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:
June 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 (I.R.S. employer
incorporation or organization) Identification no.)
4095 VALLEY PIKE
WINCHESTER, VIRGINIA 22602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, (540) 869-6600
including area code
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 8/08/97
<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
June 30, 1997 and December 31, 1996 . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Three Months and
the Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . 4-5
Consolidated Statements of Changes in
Shareholders Equity for the Six
Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1997 and 1996 . . . . . . . . . 7-8
Notes to Consolidated Financial Statements . . . . . . . . . . 9-12
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
as of
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS 6/30/97 12/31/96
-------- ---------
<S> <C>
Cash and due from banks $ 3 659 922 $ 2 846 434
Securities (fair value: 1997, $3,057,481 and
1996, $3,337,690) 3 054 217 3 331 209
Federal funds sold 2 743 000 1 656 000
Loans, net 41 745 025 37 409 043
Bank premises and equipment, net 2 056 855 1 587 342
Accrued interest receivable 237 650 212 089
Other real estate 18 123 18 123
Other assets 452 408 226 600
------------ ------------
$53 967 200 $47 286 840
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 6 625 618 $ 6 229 844
Interest bearing 39 489 841 34 495 443
---------- ------------
Total deposits $46 115 459 $40 725 287
Interest expense payable 80 099 81 764
Accounts payable and accrued expenses 129 837 273 900
Capital lease payable 297 717 315 652
------------- ------------
Total liabilities $46 623 112 $41 396 603
============= ============
STOCKHOLDERS' EQUITY
Preferred stock, Series A, 5% non-cumulative, no par
value; 1,000,000 shares authorized; no shares
issued and outstanding $ - - $ - -
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) (2 524 076) (3 019 267)
Unrealized gain (loss) on securities available for sale (3 272) 507
------------ ------------
Total stockholders' equity $ 7 344 088 $ 5 890 237
------------ ------------
$53 967 200 $47 286 840
============= ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Six Months For the Quarter
Ended June 30, Ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C>
Interest income:
Interest and fees on loans $2 128 476 $1 696 282 $ 1 109 560 $ 874 244
Interest on securities held for
maturity 28 453 24 242 10 773 7 892
Interest on securities available
for sale 43 249 17 890 21 551
Interest on federal funds sold 53 769 32 403 36 995 20 051
Dividends on securities available
for sale 8 030 7 536 5 352 20 278
---------- --------- ----------- -----------
Total interest income $2 261 977 $1 778 353 $ 1 184 231 $ 922 465
---------- ---------- ----------- -----------
Interest expense:
Interest on deposits $ 867 057 $ 717 718 $ 450 734 $ 373 343
Interest on leases and
mortgage payable 12 102 22 547 5 976 11 157
Interest on fed funds purchased 673 414 374
---------- ---------- ----------- -----------
Total interest expense $ 879 832 $ 740 679 $ 456 710 $ 384 874
---------- ---------- ----------- -----------
Net interest income $1 382 145 $1 037 674 $ 727 521 $ 537 591
Provision for loan losses 78 000 72 500 43 000 42 500
---------- ---------- ----------- -----------
Net interest income after
provision for loan loss $1 304 145 $ 965 174 $ 684 521 $ 495 091
---------- --------- ----------- -----------
Other income:
Service charges on
deposit accounts $ 167 403 $ 149 003 $ 93 164 $ 82 227
Commissions and fees 15 294 35 409 7 595 19 014
Other 16 406 9 450 6 295 7 791
---------- ---------- ----------- -----------
Total other income $ 199 103 $ 193 862 $ 107 054 $ 109 032
---------- ---------- ----------- -----------
</TABLE>
<PAGE>
MARATHON FINANCIAL CORPORATION
(continued)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S> <C>
Other expenses:
Salaries and employee benefits $ 540 333 $ 408 531 $ 286 848 $ 205 029
Net occupancy expense of
premises 117 888 65 756 65 005 30 566
Furniture and equipment 47 168 56 186 26 596 38 672
Legal and professional 33 422 25 069 19 282 6 715
Stationary and supplies 30 898 23 894 16 540 7 849
Postage 24 756 24 924 14 029 13 410
Marketing 41 599 32 531 26 996 24 451
Directors' Fees 34 800 18 725 17 850 10 200
ATM Expense 35 181 18 417 15 098 9 589
Overdraft Charge-offs 20 414 8 265 7 980 4 680
