-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qkz3WjLTO19gmM1zlTYEnOqtvu7DN97B45wXDm6W+M7ZNbQqIhEiqwBwjFByTJs1 8F70IkGVvLaZ3szLEfsWjA== 0000718446-99-000006.txt : 19990517 0000718446-99-000006.hdr.sgml : 19990517 ACCESSION NUMBER: 0000718446-99-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARATHON BANCORP CENTRAL INDEX KEY: 0000718446 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953770539 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-12510 FILM NUMBER: 99621717 BUSINESS ADDRESS: STREET 1: 11150 W OLYMPIC BL CITY: LOS ANGELES STATE: CA ZIP: 90064 BUSINESS PHONE: 3109969100 MAIL ADDRESS: STREET 1: 11150 W OLYMPIC BLVD CITY: LOS ANGELES STATE: CA ZIP: 90064 10QSB 1 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 MARCH 31, 1999 ------------------------ 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 --------------------- MARATHON BANCORP - ------------------------------------------------------ (Exact name of registrant as specified in its charter) California - -------------------------------- 95-3770539 - ---------- (State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.) 11150 West Olympic Boulevard, Los Angeles, CA 90064 - ------------------------------------------------------------------ (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 May 1, 1999, there were 3,827,019 shares of no par Common Stock issued and outstanding.
Consolidated Statements of Financial Condition Marathon Bancorp and Subsidiary March 31, December 31, ASSETS 1999 1998 ------------ -------------- Cash and Due From Banks $4,581,000 $5,074,000 Federal Funds Sold 3,640,000 4,175,000 Interest-Bearing Deposits with Financial Institutions 0 Investment Securities Securities Available for Sale 5,477,000 6,001,000 Securities Held to Maturity 11,693,000 14,291,000 ------------ -------------- TOTAL INVESTMENT SECURITIES 17,170,000 20,292,000 Loans 46,479,000 42,992,000 Less Allowance for Credit Losses (607,000) (733,000) ------------ -------------- NET LOANS 45,872,000 42,259,000 Premises and Equipment 377,000 346,000 Other Real Estate Owned 0 0 Accrued Interest and Other Assets 931,000 974,000 Cash Surrender Value of Life Insurance 1,298,000 1,280,000 ------------ -------------- TOTAL ASSETS 73,869,000 74,400,000 ============ ============== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-Bearing 23,523,000 24,478,000 Interest-Bearing 41,168,000 40,740,000 ------------ -------------- TOTAL DEPOSITS 64,691,000 65,218,000 Accrued Interest and Other Liabilities 480,000 524,000 ------------ -------------- TOTAL LIABILITIES 65,171,000 65,742,000 Shareholders' Equity Preferred Shares - No Par Value, 1,000,000 Shares Authorized, No Shares Issued and Outstanding 0 0 Common Shares - No Par Value, 9,000,000 Shares Authorized, Issued and Outstanding: 3,826,819 in 1999 and 3,811,819 in 1998 13,646,000 13,630,000 Net Unrealized Gain on Securities Available for Sale (46,000) (8,000) Accumulated Deficit (4,902,000) (4,964,000) ------------ -------------- TOTAL SHAREHOLDERS' EQUITY 8,698,000 8,658,000 ------------ -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $73,869,000 $74,400,000 ============ ==============
Consolidated Statements of Income Marathon Bancorp and Subsidiary March 31, 1999 1998 --------------- ---------- INTEREST INCOME Interest and Fees on Loans $871,000 $916,000 Interest on Investment Securities - Taxable 251,000 169,000 Other Interest Income 66,000 116,000 --------------- ---------- TOTAL INTEREST INCOME 1,188,000 1,201,000 INTEREST EXPENSE Interest on Demand Deposits 8,000 12,000 Interest on Money Market and Savings 182,000 150,000 Interest on Time Deposits 148,000 149,000 Other Interest Expense - 1,000 --------------- ---------- TOTAL INTEREST EXPENSE 338,000 312,000 --------------- ---------- NET INTEREST INCOME 850,000 889,000 Provision for Credit Losses - - --------------- ---------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 850,000 889,000 --------------- ---------- NONINTEREST INCOME Service Charges and Fees on Deposits 76,000 61,000 Gain on Sale of Other Real Estate Owned - - Other Noninterest Income 42,000 39,000 --------------- ---------- TOTAL NONINTEREST INCOME 118,000 100,000 --------------- ---------- NONINTEREST EXPENSE Salaries and Employee Benefits 420,000 392,000 Occupancy Expenses 132,000 159,000 Furniture and Equipment 29,000 23,000 Professional Services 26,000 12,000 Business Promotion 21,000 27,000 Stationery and Supplies 14,000 29,000 Data Processing Services 115,000 115,000 Messenger and Courier Services 19,000 22,000 Insurance and Assessments 33,000 81,000 Legal Fees and Costs 45,000 38,000 Net Operating Cost of Other Real Estate Owned ( 1,000) 12,000 Other Expenses 58,000 68,000 --------------- ---------- TOTAL NONINTEREST EXPENSE 911,000 978,000 --------------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 57,000 11,000 Income Tax (benefit) ( 5,000) - --------------- ---------- NET INCOME (LOSS) $62,000 $11,000 =============== ========== Per Share Data: Net Income (Loss) - Basic $0.02 $0.11 Net Income (Loss) - Diluted $0.02 $0.11
