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:

                                 March 31, 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                  3/31/00


<PAGE>

PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements.

          The following  financial  statements  are provided at the page numbers
indicated.

         Consolidated Statements of Condition as of
         March 31, 2000 and December 31, 1999..................................3

         Consolidated Statements of Income for
         the Three Months Ended March 31, 2000 and 1999........................4

         Consolidated Statements of Changes in
         Stockholders Equity for the Three Months
         Ended March 31, 2000 and 1999.........................................5

         Consolidated Statements of Cash Flow for the
         Three Months Ended March 31, 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......................................9-12



PART II.  OTHER INFORMATION

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

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


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

                                       2
<PAGE>
<TABLE>
                                 MARATHON FINANCIAL CORPORATION & SUBSIDIARY

                                    CONSOLIDATED STATEMENTS OF CONDITION

                                                    as of

                                    March 31, 2000 and December 31, 1999
<CAPTION>


          ASSETS
                                                                    3/31/00                       12/31/99
                                                                    -------                       --------
<S>                                                              <C>                            <C>
Cash and due from banks                                          $  5,338,800                   $ 8,011,673
Federal funds sold                                                 12,000,000                     6,616,000
Securities (fair value:  2000, $11,414,315 and
  1999, $10,564,216)                                               11,604,219                    10,727,548
Loans held for resale                                                 176,316                             0
Loans, net                                                         79,230,677                    74,526,925
Bank premises and equipment, net                                    2,765,810                     2,591,033
Accrued interest receivable                                           567,147                       534,911
Other real estate                                                     165,095                       183,218
Other assets                                                          625,737                       493,870
                                                                 ------------                  ------------

     Total assets                                                $112,473,801                  $103,685,178
                                                                 ============                  ============

          LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
  Deposits:
     Noninterest-bearing demand deposits                         $ 16,055,795                   $12,940,831
     Savings and interest bearing demand deposits                  32,463,412                    30,002,843
     Time deposits                                                 53,471,305                    50,398,868
                                                                 ------------                  ------------
           Total deposits                                        $101,990,512                   $93,342,542
     Interest expense payable                                         163,821                       147,164
     Accounts payable and accrued expenses                            350,063                       348,075
     Capital lease payable                                            216,411                       218,036
     Dividends Payable                                                      0                       184,180
                                                                 ------------                  ------------
           Total liabilities                                     $102,720,807                   $94,239,997
                                                                 ------------                  ------------

STOCKHOLDERS' 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                                                                                 7,750,987
                                                                    7,770,987
  Retained earnings (deficit)                                          70,579                      (222,155)
  Accumulated other comprehensive income (loss)                      (140,013)                     (130,092)
                                                                 ------------                  ------------
        Total stockholders' equity                                $ 9,752,994                   $ 9,445,181
                                                                 ------------                  ------------


        Total liabilities and stockholders' equity               $112,473,801                  $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 Three Months
                                                                                  Ended March 31,
                                                                         2000                        1999
                                                                         ----                        ----
<S>                                                                   <C>                         <C>
Interest and dividend income:
  Interest and fees on loans                                          $1,876,065                  $1,714,295
  Interest on investment securities held for maturity:
     Taxable                                                              75,543                      67,294
     Nontaxable                                                            9,418                           0
  Interest and dividends on securities available for sale:
     Taxable                                                              62,365                      62,997
     Nontaxable                                                            5,591                         992
     Dividends                                                             5,944                       4,018
  Interest on federal funds sold                                         130,231                      89,584
                                                                      ----------                  ----------
       Total interest and dividend income                             $2,165,157                  $1,939,180
                                                                      ----------                  ----------

Interest expense:
  Interest on deposits                                                $  908,889                   $ 823,540
  Interest on leases payable                                               4,350                       4,474
                                                                      ----------                  ----------
       Total interest expense                                         $  913,239                   $ 828,014
                                                                      ----------                  ----------

      Net interest income                                             $1,251,918                  $1,111,166


Provision for loan losses                                                 73,400                      60,000
                                                                      ----------                  ----------
      Net interest income after provision for loan losses             $1,178,518                  $1,051,166
                                                                      ----------                  ----------

Other Income:
  Service charges on deposit accounts                                  $ 180,768                   $ 180,737
  Commissions and fees                                                    11,653                       5,861
  Other                                                                   10,738                      12,496
                                                                      ----------                  ----------
       Total other income                                              $ 203,159                   $ 199,094
                                                                      ----------                  ----------

Other expenses:
  Salaries and employee benefits                                       $ 468,547                   $ 459,181
  Net occupancy expense of premises                                       56,956                      54,823
  Furniture and equipment                                                 73,641                      86,110
  Legal and professional                                                  18,215                      18,047
  Stationery and supplies                                                 42,602                      33,332
  Postage                                                                 31,600                      27,516
  Marketing                                                               17,079                      14,097
  Telephone                                                               28,144                      14,720
  Directors' fees                                                         29,175                      25,100
  ATM expenses                                                            50,720                      31,047
  Other operating expenses                                               129,949                     117,659
                                                                      ----------                  ----------
       Total other expenses                                             $946,628                   $ 881,632
                                                                      ----------                  ----------

       Income before income taxes                                       $435,049                   $ 368,628
Provision for income tax expense                                         142,316                     132,140
                                                                      ----------                  ----------
       Net income                                                      $ 292,733                   $ 236,488
                                                                      ==========                  ==========