Other 169 332 169 110 83 726 85 950
----------- ---------- ---------- -----------
Total other expenses $ 1 095 791 $ 851 408 $ 579 950 $ 437 111
----------- ---------- ---------- -----------
Income before income taxes $ 407 457 $ 307 628 $ 211 625 $ 167 012
Provision for income taxes
expense (benefit) $ (87 734) $ 4 066 $ (42 713) $ 4 066
----------- ---------- ---------- -----------
Net income $ 495 191 $ 303 562 $ 254 338 $ 162 946
=========== ========== ========== ===========
Net income per share $ .26 $ .23 $ .13 $ .12
=========== ========== ========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MARATHON FINANCIAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 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 - Jun. 1996 - - - - - - 303 562
Change in unrealized gain
(loss) on securities
available for sale - - - - (18 352) - -
---------- ---------- ---------- -----------
Balance, June 30, 1996 $1 306 303 $5 109 908 $ (9 935) $(3 443 316)
========== ========== ========== ===========
Balance, December 31, 1996 $1 863 495 $7 045 502 $ (507) $(3 019 267)
Net income - Jan - Jun. 1997 - - - - - - 495 191
Issuance of common stock/
exercise of stock warrants
(192,488) 192 488 769 951 - - - -
Change in unrealized gain
(loss) on securities
available for sale - - - - (3 779) - -
---------- ---------- ---------- -----------
Balance, June 30, 1997 $2 055 983 $7 815 453 $ (3 272) $(2 524 076)
========== ========== ========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MARATHON FINANCIAL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 495 191 $ 303 562
Adjustments to reconcile net income
to net cash provided by
operating activities:
Amortization 19 097 5 451
Depreciation 64 499 56 820
Net discount accretion on securities (7 605) (1 228)
Provision for loan loss 78 000 72 500
Deferred tax (benefit) (100 000) - -
Changes in assets and liabilities:
(Increase) decrease in other assets (125 808) (251 322)
(Increase) decrease in accrued
interest receivable (25 561) (40 108)
Increase (decrease) in accounts payable
and accrued expenses (32 253) 27 862
Increase (decrease) in interest
expense payable (1 666) 12 949
---------- -----------
Net cash provided by operating activities $ 363 894 $ 186 486
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and principal
payments on securities held to maturity $ 1 104 337 $ 559 340
Proceeds from principal payments on
securities available for sale - - 204 087
Purchase of securities held to maturity (752 969) (299 221)
Purchase of securities available for sale (70 550) (473 203)
Net (increase) in loans (4 413 982) (2 894 659)
Purchase of bank premises and equipment (553 109) (96 281)
----------- -----------
Net cash used in investing activities $(4 686 273) $(2 999 937)
----------- -----------
</TABLE>
<PAGE>
MARATHON FINANCIAL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Six Months Ended June 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 $2 545 338 $1 055 295
Net increase in certificates of deposits 2 844 835 4 188 690
Cash paid in lieu of fractional shares - - (3 209)
Principal payments on mortgage payable - - (11 757)
Principal payments on capital lease payable (17 935) (14 322)
Cash dividends paid (111 810) - -
Proceeds from issuance of common stock 962 439 - -
---------- ----------
Net cash provided by financing activities $6 222 867 $5 214 697
---------- ----------
Increase in cash and cash equivalents $1 900 488 $2 401 246
Beginning 4 502 434 3 856 876
---------- ----------
Ending $6 402 922 $6 258 122
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Payments for:
Interest $ 881 498 $ 727 730
========== ==========
Income taxes $ 12 266 $ 4 066
========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
Unrealized (loss) on securities available for sale $ (3 779) $ (18 352)
========== ==========
</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 June 30, 1997 and December 31, 1996, and the result of operations and
cash flows for the six months ended June 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 six month period ended June 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 June 30, 1997, and
December 31, 1996, are:
June 30, 1997 December 31, 1996
Amortized Amortized
Cost Cost
------------- -----------------
Held to Maturity
- ----------------
US treasuries & obligations of
US government corporations &
agencies $1 051 378 $1 292 094
Obligations of state and political
