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:
June 30, 1998
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 identification no.)
incorporation or organization)
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 2,060,983 8/7/98
<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, 1998 and December 31, 1997 . . . . . . . . . . . . . 3
Consolidated Statements of Income for the Six Months
Ended June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . 4-5
Consolidated Statements of Changes in
Shareholders Equity for the Six
Months Ended June 30, 1998 and 1997 . . . . . . . . . . . . ..6. .
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1998 and 1997 . . . . . . . . . 7-8
Notes to Consolidated Financial Statements . . . . . . . . . ..9-11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . 12-15
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . ..16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 16-18
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..19
2
<PAGE>
<TABLE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
as of
June 30, 1998 and December 31, 1997
<CAPTION>
ASSETS 6/30/98 12/31/97
------- --------
<S> <C>
Cash and due from banks $4,419,717 $3,477,382
Securities (fair value: 1998, $ 5,759,918 and
1997, $3,506,666 ) 5,744,847 3,490,709
Federal funds sold 5,729,000 3,570,000
Loans, net 58,063,300 50,517,071
Bank premises and equipment, net 2,607,247 2,499,374
Accrued interest receivable 326,253 285,837
Other real estate 448,123 448,123
Other assets 536,124 537,546
------------------ -----------------------
Total assets $77,874,611 $64,826,042
================== =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $9,346,418 $7,992,135
Interest bearing 59,639,658 48,443,086
------------------ -----------------------
Total deposits $68,986,076 $56,435,221
Interest expense payable 124,714 104,753
Accounts payable and accrued expenses 143,614 295,518
Capital lease payable 259,884 279,136
------------------ -----------------------
Total liabilities $69,514,288 $57,114,628
------------------ -----------------------
STOCKHOLDERS' EQUITY
Preferred stock, Series A, 5% non-cumulative, no par
value; 1,000,000 shares authorized and unissued - - - -
Common stock, $1 par value; 20,000,000 shares
authorized; 1998, 2,060,983 shares issued and
outstanding; 1997, 2,055,983 shares issued and
outstanding. $2,060,983 $2,055,983
Capital surplus 7,835,454 7,815,454
Retained earnings (deficit) (1,542,499) (2,164,825)
Accumulated other comprehensive income 6,385 4,802
------------------ -----------------------
Total stockholders' equity $8,360,323 $7,711,414
------------------ -----------------------
Total liabilities and stockholders' equity $77,874,611 $64,826,042
================== =======================
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For the Six Months For the Quarter
Ended June 30, Ended June 30,
1998 1997 1998 1997
---- ---- ---- ----
Interest income:
Interest and fees on loans $2,904,873 $2,128,476 $1,511,616 $1,109,560
Interest on securities held to maturity 64,976 28,453 39,017 10,773
Interest on securities available for sale 60,894 43,249 36,718 21,551
Interest on federal funds sold 168,711 53,769 98,582 36,995
Dividends on securities available for sale 12,075 8,030 9,127 5,352
---------- ---------- ---------- ----------
Total interest income $3,211,529 $2,261,977 $1,695,060 $1,184,231
---------- ---------- ---------- ----------
Interest expense:
Interest on deposits $1,322,525 $867,057 $701,054 $450,734
Interest on leases 10,731 12,102 5,280 5,976
Interest on fed funds purchased - - 673 - - - -
---------- ---------- ---------- ----------
Total interest expense $1,333,256 $879,832 $706,334 $456,710
---------- ---------- ---------- ----------
Net interest income $1,878,273 $1,382,145 $988,726 $727,521
Provision for loan losses 110,000 78,000 55,000 43,000
---------- ---------- ---------- ----------
Net interest income after provision for
loan loss $1,768,273 $1,304,145 $933,726 $684,521
---------- ---------- ---------- ----------
Other income:
Service charges on deposit accounts $306,811 $167,403 $167,631 $93,164
Commissions and fees 15,681 15,294 13,659 7,595
