%, due 8/25/2027        1,000,000         994,172         996,400
                                                                                     ----------      ----------
                                                                                      8,485,032       8,720,127
                                                                                     ----------      ----------
TOTAL FIXED MATURITIES AVAILABLE-FOR-SALE                                            12,654,435      13,001,000
                                                                                     ----------      ----------
</TABLE>

                                   (continued)


                                      S-2
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

   SCHEDULE I - INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS - CONTINUED

                                December 31, 2000

<TABLE>
<CAPTION>
                                                  PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE                   AMOUNT       COST (a)        VALUE (a)
---------------------------------                 ----------    ----------      ----------
<S>                                                 <C>        <C>              <C>
EQUITY SECURITIES (b)
  INDUSTRIAL
    Aluminum Company of America                       200           10,600           10,600
                                                               -----------      -----------
  PUBLIC UTILITIES
    Carolina Power & Light                            500           32,938           32,938
    Kansas City Power & Light Company                 200           11,300           11,300
    Midamerican Energy Co.                            600           37,575           37,575
    Nicor Inc.                                        800           29,000           29,000
    Pacificorp                                        500           34,750           34,750
    San Diego Gas & Electric Co.                    4,000           44,500           44,500
                                                               -----------      -----------
                                                                   190,063          190,063
                                                               -----------      -----------
      TOTAL EQUITY SECURITIES                                      200,663          200,663
                                                               -----------      -----------
      TOTAL INVESTMENTS IN SECURITIES OF
        UNAFFILIATED ISSUERS                                   $12,855,098      $13,201,663
                                                               ===========      ===========
</TABLE>

(a)   See Note A to the financial statements regarding the determination of cost
      and fair value.

(b)   These securities are non-redeemable preferred stock.


                                      S-3
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

 SCHEDULE III. - MORTGAGE LOANS ON REAL ESTATE AND INTEREST EARNED ON MORTGAGES

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                               AMOUNT OF PRINCIPAL UNPAID
                                                    AT CLOSE OF PERIOD
                                               ---------------------------
                                                                                               INTEREST     INTEREST
                                                                               AMOUNT OF       DUE AND       INCOME
                                  CARRYING                      SUBJECT TO     MORTGAGES       ACCRUED       EARNED
                                  AMOUNT OF                     DELINQUENT       BEING        AT END OF    APPLICABLE
DESCRIPTION       PRIOR LIENS     MORTGAGES        TOTAL         INTEREST      FORECLOSED      PERIOD      TO PERIOD
-------------     -----------     ---------     -----------     ----------     ----------     ---------    ---------
<S>               <C>            <C>            <C>             <C>            <C>            <C>          <C>
LIENS ON:
  RESIDENTIAL        NONE        $ 2,095,049    $ 2,095,049     $       --     $       --     $      --    $ 13,060
  COMMERCIAL         NONE          1,681,065      1,681,065             --             --            --      23,915
                  ----------     -----------    -----------     ----------     ----------     ---------    --------
    TOTAL         $       --     $ 3,776,114    $ 3,776,114     $       --     $       --     $      --    $ 36,975
                  ==========     ===========    ===========     ==========     ==========     =========    ========
</TABLE>


                                      S-4

<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

                    SCHEDULE V - QUALIFIED ASSETS ON DEPOSIT

                                December 31, 2000
<TABLE>
<CAPTION>
                                                                        FIRST MORTGAGES
                                                                           AND OTHER
                                                      INVESTMENTS IN    FIRST LIENS ON
        NAME OF DEPOSITORY                CASH        SECURITIES (a)     REAL ESTATE      OTHER (b)          TOTAL
        ------------------             -----------    --------------    ---------------  -----------      -----------
<S>                                    <C>              <C>              <C>              <C>              <C>
State governmental authorities
  Securities Department
    of Illinois                        $        --      $   265,110      $        --      $        --      $   265,110
Central depositary
  US Bank                                3,881,270       12,589,988        3,776,114           99,421       19,762,414
  Bank of America                            5,708               --               --               --            5,708
  Chase Manhattan                         (187,487)              --               --               --         (187,487)
  Chevy Chase                                  427               --               --               --              427
  State Bank                                16,475               --               --               --           16,475
  Atlantic Title & Escrow                       --               --               --          266,482          266,482
                                       -----------      -----------      -----------      -----------      -----------
Total qualified assets on deposit      $ 3,716,393      $12,855,098      $ 3,776,114      $   365,903      $20,713,508
                                       ===========      ===========      ===========      ===========      ===========
</TABLE>

(a)   Represents amortized cost of bonds and securities.