subdivisions 251 130 251 227
Corporate securities - - 99 952
Mortgage backed securities - - 7 986
---------- ----------
$1 302 508 $1 651 259
========== ==========
Fair Fair
Value Value
----- -----
US treasuries & obligations of
US government corporations &
agencies $1 050 541 $1 291 573
Obligations of state and political
subdivisions 255 231 258 165
Corporate securities - - 100 000
Mortgage backed securities - - 8 002
---------- ----------
$1 305 772 $1 657 740
========== ==========
<PAGE>
June 30, 1997 December 31, 1996
Amortized Amortized
Cost Cost
------------- -----------------
Available for Sale
- ------------------
Obligations of US government
corporations & agencies $1 347 998 $1 346 663
Mortgage backed securities 33 583 34 930
Other 373 400 297 850
---------- ----------
$1 754 981 $1 679 443
========== ==========
Fair Fair
Value Value
----- -----
Obligations of US government
corporations & agencies $1 342 833 $1 345 184
Mortgage backed securities 35 476 36 916
Other 373 400 297 850
---------- ----------
$1 751 709 $1 679 950
========== ==========
4. The consolidated entity's loan portfolio is composed of the following:
June 30, 1997 December 31, 1996
------------- -----------------
Commercial $20 169 010 $18 719 817
Real estate-mortgage 8 417 656 6 882 004
Real estate-construction 4 325 433 3 886 066
Installment loans to individuals 9 406 319 8 424 170
----------- -----------
$42 318 418 $37 912 057
Less: allowance for loan losses 573 393 503 014
----------- -----------
Loans, net $41 745 025 $37 409 043
=========== ===========
<PAGE>
5. Allowance for Loan Losses:
June 30, 1997 December 31, 1996
------------- -----------------
Balance, beginning $ 503 014 $ 393 139
Provision charged to
operating expense 78 000 165 000
Recoveries 4 963 6 007
Loan losses charged to the allowance (12 584) (61 132)
--------- ---------
Balance, ending $ 573 393 $ 503 014
========= =========
Non-accrual loans which were excluded from impaired loan disclosure under FASB
114 amounted to $281,267 on June 30, 1997 and $71,515 on December 31, 1996.
6. Weighted average shares outstanding computation
The weighted average number of shares outstanding for the six month periods
ended June 30, 1997 and 1996 were 1,877,773 shares and 1,306,303 shares
respectively.
7. 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.
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
<PAGE>
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 a 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 six months ending June 30, 1997, increased
$6,680,360 or 14.1% since December 31, 1996. This increase in total assets
resulted from a $4,335,982 increase in loans or 11.6%, an increase in federal
funds sold of $1,087,000 or 65.6%, and an increase of $813,488 or 28.6% in cash
and due from banks. This equates to an increase in earning assets of $5,145,990
or 12.1% in the six months ending June 30, 1997.
Allowance for Loan Losses
The allowance for loan losses, as of June 30, 1997, was $573,393. This
is an increase of $70,379 or 14.0% since December 31, 1996. This gives the bank
a 1.35% allowance for loan losses to total loans. Management has completed an
analysis on the reserve and feels the reserve is adequate.
Liabilities
Total deposits for the six months ending June 30, 1997, increased
$5,390,172 or 13.2% since December 31, 1996. Non-interest bearing deposits
increased by $395,774 or 6.4% and interest bearing deposits increased by
$4,994,398 or 14.5%.
Stockholders' Equity
Total equity has increased by $1,453,851 or 24.7% since December 31,
1996. The increase was due to a first half profit of $495,191. Stock rights
totaling $962,439 were also exercised during the six months. This gives a
primary capital to assets ratio of 13.6%.
<PAGE>
Interest Income
Interest income totaled $2,261,977 for the six months ending June 30,
1997, $483,624 or 27.2% higher than the six months ending June 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 six months ending June 30, 1997 was
$879,832, $139,153 or 18.8% higher than the six months ending June 30, 1996.
Interest on deposits increased by $149,339 or 20.8% over the same period in
1996. This was the result of an overall increase in deposits. Mortgage and lease
interest for the six months was $12,102 a decrease of $10,445 or 46.3% 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 six months ending June 30, 1997 was
$1,382,145, $344,471 or 33.2% higher than the six months ending June 30, 1996.