Other 57,387 16,406 3,089 6,295
---------- ---------- ---------- ----------
Total other income $379,879 $199,103 $184,379 $107,054
---------- ---------- ---------- ----------
4
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Continued)
Other expenses:
Salaries and employee benefits $743,946 $540,333 $362,864 $286,848
Net occupancy expense of premises 122,925 117,888 67,536 65,005
Furniture and equipment 186,039 47,168 92,185 26,596
Legal and professional 50,243 33,422 24,767 19,282
Stationary and Supplies 45,828 30,898 20,508 16,540
Postage 45,612 24,756 28,299 14,029
Marketing 34,239 41,599 18,537 26,996
FDIC Assessment 5,084 7,955 1,892 7,955
Directors fees 43,160 34,800 19,400 17,850
ATM expense 36,492 35,181 18,057 15,098
Overdraft charge-offs 21,257 20,414 5,160 7,980
Other operating expense 222,438 161,377 120,022 75,771
---------- ---------- -------- --------
Total other expenses $1,557,263 $1,095,791 $779,227 $579,950
---------- ---------- -------- --------
Income before income taxes $590,889 $407,457 $338,878 $211,625
Provision for income taxes expense(benefit) ($31,437) ($87,734) $10,424 ($42,713)
---------- ---------- -------- --------
Net income $622,326 $495,191 $328,454 $254,338
---------- ---------- -------- --------
Earnings per share, basic $0.30 $0.26 $0.16 $0.13
----- ----- ----- -----
Earnings per share, assuming dilution $0.29 $0.26 $0.16 $0.13
----- ----- ----- -----
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
MARATHON FINANCIAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1998 and 1997
<CAPTION>
Accumulated
Other Retained Total
Common Capital Comprehensive Earnings Comprehensive Stockholders
Stock Surplus Income (Loss) (Deficit) Income Equity
----- ------- ------------- --------- ------ ------
Balance, December 31, 1996 $1,863,495 $7,045,502 $507 ($3,019,267) $5,890,237
Comprehensive income:
Net income 495,191 495,191 495,191
Other comprehensive
income:
Unrealized (loss) on
securities available
for sale (3,779) (3,779) (3,779)
-------
Total comprehensive income 491,412
=======
Issuance of common stock/
exercise of stock warrants
(192,488 shares) 192,488 769,951 962,439
---------- ---------- ------- ----------- ----------
Balance, June 30, 1997 $2,055,983 $7,815,453 ($3,272) ($2,524,076) $7,344,088
========== ========== ======= =========== ==========
Balance, December 31, 1997 $2,055,983 $7,815,454 $4,802 ($2,164,825) $7,711,414
Comprehensive income:
Net income 622,326 622,326 622,326
Other comprehensive
income:
Unrealized gain on
securities available
for sale 1,583 1,583 1,583
-----
Issuance of common
stock/exercise of stock
options (5,000 shares) 5,000 20,000 25,000
Total comprehensive income $623,909
---------- ---------- ------- ----------- -------- ----------
Balance, June 30, 1998 $2,060,983 $7,835,454 $6,385 ($1,542,499) $8,360,323
========== ========== ====== =========== ==========
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
<CAPTION>
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $622,326 $495,191
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization 27,206 19,097
Depreciation 142,397 64,499
Net discount accretion on securities (1,009) (7,605)
Provision for loan loss 110,000 78,000
Deferred tax (benefit) (42,857) (100,000)
Changes in assets and liabilities:
(Increase) decrease in other assets 44,279 (125,808)
(Increase) in accrued
interest receivable (40,416) (25,561)
Decrease in accounts payable
and accrued expenses (151,905) (32,253)
Increase (decrease) in interest
expense payable 19,961 (1,666)
------------------ -----------------
Net cash provided by operating
activities $729,982 $363,894
================== =================
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and principal payments
on securities held to maturity $310,367 $1,104,337
Purchase of securities available for sale (1,154,650) (70,550)
Purchase of securities held to maturity (1,407,263) (752,969)
Net (increase) in loans (7,656,229) (4,413,982)
Purchase of bank premises and equipment (277,476) (553,109)
------------------ -----------------
Net cash (used in) investing activities ($10,185,251) ($4,686,273)
------------------ -----------------
7
<PAGE>