Consolidated Statements of Cash Flows Marathon Bancorp and Subsidiary Three Months Ended March 31, ------------------------------ 1999 1998 ------------------------------ ------------------- OPERATING ACTIVITIES Net Income $62,000 $11,000 Adjustments to Reconcile Net Gain (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization 32,000 36,000 Provision for Credit Losses - - Provision for OREO Losses - - Loss on Sale of Other Real Estate Owned - 34,000 Net Amortization of Premiums and Discounts on Investment Securities 9,000 7,000 Net Change in Deferred Loan Origination Fees 3,000 4,000 Net Change in Accrued Interest, Other Assets and Other Liabilities ( 19,000) ( 733,000) ------------------------------ ------------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 87,000 ( 641,000) INVESTING ACTIVITIES Purchases of Available for Sale Securities ( 2,512,000) ( 998,000) Purchases of Held to Maturity Securities ( 902,000) ( 4,535,000) Proceeds from Maturities of Available for Sale Securities 3,000,000 3,500,000 Proceeds from Maturities of Held to Maturity Securities 3,489,000 3,697,000 Net (Increase) Decrease in Loans ( 3,616,000) 1,527,000 Proceeds from Sale of Other Real Estate Owned - 1,035,000 Purchases of Furniture, Fixtures and Equipment ( 63,000) ( 19,000) ------------------------------ ------------------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES ( 604,000) 4,207,000 FINANCING ACTIVITIES Net Change in Demand Deposits, Money Market and Savings 1,273,000 ( 10,631,000) Net Change in Time Deposits ( 1,800,000) 1,508,000 Proceeds from Issuance of Common shares 16,000 - ------------------------------ ------------------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES ( 511,000) ( 9,123,000) ------------------------------ ------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 1,028,000) ( 5,557,000) Cash and Cash Equivalents at Beginning of Year 9,249,000 16,027,000 ------------------------------ ------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $8,221,000 $10,470,000 ============================== =================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest Paid $355,000 $278,000 Income Taxes Paid (Refunded) $- $- Loans Made to Facilitate the Sale of Other Real Estate Owned $- $600,000
Consolidated Statements of Equity Marathon Bancorp and Subsidiary Accumulated Other Common Shares Comprehensive Accumulated Comprehensive Shares Amount Income Deficit Income Total ------------- ----------- ------------------- -------------- -------------------- --------------- BALANCE, JANUARY 1, 1999 3,820,819 $13,630,000 $( 4,964,000) $( 8,000) $8,658,000 Exercise of Stock Options 6,000 16,000 16,000 COMPREHENSIVE INCOME: Net Income $62,000 62,000 62,000 Net Change in Unrealized Gain (Loss) on Available- for-Sale Securities ( 38,000) ( 38,000) ( 38,000) ------------------- TOTAL COMPREHENSIVE INCOME $24,000 BALANCE, MARCH 31, 1999 3,826,819 $13,646,000 $( 4,902,000) $( 46,000) $8,698,000
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 1998 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 March 31, 1999 and December 31, 1998, results of operations and changes in cash flows for the three-month period ended March 31, 1999 and 1998. The results of operations for the three-month period ended March 31, 1999 are not necessarily indicative of what the results of operations will be for the full year ending December 31, 1999. (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 3,823,619 and 3,811,819 respectively for the three-month period ended March 31, 1999 and March 31, 1998. There was no dilution to change the basic average number of shares so the diluted EPS was the same. 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 1998 Annual Report on Form 10-KSB. FINANCIAL HIGHLIGHTS OVERVIEW Marathon Bancorp recorded a profit for the seventh consecutive quarter of $62,000 for the period ending March 31, 1999, compared to $11,000 for the same period of 1998. Per share earnings were $0.02 for 1999 compared to less than one cent per share in the first quarter of 1998. At March 31, 1999 total assets were $73,869,000, total loans were $46,479,000 and total deposits $64,691,000. This compares to total assets of $74,400,000, total loans of $42,922,000 and total deposits of $65,218,000 at December 31, 1998. RESULTS OF OPERATIONS Net Interest Income Net interest income decreased 4% or $39,000 when comparing the first quarter of 1999 with the first quarter of 1998. The decrease