SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number 0-631
WEBFINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
56-2043000
(I.R.S. Employer Identification No.)
150 East 52nd Street, 21st Floor
New York, New York
10022
(Address and zip code of principal executive offices)
877-431-2942
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Class Outstanding at November 3, 2000
Common Stock, par value $.001 4,354,280 Shares
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Statements of Financial Condition
September 30, 2000 (unaudited) and December 31, 1999 2
Consolidated Statements of Operations
for the three months ended
September 30, 2000 and 1999 (unaudited) 4
Consolidated Statements of Operations
for the nine months ended
September 30, 2000 and 1999 (unaudited) 5
Consolidated Statements of Cash Flow
for the nine months ended
September 30, 2000 and 1999 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
PART II--OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
PART I--FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 7,469 $ 7,266
Investment securities
Held-to-maturity (estimated fair value $33 and $37
at September 30, 2000 and December 31, 1999) 33 37
Available-for-sale 6,345 858
------------- ------------
Total investment securities 6,378 895
Loans, net of deferred premium 12,666 10,868
Less allowance for loan loss 681 472
------------- ------------
Total loans, net 11,985 10,396
Accounts receivable - 14
Prepaid expense 46 63
Premises and equipment,
net of accumulated depreciation and amortization 119 101
Accrued interest receivable 402 163
Goodwill, net of accumulated
amortization of $247 and $158 1,528 1,616
Other assets 3,341 428
------------- ------------
$ 31,268 $ 20,942
============= ============ =
</TABLE>
(continued)
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Deposits:
Non interest-bearing demand $ 250 $ 250
Interest-bearing time certificates of deposit 13,954 4,639
------------- ------------
Total deposits 14,204 4,889
Short term borrowing -- 1,100
Accounts payable and accrued liabilities 2,570 953
Servicing liability 44 108
------------ ------------
Total liabilities before minority interests 2,614 7,050
Commitments and contingencies -- --
Minority interests 544 457
Stockholders' Equity
Preferred stock, 10,000,000 shares authorized, none issued -- --
Common stock, 50,000,000 shares authorized;
$.001 par value, 4,354,280 and 4,,349,996 shares issued
and outstanding at September 30, 2000 and
December 31, 1999, respectively 4 4
Paid-in capital 36,624 36,578
Unearned compensation (65) (65)
Accumulated deficit (22,657) (23,082)
------------- ------------
Total stockholders' equity 13,906 13,435
------------- ------------
$ 31,268 $ 20,942
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Interest and fees on commercial loans $ 509 $ 167
Interest on cash and cash equivalents 143 135
Interest on investment securities available for sale 116 50
---------------- --------------
Total interest income 768 352
Interest expense 298 67
---------------- --------------
Net interest income before loan loss provision 470 285
Loan loss provision 163 88
---------------- --------------
Net interest income after loan loss provision 307 197
---------------- --------------
Non interest income:
Gain on sale of commercial loans 365 67
Fee income on single payment loans 418 7
Fee income on structured settlements 58 68
Credit card servicing 60 --
Other income 66 192
---------------- --------------
Total non interest income 967 334
Non interest expenses:
Salaries 482 382
Occupancy 48 47
Professional fees 130 33
Goodwill amortization 30 32
Other 298 448
---------------- --------------
Total non interest expenses 988 942
Income (loss) before minority interests 286 (411)
---------------- --------------
(Income) loss attributable to minority interests -- 21
---------------- --------------
Net income (loss) $ 286 $ (390)
================ ==============
Basic and diluted net income per share $ .07 $ (.09)
Weighted average number of common shares and
common share equivalents, basic 4,354 4,432
Weighted average number of common shares and
common share equivalents, diluted 4,386 4,432
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Interest and fees on commercial loans $ 1,199 $ 265
Interest on cash and cash equivalents 347 381
Interest on investment securities available for sale 175 130
---------------- --------------
Total interest income 1,721 776
Interest expense 601 116
---------------- --------------
Net interest income before loan loss provision 1,120 660
Loan loss provision 428 144
---------------- --------------
Net interest income after loan loss provision 692 516
---------------- --------------
Non interest income:
Gain on sale of commercial loans 924 303
Fee income on single payment loans 927 11
