-----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, R9DvdFfwErKmskDvjwb14ATCHErL0HuFqsZiL62dmqZOVZSJKBj3D+dgIug1qzYb pfeAlhpOHql2D/l8XOZWtA== 0000718446-99-000009.txt : 19991117 0000718446-99-000009.hdr.sgml : 19991117 ACCESSION NUMBER: 0000718446-99-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99754898 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 September 30, 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 November 120, 1999, there were 3,830,019 shares of no par Common Stock issued and outstanding.
Consolidated Statements of Financial Condition Marathon Bancorp and Subsidiary September 30, December 31, ASSETS 1999 1998 --------------- -------------- Cash and Due From Banks 6,704,000 5,074,000 Federal Funds Sold 3,525,000 4,175,000 Interest-Bearing Deposits with Financial Institutions 199,000 0 Investment Securities Securities Available for Sale 5,628,000 6,001,000 Securities Held to Maturity (approximate market value: 1999-$12,855,000; 1998-$14,306,000 13,088,000 14,291,000 --------------- -------------- 18,716,000 20,292,000 Loans 49,088,000 42,992,000 Less Allowance for Credit Losses (659,000) (733,000) --------------- -------------- NET LOANS 48,429,000 42,259,000 Premises and Equipment 334,000 346,000 Other Real Estate Owned 0 0 Cash Surrender Value of Life Insurance 1,329,000 1,280,000 Accrued Interest and Other Assets 1,203,000 974,000 --------------- -------------- TOTAL ASSETS $ 80,439,000 $ 74,400,000 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-Bearing 29,700,000 24,478,000 Interest-Bearing 41,402,000 40,740,000 --------------- -------------- TOTAL DEPOSITS 71,102,000 65,218,000 Accrued Interest and Other Liabilities 475,000 524,000 --------------- -------------- TOTAL LIABILITIES 71,577,000 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: 3,827,019 in 1999 and 3,820,819 in 1998 13,646,000 13,630,000 Net Unrealized Gain on Securities Available for Sale (150,000) (8,000) Accumulated Deficit (4,634,000) (4,964,000) --------------- -------------- Total Shareholders' Equity 8,862,000 8,658,000 --------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 80,439,000 $ 74,400,000 =============== ==============
Consolidated Statements of Income Marathon Bancorp and Subsidiary Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 -------------------- ------------------- -------------- ---------- INTEREST INCOME Interest and Fees on Loans $ 982,000 $ 956,000 $ 2,744,000 $2,827,000 Interest on Investment Securities - Taxable 262,000 218,000 768,000 562,000 Other Interest Income 64,000 124,000 205,000 354,000 -------------------- ------------------- -------------- ---------- TOTAL INTEREST INCOME 1,308,000 1,298,000 3,717,000 3,743,000 INTEREST EXPENSE Interest on Demand Deposits 8,000 9,000 25,000 30,000 Interest on Money Market and Savings 218,000 178,000 606,000 485,000 Interest on Time Deposits 127,000 194,000 402,000 520,000 Other Interest Expense - - - -------------------- ------------------- -------------- --------- TOTAL INTEREST EXPENSE 353,000 381,000 1,033,000 1,035,000 -------------------- ------------------- -------------- ---------- NET INTEREST INCOME 955,000 917,000 2,684,000 2,708,000 Provision for Credit Losses - - - - -------------------- ------------------- -------------- ---------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 955,000 917,000 2,684,000 2,708,000 NONINTEREST INCOME Service Charges and Fees on Deposits 73,000 64,000 217,000 180,000 Other Noninterest Income 109,000 35,000 187,000 106,000 Gain/Loss on sale of securities ( 9,000) - ( 9,000) - -------------------- ------------------- -------------- ---------- TOTAL NONINTEREST INCOME 173,000 99,000 395,000 286,000 -------------------- ------------------- -------------- ---------- NONINTEREST EXPENSE Salaries and Employee Benefits 451,000 369,000 1,309,000 1,154,000 Occupancy Expenses 130,000 133,000 396,000 403,000 Furniture and Equipment 33,000 32,000 91,000 90,000 Professional Services 43,000 34,000 97,000 77,000 Business Promotion 17,000 - 54,000 20,000 Stationery and Supplies 14,000 27,000 42,000 83,000 Data Processing Services 120,000 108,000 349,000 326,000 Messenger and Courier Services 16,000 20,000 52,000 66,000 Insurance and Assessments 31,000 50,000 94,000 223,000 Legal Fees and Costs 25,000 41,000 86,000 122,000 Net Loss on Sale of OREO - ( 2,000) - 41,000 Net Operating Cost of Other Real Estate Owned ( 1,000) 5,000 - 21,000 Other Expenses 72,000 87,000 188,000 224,000 -------------------- ------------------- -------------- ---------- TOTAL NONINTEREST EXPENSE 951,000 904,000 2,758,000 2,850,000 -------------------- ------------------- -------------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 177,000 112,000 321,000 144,000 Income Tax (benefit) ( 1,000) 2,000 ( 9,000) 3,000 -------------------- ------------------- -------------- ---------- NET INCOME $ 178,000 $ 110,000 $ 330,000 $ 141,000 ==================== =================== ============== ========== Per Share Data: Net Income (Loss) - Basic $ 0.05 $ 0.03 $ 0.09 $ 0.04 Net Income (Loss) - Diluted $ 0.05 $ 0.03 $ 0.09 $ 0.04 Book Value Per Share $ 2.32 $ 2.19