(b)   Represents escrow held and due to funding agent.


                                      S-5
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

                       SCHEDULE VI - CERTIFICATE RESERVES
                           PART I - SUMMARY OF CHANGES

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                                          BALANCE AT BEGINNING OF YEAR
                                                    -------------------------------------------
                                                                                     RESERVES
                                                    NUMBER OF                       (INCLUDING
                                                    ACCOUNTS                          ADVANCE
                                                      WITH         AMOUNT OF         PAYMENTS
                                           YIELD    SECURITY        MATURITY       WITH ACCRUED
           DESCRIPTION                    PERCENT   HOLDERS          VALUE           INTEREST)
-------------------------------------     -------   --------      -----------      ------------
<S>                                        <C>        <C>        <C>              <C>
Reserves to mature, installment
  certificates
    Series 120                             2.75            9      $    54,000      $   178,492
    Series 220                             2.75           15           80,000          206,192
    Series 315                             2.66           26          102,300          149,906

Single payment certificates
    Series 503                             2.50        2,281       28,800,914       27,085,547

Fully paid installment certificates        2.50          461        2,270,391        1,958,776

Optional settlement certificates
  Paid-up certificate                      2.50            4            1,161              995
  Annuities                                3.00           50          519,876          533,587

  Due to unlocated certificate
    holders                                None           28            3,191            3,191
                                                      ------      -----------      -----------
  Total                                                2,874      $31,831,833      $30,116,686
                                                      ======      ===========      ===========

Total charged to income, per above
  Less reserve recoveries from
    terminations prior to maturity

  Interest credited on certificate
    reserves, per statement of
    operations and comprehensive
    income (loss)
</TABLE>


<TABLE>
<CAPTION>
                                                                                            ADDITIONS
                                          ---------------------------------------------------------------------------------
                                                            RESERVE
                                                           PAYMENTS BY        CHARGED                         PARTIAL MONTH
                                           CHARGED TO      CERTIFICATE        TO OTHER                        INTEREST FOR
           DESCRIPTION                       INCOME          HOLDERS        ACCOUNTS (a)      ADJUSTMENT        DEC 2000
-------------------------------------     -----------      -----------      ------------     ------------     -------------
<S>                                       <C>              <C>              <C>              <C>              <C>
Reserves to mature, installment
  certificates
    Series 120                            $     9,700      $     1,923      $        --      $     2,930      $        --
    Series 220                                 10,000            2,984               --            2,160               --
    Series 315                                  5,700            4,704               --            2,007               --

Single payment certificates
    Series 503                              1,406,478           10,036           24,151           84,397           46,000

Fully paid installment certificates            98,504               --               --               --            4,200

Optional settlement certificates
  Paid-up certificate                              72               --               --                0               --

  Annuities                                    18,000               --               --            6,148            1,500
  Due to unlocated certificate
    holders                                        --               --               --               --               --
                                          -----------      -----------      -----------      -----------      -----------
  Total                                   $ 1,548,454      $    19,647      $    24,151      $    97,642      $    51,700
                                          ===========      ===========      ===========      ===========      ===========

Total charged to income, per above        $ 1,548,454
  Less reserve recoveries from
    terminations prior to maturity            (25,285)
                                          -----------
  Interest credited on certificate
    reserves, per statement of
    operations and comprehensive
    income (loss)                         $ 1,523,169
                                          ===========
</TABLE>

                                  (continued)


