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, 2000

                           Commission File No. 0-18868

                         MARATHON FINANCIAL CORPORATION
                         ------------------------------
             (Exact name of registrant as specified in its charter)


          Virginia                                      54-1560968
--------------------------------                    -------------------
(State or other jurisdiction of             (I.R.S. employer 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            2,051,441                 8/10/00

<PAGE>
<TABLE>
PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements.

          The following  financial  statements  are provided at the page numbers
indicated.
<S> <C>
         Consolidated Statements of Condition as of
           June 30, 2000 and December 31, 1999.........................................3

         Consolidated Statements of Income for
           the  Quarter and the Six Months Ended June 30, 2000 and 1999................4

         Consolidated Statements of Changes in
         Shareholders Equity for the Six Months
           Ended June 30, 2000 and 1999................................................5

         Consolidated Statements of Cash Flow for the
           Six Months Ended June 30, 2000 and 1999.....................................6

         Notes to Consolidated Financial Statements..................................7-9


Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations................................................9-13



PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings............................................................12

Item 6.  Exhibits and Reports on Form 8-K..........................................12-13


         Signature....................................................................14


Exhibit 11............................................................................15

Exhibit 27............................................................................16
</TABLE>
                                           2
<PAGE>
<TABLE>
                                   MARATHON FINANCIAL CORPORATION & SUBSIDIARY

                                       CONSOLIDATED STATEMENTS OF CONDITION

                                                      as of

                                       June 30, 2000 and December 31, 1999

<CAPTION>

          ASSETS
                                                                         6/30/00                       12/31/99
                                                                         -------                       --------
<S>                                                                     <C>                           <C>
Cash and due from banks                                                 $6,372,742                    $8,011,673
Federal funds sold                                                      10,394,000                     6,616,000
Securities (fair value:  2000, $12,282,537 and
  1999, $10,564,216)                                                    12,461,352                    10,727,548
Loans held for resale                                                      438,084                             0
Loans, net                                                              82,175,233                    74,526,925
Bank premises and equipment, net                                         2,849,786                     2,591,033
Accrued interest receivable                                                607,407                       534,911
Other real estate                                                          165,095                       183,218
Other assets                                                               586,061                       493,870
                                                                     -------------                 -------------

          Total assets                                               $ 116,049,760                 $ 103,685,178
                                                                     =============                 =============

          LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
  Deposits:
     Non-interest bearing demand deposits                             $ 18,103,893                  $ 12,940,831
     Savings and interest bearing demand deposits                       33,494,923                    30,002,843
     Time deposits                                                      53,746,633                    50,398,868
                                                                     -------------                 -------------
           Total deposits                                             $105,345,449                  $ 93,342,542
     Interest expense payable                                              161,062                       147,164
     Accounts payable and accrued expenses                                 217,638                       348,075
     Capital lease payable                                                 214,754                       218,036
     Dividends Payable                                                           0                       184,180
                                                                     -------------                 -------------
           Total liabilities                                          $105,938,903                  $ 94,239,997
                                                                     -------------                 -------------


SHAREHOLDERS' EQUITY
  Preferred stock, Series A, 5% non-cumulative, no par
    value: 1,000,000 shares authorized and unissued                       $      0                     $       0
  Common stock, $1 par value; 20,000,000 shares
    authorized; 2000, 2,051,441 and 1999, 2,046,441 shares
    issued and outstanding                                               2,051,441                     2,046,441
  Capital surplus                                                        7,770,987                     7,750,987
  Retained earnings (deficit)                                              423,591                     (222,155)
  Accumulated other comprehensive income (loss)                           (135,162)                     (130,092)
                                                                     -------------                 -------------
        Total shareholders' equity                                    $ 10,110,857                   $ 9,445,181
                                                                     -------------                 -------------

        Total liabilities and shareholders' equity                   $ 116,049,760                 $ 103,685,178
                                                                     =============                 =============

                           See Accompanying Notes to Consolidated Financial Statements
</TABLE>


                                                        3
<PAGE>
<TABLE>
                                             MARATHON FINANCIAL CORPORATION & SUBSIDIARY
                                                  CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>

