-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V0CDbjRDrqu1zGM7a2dwuce3k9dEXlqJqJEewrdjH/Qc63UIAjACBwXqiaH2Hr4v iPva1uSfBBMlzOjjcdKUog== 0000921895-05-000727.txt : 20050516 0000921895-05-000727.hdr.sgml : 20050516 20050516170814 ACCESSION NUMBER: 0000921895-05-000727 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050516 DATE AS OF CHANGE: 20050516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEBFINANCIAL CORP CENTRAL INDEX KEY: 0000085149 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS BUSINESS CREDIT INSTITUTION [6159] IRS NUMBER: 562043000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-00631 FILM NUMBER: 05835773 BUSINESS ADDRESS: STREET 1: 150 EAST 52ND STREET 21ST FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2128131500 MAIL ADDRESS: STREET 1: 150 EAST 52ND ST STREET 2: 21ST FL CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: ROSES HOLDINGS INC DATE OF NAME CHANGE: 19970826 FORMER COMPANY: FORMER CONFORMED NAME: ROSES STORES INC DATE OF NAME CHANGE: 19920703 10QSB 1 form10qsb04197_03312005.htm sec document
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(Mark One)

/X/  Quarterly  report under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934

                  For the quarterly period ended March 31, 2005

/ /  Transition report under Section 13 or 15(d) of the Exchange Act


           For the transition period from              to
                                          ------------    -----------

                          Commission file number 0-631


                            WEBFINANCIAL CORPORATION
         ---------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)


         DELAWARE                                          56-2043000
         --------                                          ----------
(State or Other Jurisdiction of                          (IRS Employer
Incorporation or Organization)                           Identification No.)


                         590 MADISON AVENUE, 32ND FLOOR
                               NEW YORK, NY 10022
                               ------------------
          (Address of Principal Executive Offices, Including Zip Code)

                                  212-758-3232
                                  ------------
                (Issuer's Telephone Number, Including Area Code)

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

                       Yes [ X ]   No [   ]

     Shares of Issuer's Common Stock Outstanding at May 13, 2005: 2,183,433

     Transitional Small Business Disclosure Format: Yes [ ] No [ X ]







                                      INDEX


PART I - FINANCIAL INFORMATION                                       PAGE NUMBER
- ------------------------------                                       -----------

Item 1.  Condensed Consolidated Financial Statements:

         Condensed Consolidated Statements of Financial
         Condition as of March 31, 2005 (unaudited)
         and December 31, 2004..........................................  3

         Condensed Consolidated Statements of Income
         and Comprehensive Income Three Months Ended
         March 31, 2005 and 2004 (unaudited)............................  5

         Condensed Consolidated Statements of Cash Flows
         Three Months Ended March 31, 2005 and 2004 (unaudited).........  7

         Notes to Condensed Consolidated
         Financial Statements (unaudited)...............................  9

Item 2.  Management's Discussion and Analysis or Plan of Operation...... 11

Item 3.  Controls and Procedures........................................ 17


PART II - OTHER INFORMATION
- ---------------------------

Item 1.  Legal Proceedings.............................................. 18

Item 6.  Exhibits....................................................... 18

         Signatures..................................................... 19


                                       2



PART I.  FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                  (Amounts in thousands except per share data)


                                                                             MARCH 31, 2005     DECEMBER 31, 2004
                                                                             --------------     -----------------
                                                                               (unaudited)
                                          ASSETS
   Cash and due from banks                                                       $     3           $    4
   Interest bearing deposits in other banks                                       18,811           22,177
                                                                             -------------------------------
            Total cash and cash equivalents                                       18,814           22,181

   Investment securities
      Held-to-maturity (estimated fair value $45 at March 31,
      2005 and $46 at December 31, 2004)                                              45               46
      Available-for-sale                                                           3,396            2,666
                                                                             -------------------------------
            Total investment securities                                            3,441            2,712

   Loans, net                                                                      5,829            5,950
      Allowance for credit losses                                                   (312)            (321)
                                                                             -------------------------------
            Total loans, net                                                       5,517            5,629

   Foreclosed assets                                                                 100              100
   Premises and equipment, net                                                        17               21
   Accrued interest receivable                                                        51               40
   Deferred tax asset                                                                301              303
   Other assets                                                                    1,994            2,024
                                                                             ===============================
                                                                                 $30,235         $ 33,010
                                  (continued)


                                       3

                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)
                  (Amounts in thousands except per share data)


                                                                             MARCH 31, 2005     DECEMBER 31, 2004
                                                                             --------------     -----------------
                                                                               (unaudited)

       LIABILITIES AND STOCKHOLDERS' EQUITY
   Deposits:
      Certificates of deposit                                                   $  5,512          $ 8,722
                                                                             -------------------------------
            Total deposits                                                         5,512            8,722

   Other liabilities                                                                 468              480
                                                                             -------------------------------
   Total liabilities before minority interest                                      5,970            9,202

   Minority interest                                                                 388              399

   Commitments and contingencies                                                      --               --

   Stockholders' Equity
      Preferred stock, 500,000 shares authorized, none issued
      at March 31, 2005 and 10,000,000 shares authorized, none
      issued at December 31, 2004                                                     --               --
      Common stock 5,000,000 shares authorized, $.001 par
      value, 2,183,433 shares issued and outstanding at March 31,
      2005 and 50,000,000 shares authorized, $.001 par value,
      2,183,433 shares issued and outstanding at December 31, 2004                     2                2
      Paid-in-capital                                                             47,648           47,648
      Accumulated  deficit                                                      (25,684)         (25,369)
      Accumulated other comprehensive income                                       1,901            1,128
                                                                             -------------------------------
            Total stockholders' equity                                            23,877           23,409
                                                                             -------------------------------
                                                                                $ 30,235         $ 33,010
                                                                             ===============================

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.