This was the result of an increase in our earning assets.
Other Income
Total other income for the six months ending June 30, 1997 was
$199,103, $5,241 or 2.7% 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.
<PAGE>
Other Expenses
Total other expenses for the six months ending June 30, 1997 were
$1,095,791, $244,383 or 28.7% higher than the six months ending June 30, 1996.
Salary expense increased $131,803 or 32.3%, occupancy expense climbed $52,132 or
79.3%, stationery and supplies expense increased by $7,004 or 29.3%, marketing
expense jumped $9,068 or 27.9%, and legal and professional expense rose to
$33,422, a $8,353 increase or 33.3% above the same period in 1996. Directors
fees were $34,800, an increase of 85.8% due to a change in the monthly meeting
rates. Overdraft charge-offs reflect an increase of $12,149 or 147.0% as a
result of some bad check returns and by purging demand deposit accounts. ATM
expenses climbed $16,764 or 91.0%. The net increase in other expenses is in part
a result of moving one of the offices into a permanent facility from a mobile
unit. In addition, the bank opened a new branch bank in June, 1997 and is
preparing to open an additional branch during the third quarter of 1997. A
portion of this increase in expense is directly attributable to the hiring of
additional employees to staff these offices.
Net Income
Net income for the six months ending June 30, 1997 was $495,191,
compared to $303,562 in the same period in 1996. This is an increase of
$191,629 or 63.1% 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 89.9%. 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.
The Company held its 1997 Annual Meeting of Shareholders on May 6, 1997. Of the
1,863,495 shares outstanding, 1,345,410 shares were either present or received
by proxy. At the Annual Meeting, the following matters were acted upon by
shareholders.
1. Election of Directors. The following persons were elected as Class I
Directors of the Company to serve a three year term, with the votes For and
Withheld as indicated:
DIRECTOR FOR AGAINST
W. Houston Board, III 1,313,842 31,568
Ralph S. Gregory 1,342,989 2,421
George R. Irvin, Jr. 1,343,392 2,018
2. 1996 Long-term Incentive Plan
FOR AGAINST ABSTAIN TOTAL
1,029,731 130,565 5,875 1,166,171
88.3% of votes cast FOR
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: June 30, 1997 ______________________________
DONALD L. UNGER
PRINCIPAL EXECUTIVE OFFICER
DATE: June 30, 1997 ______________________________
FREDERICK A. BOARD
PRINCIPAL FINANCIAL OFFICER
Exhibit 10.5
Lease between The Marathon Bank and the Lessor H.K. Benham III
THIS LEASE, made in duplicate this 6th day of January, 1997, between H.
K. Benham, III, of the one part, hereinafter called the Lessor; and The Marathon
Bank, of the other part, hereinafter collectively called the Lessee.
WITNESSETH: That for and in consideration of the rents and covenants
hereinafter set forth, the Lessor does hereby lease to the Lessee and the Lessee
does hereby lease from the Lessor, upon the terms and conditions hereinafter set
forth, the following property:
The Northern portion of the lot owned by
the Lessor at Sunnyside on the South side of
Route 522 North, just East of its intersection
with Fox Drive and the West side of the
entrance to the Sunnyside Plaza Shopping
Center, containing a building and paved area
adjacent to it, known as 1447 North Frederick
Pike, more particularly described by Exhibit A
attached hereto.
1. TERM OF LEASE: The term of this lease shall begin on January 13,
1997 and shall terminate on December 31, 2006.
2. RENTAL: The rent shall be One Thousand Seven Hundred Fifty
Dollars ($1,750.00) a month, payable on the 1st day of each month (the first
month's rent to be prorated). The monthly
<PAGE>
rent shall be increased as follows:
YEAR MONTHLY RENT
---- ------------
1998 $2,000.00
1999 $2,250.00
2000 & 2001 $2,500.00
2002 - 2006 2 1/2% more than prior year
2007 - thereafter $2,500.00 increased by the
percentage increase in CPI
from January 1, 2001 and
January 1st of year rent
3. CARE OF PREMISES: Lessee shall maintain the leased property,
including the building and the adjacent paved area, and the grassy area between
the paved area and Route 522 and the Sunnyside Plaza Shopping Center entrance
road, including but not limited to the plumbing, heating and cooling systems,
the electrical system, the hot water heater, the paved area, the exterior
painting of the building, the interior of the building and all windows and other
glass, in good repair and condition, normal wear and tear excepted. The Lessor
shall have no responsibility of maintenance and repair nor any responsibility
regarding the building other than the structural integrity of the roof and walls
of the building, including the repair and replacement, if necessary, of the roof
in the event of leaks.
