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 June 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 56-2043000
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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 June 30, 2000
Common Stock, par value $.001 4,354,280 Shares
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
PART 1--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Statements of Financial Condition
June 30, 2000 and December 31, 1999 2
Consolidated Statements of Operations
for the three months ended June 30, 2000 and 1999 4
Consolidated Statements of Operations
for the six months ended June 30, 2000 and 1999 6
Consolidated Statements of Cash Flow
for the six months ended June 30, 2000 and 1999 8
Notes to Consolidated Financial Statements 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II--OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
<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>
June 30, 2000 December 31, 1999
------------- -----------------
(unaudited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 17,772 $ 7,266
Investment securities
Held-to-maturity (estimated fair value $37
at June 30, 2000 and December 31, 1999) 35 37
Available-for-sale 884 1,075
------------- ------------
Total investment securities 919 1,112
Loans, net of deferred premium 15,587 10,238
Less allowance for loan loss 553 276
------------- ------------
Loans, net 15,034 9,962
Accounts receivable - 14
Prepaid expense 9 151
Premises and equipment,
net of accumulated depreciation and amortization 122 89
Accrued interest receivable 343 163
Goodwill, net of accumulated
amortization of $217 and $158 1,557 1,616
Other assets 839 454
------------- ------------
$ 36,595 $ 20,827
============= ============
</TABLE>
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (continued)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
(unaudited)
Liabilities and Stockholders' Equity
<S> <C> <C>
Deposits:
Non interest-bearing demand $ 252 $ 250
Interest-bearing time certificates 20,127 4,635
------------- ------------
Total deposits 20,379 4,885
Short term borrowing -- 1,100
Income taxes payable 17 17
Accounts payable and accrued liabilities 1,910 933
Servicing liability 141 --
------------- ------------
Total liabilities before minority interests 22,447 6,935
Commitments and contingencies -- --
Minority interests 527 457
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 4,310,192 shares issued
and outstanding at June 30, 2000 and
December 31, 1999, respectively 4 4
Paid-in capital 36,603 36,578
Unearned compensation (65) (65)
Accumulated deficit (22,921) (23,082)
------------- ------------
Total stockholders' equity 13,621 13,435
------------- ------------
$ 36,595 $ 20,827
============= ============
</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
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Interest and fees on commercial loans $ 388 $ 61
Interest on cash and cash equivalents 126 129
Interest on investment securities 10 44
---------------- --------------
Total interest income 524 234
Interest expense 213 34
---------------- --------------
Net interest income before loan loss provision 311 200
Loan loss provision 200 30
---------------- --------------
Net interest income after loan loss provision 111 170
---------------- --------------
Non interest income:
Gain on sale of commercial loans 560 64
Fee income on single payment loans 297 --
Fee income on structured settlements 88 --
Fee and servicing income on credit cards 60 --
Premiums earned on sale of loans 7 --
Other income 382 109
---------------- --------------
Total non interest income 1,394 173
Non interest expenses:
Salaries 468 390
Occupancy 53 50
Professional fees 151 44
Goodwill amortization 30 33
Other 306 341
---------------- --------------
Total non interest expenses 1,008 858
Income (loss) before minority interests 497 (515)
---------------- --------------
(Income) loss attributable to minority interests (48) 36
---------------- --------------
Net income (loss) $ 449 $ (479)
================ ==============
</TABLE>
(continued)
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (continued)
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Basic net income (loss) per share $ .10 $ (.11)
Diluted net income (loss) per share $ .10 $ (.11)
Weighted average number of common shares and
common share equivalents, basic 4,354 4,408
Weighted average number of common shares and
common share equivalents, fully diluted 4,368 4,408
</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 Six Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Interest and fees on commercial loans $ 682 $ 98
Interest on cash and cash equivalents 223 246
Interest on investment securities 51 80
---------------- --------------
Total interest income 956 424
Interest expense 306 49