                                                                       For the Six Months                   For the Quarter
                                                                          Ended June 30,                     Ended June 30,
                                                                       2000             1999              2000             1999
                                                                       ----             ----              ----             ----
Interest and dividend income:
<S>                                                                 <C>             <C>                <C>             <C>
  Interest and fees on loans                                        $3,879,540      $ 3,536,894        $2,003,475      $ 1,822,599
  Interest on investment securities:
     Taxable                                                           156,442          125,392            80,899           58,098
     Non-taxable                                                        19,432              152            10,015              152
  Interest and dividends on securities available for sale:
     Taxable                                                           127,411          124,003            65,045           61,180
     Non-taxable                                                        11,013            6,052             5,422            4,886
     Dividends taxable                                                  19,120           15,368            13,176           11,350
  Interest on federal funds sold                                       303,468          170,525           173,237           80,941
                                                                   -----------      -----------        ----------       ----------
       Total interest and dividend income                           $4,516,426      $ 3,978,386        $2,351,269       $2,039,206
                                                                   -----------      -----------        ----------       ----------

Interest expense:
  Interest on deposits                                             $ 1,881,795      $ 1,653,344         $ 972,906        $ 829,804
  Interest on capital lease obligations                                  8,667            9,013             4,317            4,539
                                                                   -----------      -----------        ----------       ----------
       Total interest expense                                      $ 1,890,462      $ 1,662,357         $ 977,223        $ 834,343
                                                                   -----------      -----------        ----------       ----------

      Net interest income                                          $ 2,625,964      $ 2,316,029        $1,374,046       $1,204,863

Provision for loan losses                                              143,400          115,000            70,000           55,000
                                                                   -----------      -----------        ----------       ----------
      Net interest income after provision for loan losses          $ 2,482,564      $ 2,201,029        $1,304,046       $1,149,863
                                                                   -----------      -----------        ----------       ----------

Other income:
  Service charges on deposit accounts                                $ 384,066        $ 372,901         $ 203,298        $ 192,164
  Commissions and fees                                                  18,512           13,993             6,859            8,132
  Other                                                                 25,780           27,723            15,042           15,227
                                                                   -----------      -----------        ----------       ----------
       Total other income                                            $ 428,358        $ 414,617         $ 225,199        $ 215,523
                                                                   -----------      -----------        ----------       ----------

Other expenses:
  Salaries and employee benefits                                      $945,825        $ 922,794          $477,279        $ 463,613
  Net occupancy expense of premises                                    111,963          109,224            55,007           54,401
  Furniture and equipment                                              157,059          186,065            83,419           99,955
  Legal and professional                                                67,601           36,707            49,386           18,660
  Stationery and supplies                                               94,616           79,140            52,014           45,808
  Postage                                                               65,928           55,864            34,328           28,348
  Marketing                                                             39,100           38,902            22,020           24,805
  Directors' fees                                                       63,300           44,600            34,125           19,500
  ATM expenses                                                          99,490           76,344            48,770           45,297
  Overdraft charge-offs                                                  1,986           58,544            11,637           38,902
  Other operating expenses                                             299,096          242,658           131,351          129,921
                                                                   -----------      -----------        ----------       ----------
       Total other expenses                                        $ 1,945,964      $ 1,850,842         $ 999,336        $ 969,210
                                                                   -----------      -----------        ----------       ----------



Income before income taxes                                           $ 964,958        $ 764,804         $ 529,909        $ 396,176
Provision for income tax                                               319,213          266,255           176,897          134,115
                                                                   -----------      -----------        ----------       ----------

       Net income                                                    $ 645,745        $ 498,549         $ 353,012        $ 262,061
                                                                   ===========      ===========        ==========       ==========

  Earnings per share, basic                                            $   .31          $   .24           $   .17          $   .13
                                                                   ===========      ===========        ==========       ==========

  Earnings per share, assuming dilution                                $   .31          $   .24           $   .17          $   .13
                                                                   ===========      ===========        ==========       ==========

                                     See Accompanying Notes to Consolidated Financial Statements
</TABLE>

                                                                 4
<PAGE>
<TABLE>
                                             MARATHON FINANCIAL CORPORATION & SUBSIDIARY

                                            STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                           For the Six Months Ended June 30, 2000 and 1999