Consolidated Statements of Cash Flows Marathon Bancorp and Subsidiary Nine Months Ended September 30, ------------------------------------------------ 1999 1998 --------------------------------- ------------- OPERATING ACTIVITIES Net Income (Loss) $ 330,000 $ 141,000 Adjustments to Reconcile Net Gain (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization 100,000 109,000 Provision for Credit Losses - - Provision for OREO Losses - - Loss on Sale of Other Real Estate Owned - 44,000 Net Amortization of Premiums and Discounts on Investment Securities 37,000 ( 34,000) Loss on Sale of Securities Available for Sale 9,000 - Net Change in Deferred Loan Origination Fees 103,000 13,000 Net Change in Accrued Interest, Other Assets and Other Liabilities ( 526,000) ( 654,000) --------------------------------- ------------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 53,000 ( 381,000) INVESTING ACTIVITIES Net Decrease (Increase) in Interest-Bearing Deposits with Financial Institutions 199,000 - Purchases of Available for Sale Securities (3,771,000) (5,448,000) Purchases of Held to Maturity Securities (3,312,000) (12,782,000) Proceeds from Maturities of Available for Sale Securities 2,000,000 6,500,000 Proceeds from the Sale of Available for Sale Securities 991,000 - Proceeds from Maturities of Held to Maturity Securities 5,480,000 6,290,000 Net (Increase) Decrease in Loans (6,273,000) (430,000) Proceeds from Sale of Other Real Estate Owned - 1,634,000 Purchases of Furniture, Fixtures and Equipment (88,000) (58,000) --------------------------------- ------------- NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (4,774,000) (4,294,000) FINANCING ACTIVITIES Net Change in Demand Deposits, Money Market and Savings 8,648,000 (6,845,000) Net Change in Time Deposits (2,764,000) 4,484,000 Proceeds from Issuance of Common shares 16,000 23,000 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 5,900,000 (2,338,000) DECREASE IN CASH AND CASH EQUIVALENTS 1,179,000 (7,013,000) Cash and Cash Equivalents at Beginning of Year 9,249,000 16,027,000 --------------------------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,428,000 $ 9,014,000 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest Paid $ 988,000 $ 997,000 Income Taxes Paid (Refunded) $ ( 9,000) $ 3,000 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 6,200 16,000 16,000 Comprehensive Income: Net Income 330,000 330,000 330,000 Net Change in Unrealized Gain (Loss) on Available for-Sale Securities (142,000) (142,000) (142,000) -------------- Total Comprehensive Income $ 188,000 =============== --------------- --------------- ------------- ------------- ----------- Balance, September 30, 1999 3,827,019 $ 13,646,000 $ (4,634,000) $ (150,000) $ 8,862,000 =============== =============== ============= ============= ===========
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 September 30, 1999 and December 31, 1998, results of operations and changes in cash flows for the nine-month period ended September 30, 1999 and 1998. The results of operations for the nine-month period ended September 30, 1999 are not necessarily indicative of what the results of operations will be for the full year ending December 31, 1999. Certain reclassifications were made to prior years' presentations to conform to the current year. These reclassifications are of a normal recurring nature. (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 for the three-month period ended September 30th were 3,827,019 in 1999 and 3,820,656 in 1998 and for the nine-month period ended September 30th were 3,825,880 for 1999 and 3,816,379 for 1998. There was no dilution to change the basic average number of shares in any period leaving the diluted EPS 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 Net income for the nine-months ended September 30, 1999 increased $189,000 or 134% over the same period of 1998. The three-month net income was up $68,000 or 62% in 1999 versus1998. The per share earnings were also up, increasing to $0.09 for year-to-date 1999 versus $0.04 for 1998, while the third quarter 1999 per share earnings were $0.05 versus $0.03 in 1998. RESULTS OF OPERATIONS Net Interest Income Net interest income generated for the three months ended September 30, 1999 was up $38,000 or 4%. The decrease in interest on time deposits was the most significant item affecting the results. Interest and fees on loans were up for the quarter, due to the fact that we increased our prime rate by 50 basis points since