10QSB

                                  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 September 30, 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 [ ]

            Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the  Exchange  Act)

                                Yes [ ] No [ X ]

            Shares of Issuer's  Common Stock  Outstanding  at November 14, 2005:
2,183,366

            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
         September 30, 2005 (unaudited) and December 31, 2004..........................................2

         Condensed Consolidated Statements of Operations and Comprehensive Income
         (Loss) for the Three Months Ended September 30, 2005 and 2004 (unaudited).....................4

         Condensed Consolidated Statements of Operations and Comprehensive Income
         (Loss) for the Nine Months Ended September 30, 2005 and 2004 (unaudited)......................6

         Condensed Consolidated Statements of Cash Flows
         for the Nine Months Ended September 30, 2005 and 2004 (unaudited).............................8

         Notes to Condensed Consolidated Financial Statements (unaudited).............................10

Item 2.  Management's Discussion and Analysis or Plan of Operation....................................15

Item 3.  Controls and Procedures......................................................................25


PART II - OTHER INFORMATION

Item 1   Legal Proceedings............................................................................27

Item 6   Exhibits.....................................................................................27

         Signatures...................................................................................28


                                                   1


PART I.    FINANCIAL INFORMATION
ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

                                        ASSETS                            SEPTEMBER 30,    DECEMBER 31,
                                                                             2005            2004
                                                                          ------------     -----------
                                                                          (unaudited)

Cash and due from banks                                                    $      3         $      4
Interest bearing deposits in other banks                                      8,096           22,177
                                                                           --------         --------
           Total cash and cash equivalents                                    8,099           22,181

 Investment securities
      Held-to-maturity (estimated fair value $45 at September 30, 2005
        and $46 at December 31, 2004)                                            45               46
      Available-for-sale                                                      3,079            2,666
                                                                           --------         --------
           Total investment securities                                        3,124            2,712

Loans                                                                         6,735            5,950
      Allowance for credit losses                                              (181)            (321)
                                                                           --------         --------
          Total loans, net                                                    6,554            5,629

Foreclosed assets                                                               100              100
Premises and equipment, net                                                      16               21
Accrued interest receivable                                                      85               40
Deferred tax assets                                                              78              303
Investments                                                                   4,396            1,000
Other assets                                                                  1,055            1,024
                                                                           --------         --------
Total                                                                      $ 23,507         $ 33,010
                                                                           ========         ========

                                         (Continued)


                                             2


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

                                                                                            SEPTEMBER 30,   DECEMBER 31
                                                                                                2005          2004
                                                                                            -----------     ----------
                              LIABILITIES AND STOCKHOLDERS' EQUITY                           (unaudited)

          Deposits
                NOW/MMA accounts                                                               $    252      $     --
                Certificates of deposit                                                              --         8,722
                                                                                               --------      --------
                     Total deposits                                                                 252         8,722

          Other liabilities                                                                         371           480
                                                                                               --------      --------
                Total liabilities before minority interest                                          623         9,202

          Minority interest                                                                         336           399

          Commitments and contingencies (See Footnote 5)                                             --            --

          Stockholders' Equity
                Preferred stock,  500,000 shares authorized,  none issued at September 30,
                   2005 and 10,000,000 shares authorized, none issued
                   at December 31, 2004                                                              --            --
                Common stock, 5,000,000 shares authorized, $.001 par value,
                   2,183,366 shares issued and outstanding at September 30, 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                                                                  47,647        47,648
                Accumulated  deficit                                                            (26,380)      (25,369)
                Accumulated other comprehensive income                                            1,279         1,128
                                                                                               --------      --------
                     Total stockholders' equity                                                  22,548        23,409
                                                                                               --------      --------
                                                                                               $ 23,507      $ 33,010
                                                                                               ========      ========

                       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                                      3


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

                                                                             FOR THE THREE MONTHS
                                                                               ENDED SEPTEMBER 30,

                                                                               2005         2004
                                                                            ---------    ---------
Interest income
      Loans, including fees                                                 $   181      $   257
      Purchased receivables
           Accounts receivable factoring                                         --          490
           Other                                                                 --            3
      Interest bearing deposits in other banks                                   87           11
      Federal funds sold                                                         --            3
      Investment securities                                                      14           23
                                                                            -------      -------
           Total interest income                                                282          787

Interest expense                                                                  7           59
                                                                            -------      -------

           Net interest income before credit for credit losses                  275          728

Provision for credit losses                                                      16        1,149
                                                                            -------      -------

           Net interest income (loss) after provision for credit losses         259         (421)

Noninterest income
      Gain on sale of assets                                                     30           --
      Fee income                                                                 99           69
      Accounts receivable factoring servicing revenue                            --          170
      Miscellaneous income, net                                                   8           58
                                                                            -------      -------
           Total noninterest income                                             137          297

Noninterest expenses
      Salaries, wages, and benefits                                             172           68
      Professional and legal fees                                               145           60
      Accounts receivable factoring management and broker fees                   --          (83)
      Other management fees - related party                                      78           78
      Unrealized loss on trading liabilities                                     16           --
      Realized loss on trading liabilities                                       --           --
      Other general and administrative                                          145          158
                                                                            -------      -------
           Total noninterest expenses                                           556          281
                                                                            -------      -------
             Operating loss                                                    (160)        (405)

Income tax provision (benefit)                                                  283         (129)
                                                                            -------      -------

      Loss before minority interest                                            (443)        (276)

      (Income) loss attributable to minority interest                            33          (21)
                                                                            -------      -------
           Net loss                                                            (410)        (255)


                                        (Continued)

                                            4


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

                                                                         FOR THE THREE MONTHS
                                                                          ENDED SEPTEMBER 30,

                                                                         2005            2004
                                                                     -----------      -----------
Other comprehensive income (loss)
      Unrealized gains (losses) on available-for-sale securities            (200)              16
      Income tax expense on other comprehensive income                        --               --
                                                                     -----------      -----------
           Total other comprehensive income (loss), net of tax              (200)              16
                                                                     -----------      -----------

Comprehensive loss                                                   $      (610)     $      (239)
                                                                     ===========      ===========


Net loss per common share, basic and diluted                         $      (.19)     $      (.16)
Weighted average number of common shares, basic and diluted            2,183,366        1,607,516