The Lessee shall return the building to the Lessor at the
termination of the lease in good and sound condition, normal
- 2 -
<PAGE>
wear and tear excepted.
4. REFUSE: Lessee shall remove all refuse and garbage so as not to
permit an unreasonable accumulation thereof nor permit the leased property to
appear unsightly.
5. INSPECTION: Lessor shall have the right to inspect the building
at all reasonable times.
6. ALTERATIONS: Lessee shall not make any alterations or changes to
the building or the property without the written permission of the Lessor, which
will not be unreasonably withheld. However, during the first year of the lease,
the Lessee may make substantial changes to the building and to the property for
purposes of making improvements to the property so that it can be used for a
branch bank.
7. UTILITIES: Lessee shall be responsible for the payment of all
utility costs applicable to the leased property during the term of this lease.
8. TAXES: The Lessee shall pay the real estate taxes accessible against
the improvements to the property, either made by the Lessee or leased by the
Lessee, and two-thirds of the real estate taxes assessable against the land.
Presently the entire lot and the building being leased are all assessed as one
parcel, the taxes for 1996 being $1,740.00.
- 3 -
<PAGE>
9. INSURANCE AND WAIVER:
A. Lessee shall keep the building on the property insured
beginning January 7, 1997 to the extent of its full insurable value against loss
or damage by fire or other casualty, with the Lessor being named as the payee of
the policy.
B. Lessee shall indemnify and save Lessor harmless from and
against all loss, damage or claims for injuries or death suffered in, upon or
about the leased property, resulting from the negligence of the Lessee, its
agents or employees. Lessee shall provide for the mutual benefit of the Lessor
and the Lessee general public liability insurance upon the leased property, with
the Lessor named as an additional insured, which policy shall provide a minimum
coverage of Five Hundred Thousand Dollars ($500,000.00).
10. DESTRUCTION OF PREMISES: If the building on the leased property
shall be damaged by fire or other casualty, Lessee shall terminate this lease or
shall repair said damage and if necessary replace said building so that same
will thereafter be in as good a condition as existing immediately prior to such
fire or other casualty. If Lessee repairs said damages or replaces said
building, upon completion of said
- 4 -
<PAGE>
repairs or replacement, Lessee shall be reimbursed by Lessor for Lessee's
expenses, to the extent Lessor has been paid under the fire insurance policy
listed under Paragraph 9 B above.
11. Notices. Any notices or demands required or permitted by law or any
provisions of this lease shall be in writing, and if the same is to be served
upon Lessor or Lessee may be personally delivered to Lessor or my be deposited
in the United States mail, registered or certified with return receipt
requested, postage prepaid and addressed to Lessor, 21 South Loudoun Street,
Winchester, Virginia 22601, or to Lessee, 4095 Valley Pike, Winchester, Virginia
22602. Either party shall have the right to specify from time to time changes to
its address for purposes of this lease upon giving the other party ten (10) days
advance written notice of such change.
12. If suit is brought to enforce any covenant of this lease or for the
breach of any covenant herein, the losing party shall pay the prevailing party a
reasonable attorney's fees, which will be fixed by the Court, plus Court costs.
13. Default. If Lessee defaults in any of its obligations under this
agreement, including the payment of rent and all other amounts due under this
lease, and such failure shall continue for a period of ten (10) days after
written notice
- 5 -
<PAGE>
thereof is given by Lessor to Lessee, then the Lessor shall have the immediate
right to terminate this lease. If the lease is terminated, the rent for the
entire term shall become due and payable and the Lessee shall deliver possession
immediately of all the leased property to the Lessor.
If, on three (3) separate occasions, Lessor gives Lessee
written notice under this paragraph after Lessee is in default of its payment
under this lease, then Lessee shall not be entitled to said ten (10) day written
notice and any default in the payment of rent or other payments due hereunder
shall immediately grant Lessor the right to terminate this lease as set forth
above.