June. The increase was based on the Federal Reserve Bank increasing the target rate on fed funds by the same amount. With the rate increase the year-to-date net interest income was only $24,000 less than 1998 recovering from the rate decrease during the second half of 1998. For the quarter the interest and fees on loans were up due to the increase in the loan portfolio as well as the increase in prime rate which affects about 40% of the loan portfolio. The interest on the investment portfolio also increased by $44,000 or 20% and was due to higher yields obtained on investments. Other interest income decreased because the investment in fed funds was decreased to fund the loan portfolio increase. Interest income earned year-to-date has been effected by the same factors, except that the loan portfolio increase has taken place mostly in the third quarter. The change in mix of deposits during the last year has helped to offset the rise in rates that were paid on deposits. Time deposits which are our highest cost of funds has decreased since the third quarter of 1998 while the interest cost that declined in the latter half of 1998 has increased back to the levels paid early in 1998. The rates paid on money market accounts as well as the average balances have increased causing the rise in interest paid. Noninterest Income Non-interest income has increased for both the quarter and the nine-month period. During the third quarter, there was a one-time recovery of $70,000 in service charges, fees and interest thereon from a corporation that had gone into receivership five years ago. Without that one-time recovery, other noninterest income increased 11% for the quarter and 10% for the nine-month period. Third quarter service charges and fees on deposit accounts increased 14% and also rose 21% for the nine-months ending September 1999. During the third quarter, the bank realized a loss on sale of a security swapped for a higher yielding agency security to improve future yield. Noninterest Expense Non-interest expenses increased by $47,000 or 5% for the third quarter. The main factor was the increased human resource costs for two new loan officers. The Bank increased its marketing costs with some direct mail programs and will be continuing to do additional marketing in the fourth quarter and into 2000. The bank decreased costs in stationary and supplies, courier services, insurance and legal costs. For the nine-month period non-interest costs declined $92,000 or 3% compared to 1998. Salaries and employee benefits were up from 1998 due to the increase in staff. Professional services increased with the hiring of and outside firm to do internal and policy and procedure auditing. Data processing costs are higher and include Y2K upgrading charges. Insurance and assessment costs have been reduced with the improved condition and quality of the Company. We now receive the lowest rates for insurance and regulatory assessment. The holding company reduced its expenses this year by changing its stock transfer and registrar agent. The Company changed from Chase Mellon Shareholder Services to U. S. Stock Transfer. This change cut our costs by approximately $5,000 per year. Provision for Credit Losses: This year the bank has made no provision for credit losses due to the low level of charge-offs and good recoveries for the year. Charge-offs for the year are $187,000 with only $50,000 since the end of the first quarter while recoveries are $113,000 for the year, with $94,000 in the third quarter. During 1998 charge-offs for the first nine months were $117,000 and loan recoveries were $107,000. Loans classified at September 30, 1999 as substandard or doubtful totaled $2,192,000 or 4.5% of loans compared to $1,919,000 or 4.2% at September 30, 1998. The current classified loans total 24.7% of capital. Loans past due 30 days or more at the end of the quarter were $600,000 with no loans past due 90 days or more and no loans on non-accrual. Based upon the current levels of classified and past due loans and management's assessment of the overall quality of the loan portfolio management has determined that the current level of reserve for credit losses is adequate. This does not mean that the bank may not need to increase reserves if the economy starts to decline or should problems arise with Y2K in the future that were not anticipated. ASSETS AND LIABILITIES The Company has had good asset growth since December 31, 1998 increasing by $6,039,000 or 8% with a large volume of the growth happening in the third quarter. Assets for the quarter increased 7%. Almost all of this growth has been in the loan portfolio, which has increased $6,096,000 or 14% since year-end. We have had good success in the real estate construction area and in commercial loans. Earlier in the year we had targeted the San