                  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

                                       5


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

                                                                          FOR THE NINE MONTHS
                                                                           ENDED SEPTEMBER 30,

                                                                            2005        2004
                                                                          -------      -------
Interest income
      Loans, including fees                                               $   439      $   645
      Purchased receivables
           Accounts receivable factoring                                       --        1,897
           Other                                                               --           12
      Interest bearing deposits in other banks                                284           26
      Federal funds sold                                                       --           10
      Investment securities                                                    49           72
                                                                          -------      -------
           Total interest income                                              772        2,662

Interest expense                                                               72          193
                                                                          -------      -------

                Net interest income before credit for credit losses           700        2,469

Provision for credit losses                                                   172        1,001
                                                                          -------      -------

                Net interest income after provision for credit losses         528        1,468

Noninterest income
      Gain on sale of assets                                                   72           15
      Fee income                                                              260          203
      Accounts receivable factoring servicing revenue                          --          431
      Miscellaneous income, net                                                37          184
                                                                          -------      -------
           Total noninterest income                                           369          833

Noninterest expenses
      Salaries, wages, and benefits                                           372          557
      Professional and legal fees                                             529          390
      Accounts receivable factoring management and broker fees                 --          691
      Other management fees - related party                                   223          225
      Unrealized loss on trading liabilities                                   46           --
      Realized loss on trading liabilities                                     35           --
      Other general and administrative                                        538          551
                                                                          -------      -------
           Total noninterest expenses                                       1,743        2,414
                                                                          -------      -------
                Operating loss                                               (846)        (113)

Income tax provision                                                          228           75
                                                                          -------      -------

      Loss before minority interest                                        (1,074)        (188)

Loss attributable to minority interest                                         63            3
                                                                          -------      -------

      Net loss                                                             (1,011)        (191)


                                        (Continued)

                                            6


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

                                                                  FOR THE NINE MONTHS
                                                                   ENDED SEPTEMBER 30,

                                                                    2005             2004
                                                                -----------      -----------
Other comprehensive income
     Unrealized gains on available-for-sale securities                  151              191
     Income tax expense on other comprehensive income                    --               --
                                                                -----------      -----------
          Total other comprehensive income, net of tax                  151              191
                                                                -----------      -----------

Comprehensive loss                                              $      (860)     $        --
                                                                ===========      ===========


Net loss per common share, basic and diluted                    $      (.46)     $      (.15)
Weighted average number of common shares, basic and diluted       2,183,366        1,263,605

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                       7


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

                                                                                      FOR THE NINE MONTHS
                                                                                      ENDED SEPTEMBER 30,
                                                                                        2005         2004
                                                                                     --------      --------
Cash flows from operating activities:
Net loss from operations                                                             $ (1,011)     $   (191)
Adjustments to reconcile net loss to net cash used in operating activities:
           Minority interest                                                              (63)            3
           Depreciation                                                                     9            12
           Provision  for credit losses                                                   172         1,001
           Accretion of loan income and fees, net                                          (5)          (70)
           Amortization of servicing assets                                                13            19
           Amortization of other assets                                                     1             2
           Write down of foreclosed assets                                                 --            25
           Unrealized loss on trading liabilities                                          46            --
           Gain on sale of AFS securities                                                 (40)           (1)
Changes in operating assets and liabilities:                                                             --
           Accrued interest receivable                                                    (45)          (39)
           Deferred tax assets                                                            225            42
           Other assets                                                                   (45)          (73)
           Interest payable                                                               (12)          (13)
           Other liabilities                                                             (143)          108
                                                                                     --------      --------
                  Net cash used in operating activities                                  (898)         (825)

Cash flows from investing activities:
           Principal payments received on investment securities held-to-maturity            1             2
           Purchase of investment securities available-for-sale                          (394)       (1,165)
           Sale of investment securities available-for-sale                               135             2
           Principal payments received on investment securities
             available-for-sale                                                            37            21
           Purchase of premises and equipment                                              (4)          (21)
           Loans originated, receivables purchased, and principal collections,
             net                                                                       (1,092)       (1,118)
           Purchase of investment in real estate limited partnership                   (3,396)       (1,000)
                                                                                     --------      --------
                  Net cash used in investing activities                                (4,713)       (3,279)

Cash flows from financing activities:
           Decrease in noninterest bearing deposits                                        --            (4)
           Increase (decrease) in NOW/MMA deposits                                        252          (316)
           Decrease  in certificates of deposit                                        (8,722)       (2,373)
           Cash in lieu of fractional shares for reverse stock split                       (1)           --
           Net proceeds from stock rights offering                                         --         9,575
                                                                                     --------      --------
                  Net cash provided (used) in financing activities                     (8,471)        7,141

Net increase (decrease) in cash and cash equivalents                                  (14,082)        4,687

           Cash and cash equivalents at beginning of period                            22,181         7,245
                                                                                     --------      --------
           Cash and cash equivalents at end of period                                $  8,099      $ 11,932
                                                                                     ========      ========

                                        (Continued)


                                            8


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

                                                                                      FOR THE NINE MONTHS
                                                                                       ENDED SEPTEMBER 30,
                                                                                       2005          2004
                                                                                     --------      --------
 Supplemental disclosure of cash flow information:
           Cash paid for interest                                                    $     60      $    206
           Cash paid for income taxes                                                $      3      $     33

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

                                       9


                    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 and nine months
ended September 30, 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 September 30, 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
       available-for-sale securities arising
       during the period.                                          151
                                                                -------
Balance at September 30, 2005                                   $1,279
                                                                =======

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 nine months 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. During the

                                       10


first nine months of 2004,  the Company  recognized two operating  segments.  In
addition to the "other"  segment  described  above,  in 2004 WebBank's  accounts
receivable  program  constituted a second  operating  segment,  termed "accounts
receivable factoring" in the table below. On December 30, 2004, WebBank sold its
entire portfolio of factored accounts receivable and discontinued that operating
segment.

