UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10- QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _________
Commission file number 0-12510
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MARATHON BANCORP
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(Exact name of registrant as specified in its charter)
California 95-3770539
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(State or other jurisdiction of incorporation) (I.R.S. Employer Identification
No.)
11150 West Olympic Boulevard, Los Angeles, CA 90064
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 996-9100
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
---
As of August 1, 2002, there were 3,853,019 shares of no par Common Stock
issued and outstanding.
1
Consolidated Statements of Financial Condition
Marathon Bancorp and Subsidiary
JUNE 30, December 31,
ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2002 2001
----------------- -----------------
Cash and Due From Banks . . . . . . . . . . . . . . . . . . . . . . . $ 6,883,000 $ 4,291,000
Federal Funds Sold. . . . . . . . . . . . . . . . . . . . . . . . . . 7,390,000 2,905,000
----------------- -----------------
TOTAL CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . 14,273,000 7,196,000
Investment Securities
Securities Available for Sale. . . . . . . . . . . . . . . . . . . 15,297,000 16,368,000
Securities Held to Maturity. . . . . . . . . . . . . . . . . . . . 11,704,000 12,918,000
----------------- -----------------
TOTAL INVESTMENT SECURITIES. . . . . . . . . . . . . . . . . . 27,001,000 29,286,000
Federal Home Loan Bank and Federal Reserve Bank Stock, at cost. . . . 496,000 426,000
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,380,000 60,988,000
Less Allowance for Credit Losses . . . . . . . . . . . . . . . . . ( 1,246,000) ( 1,082,000)
----------------- -----------------
NET LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 63,134,000 59,906,000
Premises and Equipment. . . . . . . . . . . . . . . . . . . . . . . . 194,000 231,000
Cash Surrender Value of Life Insurance. . . . . . . . . . . . . . . . 3,954,000 3,855,000
Accrued Interest and Other Assets . . . . . . . . . . . . . . . . . . 1,469,000 1,439,000
----------------- -----------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . $ 110,521,000 $ 102,339,000
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-Bearing Demand . . . . . . . . . . . . . . . . . . . . $ 37,951,000 $ 27,859,000
Interest-Bearing Demand. . . . . . . . . . . . . . . . . . . . . . 3,908,000 3,504,000
Money Market and Savings . . . . . . . . . . . . . . . . . . . . . 38,103,000 38,211,000
Time Deposits Under $100,000 . . . . . . . . . . . . . . . . . . . 6,533,000 6,963,000
Time Deposits $100,000 and Over. . . . . . . . . . . . . . . . . . 10,712,000 13,111,000
----------------- -----------------
TOTAL DEPOSITS. . . . . . . . . . . . . . . . . . . . . . . . 97,207,000 89,648,000
Accrued Interest and Other Liabilities. . . . . . . . . . . . . . . . 798,000 899,000
Federal Home Loan Bank Advance. . . . . . . . . . . . . . . . . . . . - -
----------------- -----------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 98,005,000 90,547,000
Shareholders' Equity
Preferred Shares - No Par Value, 1,000,000 Shares Authorized,
No Shares Issued and Outstanding. . . . . . . . . . . . . . . . - -
Common Shares - No Par Value, 9,000,000 Shares Authorized,
Issued and Outstanding: 3,853,019 in 2002 and 3,849,819 in 2001 13,714,000 13,713,000
Accumulated Deficit. . . . . . . . . . . . . . . . . . . . . . . . ( 1,322,000) ( 2,168,000)
Accumulated Other Comprehensive Income - Net Unrealized
Gains (Losses) on Securities Available for Sale. . . . . . . . 124,000 247,000
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . 12,516,000 11,792,000
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . . . . . $ 110,521,000 $ 102,339,000
================= =================
2
Consolidated Statements of Operations
Marathon Bancorp and Subsidiary
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
