..
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                FORM 10-K/A NO. 1

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

FOR FISCAL YEAR ENDED DECEMBER 31, 2001

AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K FOR THE ANNUAL PERIOD ENDED
DECEMBER 31, 2001

|_| 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 of principal 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, 2001, 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. 1 TO ANNUAL REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2001

Reference is made to Exhibit 99.1 (Current Report on Form 8-K dated October 3,
2002) to this Amendment No. 1 to the Annual Report on Form 10-K for the year
ended December 31, 2001, 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, 2001. The financial data was derived from the
Company's audited financial statements. The reports of Reznick Fedder &
Silverman, independent auditors, with respect to the years ended December 31,
2001 and 2000, and of Ernst & Young LLP, independent auditors, with respect to
the year ended December 31, 1999, appear at page F-02 and F-03, respectively 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
                                                      ----------------------------------------------------------------
                                                        2001          2000          1999          1998           1997
                                                      --------      --------      --------      --------      --------
                                                                  (In thousands, except per share data)
<S>                                                   <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA
Total investment income                               $  1,615      $  1,618      $  2,292      $  2,827      $  3,922
Interest credited on certificate reserves               (1,173)       (1,523)       (1,615)       (2,063)       (2,795)
Net investment spread                                      442            95           677           763         1,138
Total investment and other expenses                     (2,443)         (870)         (376)         (576)         (755)
Federal income tax (expense) benefit                        --           621           102           (54)         (124)
Net investment income (loss)                            (2,001)         (154)          409           134           259
Net other operating loss                                   (38)           --            --            --            --
Federal income tax (expense) benefit                       288            --            --            --            --
Net investment and other operating income (losses)      (1,751)         (154)          409           134           259
Net realized investment gains (losses)                      69          (429)         (373)         (103)         (164)
Net income (loss)                                       (1,682)         (583)           36            31            95
Earnings (loss) per share*                               (6.73)        (2.33)         0.14          0.12          0.38

BALANCE SHEET DATA (END OF PERIOD)
Total assets                                          $ 23,881      $ 21,967      $ 34,285      $ 39,354      $ 60,270
Total liabilities                                       24,152        21,527        30,117        34,068        45,127
Shareholder's equity                                      (271)          440         4,168         5,028         4,982
</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 various
series of single-payment face-amount certificates. The Company issues and
services fixed rate face-amount certificates and provides related services to
holders of the certificates. ACFC performs underwriting and closing services for
the Company, as well as other such services to outside brokers and bankers.


                                       2
<PAGE>

Financial Condition, Changes in Financial Condition and Results Of Operations

2001 compared with 2000

      During 2001, total assets increased $1,913,572 from $22.0 million in 2000
to $23.9 million in 2001, while certificate liability increased $2,894,422 from
$20.9 million in 2000 to $23.8 million in 2001. The increase in total assets and
certificate liability is primarily due to certificate sales exceeding
certificate maturities, redemptions and early surrenders.

      The Company's earnings are derived primarily from net investment income
and net other operating income. Net investment income is income earned from
invested assets less investment expenses and interest credited on certificate
reserve liability. Net other operating income is income earned from the
origination of loans in the mortgage broker business less operating expenses.
Changes in net investment income are largely due to changes in the rate of
return on investments. Changes in net other operating income is attributable to
changes in the volume of loans originated.

      The Company had a net loss of $1,681,812 and $582,879 for the years ended
December 31, 2001 and 2000, respectively. The increase in net loss for 2001
stemmed mainly from the net investment loss before income tax of $2,000,732 for
the period ended December 31, 2001 as compared to net investment loss before
income tax of $775,352 for the period ended December 31, 2000. The increase in
net investment loss before income tax for 2001 was due mainly to an increase in
investment and other expenses.

      Investment income (excluding realized investment gains and losses) in 2001
was $1,615,128 compared to investment income of $1,617,929 for 2000. Investment
income plus realized investment gains less realized investment losses represents
annualized investment yields of 7.90% and 4.30% on average cash and investments
of $21.3 million and $27.6 million for 2001 and 2000, respectively. The decrease
in investment income is attributable to a decrease in cash and investments being
held by the Company.

      Net investment spread, which is the difference between investment income
and interest credited on certificate liability, was $442,576 for 2001 compared
to $94,760 in 2000. On an annualized yield basis, these amounts reflect net
investment spread for 2001 and 2000 of 1.98% and .37%, respectively.

      Interest credited on certificate reserves for 2001 and 2000 was $1,172,552
and $1,523,169, respectively. These amounts represent annualized average rates
of interest credited of 5.24% and 5.97% on average certificate liability of
$22.4 million and $25.5 million for 2001 and 2000, respectively. The Company
monitors credited interest rates for new and renewal issues against competitive
products, such as bank certificates of deposit. Credited interest rate
adjustments (up or down) on new face-amount certificates are made by the Company
periodically, resulting in the overall decrease in the average crediting rate.

      Investment and other expenses were $2,443,308 and $870,112 for 2001 and
2000, respectively. The increase in investment and other expenses was the result
of an increase in the management fee paid to the Company's parent, State Bond,
and other expenses. The increase in the management fee was due to a majority of
the payment to State Bond in 2001 being made in the form of a management fee,
whereas, in 2000 the payment to State Bond was in the form of both a management
fee and dividends. Total dividends paid to cover management services and
management fee expense combined for 2001 and 2000 was $1,658,773 and $1,486,344,
respectively. Investment and other expenses were further increased by the
reserve for losses on the shareholder receivable of $469,982 and $342,236 for
2001 and 2000, respectively. See Note L and Note O of the Notes to the
Consolidating Financial Statements. The increase in other expenses from $178,365
in 2000 to $704,864 in 2001 was mainly due to a new policy implemented after the
Acquisition as to the payment of certain direct expenses by the Company. Prior
to Acquisition, certain expenses that are currently paid by the Company were
paid by ARM.


                                       3
<PAGE>

      Net other operating loss before income tax of $38,041 for the year ended
December 31, 2001, consists of the mortgage broker operations of ACFC, which
became a subsidiary of the Company in December 2000. Other operating income of
$897,267 is derived from loan origination fees, gain on sale to investor and
other processing and underwriting loan fees relating to originating and
brokering loans. Other operating expenses of $935,308 consist of salaries and
commissions paid in relation to originating and brokering loans and other costs
in operating the mortgage company.

      Realized investment gains (losses) were $68,697 and ($428,582) for 2001
and 2000, respectively. Realized investment gains and losses are primarily
interest-rate related and attributable to the asset/liability management
strategies of the Company. Realized investment losses in 2000 were due to the
sale of securities as required of SBM MN in the Acquisition transaction. The
Company invests in a mixture of investments ranging from securities with fixed
maturities, mortgage notes and real estate tax lien certificates. The objective
of each investment is to provide reasonable returns while limiting liquidity and
credit risks.

      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.

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


                                       4
<PAGE>

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 the Chairman of the Board
and Chief Executive Officer and suspended his authority to act for or bind the
Company with respect to any 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


                                       5
<PAGE>

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.

      Asset Portfolio Review

      The Company invests its assets in accordance with the provisions of the
1940 Act, which permits the investment of reserves only in cash or "qualified
investments." Qualified investments are investments of a kind which life
insurance companies may hold under the Insurance Code of the District of
Columbia, and other such assets as the SEC may permit under the 1940 Act. The
Company's investment policy is to invest reserves in a variety of investments
that diversify risk, provide a reasonable return on investment and allow for
liquidity consistent with the cash requirements of the Company. The Company's
four principal investment types as of December 31, 2001 are fixed maturity
securities, mortgage notes, property held for sale, and real estate tax lien
certificates. The Company monitors its short-term liquidity needs to ensure that
cash flow from investments allows for the payment of all of its obligations due,
including expected cash outflow to certificate holders, with the goal of
maintaining an adequate level of liquidity for maturing face-amount
certificates. In addition, the investment strategy also is designed to provide
protection of the investment portfolio from adverse changes in interest rates.

      The Company's investments in fixed maturity securities totaled $6,774,313
at December 31, 2001, 30.47% of the investment portfolio (41.60% at December 31,
2000). Fixed maturity investments were 100% investment grade at December 31,
2001. 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's Corporation's rating of BBB- or
above). As of December 31, 2001, the Company held no fixed maturity securities
that had defaulted on principal or interest payments. Fixed maturities include
mortgage-backed securities ("MBSs"), collateralized mortgage obligations
("CMOs") and asset-backed securities, which include pass-through securities.
MBSs and 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.

      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 securities as
available-for-sale. Such securities are carried at fair value and changes in
fair value, net of deferred income taxes, are charged or credited directly to
shareholder's equity. During 2001, the change in unrealized gains, net of tax
increased by $4,657 resulting in an unrealized gain, net of tax at December 31,
2001 of $217,448. Unrealized gain net of tax at December 31, 2000 was $212,791.
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 maturity 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.

      The Company's investments in residential and commercial real estate
mortgage notes receivable and property held for sale totaled $6,587,523 at
December 31, 2001, 29.63% of the investment portfolio. These real estate
mortgage notes consist of $5,436,118 of mortgage notes held for sale and
$731,482 of mortgage notes


                                       6
<PAGE>

held for investment. The notes accrue interest at rates ranging from 8.0% to
14.5% per annum and are secured by the underlying real property. The Company's
intention is to sell the mortgage notes held for sale to a buyer under certain
favorable market conditions and to hold the mortgage notes held for investment
as a long-term investment. Property held for sale of $419,923 is the cost basis
of a property in which the Company has a beneficial interest. The property is
currently under a contract for sale, which will close in December 2002. See Note
L and Note O of the Notes to Consolidating Financial Statements.