14. BINDING AGREEMENT: This lease is binding upon and shall inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, and assigns, as the case may be. This lease shall be subject to and
subordinate to all recorded deeds of trust and/or mortgages encumbering the
subject premises.
15. This instrument contains all the agreements between the parties
hereto and may not be modified except by a writing signed by all of the parties
hereto.
16. WAIVER: A waiver of the breach of any of the
- 6 -
<PAGE>
provisions of this lease shall not constitute waiver of any subsequent breaches.
17. The Lessor covenants that he has the right to lease said property
to the Lessee; that the Lessee shall have quiet possession thereof, free from
all encumbrances; that the Lessor has done no act to encumber said property and
that the Lessor will execute such further assurances there of as may be
requisite.
18. EXTENSION: This lease shall be automatically extended for two (2)
additional five (5) years terms, unless Lessee notifies the Lessor in writing at
least ninety (90) days prior to the termination of the then current lease that
it is not extending the lease. If extended, the lease shall be upon the same
terms and conditions set forth herein.
19. FIRST RIGHT OF REFUSAL: Neither the Lessor nor any successor in
title to the Lessor shall sell the above described real estate without first
offering the property in writing to the Lessee upon certain terms and prices set
forth in the written notice. The Lessee shall have an option to purchase the
property for said price for a period of thirty (30) days after receiving notice.
If the Lessee does not exercise its option, Lessor shall have the right to sell
said property at said price
- 7 -
<PAGE>
and upon said terms for a period of ninety (90) days thereafter. If the property
is not so sold, the property will continue to be subject to this restriction.
IN WITNESS WHEREOF, this lease agreement has been duly executed by the
parties hereto.
___________________________(SEAL)
H. K. Benham, III - Lessor
THE MARATHON BANK
Lessee
By_________________________(SEAL)
- 8 -
Exhibit 11
MARATHON FINANCIAL CORPORATION
Computation of Weighted Average Shares Outstanding and Earnings Per Share
Shares Outstanding End of Month
1997 1996
---- ----
January 1 863 495 1 306 303
February 1 863 495 1 306 303
March 1 865 495 1 306 303
April 1 868 495 1 306 303
May 1 888 167 1 306 303
June 2 055 983 1 306 303
---------- ---------
11 405 130 7 837 818
Divided by 6 months 6 months
-------- --------
Weighted Shares Outstanding 1 900 855 1 306 303
========== ==========
Net Income $ 495 191 $ 303 562
========== ==========
Net Income Per Share $ .26 $ .23
========== ==========
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,659,922
<INT-BEARING-DEPOSITS> 39,489,841
<FED-FUNDS-SOLD> 2,743,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,751,709
<INVESTMENTS-CARRYING> 1,302,508
<INVESTMENTS-MARKET> 1,305,772
<LOANS> 42,318,418
<ALLOWANCE> 573,393
<TOTAL-ASSETS> 53,967,200
<DEPOSITS> 46,115,459
<SHORT-TERM> 0
<LIABILITIES-OTHER> 209,936
<LONG-TERM> 297,717
0
0
<COMMON> 2,055,983
<OTHER-SE> 5,288,105
<TOTAL-LIABILITIES-AND-EQUITY> 53,967,200
<INTEREST-LOAN> 2,128,476
<INTEREST-INVEST> 79,732
<INTEREST-OTHER> 53,769
<INTEREST-TOTAL> 2,261,977
<INTEREST-DEPOSIT> 867,057
<INTEREST-EXPENSE> 879,832
<INTEREST-INCOME-NET> 1,382,145
<LOAN-LOSSES> 78,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,095,791
<INCOME-PRETAX> 407,457
<INCOME-PRE-EXTRAORDINARY> 495,191
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 495,191
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<YIELD-ACTUAL> 5.79
<LOANS-NON> 280,592
<LOANS-PAST> 257,728
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 538,320
<ALLOWANCE-OPEN> 503,014
<CHARGE-OFFS> 12,584
<RECOVERIES> 4,963
<ALLOWANCE-CLOSE> 573,393
<ALLOWANCE-DOMESTIC> 220,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 353,393
</TABLE>