-------------------- ------------------ ----------- --------------
INTEREST INCOME
Interest and Fees on Loans . . . . . . . . . . . . . $ 1,264,000 $ 1,327,000 2,489,000 2,589,000
Interest on Investment Securities - Taxable. . . . . 358,000 320,000 732,000 713,000
Other Interest Income. . . . . . . . . . . . . . . . 29,000 47,000 49,000 129,000
-------------------- ------------------ ----------- --------------
TOTAL INTEREST INCOME. . . . . . . . . . . . . . . 1,651,000 1,694,000 3,270,000 3,431,000
INTEREST EXPENSE
Interest on Demand Deposits. . . . . . . . . . . . . 9,000 8,000 19,000 16,000
Interest on Money Market and Savings . . . . . . . . 178,000 219,000 359,000 464,000
Interest on Time Deposits. . . . . . . . . . . . . . 118,000 280,000 254,000 607,000
Other Interest Expense . . . . . . . . . . . . . . . 3,000 - 4,000 2,000
-------------------- ------------------ ----------- --------------
TOTAL INTEREST EXPENSE . . . . . . . . . . . . . . 308,000 507,000 636,000 1,089,000
-------------------- ------------------ ----------- --------------
NET INTEREST INCOME. . . . . . . . . . . . . . . . . . . 1,343,000 1,187,000 2,634,000 2,342,000
Provision for Credit Losses. . . . . . . . . . . . . . . 20,000 25,000 50,000 25,000
-------------------- ------------------ ----------- --------------
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES . . . . . . . . . . . . . 1,323,000 1,162,000 2,584,000 2,317,000
NONINTEREST INCOME
Service Charges and Fees on Deposits . . . . . . . . 135,000 74,000 267,000 160,000
Dividends on Cash Surrender Value of Life Insurance. 57,000 54,000 113,000 105,000
Gain (Loss) Sale of Securities . . . . . . . . . . . - - 62,000 4,000
Other Noninterest Income . . . . . . . . . . . . . . 24,000 18,000 54,000 65,000
-------------------- ------------------ ----------- --------------
TOTAL NONINTEREST INCOME . . . . . . . . . . . . . 216,000 146,000 496,000 334,000
NONINTEREST EXPENSE
Salaries and Employee Benefits . . . . . . . . . . . 551,000 547,000 1,124,000 1,134,000
Occupancy Expenses . . . . . . . . . . . . . . . . . 132,000 144,000 274,000 284,000
Furniture and Equipment. . . . . . . . . . . . . . . 38,000 22,000 64,000 46,000
Professional Services. . . . . . . . . . . . . . . . 32,000 29,000 74,000 59,000
Business Promotion . . . . . . . . . . . . . . . . . 12,000 25,000 18,000 41,000
Stationery and Supplies. . . . . . . . . . . . . . . 13,000 14,000 26,000 24,000
Data Processing Services . . . . . . . . . . . . . . 77,000 68,000 149,000 139,000
Customer Related Expenses. . . . . . . . . . . . . . 58,000 71,000 119,000 155,000
Insurance and Assessments. . . . . . . . . . . . . . 42,000 35,000 73,000 70,000
Legal Fees and Costs . . . . . . . . . . . . . . . . 4,000 83,000 58,000 108,000
Other Expenses . . . . . . . . . . . . . . . . . . . 79,000 67,000 156,000 137,000
-------------------- ------------------ ----------- --------------
TOTAL NONINTEREST EXPENSE. . . . . . . . . . . . . 1,038,000 1,105,000 2,135,000 2,197,000
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . 501,000 203,000 945,000 454,000
Income Taxes (Benefit). . . . . . . . . . . . . . . . 54,000 ( 3,000) 99,000 ( 5,000)
-------------------- ------------------ ----------- --------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . $ 447,000 $ 206,000 $ 846,000 $ 459,000
==================== ================== =========== ==============
Per Share Data:
Net Income - Basic. . . . . . . . . . . . . . . . . $ 0.12 $ 0.05 $ 0.22 $ 0.12
Net Income - Diluted. . . . . . . . . . . . . . . . $ 0.11 $ 0.05 $ 0.21 $ 0.12
Return on Average Assets . . . . . . . . . . . . . . . . 1.64% 0.89% 1.84% 0.99%
Return on Average Equity . . . . . . . . . . . . . . . . 14.68% 7.55% 14.13% 8.59%
3
Consolidated Statements of Cash Flows
Marathon Bancorp and Subsidiary
Three Months Ended June 30,
---------------------------------
2002 2001
--------------- ----------------
OPERATING ACTIVITIES
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 846,000 $ 459,000