                                       4




                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
                               INCOME (UNAUDITED)
                 (Amounts in thousands except per share amounts)

                                                                                FOR THE THREE MONTHS
                                                                                   ENDED MARCH 31,
                                                                                2005             2004
                                                                                ----             ----

    Interest income
       Loans, including fees                                                   $ 129            $ 193
       Purchased receivables
          Accounts receivable factoring                                           --              730
          Other                                                                   --                5
       Interest bearing deposits in other banks                                   96                9
       Federal funds sold                                                         --                4
       Investment securities                                                      23               27
                                                                          --------------  -------------
          Total interest income                                                  248              968

    Interest expense                                                              42               73
                                                                          --------------  -------------
            Net interest income before credit for
            credit losses                                                        206              895

    Credit for credit losses                                                      (9)             (25)
                                                                          --------------  -------------
            Net interest income after credit for
            credit losses                                                        215              920

    Noninterest income
       Gain on sale of assets                                                     41               --
       Fee income                                                                 58               71
       Miscellaneous income, net                                                  19              144
                                                                          --------------  -------------
            Total noninterest income                                             118              215

    Noninterest expenses
       Salaries, wages, and benefits                                              78              269
       Professional and legal fees                                               242              294
       Accounts receivable factoring management and broker fees                   --              352
       Other management fees - related party                                      69               69
       Unrealized loss on trading liabilities                                     53               --
       Other general and administrative                                          212              229
                                                                          --------------  -------------
            Total noninterest expenses                                           654            1,213
                                                                          --------------  -------------
               Loss before income taxes and minority interest                   (321)             (78)

    Income taxes                                                                   5               89
                                                                          --------------  -------------
       Loss before minority interest                                            (326)            (167)

    (Income)/loss attributable to minority interest                               11               (8)
                                                                          --------------  -------------
       Net loss                                                                 (315)            (175)


                                       5

                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
                          INCOME (UNAUDITED)(continued)
                 (Amounts in thousands except per share amounts)

                                                                                FOR THE THREE MONTHS
                                                                                   ENDED MARCH 31,
                                                                                2005             2004
                                                                                ----             ----

    Other comprehensive income
       Unrealized gains on available-for-sale securities arising in
            period                                                               773               35
       Income tax expense on other comprehensive income                           --               --
                                                                          --------------  -------------
            Total other comprehensive income, net of tax                         773               35
                                                                          --------------  -------------

    Comprehensive income (loss)                                                $ 458           $ (140)
                                                                          ==============  =============
    Net loss per common share, basic and diluted                               $(.14)          $ (.16)
    Weighted average number of common shares:
       Basic                                                               2,183,433        1,091,717
       Diluted                                                             2,183,433        1,091,717


         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS






                                       6




                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                             (Amounts in thousands)


                                                                              FOR THE THREE MONTHS
                                                                                 ENDED MARCH 31,
                                                                              2005          2004
                                                                              ----          ----

   Cash flows from operating activities:
   Net loss from operations                                              $     (315)      $  (175)
   Adjustments to reconcile net loss to net cash
         used in operating activities:
     Minority interest                                                          (11)            8
     Depreciation                                                                 4             3
     Credit for credit losses                                                    (9)          (25)
     Accretion of loan income and fees, net                                      (1)          (20)
     Amortization of servicing assets                                             4             4
     Amortization of other assets                                                --             1
     Write down of foreclosed assets                                             --            20
     Gain on sale of other assets                                                (1)           --
     Gain on sale of AFS securities                                             (40)           (1)
     Unrealized loss on trading liabilities                                      53            --
   Changes in operating assets and liabilities:
     Accrued interest receivable                                                (11)          (19)
     Deferred tax asset                                                           2            68
     Other assets                                                                27            96
     Interest payable                                                            (3)           (8)
     Other liabilities                                                          (62)          (66)
                                                                         ------------  -------------
           Net cash used in operating activities                               (363)         (114)

  Cash flows from investing activities:
     Principal payments received on investment securities held-
     to-maturity                                                                  1            --
     Purchase of investment securities available-for-sale                       (86)           --
     Sale of investment securities available-for-sale                           135             2
     Principal payments received on investment securities
     available-for-sale                                                          34             9
     Purchase of premises and equipment                                          --           (10)
     Loans originated, receivables purchased, and principal
     collections, net                                                           122           680
                                                                         ------------  -------------
           Net cash provided by investing activities                            206           681

  Cash flows from financing activities:
     Net increase in noninterest bearing deposits                                --            239
     Net decrease in NOW/MMA deposits                                            --           (301)
     Net decrease  in certificates of deposit                                (3,210)          (549)
                                                                         ------------  -------------
           Net cash used in financing activities                             (3,210)          (611)

   Net decrease in cash and cash equivalents                                 (3,367)           (44)

     Cash and cash equivalents at beginning of period                        22,181          7,245
                                                                         ------------  -------------
     Cash and cash equivalents at end of period                          $   18,814        $ 7,201
                                                                         ============  =============

                                  (continued)


                                       7

                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(continued)
                             (Amounts in thousands)


                                                                              FOR THE THREE MONTHS
                                                                                 ENDED MARCH 31,
                                                                              2005          2004
                                                                              ----          ----


   Supplemental disclosure of cash flow information:
     Cash paid for interest                                                      21             81
     Cash paid for income taxes                                                   3             21

   Supplemental disclosure of additional non-cash activities:

At March 31,  2005,  the  Company  had a balance  of net  unrealized  gains from
available-for-sale  securities  of $1,901.  The balance at December 31, 2004 was
$1,128.  Net unrealized  gains and losses on  available-for-sale  securities are
shown as "accumulated other comprehensive income" on the Condensed  Consolidated
Statements  of  Financial  Condition.  The  change  in net  unrealized  gains on
available-for-sale  securities  between  the  two  periods  resulted  in a  $773
increase in accumulated other comprehensive income in the first quarter of 2005.

         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS




                                       8




                    WEBFINANCIAL CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
           (All numbers except shares and per share data in thousands)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of  Presentation--The  accompanying  interim  condensed  consolidated
financial  statements of  WebFinancial  Corporation  and its  subsidiaries  (the
"Company")  are  unaudited  and  have  been  prepared  in  conformity  with  the
requirements of Regulation S-X promulgated under the Securities  Exchange Act of
1934, as amended (the "Exchange Act"),  particularly  Rule 10-01 thereof,  which
governs the presentation of interim financial statements.  Accordingly,  they do
not  include  all  of the  information  and  footnotes  required  by  accounting
principles  generally accepted in the United States of America. The accompanying
interim  condensed   consolidated   financial   statements  should  be  read  in
conjunction with the Company's  significant  accounting policies as set forth in
Note 1 to the consolidated  financial  statements in the Company's Annual Report
on Form 10-KSB for the year ended  December  31, 2004 (the "2004  10-KSB").  The
Condensed Consolidated Statement of Financial Condition at December 31, 2004 was
extracted from the Company's audited consolidated financial statements contained
in the 2004 10-KSB, and does not include all disclosures  required by accounting
principles  generally  accepted  in the  United  States of  America  for  annual
consolidated financial statements.

     In the opinion of  management,  all  adjustments  are  comprised  of normal
recurring  accruals necessary for the fair presentation of the interim financial
statements.  Operating results for the three months ended March 31, 2005 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2005.