Fee income on structured settlements 222 146
Credit card servicing 170 --
Other income 485 234
---------------- --------------
Total non interest income 2,728 694
Non interest expenses:
Salaries 1,423 1,185
Occupancy 142 148
Professional fees 445 75
Goodwill amortization 88 97
Other 844 1,168
---------------- --------------
Total non interest expenses 2,942 2,673
Income (loss) before minority interests 478 (1,463)
---------------- --------------
(Income) loss attributable to minority interests (53) 100
----------------- --------------
Net income (loss) $ 425 $ (1,363)
================ ==============
Basic net income (loss) per share $ .10 $ (.31)
Diluted net income (loss) per share $ .09 $ (.31)
Weighted average number of common shares and
common share equivalents, basic 4,354 4,381
Weighted average number of common shares and
common share equivalents, diluted 4,696 4,381
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 425 $ (1,363)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Minority interest 53 (100)
Depreciation and amortization 40 46
Common stock granted in lieu of cash 46 23
Gain on sale of commercial loans 924 (303)
Loan loss provision 428 144
Amortization of loan premiums -- 18
Amortization of goodwill 88 97
Amortization of premiums for held-to-maturity securities -- 1
Amortization of deferred gains on sale of loans 48 (6)
Amortization of servicing asset (64) 2
Amortization of deferred compensation on stock options -- 61
Net changes in:
Cash restricted in escrow -- 1,687
Accounts receivable 14 --
Prepaid expenses 17 (40)
Accrued interest receivable (239) (51)
Other assets (2,913) (100)
Accounts payable and accrued expenses 1,617 68
------------ ------------
Net cash provided by operating activities 484 184
Cash flows from investing activities:
Principal payments received on available-for-sale securities 4 1,050
Purchase of available-for-sale securities (5,487) (205)
Purchase of held-to-maturity securities -- (49)
Payments on held-to-maturity securities -- 10
Purchase of premises and equipment (58) (17)
Principal payments received on loans -- 62
Deferred loan origination fees -- 155
Servicing asset on sale of commercial loans -- (122)
Addition to minority interest 34 --
Net increase in loans (2,989) (8,818)
------------ ------------
Net cash used in investing activities (8,496) (7,934)
</TABLE>
(continued)
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (continued)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Cash flows provided by financing activities:
Non interest-bearing demand -- 145
Net increase in interest-bearing certificates of deposit 9,315 5,436
Minority interest -- 30
Stock options exercised -- 416
Contribution of capital -- 184
Net decrease in line of credit (1,100) --
------------ ------------
Net cash provided by financing activities 8,215 6,211
Net increase (decrease) in cash and cash equivalents 203 (1,539)
Cash and cash equivalents at beginning of period 7,266 8,681
------------ ------------
Cash and cash equivalents at end of period $ 7,469 $ 7,142
============ ============
Supplemental disclosure of additional cash activities:
Cash paid for interest $ 333 $ 101
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
(Amounts in thousands except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--The accompanying interim consolidated financial
statements of WebFinancial Corporation and its subsidiaries (the "Company") are
unaudited and have been prepared in conformity with the requirements of
Regulations 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 generally accepted accounting
principles for complete financial statements. The accompanying interim
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 1999 Annual Report on Form 10-K. The
consolidated Statement of Financial Condition at December 31, 1999 was extracted
from the Company's audited consolidated financial statements contained in the
1999 10-K, and does not include all disclosures required by generally accepted
accounting principles 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 quarter ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
2. ORGANIZATION AND RELATIONSHIPS
The consolidated financial statements include the financial statements of
WebFinancial Corporation and its subsidiaries: WebFinancial Holding Corporation
("Holding"), WebBank ("WebBank"), Praxis Investment Advisers, Inc. ("Praxis"),
WebFinancial Government Lending, Inc. ("Lending"), and Web Film Financial, Inc.
("Film"), collectively referred to as the Company. WebBank is a Utah-chartered
industrial loan corporation, 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.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the interim
consolidated financial statements of the Company and the Notes thereto.