Adjustments to Reconcile Net Loss to Net Cash Provided
by Operating Activities:
Gain on sale of Investment Securities . . . . . . . . . . . . 62,000 -
Depreciation and Amortization . . . . . . . . . . . . . . . . 60,000 58,000
Provision for Credit Losses . . . . . . . . . . . . . . . . . 50,000 25,000
Net Amortization of Premiums and Discounts
on Investment Securities . . . . . . . . . . . . . . . . . ( 27,000) 36,000
Net Change in Deferred Loan Origination Fees. . . . . . . . . 42,000 ( 163,000)
Net Increase in Cash Surrender Value of Life Insurance. . . . ( 99,000) ( 92,000)
Net Change in Accrued Interest, Other Assets
and Other Liabilities . . . . . . . . . . . . . . . . . . ( 131,000) 90,000
--------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . . . . 803,000 413,000
INVESTING ACTIVITIES
Net Change in Interest-Bearing Deposits with Financial Institutions - -
Purchases of Available for Sale Securities . . . . . . . . . . . . ( 2,505,000) ( 9,508,000)
Purchases of Held to Maturity Securities. . . . . . . . . . . . . . ( 500,000) ( 3,733,000)
Proceeds from Maturities of Available for Sale Securities . . . . . 1,856,000 11,500,000
Proceeds from Maturities of Held to Maturity Securities . . . . . . 2,138,000 5,608,000
Proceeds from Sale of Available-for-Sale Securities . . . . . . . . 1,138,000 -
Purchase of Federal Home Loan & Federal Reserve Bank Stock. . . . . ( 70,000) ( 32,000)
Net Change in Loans . . . . . . . . . . . . . . . . . . . . . . . . ( 3,320,000) ( 10,697,000)
Purchase of Life Insurance. . . . . . . . . . . . . . . . . . . . . - -
Purchases of Furniture, Fixtures and Equipment. . . . . . . . . . . ( 23,000) ( 25,000)
--------------- ----------------
NET CASH (USED) BY INVESTING ACTIVITIES. . . . . . . . . . . . ( 1,286,000) ( 6,887,000)
FINANCING ACTIVITIES
Net Change in Demand Deposits, Money Market and Savings . . . . . . 10,388,000 5,298,000
Net Change in Time Deposits . . . . . . . . . . . . . . . . . . . . ( 2,829,000) 1,777,000
Net Change in Federal Home Loan Bank Advance. . . . . . . . . . . . - ( 1,800,000)
Proceeds from Exercise of Stock Options . . . . . . . . . . . . . . 1,000 31,000
--------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . . . . 7,560,000 5,306,000
--------------- ----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 7,077,000 ( 1,168,000)
Cash and Cash Equivalents at Beginning of Year. . . . . . . . . . . 7,196,000 10,940,000
--------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . $ 14,273,000 $ 9,772,000
=============== ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 776,000 $ 1,127,000
Income Taxes Paid . . . . . . . . . . . . . . . . . . . . . . . . . $ 156,000 $ 23,000
4
Consolidated Statement of Equity
Marathon Bancorp and Subsidiary
Accumulated
Common Shares Other
-------------------------------- Comprehensive Accumulated Comprehensive
Shares Amount Income Deficit Income Total
--------------- --------------- ------------- -------------- ----------- ------------
BALANCE, DECEMBER 31, 2001. 3,852,819 $ 13,713,000 $ (2,168,000) $ 247,000 $11,792,000
Exercise of Stock Options . 200 1,000 1,000
COMPREHENSIVE INCOME:
Net Income. . . . . . . . $ 846,000 846,000 846,000
Net Change in Unrealized
Gain (Loss) on Available-
for-Sale Securities. . . . (123,000) (123,000) (123,000)
---------------
TOTAL COMPREHENSIVE INCOME. $ 723,000
===============
BALANCE, JUNE 30, 2002. . . 3,853,019 $ 13,714,000 $ (1,322,000) $ 124,000 $12,516,000
=============== =============== ============= =========== ============
5
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATIONS
The unaudited consolidated financial statements have been prepared in accordance
with the instructions to Form 10-QSB and, therefore, do not include all
footnotes normally required for complete financial disclosure. While the
Company believes that the disclosures presented are sufficient to make the
information not misleading, reference may be made to the consolidated financial
statements and notes thereto included in the Company's 2001 Annual Report on
Form 10-KSB.
