UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
--------------------------
Form 10-QSB
Quarterly Report Pursuant of Section 13 or 15(d)
of the Securities Exchange Act of 1934
--------------------------
For the quarterly
period ended:
September 30, 1997
Commission File No. 0-18868
MARATHON FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1560968
(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
4095 VALLEY PIKE
WINCHESTER, VIRGINIA 22602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (540) 869-6600
Indicate by check mark whether the registrant (1) has filed all documents and
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Class Number of Shares Outstanding at
Common Stock 2,055,983 11/7/97
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements are provided at the page numbers
indicated.
Consolidated Statements of Condition as of
September 30, 1997 and December 31, 1996 . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three Months and
the Nine Months Ended September 30, 1997 and 1996 . . . . . . . . 4-5
Consolidated Statements of Changes in
Shareholders Equity for the Nine
Months Ended September 30, 1997 and 1996 . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1997 and 1996 . . . . . . . . 7-8
Notes to Consolidated Financial Statements . . . . . . . . . . . 9-12
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
as of
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS 9/30/97 12/31/96
<S> <C>
Cash and due from banks $ 3 569 364 $ 2 846 434
Securities (fair value: 1997, $ 3,888,314 and
1996, $3,337,690 ) 3 877 980 3 331 209
Federal funds sold 2 044 000 1 656 000
Loans, net 44 567 688 37 409 043
Bank premises and equipment, net 2 292 904 1 587 342
Accrued interest receivable 277 276 212 089
Other real estate 18 123 18 123
Other assets 449 200 226 600
----------- ------------
$57 096 535 $ 47 286 840
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 7 457 499 $ 6 229 844
Interest bearing 41 501 943 34 495 443
----------- ------------
Total deposits $48 959 442 $ 40 725 287
Interest expense payable 87 548 81 764
Accounts payable and accrued expenses 145 421 273 900
Capital lease payable 288 509 315 652
----------- ------------
Total liabilities $49 480 920 $ 41 396 603
----------- ------------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; 20,000,000 shares
authorized; 1997, 2,055,983 shares issued and
outstanding; 1996, 1,863,495 shares issued and
outstanding. $ 2 055 983 $ 1 863 495
Capital surplus 7 815 453 7 045 502
Retained earnings (deficit) (2 256 050) (3 019 267)
Unrealized gain on securities available for sale 229 507
----------- ------------
Total stockholders' equity $ 7 615 615 $ 5 890 237
----------- ------------
$57 096 535 $ 47 286 840
=========== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Nine Months For the Quarter
Ended September 30, Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C>
Interest income:
Interest and fees on loans $3 372 427 $2 613 438 $1 243 951 $ 917 156
Interest on securities held for maturity 51 320 36 710 22 867 12 468
Interest on securities available for sale 64 699 31 788 21 450 13 898
Interest on federal funds sold 91 073 77 736 37 304 45 333
Dividends on securities available for sale 12 262 9 488 4 232 1 952
---------- ---------- ---------- -----------
Total interest income $3 591 781 $2 769 160 $1 329 804 $ 990 807
---------- ---------- ---------- -----------
Interest expense:
Interest on deposits $1 363 566 $1 138 115 $ 496 509 $ 420 397
Interest on leases and mortgage payable 17 885 33 465 5 783 10 918
Interest on fed funds purchased 673 414 - - - -
---------- ---------- ---------- -----------
Total interest expense $1 382 124 $1 171 994 $ 502 292 $ 431 315
----------- ---------- ---------- -----------
Net interest income $2 209 657 $1 597 166 $ 827 512 $ 559 492
Provision for loan losses 133 000 100 000 55 000 27 500
---------- ---------- ---------- -----------
Net interest income after provision for loan loss $2 076 657 $1 497 166 $ 772 512 $ 531 992
---------- ---------- ---------- -----------
Other income:
Service charges on deposit accounts $ 274 184 $ 223 383 $ 106 781 $ 74 380
Commissions and fees 22 482 50 403 7 188 14 994
Other 22 215 11 601 5 809 2 151
---------- --------- ---------- -----------
Total other income $ 318 881 $ 285 387 $ 119 778 $ 91 525
---------- ---------- ---------- -----------
</TABLE>
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
<TABLE>
<CAPTION>
Other expenses:
<S> <C>
Salaries and employee benefits $ 865 172 $ 631 469 $ 324 839 $ 222 938
Net occupancy expense of premises 197 225 101 844 79 337 35 626