OVERVIEW
WebFinancial Corporation is a holding company headquartered in New York,
NY. As of September 30, 2000, the consolidated Company holds $7.5 million in
cash, has no long term debt, and owns 100% of WebFinancial Holding Corporation
("Holding"), an intermediary holding company, which owns 90% of WebBank, 90% of
Praxis Investment Advisers, Inc. ("Praxis"), 100% of Web Financial Government
Lending Corporation ("Lending"), and 100% of Web Film Financial, Inc. ("Film").
The former President and CEO of Holding is the sole minority stockholder and
owns the other 10% of WebBank and Praxis.
WebBank, located in Salt Lake City, Utah, is a Utah chartered Industrial
Loan Corporation ("ILC") regulated by the Federal Deposit Insurance Corporation
("FDIC") and Utah Department of Financial Institutions and is a member of the
Seattle Federal Home Loan Bank. The ILC charter has the ability to attract FDIC
insured deposits, underwrite insurance, and export Utah's favorable interest
rates and terms to 48 other states. At present, WebBank has one office and has
no plan to open any other offices. Due to the benefits and characteristics of
the Utah ILC charter, WebBank is uniquely positioned to develop loan products
and provide other banking services that could be distributed throughout the
United States. WebBank was purchased in August 1998 from H&R Block.
WebBank's business plan contains three facets: Portfolio Income,
Origination of USDA B&I loans and SBA loans (both as defined below), and
Sourcing Partnerships.
Portfolio Income - WebBank acquires assets for its portfolio that include
loans funded under U.S. Government credit enhancement programs such as USDA
Rural Development Business and Industry Loans ("USDA B&I"), Small Business
Administration loans ("SBA"), and investment grade securities. Deposits are
obtained from both strategic partners and a brokered CD program. These deposits
fund the purchases of the above assets. At present, WebBank has about $24.8
million of assets and $14.8 million of deposits, and believes it will be able to
meet the funding requirements of its business plans for at least the next 12
months.
Origination of USDA B&I loans and SBA loans - These Loan programs are
sponsored by U.S. Government agencies that encourage lending to small businesses
by guaranteeing a portion of the loan (up to 90%) with a full faith and credit
guarantee of the United States Government. In fiscal year 1999, the USDA B&I
loan guarantee program had the authority to guarantee up to $1 billion dollars,
and since 1994 this program has guaranteed about $3.5 billion dollars of B&I
loans. Generally, USDA B&I loans tend to be for amounts less than $10 million,
and WebBank has been able to structure these loans with prepayment penalties,
adjustable rates, and other features to enhance the safety and marketability of
the loans. To date in 2000, WebBank has funded $20.3 million of these loans. In
general, WebBank will seek to sell the guaranteed portions of the loans while
retaining the unguaranteed portions and servicing rights to the loans.
Sourcing Partnerships - Sourcing Partnerships are joint ventures in which
WebBank works with certain specialty loan originators. WebBank's ILC allows the
originator flexibility regarding loan structure, terms and/or conditions. In
general, WebBank and its Sourcing Partner (the "Partner") will jointly agree on
underwriting criteria. The Partner will generally agree contractually to
purchase loans WebBank originates under the program and to directly reimburse
WebBank for any and all costs of origination, including legal, compliance,
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
management oversight, and audit costs. The Partners will generally contribute
marketing, sales, in-depth industry knowledge and an origination network.
WebBank will establish underwriting standards and approve the credit and
originate qualifying loans presented by the Partners. WebBank may resell the
loans to the Partner, thereby minimizing portfolio and credit risk while
securing attractive fees. WebBank believes these arrangements can generate
consistent fee based income streams without any significant risks to WebBank and
with minimal incremental expense to WebBank (since most or all expenses will be
reimbursed). Additionally, the Partners will fund deposits in WebBank in excess
of the daily production of their loan program, giving WebBank the right to
offset any losses against these deposits. At present, WebBank has five Sourcing
Partnerships that are generating loans. WebBank is currently negotiating with
other potential Partners.
During the second quarter of the current year, the Company moved assets
from Lending into WebBank, which will improve administrative efficiency.
On December 31,1999, the Company had net operating loss carry-forwards of
approximately $38 million that are scheduled to expire during the years ending
2010 through 2018. The Company has treated net operating losses incurred prior
to April 28, 1995 (the "Effective Date") in accordance with Section 382(1)(5) of
the Internal Revenue Code. As a result, there is approximately $27 million in
net operating losses incurred prior to the Effective Date as well as $11 million
incurred subsequent to the Effective Date available as carryovers.