                                       S-6
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

                 SCHEDULE VI - CERTIFICATE RESERVES - CONTINUED
                     PART I - SUMMARY OF CHANGES - CONTINUED

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                                       DEDUCTIONS                              BALANCE AT END OF YEAR
                                     -------------------------------------------     --------------------------------------------
                                                                                                                      RESERVES
                                                                                                                     (INCLUDING
                                                        CASH                           NUMBER OF                       ADVANCE
                                                      SURRENDERS                     ACCOUNTS WITH     AMOUNT OF      PAYMENTS)
                                                        PRIOR                          SECURITY        MATURITY      WITH ACCRUED
          DESCRIPTION                MATURITIES      TO MATURITY     OTHER (a)(b)       HOLDERS         VALUE          INTEREST
---------------------------------    -----------     -----------     -----------     -------------   -----------     ------------
<S>                                  <C>             <C>             <C>                   <C>       <C>             <C>
Reserves to mature, installment
  certificates
    Series 120                       $    21,003     $        --     $        --               8     $    50,000     $   172,042
    Series 220                                --              --              --              15          80,000         221,336
    Series 315                            12,787           7,931              --              22          90,200         141,599

Single payment certificates
    Series 503                         5,315,278       2,930,926       1,484,092           1,691      21,087,286      18,926,313

Paid-up bonds                                 --         263,366         526,489             397       2,099,101       1,271,625

Optional settlement certificates
  Paid-up certificate                         --             584              --               3             575             483
  Annuities                              365,465             540              --              17         193,230         193,230

  Due to unlocated certificate
    holders                                   --             392           2,799              26           2,799              --
                                     -----------     -----------     -----------     -----------     -----------     -----------

  Total                              $ 5,714,533     $ 3,203,739     $ 2,013,380           2,179     $23,603,191     $20,926,628
                                     ===========     ===========     ===========     ===========     ===========     ===========
</TABLE>

NOTES TO PART I

(a)   Certificate liability release (see note B).

(b)   Direct interest payment to certificate holders.

                                   (continued)


                                       S-7
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

                 SCHEDULE VI - CERTIFICATE RESERVES - CONTINUED
            PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                           CLASSIFIED BY AGE GROUPINGS

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                                          BALANCE AT BEGINNING OF YEAR
                                                     --------------------------------------
                                                     NUMBER OF
                                                     ACCOUNTS
                                          AGE          WITH        AMOUNT OF
                                        GROUPING     SECURITY      MATURITY       AMOUNT OF
                                        IN YEARS      HOLDERS        VALUE        RESERVES
                                        --------     ---------     ---------      ---------

<S>                                        <C>          <C>         <C>           <C>
Series 120                                 23           1           $  6,000      $  12,426
                                           24           1              8,000         10,807
                                           25           0                  -              -
                                           31           1              5,000         13,509
                                           32           0                  -              -
                                           34           1              6,000         17,720
                                           35           1              6,000         18,904
                                           36           1              3,000         10,268
                                           37           0                  -              -
                                           38           1              6,000         22,511
                                           40           2             14,000         68,775
Interest reserve
Accrued interest payable                                                              3,572
                                                      ----          --------      ---------
Total                                                   9           $ 54,000      $ 178,492
                                                      ====          ========      =========

Series 220                                 23           1           $ 12,000      $  16,086
                                           24           0                  -              -
                                           29           1              4,000          8,524
                                           30           0                  -              -
                                           31           1              6,000         14,659
                                           32           7             35,000         93,039
                                           33           3             15,000         46,069
                                           34           2              8,000         24,717
                                           35           0                  -              -
Interest reserve
Accrued interest payable                                                              3,098
                                                      ----          --------      ---------
Total                                                  15           $ 80,000      $ 206,192
                                                      ====          ========      =========
</TABLE>

                                  (continued)


                                      S-8
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

                 SCHEDULE VI - CERTIFICATE RESERVES - CONTINUED
            PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                     CLASSIFIED BY AGE GROUPINGS - CONTINUED