MARATHON FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
For the Six Months Ended June 30, 1998 and 1997
<CAPTION>
1998 1997
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits, NOW
accounts, and savings accounts $6,063,580 $2,545,338
Net increase in certificates of deposits 6,487,275 2,844,835
Principal payments on capital lease payable (19,251) (17,935)
Cash dividends paid (111,810)
Proceeds from issuance of common stock 25,000 962,439
------------------ -----------------
Net cash provided by financing activities $12,556,604 $6,222,867
------------------ -----------------
Increase in cash and cash equivalents $3,101,335 $1,900,488
Beginning 7,047,382 4,502,434
------------------ -----------------
Ending $10,148,717 $6,402,922
================== =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $1,313,295 $881,498
================== =================
Income Taxes $11,420 $12,266
================== =================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
ACTIVITIES
Unrealized gain (loss) on securities
available for sale $1,583 ($3,779)
================== =================
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
8
<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, 1998 and December 31, 1997, and the result of operations and
cash flows for the six months ended June 30, 1998 and 1997. 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, 1997.
2. The results of operations for the six month period ended June 30, 1998 and
1997, 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, 1998 and
December 31, 1997, are:
06/30/98 12/31/97
Amortized Amortized
Held to Maturity Cost Cost
---------- ----------
US treasury securities & obligations of
US government corporations & agencies $2,651,636 $1,452,899
Obligations of state and political subdivisions 100,936 254,033
---------- ----------
$2,752,572 $1,706,932
========== ==========
Fair Fair
Value Value
---------- ----------
US treasury securities & obligations of
US government corporations & agencies $2,665,082 $1,467,012
Obligations of state and political subdivisions 102,561 255,877
---------- ----------
$2,767,643 $1,722,889
========== ==========
9
<PAGE>
6/30/98 12/31/97
Amortized Amortized
Available for Sale Cost Cost
---------- ----------
US treasury securities & obligations
of US government corporation & agencies $2,506,242 $1,352,298
Mortgage backed securities 26,448 31,477
Other 453,200 395,200
---------- ----------
$2,985,890 $1,778,975
========== ==========
Fair Fair
Value Value
---------- ----------
US treasury securities & obligations
of US government corporations & agencies $2,511,154 $1,355,054
Mortgage backed securities 27,921 33,523
Other 453,200 395,200
---------- ----------
$2,992,275 $1,783,777
========== ==========
4. The consolidated entity's loan portfolio is composed of the following:
6/30/98 12/31/97
---------- ----------
Commercial $30,252,131 $24,399,929
Real estate-mortgage 11,074,440 10,065,627
Real estate-construction 6,172,150 6,075,464
Installment loans to individuals 11,234,344 10,552,548
----------- -----------
$58,733,065 $51,093,568
Less: allowance for loan losses 669,765 576,497
----------- -----------
Loans, net $58,063,300 $50,517,071
=========== ===========
The company had non-accrual loans which were excluded from the impaired loan
disclosure under FASB 114 which amounted to $23,813 on June 30, 1998 and
$38,116 on December 31, 1997.
5. Reserve for Loan Losses: 6/30/98 12/31/97
---------- ----------
Balance, beginning $576,497 $503,014
Provision charged to operating expense 110,000 133,000
Recoveries 16,984 27,823
Loan losses charged to the allowance (33,716) (87,340)
---------- ----------
Balance, ending $669,765 $576,497
========== ==========
10
<PAGE>
6. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires corporations to record
derivatives on the balance sheet as assets and liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. This statement is not expected to have a
material impact on the Corporation's financial statements. This statement is
effective for fiscal years beginning after June 15, 1999, with earlier adoption
encouraged. The Corporation will adopt this accounting standard as required by
January 1, 2000.