Furniture and equipment 84 402 64 429 37 234 23 807
Legal and professional 37 712 31 622 4 290 6 553
Marketing 68 301 48 625 26 702 16 094
Stationary and Supplies 54 881 35 792 23 983 11 898
Postage 42 407 35 911 17 651 10 987
Directors fees 52 250 30 760 17 450 12 035
ATM expense 45 034 25 770 9 853 7 352
Overdraft charge-offs 51 629 17 004 31 215 8 739
Other 271 042 255 577 101 710 71 366
---------- ---------- ---------- -----------
Total other expenses $1 770 055 $1 278 803 $ 674 264 $ 427 395
---------- ---------- ---------- -----------
Income before income taxes $ 625 483 $ 503 750 $ 218 026 $ 196 122
Provision for income taxes expense (benefit) $ (137 734) $ 4 067 $ (50 000) $ - -
---------- ---------- ---------- -----------
Net income $ 763 217 $ 499 683 $ 268 026 $ 196 122
---------- ---------- ---------- -----------
Net income per share $.39 $.38 $.14 $.15
---- ---- ---- ----
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MARATHON FINANCIAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Securities Retained
Common Capital Available Earnings
Stock Surplus for Sale (Deficit)
---------- ---------- -------------- -----------
<S> <C>
Balance, December 31, 1995 $1 306 303 $5 109 908 $ 8 417 $(3 746 878)
Net income-Jan-Sept, 1996 - - - - - - 499 683
Sale of common stock
(567,192 shares), net of
issuance cost, $210,689 567 192 2 058 079 - - - -
Unrealized gain (loss) on
securities available
for sale - - - - (15 484) - -
---------- ---------- ---------- -----------
Balance, September 30, 1996 $1 873 495 $7 167 987 $ (7 067) $(3 247 195)
---------- ---------- ---------- -----------
Balance, December 31, 1996 $1 863 495 $7 045 502 $ 507 $(3 019 267)
Net income-Jan-Sept, 1997 - - - - - - 763 217
Issuance of common stock/exercise
of stock warrants
(192,488 shares) 192 488 769 951 - - - -
Change in unrealized gain (loss) on
securities available
for sale - - - - (278) - -
---------- ---------- ---------- -----------
Balance, September 30, 1997 $2 055 983 $7 815 453 $ 229 $(2 256 050)
---------- ---------- ---------- -----------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 763 217 $ 499 683
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization 30 471 30 702
Depreciation 111 759 62 577
Provision for loan loss 133 000 100 000
Deferred tax (benefit) (150 000) - -
Net discount accretion on securities (8 488) (2 246)
Changes in assets and liabilities:
(Increase) in other assets (72 600) (34 172)
(Increase) in accrued
interest receivables (65 187) (52 044)
Increase (decrease) in accounts payable
and accrued expenses (16 669) 31 256
Increase in interest
expense payable 5 784 22 162
----------- -----------
Net cash provided by operating
activities 731 287 657 918
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and principal payments
on securities held to maturity 1 107 993 559 340
Purchase of securities held to maturity (1 170 539) - -
Purchase of securities available for sale (573 323) (1 121 862)
Proceeds from maturities and principal payments
on securities available for sale 97 308 209 966
Net (increase) in loans (7 291 645) (6 534 877)
Purchase of bank premises and equipment (847 792) (129 864)
----------- ------------
Net cash (used in) investing activities $(8 677 998) $(7 017 297)
----------- -----------
</TABLE>
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW
accounts, and savings accounts $4 464 954 $ 711 491
Net increase in certificates of deposits 3 769 201 6 803 220
Principal payments on mortgage payable (17 802)
Principal payments on capital lease payable (27 143) (21 671)
Net proceeds from issuance of common stock 962 439 2 625 271
Cash dividends paid (111 810) - -
---------- -------------
Net cash provided by financing activities $9 057 641 $ 10 100 509
---------- -------------
Increase in cash and cash equivalents $1 110 930 $ 3 741 130
Beginning 4 502 434 3 856 876
---------- -------------
Ending $5 613 364 7 598 006
========== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $1 376 340 $ 1 149 832
========== =============
Income Taxes $ 12 266 $ 4 067
========== =============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
ACTIVITIES
Unrealized gain (loss) on securities
available for sale $ (278) $ (15 484)
========== =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MARATHON FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as
of September 30, 1997 and December 31, 1996, and the result of operations
and cash flows for the nine months ended September 30, 1997 and 1996. The
statements should be read in conjunction with the Notes to Consolidated
Financial Statements included in the Company's Annual Report for the year
ended December 31, 1996.