2.   ORGANIZATION AND RELATIONSHIPS

     The consolidated  financial  statements include the financial statements of
WebFinancial Corporation and its subsidiaries: WebFinancial Holding Corporation,
WebBank,  Praxis Investment  Advisers,  Inc.,  WebFinancial  Government Lending,
Inc., and Web Film  Financial,  Inc.,  collectively  referred to as the Company.
WebBank is a  Utah-chartered  industrial  bank, and is subject to  comprehensive
regulation,  examination,  and  supervision  by the  Federal  Deposit  Insurance
Corporation   ("FDIC"),   and  the  State  of  Utah   Department   of  Financial
Institutions.   WebBank  provides  commercial  and  consumer  specialty  finance
services.  All intercompany  accounts and  transactions  have been eliminated in
consolidation.

3.    ACCUMULATED OTHER COMPREHENSIVE INCOME

     Other  comprehensive  income is defined  as the  change in equity  during a
period from transactions and other events not included in net income,  excluding
changes resulting from investments by owners (e.g.,  supplement stock offerings)
and distributions to owners (e.g., dividends).

     As of March 31, 2005,  accumulated other comprehensive  income consisted of
the following:

        Balance at December 31, 2004                     $  1,128
        Net change during the period related to
        unrealized holding gains on AFS securities
        arising during the period                             773
                                                         --------
            Balance at March 31, 2005                    $  1,901
                                                         ========


4.    OPERATING SEGMENT INFORMATION

     Operating  segments  represent  components  of an  enterprise  about  which
separate financial  information is available that is evaluated  regularly by the
chief  operating  decision  maker in deciding how to allocate  resources  and in
assessing  performance.  The Company  evaluates segment  performance  internally
based on lines of business and the operating segments are so defined.

     For the first quarter of 2005,  the Company  recognized  only one operating
segment.  This  segment  included  commercial  lending,  fee for  services,  and
investment activities and is labeled "other" in the table below. On December 30,


                                       9


2004,  WebBank sold its entire portfolio of factored  accounts  receivable.  The
factored accounts  receivable program previously  constituted a second operating
segment,  termed "accounts receivable  factoring" in the table below. During the
first quarter of 2004, the Company recognized both of these operating segments.

     The following is a summary of selected  operating  segment  information for
the quarters ended March 31, 2005 and 2004. For 2004 the information  represents
operating  results as if the two segments  were operated on a stand alone basis.
However,  the  results do not  reflect a full  allocation  of costs based on the
current structure of the entities,  and thus the results might not be comparable
to like information from other companies.

                                                                     Accounts
                                                                   Receivable                             Consolidated
                                                                    Factoring              Other             Company
                                                                    ---------              -----             -------
THREE MONTHS ENDED MARCH 31, 2005:
Statement of Operations Information (Quarter):
Net interest income after credit for credit losses                    $   --            $    215           $    215
Noninterest income                                                        --                 118                118
Noninterest expense                                                       --                 654                654
                                                                    -------------------------------------------------
Income (loss) before income taxes and minority interest                   --                (321)              (321)
Income taxes                                                              --                   5                  5
Loss attributable to minority interest                                    --                  11                 11
                                                                    -------------------------------------------------
Net income (loss)                                                         --                (315)              (315)

Statement of Financial Condition Information (As of
  March 31, 2005):
Total assets                                                              --            $ 30,235           $ 30,235
Net loans and leases                                                      --            $  5,517           $  5,517
Deposits                                                                  --            $  5,512           $  5,512

THREE MONTHS ENDED MARCH 31, 2004:
Statement of Operations Information (Quarter):
Net interest income after credit  for credit losses                   $    671          $    249           $    920
Noninterest income                                                          81               134                215
Noninterest expense                                                        401               812              1,213
                                                                    -------------------------------------------------
Income (loss) before income taxes and minority interest                    351              (429)               (78)
Income taxes                                                              --                  89                 89
Income attributable to minority interest                                  --                  (8)                (8)
                                                                    -------------------------------------------------
Net income (loss)                                                     $    351          $   (526)          $   (175)

Statement of Financial Condition Information (As of
  March 31, 2004):
Total assets                                                          $  8,630          $ 17,002           $ 25,632
Net loans and leases                                                  $  6,523          $  7,979           $ 14,502
Deposits                                                              $  7,334          $  3,972           $ 11,306

5.   REGULATORY MATTERS

     On January 31, 2005, the Federal Deposit Insurance Corporation ("FDIC") and
the Department of Financial Institutions for the State of Utah issued to WebBank
an Order to Cease and Desist (the "Order") in connection with alleged violations
of certain banking  regulations.  WebBank consented to the issuance of the Order
without   admitting  or  denying  the  alleged   violations   of  those  banking
regulations.

     The Order requires  WebBank to comply with a number of  requirements  which
include, but are not limited to, increasing the number of directors,  increasing
board  involvement,   hiring  new  executive  officers,  creating  a  three-year
strategic plan,  charging off or collecting certain  classified loans,  revising
and  adopting  various  policies,  developing  and  adopting a budget plan and a
capital  plan  that is  designed  to  maintain  an  adequate  level  of  capital
protection  for  the  kind of and  quality  of  assets  held  by the  bank,  and
establishing and implementing procedures for affiliate  transactions.  The Order
also immediately  prohibits certain actions such as purchasing factored accounts


                                       10


receivable  until  proper  procedures  and  policies  are  in  place,  extending
additional credit to substandard borrowers, and paying cash dividends. The Order
further  prohibits  WebBank from issuing brokered  certificates of deposit in an
aggregate  amount  greater than the amount  outstanding on the effective date of
the Order, which is $7,465,000.  The effective date of the Order is February 10,
2005, and the due dates for the requirements range from 10 days to 360 days from
the  effective  date with the  majority  to be  achieved  within 120 days of the
Order.