The accompanying consolidated statements of financial condition and the related
consolidated statements of operations and cash flows reflect, in the opinion of
management, all material adjustments necessary for fair presentation of the
Company's financial position as of June 30, 2002 and December 31, 2001, results
of operations and changes in cash flows for the six-month period ended June 30,
2002 and 2001. The results of operations for the three-month period and
six-month period ended June 30, 2002 are not necessarily indicative of what the
results of operations will be for the full year ending December 31, 2002.
(2) EARNINGS PER SHARE (EPS)
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.
Accordingly, the basic weighted average number of shares used to compute the net
income per share were 3,853,019 and 3,849,819 respectively for the three-month
period ended June 30, 2002 and June 30, 2001 and 3,852,933 and 3,846,014 for the
six-month period ending June 30, 2002 and June 30, 2001.
The diluted weighted average number of shares for the three-month period ended
June 30, 2002 and June 30, 2001 respectively were 3,977,187 and 3,854,495 and
for the six-month period ending June 30, 2002 and June 30, 2001 were 3,953,032
and 3,850,690.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion is intended to provide additional information about
Marathon Bancorp (the Company), its financial condition and results of
operations, which is not otherwise apparent from the consolidated financial
statements. Since Marathon National Bank (the Bank) represents a substantial
portion of the Company's activities and investments, the following relates
primarily to the financial condition and operations of the Bank. It should be
read in conjunction with the Company's 2001 Annual Report on Form 10-KSB.
FINANCIAL HIGHLIGHTS OVERVIEW
Marathon Bancorp had one of its most profitable quarters with net income of
$447,000, an increase of 117% over the $206,000 posted in the second quarter of
2001. Profits for the six months ended June 30, 2002 improved 84% to $846,000
and increased $387,000 over the $459,000 earned in the first six months of
2001.
Basic earnings per share for the second quarter were $0.12 compared to $0.05
earned in the second quarter of 2001 and the six month basic earnings per share
for 2002 were $0.22 compared to $0.12 for the same period in 2001.
Assets grew by $8,182,000 from yearend 2001 to June 30, 2002 while loans
increased 5.6% or $3,392,000 for the same period. Deposits increased $7,559,000
since yearend 2002 with non-interest deposits on the increase and
interest-bearing deposits declining.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income increased for both the three-month period and six-month
period ending June 30, 2002. For the second quarter period net interest income
grew $156,000 or 13.1%. Interest income was maintained, even though interest
rates declined, by an increase in the loan portfolio that generated a higher
yield than investments. Also an increase in the size of the investment
portfolio increased the interest income on investment securities.
A decrease in the interest paid on deposits was the main factor in increasing
net interest income. Interest expense declined $199,000 or 64.6% for the second
quarter of 2002 compared to the second quarter of 2001. Declining interest
rates and a reduction in certificates of deposits contributed to the drop in
cost of funds. The net interest margin for the second quarter of 2002 was 5.39%
compared to 5.66% for the second quarter of 2001.
For the six-month period ending June 30, 2002 net interest income increased
$292,000 or 12.5% over the first six months of 2001. Although interest income
decreased by 4.7% or $161,000, interest expense declined by $453,000 or 41.6%
generating the increase in net interest income. The largest decline in interest
expense was in the interest paid on time certificates of deposit. Net interest
margin for the six months ending June 30, 2002 was 5.43% compared to 5.62% for
the first six months of 2001.
Noninterest Income
For the second quarter of 2002 noninterest income increased by $70,000 or 48.0%
over the same period of 2001. The large increase is due to an increase in the
service charges and fees collected on deposit accounts. Other services charges
and fees also rose with increased income generated from merchant discount
revenue sharing.
For the six-month period ended June 30, 2002 noninterest income rose $162,000 or
48.5% over the six-months ended June 30 2001. Service charges and fees on
deposit accounts increased $107,000 and gain on sale of securities increased
from $4,000 in the 2001 period to $62,000 in 2002.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Noninterest Expense
Noninterest expense decreased during the second quarter of 2002 by 6.1% when
compared to the same period of 2001. Reductions in occupancy expense business
promotion, customer related expenses and legal costs offset gains in human
resources, insurance and data processing. Human resource costs increased with
the rising costs of employee benefits and insurance costs were up with increased
costs for workmen's compensation insurance.
For the first six months of 2002 noninterest expense also decreased. Expenses
declined $62,000 or 2.8% compared to the six-month period ended June 30, 2001.