<CAPTION>

                                                                                     Accumulated
                                                                     Retained          Other                               Total
                                         Common        Capital       Earnings       Comprehensive     Comprehensive     Shareholders
                                         Stock         Surplus       (Deficit)      Income/(Loss)         Income           Equity
                                         -----         -------       ---------      -------------         ------           ------

<S>                                    <C>           <C>            <C>               <C>                  <C>           <C>
Balance, December 31, 1998             $2,063,186    $7,849,522     $(1,149,567)      $   26,972                         $8,790,113
   Comprehensive income:
      Net income                                                        498,549                           $498,549          498,549
      Other comprehensive income,
         unrealized (loss) on
         securities available for sale
         (net of tax $55,126)                                                           (107,008)         (107,008)        (107,008)
                                                                                                          --------
   Total comprehensive income                                                                             $391,541
                                                                                                          ========
   Issuance of common stock -
      exercise of stock options
        (500 shares)                          500         2,000                                                               2,500

   Acquisition of common stock
      (8,500 shares)                       (8,500)      (51,758)                                                            (60,258)
                                       ----------    ----------    ------------        ---------                         ----------

Balance, June 30, 1999                 $2,055,186    $7,799,764    $   (651,018)       $ (80,036)                        $9,123,896
                                       ==========    ==========    =============       =========                         ==========



                                                                                     Accumulated
                                                                     Retained          Other                               Total
                                         Common        Capital       Earnings       Comprehensive     Comprehensive     Shareholders
                                         Stock         Surplus       (Deficit)      Income/(Loss)         Income           Equity
                                         -----         -------       ---------      -------------         ------           ------

Balance, December 31, 1999             $2,046,441    $7,750,987       $(222,154)      $ (130,092)                        $9,445,182
   Comprehensive income:
      Net income                                                        645,745                           $645,745          645,745
      Other comprehensive income,
         unrealized (loss) on
         securities available for sale                                                    (5,070)           (5,070)          (5,070)
          (net of tax $2,612)
   Total comprehensive income                                                                            $ 640,675
                                                                                                         =========

   Issuance of common stock -
      exercise of stock options
        (5,000 shares)                      5,000        20,000            ----                                              25,000
                                       ----------    ----------   -------------        ---------                        -----------


Balance, June 30, 2000                 $2,051,441    $7,770,987   $     423,591        $(135,162)                       $10,110,857
                                       ==========    ==========   =============        =========                        ===========

                                                  See Accompanying Notes to Consolidated Financial Statements
</TABLE>


                                                                 5
<PAGE>
<TABLE>
                                      MARATHON FINANCIAL CORPORATION & SUBSIDIARY
                                          CONSOLIDATED STATEMENTS OF CASH FLOW
                                    For the Six Months Ended June 30, 2000 and 1999
<CAPTION>

                                                                                  2000                         1999
                                                                                  ----                       ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                              <C>                         <C>
   Net income                                                                    $645,745                    $498,549
   Adjustments to reconcile net income
     To net cash provided by operating activities:
        Amortization                                                               25,411                      30,557
        Depreciation                                                              118,685                     116,567
        Net discount accretion on securities                                        4,709                      (6,459)
        Provision for loan loss                                                   143,400                      55,000
        Deferred tax (benefit)                                                        ---                     (31,067)
        Origination of loans available for sale                                (2,136,272)                 (4,090,833)
        Proceeds from sale of loans available for sale                          1,698,488                   4,750,608
        Loss on sale of other real estate                                          10,264                          --
        Changes in assets and liabilities:
          (Increase) in other assets                                             (114,989)                    (30,239)
          (Increase) in accrued interest receivable                               (72,497)                    (26,831)
          (Decrease) in accounts payable and accrued expenses                    (130,437)                    (21,627)
          Increase in interest expense payable                                     13,898                       3,441
          (Increase) in other real estate                                            ----                    (165,095)
                                                                             ------------                 -----------
                Net cash provided by operating activities                        $206,405                  $1,082,571
                                                                             ------------                 -----------


CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturities on securities held to maturity                     $     ----                 $ 1,102,889
   Proceeds from maturities on securities available for sale                       50,812                     216,983
   Purchase of securities available for sale                                     (810,526)                   (666,920)
   Purchase of securities held to maturity                                       (986,481)                   (150,000)
   Net (increase) in loans                                                     (7,792,008)                 (7,536,124)
   Purchase of bank premises and equipment                                       (377,437)                    (49,809)
   Proceeds from sale of other real estate                                          7,859                        ----
                                                                             ------------                 -----------
          Net cash used in investing activities                               $(9,907,781)                $(7,082,981)
                                                                             ------------                 -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in demand deposits,
      NOW accounts and savings accounts                                       $ 8,655,142                 $ 6,056,575
   Net increase in certificates of deposits                                     3,347,765                   4,514,729
   Principal payments on capital lease payable                                     (3,282)                     (3,030)
   Cash dividends paid                                                           (184,180)                          0
   Proceeds from issuance of common stock                                          25,000                       2,500
   Purchase of common stock                                                          ----                     (60,258)
                                                                             ------------                 -----------
             Net cash provided by financing activities                        $11,840,445                 $10,510,516
                                                                             ------------                 -----------

Increase in cash and cash equivalents                                         $ 2,139,069                  $4,510,106
          Beginning                                                            14,627,673                  12,814,428
                                                                             ------------                 -----------
          Ending                                                             $ 16,766,742                 $17,324,534
                                                                             ============                 ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash payments for:
        Interest                                                               $1,876,564                 $ 1,658,916
                                                                             ============                 ===========

        Income taxes                                                            $ 362,820                   $  82,516
                                                                             ============                 ===========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
   Unrealized (loss) on securities available for sale                          $   (7,682)                $  (162,134)
                                                                             ============                 ===========

                              See Accompanying Notes to Consolidated Financial Statements
</TABLE>

                                                           6
<PAGE>
                   MARATHON FINANCIAL CORPORATION & SUBSIDIARY

                   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, 2000 and December 31, 1999, and the result of operations
         and cash flows for the six months  ended  June 30,  2000 and 1999.  The
         statements  should be read in  conjunction  with the Notes to Financial
         Statements  included in the Company's  Annual Report for the year ended
         December 31, 1999.

2.       The results of operations  for the six month period ended June 30, 2000
         and 1999 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, 2000
         and December 31, 1999 are:
<TABLE>
<CAPTION>
                                                                June 30, 2000           December 31, 1999
         Held to Maturity                                      Amortized Cost              Amortized Cost
         ----------------                                      --------------              --------------





         <S>                                                       <C>                         <C>
         US government & federal agencies                          $5,283,963                  $4,687,181
         Obligations of state and political subdivisions            1,348,529                     959,610
                                                                   ----------                  ----------
                                                                   $6,632,492                  $5,646,791
                                                                   ==========                  ==========


                                                                   Fair Value                  Fair Value
                                                                   ----------                  ----------


         US government & federal agencies                          $5,127,876                  $4,541,063
         Obligations of state and political subdivisions            1,325,982                     942,396
                                                                   ----------                  ----------
                                                                   $6,453,858                  $5,483,459
                                                                   ==========                  ==========


<CAPTION>
                                                                June 30, 2000           December 31, 1999
         Available for Sale                                    Amortized Cost              Amortized Cost
         ------------------                                    --------------              --------------

         US government & federal agencies                          $4,411,414                  $4,115,468
         Mortgage-backed securities                                    14,228                      15,042
         Obligations of state & political subdivisions                777,479                     567,007
         Other                                                        830,350                     580,350
                                                                   ----------                  ----------
                                                                   $6,033,471                  $5,277,867
                                                                   ==========                  ==========

<CAPTION>
                                                                   Fair Value                  Fair Value
                                                                   ----------                  ----------

         US government & federal agencies                          $4,229,486                  $3,944,510
         Mortgage-backed securities                                    14,703                      15,765
         Obligations of state & political subdivisions                754,321                     540,132
         Other                                                        830,350                     580,350
                                                                   ----------                  ----------
                                                                   $5,828,860                  $5,080,757
                                                                   ==========                  ==========
</TABLE>