     It is possible that unforeseen  circumstances  could delay  compliance with
certain  requirements  or  submissions  to the FDIC  beyond  due  dates or cause
WebBank's  submissions to be unacceptable  to the regulators.  The provisions of
the Order will be in effect and  enforceable  until  such  provisions  have been
modified, terminated,  suspended, or set aside by the FDIC and the Department of
Financial  Institutions  for the State of Utah.  If WebBank does not comply with
the terms of the Order,  WebBank and/or its Board of Directors  could be subject
to regulatory fines, additional regulatory restrictions and the Company could be
forced to sell or close WebBank.  Except as discussed  above,  the  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

6.   SUBSEQUENT EVENT

     At the 2004 annual  meeting of  stockholders  on  December  15,  2004,  the
Company's  stockholders  approved a reverse split of the Company's  common stock
and a  reduction  of the  Company's  authorized  number of shares of common  and
preferred stock. At that time, neither the final amounts nor the effective dates
were determined for the approved actions.  On March 9, 2005, the Company's Board
of Directors  approved a  one-for-four  reverse stock split,  a reduction of the
Company's  authorized  number  of  shares of common  stock  from  50,000,000  to
5,000,000 shares,  and a reduction of the Company's  authorized number of shares
of preferred  stock from  10,000,000  to 500,000  shares.  The reverse split was
effective on April 5, 2005 as to  stockholders  of record on April 4, 2005.  The
reductions  of authorized  number of shares of common and  preferred  stock were
effective on April 5, 2005. After giving effect to the reverse split, there were
2,183,433  common shares issued and  outstanding.  The computations of basic and
diluted  loss per  common  share were  adjusted  retroactively  for all  periods
presented to reflect the effect of the reverse split.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The  following   discussion   should  be  read  in  conjunction   with  the
consolidated  unaudited  interim  financial  statements  as of and for the three
month period ended March 31, 2005 of the Company and the notes thereto presented
elsewhere herein.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THREE MONTHS ENDED MARCH 31, 2004

     The net loss for the quarter ended March 31, 2005 was  $(315,000) or $(.14)
per share  compared to a net loss of $(175,000) or $(.16) per share for the same
period in 2004.  The change  between  quarters  represented an increased loss of
$140,000. The decreased loss in earnings per share of $.02, despite an increased
quarterly  net  loss  of  nearly  80%,   reflects  the  Company's  common  stock
subscription  rights offering  concluded in August 2004 which doubled the number
of common shares outstanding at that time.

     The Company's net interest income before credit for credit losses increased
by $689,000 from quarter to quarter.  Interest  income from accounts  receivable
factoring  decreased  by $730,000  due to the sale of the  portfolio in December
2004. Interest income from interest bearing deposits in other banks increased by
$87,000 because the proceeds from the sale of the accounts receivable  factoring
portfolio were invested  primarily in these  instruments.  Interest  income from
loans decreased by $64,000. The average balance of the commercial loan portfolio
for the first quarter of 2005 was approximately $2,900,000 less than the average
for the first quarter of 2004.  The Company  discontinued  new  originations  of
commercial loans in 2001.  Interest expense decreased by $31,000 due to a nearly
$3,500,000 decrease in average certificates of deposit.

     The following  table shows an analysis of net interest income before credit
for credit losses for the three-month periods ended March 31, 2005 and 2004:


                                       11



                                                                                   Average
                                                       Average       Interest       Annual
                                                        Amount        Earned       Yield/Rate
                                                        ------        ------       ----------
      QUARTER ENDED MARCH 31, 2005

INTEREST EARNING ASSETS
Interest bearing deposits in other banks             $ 20,966        $  96         1.83%
Federal funds sold                                         --           --            --
Investment securities                                   3,440           23         2.67%
Loans                                                   5,798          129         8.90%
Purchased receivables
   Accounts receivable factoring                           --           --            --
   Other                                                   --           --            --
                                                  -------------------------
  TOTAL INTEREST EARNING ASSETS                      $ 30,204        $ 248         3.28%
                                                  =========================

INTEREST BEARING LIABILITIES
NOW/MMA deposits                                        $   1        $  --            --
Certificates of deposit                                 7,534           42         2.23%
                                                  -------------------------
   TOTAL INTEREST BEARING LIABILITIES                  $7,535        $  42         2.23%
                                                  =========================

NET INTEREST INCOME                                                  $ 206
                                                                ===========
NET INTEREST MARGIN                                                                2.73%


                                                                                   Average
                                                       Average       Interest       Annual
                                                        Amount        Earned       Yield/rate
                                                        ------        ------       ----------
      QUARTER ENDED MARCH 31, 2004

INTEREST EARNING ASSETS
Interest bearing deposits in other banks              $ 5,839        $   9         0.62%
Federal funds sold                                      1,441            4         1.11%
Investment securities                                     402           27        26.87%
Loans                                                   8,701          193         8.87%
Purchased receivables
   Accounts receivable factoring                        7,021          730        41.59%
   Other                                                  236            5         8.47%
                                                  -------------------------
  TOTAL INTEREST EARNING ASSETS                       $23,640        $ 968        16.38%
                                                  =========================
INTEREST BEARING LIABILITIES
NOW/MMA deposits                                       $  399        $   1         1.00%
Certificates of deposit                                11,032           72         2.61%
                                                  -------------------------
   TOTAL INTEREST BEARING LIABILITIES                 $11,431        $  73         2.55%
                                                  =========================
NET INTEREST INCOME                                                  $ 895
                                                                ===========
NET INTEREST MARGIN                                                               15.14%

     The following  table  represents  the effect of changes in volume  (average
balances)  and  interest  rates on  interest  income,  interest  expense and net
interest income when comparing the first quarter of 2005 to the first quarter of
2004.  The  effect of a change in volume has been  determined  by  applying  the
highest  average  rate to the change in the  average  balances  between  the two
periods.  The  effect of a change in the  average  rate has been  determined  by


                                       12


applying the highest  average balance to the change in average rates between the
two  periods.  Changes  resulting  from  a mix  of  volume/rate  variances  were
distributed proportionately between volume and rate based on the relative values
of the volume and rate variances to the total mix variance.

                                                            QUARTER ENDED MARCH 31, 2005
                                                                  COMPARED TO 2004
                                                                  ----------------
                                                           Due to      Due to       Total
                                                           Volume       Rate        Change
                                                           ------       ----        ------
INCREASE (DECREASE) IN INTEREST INCOME
Interest bearing deposits in other banks                   $   49      $  38      $   87
Federal funds sold                                             (4)        --          (4)
Investment securities                                          20        (24)         (4)
Loans                                                         (64)        --         (64)
Purchased receivables
   Accounts receivable factoring                             (730)        --        (730)
   Other                                                       (5)        --          (5)
                                                           -------      -----     -------
   TOTAL INTEREST INCOME                                   $ (734)      $ 14      $ (720)
                                                           =======      =====     =======

NOW/MMA deposits                                           $   (1)      $ --      $   (1)
Certificates of deposit                                       (22)        (8)        (30)
                                                           -------      -----     -------
   TOTAL INTEREST EXPENSE                                  $  (23)      $ (8)     $  (31)
                                                           =======      =====     =======
     The credit for credit  losses  decreased  by  $16,000.  A credit for credit
losses  rather than a provision  for credit  losses was the result of  principal
reductions  and risk grade  changes  within  the  discontinued  commercial  loan
portfolio at WebBank.  The allowance for credit losses is  established as losses
are estimated to have occurred  through a provision for credit losses charged to
earnings.  Credit  losses are charged  against  the  allowance  when  management
believes the  uncollectibility  of a loan or  receivable  balance is  confirmed.
Subsequent recoveries, if any, are credited to the allowance.