      The Company's other significant investments are real estate tax lien
certificates. These certificates are comprised of delinquent real estate tax
bills purchased from municipalities. They accrue interest at the rate of 20% per
annum on the outstanding taxes and are secured by a first lien on the property
on which the tax is owed. In all cases, the certificates are significantly
over-collateralized by the underlying property. As of December 31, 2001, the
real estate tax lien certificates had a balance of $2,628,528, 11.82% of the
investment portfolio.

      Liquidity and Financial Resources

      As of December 31, 2001, the Company had $711,879 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
the 1940 Act.

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

      At December 31, 2001, cash and cash equivalents totaled $5.5 million, an
increase of $1.8 million from December 31, 2000. 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.

      Cash flows of ($1.2) million, $1.6 million, and $2.1 million were
generated from (used in) operating activities in 2001, 2000, and 1999,
respectively. These cash flows resulted principally from investment income, less
management fees, and commissions paid. Proceeds from sales, redemptions and
maturities of investments generated $9.5 million, $6.4 million, and $37.0
million in cash flows during 2001, 2000, and 1999, respectively, which were
offset by purchases of investments of $7.4 million, $3.5 million, and $22.5
million, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The Company's financial statements begin on page F-02. Reference is made
to the Index to Financial Statements on page F-01 of this Annual Report. The
Company's supplementary financial information as required per regulation S-X
begins on page S-01.

PART III

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Pursuant to an Amended and Restated Administrative Services Agreement
dated as of July 1, 2001 (the "Administrative Services Agreement"), State Bond
provides various administrative services to the Company. 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 administrative and special services, including
personnel and furnishes or otherwise makes available accounting services to the
Company. The annual charge to the Company for the services and facilities
provided by State Bond is 1% of the Company's average certificate liability
balances, or an amount not to exceed $2.5 million. The charge will be determined
monthly by State Bond and Company management.


                                       7
<PAGE>

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. State Bond waived its fees due under the original Administrative
Services Agreement dated July 1, 2000 through September 30, 2000. For the last
quarter of 2000 a fee of $112,223 was charged to the Company, of which $40,289
remained payable at December 31, 2000. During 2001, a fee totaling $1,078,839
was charged and $1,119,128 was paid by the Company to State Bond.

      In connection with the Acquisition, certain dividend payments were made by
the Company to its former, and to its current, parent as described in Note A of
the Notes to Consolidating Financial Statements. Also, from time-to-time the
Company makes dividend payments to State Bond, which, in turn, may make dividend
payments to 1st Atlantic, State Bond's parent. During 2001, the Company paid
$579,934 of cash dividends to State Bond.

      See Note L of Notes to Consolidating Financial Statements with respect to
the contribution of a mortgage note and property as additional paid-in capital
made by State Bond to the Company on September 30, 2001.

      Recently, the Company confirmed facts that came to its attention regarding
several transactions involving John J. 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 the amount of
approximately $810,000. See Exhibit 99.1 to this Form 10-K/A No. 1.

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-01 for a listing of financial
statements and related reports of independent auditors included in this report.

2.    FINANCIAL STATEMENT SCHEDULES

      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, 2001

      Schedule II       Investments in and Advances to Affiliates and Income
                        Thereon - December 31, 2001

      Schedule III      Mortgage loans on real estate and interest earned on
                        mortgages - December 31, 2001

      Schedule V        Qualified Assets on Deposit-December 31, 2001

      Schedule VI       Certificate Reserves-Year Ended December 31, 2001

      Schedule VII      Valuation and Qualifying Accounts-December 31, 2001

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.


                                       8
<PAGE>

                  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) 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

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

(10)(a)       Amended and Restated Administrative Services Agreement dated as of
              the 1st day of July, 2001, by and between the Company and State
              Bond & Mortgage Company, L.L.C.

(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

(24)          Powers of Attorney

(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 2001. No amendments to previously filed Form 8-K were filed during 2001.


                                       9
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                             PAGE
<S>                                                                                          <C>
INDEPENDENT AUDITORS' REPORT                                                                 F-02
REPORT OF INDEPENDENT AUDITORS                                                               F-03
FINANCIAL STATEMENTS
         CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 2001 AND 2000                       F-04
         CONSOLIDATING STATEMENTS OF OPERATIONS AND
             COMPREHENSIVE INCOME (LOSS) FOR YEAR ENDED DECEMBER 31, 2001 AND 2000           F-06
         STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEAR
            ENDED DECEMBER 31, 1999                                                          F-08
         CONSOLIDATING STATEMENTS OF SHAREHOLDER'S EQUITY FOR YEAR ENDED
            DECEMBER 31, 2001 AND 2000                                                       F-09
         STATEMENT OF SHAREHOLDER'S EQUITY FOR YEAR ENDED DECEMBER 31, 1999                  F-10
         CONSOLIDATING STATEMENTS OF CASH FLOWS FOR YEARS ENDED DECEMBER 31, 2001
            AND 2000                                                                         F-11
         STATEMENT OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 1999                            F-14
         NOTES TO CONSOLIDATING FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 2001        F-15

SUPPLEMENTAL SCHEDULES
         SCHEDULE I - INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS                      S-01
         SCHEDULE II - INVESTMENTS IN AND ADVANCES TO AFFILIATES AND INCOME THEREON          S-03
         SCHEDULE III - MORTGAGE LOANS ON REAL ESTATE AND INTEREST EARNED ON MORTGAGES       S-04
         SCHEDULE V - QUALIFIED ASSETS ON DEPOSIT                                            S-05
         SCHEDULE VI - CERTIFICATE RESERVES                                                  S-06
         SCHEDULE VII - VALUATION AND QUALIFYING ACCOUNTS                                    S-12
</TABLE>


                                      F-01
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Shareholder and Board of Directors
SBM Certificate Company

      We have audited the accompanying consolidating balance sheets of SBM
Certificate Company and Subsidiary as of December 31, 2001 and 2000, and the
related consolidating statements of operations and comprehensive income (loss),
shareholder's equity, and cash flows for the years 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 audits. The financial statements of SBM
Certificate Company (formerly SBM Certificate Company, a Minnesota Corporation)
as of 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 audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the 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 consolidating financial statements referred to above
present fairly, in all material respects, the financial position of SBM
Certificate Company and Subsidiary at December 31, 2001 and 2000, and the
results of its operations and its cash flows for the years 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 O to the financial statements, certain transactions
resulting in an overstatement of qualified assets and additional paid in capital
were discovered by management of the Company subsequent to the issuance of the
2001 financial statements. Accordingly, the 2001 financial statements have been
restated to give effect to these trasactions.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 28, 2002, except for notes B, F, H, J, L, M,
   and O and to the supplemental schedules on pages S-04 and S-05
   as to which the date is October 4, 2002


                                      F-02
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
SBM Certificate Company (Minnesota)

We have audited the accompanying statement of operations, shareholder's equity
and cash flows of SBM Certificate Company (Minnesota) for the year 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 audit.

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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of SBM Certificate Company's (Minnesota)
operations and its cash flows for the year 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-03
<PAGE>

                     SBM Certificate Company and Subsidiary

                           CONSOLIDATING BALANCE SHEET

                                December 31, 2001

<TABLE>
<CAPTION>
                                                             SBM Certificate  Atlantic Capital    Eliminating
                                                                 Company        Funding Corp.       Entries           Totals
                                                             ---------------  ----------------    -----------      ------------
<S>                                                            <C>               <C>              <C>              <C>
Qualified assets
  Cash and investments
    Fixed maturities, available-for-sale, at fair value
          (amortized cost: $6,440,016)                         $  6,774,313      $        --      $        --      $  6,774,313
    Mortgage notes held for sale                                  4,965,696          470,422               --         5,436,118
    Mortgage notes held for investment                              378,750          352,732               --           731,482
    Real estate tax lien certificates                             2,628,528               --               --         2,628,528
    Property held for sale                                          419,923               --               --           419,923
    Escrows                                                         608,037               --               --           608,037
    Certificate loans                                                98,137               --               --            98,137
    Cash and cash equivalents                                     4,676,654          861,440               --         5,538,094
                                                               ------------      -----------      -----------      ------------

        Total cash and investments                               20,550,038        1,684,594               --        22,234,632
                                                               ------------      -----------      -----------      ------------

  Receivables
    Dividends and interest                                          369,046            3,848               --           372,894
                                                               ------------      -----------      -----------      ------------

        Total receivables                                           369,046            3,848               --           372,894
                                                               ------------      -----------      -----------      ------------

        Total qualified assets                                   20,919,084        1,688,442               --        22,607,526

Other assets
  Related party receivable                                           80,608           16,744          (49,565)           47,787
  Fixed assets, net of accumulated depreciation of $20,657          185,788           18,818               --           204,606
  Investment in subsidiary                                        1,619,007               --       (1,619,007)               --
  Goodwill, net of accumulated amortization of $61,686              591,463               --               --           591,463
  Deferred acquisition costs                                        420,093               --               --           420,093
  Due from shareholder                                              812,218               --               --           812,218
  Allowance - due from shareholder                                 (812,218)              --               --          (812,218)
  Other assets                                                        5,815            3,404               --             9,219
                                                               ------------      -----------      -----------      ------------

        Total assets                                           $ 23,821,858      $ 1,727,408      $(1,668,572)     $ 23,880,694
                                                               ============      ===========      ===========      ============


Liabilities

  Statutory certificate liability                              $ 21,311,350      $        --      $        --      $ 21,311,350
  Additional certificate liability                                2,509,700               --               --         2,509,700
  Accounts payable and other liabilities                            270,881           36,582               --           307,463
  Related party payable                                                 957           71,819          (49,565)           23,211
                                                               ------------      -----------      -----------      ------------

        Total liabilities                                        24,092,888          108,401          (49,565)       24,151,724
                                                               ------------      -----------      -----------      ------------