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. This SOP requires that entities capitalize certain internal-use software
costs once certain criteria are met. This statement is not expected to have a
material impact on the Corporation's financial statements.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities," which requires the costs of start-up activities and organization
costs to be expensed as incurred. This statement is effective for the fiscal
year 1999 financial statements. This statement is not expected to have a
material impact on the Corporation's financial statements.
Effective January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This statement
establishes standards for reporting and the display of comprehensive income and
its components (revenues, expenses, gains and losses) in full for general
purpose financial statements. Financial statements for prior periods have been
restated as required.
11
<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, 1998, increased
$13,048,569 or 20.1% since December 31, 1997. This increase in
total assets resulted from a $7,546,229 increase in net loans or
14.9%, an increase in federal funds sold of $2,159,000 or 60.5%,
and an increase of $2,254,138 or 64.6% in securities. This equates
to an increase in earning assets of $11,959,367 or 20.8% in the six
months ending June 30, 1998.
Allowance for Loan Losses
-------------------------
The allowance for loan losses, as of June 30, 1998, was $669,765.
This is an increase of $93,268 or 16.2% since December 31, 1997.
This gives the bank a 1.14% 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, 1998, increased
$12,550,855 or 22.2% since December 31, 1997. Non-interest bearing
deposits increased by $1,354,283 or 16.9% and interest bearing
deposits increased by $11,196,572 or 23.1%.
12
<PAGE>
Stockholders' Equity
--------------------
Total equity has increased by $648,909 or 8.4% since December 31,
1997. The increase was due to a first half profit of $622,326, the
exercise of stock options of $25,000, and an increase in unrealized
gains on securities available for sale of $1,583. The primary
capital to assets ratio is 10.74%.
Interest Income
---------------
Interest income totaled $3,211,529 for the six months ending June
30, 1998, $949,552 or 42.0% higher than the six months ending June
30, 1997. 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, 1998 was
$1,333,256, $453,424 or 51.5% higher than the six months ending
June 30, 1997. Interest on deposits increased by $455,468 or 52.5%
over the same period in 1997. This was the result of an overall
increase in deposits. Interest on capital leases for the quarter
was $10,731, $1,371 or 11.3% less than the same period in 1997.
Net Interest Income
-------------------
Net interest income for the six months ending June 30, 1998 was
$1,878,273 $496,128 or 35.9% higher than the six months ending June
30, 1997. This was the result of an increase in our earning assets.
13
<PAGE>
Other Income
------------
Total other income for the six months ending June 30, 1998 was
$379,879, $180,776 or 90.8% higher than the same period in 1997.
This is a result of a $45,000 recovery of a charged off deposit
account. In addition the bank experienced an increase in the demand
deposit area which has contributed $306,811 in service charges for
the first half of 1998. This is a 83.3% increase over the same
period of 1997.
Other Expenses
--------------
Total other expenses for the six months ending June 30, 1998 were
$1,557,263, $461,472 or 42.1% higher than the six months ending
June 30, 1997. Salary expense increased $203,613 or 37.7%,
occupancy expense increased $5,037 or 4.3%, furniture and equipment
expense increased by $138,871 or 294.4%, and stationery and
supplies expense increased by $14,930 or 48.3% over the same period
in 1997. Directors fees were $43,160, an increase of 24.0% due to a
change in the monthly meeting rates. Legal and professional fees
increased $16,821 or 50.3%, mainly as a result of legal fees
incurred in the recovery of a charged off account. The net increase
in other expenses is in part a result of staffing and furnishing
for two additional branches which opened later in 1997. The
depreciation of new equipment and the costs of maintenance
contracts on this equipment caused a substantial increase in
furniture and equipment expense.
14
<PAGE>
Net Income
----------
Net income for the six months ending June 30, 1998 was $622,326,
compared to $495,191 in the same period in 1997. This is an
increase of $127,135 or 25.7% over the same period of 1997. Net
income for the second quarter of 1998 was $328,454, representing a
gain of $74,116 or 29.1% greater than the second quarter of 1997.