came from both a decrease in interest income and an increase in interest expense. Although the overall average earning assets increased, the reduction in interest rates over the last year has decreased the yield on total earning assets by approximately 25 basis points. This was reflected the most in the interest and fees on the loan portfolio. Since a large portion of the portfolio is tied to prime rate the decrease of 75 basis points in the prime rate during the latter half of 1998 was the main reason for the $45,000 decline in income. The investment portfolio increased by an average of $6,429,000 which came from both a increase in deposits and a decrease in fed funds sold. Due to the fact that the bond market did not decline as much as the fed funds rate did the overall yield did not perceptibly change. The interest on investment securities increased by $82,000. The interest on fed funds decreased because of both rate and average investment. Interest expense increased in the money market deposits and specifically in the interest paid on our Investors Money Market account, which pays approximately 200 basis points higher. The average balances increased during 1998 as the account was first launched in the fourth quarter of 1997. The interest on time deposits was constant. Overall interest expense increased $27,000 over the first quarter of last year. Noninterest Income Noninterest income increased for the first quarter of 1999 compared to the first quarter of 1998 by $18,000, or 18%. Service charges on deposit accounts increased do an increase in the analysis income on commercial business accounts and selected fee increases. Other noninterest income increased from increased merchant discount, noninterest income on loans and research fees. Noninterest Expense The Company has worked hard to decrease the noninterest expense, which has been high for the last few years. Noninterest expenses were reduced $67,000, or 7% compared to the first quarter of 1998. Salaries and employee benefits increased by 7%. Occupancy and equipment expenses were decreased by renting out to subtenants some of the Company's office space. Professional services costs increased with higher audit and tax fees accrued. Business promotion, supplies, courier services and other expense had reductions in cost. The largest decrease came in the insurance and assessments where the improvement in the quality of the bank helped reduce the premiums for FDIC insurance, regulatory examination, and other insurance. The ability of the bank to divest itself of all the other real estate owned, reduced the net operating cost of other real estate owned from $12,000 in 1998 to a recovery of $1,000 in costs in 1999. Provision for Credit Losses: Based upon management's assessment of the overall quality of the loan portfolio, and of external economic conditions the Bank felt that the current level in the reserve for credit losses was adequate an therefore made no provision to the credit loss reserve for the quarter. During the first quarter, the Bank recorded charge-offs of $137,000 while collecting recoveries on loans charged off of $11,000. The Bank's internally classified loans decreased from $1,990,000 at December 31, 1998 to $1,832,000 at March 31, 1999. Nonperforming loans decreased from $259,000 at December 31, 1998 to $182,000 at March 31, 1999 and the Company continued to have no other real estate owned. Based upon these factors and management's assessment of the overall quality of the loan portfolio, its internal migration analysis and economic conditions they felt the current level of the reserve for credit losses was adequate without the need for further provisions. ASSETS AND LIABILITIES The Company continued to focus on improving the level of earning assets as a percentage of assets. This ratio improved from 90.8% at March 31, 1998 to 91.5% at yearend to 92.3% at March 31, 1999. This came from a reduction in OREO, nonperforming loans and cash. We also decreased the amount of the overnight federal funds sold and moved the funds into higher yielding securities. Most of these were put into the available-for-sale portfolio for liquidity purposes. The loan portfolio also increased with the additions to the commercial loans. Most of these loans are floating rate loans tied to the Bank's prime rate. As was noted earlier the Company has sold all the OREO properties it had during 1998. Deposits for the quarter decreased slightly from the totals at yearend declining from $65,218,000 to $64,691,000 at March 31, 1999. Noninterest-bearing deposits declined by $955,000 while the interest-bearing deposits increased by $428,000. The Company normally has low to no deposit growth during the first quarter when its customers pay yearend expenses and tax bills. LIQUIDITY AND CAPITAL Asset/Liability Management The Company's Asset/Liability Committee is responsible for managing the risks associated with changing interest rates and their impact on earnings, as well as, the liquidity needs of the Company. Management monitors its 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 their credit needs as well as their 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 21% as of March 31, 1999 and the loan to deposit ratio was 72%. Interest rate risk management focuses on the maturity and repricing of interest 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. 