Shareholder's equity
  Common stock, $1 par value; 10,000,000 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                                      3,222,591        1,621,481       (1,621,481)        3,222,591
  Accumulated comprehensive income, net of taxes                    217,448               --               --           217,448
  Retained earnings (deficit)                                    (3,961,069)         (22,474)          22,474        (3,961,069)
                                                               ------------      -----------      -----------      ------------

        Total shareholder's equity                                 (271,030)       1,619,007       (1,619,007)         (271,030)
                                                               ------------      -----------      -----------      ------------

        Total liabilities and shareholder's equity             $ 23,821,858      $ 1,727,408      $(1,668,572)     $ 23,880,694
                                                               ============      ===========      ===========      ============
</TABLE>

   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-04
<PAGE>

                     SBM Certificate Company and Subsidiary

                           CONSOLIDATING BALANCE SHEET

                                December 31, 2000

<TABLE>
<CAPTION>
                                                                       SBM          Atlantic
                                                                   Certificate       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)               --
    Fixed assets                                                        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; 10,000,000 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 accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-05
<PAGE>

                     SBM Certificate Company and Subsidiary

      CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                SBM Certificate   Atlantic Capital   Eliminating
                                                                    Company         Funding Corp.       Entries         Totals
                                                                ---------------   ----------------   -----------      -----------
<S>                                                               <C>                 <C>               <C>           <C>
Investment income
    Interest and dividend income                                   $   910,395       $  39,653         $    --       $   950,048
    Other investment income                                             10,060              --              --            10,060
    Loss from investment in subsidiary                                 (21,475)             --          21,475                --
    Mortgage interest income                                           647,200           7,820              --           655,020
                                                                   -----------       ---------         -------       -----------

            Total investment income                                  1,546,180          47,473          21,475         1,615,128
                                                                   -----------       ---------         -------       -----------

Investment and other expenses
    Administrative services fee                                      1,078,839              --              --         1,078,839
    Deferred acquisition cost amortization and
        renewal commissions                                            125,422              --              --           125,422
    Amortization of goodwill                                            43,543              --              --            43,543
    Depreciation expense                                                20,117             541              --            20,658
    Reserve for losses - shareholder receivable                        469,982              --              --           469,982
    Other expenses                                                     704,864              --              --           704,864
                                                                   -----------       ---------         -------       -----------

            Total investment and other expenses                      2,442,767             541              --         2,443,308
                                                                   -----------       ---------         -------       -----------

Interest credited on certificate liability                           1,172,552              --              --         1,172,552
                                                                   -----------       ---------         -------       -----------

            Net investment loss before income taxes                 (2,069,139)         46,932          21,475        (2,000,732)
                                                                   -----------       ---------         -------       -----------

Other operating income
    Origination fee income                                              30,366         421,449              --           451,815
    Gain on sale to investor                                                --         378,034              --           378,034
    Other loan fee income                                                   --          67,418              --            67,418
                                                                   -----------       ---------         -------       -----------

            Total other operating income                                30,366         866,901              --           897,267
                                                                   -----------       ---------         -------       -----------

Other operating expenses
    Salaries and commissions                                                --         651,311              --           651,311
    Other expenses                                                          --         283,997              --           283,997
                                                                   -----------       ---------         -------       -----------

            Total other operating expenses                                  --         935,308              --           935,308
                                                                   -----------       ---------         -------       -----------

            Net other operating loss before income taxes                30,366         (68,407)             --           (38,041)
                                                                   -----------       ---------         -------       -----------

Net investment and other operating loss before income taxes         (2,038,773)        (21,475)         21,475        (2,038,773)
Deferred income tax benefit                                            288,264              --              --           288,264
                                                                   -----------       ---------         -------       -----------

            Net investment and other operating income (loss)        (1,750,509)        (21,475)         21,475        (1,750,509)
                                                                   -----------       ---------         -------       -----------

Realized investment gains                                               68,697              --              --            68,697
Income tax expense on realized investment gains                             --              --              --                --
                                                                   -----------       ---------         -------       -----------

            Net realized investment gains                               68,697              --              --            68,697
                                                                   -----------       ---------         -------       -----------

            Net loss                                                (1,681,812)        (21,475)         21,475        (1,681,812)

Other comprehensive income (loss):
    Unrealized gains on available-for-sale
    securities, net of taxes

        Net unrealized gain                                              4,657              --              --             4,657
                                                                   -----------       ---------         -------       -----------

Net comprehensive loss                                             $(1,677,155)      $ (21,475)        $21,475       $(1,677,155)
                                                                   ===========       =========         =======       ===========
</TABLE>

   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-06
<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                                502,906                 --                 --           502,906
                                                       -----------          ---------          ---------       -----------

Total comprehensive income (loss)                      $   (79,973)         $    (999)         $     999       $   (79,973)
                                                       ===========          =========          =========       ===========
</TABLE>

   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-07
<PAGE>

                             SBM Certificate Company

                 STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

                          Year ended December 31, 1999

Investment income
   Interest income from securities                                  $ 2,261,957
   Other investment income                                               29,602
                                                                    -----------

         Total investment income                                      2,291,559
                                                                    -----------

Investment and other expenses
   Management and investment advisory fees                              154,042
   Deferred acquisition cost amortization and renewal commissions       193,973
   Real estate expenses                                                   2,610
   Other expenses                                                        19,200
                                                                    -----------

         Total investment and other expenses                            369,825
                                                                    -----------

Interest credited on certificate liability                            1,615,074
                                                                    -----------

         Net investment income before income taxes                      306,660

Income tax benefit                                                      102,013
                                                                    -----------

         Net investment income                                          408,673
                                                                    -----------

Realized investment losses                                             (470,507)
Income tax benefit on realized investment losses                         97,977
                                                                    -----------

         Net realized investment losses                                (372,530)
                                                                    -----------

         Net income                                                 $    36,143
                                                                    ===========

Other comprehensive loss:
   Unrealized loss on available-for-sale securities
      Unrealized holding loss in current year                       $  (895,970)
      Income tax                                                             --
                                                                    -----------

         Net unrealized loss during period                             (895,970)
                                                                    -----------

Net other comprehensive loss                                        $  (859,827)
                                                                    ===========

   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-08
<PAGE>

                     SBM Certificate Company and Subsidiary

                CONSOLIDATING STATEMENTS OF SHAREHOLDER'S EQUITY

                     Years ended December 31, 2001 and 2000

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

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)    (3,050,000)       535,407      2,444,096      (320,497)
                                                ----------   -----------    -----------      ---------    -----------   -----------

Balance at July 19, 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 - noncash                    --            --        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)   (2,805,421)

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

  Net loss since Acquisition                            --            --             --             --       (153,432)     (153,432)
                                                ----------   -----------    -----------      ---------    -----------   -----------

Balance at December 31, 2000                       250,000       250,000      1,676,457        212,791     (1,699,323)      439,925

Additional paid-in capital                              --            --      1,546,134             --             --     1,546,134

Changes in net unrealized gains (losses)
  on available-for-sale securities, net of tax          --            --             --          4,657             --         4,657

Retained earnings (deficit):
  Dividends paid, net                                   --            --             --             --       (579,934)     (579,934)

  Net loss                                              --            --             --             --     (1,681,812)   (1,681,812)
                                                ----------   -----------    -----------      ---------    -----------   -----------

Balance at December 31, 2001                       250,000   $   250,000    $ 3,222,591      $ 217,448    $(3,961,069)  $  (271,030)
                                                ==========   ===========    ===========      =========    ===========   ===========

<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>
Balance at December 31, 1999                        --   $    --  $       --   $     --    $        --   $        --    $ 4,168,213

Net loss - SBM-MN                                   --        --          --         --             --            --       (429,447)

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

Dividends paid                                                                                                           (3,708,384)

Sale of SBM-MN as a reverse merger
  transaction (July 19, 2000)                       --        --          --         --             --            --       (320,497)
                                                ------   -------  ----------   --------    -----------   -----------    -----------

Balance at July 19, 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 - noncash            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                               --        --          --         --             --            --     (2,805,421)

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

  Net loss since Acquisition                        --        --          --       (999)          (999)          999       (153,432)
                                                ------   -------  ----------   --------    -----------   -----------    -----------

Balance at December 31, 2000                    10,000    20,000   1,553,957       (999)     1,572,958    (1,572,958)       439,925

Additional paid-in capital                          --        --      67,524         --         67,524       (67,524)     1,546,134

Changes in net unrealized gains (losses)
  on available-for-sale securities, net of tax      --        --          --         --             --            --          4,657

Retained earnings (deficit):
  Dividends paid, net                               --        --          --         --             --            --       (579,934)

  Net loss                                          --        --          --    (21,475)       (21,475)       21,475     (1,681,812)
                                                ------   -------  ----------   --------    -----------   -----------    -----------

Balance at December 31, 2001                    10,000   $20,000  $1,621,481   $(22,474)   $ 1,619,007   $(1,619,007)   $  (271,030)
                                                ======   =======  ==========   ========    ===========   ===========    ===========
</TABLE>

            *     On July 19, 2000 SBM Certificate Company of Maryland purchased
                  SBM Certificate of Minnesota (see note A)

   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-09
<PAGE>

                             SBM Certificate Company

                        STATEMENT OF SHAREHOLDER'S EQUITY

                          Year ended December 31, 1999

<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, 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 accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-10
<PAGE>