The following is a summary of selected  operating  segment  information  for the
three months and nine months ended  September 30, 2005 and 2004. The information
represents  operating  results as if the 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 SEPTEMBER 30, 2005:
Statement of Operations Information (Quarter):
  Net interest income after provision for credit
     losses                                                                  $     --      $    259      $    259
   Noninterest income                                                              --           137           137
   Noninterest expense                                                             --           556           556
                                                                             --------      --------      --------
   Operating loss                                                                  --          (160)         (160)
   Income taxes                                                                    --           283           283
   Loss attributable to minority interest                                          --            33            33
                                                                             --------      --------      --------
      Net loss                                                               $     --      $   (410)     $   (410)
                                                                             ========      ========      ========
Statement of Financial Condition Information
    (As of September 30, 2005):
   Total assets                                                              $     --      $ 23,507      $ 23,507
   Net loans and purchased receivables                                       $     --      $  6,554      $  6,554
   Deposits                                                                  $     --      $    252      $    252

THREE MONTHS ENDED SEPTEMBER 30, 2004:
Statement of Operations Information (Quarter):
   Net interest income (loss) after credit  for credit
     losses                                                                  $   (766)     $    345      $   (421)
   Noninterest income                                                             170           127           297
   Noninterest expense (credit)                                                   (81)          362           281
                                                                             --------      --------      --------
   Operating income (loss)                                                       (515)          110          (405)
   Income taxes                                                                    --          (129)         (129)
   (Income) attributable to minority interest                                      --           (21)          (21)
                                                                             --------      --------      --------
      Net income (loss)                                                      $   (515)     $    260      $   (255)
                                                                             ========      ========      ========
Statement of Financial Condition Information
    (As of September 30, 2004):
   Total assets                                                              $  8,004      $ 25,683      $ 33,687
   Net loans and purchased receivables                                       $  7,004      $  8,280      $ 15,324
   Deposits                                                                  $  6,481      $  2,743      $  9,224


                                                       11


                                                                             ACCOUNTS
                                                                            RECEIVABLE                 CONSOLIDATED
                                                                             FACTORING      OTHER        COMPANY
                                                                             --------      --------      --------
NINE MONTHS ENDED SEPTEMBER 30, 2005:
Statement of Operations Information (Period):
   Net interest income after credit for credit losses                        $     --      $    528      $    528
   Noninterest income                                                              --           369           369
   Noninterest expense                                                             --         1,743         1,743
                                                                             --------      --------      --------
   Operating loss                                                                  --          (846)         (846)
   Income taxes                                                                    --           228           228
   Loss attributable to minority interest                                          --            63            63
                                                                             --------      --------      --------
      Net loss                                                               $     --      $ (1,011)     $ (1,011)
                                                                             ========      ========      ========
Statement of Financial Condition Information
    (As of September 30, 2005):
   Total assets                                                              $     --      $ 23,507      $ 23,507
   Net loans and purchased receivables                                       $     --      $  6,554      $  6,554
   Deposits                                                                  $     --      $    252      $    252

NINE MONTHS ENDED SEPTEMBER 30, 2004:
Statement of Operations Information (Period):
   Net interest income after credit  for credit losses                       $    517      $    951      $  1,468
   Noninterest income                                                             431           402           833
   Noninterest expense                                                            745         1,669         2,414
                                                                             --------      --------      --------
   Operating income (loss)                                                        203          (316)         (113)
   Income taxes                                                                    --            75            75
   (Income) attributable to minority interest                                      --             3             3
                                                                             --------      --------      --------
      Net income (loss)                                                      $    203      $   (394)     $   (191)
                                                                             ========      ========      ========
Statement of Financial Condition Information
    (As of September 30, 2004):
   Total assets                                                              $  8,004      $ 25,683      $ 33,687
   Net loans and purchased receivables                                       $  7,044      $  8,280      $ 15,324
   Deposits                                                                  $  6,481      $  2,743      $  9,224

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 required  WebBank to comply with a number of  requirements
which  included,  but were 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 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
prohibited certain actions such as purchasing factored accounts receivable until
proper  procedures  and policies are in place,  extending  additional  credit to
substandard borrowers,  and paying cash dividends.  The Order further prohibited
WebBank from issuing  brokered  certificates  of deposit in an aggregate  amount
greater than the amount  outstanding on the effective  date of the Order,  which
was  $7,465,000.  The effective date of the Order was February 10, 2005, and the
due  dates  for the  requirements  ranged  from 10 days  to 360  days  from  the
effective date with the majority to be achieved within 120 days of the Order.

            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

                                       12


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.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

            On July 27,  2005,  the FDIC and the Utah  Department  of  Financial
Institutions  granted WebBank a waiver from restrictions imposed on the issuance
of brokered  certificates of deposit. The waiver allows WebBank to hold brokered
deposits up to an aggregate of $20,000,000 through January 1, 2007. At that time
the waiver will expire, and WebBank expects to submit a new request for approval
of the use of brokered deposits.

6. REVERSE STOCK SPLIT

            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 and cash issued in lieu of fractional shares,
there were 2,183,366 common shares issued and  outstanding.  The computations of
basic and diluted income/(loss) per common share were adjusted retroactively for
all periods presented to reflect the effect of the reverse split.

7. LOSS PER SHARE

            Loss per  share  are  based  on  dividing  net loss by the  weighted
average  number of shares  outstanding  for each  period.  Diluted  earnings per
common  share are based on shares  outstanding  (computed  under  basic EPS) and
potentially  dilutive  shares.  Since the  Company  recorded  net losses for the
three-month  and  nine-month  periods  ended  September  30, 2005 and 2004,  the
diluted  EPS of common  stock is the same as the basic EPS,  as any  potentially
dilutive  securities  would be  anti-dilutive.  If the  number of common  shares
outstanding  increases  as a  result  of a stock  dividend  or  stock  split  or
decreases as a result of a reverse stock split,  the  computations  of basic and
diluted  income per common  share are  adjusted  retroactively  for all  periods
presented  to reflect  that  change in capital  structure.  Shares  included  in
dilutive earnings per share calculations  include stock options granted that are
in the money but have not yet been  exercised.  In the money  stock  options are
adjusted using the Treasury Stock method. The Treasury Stock method assumes that
proceeds from options  exercised are used to purchase  Treasury  Stock at market
prices.  The net number of shares  (option  shares  issued less  Treasury  Stock
purchased) is the number of dilutive shares.