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                     DEDUCTIONS                     BALANCE AT END OF YEAR
                              ----------------------    --------------------------------------------------
                                                                     NUMBER OF
                                  CASH                               ACCOUNTS
                               SURRENDERS                 AGE          WITH        AMOUNT OF
                                 PRIOR                  GROUPING     SECURITY      MATURITY      AMOUNT OF
                              TO MATURITY     OTHER     IN YEARS      HOLDERS        VALUE       RESERVES
                              -----------     -----     --------     ---------     ---------     ---------
<S>                             <C>            <C>        <C>           <C>        <C>           <C>
Series 120                                                23            0          $     --      $      --
                                                          24            1             6,000         15,869
                                                          25            1             8,000         11,710
                                                          31            0                --             --
                                                          32            1             5,000         14,904
                                                          34            0                --             --
                                                          35            1             6,000         18,966
                                                          36            1             6,000         19,082
                                                          37            1             3,000         11,138
                                                          38            0                --             --
                                25,988                    40            2            16,000         75,076
Interest
  reserve

Accrued interest
  payable                                                                                            5,297
                              ---------       -----                   ----         --------      ---------
Total                         $ 25,988           --                     8          $ 50,000      $ 172,042
                              =========       =====                   ====         ========      =========
Series 220                                                23            0          $     --      $      --
                                                          24            1            12,000         16,521
                                                          29            0                --             --
                                                          30            1             4,000          8,970
                                                          31            0                --             --
                                                          32            1             5,000         15,711
                                                          33            7            35,000         99,512
                                                          34            3            15,000         48,866
                                                          35            2             8,000         26,457
Interest
  reserve

Accrued interest
  payable                                                                                            5,299
                              ---------       -----                   ----         --------      ---------
Total                         $      --       $  --                     15         $ 79,000      $ 221,336
                              =========       =====                   ====         ========      =========
</TABLE>

                                   (continued)


                                      S-9
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

                 SCHEDULE VI - CERTIFICATE RESERVES - CONTINUED
            PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                           CLASSIFIED BY AGE GROUPINGS

                          Year ended December 31, 2000

                                              BALANCE AT BEGINNING OF YEAR
                                          ------------------------------------
                                          NUMBER OF
                                          ACCOUNTS
                               AGE          WITH       AMOUNT OF
                             GROUPING     SECURITY     MATURITY      AMOUNT OF
                             IN YEARS      HOLDERS      VALUE        RESERVES
                             --------     --------     ---------     ---------

Series 315                      12             2       $   7,700     $   5,363
                                13             0              --            --
                                14             4          22,000        19,018
                                15             1           2,200         2,098
                                16             3           7,700         9,223
                                17             7          25,300        33,771
                                18             0              --            --
                                19             3          22,000        44,932
                                20             6          15,400        27,380

Interest reserve                                                         3,382

Accrued interest payable                                                 4,739
                                             ---       ---------     ---------
Total                                         26       $ 102,300     $ 149,906
                                             ===       =========     =========

                                  (continued)


                                      S-10
<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

                 SCHEDULE VI - CERTIFICATE RESERVES - CONTINUED
            PART II - INFORMATION REGARDING INSTALLMENT CERTIFICATES
                     CLASSIFIED BY AGE GROUPINGS - CONTINUED

                          Year ended December 31, 2000

<TABLE>
<CAPTION>
                                    DEDUCTIONS                      BALANCE AT END OF YEAR
                              --------------------     ----------------------------------------------------
                                                                    NUMBER OF
                                 CASH                               ACCOUNTS
                              SURRENDERS                 AGE          WITH        AMOUNT OF
                               PRIOR TO                GROUPING     SECURITY      MATURITY      AMOUNT OF
                               MATURITY      OTHER     IN YEARS     HOLDERS         VALUE       RESERVES
                              ----------     -----     --------     ---------     ---------     ---------
<S>                               <C>         <C>         <C>            <C>      <C>           <C>
Series 315                                                12             1        $  2,200      $   1,644
                                                          13             1           5,500          4,401
                                                          14             0              --             --
                                                          15             4          22,000         21,766
                                  9,054                   16             1           2,200          2,657
                                                          17             5          13,200         18,161
                                                          18             4          17,600         25,633
                                                          19             2          13,200         31,399
                                                          20             4          14,300         26,376

Interest reserve                                                                                    2,706
Accrued interest
  payable                                                                                           6,856
                                -------      -----                     ---        --------      ---------
Total                           $ 9,054      $  --                      22        $ 90,200      $ 141,599
                                =======      =====                     ===        ========      =========
</TABLE>