                     SBM Certificate Company and Subsidiary

                      CONSOLIDATING STATEMENT OF CASH FLOWS

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                 SBM Certificate    Atlantic Capital    Eliminating
                                                                     Company          Funding Corp.       Entries         Totals
                                                                 ---------------    ----------------    -----------     -----------
<S>                                                                <C>                <C>                <C>            <C>
Cash flows from operating activities
   Net loss                                                        $(1,681,812)       $   (21,475)       $  21,475      $(1,681,812)
   Adjustments to reconcile net loss to net
   cash provided by (used in) operating activities
      Loss from investment in subsidiary                                21,475                 --          (21,475)              --
      Provision for certificate liability                            1,172,552                 --               --        1,172,552
      Reserve for losses - shareholder receivable                      469,982                 --                           469,982
      Realized investment gains                                       (117,674)                --               --         (117,674)
      Deferred income tax benefit                                     (239,287)                --               --         (239,287)
      Deferral of acquisition costs                                   (465,079)                --               --         (465,079)
      Amortization of deferred acquisition costs
         and renewal commissions                                       125,422                 --               --          125,422
      Other amortization and depreciation                               63,660                541               --           64,201
      Increase in dividends and interest receivable                   (269,625)            (3,848)              --         (273,473)
      Changes in other assets and liabilities                         (246,517)            33,636               --         (212,881)
                                                                   -----------        -----------        ---------      -----------

           Net cash provided by (used in) operating activities      (1,166,903)             8,854               --       (1,158,049)
                                                                   -----------        -----------        ---------      -----------

Cash flows from investing activities
   Fixed maturity investments:
      Sales and redemptions                                          6,532,248                 --               --        6,532,248
   Purchase of mortgage notes held for sale                         (3,196,222)          (332,421)              --       (3,528,643)
   Investment in mortgage notes held for investment                    (15,000)                --               --          (15,000)
   Principal payments received on mortgage notes receivable          1,775,650            135,882               --        1,911,532
   Real estate tax lien certificates:
      Purchases                                                     (4,145,261)                --               --       (4,145,261)
      Repayments of tax lien certificates                            1,228,198                 --               --        1,228,198
   Investment in subsidiary                                            (67,524)                --           67,524               --
   Purchase of fixed assets                                           (137,902)           (19,290)              --         (157,192)
   Repayment of certificate loans, net                                  11,932                 --               --           11,932
                                                                   -----------        -----------        ---------      -----------

           Net cash provided by (used in) investing activities       1,986,119           (215,829)          67,524        1,837,814
                                                                   -----------        -----------        ---------      -----------

Cash flows from financing activities
   Amounts paid to face-amount certificate holders                  (4,750,988)                --               --       (4,750,988)
   Amounts received from face-amount certificate holders             6,472,858                 --               --        6,472,858
   Capital contributed to company                                           --             67,524          (67,524)              --
   Net dividends paid                                                 (579,934)                --               --         (579,934)
                                                                   -----------        -----------        ---------      -----------

           Net cash provided by (used in) financing activities       1,141,936             67,524          (67,524)       1,141,936
                                                                   -----------        -----------        ---------      -----------

           NET INCREASE (DECREASE) IN CASH
              AND CASH EQUIVALENTS                                   1,961,152           (139,451)              --        1,821,701

Cash and cash equivalents, beginning                                 2,715,502          1,000,891               --        3,716,393
                                                                   -----------        -----------        ---------      -----------

Cash and cash equivalents, end                                     $ 4,676,654        $   861,440        $      --      $ 5,538,094
                                                                   ===========        ===========        =========      ===========

Supplemental disclosure of significant noncash investing
   and financing activities:
     Contribution of assets from State Bond                        $ 1,546,134        $        --        $      --      $ 1,546,134
                                                                   ===========        ===========        =========      ===========
</TABLE>

   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-11
<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
  Investment in mortgage notes held for investment                  (375,000)               --                --           (375,000)
  Investment in subsidiary                                        (1,000,000)               --         1,000,000                 --
  Purchase of mortgage notes held for sale                        (2,816,735)               --                --         (2,816,735)
  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-12
<PAGE>

                     SBM Certificate Company and Subsidiary

                CONSOLIDATING STATEMENT OF CASH FLOWS - CONTINUED

                          Year ended December 31, 2000

<TABLE>
<S>                                                                                              <C>
Supplemental disclosure of significant noncash investing and financing activities:
   Release of cerfificate liability, net of tax                                                  $  1,259,530
                                                                                                 ============

   Acquisition of SBM-MN:
      Assets acquired                                                                            $ 27,390,982
      Liabilities assumed                                                                         (26,557,263)
      Legal acquisiton costs                                                                         (136,868)
      Goodwill                                                                                        653,149
                                                                                                 ------------

            Total purchase price                                                                 $  1,350,000
                                                                                                 ============

      Contribution of 1st Atlantic ownership to SBM-MD                                           $     20,000
                                                                                                 ============

      Contribution of of mortgage notes from 1st Atlantic to ACFC                                $    553,957
                                                                                                 ============
</TABLE>

   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-13
<PAGE>

                             SBM Certificate Company

                             STATEMENT OF CASH FLOWS

                          Year ended December 31, 1999

Cash flows from operating activities
    Net income                                                     $     36,143
    Adjustments to reconcile net income to net cash
    provided by operating activities
        Provision for certificate liability                           1,615,074
        Realized investment losses                                      470,507
        Deferral of acquisition costs                                  (140,145)
        Amortization of deferred acquisition costs and
           renewal commissions                                          193,973
        Other amortization and depreciation                              23,711
        Deferred tax expense                                             11,513
        Decrease in dividends and interest receivable                   115,051
        Changes in other assets and liabilities                        (247,085)
                                                                   ------------

            Net cash provided by operating activities                 2,078,742
                                                                   ------------

Cash flows from investing activities
    Fixed maturity investments:
        Purchases                                                   (22,469,407)
        Maturities and redemptions                                   26,873,872
        Sales                                                        10,171,240
    Repayment of certificate loans, net                                  39,276
                                                                   ------------

            Net cash provided by investing activities                14,614,981
                                                                   ------------

Cash flows from financing activities
    Amounts paid to face-amount certificate holders                  (5,737,826)
    Amounts received from face-amount certificate holders               171,612
                                                                   ------------

            Net cash used in financing activities                    (5,566,214)
                                                                   ------------

            NET INCREASE (DECREASE) IN CASH
              AND CASH EQUIVALENTS                                   11,127,509

Cash and cash equivalents, beginning                                  3,279,970
                                                                   ------------

Cash and cash equivalents, end                                     $ 14,407,479
                                                                   ============


   See accompanying summary of accounting policies and notes to consolidating
                              financial statements


                                      F-14
<PAGE>

                     SBM Certificate Company and Subsidiary

                   NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999

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, a Maryland 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. 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 was held by an escrow agent as security for certain
      post-closing obligations and liabilities of ARM under the Stock Purchase
      Agreement. In October 2001, a final settlement was reached with ARM
      relating to these post-closing obligations, whereby, the Company received
      $278,333 and the remainder of the escrow monies were released to ARM. The
      Acquisition 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-15
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000 and 1999

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.

      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").

      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.

      Nature of Operations

      SBM-MD is engaged in the business of issuing and servicing 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.

      The Company currently offers various 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.


                                      F-16
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000 and 1999

NOTE A - ORGANIZATION AND BUSINESS (Continued)

      Nature of Operations (Continued)

      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
      accounting principles generally accepted in the United States of America
      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 intercompany balances
      and transactions have been eliminated.

      Cash and Fixed Maturity 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.


                                      F-17
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000 and 1999

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Cash and Fixed Maturity Investments (Continued)

      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. Loan origination fees and discount points paid by
      borrowers and the incremental direct costs of originating the loans are
      capitalized until the loans are sold or paid off. The market value is
      determined by evaluating, on a loan by loan basis, the note receivable
      expected loan payments and the market value of the real estate securing
      the loan.

      Mortgage Notes Held for Investment

      Mortgage notes held for investment are carried at amortized cost net of
      loan origination fees and discount points paid by borrowers and the
      incremental direct costs of originating the loans. These fees and costs
      are capitalized and amortized through maturity. If necessary, 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.

      Property Held for Sale

      Property held for sale consists of 100% beneficial interest in land and
      buildings held for sale. The beneficial interest was contributed to 1st
      Atlantic in a previous year and subsequently contributed to the Company by
      1st Atlantic in September 2001. The Property is owned by a partnership
      that is 100% owned and controlled by the shareholders of 1st Atlantic. The
      property is carried at the shareholders' costs basis at the date the
      beneficial interest in the property was contributed to 1st Atlantic.
      Expenditures are related to maintaining the value of the investment in the
      property held for sale.

      Real Estate Tax Lien Certificates

      Real estate tax lien certificates are investments comprised of delinquent
      real estate tax bills purchased from municipalities. The investments are
      secured by a first lien on the respective properties on which the tax is
      owed. They are carried at cost and, if necessary, a reserve is recognized
      for management's estimate of unrecoverable amounts.

      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.


                                      F-18
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000 and 1999

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 surrender value. 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 accumulated deficit in the statement of shareholder's
equity.

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. Upon the adoption of SFAS No. 142, goodwill and intangible assets that
have indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. The statement is applicable starting with fiscal
years beginning after December 15, 2001. The Company will adopt the provisions
of SFAS No. 142 on January 1, 2002. Under the new rules, goodwill will no longer
be amortized but will be subject to annual impairment tests in accordance with
the Statements. During 2002, the Company will perform the first of the required
impairment tests of goodwill as of January 1, 2002 and has not yet determined
what the effect of these tests will be on the earnings and financial position of
the Company.

Fixed Assets

Fixed assets are carried at cost and depreciated using the straight-line method
over the estimated useful lives of the assets.

Revenue Recognition

The Company recognizes interest and dividend income on investments when earned
on an accrual basis. Revenue earned from the origination and brokering of loans
is recognized upon the sale of the loan to an investor or third party. Gains and
losses from the sales of investments are recognized at the date of sale of the
investment.