            The following tables show the computation of basic and fully diluted
earnings  per share for the three  months and nine months  ended  September  30,
2005.  The 2005  earnings  per share  calculation  includes  the  results of the
Company's common stock  subscription  rights offering  concluded in August 2004,
which doubled the number of common shares outstanding at that time. The earnings
per share for both 2005 and 2004  reflect the effect of a  one-for-four  reverse
split effective in April 2005.

                                                                                       FOR THE THREE MONTHS ENDED
                                                                                              SEPTEMBER 30,
                                                                                          2005            2004
                                                                                      -----------      -----------
      Loss available to common shareholders                                           $      (410)     $      (255)

      BASIC AND DILUTIVE LOSS PER SHARE

      Computation of EPS shares - basic and dilutive:
         Common shares outstanding entire period                                        2,183,366        1,091,650
         Weighted average common shares issued during period                                   --          515,866
                                                                                      -----------      -----------
              Weighted average common shares outstanding during period -basic           2,183,366        1,607,516
                                                                                      ===========      ===========

      Loss per common share - basic and dilutive                                      $      (.19)     $      (.16)
                                                                                      ===========      ===========

      Potentially dilutive shares not used in diluted EPS:
         Outstanding stock options not in the money                                            --            8,712
         Outstanding stock options in the money but antidilutive because of a net
            loss for the period                                                             5,744            3,282

                                       13


                                                                                        FOR THE NINE MONTHS ENDED
                                                                                              SEPTEMBER 30,
                                                                                          2005           2004
                                                                                      ------------     ------------
      Loss available to common shareholders                                           $    (1,011)     $      (191)

      BASIC LOSS PER SHARE

      Computation of EPS shares - basic:
         Common shares outstanding entire period                                        2,183,366        1,091,650
         Weighted average common shares issued or cancelled during period                      --          171,955
                                                                                      -----------      -----------
              Weighted average common shares outstanding during period basic            2,183,366        1,263,605
                                                                                      ===========      ===========

      Loss per common share - basic                                                   $      (.46)     $      (.15)
                                                                                      ===========      ===========

      Potentially dilutive shares not used in diluted EPS:
         Outstanding stock options not in the money                                            --            8,712
         Outstanding stock options in the money but antidilutive because of a net
            loss for the period                                                             5,744            3,282


8.          RELATED PARTY TRANSACTIONS

            Pursuant to a management  agreement  (the  "Management  Agreement"),
approved by a majority of the  Company's  disinterested  directors,  between the
Company and Steel Partners,  Ltd. ("SPL"), an entity controlled by the Company's
Chairman,  SPL provides  the Company  with office space and certain  management,
consulting  and advisory  services.  The Management  Agreement is  automatically
renewable on an annual basis unless  terminated by either party, for any reason,
upon at least 60 days written  notice.  The  Management  Agreement also provides
that the Company  shall  indemnify,  save and hold SPL harmless from and against
any obligation, liability, cost or damage resulting from SPL's actions under the
terms of the  Management  Agreement,  except to the extent  occasioned  by gross
negligence or willful misconduct of SPL's officers, directors or employees.

            Pursuant to an Employee Allocation Agreement between WebBank and SPL
(the "Allocation Agreement"), James Henderson, an employee of SPL and a director
and chief executive  officer of the Company,  performed  services in the area of
management,  accounting and finances, and identified business opportunities, and
such other services  reasonably  requested by WebBank.  In  consideration of the
services  performed  by  Mr.  Henderson  under  the  Allocation  Agreement,  Mr.
Henderson's  salary and the cost of certain other benefits are allocated between
WebBank and SPL based on the  percentage  of time  devoted by Mr.  Henderson  to
WebBank matters. Unless agreed to by both parties in writing, the amount paid by
WebBank  to SPL under the  Allocation  Agreement  in any  calendar  year may not
exceed  $100,000.   The  Allocation  Agreement  will  continue  in  force  until
terminated by either of the parties upon 30 days written notice.

            In  consideration  of the  services  rendered  under the  Management
Agreement,  SPL charges the Company a fixed  monthly fee  totaling  $310,000 per
annum,   adjustable   annually  upon  agreement  of  the  Company  and  SPL.  In
consideration  of the services  provided  under the  Allocation  Agreement,  SPL
charged  WebBank  $100,000 per annum during the previous two fiscal  years.  The
fees payable by WebBank are  included in the fees  payable by the Company  under
the Management  Agreement.  The Company  believes that the cost of obtaining the
type and quality of services rendered by SPL under the Management  Agreement and
the Allocation Agreement is no less favorable than the cost at which the Company
and WebBank, respectively, could obtain from unaffiliated entities.

            During  the fiscal  year ended  December  31,  2004,  SPL billed the
Company fees with respect to fiscal 2004 of $310,000 for services rendered under
the  Management  Agreement.  Included in these fees was $100,000 paid by WebBank

                                       14


for  services  rendered  under the  Allocation  Agreement.  The fees  payable by
WebBank are  included in the fees  payable by the Company  under the  Management
Agreement.

9.          INVESTMENTS

            During the quarter the Company made an investment of $3.396  million
in a real estate master  limited  partnership.  The real estate  master  limited
partnership  has invested in two leisure  hotels in Japan.  The market for these
real estate investments is considered highly illiquid.

10.         PROVISION FOR CREDIT LOSSES

            An analysis of the Company's  allowance for credit losses and credit
loss  experience is furnished in the following table for the year ended December
31, 2004 and the nine months ended September 30,2005 (in thousands):


                                 SEPTEMBER 30,  DECEMBER 31,
                                     2005         2004
                                 ------------   ------------
                                 (unaudited)

     Balance at beginning of period     $   321      $ 1,302
     Provision for credit losses            172           62
     Loans charged off                     (312)      (1,108)
     Recoveries                              --           65
                                        -------      -------
     Balance at end of period           $   181      $   321
                                        =======      =======

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

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.

            The  following  discussion  should be read in  conjunction  with the
condensed  consolidated unaudited interim financial statements as of and for the
three month and nine month periods  ended  September 30, 2005 of the Company and
the notes thereto presented elsewhere herein.