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. The Company is asset sensitive and has been able to decrease its asset sensitivity during the last twelve month period by an increase in the investment portfolio and a lengthening of maturities. The Company's cumulative gap as a percent of total assets at March 31, 1999 was 35.7% Capital 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 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 risk-weighted assets required by the federal regulators is 4.0 percent and 6.0 percent to be well-capitalized. At March 31, 1999 the Company and the Bank had a risk based capital ratio of 17.0 percent, and a Tier 1 capital leverage ratio of 15.9 percent. YEAR 2000 READINESS DISCLOSURE The Company is well aware of the issues relating to the century date change and the impact on computer systems and business operations. The Company started its analysis of the problem in June 1997 when it sent letters to its vendors that supplied computer services to the Company on the status of their Year 2000 plans. All the mission critical vendors were well on their way with plans to make their products Year 2000 compliant. The Company then went on to develop its own Year 2000 plan. The Company's Year 2000 Plan (the Plan) was submitted to the Board of Directors for review in January 1998 and approved in February 1998. The Plan includes the steps necessary for the Company to become year 2000 compliant, as well as, the steps to be taken to check that the major borrowers and fund providers of the Company are also working to become compliant. The Company's main computer processing is supplied by the Fiserv CBS Service Bureau, who has notified the Company that its software has been modified to be year 2000 compliant and that it has been tested. The software is now fully operational and had been in use since the fourth quarter of 1998. The Company has tested its equipment and programs for compliance and has completed the upgrade of all critical systems. These systems are now year 2000 compliant. The costs to the Company were both capital costs for the purchase of new equipment and the expense for the maintenance and testing of computer software. These costs totaled approximately $105,000 through March 31, 1999 and the Company anticipates minimal costs during the remainder of 1999. The company has prepared a contingency plan to be implemented, if needed, to minimize any interruptions for our customers. This plan will be tested during the second quarter of 1999. 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 On March 30, 1999, proxy materials for 1999 Annual Meeting of Shareholders were mailed to all shareholders of record as of March 17, 1999. The meeting took place on April 26, 1999. Shareholders were asked to vote on the matters shown below. Of the total 3,826,819 shares outstanding and entitled to vote 3,220,536 shares were represented either in person or by properly executed proxies. The results of the voting on the matters are shown below: Matter 1. Election of Directors. To elect seven (7) persons to the board of directors to serve until the 2000 annual meeting of Shareholders and until their successors are elected and have been qualified. For Withhold Authority for Robert J. Abernethy 3,208,484 12,052 Craig C. Collette 3,208,484 12,052 Frank Jobe, M.D. 3,195,484 25,052 C. Thomas Mallos 3,208,484 12,052 Robert Oltman 3,208,484 12,052 Ann Pappas 3,195,484 25,052 Nick Patsaouras 3,208,484 12,052 Matter 2. Other Business. There was none. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K None. 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: May 12, 1999 Craig D. Collette ------------------- Craig D. Collette President and Chief Executive Officer Howard J. Stanke ------------------ Howard J. Stanke Executive Vice President and Chief Financial Officer EX-27 2
9 1000 U.S.DOLLARS 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1 4,581 41,168 3,640 0 5,477 11,693 11,634 46,479 607 73,869 64,691 0 480 0 0 0 13,646 0 73,869 871 251 66 1,188 338 338 850 137 0 911 57 57 0 0 62 .02 .02 7.09 121 31 0 0 733 137 11 607 607 0 607
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