                                      F-19
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Advertising Costs

      The Company expenses the costs of advertising as incurred. Advertising
      expense for the years ended December 31, 2001 and 2000 was $93,422 and $0,
      respectively.

NOTE C - FIXED MATURITY INVESTMENTS

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

<TABLE>
<CAPTION>
                                                                     Gross        Gross
                                                                  Unrealized    Unrealized
      December 31, 2001                               Cost           Gain          Loss        Fair Value
                                                  -----------     ----------    ----------     -----------
<S>                                               <C>              <C>           <C>           <C>
        Fixed maturities
          Mortgage-backed
            securities                            $ 2,390,095      $209,896      $ 43,772      $ 2,556,219
          Corporate securities                      3,656,575       317,534       161,888        3,812,221
          U.S. Treasury securities
            and obligations of U.S.
            government agencies                       265,110        16,420        10,747          270,783
          Obligations of state and
            political subdivisions                    128,236        10,764         3,910          135,090
                                                  -----------      --------      --------      -----------

              Total available-for-sale
                securities                        $ 6,440,016      $554,614      $220,317      $ 6,774,313
                                                  ===========      ========      ========      ===========

      December 31, 2000
        Fixed maturities
          Mortgage-backed
            securities                            $ 8,485,032      $236,944      $  1,849      $ 8,720,127
          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
                                                  ===========      ========      ========      ===========
</TABLE>


                                      F-20
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE C - FIXED MATURITY 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 securities provide for periodic payments
      throughout their life.

<TABLE>
<CAPTION>
                                        December 31, 2001                December 31, 2000
                                   --------------------------      ----------------------------
                                                    Estimated                        Estimated
                                      Cost         fair value         Cost          fair value
                                   ----------      ----------      -----------      -----------
<S>                                <C>             <C>             <C>              <C>
      FIXED MATURITIES
         Due in one year
           or less                 $       --      $       --      $        --      $        --
         Due after one year
           through five years         951,380       1,010,344          227,452          227,702
         Due after five years
           through ten years          937,420       1,028,602        1,786,485        1,868,662
         Due after ten years        2,161,121       2,179,148        2,155,466        2,184,509
         Mortgage-backed
           securities               2,390,095       2,556,219        8,485,032        8,720,127
                                   ----------      ----------      -----------      -----------

      Total fixed maturities       $6,440,016      $6,774,313      $12,654,435      $13,001,000
                                   ==========      ==========      ===========      ===========
</TABLE>

      Gains (losses) of $64,966, ($443,445), and ($470,507) were realized on
      sales of fixed maturities classified as available-for-sale for the years
      ended December 31, 2001, 2000, and 1999, respectively.

      Gains of $3,731 and $14,863 were recognized on equity securities sold
      during 2001 and 2000, respectively. There were no gains or losses
      recognized on equity securities sold for the year ended December 31, 1999.


                                      F-21
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

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,
                                            ------------------------------------------
                                              2001            2000            1999
                                            --------       ---------       -----------
<S>                                         <C>            <C>             <C>
      Net unrealized gain (loss)
         arising during period on
         available-for-sale securities      $ 50,079       $ 221,294       $(1,162,300)

      Reclassification adjustment
         for net realized (gains)
         losses included in net
         income                              (45,422)         (8,503)          266,330
                                            --------       ---------       -----------

      Change in net unrealized gains
         (losses) on available-for-
         sale securities                    $  4,657       $ 212,791       $  (895,970)
                                            ========       =========       ===========
</TABLE>


                                      F-22
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE E - FIXED ASSETS

      Fixed assets are as follows as of December 31, 2001 and 2000:

                                                      2001           2000
                                                    --------       -------

      Land and building                             $129,887       $    --
      Furniture and fixtures                          18,066            --
      Computer equipment                              77,311        68,072
                                                    --------       -------

          Total cost                                 225,264        68,072
          Less accumulated depreciation               20,658            --
                                                    --------       -------

                                                    $204,606       $68,072
                                                    ========       =======

NOTE F - MORTGAGE NOTES HELD FOR SALE

      At December 31, 2001 and 2000, the Company held residential and commercial
      mortgage notes receivable for sale of $5,436,118, net of capitalized
      origination fees of $214,012 and deferred direct loan costs of $9,834. The
      notes accrue interest at rates ranging from 9.25% to 14.5%, are secured by
      real property and have maturity dates through October 1, 2031. The
      Company's intention is to sell the notes to a buyer under certain
      favorable market conditions. As of December 31, 2001, there are no
      commitments from investors to purchase any of these mortgage notes.


                                      F-23
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE G - MORTGAGE NOTES HELD FOR INVESTMENT

      The Company held two mortgage notes receivable as of December 31, 2001 and
      2000 as long-term investments. These notes are serviced by the Company and
      are secured by real property. The notes accrue interest at rates of 12%
      and 8% with maturity dates through December 31, 2001.

NOTE H - REAL ESTATE TAX LIEN CERTIFICATES

      The Company held investments in real estate tax lien certificates at
      December 31, 2001 in the amount of $2,628,528. Interest is earned based on
      a fixed rate of 20% on the outstanding taxes owed. Interest income on
      these investments for the year ended December 31, 2001 was $159,354 and
      accrued interest at December 31, 2001 was $142,967. The Company recovers
      the cost of its investment plus accrued interest from pass through
      payments on the tax bills from the municipality, which receives payments
      directly from the tax payers. The Company may also recover the cost of its
      investment plus accrued interest by exercising its rights to foreclose on
      the underlying properties within a two year period from the date of the
      investment purchase.

NOTE I - CERTIFICATE LIABILITY

      The Company's certificate liability consists of the statutory certificate
      liability and the additional certificate liability. The statutory
      certificate liability is calculated based on section 28(a) of the 1940
      Act. The Company maintains an additional certificate liability amount in
      excess of the statutory liability. This additional liability plus the
      statutory liability is equal to the certificates' surrender value.

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

<TABLE>
<CAPTION>
                                                                                 Minimum        Additional
                                                  2001            2000           Interest        Interest
                                              -----------      -----------     ------------   ------------
<S>                                           <C>              <C>             <C>            <C>
      Fully-paid certificates:

      Single-payment series 503               $22,011,880      $18,926,313         2.50       2.10 to 4.60
      Installment                               1,226,036        1,271,625     2.50 to 3.50   1.50 to 2.75
      Optional settlement                         161,607          193,713     2.50 to 3.50   2.00 to 2.75
      Due to unallocated
        certificate holders                            --               --         None
                                              -----------      -----------

                                               23,399,523       20,391,651
                                              -----------      -----------

      Installment certificates:
        Reserves to mature, by series
          120 and 220                             336,000          274,385         3.25       1.75 to 2.00
          315                                      85,527          115,703         3.50       1.50 to 1.75
        Advance payments                               --          144,889
                                              -----------      -----------

                                                  421,527          534,977
                                              -----------      -----------

      Total certificate liability             $23,821,050      $20,926,628
                                              ===========      ===========
</TABLE>


                                      F-24
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE J - 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, 2001                 December 31, 2000
                                    ----------------------------      ----------------------------
                                      Carrying        Estimated        Carrying         Estimated
                                       Value          Fair Value         Value          Fair Value
                                    -----------      -----------      -----------      -----------
<S>                                 <C>              <C>              <C>              <C>
      Assets
        Fixed maturities            $ 6,440,016      $ 6,774,313      $13,001,000      $13,001,000
        Equity securities                    --               --          200,663          200,663
        Mortgage notes held
          for sale                    5,436,118        5,436,118        3,060,252        3,197,418
        Mortgage notes held
          for investment                731,482          731,482          715,862          715,862
        Real estate tax lien
          certificates                2,628,528        2,628,528               --               --
        Property held for sale          419,923        1,911,000               --               --
        Certificate loans                98,137           98,137          110,069          110,069
        Cash and cash
          equivalents                 5,538,094        5,538,094        3,716,393        3,716,393
      Liabilities
        Certificate liability        23,821,050       23,821,050       20,926,628       20,926,628
</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-25
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE J - 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 expected loan payments and the market value of the real
      estate securing the loan.

      Mortgate Notes Held for Investment

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

      Real Estate Tax Lien Certificates

      Estimated fair value of tax lien certificates approximates their carrying
      value.

      Property Held For Sale

      Estimated fair value of property held for sale is based on a contract for
      the sale of the property to an unrelated third party

      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 and carrying value of the certificate liability is based on
      the surrender value of the applicable certificate prospectus.


                                      F-26
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE K - 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, 2001 and 2000 were:

                                                            2001         2000
                                                        -----------   ---------
      Deferred tax liabilities
         Net unrealized gains on available-for-sale
           securities                                   $   116,849   $ 133,774
         Certificate liability                              640,269     630,724
                                                        -----------   ---------

           Total deferred tax liabilities                   757,118     764,498
                                                        -----------   ---------

      Deferred tax assets
         Investments                                        185,644     311,829
         Mortgage notes                                          --      38,136
         Capital loss carryover                             381,925     206,455
         Net operating loss carryforward                    967,671     109,324
                                                        -----------   ---------

           Total deferred tax assets                      1,535,240     665,744

      Valuation allowance for deferred tax assets          (778,122)   (206,455)
                                                        -----------   ---------

         Net deferred tax assets                            757,118     459,289
                                                        -----------   ---------

         Deferred tax liabilities shown on the
             accompanying balance sheets                $        --   $ 305,209
                                                        ===========   =========

      In 2001 and 2000, the Company has provided a valuation allowance for
      deferred tax assets for net operating loss carryforwards and capital loss
      carryforwards in which realization of these future benefits cannot be
      reasonably assured as a result of recurring operating losses and the
      uncertainty of the Company's ability to realize the capital loss
      carryforwards. If the Company has capital gains, these capital loss
      carryforwards would be available to offset such gain, subject to certain
      limitations. 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-27
<PAGE>

                     SBM Certificate Company and Subsidiary

             NOTES TO CONSOLIDATING FINANCIAL STATEMENTS - CONTINUED

                        December 31, 2001, 2000, and 1999

NOTE K - INCOME TAXES (Continued)

      At December 31, 2001 and 2000, the Company had net operating loss
      carryforwards of approximately $2,506,919 and $283,223, respectively, for
      income tax purposes which expire in various years through 2021. The
      Company had capital loss carryforwards at December 31, 2001 and 2000 of
      approximately $988,930 and $283,223, respectively, which expire in various
      years through 2006.