---------------- --------------
Net interest income before loan loss provision 650 375
Loan loss provision 265 56
---------------- --------------
Net interest income after loan loss provision 385 319
---------------- --------------
Non interest income:
Gain on sale of commercial loans 560 236
Fee income on single payment loans 509 --
Fee income on structured settlements 164 --
Fee and servicing income on credit cards 110 --
Premiums earned on sale of loans 29 --
Other income 382 124
---------------- --------------
Total non interest income 1,754 360
Non interest expenses:
Salaries 941 803
Occupancy 94 101
Professional fees 315 97
Goodwill amortization 59 65
Other 534 665
---------------- --------------
Total non interest expenses 1,943 1,731
Income (loss) before minority interests 196 (1,052)
---------------- --------------
(Income) loss attributable to minority interests (35) 79
----------------- --------------
Net income (loss) $ 161 $ (973)
================ ==============
</TABLE>
(continued)
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)(continued)
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Basic net income (loss) per share $ .04 $ (.22)
Diluted net income (loss) per share $ .04 $ (.22)
Weighted average number of common shares and
common share equivalents, basic 4,349 4,408
Weighted average number of common shares and
common share equivalents, fully diluted 4,429 4,408
</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 Six For the Six
Months Ended Months Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 161 $ (973)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Minority interest 35 (79)
Depreciation and amortization 28 32
Common stock granted in lieu of cash 25 23
Gain on sale of commercial loan 560 (236)
Loan loss provision 265 56
Amortization of loan premiums -- 16
Amortization of servicing asset 33 --
Amortization of goodwill 59 65
Amortization of deferred gains on sale of loans 5 --
Amortization of premiums for available-for-sale securities -- 54
Amortization of premiums for held-to-maturity securities -- 1
Cash restricted in escrow -- 1,686
Net changes in:
Accounts receivable 14 --
Prepaid expenses 142 (10)
Accrued interest receivable (180) (22)
Other assets (385) (112)
Accounts payable and accrued expenses 1,085 214
------------ ------------
Net cash provided by operating activities 727 715
Cash flows from investing activities:
Principal payments received on available-for-sale securities -- 539
Principal payments received on loans -- 40
Principal payments received on held to maturity securities 219 --
Purchase of available-for-sale securities (26) (204)
Purchase of held-to-maturity securities -- (41)
Purchase of property and equipment (61) (6)
Reduction in minority interest 35 --
Net increase in loans (4,782) (2,361)
------------ ------------
Net cash used in investing activities (4,615) (2,033)
Cash flows provided by financing activities-
Net increase in deposits 15,494 2,550
Stock options exercised -- 417
Net decrease in line of credit (1,100) --
------------ ------------
Net cash provided by financing activities 14,394 2,967
</TABLE>
(continued)
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (continued)
(Amounts in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Net increase in cash and cash equivalents 10,506 1,649
Cash and cash equivalents at beginning of period 7,266 8,681
------------ ------------
Cash and cash equivalents at end of period $ 17,772 $ 10,330
============ ============
Supplemental disclosure of additional cash activities:
Cash paid for interest $ 213 $ 13
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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 June 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.
The Company has received approval of the Department of Financial
Institutions of the State of Utah to cause Lending to become a direct subsidiary
of WebBank and that transaction is expected to be completed in 2000.
<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 June 30, 2000 the consolidated Company holds $17.772 million in cash,
has no long term debt, and owns 100% of WebFinancial Holding Corporation
("Holding"), an intermediary holding company, which owns 92.8% 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 7.2% of WebBank and 10% of 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 has recently become 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 is acquiring 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 accessed
from strategic partners and certificates of deposit ("CD's") acquired through a
brokered CD program fund the purchases of these assets. At present, WebBank has
about $30.1 million of assets and $20.9 million of deposits, and believes it
will be able to grow its asset base to approximately $70 million without any
additional equity.