2. The results of operations for the nine month period ended September 30,
1997 and 1996, are not necessarily indicative of the results to be expected
for the full year.
3. Securities held to maturity and available for sale as of September 30, 1997
and December 31, 1996, are:
09/30/97 12/31/96
Amortized Amortized
Held to Maturity Cost Cost
----------- ----------
US treasuries & obligations of
US government corporations & agencies $1 451 312 $1 292 094
Obligations of state and political subdivisions 251 082 251 227
Corporate securities - - 99 952
Mortgage backed securities - - 7 986
---------- ----------
$1 702 394 $1 651 259
========== ==========
Fair Fair
Value Value
---------- ----------
US treasuries & obligations of
US government corporations & agencies $1 456 841 $1 291 573
Obligations of state and political subdivisions 257 410 258 165
Corporate securities - - 100 000
Mortgage backed securities - - 8 002
---------- ----------
$1 714 251 $1 657 740
========== ==========
<PAGE> 9/30/97 12/31/96
Amortized Amortized
Available for Sale Cost Cost
---------- ----------
US treasury securities & obligations
of US government corporation & agencies $1 752 009 $1 346 663
Mortgage backed securities 32 299 34 930
Other 391 050 297 850
---------- ----------
$2 175 358 $1 679 443
========== ==========
Fair Fair
Value Value
---------- ----------
US treasury securities & obligations
of US government corporations & agencies $1 750 157 $1 345 184
Mortgage backed securities 34 379 36 916
Other 391 050 297 850
---------- ----------
$2 175 586 $1 679 950
========== ==========
4. The consolidated entity's loan portfolio is composed of the following:
9/30/97 12/31/96
---------- ----------
Commercial $21 993 098 $18 719 817
Real estate-mortgage 7 909 009 6 882 004
Real estate-construction 5 297 592 3 886 066
Installment loans to individuals 10 005 489 8 424 170
----------- -----------
$45 205 188 $37 912 057
Less: allowance for loan losses 637 500 503 014
----------- -----------
Loans, net $44 567 688 $37 409 043
=========== ===========
<PAGE>
5. Allowance for Loan Losses: 9/30/97 12/31/96
-------- --------
Balance, beginning $503 014 $393 139
Provision charged to operating expense 133 000 165 000
Recoveries 25 530 6 007
Loan losses charged to the allowance (24 044) (61 132)
-------- --------
Balance, ending $637 500 $503 014
======== ========
Nonaccrual loans which were excluded from impaired loan disclosure under
FASB 114 amounted to $280,730 on September 30, 1997 and $71,515 on December
31, 1996.
6. Weighted average shares outstanding computation
The weighted average number of shares outstanding for the nine-month
periods ended September 30, 1997 and 1996 were 1,915,851 shares and
1,308,373 shares respectively.