     The  allowance  for  credit  losses  is  evaluated  on a  regular  basis by
management and is based upon management's  periodic review of the collectibility
of the amounts due in light of historical  experience,  the nature and volume of
the loan portfolio, adverse situations that may affect the borrower's ability to
repay,  estimated  value of any underlying  collateral  and prevailing  economic
conditions.  This evaluation is inherently  subjective as it requires  estimates
that  are  susceptible  to  significant  revision  as more  information  becomes
available.

     The allowance for purchased  receivable losses, which was included with the
allowance  for credit  losses in the first  quarter of 2004,  was  increased  by
charges to income and  decreased by charge offs (net  recoveries).  Management's
periodic  evaluation of the adequacy of the allowance was based on the Company's
past  purchased  receivables  loss  experience,  known and inherent risks in the
portfolio, adverse situations that may affect the debtor's ability to repay, the
estimated value of any underlying  collateral and current  economic  conditions.
Purchased receivables were charged off when they were 90 days contractually past
due, at which time the Company could  enforce the recourse  agreement to collect
from the customer the remaining outstanding balances.

     The following table shows an analysis of the Company's allowance for credit
losses for the quarters ended March 31, 2005 and 2004 :

                                                      QUARTER ENDED MARCH 31,
                                                      -----------------------
                                                         2005         2004
                                                         ----         ----

  Balance at beginning of year                          $ 321      $ 1,302

  Charge-offs by category:
     Commercial, financial and agricultural                --           --
     Installment loans to individuals                      --            3

                                       13

                                                      QUARTER ENDED MARCH 31,
                                                      -----------------------
                                                         2005         2004
                                                         ----         ----

     Purchased receivables
        Accounts receivable factoring                      --           46
        Other                                              --           --
                                                       ----------------------
           Total charge-offs                               --           49

  Recoveries by category:
     Commercial, financial and agricultural                --           --
     Installment loans to individuals                      --           --
     Purchased receivables
        Accounts receivable factoring                      --           --
        Other                                              --           --
                                                       ----------------------
           Total recoveries                                --           --
                                                       ----------------------

  Net charge-offs                                          --           49

  Credit for credit losses                                (9)         (25)
                                                       ----------------------
  Balance at end of quarter                             $ 312      $ 1,228
                                                       ======================

  Ratio of net charge-offs to average loans
     outstanding during the quarter                     0.00%        0.31%
                                                       ======================

     The following  table shows the allocation  between  categories of loans for
the allowance for credit losses as of March 31, 2005 and 2004:


                                                                     March 31,
                                                                     ---------
                                                      2005                                 2004
                                                      ----                                 ----
                                             Amount of     % of Loans in      Amount of         % of Loans in
                                             allowance      category to      allowance by        category to
BALANCE AT END OF QUARTER APPLICABLE TO:    by Category     total Loans       by Category        total Loans
                                            -----------     -----------       -----------        -----------
Commercial, financial and agricultural        $ 312           100.00%           $ 1,087            53.11%
Installment loans to individuals                 --                --                 1             0.54%
Purchased receivables
   Accounts receivable factoring                 --                --               135            44.72%
   Other                                         --                --                 5             1.63%
Unallocated                                      --                --                --                --
                                            ----------------------------------------------------------------
   Totals                                     $ 312           100.00%           $ 1,228           100.00%
                                            ================================================================

     Noninterest  income  for the  Company  decreased  by  $97,000.  Fee  income
decreased  by  $13,000,  primarily  because  of  a  decline  in  the  number  of
fee-for-services   partners  at  WebBank.   Miscellaneous  income  decreased  by
$125,000,  primarily  because of the sale of the accounts  receivable  factoring
portfolio and the  consequent  elimination  of servicing  income from  factoring
participations  at WebBank.  Partially  offsetting these decreases,  the Company
recognized  gains of $41,000 on the sale of  securities  in the first quarter of
2005.

     The Company's  noninterest  expenses decreased by $559,000,  comparatively,
between  the two  quarters.  The  primary  reason  for the change was a $352,000
decrease in accounts receivable  factoring management and broker fees related to


                                       14


the discontinued  factoring  program.  Salaries,  wages,  and benefits  expenses
decreased by $191,000 due to a reduction of staff and  discontinuance of a bonus
accrual at WebBank.  The Company recognized a $53,000 unrealized loss on a short
sale of securities in 2005.

     Income tax  expense  decreased  by $84,000  between  quarters.  The Company
established a valuation  reserve to cover its net  operating  loss at the end of
2004.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31,  2005 and  December  31,  2004,  the  Company's  cash and cash
equivalents totaled $18,814,000 and $22,181,000, respectively. The cash and cash
equivalent  balances at those dates included  proceeds from the Company's common
stock subscription rights offering in August 2004 and the December 30, 2004 sale
of the accounts receivable  factoring  portfolio.  The approximately  $3,400,000
decrease in cash and cash  equivalent  balances  between  December  31, 2004 and
March 31,  2005  reflects  the  maturities  of  nearly  $3,300,000  of  brokered
certificates of deposit.  Until the Company establishes new lines of business to
replace the factoring  program,  the Company  intends to use additional cash and
cash equivalent balances to reduce remaining outstanding certificates of deposit
as they mature.

     Funding for WebBank is obtained  primarily  from brokered  certificates  of
deposit obtained through brokers and from a $1,000,000  unsecured line of credit
with a local correspondent bank. The Order,  described in Note 5 of the Notes to
Condensed  Consolidated  Financial Statements,  restricts the amount of brokered
certificates  of  deposits  that  WebBank  is  allowed  to issue  to the  amount
outstanding on the effective date of the Order, which is $7,465,000.

     Management  believes  that the Company's  current cash and cash  equivalent
balances and expected  operating  cash flows are adequate to meet the  Company's
liquidity needs through at least the next 12 months.

     The Company and Steel Partners, Ltd., an entity controlled by the Company's
Chairman,  devote  significant time to exploration of potential  acquisition and
other business opportunities. There can be no assurance that the Company will be
able  to  acquire  an  additional  business,  or  that  such  business  will  be
profitable.  In order to finance an acquisition,  the Company may be required to
incur or assume indebtedness or issue securities.