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

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                -----------------------------------------
                                                   2001            2000            1999
                                                ---------       ---------       ---------
<S>                                             <C>             <C>             <C>
      Current                                   $      --       $      --       $(211,503)
      Deferred                                   (288,264)       (621,055)         11,513
                                                ---------       ---------       ---------

      Total federal income tax benefit          $(288,264)      $(621,055)      $(199,990)
                                                =========       =========       =========
</TABLE>

      Federal income tax expense differs from that computed by using the income
      tax rate of 35%, as shown below.

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                -----------------------------------------
                                                   2001            2000            1999
                                                ---------       ---------       ---------
<S>                                             <C>             <C>             <C>
      Income tax benefit at
        statutory rate                          $(441,577)      $(309,977)      $ (57,346)
      State tax benefit, net of federal
        tax benefit                               (86,968)        (24,277)             --
      Increase in valuation allowance
        related to capital loss and
        NOL carryovers                            571,667         206,455          66,700
      Decrease in contingent tax liability             --              --        (200,000)
      Dividend received deduction                      --              --          (7,211)
      Certificate liability adjustment           (287,735)       (615,904)             --
      Mortgage notes marked to market                  --          38,136              --
      Tax-exempt interest                         (12,000)        (12,000)         (2,612)
      Other                                       (31,651)         96,512             479
                                                ---------       ---------       ---------

      Total federal income tax benefit          $(288,264)      $(621,055)      $(199,990)
                                                =========       =========       =========
</TABLE>


                                      F-28
<PAGE>

                     SBM Certificate Company and Subsidiary

                   NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999

NOTE L - 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 the 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 either 1% of the Company's average certificate liability
      balances, or an amount not to exceed $2.5 million. The charge is
      determined monthly by State Bond and Company management. During 2001 and
      2000, a fee was charged totaling $1,078,839 and $112,223, respectively.
      Management fees paid in 2001 and 2000 were $1,119,128 and $71,934,
      respectively, and $40,289 remained payable at December 31, 2000.

      On September 30, 2001, State Bond contributed as additional paid in
      capital a mortgage note to the Company which totaled $1,136,047 at that
      date.

      On September 30, 2001, State Bond through its sole member, 1st Atlantic,
      contributed beneficial interest in a property consisting of land and
      building held for sale as addition paid in capital to the Company which
      totaled $410,087 at the date of contribution to the Company. The basis in
      the property at the contribution date is the original cost basis of the
      shareholders of 1st Atlantic at the date of the original contribution to
      1st Atlantic (September 30, 1998), increased for the expenditures made by
      1st Atlantic and subsequently by the Company in connection with the
      investment in the property held for sale. As of December 31, 2001, the
      carrying amount of the property is $419,923.

      The Company made a mortgage loan to a partnership in which an affiliate of
      the Company owned a 51% interest. As of December 31, 2001, the outstanding
      principal balance of the mortgage note is $378,950 and accrued interest
      totals $59,104. 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.

      A director of the Company provided legal services relating to the
      Acquisition and throughout 2001. Total costs for services provided during
      2001 and 2000 were $8,150 and $61,960, respectively, and $18,000 remained
      payable as of December 31, 2000.

      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, directly or through companies
      affiliated with the shareholder during 2001 ($469,982) and 2000 ($342,236)
      totaling $812,218. An allowance has been recorded in the full amount due
      from shareholder. (See note O)

NOTE M - 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 ($21.5 million and $20.2
      million at December 31, 2001 and 2000, respectively). The Company had
      qualified assets (at amortized cost) of $22.2 million and $20.7 million at
      those respective dates.


                                      F-29
<PAGE>

                     SBM Certificate Company and Subsidiary

                   NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999

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

      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.

      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, 2001 and 2000, as shown in the following table.
      Certificate loans, secured by applicable certificate liabilities, are
      deducted from certificate reserves in computing deposit requirements.

                                                          December 31,
                                                 ------------------------------
                                                     2001               2000
                                                 ------------      ------------
      Qualified assets on deposit:
          Central depository                     $ 21,904,193      $ 20,448,398
          State governmental authorities              270,899           265,110
                                                 ------------      ------------

      Total qualified assets on deposit          $ 22,175,092      $ 20,713,508
                                                 ============      ============

      Certificate reserve under Section 28(a)    $ 21,311,350      $ 20,020,189
      Less: Certificate loans                         (98,137)         (110,069)
      Plus: Base capital requirement                  250,000           250,000
                                                 ------------      ------------

      Required deposits                          $ 21,463,213      $ 20,160,120
                                                 ============      ============


                                      F-30
<PAGE>

                     SBM Certificate Company and Subsidiary

                   NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999

NOTE N - CONCENTRATIONS

      During 2001, the Company had selling agreements in place with six
      broker-dealer firms to sell the face-amount certificates of the Company.
      Of the Company's $6,472,858 of new certificate sales, $4,226,506, or 65%,
      were sold by one broker-dealer, ARM Securities. To mitigate this
      concentration, in 2002, the Company has executed one new selling agreement
      and has begun extensive marketing to the other broker-dealers with which
      it has selling agreements. In addition, the Company has implemented a new
      internal retail sales division.

NOTE O - SUBSEQUENT DISCOVERY OF FACTS

      Subsequent to the issuance of its December 31, 2001 financial statements,
      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, 2001
      financial statements.

      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 Securities Exchange Act of 1934, and diverted cash assets
      of the Company during 2000 and 2001 to himself directly or indirectly in
      the amount of approximately $812,000.

      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 2001 and 2000 have been
      reissued to give effect to the transactions discussed below in the
      financial statements of the respective years. Mr. Lawbaugh continues to
      control 100% of the Company's common stock.

      The following is a summary of the transactions requiring adjustment and
      their affect on the financial statements as of December 31, 2001.

      (a)   During 2001, origination and other fees totaling $154,952 were paid
            to other entities controlled by Mr. Lawbaugh with respect to two
            loans originated by the Company. 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 a
            corresponding amount due from shareholder.

      (b)   During 2001, pursuant to the instructions of Mr. Lawbaugh, a cash
            payment of $84,000 was made to Mr. Lawbaugh's personal bank account
            by an escrow agent from funds provided by the Company to the escrow
            agent for the purchase of a mortgage note. 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 a corresponding amount due from shareholder. With respect to the
            origination fees of $111,279 on one of the loans discussed in (a)
            above and the $84,000 discussed in (b) above, the borrower sold the
            property out of bankruptcy court to an unrelated third party
            subsequent to December 31, 2001. The Company entered into a new loan
            agreement with the purchaser in the amount of $1,050,000. During
            2002, income of approximately $300,000 was recognized in conjunction
            with the sale of the property and cancellation of the old note.


                                      F-31
<PAGE>

                     SBM Certificate Company and Subsidiary

                   NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999

      (c)   An interest escrow account was established for the benefit of a
            borrower in the amount of $42,286. This amount was funded by the
            Company in connection with a mortgage loan at the closing of the
            loan. Mr. Lawbaugh subsequently transferred the interest escrow
            account to his personal control. The liability to the borrower was
            previously omitted from the Company's financial statements and is
            adjusted to record a due from shareholder and a corresponding
            liability for the benefit of the borrower.

      (d)   Cash payments of $188,744 were made to a bank account controlled by
            Mr. Lawbaugh in connection with the purchase of real estate tax lien
            certificates held for investment by the Company. The payment was
            made to the account controlled by Mr. Lawbaugh by the settlement
            agent pursuant to the instructions of Mr. Lawbaugh. The amount was
            previously recorded as an investment in real estate tax lien
            certificates, which is adjusted to record a reduction of the tax
            lien certificates and a corresponding amount due from shareholder.

      (e)   An allowance for uncollectible amounts due from shareholder has been
            recorded for the full amount due from the shareholder totaling
            $812,218 with a corresponding charge to operations in the amount of
            $469,982 for the year ended December 31, 2001 and $342,236 for the
            year ended December 31, 2000.

      (f)   Mortgage notes contributed to the Company during 2001 by 1st
            Atlantic were recorded as mortgage notes held for sale in the amount
            of $1,127,473 and a corresponding amount to additional paid in
            capital. The asset has a cost basis of $419,923. The asset has been
            reduced to the cost basis and reclassified to property held for sale
            with a corresponding adjustment to additional paid in capital of
            $705,550 to reflect the contribution at the cost basis of the
            shareholder.

      The net increase (decrease) in the amounts previously reported for the
      year ended December 31, 2001 is as follows:

                  Qualified assets                   $(1,396,907)
                  Additional paid in capital         $  (707,550)
                  Retained earnings                  $  (731,643)
                  Shareholder's Equity               $(1,439,193)
                  Net loss                           $   439,407

      The Company currently has a contract in the amount of $1,911,000 for the
      sale of the property held for sale as previously described in item (f)
      above. The contract is scheduled to close in December 2002. The Company
      expects to receive approximately $1,400,000 to $1,700,000 of cash proceeds
      in connection with the sale, and recognize a gain on its December 31, 2002
      financial statements of approximately $900,000 to $1,200,000 upon the
      closing of the transaction.