Human resource costs, occupancy, business promotion, customer costs and legal
expenses declined. Banking equipment, equipment maintenance and professional
services were areas where expenses increased.
Provision for Credit Losses:
Loans that the Bank classified as substandard or doubtful as of the end of the
second quarter totaled $1,177,000 compared to $1,410,000 at December 31, 2001
Nonperforming loans, which consist of loans past due over 90 days plus loans on
nonaccural, totaled $1,058,000 at June 30, 2002 compared to $1,151,000 at
December 31, 2001. The Company does not currently have any other real estate
owned but is in the process of legal settlement on a $1,000,000 loan that is in
the nonaccrual total and where the company does not anticipate any a loss.
The portfolio is analyzed for changes in the risk category ratings, criticized
and classified loans, loan personnel, delinquency trends and general economic
indicators. The risk aspects of the loan portfolio did not materially change
during the first quarter but the size of the portfolio did increase. Loan
portfolio increases came in the loans classified as low risk that did not
require a large increase in the reserve for loan losses. The economic
conditions appear to be improving and our classified loans and delinquencies
have declined. We also use a number of different statistical assessments such
as historical loss experience, migration analysis, trend analysis and peer
comparison to determine the correct level of the reserve.
During the quarter, the Bank had charge-offs of $16,000 and collected loan
recoveries of $109,000. The Company made a provision to the reserve for credit
losses of $20,000. The net change to the reserve for credit losses for the
quarter was an increase of $113,000. The current reserve is $1,246,000, or
1.94% of outstanding loans.
Based upon the factors previously discussed and management's assessment of the
overall quality of the loan portfolio, management felt the current level in the
reserve for credit losses was adequate at June 30, 2002.
ASSETS AND LIABILITIES
During the second quarter of 2002 the Company increased the asset base to over
$110 million. Loans outstanding decreased from the first quarter but are still
up 5.6% from yearend. Securities increased to $27,001,000 with the majority
categorized in the available for sale portfolio for liquidity purposes. The
Company increased the federal funds sold to $7,390,000 at June 30, 2002.
Deposits increased to $97,207,000 up 8.4% from yearend December 31, 2001 and are
up $10,247,000 or 11.8% from June 30, 2001. Almost all the growth has been in
noninterest bearing demand deposits which has helped us to maintain a low cost
of funds and offset the declining interest rates on the assets. The Company had
no borrowed funds at June 30, 2002.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
The lease on the Company's head banking office and corporate space expires on
August 31, 2002 and the
Company has negotiated a five-year extension of its lease on the banking office
and a two-year extension on the corporate office space.
LIQUIDITY AND CAPITAL
Asset/Liability Management
Liquidity and asset/liability management is the responsibility of the Company's
Asset/Liability Committee (ALCO). They are responsible for managing the risks
associated with changing interest rates and their impact on earnings, as well
as, the liquidity needs of the Company within the guidelines of policy.
The ALCO monitors the Company's liquidity position continuously in relation to
trends in loans and deposits, and relates the data to short and long term
expectations. In order to serve customers effectively, funds must be available
to meet credit needs as well as withdrawals of deposited funds. Assets that are
normally considered liquid are federal funds sold, available for sale investment
securities, cash and due from banks, and securities purchased under agreements
to resell. The ratio of liquid assets to deposits was 30.4% as of June 30, 2002
and the loan to deposit ratio was 66.2%.
Interest rate risk management focuses on the maturity and repricing of
interest-bearing earning assets in relationship to the interest-bearing
liabilities that fund them. Net interest income can be vulnerable to
fluctuations arising from a change in the general level of interest rates to the
extent that the average yield on earning assets responds differently to such a
change than does the average cost of funds.
The Company measures interest rate sensitivity by distributing the maturities
and repricing periods of assets and supporting funding liabilities into interest
sensitivity periods, summarizing interest rate risk in terms of the resulting
interest sensitivity gaps. A positive gap indicates that more interest
sensitive assets than interest sensitive liabilities will be repriced during a
specified period, while a negative gap indicates the opposite condition.
It is the Bank's policy to maintain an adequate balance of rate sensitive assets
to rate sensitive liabilities that provides for good earnings but acceptable
interest rate risk. Due to the fact that the Bank has a large portfolio of
noninterest bearing demand deposits, the Company has historically been asset
sensitive with a positive gap. Our Company is currently asset sensitive but we
have decreased its overall asset sensitivity during the last two years and
currently has a positive one-year cumulative gap as a percent of total assets at
of 17.7%.