Liquidity and Capital Resources
-------------------------------
The liquidity position of the Bank is less than it peer's because
of a loan to deposit ratio of 85.1%. In order to maximize earning
assets, management has exceeded the bank's policy by maintaining a
higher ratio than that of it's peers'. This policy exception has
been approved by the Board of Directors. As the core deposits of of
the bank continue to increase, this ratio will become more in line
with that of the industry.
16
<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
16
<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 Lease between the Marathon Bank and the
Lessors, Keith R. Lantz and Mary G. Lantz
for land upon which the Bank has placed a
double-wide modular unit to house the branch
office at 1014 South Main Street, Woodstock,
Virginia, filed herein (File No. 0-18868).
Exhibit 10.7 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
17
<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 - See attached
99. Additional Exhibits - None
(b) Reports on Form 8-K - None
18
<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, 1998 /s/ Donald L. Unger
---------------------------------------
DONALD L. UNGER
PRINCIPAL EXECUTIVE OFFICER
DATE: June 30, 1998 /s/ Frederick A. Board
---------------------------------------
FREDERICK A. BOARD
PRINCIPAL FINANCIAL OFFICER
19
<TABLE>
Exhibit 11
MARATHON FINANCIAL CORPORATION
Computation of Weighted Average Shares Outstanding and Earnings Per Share
Shares Outstanding End of Month - 2nd Quarter
<CAPTION>
<S> <C>
1998 1997
---- ----
April 2,055,983 1,868,495
May 2,055,983 1,873,235
June 2,059,610 1,920,972
------------------- -----------------------
6,171,576 5,662,702
Divided by: 3 months 3 months
-------- --------
2,057,192 1,887,567
=================== =======================
Add Dilutive Shares 55,328 31,009
2,112,520 1,918,576
=================== =======================
Net Income $328,454 $254,338
=================== =======================
Net Income Per Share - Basic
and Assuming Dilution $0.16 $0.13
=================== =======================
Shares Outstanding End of Month - Year-to-date:
1998 1997
---- ----
January 2,055,983 1,863,495
February 2,055,983 1,863,495
March 2,055,983 1,865,495
April 2,055,983 1,868,495
May 2,055,983 1,888,167
June 2,059,610 2,055,983
------------------- -----------------------
12,339,525 11,405,130
Divided by 6 months 6 months
-------- --------
2,056,588 1,900,855
=================== =======================
Add Dilutive Shares 58,004 24,681
2,114,592 1,925,536
=================== =======================
Net Income $622,326 $495,191
=================== =======================
Net Income Per Share-Basic $0.30 $0.26
=================== =======================
Net Income Per Share-
Assuming Dilution $0.29 $0.26
=================== =======================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> $4,419,717
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,729,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,992,275
<INVESTMENTS-CARRYING> 2,752,572
<INVESTMENTS-MARKET> 2,767,643
<LOANS> 58,733,065
<ALLOWANCE> 669,765
<TOTAL-ASSETS> 77,874,611
<DEPOSITS> 68,986,076
<SHORT-TERM> 0
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<LONG-TERM> 259,884
2,060,983
0
<COMMON> 0
<OTHER-SE> 6,299,340
<TOTAL-LIABILITIES-AND-EQUITY> 77,874,611
<INTEREST-LOAN> 2,904,873
<INTEREST-INVEST> 137,945
<INTEREST-OTHER> 168,711
<INTEREST-TOTAL> 3,211,529
<INTEREST-DEPOSIT> 1,322,525
<INTEREST-EXPENSE> 1,333,256
<INTEREST-INCOME-NET> 1,878,273
<LOAN-LOSSES> 110,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,557,263
<INCOME-PRETAX> 590,889
<INCOME-PRE-EXTRAORDINARY> 590,889
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 622,326
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.29
<YIELD-ACTUAL> 5.94
<LOANS-NON> 23,813
<LOANS-PAST> 148,174
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 576,497
<CHARGE-OFFS> (33,716)
<RECOVERIES> 16,984
<ALLOWANCE-CLOSE> 669,765
<ALLOWANCE-DOMESTIC> 669,765
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