                                       7

<PAGE>

4.       The consolidated entity's loan portfolio is composed of the following:
<TABLE>
<CAPTION>
                                                          June 30, 2000           December 31, 1999
                                                          -------------           -----------------

         <S>                                                <C>                         <C>
         Commercial                                         $46,790,956                 $40,374,011
         Real estate-mortgage                                14,076,910                  14,353,721
         Real estate-construction                            10,971,843                   9,759,118
         Installment loans to individuals                    11,170,707                  10,809,485
                                                            -----------                 -----------
                                                            $83,010,416                 $75,296,335
         Less:  allowance for loan losses                       835,183                     769,410
                                                            -----------                 -----------
         Loans, net                                         $82,175,233                 $74,526,925
                                                            ===========                 ===========

         The  company  had  non-accrual  loans,  which  were  excluded  from the
         impaired loan disclosure  under FASB 114, which amounted to $244,042 on
         June 30, 2000 and $40,541 on December 31, 1999.

5.       Reserve for Loan Losses:
<CAPTION>
                                                             June 30, 1999           December 31, 1999
                                                             -------------           -----------------

         Balance, beginning                                       $769,410                    $754,597
         Provision charged to operating expense                    143,400                     260,000
         Recoveries                                                 53,762                      27,505
         Loan losses charged to the allowance                     (131,389)                   (272,692)
                                                                 ---------                   ---------
         Balance, ending                                          $835,183                    $769,410
                                                                 =========                   =========


6.       Weighted average shares outstanding computation

         The  following  shows the  weighted  average  number of shares  used in
         computing  basic earnings per share and the effect on weighted  average
         number of shares of diluted potential common stock.
<CAPTION>
                                                         6/30/00                       6/30/99
                                                         -------                       -------
                                                              Per Share                     Per Share
                                                 Shares         Amount          Shares        Amount
                                                 ------         ------          ------        ------
         Basic earnings per share              2,051,102        $  .31        2,060,097       $  .24
                                                                ======                        ======

         Effect of dilutive securities:
              Stock options                       16,076                         38,167
                                               ---------        ------        ---------       ------
         Diluted earnings per share            2,067,178        $  .31        2,098,264       $  .24
                                               =========        ======        =========       ======
</TABLE>


7.       New Accounting Pronouncements

         In June 1998,  the FASB  issued  Statement  No.  133,  "Accounting  for
         Derivative  Instruments and Hedging  Activities ", which was originally
         required  to be  adopted  in  years  beginning  after  June  15,  1999.
         Statement  No.  137,  issued in June  1999,  subsequently  amended  the
         effective date of Statement No. 133 to years  beginning  after June 15,
         2000.  Statement No. 133 permits early  adoption as of the beginning of
         any fiscal  quarter  after its  issuance.  The Bank has not  determined
         whether to adopt the new statement  early.  This Statement will require
         the Bank to  recognize  all  derivatives  on the balance  sheet at fair
         value.  Because  the Bank does not  currently  employ  such  derivative
         instruments and does not intend to do so in the future, management does
         not  anticipate  that the adoption of the new  Statement  will have any
         effect on the Bank's earnings or financial position.

                                       8

<PAGE>

8.       Proposed Merger

               Rockingham  Heritage  Bank  (NASDAQ  Small  Cap:  RKNG)  and  the
               Corporation   have   approved  a  definitive   merger  of  equals
               agreement.  This  transaction  is  subject  to  the  approval  of
               regulatory  authorities  and  shareholders  of both MFC and RKNG.
               Under the terms of the merger  agreement,  the  existing  holding
               company  of  Marathon  Financial  Corporation  will be  utilized,
               changing  its  name  to  Premier   Community   Bankshares,   Inc.
               (Premier).  Marathon  and  Rockingham  will  operate as  separate
               banks.  Rockingham Heritage shareholders will receive 1.58 shares
               of Premier  common  stock for each share of  Rockingham  Heritage
               common  stock.  The  transaction  will be a tax-free  exchange of
               shares  and  be  accounted  for as a  pooling-of-interest.  It is
               anticipated  that the merger will become  effective  in the third
               quarter of 2000.  As of  December  31,  1999,  RKNG had assets of
               $101.1million,  net loans of $77.9  million,  total  deposits  of
               $87.8 million and total shareholders' equity of $11.6 million.