OFF-BALANCE SHEET ARRANGEMENTS

     The  Company  is  periodically  a  party  to  financial   instruments  with
off-balance  sheet  risk.  In the normal  course of  business,  these  financial
instruments include commitments to extend credit in the form of loans or through
letters of credit.  Those  instruments  involve to varying degrees,  elements of
credit and interest rate risk in excess of the amount  recognized on the balance
sheet.  The  contract  amounts  of  those  instruments  reflect  the  extent  of
involvement the Company has in particular classes of financial instruments.

     The Company's exposure to credit loss in the event of nonperformance by the
other party to the  financial  instrument  for  commitments  to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policy in making commitments and conditional  obligations as it does
for on-balance sheet  instruments.  At March 31, 2005 and December 31, 2004, the
Company's had no undisbursed loan commitments.

     Commitments to extend credit are agreements to lend to a customer  provided
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee.  Since  certain of the  commitments  are  expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash  requirements.  WebBank  evaluates each customer's  credit
worthiness on a case-by-case  basis. The amount of collateral obtained if deemed
necessary by WebBank upon  extension of credit is based on  management's  credit
evaluation of the borrower.

CRITICAL ACCOUNTING ISSUES

ALLOWANCE FOR CREDIT LOSSES

     Management  utilizes a comprehensive  loan grading system to determine risk
potential in its loan  portfolio.  Determination  of the allowance is inherently
subjective  as it  requires  significant  estimates,  including  the amounts and
timing of  expected  future cash flows on impaired  loans,  estimated  losses on
pools  of  homogeneous   loans  based  on  historical   loss   experience,   and
consideration  of current  economic  trends,  all of which may be susceptible to
significant change. The amount of allowance for credit losses assigned to a loan
or group of loans is determined by the category of loan as described below:

                                       15


     o    The allowance for credit losses for  non-impaired  commercial loans is
          calculated  on a loan by loan  basis.  Each loan is  assigned  a grade
          ranging  from 1  (excellent)  to 7  (substandard).  A two  dimensional
          matrix is used to determine the amount of allowance assigned.

          One axis of the  matrix  consists  of six  risk  factors  which  could
          contribute to a potential  loss for that loan.  The risk factors cover
          both a) elements  related  specifically  to the loan such as financial
          condition  of the  borrower  and value of  collateral  and b) elements
          related to external matters such as the condition of the local economy
          or industry trends.  Each of the risk factors is assigned a percentage
          weight which  reflects the potential  risk of loss relative to each of
          the other five factors.

          The second axis of the matrix consists of up to five risk levels. Each
          of the risk levels is represented  by a percentage  figure that equals
          the portion of the  outstanding  loan balance that is expected to be a
          loss.  The risk level  percentage  falls within a range of percentages
          assigned to that grade based on historical loss experience.

          The allowance for credit losses for a particular loan is calculated by
          matching one of the five risk levels to each of the six risk  factors.
          The product of the risk level percentage and the risk factor weight is
          calculated  for each risk factor and all six are summed to produce the
          allowance for credit loss percentage used for that loan.

          The matrix  approach  allows the  Company  to  quantify,  in a logical
          fashion based on both  historical  experience and currently  available
          information,  whether or not a future  credit loss is probable and, if
          so, approximately how much that loss will be. This methodology, in the
          Company's  opinion,  complies  with  the  guidelines  of the  SFAS  5,
          "Accounting for  Contingencies"  and related accounting and regulatory
          guidelines.

          The above  calculation is performed for non-impaired  commercial loans
          ranging from grade 1 (excellent) to grade 7  (substandard).  For loans
          graded 8 (doubtful) or 9 (loss),  which are considered  impaired,  the
          matrix is not used. The allowance for credit losses for impaired loans
          is  calculated  using  the  guidelines  of SFAS 114,  "Accounting  for
          Creditors for Impairment of a Loan." A loan is considered  impaired if
          it is  probable  that the  Company  will not  collect  all amounts due
          according to the contractual terms of the original loan agreement. The
          preferred methodology for calculating  impairment under SFAS 114 is to
          calculate  the present  value of expected cash flows from the loan and
          subtract that from the current book value of the loan. The difference,
          if positive,  requires additional  allowance for credit losses. If the
          loan is collateral dependent, another methodology used is to determine
          the  market  value  of the  collateral,  less  selling  expenses,  and
          subtract that from the current book value of the loan. The difference,
          if positive, requires additional allowance for credit losses.

     o    Prior to the sale of the accounts receivable factoring portfolio,  the
          allowance for credit losses for non-impaired purchased receivables was
          calculated on a pooled or group basis.  The allowance amount was based
          on  a  percentage   of   outstanding   receivables   which  took  into
          consideration a combination of historical loss experience and industry
          loss  experience.   The  allowance  for  credit  losses  for  impaired
          purchased  receivables  was  calculated  on a loan  by loan  basis  in
          accordance with the guidelines of SFAS 114 as described above.

EQUITY SECURITIES AVAILABLE FOR SALE

     The  Company,  both  directly  and  through  its  WebBank  subsidiary,  has
investments in equity securities.  Available-for-sale securities are recorded at
fair value. Unrealized holding gains or losses on available-for-sale  securities
are excluded from earnings and reported,  until realized,  in accumulated  other
comprehensive  income (loss) as a separate component of stockholders'  equity. A
decline  in the  market  value  of any  available-for-sale  or  held-to-maturity
security below cost that is deemed "other than temporary" is charged to earnings
resulting  in  the   establishment  of  a  new  cost  basis  for  the  security.
Determination  of whether a decline in market value is other than  temporary may
be  subjective  because  it  requires  significant  estimates  of the  projected
financial condition of the issuer, of the industry in which the issuer operates,
and of local, regional, and national economies.

DEFERRED INCOME TAXES

     The Company uses the liability method of accounting for income taxes. Under


                                       16


the  liability  method,  deferred tax assets and deferred  tax  liabilities  are
recognized for the future tax consequences  attributable to differences  between
the financial  statement carrying amounts of existing assets and liabilities and
their  respective  tax bases and operating  loss and tax credit carry  forwards.
Deferred tax assets and deferred tax  liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and deferred tax  liabilities  of a change in tax rates is  recognized in
income in the period that includes the enactment date.