Capital
Shareholders' equity increased by $724,000, or 6.1% during the first six month's
of 2002. Unrealized gain/loss on available-for-sale securities decreased
$123,000, stock options exercised by employees were $1,000 and earnings for the
period added $846,000.
The Bank is required to meet certain minimum risk-based capital guidelines and
leverage ratios promulgated by the bank regulatory authorities. The risk based
capital standards establish capital requirements that are more sensitive to risk
differences between various assets, consider off balance sheet activities in
assessing capital adequacy, and minimize the disincentives to holding liquid,
low risk assets. The leverage ratio consists of tangible Tier 1 capital divided
by average total assets.
The adequately capitalized total risk-based capital ratio required by the
federal regulators is 8.0 percent and the well-capitalized ratio is 10.0
percent. The Tier I capital to average assets (leverage ratio) required by the
federal regulators for adequately capitalized is 4.0 percent and 5.0 percent is
required to be well-capitalized. At June 30, 2002, the Bank had a risk based
capital ratio of 15.9 percent, and a Tier 1 capital leverage ratio of 11.3
percent.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
FUTURE EVENTS
As previously announced on May 14, 2002, the Company has entered into an
agreement to merge with First Community Bancorp. A special meeting of
shareholders has been scheduled for August 19, 2002 at which time shareholders
will vote upon the proposed merger. First Community filed a registration
statement with the Securities and Exchange Commission for the issuance of shares
of common stock in connection with the proposed merger on June 28, 2002, and
amended it on July 17, 2002. On July 19, 2002, a proxy statement-prospectus was
mailed to Marathon's shareholders of record as of July 3, 2002.
Registration Statement
Investors and security holders are urged to read the proxy
statement-prospectuses regarding the business combination transactions referred
to in this press release because they contain important information. Investors
and security holders may obtain free copies of the proxy statement-prospectus at
the Securities and Exchange Commission's website at www.sec.gov. The proxy
statement-prospectus may also be obtained for free from Marathon Bancorp by
directing a request to: Marathon Bancorp, 11150 W. Olympic Boulevard, Los
Angeles, CA 90064. Attention: Howard Stanke. Telephone: 310-996-9100.
Management's discussion and analysis includes forward-looking statements that
involve inherent risks and uncertainties and Marathon Bancorp cautions readers
that a number of important factors could cause actual results to differ
materially from those in the forward-looking statements. These factors include
economic conditions and competition in the geographic and business areas in
which Marathon Bancorp operates, inflation, deflation, fluctuations in interest
rates, legislation and governmental regulation.
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes 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
As previously disclosed in a 8-K filing on May 14, 2002 the Company entered into
an agreement to merge with First Community Bancorp. A special meeting of
shareholders has been scheduled for August 19, 2002 at which time shareholders
will vote upon the proposed merger. First Community filed a registration
statement with the Securities and Exchange Commission for the issuance of shares
of common stock in connection with the proposed merger on June 28, 2002, and
amended it on July 17, 2002. On July 19, 2002, a proxy statement-prospectus was
mailed to Marathon's shareholders of record as of July 3, 2002.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99. Certification of Chief Executive Officer and Chief
Financial Officer
11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARATHON BANCORP
Date: August 1, 2002 Craig D. Collette
-------------------
Craig D. Collette
President and Chief Executive
Officer
Howard J. Stanke
------------------
Howard J. Stanke
Executive Vice President and
Chief Financial Officer
12.
<Page>
Exhibit 99.
MARATHON BANCORP
Certification of Chief Executive Officer and Chief Financial Officer
Regarding Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 2002
Craig Collette and Howard Stanke, the Chief Executive Officer and Chief
Financial Officer, respectively, of Marathon Bancorp (the "Company"), hereby
certify that, to the best of their knowledge, based upon a review of the
Quarterly Report on Form 10-Q for the Quarter ended June 30, 2002 (the
"Covered Report") and, except as corrected or supplemented in a subsequent
covered report:
? the Covered Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
? the information contained in the Covered Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
In Witness Whereof, each of the undersigned has signed this Certification as
of this August 12, 2002.
Craig Collette Howard Stanke
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Craig Collette Howard Stanke