RESULTS OF OPERATIONS

THREE MONTHS ENDED  SEPTEMBER 30, 2005 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 2004

            The net loss for the quarter ended September 30, 2005 was $(410,000)
or $(.19) per share compared to a net loss of $(255,000) or $(.16) per share for
the same period in 2004,  an increased  loss of  $(155,000) or $(.03) per share.
The 2005 loss per share calculation includes the results of the Company's common
stock  subscription  rights offering concluded in August 2004, which doubled the
number of common shares  outstanding  at that time.  The loss per share for both
2005 and 2004  reflect the effect of a  one-for-four  reverse  split that became
effective in April 2005.

                                       15


            The  Company's  net interest  income before credit for credit losses
decreased  by  $453,000.  Interest  income from  accounts  receivable  factoring
decreased  by  $490,000  due to the sale of the  accounts  receivable  factoring
portfolio in December 2004.  Interest income from interest  bearing  deposits in
other banks  increased  by $76,000  because the proceeds  from the  subscription
rights offering and the sale of the accounts receivable factoring portfolio were
invested primarily in these instruments. Interest income from loans decreased by
$76,000 due to reductions in commercial  loan balances.  The average  balance of
the net  commercial  loan portfolio for the third quarter of 2005 was $1,355,000
less than the average for the third  quarter of 2004.  The Company  discontinued
new originations of commercial loans in 2001, and the portfolio has been running
off since that time.  Interest expense  decreased by $52,000 due to a $5,602,000
decrease in average certificates of deposit.

            The following  table shows an analysis of net interest income before
provision (credit) for credit losses for the three-month periods ended September
30, 2005 and 2004 (amounts in thousands):

                                                   AVERAGE       INTEREST     AVE. ANNUAL
                                                   AMOUNT         EARNED      YIELD/RATE
                                                   ------        --------     ----------

                  QUARTER ENDED SEPTEMBER 30, 2005

     INTEREST EARNING ASSETS
     Interest bearing deposits in other banks     $11,850      $    87         2.94%
     Federal funds sold                                --           --           --
     Investment securities                          3,126           14         1.79%
     Loans, net                                     7,430          181         9.74%
     Purchased receivables
        Accounts receivable factoring                  --           --           --
        Other                                          --           --           --
                                                  -------      -------       -------
        TOTAL INTEREST EARNING ASSETS             $22,406      $   282         5.03%
                                                  =======      =======

     INTEREST BEARING LIABILITIES
     NOW/MMA deposits                             $    48      $     2         3.46%
     Certificates of deposit                        3,866            5          .55%
                                                  -------      -------

        TOTAL INTEREST BEARING LIABILITIES        $ 3,934      $     7          .71%
                                                  =======      =======

     NET INTEREST INCOME                                       $   275
                                                               =======

     NET INTEREST MARGIN                                                       4.91%


                                                  AVERAGE       INTEREST     AVE. ANNUAL
                                                  AMOUNT         EARNED      YIELD/RATE
                                                  ------        ------       ----------

                  QUARTER ENDED SEPTEMBER 30, 2004

     INTEREST EARNING ASSETS
     Interest bearing deposits in other banks     $12,484      $    11          .35%
     Federal funds sold                               739            3         1.62%
     Investment securities                          1,710           23         5.38%
     Loans, net                                     8,785          257        11.70%
     Purchased receivables
        Accounts receivable factoring               7,501          490        26.13%
        Other                                         122            3         9.84%
                                                  -------      -------
        TOTAL INTEREST EARNING ASSETS             $31,341      $   787        10.04%
                                                  =======      =======

     INTEREST BEARING LIABILITIES
     NOW/MMA deposits                             $   473      $     3         2.54%
     Certificates of deposit                        9,468           56         2.37%
                                                  -------      -------
        TOTAL INTEREST BEARING LIABILITIES        $ 9,941      $    59         2.37%
                                                  =======      =======


                                            16


     NET INTEREST INCOME                                       $   728
                                                               =======
     NET INTEREST MARGIN                                                       9.29%


            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 third  quarter  of 2005 to the third
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 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 SEPTEMBER 30, 2005
                                                            COMPARED TO 2004
                                                         (amounts in thousands)
                                                 DUE TO
                                                 VOLUME       DUE TO RATE    TOTAL CHANGE
                                                 -------      -----------    ------------

       INCREASE (DECREASE) IN INTEREST INCOME
       Interest bearing deposits in other banks         $  (1)         $  77          $  76
       Federal funds sold                                  (3)            --             (3)
       Investment securities                                6            (15)            (9)
       Loans, net                                         (36)           (40)           (76)
       Purchased receivables
          Accounts receivable factoring                  (490)            --           (490)
          Other                                            (3)            --             (3)
                                                        -----          -----          -----
          TOTAL INTEREST INCOME                         $(527)         $  22          $(505)
                                                        =====          =====          =====

       INCREASE (DECREASE) IN INTEREST EXPENSE
       NOW/MMA deposits                                 $  (3)         $   1          $  (2)
       Certificates of deposit                            (15)           (35)           (50)
                                                        -----          -----          -----
          TOTAL INTEREST EXPENSE                        $ (18)         $ (34)         $ (52)
                                                        =====          =====          =====

            The provision for credit losses decreased by $1,133,000. Most of the
provision taken in the third quarter of 2004 related to the accounts  receivable
factoring  portfolio,  which was sold in December 2004. 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 Company had $312,000 of charge-offs during the third quarter
of  2005  related  to a  single  loan to a coal  mining  operation  that  ceased
operations in that period.