      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.


                                      F-32
<PAGE>

                     SBM Certificate Company and Subsidiary

                   NOTES TO CONSOLIDATING FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999

      (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-33
<PAGE>

                     SBM Certificate Company and Subsidiary

                             SUPPLEMENTAL SCHEDULES

         SCHEDULE I - INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS

                                December 31, 2001

<TABLE>
<CAPTION>
                                                                PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE                                 AMOUNT          COST           VALUE
---------------------------------------------------------       ----------     ----------     ----------
<S>                                                             <C>            <C>            <C>
FIXED MATURITIES AVAILABLE-FOR-SALE
  U.S. TREASURY SECURITIES
    U.S. Treasury Note, 5.625%, due 5/15/2008                   $   50,000     $   51,360     $   52,407
    U.S. Treasury Note, 7.25%, due 8/15/2004                       200,000        213,750        218,376
                                                                               ----------     ----------
                                                                                  265,110        270,783
                                                                               ----------     ----------
OBLIGATIONS OF STATE AND POLITICAL
  SUBDIVISIONS
  Belmont County, Ohio, Sanitary Sewer District #3
    Waterworks Revenue Bonds, 4.25%, due 4/01/2004                  14,000         13,801         13,963
  Douglas County, Washington, Public Utilities Districts
    #1, Wells Hydroelectric Revenue Bonds, 4%,
    due 9/01/2018                                                   55,000         50,066         52,104
  Yuba County California, Water Agency Bonds, 4%,
    due 3/01/2016                                                   75,000         64,369         69,023
                                                                               ----------     ----------
                                                                                  128,236        135,090
                                                                               ----------     ----------

CORPORATE SECURITIES
  FINANCIAL INSTITUTIONS
    Central Fidelity Cap. I, Series A, 7.18%, due 4/15/2027        950,000        926,188        884,982
    Citigroup Inc., 7%, due 12/01/2025                             300,000        271,225        307,077
    First Union Corp., 6.4%, due 4/1/2008                          960,000        886,080        976,195
                                                                               ----------     ----------
                                                                                2,083,493      2,168,254
                                                                               ----------     ----------

PUBLIC UTILITIES
  MCI Communications Corp., 7.75%, due 3/15/2024                   900,000        849,253        865,962
                                                                               ----------     ----------
                                                                                  849,253        865,962
                                                                               ----------     ----------

INDUSTRIAL:
  USX Corp., 6.65%, due 2/1/2006                                   750,000        723,829        778,005
                                                                               ----------     ----------
                                                                                  723,829        778,005
                                                                               ----------     ----------

TOTAL CORPORATE SECURITIES                                                      3,656,575      3,812,221
                                                                               ----------     ----------
</TABLE>

                                   (continued)


                                      S-01
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

   SCHEDULE I - INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS - CONTINUED

                                December 31, 2001

<TABLE>
<CAPTION>
                                                           PRINCIPAL
NAME OF ISSUER AND TITLE OF ISSUE                            AMOUNT         COST          VALUE
------------------------------------------------------     ---------     ----------    ----------
<S>                                                        <C>           <C>           <C>
MORTGAGE-BACKED SECURITIES
   Countrywide Home Loans RAST, 1998-A8, A6, 6.2124%,
      due 8/25/2028                                          900,000        850,401       905,481
   Federal Home Loan Mortgage Corporation, 6.5%,
      due 5/15/2028                                        1,000,000        895,253       954,530
   Federal National Mortgage Association, 9%,
      due 4/01/2021                                           13,043         13,784        14,213
   Government National Mortgage Association
      11.5%, due 3/15/2015                                        98            196           113
      11.5%, due 4/15/2013                                       434            476           501
      11.5%, due 5/15/2015                                       127            144           147
      11.5%, due 8/15/2013                                       787            821           909
      6.875%, due 1/20/2026                                  139,514        137,203       142,740
   PNC Mortgage Securities Corp., 1998-7 1A13, 6.75%,
      due 9/25/2028                                          423,275        408,839       435,245
   PNC Mortgage Securities Corp., 1998-7 1A24, 7.25%,
      due 9/25/2028                                          101,864         82,978       102,340
                                                                         ----------    ----------
                                                                          2,390,095     2,556,219
                                                                         ----------    ----------

            TOTAL FIXED MATURITIES AVAILABLE-FOR-SALE                    $6,440,016    $6,774,313
                                                                         ==========    ==========
</TABLE>


                                      S-02
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

   SCHEDULE II - INVESTMENTS IN AND ADVANCES TO AFFILIATES AND INCOME THEREON

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                                         AMOUNT OF DIVIDENDS OR INTEREST
                                                                         ----------------------------------------------------------
                                                                                                                        LOSS FROM
                                                                         CARRYING VALUE                               INVESTMENT IN
                                          NUMBER OF      PAR VALUE OF     OF INVESTMENT     CREDITED TO                 SUBSIDIARY
 NAME OF INVESTMENT IN SUBSIDIARY        SHARES HELD     SHARES HELD      IN SUBSIDIARY        INCOME       OTHER       FOR PERIOD
-------------------------------------    -----------     ------------    --------------        ------       -----     --------------
<S>                                         <C>            <C>             <C>              <C>           <C>             <C>
Atlantic Capital Funding Corporation        10,000         $20,000         $1,619,007       $       --    $       --      $(21,475)
                                                           =======         ==========       ==========    ==========      ========
</TABLE>


                                      S-03
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

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

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                    AMOUNT OF PRINCIPAL UNPAID AT
                                                            CLOSE OF PERIOD
                                                    -----------------------------
                                                                                      AMOUNT OF                     INTEREST INCOME
                                       CARRYING                        SUBJECT TO     MORTGAGES     INTEREST DUE         EARNED
                                       AMOUNT OF                       DELINQUENT       BEING      AND ACCRUED AT    APPLICABLE TO
      DESCRIPTION       PRIOR LIENS      ASSET        TOTAL             INTEREST     FORECLOSED     END OF PERIOD        PERIOD
------------------      -----------   ----------    ----------        ------------   ----------    --------------  ----------------
<S>                       <C>         <C>           <C>                <C>           <C>              <C>              <C>
LIENS ON:
     RESIDENTIAL            NONE      $4,042,490    $4,042,490         $2,395,676    $1,792,811       $131,050         $530,103
     COMMERCIAL             NONE       2,125,110     2,125,110          1,097,871       719,721         24,917           24,917
                          -------     ----------    ----------         ----------    ----------       --------         --------

      TOTAL               $    --     $6,167,600    $6,167,600         $3,493,547    $2,512,532       $155,967         $555,020
                          =======     ==========    ==========         ==========    ==========       ========         ========
</TABLE>


                                      S-04
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

                    SCHEDULE V - QUALIFIED ASSETS ON DEPOSIT

                                December 31, 2001

<TABLE>
<CAPTION>
                                                                     FIRST
                                                                 MORTGAGES AND
                                                INVESTMENTS IN    OTHER FIRST
                                                  SECURITIES     LIENS ON REAL       OTHER
   NAME OF DEPOSITORY                 CASH           (a)             ESTATE           (b)      REAL ESTATE      TOTAL
------------------------------     ----------   --------------   -------------      --------   -----------    -----------
<S>                                <C>            <C>              <C>              <C>          <C>          <C>
State governmental authorities
   Securities Department
     of Illinois                   $       --     $  265,110       $       --       $  5,789                     $270,899
Central depositary
   US Bank                          5,210,521      6,174,906        8,796,128        367,105      419,923      20,968,583
   Bank of America                    719,963             --               --             --           --         719,963
   Chase Manhattan                     65,960             --               --             --           --          65,960
   Chevy Chase                         45,648             --               --             --           --          45,648
   State Bank                          16,799             --               --             --           --          16,799
   Wells Fargo                         87,240             --               --             --           --          87,240
                                   ----------     ----------       ----------       --------     --------     -----------

Total qualified assets on
 deposit                           $6,146,131     $6,440,016       $8,796,128       $372,894     $419,923     $22,175,092
                                   ==========     ==========       ==========       ========     ========     ===========
</TABLE>

(a)   Represents amortized cost of bonds and securities.

(b)   Represents dividend and interest receivable on qualified assets.


                                      S-05
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

                    SCHEDULE VI - CERTIFICATE RESERVES
                         PART I - SUMMARY OF CHANGES

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                                 BALANCE AT BEGINNING OF YEAR
                                                                          -----------------------------------------
                                                                                                        RESERVES
                                                                          NUMBER OF                    (INCLUDING
                                                                          ACCOUNTS                       ADVANCE
                                                                            WITH                      PAYMENTS WITH
                                                               YIELD      SECURITY      AMOUNT OF        ACCRUED
               DESCRIPTION                                    PERCENT      HOLDERS   MATURITY VALUE      INTEREST)
------------------------------------------------------        -------     --------   --------------   -------------
<S>                                                                          <C>       <C>             <C>
Reserves to mature, installment certificates
   Series 120                                                    2.75            8     $    50,000     $   172,042
   Series 220                                                    2.75           15          80,000         221,336
   Series 315                                                    2.66           22          90,200         141,599

Single payment certificates
   Series 503                                                    2.50        1,691      21,087,286      18,926,313
   Series 505                                                    2.50           --              --              --
   Series 507                                                    2.50           --              --              --
   Series 510                                                    2.50           --              --              --

Fully paid installment certificates - (Paid Up Bonds)            2.50          404       2,099,101       1,271,625

Optional settlement certificates
   Paid-up certificate (Special Maturity)                        2.50            3             575             483
   Annuities                                                     3.00           43         437,675         193,230

   Due to unlocated certificate holders                          None           26           2,799              --

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

   Total                                                                     2,212     $23,847,636     $20,926,628
                                                                          ========     ===========     ===========