7. Stock Options Outstanding
The Corporation has granted 1,500 stock options to the Corporation's chief
executive officer pursuant to his employment agreement with the Corporation. The
stock options are exercisable at $5.00 per share. As of September 31, 1997, all
1,500 stock options were outstanding.
In August 1996, the Corporation's Board of Directors approved creation of the
1996 Long-Term Incentive Plan, which provides stock options to the employees and
directors of the Corporation. Awards have been approved under such plan in the
aggregate amount of 141,875 shares, 65,625 of which will be exercisable
immediately. This plan was approved by the shareholders at the May 6, 1997
meeting.
8. New Accounting Pronouncements
FASB Statement No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities", was issued in June 1996 and
establishes, among other things, new criteria for determining whether a transfer
of financial assets in exchange for cash or other consideration should be
accounted for as a sale or as a pledge of collateral in a secured borrowing.
Statement 125 also establishes new accounting requirements for pledged
collateral. As issued, Statement 125 is effective for all transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 1996.
<PAGE>
FASB Statement No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125", defers for one year the effective date (a) paragraph 15
of Statement 125 and (b) for repurchase agreement, dollar-roll, securities
lending, or similar transactions, of paragraph 9-12 and 237 (b) of Statement
125.
FASB Statement No 128, "Earnings per Share", was issued in February 1997 and
establishes standards for computing and presenting earnings per share (EPS) and
applies to entities with publicly held common stock or potential common stock.
This Statement simplifies the standards for computing earnings per share
previously found in APB Opinion No 15, "Earnings per Share", and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPOS computation. This Statement is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods.
FASB Statement No. 129, "Disclosure of Information About Capital Structure", was
issued in February 1997 and establishes standards for disclosing information
about an entity's capital structure. It applies to all entities. This Statement
continues the previous requirements to disclose certain information about an
entity's capital structure found in APB Opinions No. 10, "Omnibus Opinion -
1966, and No. 15, Earnings per Share", and FASB Statement No. 47, "Disclosure of
Long-Term Obligations", for entities that were subject to the requirements of
those standards. This Statement is effective for financial statements for
periods ending after December 15, 1997.
FASB Statement No. 130, "Reporting Comprehensive Income", was issued in June
1997 and establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains, and losses) in full set of
general- purpose financial statements. This Statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.
This Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. This Statement is effective for fiscal years beginning after
December 15, 1997.
The effects of these Statements on the Bank's financial statements are not
expected to be material.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Total Assets
Total assets for the nine months ending September 30, 1997,
increased $9,809,695 or 20.7% since December 31, 1996. This
increase in total assets resulted from $7,158,645 increase in
loans or 19.1%, an increase in securities of $546,771 or 16.4%,
and an increase of $722,930 or 25.4% in cash and due from
banks. This equates to an increase in earning assets of
$8,093,416 or 19.1% for the nine months ending September 30,
1997. The increase in bank premises and equipment of $705,562
which reflects a 44.4% increase since December 31, 1996 is the
result of the Bank opening two new branches and a major
addition to the Main Office during the first nine months. This
expansion was necessary to meet our customer needs.
Allowance for Loan Losses
The allowance for loan losses, as of September 30, 1997, was
$637,500. This is an increase of $134,486 or 26.7% since
December 31, 1996. This gives the bank a 1.41% allowance for
loan losses to total gross loans. Management has completed an
analysis on the reserve and feels the reserve is adequate.
Liabilities
Total deposits for the nine months ending September 30, 1997,
increased $8,234,155 or 20.2% since December 31, 1996.
Non-interest bearing deposits increased by $1,227,655 or 19.7%
and interest bearing deposits increased by $7,006,500 or 20.3%.
<PAGE>
Stockholders' Equity
Total equity has increased by $1,725,378 or 29.3% since
December 31, 1996. The increase was due to a nine month profit
of $763,217. Stock warrants totaling $962,439 were also
exercised during the nine months. This gives a primary capital
to assets ratio of 13.3%.