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations



         General
         -------

         Marathon  Financial  Corporation ("the  Corporation") is a bank holding
         company that was  incorporated  under the laws of the  Commonwealth  of
         Virginia  in June 1989.  The  Corporation  owns all of the  outstanding
         stock of its sole subsidiary, The Marathon Bank ("the Bank"), which was
         incorporated  in August 1987 and acquired by the Corporation in October
         1990,  in  accordance  with  the  Plan  of  Exchange  approved  by  the
         shareholders of the Bank in June 1990. The Corporation is headquartered
         in Frederick County, Virginia. The Corporation is a holding company for
         the Bank and is not  directly  engaged  in the  operation  of any other
         business.

         The Bank is engaged in the business of offering banking services to the
         general public. It offers checking accounts, savings and time deposits,
         and commercial, real estate, personal, home improvement, automobile and
         other installment and term loans. It also offers travelers checks, safe
         deposit,  collection,  notary public and other  customary bank services
         (with the  exception  of trust  services) to its  customers.  The three
         principal  types of loans  made by the Bank  are:  (1)  commercial  and
         industrial  loans;  (2) real estate loans; and (3) loans to individuals
         for household, family and other consumer expenditures.

         Total Assets

         Total  assets for the first six months  ending June 30, 2000  increased
         $12,364,582  or 11.9% since  December 31, 1999.  This increase in total
         assets  resulted from a $7,648,308 or 10.3%  increase in net loans,  an
         increase in federal  funds sold of  $3,778,000 or 57.1% and an increase
         of  $1,733,804 or 16.2% in  securities.  This equates to an increase in
         earning  assets of  $13,598,196  or 14.8% in the six months ending June
         30, 2000.


                                       9
<PAGE>
         Allowance for Loan Losses
         -------------------------
         The allowance for loan losses, as of June 30, 2000, was $835,183.  This
         is an increase of $65,773 or 8.5% since  December 31, 1999.  This gives
         the bank a 1.00%  allowance for loan losses to total loans.  Management
         has  analyzed  the  reserve  for loan  losses and feels the  reserve is
         adequate.

         Liabilities
         -----------
         Total  deposits for the six months  ending June 30, 2000,  increased by
         $12,002,907  or 12.9% since  December  31, 1999.  Non-interest  bearing
         deposits increased by $5,163,062 or 39.9% and interest bearing deposits
         increased  by  $6,839,845  or  8.5%.   Non-interest   bearing  deposits
         represented 17.2% of total deposits as of June 30, 2000, as compared to
         13.9% at December 31,  1999.  Savings and money  market  deposits  were
         31.8% of total deposits at the end of the second  quarter,  which was a
         slight decrease from 32.1% as of December 31, 1999.

         Shareholders' Equity
         --------------------
         Total equity has increased by $665,676 or 7.0% since December 31, 1999.
         The increase was due to a first half profit of $645,745 and an increase
         in unrealized losses on securities  available for sale of $5,070 net of
         tax. An additional  $25,000 of capital was raised  through the exercise
         of stock options  equating to 5000  additional  shares of common stock.
         The primary capital to assets ratio is 8.8%.

         Interest Income
         ---------------
         Interest  income totaled  $4,516,426 for the six months ending June 30,
         2000,  $538,040  or 13.5%  higher  than the six months  ending June 30,
         1999. This is a direct result of the increase in earning assets,  which
         increased the interest and fee income.

         Interest Expense
         ----------------
         Total  interest  expense  for the six months  ending  June 30, 2000 was
         $1,890,462,  $228,105 or 13.7%  higher than the six months  ending June
         30, 1999.  Interest on deposits increased by $228,451 or 13.8% over the
         same  period in 1999.  This was the  result of an overall  increase  in
         deposits.  Interest on capital leases for the quarter was $8,667,  $346
         or 3.8% less than the same period in 1999.