            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 following table shows an analysis of the Company's allowance for
credit  losses for the quarters  ended  September  30, 2005 and 2004 (amounts in
thousands):

                                                                            QUARTER ENDED SEPTEMBER 30,
                                                                                2005          2004
                                                                              -------        ------
                Balance at beginning of period                                $  477          $1,070

                                              17


                                                                            QUARTER ENDED SEPTEMBER 30,
                                                                                2005          2004
                                                                              -------        ------

                Charge-offs by category:
                    Commercial, financial and agricultural                       312              --
                    Installment loans to individuals                              --               2
                    Purchased receivables
                        Accounts receivable factoring                             --             566
                        Other                                                     --              --
                                                                              ------          ------
                           Total charge-offs                                     312             568

                Recoveries by category:
                    Commercial, financial and agricultural                        --              --
                    Installment loans to individuals                              --              --
                    Purchased receivables
                        Accounts receivable factoring                             --              65
                        Other                                                     --              --
                                                                              ------          ------
                           Total recoveries                                       --              --
                                                                              ------          ------

                Net charge-offs                                                  312             503

                Provision (credit) for credit losses                              16           1,149
                                                                              ------          ------

                Balance at end of period                                      $  181          $1,716
                                                                              ======          ======

                Ratio of net charge offs to average loans outstanding
                during the quarter                                              4.20%           3.07%
                                                                              ======          ======

            The following table shows the allocation between categories of loans
for the  allowance  for credit losses as of September 30, 2005 and 2004 (amounts
in thousands):

                                                                          SEPTEMBER 30,
                                                               2005                          2004
                                                               ----                          ----
                                                    AMOUNT OF     % OF LOANS IN    AMOUNT OF     % OF LOANS IN
                                                  ALLOWANCE BY     CATEGORY TO    ALLOWANCE BY     CATEGORY TO
    Balance at End of Quarter Applicable to:        CATEGORY       TOTAL LOANS     CATEGORY         TOTAL LOANS
                                                   ----------      -----------    -----------      -----------

    Commercial, financial and agricultural         $  167            100.00%      $  853             52.78%
    Installment loans to individuals                   --              0.00%          10              0.31%
    Purchased receivables
       Accounts receivable factoring                   --              0.00%         850             46.33%
       Other                                           --              0.00%           3               .58%
    Unallocated                                        14               N/A           --                N/A
                                                   ------             ------       ------            ------
       Totals                                      $  181            100.00%      $1,716            100.00%
                                                   ======            =======      ======            =======

            Non  interest  income for the Company  decreased  by  $160,000.  Fee
income  increased  by $30,000,  primarily  because of  additional  revenue  from
fee-for-services  partners at WebBank.  Accounts receivable  factoring servicing
revenue  decreased by $170,000  because of the sale of the  accounts  receivable
factoring portfolio in December 2004.  Miscellaneous income decreased by $50,000
primarily because 2004 included servicing fees for accounts receivable factoring
participations which were eliminated after the sale of the factoring portfolio.

            The   Company's   noninterest   expenses   increased   by  $275,000,
comparatively,  between the two quarters. Salaries, wages, and benefits expenses
increased by $104,000 due to an increase in staffing and related moving costs.

                                       18


Professional  and legal fees  increased  by $85,000 due to  employee  recruiting
costs and  compliance  efforts  related to the Order.  The Company  recognized a
$16,000 unrealized loss on a short sale of unregistered  securities in the third
quarter of 2005.  The negative  expense of $83,000 shown in accounts  receivable
factoring  management  and  broker  fees in 2004 was due to  charge-offs  in the
accounts receivable  factoring  portfolio that, by contract,  allowed WebBank to
reduce these fees by the full or partial amount of the charge-offs.

            Income tax expense  increased by $412,000  which  resulted  from the
decline in loan  allowance  due to loans being  charged  off.  Accordingly,  the
related deferred tax asset  associated with the loan allowance  reversed causing
the income tax expense to increase.

            Other  comprehensive  income  (loss)  decreased  by $216,000  due to
changes in the market value of securities available-for-sale.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2004

            The net  loss for the  nine  months  ended  September  30,  2005 was
$(1,011,000)  or $(.46) per share compared to a net loss of $(191,000) or $(.15)
per share  for the same  period  in 2004.  The 2005  loss per share  calculation
includes the results of the Company's common stock subscription  rights offering
concluded in August 2004 which doubled the number of common  shares  outstanding
at that time.  The  earnings per share for both 2005 and 2004 reflect the effect
of a one-for-four reverse split that became effective in April 2005.

            The Company's net interest income before provision for credit losses
decreased by  $1,769,000.  Interest  income from accounts  receivable  factoring
decreased by  $1,897,000  due to the sale of the accounts  receivable  factoring
portfolio in December 2004.  Interest income from interest  bearing  deposits in
other banks  increased by $258,000  because the proceeds  from the  subscription
rights offering and the sale of the accounts receivable factoring portfolio were
invested primarily in these instruments. Interest income from loans decreased by
$206,000 due to reductions in commercial  loan balances.  The average balance of
the  commercial  loan  portfolio for the first six months of 2005 was $2,891,000
less  than  the  average  for  the  first  nine  months  of  2004.  The  Company
discontinued  new  originations of commercial  loans in 2001.  Interest  expense
decreased by $121,000 due to a $6,109,000  decrease in average  certificates  of
deposit.

           The following  table shows an analysis of net interest  income before
credit for credit losses for the nine month periods ended September 30, 2005 and
2004 (amounts in thousands):

                                                       AVERAGE        INTEREST     AVE. ANNUAL
                                                       AMOUNT         EARNED       YIELD/RATE
                                                       ------         ------       ----------
            NINE MONTHS ENDED SEPTEMBER 30, 2005

      INTEREST EARNING ASSETS
      Interest bearing deposits in other banks         $15,675        $   284          2.42%
      Federal funds sold                                    --             --            --
      Investment securities                              3,241             49          2.02%
      Loans                                              6,252            439          9.36%
      Purchased receivables
         Accounts receivable factoring                      --             --            --
         Other                                              --             --            --
                                                       -------        -------
        TOTAL INTEREST EARNING ASSETS                  $25,168        $   772          4.09%
                                                       =======        =======

      INTEREST BEARING LIABILITIES
      NOW/MMA deposits                                 $   100        $     2          2.67%
      Certificates of deposit                            4,136             70          2.26%
                                                       -------        -------
         TOTAL INTEREST BEARING LIABILITIES            $ 4,236        $    72          2.27%
                                                       =======        =======

                                                  19


     NET INTEREST INCOME                                          $   700
                                                                  =======                                                                                  ====
     NET INTEREST MARGIN                                                              3.71%

                                                        AVERAGE         INTEREST     AVE. ANNUAL
                                                        AMOUNT          EARNED       YIELD/RATE
                                                        ------          ------       ----------
      NINE MONTHS ENDED SEPTEMBER 30, 2004

     INTEREST EARNING ASSETS
     Interest bearing deposits in other banks         $ 6,771         $    26             0.51%
     Federal funds sold                                 1,062              10             1.26%
     Investment securities                              1,251              72             7.67%
     Loans                                              9,143             645             9.41%
     Purchased receivables
        Accounts receivable factoring                   7,283           1,897            34.73%
        Other                                             179              12             8.94%
                                                      -------         -------
       TOTAL INTEREST EARNING ASSETS                  $25,689         $ 2,662            13.82%
                                                      =======         =======

     INTEREST BEARING LIABILITIES
     NOW/MMA deposits                                 $   384         $     7             2.43%
     Certificates of deposit                           10,245             186             2.42%
                                                      -------         -------
        TOTAL INTEREST BEARING LIABILITIES            $10,629         $   193             2.42%
                                                      =======         =======

     NET INTEREST INCOME                                              $ 2,469
                                                                      =======

     NET INTEREST MARGIN                                                                 12.81%

            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 nine months of 2005 to the first
nine  months 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 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.