     From its inception in 1998 through the end of 2001,  WebBank  experienced a
history of inconsistent  earnings which made it "more likely than not" that some
portion or all of its deferred tax assets  would not be realized.  Therefore,  a
valuation  allowance for deferred tax assets was  established in accordance with
SFAS 109. As of December 31, 2003, the Company determined that, based on the two
previous  year's  earnings  and the  prospect  for  similar  performance  in the
foreseeable future, it was "more likely than not" that all of WebBank's deferred
tax assets would be realized. As a result, the amount of the valuation allowance
remaining  at WebBank  at that time was  reversed  and a  deferred  tax asset of
$757,000 was recognized.

     As of December 31, 2004, the Company  determined that the lack of new lines
of business to replace the accounts  receivable  factoring line of business made
it "more  likely than not" that the net  operating  loss portion of the deferred
tax  asset  would  not  be  realized.   Therefore,  a  valuation  allowance  was
established to cover the portion of WebBank's deferred tax assets related to its
remaining net operating  loss portion,  leaving a net deferred tax asset balance
of $303,000.  The deferred tax asset balance  increased to $310,000 at March 31,
2005.

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     SFAS  123R  is  a  revision  of  SFAS  123,   "Accounting  for  Stock-Based
Compensation" and supersedes APB 25, "Accounting for Stock Issued to Employees."
This  Statement  will  require  the  Company to  recognize  the cost of employee
services received in share-based payment transactions based on the fair value of
the shares awarded.  As stated in Note 1 of the Notes to Consolidated  Financial
Statements,  the Company currently  measures  compensation costs for stock-based
payments as prescribed by APB 25. While APB 25 generally resulted in recognition
of no  compensation  cost,  SFAS 123R will  typically  result in  recognition of
compensation  cost.  The  Company  is  required  to  adopt  SFAS  123R as of the
beginning of 2006. The Company does not expect the adoption of SFAS 123R to have
a material  impact on its financial  condition or results of operations  for the
year ended December 31, 2006.

FORWARD-LOOKING STATEMENTS

     THE FOLLOWING IMPORTANT FACTORS,  AMONG OTHERS,  COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE INDICATED BY FORWARD-LOOKING  STATEMENTS MADE IN
THIS QUARTERLY REPORT ON FORM 10-QSB AND PRESENTED ELSEWHERE BY MANAGEMENT.  ALL
FORWARD-LOOKING  STATEMENTS  INCLUDED IN THIS DOCUMENT ARE BASED ON  INFORMATION
AVAILABLE  TO THE  COMPANY  ON THE  DATE  HEREOF,  AND THE  COMPANY  ASSUMES  NO
OBLIGATION  TO  UPDATE  ANY  SUCH  FORWARD-LOOKING   STATEMENTS.   A  NUMBER  OF
UNCERTAINTIES  EXIST THAT COULD AFFECT THE COMPANY'S FUTURE  OPERATING  RESULTS,
INCLUDING, WITHOUT LIMITATION,  GENERAL ECONOMIC CONDITIONS, CHANGES IN INTEREST
RATES, THE COMPANY'S ABILITY TO ATTRACT  DEPOSITS,  AND THE COMPANY'S ABILITY TO
CONTROL COSTS.  BECAUSE OF THESE AND OTHER FACTORS,  PAST FINANCIAL  PERFORMANCE
SHOULD NOT BE  CONSIDERED AN  INDICATION  OF FUTURE  PERFORMANCE.  THE COMPANY'S
FUTURE  OPERATING  RESULTS  MAY VARY  SIGNIFICANTLY.  INVESTORS  SHOULD  NOT USE
HISTORICAL  TRENDS TO  ANTICIPATE  FUTURE  RESULTS  AND SHOULD BE AWARE THAT THE
TRADING PRICE OF THE COMPANY'S COMMON STOCK MAY BE SUBJECT TO WIDE  FLUCTUATIONS
IN RESPONSE TO  QUARTERLY  VARIATIONS  IN OPERATING  RESULTS AND OTHER  FACTORS,
INCLUDING THOSE  DISCUSSED IN THIS QUARTERLY  REPORT ON FORM 10-QSB AND THE RISK
FACTORS IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB.

ITEM 3.  CONTROLS AND PROCEDURES

     Disclosure  controls are procedures that are designed with the objective of
ensuring  that  information  required to be disclosed in the  Company's  reports
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such
as this Form 10-QSB,  is reported in accordance with the rules of the Securities
and Exchange Commission ("SEC").  Disclosure controls are also designed with the
objective of ensuring that such  information is accumulated and  communicated to


                                       17

management, including the Chief Executive Officer and Chief Financial Officer as
appropriate to allow timely decisions regarding required disclosure.

In connection with the Company's  evaluation of the  effectiveness of the design
and operation of the Company's  disclosure  controls and procedures  pursuant to
Securities  Exchange Act Rules  13a-15(e) and  15d-15(e) for the Company's  2004
Form 10-KSB, the Company's  independent  auditors discovered a material weakness
in internal  controls.  A material  weakness is a  significant  deficiency  that
results in more than a remote  likelihood  that a material  misstatement  of the
annual or interim  financial  statements will not be prevented or detected.  The
material  weakness  discovered  involved a segregation  of duties  regarding the
general ledger and financial applications data processing system (the "System").
Shortly after the material  weakness was  discovered,  the Company  conducted an
examination,  with the  assistance of another  outside  accounting  firm, of all
System  maintenance  activities  for  each  day of the  year  2004  and  for the
year-to-date  2005. Such examination  indicated no inappropriate or unauthorized
maintenance  activity during the periods reviewed.  Temporary  arrangements were
made to  segregate  the system  administrator  from user duties and for periodic
testing of the system maintenance records until sufficient permanent staffing is
hired by the Company. The Company believes that it has taken sufficient steps to
address this  weakness,  however,  the new controls have not been in place for a
sufficient  period of time and  therefore not  sufficiently  tested to  conclude
whether such controls are designed effectively or operating effectively.

     As of the end of the  period  covered  by this  Form  10-QSB,  the  Company
carried out an evaluation  under the  supervision  of the Company's  management,
including the Company's Chief Executive Officer and Chief Financial Officer,  of
the  effectiveness  of the  design and  operation  of the  Company's  disclosure
controls and procedures  pursuant to Securities Exchange Act Rules 13a-15(e) and
15d-15(e).  Based upon that  evaluation,  prior  period  testing and  corrective
actions taken, the Chief Executive  Officer and Chief Financial  Officer believe
that the Company's disclosure controls and procedures are effective,  subject to
passage of  sufficient  time and  sufficient  testing to  conclude  that the new
controls are sufficient to insure that  information  required to be disclosed in
the  reports  that  the  Company  files  under  the  Exchange  Act is  recorded,
processed,  summarized  and reported  within the time  periods  specified by the
SEC's rules and regulations. Other than the issue discussed above, there were no
significant  changes in the Company's internal controls or in other factors that
could  significantly  affect  these  controls  subsequent  to the  date of their
evaluation.