Interest Income
Interest income totaled $3,591,781 for the nine months ending
September 30, 1997, $822,621 or 29.7% higher than the nine
months ending September 30, 1996. This is a direct result of
the increase in our earning assets, which increased the
interest and fee income.
Interest Expense
Total interest expense for the nine months ending September 30,
1997 was $1,382,124, $210,130 or 17.9% higher than the nine
months ending September 30, 1996. Interest on deposits
increased by $225,451 or 19.8% over the same period in 1996.
This was the result of an overall increase in deposits.
Mortgage and lease interest for the nine months was $17,885 a
decrease of $15,580 or 46.6% from the same period in 1996. The
mortgage on the main bank was paid in full during the fourth
quarter of 1996.
Net Interest Income
Net interest income for the nine months ending September 30,
1997 was $2,209,657 $612,491 or 38.3% higher than the nine
months ending September 30, 1996. This was the result of an
increase in our earning assets.
<PAGE>
Other Income
Total other income for the nine months ending September 30,
1997 was $318,881, $33,494 or 11.7% higher than the same period
in 1996. This is a result of our increase in the demand deposit
area, which has improved our service charge income.
Other Expenses
Total other expenses for the nine months ending September 30,
1997 were $1,770,055, $491,252 or 38.4% higher than the nine
months ending September 30, 1996. Salary expense increased
$233,703 or 37.0%, occupancy expense climbed $95,381 or 93.7%,
stationery and supplies expense increased by $19,089 or 53.3%,
marketing expense jumped $19,676 or 40.5%, and legal and
professional expense rose to $37,712, a $6,090 increase or
19.3% above the same period in 1996. Directors fees were
$52,250, an increase of 69.9% due to a change in the amounts
paid to Directors per meeting. Overdraft charge-offs reflect an
increase of $34,625 or 203.6% as a result of a bad check
returned that was previously taken on deposit. ATM expenses
climbed $19,264 or 74.8%. This cost reflects the seven
additional ATM's placed in service during the first nine months
of 1997. The net increase in other expenses is due mainly to
the expansion of our facilities and the additional staffing
that this growth required. During the latter part of 1996 one
of the offices moved into a permanent facility from a mobile
unit. In addition, the bank opened two new branches during
1997, one in June and the second in September. The bank is also
undergoing a major addition to the main office which will
double the office space at that location. This addition is
expected to be completed by early 1998.
<PAGE>
Net Income
Net income for the nine months ending September 30, 1997 was
$763,217, compared to $499,683 in the same period in 1996. This
is an increase of $263,534 or 52.7% over the same period of
1996.
Liquidity and Capital Resources
The liquidity position of the Bank is less than it peer's
because of a loan to deposit ratio of 92.3%. Management is
maximizing earning assets, which exceed policy guidelines to
improve profitability. This policy exception has been approved
by Management and the Board of Directors. The core deposits of
the bank continue to increase.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Change in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession - N/A
3. (i) Articles of incorporation. Incorporated by
reference as Exhibit 3(i) to the Corporation's
Registration Statement on Form S-1 filed on August
26, 1992 (File No. 33-51366).
(ii) By-laws. Incorporated by reference as Exhibit
3(ii) to the Corporation's Registration Statement on
Form S-1 filed on August 26, 1992 (File No.
33-51366).
4. Instruments defining the rights of security holders,
including Indentures - N/A
<PAGE>
10. Material contracts
Exhibit 10.1 401(k) Plan of Marathon Financial
Corporation, incorporated herein by
reference as Exhibit 10.1 to the
Corporation's Registration Statement on
Form S-1 filed August 26, 1992 (File No.
33-51366).
Exhibit 10.2 Employment Agreement between The Marathon
Bank and Donald L. Unger, incorporated
herein by reference as Exhibit 10.2 to
the Corporation's Registration Statement
on Form S-1 filed on August 26, 1992
(File No. 33-51366).