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 $17.5 million of these loans, and
has signed commitment letters for approximately $5.2 million of additional
loans. In general, WebBank will 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 ("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,
management oversight, and audit costs. WebBank's Partners will generally
contribute marketing, sales, in-depth industry knowledge and an origination
network. WebBank will establish underwriting standards and approve the credit
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
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 or
depositors and with minimal incremental expense to WebBank (since all expenses
will be reimbursed). Additionally, the Partners will place a deposit in WebBank
in excess of the daily production of their loan program, with WebBank's 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 specialty loan and credit card issuers.
During the current quarter 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 the 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 June 30, 2000 Compared to Three Months Ended June 30, 1999
Noninterest income increased by $1.221 million, primarily from (i) a
$500,000 improvement in the gain on sale of USDA B&I loans (ii) increases in
sourcing partnerships with single payment, structured settlement and credit card
vendors that created an additional $365,000 increase in fee income, and (iii)
fees for services provided in securitizing loans for Lending generated an
additional $382,000 in noninterest income.
Noninterest expense increased by $150,000 primarily from increased
personnel and related expenses of $78,000. Increases in loan production costs
and professional fees made up most of the remaining increase.
Net interest income before loan loss provision increased by $111,000 and a
$170,000 increase in loan loss provision resulted in a $59,000 reduction in net
interest income. Because WebBank sells the major portion of loans originated,
net interest income does not grow in proportion to the volume of loans produced.
The Company did not book any income tax provision in either period due to
prior year loss carryforwards.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Noninterest income increased by $1.394 million primarily due to a $324,000
increase in the gain on sale of USDA B&I loans, a $701,000 increase in fees from
sourcing partnerships with single payment, structured settlement and credit card
vendors, and a $382,000 increase in fees for services provided in securitizing
loans.
Noninterest expense increased by $212,000 primarily from increased
personnel expenses of $138,000 and professional fees of $218,000 offset by the
elimination of administrative expense generated by the closing of the operations
of Praxis during the first quarter of 2000.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Net interest income before loan loss provision increased by $275,000 and
there was a $209,000 increase in loan loss provision resulting in only an
$66,000 increase in net interest income. Because WebBank sells the major portion
of loans originated, net interest income does not grow in proportion to the
volume of loans produced.
The Company did not book any income tax provision in either period due to
prior year loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000 and December 31, 1999, the Company's cash and cash
equivalents totaled approximately $17,772,000 and $7,266,000 respectively. The
relatively large balance at June 30, 2000 was due to loan sale proceeds held
until reinvested in US Government securities in early July.
Funding currently comes from brokered certificates of deposit. 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 the next year.
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.
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 which may affect the Company's
financial results and operations and should be considered in evaluating the
Company.
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Interest Rates. The Company's earnings are 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
anticipates that interest rates may continue to increase should the Federal
Reserve Board continue to raise rates. 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 August 10, 2000,
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
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See exhibit index immediately following the signature page.
(b) Reports in Form 8-K
A current report on Form 8-K was filed as of May 4, 2000.
A current report on Form 8-K/A was filed as of May 12, 2000.
<PAGE>
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: August 15, 2000
<PAGE>
WEBFINANCIAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
11 Statement Regarding Computation of Net Income Per Share
16.1 Current report on form 8K filed May 4, 2000 reporting the change in its
certified public accountants.
16.2 Current report on form 8K/A filed May 12, 2000 reporting the change in
its certified public accountants.
27 Financial Data Schedule as Part of the Electronic Filing Only
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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 Six Months Ended
June 30, 2000 June 30, 1999
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<S> <C> <C>
Net income (loss) $ 161 $ (973)
Shares used in computation:
Weighted average number of common shares and
common share equivalents, basic 4,349 4,408
Common shares and common share equivalents,
fully diluted 4,429 4,408
Net income (loss) per share-basic $ .04 $ (.22)
Net income (loss) per share-diluted $ .04 $ (.22)
</TABLE>