                                                         NINE MONTHS ENDED SEPTEMBER 30, 2005
                                                                  COMPARED TO 2004
                                                                (amounts in thousands)
                                                    DUE TO VOLUME      DUE TO RATE     TOTAL CHANGE
                                                    -------------      -----------     ------------

     INCREASE (DECREASE) IN INTEREST INCOME
     Interest bearing deposits in other banks         $    67          $   191          $   258
     Federal funds sold                                   (10)              --              (10)
     Investment securities                                (43)              20              (23)
     Loans                                               (204)              (2)            (206)
     Purchased receivables
        Accounts receivable factoring                  (1,897)              --           (1,897)
        Other                                             (12)              --              (12)
                                                      -------          -------          -------
        TOTAL INTEREST INCOME                         $(2,099)         $   209          $(1,890)
                                                      =======          =======          =======

     INCREASE (DECREASE) IN INTEREST EXPENSE
     NOW/MMA deposits                                 $    (5)         $    --          $    (5)
     Certificates of deposit                             (111)              (5)            (116)
                                                      -------          -------          -------
        TOTAL INTEREST EXPENSE                        $  (116)         $    (5)         $  (121)
                                                      =======          =======          =======

                                       20


            The provision for credit losses  decreased by $829,000.  Most of the
provision  taken in the  first  nine  months  of 2004  related  to the  accounts
receivable factoring  portfolio,  which was sold in December 2004. 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 Company had $312,000 of  charge-offs  during the
first nine months of 2005  related to a single  loan to a coal mining  operation
that ceased operations in the third quarter.

            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 following table shows an analysis of the Company's allowance for
credit losses for the nine months ended  September 30, 2005 and 2004 (amounts in
thousands):

                                                                                         NINE MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                       2005           2004
                                                                                     ------          ------

                Balance at beginning of year                                         $  321          $1,302

                Charge-offs by category:
                     Commercial, financial and agricultural                             312              --
                     Installment loans to individuals                                    --               8
                     Purchased receivables
                         Accounts receivable factoring                                   --             644
                         Other                                                           --              --
                                                                                     ------          ------
                              Total charge-offs                                         312             652

                Recoveries by category:
                     Commercial, financial and agricultural                              --              --
                     Installment loans to individuals                                    --              --
                     Purchased receivables
                         Accounts receivable factoring                                   --              65
                         Other                                                           --              --
                                                                                     ------          ------
                              Total recoveries                                           --              65
                                                                                     ------          ------

                Net charge-offs                                                          --             587

                Provision (credit) for credit losses                                    172           1,001
                                                                                     ------          ------

                Balance at end of period                                             $  181          $1,716
                                                                                     ======          ======

                Ratio of net charge-offs to average loans outstanding during
                the period                                                             4.99%           3.54%
                                                                                     ======          ======

            The following table shows the allocation between categories of loans
for the  allowance  for credit losses as of September 30, 2005 and 2004 (amounts
in thousands):

                                                  21


                                                                                  SEPTEMBER 30,
                                                                     2005                                2004
                                                                     ----                                ----
                                                          AMOUNT OF     % OF LOANS IN       AMOUNT OF       % OF LOANS IN
                                                        ALLOWANCE BY     CATEGORY TO       ALLOWANCE BY       CATEGORY TO
           Balance at End of Period Applicable to:        CATEGORY        TOTAL LOANS        CATEGORY         TOTAL LOANS
                                                        ------------     ------------      ------------       -----------

           Commercial, financial and agricultural         $  167             100.00%          $  853             57.78%
           Installment loans to individuals                   --               0.00%              10              0.31%
           Purchased receivables
              Accounts receivable factoring                   --               0.00%             850             46.33%
              Other                                                            0.00%               3               .58%
           Unallocated                                        14                N/A               --               N/A
                                                          ------              ------          ------             ------

              Totals                                      $  181             100.00%      $1,716                100.00%
                                                          ======             =======      ======                =======

            Noninterest  income  for the  Company  decreased  by  $464,000.  The
Company recognized gains of $40,000 on the sale of securities and $32,000 on the
sale of foreclosed  assets in the nine months of 2005.  Fee income  increased by
$139,000, primarily because of additional revenue from fee-for-services partners
at  WebBank.  Accounts  receivable  factoring  servicing  revenue  decreased  by
$431,000 because of the sale of the accounts  receivable  factoring portfolio in
December 2004. Miscellaneous income decreased by $147,000 primarily because 2004
included servicing fees for accounts receivable  factoring  participations which
were eliminated after the sale of the factoring portfolio.

            The  Company's  noninterest  expenses  decreased  by  $671,000.  The
primary  reason for the change was a $691,000  decrease in  accounts  receivable
factoring  management  and broker  fees  related to the  discontinued  factoring
program.  Salaries,  wages, and benefits expenses decreased by $185,000 due to a
smaller staff  throughout the first half of 2005 and  discontinuance  of a bonus
accrual  at  WebBank  in 2005.  The  Company  recognized  a total of  $71,000 of
realized and unrealized loss on a short sale of unregistered securities in 2005.

            Income tax  provision  increased by $153,000  between  periods.  The
increased income tax expense in 2005 resulted  primarily from the impact of loan
charge-offs for tax purposes and the related  reversal of the deferred tax asset
for the allowance for loan losses.

           Other comprehensive income decreased by $40,000 due to changes in the
market value of securities available- for-sale.