         Net Interest Income
         -------------------
         Net  interest  income  for the six  months  ending  June  30,  2000 was
         $2,625,964,  $309,935 or 13.4%  higher than the six months  ending June
         30, 1999. This was the result of an increase in our earning assets. The
         net interest margin held steady in the first half of 2000 at 5.22%. The
         average for 1999 was 5.20%.


                                       10
<PAGE>
         Other Income
         ------------
         Total  other  income  for the six  months  ending  June  30,  2000  was
         $428,358,  $13,741 or 3.3% higher than the same period in 1999. This is
         a result of an  increase  in the  demand  deposit  accounts,  which has
         increased our service charge income.

         Other Expenses
         --------------
         Total  other  expenses  for the six months  ending  June 30,  2000 were
         $1,945,964,  $95,122 or 5.1% higher than the six months ending June 30,
         1999.  Salary  expense  increased  $23,031  or  2.5%,  postage  expense
         increased  $10,064 or 18.0%,  furniture and equipment expense decreased
         by  $29,006  or  15.6%,  ATM  expense  increased  $23,146  or 30.3% and
         stationery and supplies increased $15,476 or 19.6% over the same period
         in 1999.  Directors' fees increased  $18,700 or 41.9%. This increase is
         due to an increased  number of meetings  regarding the pending  merger.
         Legal and professional  costs were $67,601,  an increase of 84.2%. This
         increase  was due to the pending  merger.  The Bank  experienced  a net
         recovery of $1,986 from overdrafts for the first half. This compares to
         a $58,544 net chargeoff  for the same period of 1999.  The net increase
         in other  expenses  is in part a result of  handling  the growth of the
         bank and the  costs  involved  in  processing  an  increased  number of
         accounts  and  transactions.  In  spite  of  rising  costs  in  certain
         categories,  The Bank's  efficiency  ratio  improved from 67.7% for the
         first half of 1999 to 63.4% for the same period of 2000.

         Net Income
         ----------
         Net  income  for the six  months  ending  June 30,  2000  was  $645,745
         compared to $498,549 in the same period in 1999. This is an increase of
         $147,196  or 29.5%  over the same  period of 1999.  The  provision  for
         income tax increased $52,958 from $266,255 in 1999 to $319,213 in 2000.
         The  return  on assets  was  1.18% for the first six  months of 2000 as
         compared to 1.09% for the year of 1999.  For the first half of 2000 the
         return on equity was 13.31% up from the 1999 annual percent of 12.20%.

         Liquidity and Capital Resources
         -------------------------------
         The liquidity  position of the bank has been consistently less than its
         peers  because  of a high loan to deposit  ratio.  This was a result of
         management  maximizing  earning  assets to  increase  the net income in
         order to  eliminate  the  negative  balance in retained  earnings.  The
         deficit has now been  eliminated and management has allowed the loan to
         deposit ratio to decline to a level that is closer to its peers.  As of
         June 30, 2000, the loan to deposit ratio was 78.79%.

                                       11
<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

               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 on
                    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 16, 1996 (File No. 333-08995).

                    Exhibit 10.4 Lease between The Marathon Bank and the Lessor,
                    James  Butcher  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 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,   incorporated   herein   by   reference   to  the
                    Corporation's  Annual Report on Form 10-K for the year ended
                    December 31, 1997 (File No. 0-18868).

                    Exhibit  10.6 1996  Long-Term  Incentive  Plan  incorporated
                    herein by reference as to the Corporation's  Proxy Statement
                    for 1997 Annual Meeting of Stockholders filed April 7, 1997.


                                       12
<PAGE>

               11.  Statement re computation of per share earnings

               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

               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

               99.  Additional Exhibits - None

(b)      Reports on Form 8-K - None


                                       13
<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, 2000                             /s/ Donald L. Unger
                                         --------------------------------------
                                         DONALD L. UNGER
                                         PRINCIPAL EXECUTIVE OFFICER



DATE:  June 30, 2000                               /s/ Frederick A. Board
                                         --------------------------------------
                                         FREDERICK A. BOARD
                                         PRINCIPAL FINANCIAL OFFICER



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