     A control  system,  no matter how well conceived and operated,  can provide
only  reasonable,  not absolute,  assurance  that the  objectives of the control
system are met. Because of the inherent  limitations in all control systems,  no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud, if any, within a company have been detected.

     Certifications  of the Chief Executive  Officer and Chief Financial Officer
regarding, among other items, disclosure controls and procedures are included as
exhibits to this Form 10-QSB.

PART II:  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     As  discussed  in  more  detail  in  Note  5  of  the  Notes  to  Condensed
Consolidated  Financial  Statements,  WebBank  was  issued an Order to Cease and
Desist (the "Order") on January 31, 2005 in connection  with alleged  violations
of certain banking  regulations.  WebBank consented to the issuance of the Order
without  admitting  or denying  the alleged  charges.  As a result of the Order,
WebBank is required by the FDIC and the State of Utah  Department  of  Financial
Institutions to complete a number of actions within  specified  periods of time.
For example, WebBank must develop and submit a written three-year strategic plan
within 120 days of the effective  date of the Order.  Although the Company feels
that WebBank will comply with the Order on a timely  basis,  it is possible that
unforeseen  circumstances  could  delay  submissions  beyond  due dates or cause
responses to be unacceptable to the regulators.

ITEM 6.   EXHIBITS

          Exhibits

              *31.1   Certification  of  Chief  Executive  Officer  pursuant  to
                      Section 302 of The Sarbanes-Oxley Act of 2002.

              *31.2   Certification  of  Chief  Financial  Officer  pursuant  to
                      Section 302 of The Sarbanes-Oxley Act of 2002.

              *32.2   Certification  of  Chief  Executive  Officer  pursuant  to
                      Section 906 of The Sarbanes-Oxley Act of 2002.

              *32.2   Certification  of  Chief  Financial  Officer  pursuant  to
                      Section 906 to The Sarbanes-Oxley Act of 2002.

                                       18





                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Date:  May 16, 2005                   WEBFINANCIAL CORPORATION





                                      By:  /s/ Warren G. Lichtenstein
                                           -------------------------------
                                      Name:  Warren G. Lichtenstein
                                      Title: President and Chief Executive
                                             Officer







                                      By:  /s/ Glen M. Kassan
                                           --------------------------------
                                      Name:  Glen M. Kassan
                                      Title: Vice President and Chief
                                             Financial Officer


                                       19

EX-31 2 ex311to10qsb04197_03312005.htm EX-31.1 sec document

EXHIBIT 31.1


                                  CERTIFICATION

                            Section 302 Certification

I, Warren G. Lichtenstein, certify that:


1. I have  reviewed  this  quarterly  report  on  Form  10-QSB  of  WebFinancial
Corporation, a Delaware corporation;

2. Based on my knowledge, this 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 report;

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

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

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

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

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

5. The small business  issuer's other  certifying  officer and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the small business  issuer's  auditors and the audit committee of
the small  business  issuer's  board of  directors  (or persons  performing  the
equivalent functions):

     (a) All significant  deficiencies and material  weaknesses in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely  affect the small business  issuer's ability to record,
     process, summarize and report financial information; and

     (b) Any fraud,  whether or not material,  that involves management or other
     employees  who  have a  significant  role in the  small  business  issuer's
     internal control over financial reporting.

Date: May 16, 2005


                                       By: /s/ Warren G. Lichtenstein
                                          -----------------------------------
                                          Warren G. Lichtenstein
                                          President and Chief Executive Officer



EX-31 3 ex312to10qsb04197_03312005.htm EX-31.2 sec document


EXHIBIT 31.2

                                  CERTIFICATION

                            Section 302 Certification

I, Glen M. Kassan, certify that:


1. I have  reviewed  this  quarterly  report  on  Form  10-QSB  of  WebFinancial
Corporation, a Delaware corporation;

2. Based on my knowledge, this 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 report;

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

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

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

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

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

5. The small business  issuer's other  certifying  officer and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the small business  issuer's  auditors and the audit committee of
the small  business  issuer's  board of  directors  (or persons  performing  the
equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design
          or operation of internal  control over financial  reporting  which are
          reasonably  likely to  adversely  affect the small  business  issuer's
          ability   to  record,   process,   summarize   and  report   financial
          information; and

          (b) Any fraud,  whether or not material,  that involves  management or
          other  employees  who have a  significant  role in the small  business
          issuer's internal control over financial reporting.

Date: May 16, 2005





                                   By: /s/ Glen M. Kassan
                                      ----------------------------------------
                                      Glen M. Kassan
                                      Vice President and Chief Financial Officer



EX-32 4 ex321to10qsb04197_03312005.htm EX-32.1 sec document
EXHIBIT 32.1

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss.1350)


Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (18 U.S.C.  ss.1350),
the undersigned,  Warren G. Lichtenstein,  President and Chief Executive Officer
of WebFinancial Corporation, a Delaware corporation (the "Company"), does hereby
certify, to his knowledge, that:

The Quarterly  Report on Form 10-QSB for the quarter ended March 31, 2005 of the
Company (the "Report") fully complies with the  requirements of Section 13(a) or
15(d) of the Securities  Exchange Act of 1934, and the information  contained in
the Report fairly presents,  in all material respects,  the financial  condition
and results of operations of the Company.



                                         /s/ Warren G. Lichtenstein
                                         ---------------------------------------
                                         Warren G. Lichtenstein
                                         President and Chief Executive Officer
                                         May 16, 2005




EX-32 5 ex322to10qsb04197_03312005.htm EX-32.2 sec document

EXHIBIT 32.2

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss.1350)


Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (18 U.S.C.  ss.1350),
the undersigned,  Glen M. Kassan,  Vice President and Chief Financial Officer of
WebFinancial  Corporation,  a Delaware corporation (the "Company"),  does hereby
certify, to his knowledge, that:

The Quarterly  Report on Form 10-QSB for the quarter ended March 31, 2005 of the
Company (the "Report") fully complies with the  requirements of Section 13(a) or
15(d) of the Securities  Exchange Act of 1934, and the information  contained in
the Report fairly presents,  in all material respects,  the financial  condition
and results of operations of the Company.






                                     /s/ Glen M. Kassan
                                     -------------------
                                     Glen M. Kassan
                                     Vice President and Chief Financial Officer
                                     May 16, 2005


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