At a June 26, 1997 meeting the Company's shareholders approved an amendment
to the Corporation's Certificate of Incorporation to prohibit purchases of more
than 5% of the Company's shares. The purpose of this limitation is to help
assure that the consolidated corporation's substantial tax benefits (in the form
of net operating loss carry-forwards) will continue to be available to offset
future taxable income.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Net income increased by $676,000, comparatively, primarily due to
improvements in net interest income and non interest income.
Net interest income before loan loss provision increased by $185,000. Most
of this increase was due to the origination of over $20 million B&I loans and
the retention of the unguaranteed portion of those loans by WebBank during the
year 2000. A $75,000 increase in loan loss provision reduced the increase in net
interest income after loan loss provision to $110,000.
Non interest income increased by $633,000, primarily from (i) a $298,000
increase in the gain on sale of USDA B&I loans and (ii) increases in sourcing
partnerships with single payment, structured settlement and credit card vendors
that created an additional $461,000 in fee income. Other income decreased by
$126,000 between periods primarily due to a nonrecurring $75,000 gain on
securities sales in 1999.
Non interest expense increased by $46,000 primarily from an increase in
personnel and related expenses of $100,000 and an increase in professional fees
of $97,000. These increases were offset by a decrease in other expense of
$150,000.
The Company did not record any income tax provision in either period due to
prior year tax loss carryforwards.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30,1999
Net income increased by $1.8 million, comparatively, primarily due to
improvements in non interest income.
Non interest income increased by $2.0 million primarily due to (i) a
$621,000 increase in the gain on sale of USDA B&I loans, (ii) a $1.2 million
increase in fees from sourcing partnerships with single payment, structured
settlement and credit card vendors, (iii) and a $428,000 increase in fees for
services provided in securitizing loans.
The Company did not record any income tax provision in either period due to
prior year loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000 and December 31, 1999, the Company's cash and cash
equivalents totaled approximately $7.5 million and $7.3 million, respectively.
Funding currently comes primarily from certificates of deposit obtained
through brokers. WebBank is currently investigating the possibility of
establishing a retail deposit program in order to secure a less expensive and
more dependable source of funds.
Management believes that the Company's current cash and cash equivalent
balances and expected operating cash flows and available credit lines are
adequate to meet its liquidity needs through at least the next 12 months.
The Company continues to actively seek acquisition transactions. There can
be no assurance that the Company will be able to locate or purchase 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.
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 of Form 10-Q 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 quarterly 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 above.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company maintains an investment portfolio and participates in
commercial loans. Both of these activities are subject to specific policies that
are focused on preserving principal, maintaining proper liquidity to meet
operating needs, and maximizing yields.
The Company's operations may be subject to a variety of market risks, the
most material of which is the risk of changing interest rates. Most generally,
interest rate risk is the volatility in financial performance attributable to
changes in market interest rates, which may result in either fluctuation of net
interest income or changes to the economic value of the equity of the Company.
The following discusses certain factors that may affect the Company's
financial results and operations and should be considered in evaluating the
Company.
Interest Rates. The Company's earnings may be impacted by changing interest
rates. Changes in interest rates impact the level of loans, deposits and
investments, the credit profile of existing loans, the rates received on loans
and securities and the rates paid on deposits and borrowings. The Company
attempts to minimize interest rate risk through various means including the
matching of interest rate volatility of assets and liabilities. However,
significant fluctuations in interest rates may have an adverse affect on the
Company's financial condition and results of operations.
Government Regulation and Monetary Policy. The banking industry is subject
to extensive federal and state supervision and regulation. Significant new laws
or changes in existing laws, or repeals of existing laws may cause the Company's
results to differ materially. Further, federal monetary policy, particularly as
implemented through the Federal Reserve System, significantly affects credit
conditions for the Company and a material change in these conditions could have
a material adverse impact on the Company's financial condition and results of
operations.
Competition. The banking and financial services businesses in the Company's
lines of business are highly competitive. The increasingly competitive
environment is a result of changes in regulation, changes in technology and
product delivery systems, and the accelerating pace of consolidation among
financial services providers. The results of the Company may differ if
circumstances affecting the nature or level of competition change.