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)

<CAPTION>
                                                                                            ADDITIONS
                                                                      ---------------------------------------------------------


                                                                                      RESERVE
                                                                                    PAYMENTS BY      CHARGED TO
                                                                      CHARGED TO    CERTIFICATE    OTHER ACCOUNTS
                  DESCRIPTION                                           INCOME         HOLDERS           (a)         Adjustment
------------------------------------------------------                ----------    -----------    --------------    ----------
<S>                                                                   <C>            <C>              <C>            <C>
Reserves to mature, installment certificates
   Series 120                                                         $    6,058     $    1,398       $     --       $      --
   Series 220                                                             10,588          3,180             --              --
   Series 315                                                              6,309          4,202             --              --
Single payment certificates
   Series 503                                                            849,241      2,079,484             --          49,589
   Series 505                                                             55,306      1,361,590             --              --
   Series 507                                                             27,133        506,043             --              --
   Series 510                                                            129,766      2,516,961             --              --

Fully paid installment certificates - (Paid Up Bonds)                     82,452             --             --          14,965

Optional settlement certificates
   Paid-up certificate (Special Maturity)                                     15             --             --              --
   Annuities                                                              20,127                            --          69,916

   Due to unlocated certificate holders                                       --             --             --              --

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

   Total                                                              $1,186,995     $6,472,858       $     --       $ 134,470
                                                                      ==========     ==========       ========       =========

Total charged to income, per above                                    $1,186,995
   Less reserve recoveries from terminations prior to maturity           (14,443)
                                                                      ----------
   Interest credited on certificate reserves,
      per statement of operations and comprehensive income (loss)     $1,172,552
                                                                      ==========
</TABLE>

                                  (continued)


                                      S-06
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

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

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                          DEDUCTIONS                              BALANCE AT END OF YEAR
                                           --------------------------------------  -------------------------------------------------
                                                                                                                          RESERVES
                                                                                                                        (INCLUDING
                                                              CASH                   NUMBER OF                            ADVANCE
                                                           SURRENDERS              ACCOUNTS WITH                          PAYMENTS)
                                                            PRIOR TO                 SECURITY            AMOUNT OF      WITH ACCRUED
            DESCRIPTION                    MATURITIES       MATURITY      OTHER       HOLDERS         MATURITY VALUE      INTEREST
----------------------------------         ----------      ----------    --------  -------------      --------------    ------------
<S>                                        <C>             <C>           <C>             <C>            <C>              <C>
Reserves to mature, installment
certificates
  Series 120                               $   25,988      $       --    $ 25,991            7          $    40,000      $   127,519
  Series 220                                   11,516              --      15,107           13               71,000          208,481
  Series 315                                       --           4,182      62,401           16               61,600           85,527

Single payment certificates
  Series 503                                3,387,995       1,003,175          --        1,348           17,840,500       17,513,457
  Series 505                                       --           8,083       2,200          152            2,441,879        1,406,613
  Series 507                                       --              --       1,581           68              798,935          531,595
  Series 510                                       --          68,888      17,624          189            3,761,918        2,560,215

Paid-up bonds                                      --         125,294      17,712          391            2,006,476        1,226,036

Optional settlement certificates
  Paid-up certificate                              --              --          --            3                  575              498
  Annuities                                   115,867              --       6,297           38              161,608          161,109

  Due to unlocated certificate
  holders                                          --              --          --           --                   --               --
                                           ----------      ----------    --------        -----          -----------      -----------

  Total                                    $3,541,366      $1,209,622    $148,913        2,225          $27,184,491      $23,821,050
                                           ==========      ==========    ========        =====          ===========      ===========
</TABLE>

                                   (continued)


                                      S-07
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

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

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                               BALANCE AT BEGINNING OF YEAR
                                                    ---------------------------------------------------
                                                        NUMBER OF
                                           AGE          ACCOUNTS
                                         GROUPING    WITH SECURITY       AMOUNT OF            AMOUNT OF
                                         IN YEARS        HOLDERS      MATURITY VALUE           RESERVES
                                         --------    -------------    --------------          ---------
<S>                                         <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
                                            33              0                     --                 --
                                            34              0                     --                 --
                                            35              1                  6,000             18,966
                                            36              1                  6,000             19,082
                                            37              1                  3,000             11,138
                                            38              0                     --                 --
                                            40              2                 16,000             75,076

Interest reserve

Accrued interest payable                                                                          5,297
                                                       ------               --------          ---------

Total                                                       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             99,947
                                            34              3                 15,000             48,866
                                            35              2                  8,000             26,457

Interest reserve

Accrued interest payable                                                                          4,864
                                                       ------               --------          ---------

Total                                                      15               $ 79,000          $ 221,336
                                                       ======               ========          =========
</TABLE>

                                   (continued)


                                      S-08
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

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

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                   DEDUCTIONS                                 BALANCE AT END OF YEAR
                             ----------------------    --------------------------------------------------------------------
                                CASH
                             SURRENDERS                                      NUMBER OF
                              PRIOR TO                 AGE GROUPING IN     ACCOUNTS WITH          AMOUNT OF       AMOUNT OF
                              MATURITY        OTHER          YEARS        SECURITY HOLDERS      MATURITY VALUE    RESERVES
                             ----------       -----    ---------------    ----------------      --------------    ---------
<S>                            <C>            <C>                 <C>            <C>               <C>            <C>
Series 120                                                        23              0                $     --       $      --
                                                                  24              1                   6,000          15,917
                                                                  25              1                   8,000          12,645
                                                                  31              0                      --              --
                                                                  32              0                      --              --
                                                                  33              1                   5,000          16,224
                                                                  34              0                      --              --
                                                                  35              0                      --              --
                                                                  36              2                  12,000          41,137
                                                                  37              1                   3,000          11,827
                                                                  38              0                      --              --
                                 25,988                           40              1                   6,000          25,846
Interest
  reserve
Accrued
  interest
  payable                                                                                                             3,923
                               --------       --------                    ---------                --------       ---------

      Total                    $ 25,988       $     --                            7                $ 40,000       $ 127,519
                               ========       ========                    =========                ========       =========

Series 220                                                        23              0                $     --       $      --
                                                                  24              1                  12,000          18,271
                                                                  29              0                      --              --
                                                                  30              1                   4,000           9,684
                                                                  31              0                      --              --
                                 11,515                           32              1                   6,000          16,759
                                                15,107            33              4                  21,000          63,297
                                                                  34              3                  14,000          47,622
                                                                  35              3                  14,000          48,400
Interest
  reserve
Accrued
  interest
  payable                                                                                                             4,448
                               --------       --------                    ---------                --------       ---------

      Total                    $ 11,515       $ 15,107                           13                $ 71,000       $ 208,481
                               ========       ========                    =========                ========       =========
</TABLE>

                                   (continued)


                                      S-09
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

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

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                                                     BALANCE AT BEGINNING OF YEAR
                                                          ------------------------------------------------
                                                              ACCOUNTS
                                                AGE             WITH             AMOUNT OF
                                              GROUPING        SECURITY            MATURITY      AMOUNT OF
                                              IN YEARS        HOLDERS              VALUE         RESERVES
                                              --------    ------------------------------------------------
<S>                                                              <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
                                                 16               2                  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                                                        23                $90,200       $141,599
                                                             ==========            =======       ========
</TABLE>

                                   (continued)


                                      S-10
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

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

                          Year ended December 31, 2001

<TABLE>
<CAPTION>
                                 DEDUCTIONS                                   BALANCE AT END OF YEAR
                        --------------------------    --------------------------------------------------------------------
                                                                             NUMBER OF
                         CASH SURRENDERS              AGE GROUPING IN      ACCOUNTS WITH        AMOUNT OF        AMOUNT OF
                        PRIOR TO MATURITY    OTHER         YEARS          SECURITY HOLDERS    MATURITY VALUE      RESERVES
                        -----------------    -----    ---------------     ----------------    --------------     ---------
<S>                         <C>            <C>               <C>                <C>               <C>             <C>
Series 315                                                   12                  0                $     --        $     --
                                                             13                  0                      --              --
                                                             14                  2                   7,700           6,829
                                             37,258          15                  0                      --              --
                                                             16                  4                  20,900          23,035
                                                             17                  2                   4,400           5,797
                                                             18                  1                   2,200           3,527
                                                             19                  6                  24,200          38,555
                              4,182          24,021          20                  1                   2,200           3,932



  Interest
    reserve                                                                                                          2,302
  Accrued interest
    payable                                                                                                          1,550
                            -------        --------                         ------                --------        --------

Total                       $ 4,182        $ 61,279                             16                $ 61,600        $ 85,527
                            =======        ========                         ======                ========        ========
</TABLE>


                                      S-11
<PAGE>

                     SBM Certificate Company and Subsidiary

                       SUPPLEMENTAL SCHEDULES - CONTINUED

                SCHEDULE VII - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                              ADDITIONS
                                                 --------------------------------
                                                 CHARGED TO      CHARGED TO OTHER
     DESCRIPTION            BEGINNING OF YEAR      EXPENSE           ACCOUNTS        DEDUCTIONS         END OF YEAR
-----------------------     -----------------    ----------      ----------------    ----------         -----------
<S>                             <C>               <C>             <C>       <C>      <C>                <C>
Valuation allowance on
   deferred tax assets
   year ended
   December 31,
      2001                      $ 206,455         $      --       $ 571,667 (1)      $       --         $ 778,122
      2000                      $      --         $      --       $ 206,455 (1)      $       --         $ 206,455
      1999                      $ 120,000         $ 140,981       $ 261,163 (2)      $       --         $ 522,144
      1998                      $ 400,000         $      --       $      --          $ (280,000)(3)     $ 120,000
</TABLE>

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


                                      S-12
<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)