Exhibit 10.3 Lease between The Marathon Bank and Post
Office Plaza, L. C. for the branch office
at 300 Warren Avenue, Front Royal,
Virginia, incorporated herein by
reference as Exhibit 10.3 to the
Corporation's Registration Statement on
Form S-1 filed July 26, 1996 (File No.
333-08995).
Exhibit 10.4 Lease between The Marathon Bank and the
Lessors, Rogers M. Fred and Clifton G.
Stoneburner for the branch office at 1041
Berryville Avenue, Winchester, Virginia,
incorporated herein by reference to the
Corporation's Annual Report on Form 10-K
for the year ended December 31, 1995
(File No. 0-18868).
Exhibit 10.5 Lease between The Marathon Bank and the
lessor, H. K. Benham, III for the branch
office at 1447 North Frederick Pike,
Winchester, Virginia.
Exhibit 10.6 1996 Long-Term Incentive Plan
incorporated herein by reference as to
the Corporation's Proxy Statement for
1997 Annual Meeting of Stockholders filed
April 7, 1997.
11. Statement re:Computation of Per Share Earnings - See
attached
15. Letter re:unaudited interim financial information - N/A
18. Letter re:change in accounting principles - N/A
19. Report furnished to security holders - N/A
<PAGE>
22. Published report regarding matters submitted to vote of
security Holders - N/A
23. Consents of experts and counsel - N/A
24. Power of attorney - N/A
27. Financial Data Schedule - N/A
99. Additional Exhibits - None
(b) There were no Form 8-K's filed during the quarter.
<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.
MARATHON FINANCIAL CORPORATION
DATE: September 30, 1997 /s/ DONALD L. UNGER
-------------------------------------
DONALD L. UNGER
PRINCIPAL EXECUTIVE OFFICER
DATE: September 30, 1997 /s/ FREDERICK A. BOARD
-------------------------------------
FREDERICK A. BOARD
PRINCIPAL FINANCIAL OFFICER
EXHIBIT 11
MARATHON FINANCIAL CORPORATION
Computation of Weighted Average Shares Outstanding and Earnings Per Share
Shares Outstanding End of Month
1997
----
January 1 863 495
February 1 863 495
March 1 865 495
April 1 868 495
May 1 888 167
June 2 055 983
July 2 055 983
August 2 055 983
September 2 055 983
-----------------
17 573 079
Divided by 9 months
Weighted Shares Outstanding 1,952,564
=================
Net Income $763,217
=================
Net Income Per Share $.39
=================
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,569,364
<INT-BEARING-DEPOSITS> 41,501,943
<FED-FUNDS-SOLD> 2,044,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,175,586
<INVESTMENTS-CARRYING> 1,702,394
<INVESTMENTS-MARKET> 1,714,251
<LOANS> 45,205,188
<ALLOWANCE> 637,500
<TOTAL-ASSETS> 57,096,535
<DEPOSITS> 48,959,442
<SHORT-TERM> 0
<LIABILITIES-OTHER> 232,969
<LONG-TERM> 288,509
0
0
<COMMON> 2,055,983
<OTHER-SE> 5,559,632
<TOTAL-LIABILITIES-AND-EQUITY> 57,096,535
<INTEREST-LOAN> 3,372,427
<INTEREST-INVEST> 128,281
<INTEREST-OTHER> 91,073
<INTEREST-TOTAL> 3,591,781
<INTEREST-DEPOSIT> 1,363,566
<INTEREST-EXPENSE> 1,382,124
<INTEREST-INCOME-NET> 2,209,657
<LOAN-LOSSES> 133,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,770,055
<INCOME-PRETAX> 625,483
<INCOME-PRE-EXTRAORDINARY> 763,217
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 763,217
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
<YIELD-ACTUAL> 5.78
<LOANS-NON> 280,730
<LOANS-PAST> 192,164
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 472,894
<ALLOWANCE-OPEN> 503,014
<CHARGE-OFFS> 24,044
<RECOVERIES> 25,530
<ALLOWANCE-CLOSE> 637,500
<ALLOWANCE-DOMESTIC> 250,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 387,500
</TABLE>