                                      S-11

<PAGE>

                     SBM Certificate Company and Subsidiary

                              SUPPLEMENTAL SCHEDULE

            SCHEDULE VIII - SUPPLEMENTARY PROFIT AND LOSS INFORMATION

                                December 31, 2000

<TABLE>
<CAPTION>
                                                                      CHARGED TO     CHARGED TO OTHER ACCOUNTS
                                                                      INVESTMENT     --------------------------
                          ITEM                                          EXPENSE        ACCOUNT         AMOUNT         TOTAL
-------------------------------------------------------------         ----------     -----------     ----------     ---------
<S>                                                                   <C>               <C>          <C>            <C>
1.    LEGAL EXPENSES (Including those in connection with any
      matter, measure or proceeding before legislative
      bodies, officers or government departments)                     $ 88,890          NONE         $    --        $ 88,890

2.    ADVERTISING AND PUBLICITY                                             --          NONE              --              --

3.    SALES PROMOTION                                                       --          NONE              --              --

4.    PAYMENTS DIRECTLY AND INDIRECTLY TO TRADE ASSOCIATIONS
      AND SERVICE ORGANIZATIONS, AND CONTRIBUTIONS TO OTHER
      ORGANIZATIONS                                                         --          NONE              --              --
                                                                      --------        --------       -------        --------
        TOTALS                                                        $ 88,890                       $    --        $ 88,890
                                                                      ========        ========       =======        ========
</TABLE>


                                      S-12
<PAGE>

           SBM Certificate Company and Subsidiary

                    SUPPLEMENTAL SCHEDULE

      SCHEDULE XII - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                         ADDITIONS
                                                  -------------------------
                                                                 CHARGED TO
                                   BEGINNING      CHARGED TO        OTHER
        DESCRIPTION                 OF YEAR         EXPENSE       ACCOUNTS      DEDUCTIONS       END OF YEAR
-------------------------------    ---------      ----------     ----------     ----------       -----------
<S>                                <C>            <C>            <C>            <C>               <C>
(IN THOUSANDS)

Valuation allowance on deferred
  tax assets year ended
  December 31,
     2000                          $      --      $      --      $ 206,455 (1)  $       --        $ 206,455
     1999                          $ 120,000      $ 140,981      $ 261,163 (2)  $       --        $ 522,144
     1998                          $ 400,000      $      --      $      --      $ (280,000)(3)    $ 120,000
     1997                          $ 714,521      $      --      $      --      $ (314,521)(4)    $ 400,000
</TABLE>

(1)   The valuation allowance was increased as a result of establishing a full
      valuation allowance on deferred tax assets for capital loss carryforwards.

(2)   The valuation allowance was increased as a result of establishing a full
      valuation allowance on deferred tax assets for unrealized losses on assets
      available-for-sale. The increase in valuation allowance resulted in a
      reduction of shareholders' equity.

(3)   The capital loss carryover was utilized during 1998, and therefore the
      related valuation allowance was released.

(4)   In the event that deferred tax assets are recognized on deductible
      temporary differences for which a valuation allowance was provided at the
      date of an acquisition, such benefits are applied to first reduce the
      balance of intangible assets related to the acquisition, and then income
      tax expense. As such, the Company reduced its valuation allowance with an
      offsetting reduction to goodwill. After goodwill was reduced to zero
      during 1997, the reduction in valuation allowance resulted in a reduction
      of income taxes.


                                      S-13
<PAGE>

                                  CERTIFICATION

I, Eric M. Westbury, certify that:

1. I have reviewed this amended annual report on Form 10-K of the registrant,
SBM Certificate Company;

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

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


Date:  October 29, 2002
                                              /s/Eric M. Westbury
                                              ----------------------------
                                                 Eric M. Westbury
                                                 President
                                                 (Principal Executive Officer)

<PAGE>

                                  CERTIFICATION

I, Trey Stafford, certify that:

1. I have reviewed this amended annual report on Form 10-K of the registrant,
SBM Certificate Company;

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

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


Date:  October 29, 2002
                                              /s/Trey Stafford
                                              ----------------------------
                                                 Trey Stafford
                                                 Chief Financial and Accounting
                                                    Officer
                                                 (Principal Financial Officer)