Fernando Valley area of Los Angeles for loan production and deposits and have had success. In October the bank opened a loan production office there and we anticipate continuing growth from this office. With the loan portfolio increasing there has been no new investment in the securities portfolio although, maturing investments have been reinvested at better yields. The average in fed funds sold has stayed fairly constant and cash has increased somewhat with an increase in the demand deposit accounts and the increase in bank float that comes with it. The bank continues to have no other real estate owned. Deposits increased $5,884,000 or 9% since the end of 1998. The increase has been in the non-interest bearing deposit accounts, which has helped the bank to keep the cost of funds from increasing with the rising rate environment over the last six months. The mix of interest-bearing deposits has changed through the year. We have had a decrease in time deposits and an increase in our investors money market accounts. With time deposit rates being somewhat higher than the money market accounts this change in deposit mix also helped reduce our deposit costs. LIQUIDITY AND CAPITAL Asset/Liability Management Managing liquidity and the risks associated with interest rates and their impact on both income and the present value of equity is the responsibility of the Bank's Asset/Liability Committee. The committee monitors the liquidity position to assure that sufficient funds are available for the funding of assets as well as deposit fluctuations. Assets that are normally considered liquid are federal funds sold, available for sale investment securities and cash and funds due from banks. The Bank has backup fed fund lines with its correspondent banks and can borrow at the Federal Reserve Bank discount window. During the third quarter, the Bank was approved for membership in the Federal Home Loan Bank that gives us an additional source of liquidity if needed for loan growth. During the third quarter an increased deposit base funded the increase in the loan portfolio. 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 and understands that its business goals will create asset sensitivity. Due to the fact that the Bank has a large portfolio of noninterest bearing demand deposits the Company has historically been and will continue to be asset sensitive with a positive gap. The Company currently is asset sensitive but has been able to decrease its asset sensitivity during the last year by a lengthening of maturities in the investment portfolio and a decrease in time deposits. The Company's cumulative gap as a percent of total assets was 30.9% at September 30, 1999 down from 38.2% at June 30, 1999 and 39.3% at December 31, 1998. 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 Company's capital position is strong. The adequately capitalized risk-based capital ratio required by the federal regulators is 8.0% and the well capitalized ratio is 10.0%. At September 30, 1999 the Company and the Bank had a risk based capital ratio of 16.1% and a Tier 1 capital leverage ratio of 11.5% compared with a risk based ratio of 16.5% and a Tier 1 capital leverage ratio of 11.0% at September 30, 1998. The Company is under no special regulatory restrictions. YEAR 2000 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 (Y2K) 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 already modified and installed software that is Y2K compliant. The Company, and the user group to which it belongs, has finished testing the Fiserv software for all the critical dates and has had a third party review of the testing done by an outside audit firm. The Company has received year 2000 compliant software from all its vendors within a time frame that allowed for sufficient testing to insure year 2000 compliance. The Company has also tested its other non-critical software programs that have been modified for year 2000. A contingency plan to cover Y2K has been put in place and tested and we feel the Company is now Y2K ready. The Y2K costs to the Company have been both capital costs for the purchase of new equipment and the expense for the maintenance and testing of computer software. These costs have been expensed and others will be ongoing over the next few months, but they should not have a major impact on future earnings. 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 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: November 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. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 6,704 41,402 3,525 0 5,628 13,088 12,855 49,088 659 80,439 71,102 0 475 0 0 0 13,646 0 80,439 2,744 768 205 3,717 1,033 1,033 2,684 50 (9) 2,758 321 0 0 0 330 .09 .09 6.93 0 600 0 0 733 187 113 659 659 0 659
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