LIQUIDITY AND CAPITAL RESOURCES

            At September 30, 2005 and December 31, 2004,  the Company's cash and
cash equivalents totaled $8,099,000 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  $14,082,000
decrease in cash and cash  equivalent  balances  between  December  31, 2004 and
September   30,  2005   reflects  the   maturities  of  $8,722,000  of  brokered
certificates  of deposit.

            During the  quarter,  the Company made an  investment,  as a limited
partner,  of  $3.396  million  in a newly  formed  real  estate  master  limited
partnership  (RELP).  The RELP can invest in certain Japanese real estate assets
such as hotels,  social  buildings and other real estate  properties.  There are
currently 4 investors in the RELP. The $3.396  million  invested by the Company,
along  with  investments  from the  other  partners,  was used to  purchase  two
Japanese hotels.  One of those hotels requires  significant  renovations and the
RELP is  seeking  financing  for those  renovations  on behalf of the RELP.  The
Company  is  considering  increasing  its  investment  in the RELP to between $6
million and $7 million in total and the RELP has  currently  identified  another
hotel  property to purchase.  The sourcing of the hotel  properties,  the direct
oversight  of the  management  of the hotels as well as securing  any  necessary
financing for the hotels owned by the RELP is being  performed by a professional
Japanese real estate  advisory  company.  The market for these types of Japanese
real estate investments is considered highly illiquid.

            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,  restricted the amount of
brokered  certificates  of  deposits  that  WebBank  was allowed to issue to the
amount  outstanding  on the effective date of the Order,  which was  $7,465,000.
Further,  because  WebBank is subject to the Order,  WebBank is considered  only
"adequately  capitalized"  and must  obtain a waiver to issue  any new  brokered
certificates  of deposit.  On July 27, 2005, the FDIC and the Utah Department of
Financial Institutions granted WebBank a waiver from restrictions imposed on the
issuance of brokered  certificates of deposit. The waiver allows WebBank to hold
brokered deposits up to an aggregate of $20,000,000  through January 1, 2007. At
that time the waiver will  expire,  and WebBank  expects to submit a new request
for approval of the use of brokered deposits.  As of September 30, 2005, WebBank
had no  remaining  outstanding  brokered  certificates  of  deposit.  As WebBank
establishes new lines of business to replace the accounts  receivable  factoring
program,  the Company  anticipates  that WebBank will fund itself  incrementally
with brokered certificates of deposit.

            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.

                                       22


           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 September 30, 2005 and December 31,
2004, the Company 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.

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  required  WebBank to comply with a number of  requirements
which  included,  but were 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 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
prohibited certain actions such as purchasing factored accounts receivable until
proper  procedures  and policies are in place,  extending  additional  credit to
substandard borrowers,  and paying cash dividends.  The Order further prohibited
WebBank from issuing  brokered  certificates  of deposit in an aggregate  amount
greater than the amount  outstanding on the effective  date of the Order,  which
was  $7,465,000.  The effective date of the Order was February 10, 2005, and the
due  dates  for the  requirements  ranged  from 10 days  to 360  days  from  the
effective date with the majority to be achieved within 120 days of the Order.

            WebBank  believes  that during the period  since the issuance of the
Order, it has provided all information  required by the Order on a timely basis.
WebBank's  compliance  with  the  Order  was  reviewed  by the FDIC and the Utah
Department  of Financial  Institutions  during the annual  Safety and  Soundness
examination in September  2005. The regulators  provided a report to the WebBank
Board of  Directors  on October 24,  2005.  No new issues were raised other than
those previously  documented.  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.  The consolidated  financial  statements do not include any adjustments
that might result from the outcome of this uncertainty.

            On July 27,  2005,  the FDIC and the Utah  Department  of  Financial
Institutions  granted WebBank a waiver from restrictions imposed on the issuance
of brokered  certificates of deposit. The waiver allows WebBank to hold brokered
deposits up to an aggregate of $20,000,000 through January 1, 2007. At that time
the waiver will expire, and WebBank expects to submit a new request for approval
of the use of brokered deposits.

                                       23


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:

          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

                                       24


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 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 was $78,000 at September 30, 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.  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.

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  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
2005  through  March  18,  by which  time  temporary  arrangements  were made to
segregate the system administrator from user duties. Such examination  indicated
no  inappropriate  or  unauthorized  maintenance  activity  during  the  periods
reviewed.  Subsequent to the  examination,  an independent  staff member reviews
system maintenance  records on a daily basis. During the second quarter of 2005,

                                       25


permanent arrangements were made to segregate the system administrator from user
duties.  Based on the above actions taken to date, the Company  believes that it
has taken sufficient steps to address this weakness.

            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  and
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.  During the current quarter,  there were no significant  changes in
the Company's internal controls.  On October 31, 2005, subsequent to the Company
completing  all material  procedures  in  connection  with this Form 10-Q,  Dave
Fischer,  the chief  financial  officer of WebBank,  resigned in order to pursue
another opportunity.  The Company is currently  considering various alternatives
to perform the functions previously performed by Mr. Fischer.

            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.



                                       26


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 developed and submitted a written three-year strategic plan
within  120  days of the  effective  date of the  Order.  Although  the  Company
believes  that WebBank has  complied  fully with all  requirements  of the Order
to-date on a timely basis,  it is possible that unforeseen  circumstances  could
cause future compliance measures to be unsatisfactory 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.

               *32.1     Certification of Chief Executive Officer pursuant to
                         Section 906 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.

                                       27


                                   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:  November 14, 2005               WEBFINANCIAL CORPORATION





                                       By: /s/ James R. Henderson
                                           -------------------------------------
                                           James R. Henderson
                                           President and Chief Executive Officer







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





                                       28

EX-31

EXHIBIT 31.1


                                  CERTIFICATION

                            Section 302 Certification

I, James R. Henderson, 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: November 14, 2005




                                      By: /s/ James R. Henderson
                                          --------------------------------------
                                          James R. Henderson
                                          President and Chief Executive Officer

EX-31

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: November 14, 2005


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

EX-32

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,  James R. Henderson,  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  September
30, 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/ James R. Henderson
                                          ----------------------------
                                          James R. Henderson
                                          President and Chief Executive Officer
                                          November 14, 2005

EX-32

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  September
30, 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
                                   November 14, 2005