Credit Quality. A source of risk arises from the possibility that losses
will be sustained because borrowers, guarantors and related parties may fail to
perform in accordance with the terms of their loans. The Company has adopted
underwriting and credit monitoring procedures and credit policies, including the
establishment and review of the allowance for credit losses, that management
believes are appropriate to minimize this risk by assessing the likelihood of
nonperformance, tracking loan performance and diversifying the Company's credit
portfolio. These policies and procedures, however, may not prevent unexpected
losses that could have a material adverse effect on the Company's results.
Non-banking Activities. The Company may expand its operations into new
non-banking activities in 2000. Although the Company has experience in providing
bank-related services, this expertise may not assist us in our expansion into
non-banking activities. As a result, we may be exposed to risks associated with,
among other things, (1) a lack of market and product knowledge or awareness of
other industry related matters and (2) an inability to attract and retain
qualified employees with experience in these non-banking activities.
Year 2000 Compliance. Most of the Company's operations are dependent on the
efficient functioning of the Company's computer systems and software. Computer
system failures or disruption could have a material adverse effect on the
Company's financial condition and results of operations. As of November 3, 2000,
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
WebBank experienced no problems with respect to Year 2000 technology issues.
This does not mean that some problems may not occur in the future.
Proposed Legislation. From time to time, various types of federal and state
legislation have been proposed that could result in additional regulation of,
and modifications of restrictions on, the business of the Company. It cannot be
predicted whether any legislation currently being considered will be adopted or
how such legislation or any other legislation that might be enacted in the
future would affect the business of the Company.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
PART II--OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
In January 2000, a former executive officer and director of the Company's
subsidiary Praxis (the "officer") filed a lawsuit in the Superior Court of the
State of California, County of Napa against the Company, Praxis and Holdings.
The lawsuit alleges that Praxis has breached its employment agreement with the
officer. The lawsuit also asserts claims for interference with contract and
unjust enrichment based upon the purported wrongful termination of the officer's
employment contract with Praxis. The lawsuit seeks damages of an unspecified
amount and compliance by Praxis with the termination pay out provisions in the
officer's employment agreement relating to purchase of the officer's 10%
interest in Praxis and WebBank (both 90% covered subsidiaries of the Company) at
their fair market value. The time for the Company to answer and assert
counterclaims in this matter has not yet expired. The Company and Praxis deny
that Praxis wrongfully terminated the officer's employment and intend to
vigorously defend this matter. The Company does not believe that this lawsuit
will have a material impact on its financial condition, results of operations,
or liquidity.
Other Risks. From time to time, the Company details other risks with
respect to its business and/or financial results in its filings with the
Commission.
Item 2. CHANGES IN SECURITIES.
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the period
covered by this report.
Item 5. OTHER INFORMATION.
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
See exhibit index immediately following the signature page.
(b) Reports on Form 8-K during the quarter
None.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEBFINANCIAL CORPORATION
By /s/ Warren G. Lichtenstein
Warren G. Lichtenstein
President
By /s/ Glen M. Kassan
Glen M. Kassan
Vice President, Chief Financial Officer
Date: November 14, 2000
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
11 Statement Regarding Computation of Net Income Per Share
27 Financial Data Schedule as Part of the Electronic Filing Only
<PAGE>
Exhibit 11
WEBFINANCIAL CORPORATION. AND SUBSIDIARIES
Statement Regarding Computation of Net Income (Loss) Per Share
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Net income (loss) $ 425 $ (1,363)
Shares used in computation:
Weighted average number of common shares and
common share equivalents, basic 4,354 4,381
Common shares and common share equivalents,
fully diluted 4,696 4,381
Net income (loss) per share-basic $ .10 $ (.31)
Net income (loss) per share-diluted $ .09 $ (.31)
</TABLE>
Common stock equivalents (stock options and warrants) of approximately 342
were outstanding during the nine month period ended at September 30, 2000 that
could potentially dilute basic weighted average earnings per share in the future
were included in the computation of diluted earnings per share.
Common stock equivalents (stock options and warrants) of approximately 311
shares were outstanding during the nine month period ended at September 30, 1999
that could potentially dilute basic earnings per share in the future were not
included in the computation of diluted earnings per share.