  Net income per share, basic and assuming dilution                      $   .14                     $   .11
                                                                      ==========                  ==========

                         See Accompanying Notes to Consolidated Financial Statements
</TABLE>
                                                     4
<PAGE>
<TABLE>
                                             MARATHON FINANCIAL CORPORATION & SUBSIDIARY

                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                         For the Three Months Ended March 31, 2000 and 1999
<CAPTION>
                                                                                    Accumulated
                                                                    Retained           Other                              Total
                                          Common       Capital      Earnings       Comprehensive     Comprehensive     Stockholders
                                          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                                                      236,488                           $236,488         236,488
      Other comprehensive income,
         unrealized (loss) on
         securities available for sale
         (Net of Tax, $22,412)                                                          (43,507)         (43,507)        (43,507)
                                                                                                        --------

   Total comprehensive income                                                                           $192,981
                                                                                                        ========
   Issuance of common stock -
      exercise of stock options
        (500 shares)
                                              500        2,000                                                             2,500

   Acquisition of common stock
      (3,000 shares)                       (3,000)     (18,752)          ----              ----                          (21,752)
                                       ----------   ----------    -----------        ----------                       ----------
Balance, March 31, 1999                $2,060,686   $7,832,770    $  (913,079)        $ (16,535)                      $8,963,842
                                       ==========   ==========    ===========         ==========                      ==========

<CAPTION>
                                                                                    Accumulated
                                                                    Retained           Other                              Total
                                          Common       Capital      Earnings       Comprehensive     Comprehensive     Stockholders
                                          Stock        Surplus      (Deficit)          Loss              Income           Equity
                                          -----        -------      ---------          ----              ------           ------

Balance, December 31, 1999              $2,046,441    $7,750,987   $(222,154)         $(130,092)                      $9,445,182
   Comprehensive income:
      Net income                                                     292,733                            $292,733         292,733
      Other comprehensive income,
         unrealized (loss) on
         securities available for sale
         (Net of Tax, $5,111)                                                            (9,921)          (9,921)         (9,921)
                                                                                                        --------
   Total comprehensive income                                                                           $282,812
                                                                                                        ========

    Issuance of common stock -
        exercise of stock options
        (5000 shares)
                                            5,000       20,000          ----               ----                           25,000
                                       ----------   ----------    -----------        ----------                       ----------

Balance, March 31, 2000                $2,051,441   $7,770,987       $70,579          $(140,013)                      $9,752,994
                                       ==========   ==========    ===========         ==========                      ==========


                                     See Accompanying Notes to Consolidated Financial Statements
</TABLE>
                                                                 5
<PAGE>
<TABLE>

                                    MARATHON FINANCIAL CORPORATION & SUBSIDIARY

                                       CONSOLIDATED STATEMENTS OF CASH FLOW

                                For the Three Months Ended March 31, 2000 and 1999
<CAPTION>

                                                                              2000                         1999
                                                                              ----                         ----
<S>                                                                          <C>                         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                $292,733                    $236,488
   Adjustments to reconcile net income
     to net cash provided by operating activities:
        Amortization                                                           12,595                      27,897
        Depreciation                                                           57,503                      58,284
        Net discount accretion on securities                                    2,397                      (1,842)
        Provision for loan loss                                                73,400                      60,000
        Loss on sale of other real estate                                      10,264                        ----
        Origination of loans available for sale                            (1,090,332)                 (2,320,809)
        Proceeds from sale of loans available for sale                        914,316                   2,492,913
       Changes in assets and liabilities:
          (Increase) in other assets                                         (139,351)                     (4,748)
          (Increase) decrease in accrued interest receivable                 (32,237)                       1,809
          Increase in accounts payable and accrued expenses                     1,988                      45,685
          Increase (decrease) in interest expense payable                      16,657                     (1,915)
                                                                           ----------                  ----------
                Net cash provided by operating activities                    $119,933                    $593,762
                                                                           ----------                  ----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturities and principal
      Payments on securities held to maturity                                    ----                     650,000
   Proceeds from maturities on securities available for sale                      461                     176,937
   Purchase of securities available for sale                                 (298,758)                   (427,570)
   Purchase of securities held to maturity                                   (595,803)                       ----
   Net (increase) in loans                                                 (4,777,452)                 (6,461,610)
   Purchase of bank premises and equipment                                   (232,278)                    (48,497)
   Proceeds from sale of other real estate                                      7,859                        ----
                                                                           ----------                  ----------
             Net cash used in investing activities                        $(5,895,971)                $(6,110,740)
                                                                           ----------                  ----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in demand deposits,
      NOW accounts and savings accounts                                   $ 5,575,533                 $ 3,550,388
   Net increase (decrease) in certificates of deposits                      3,072,437                    (387,841)
   Principal payments on capital lease payable                                 (1,625)                     (1,500)
   Cash dividends paid                                                       (184,180)                   (165,055)
   Proceeds from issuance of common stock                                      25,000                       2,500
   Purchase of common stock                                                      ----                     (21,752)
                                                                           ----------                  ----------
             Net cash provided by financing activities                    $ 8,487,165                 $ 2,976,740
                                                                           ----------                  ----------

Increase (decrease) in cash and cash equivalents                           $2,711,127                 $(2,540,238)
          Beginning                                                        14,627,673                  12,814,428
                                                                           ----------                  ----------
          Ending                                                          $17,338,800                 $10,274,190
                                                                          ===========                 ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash payments for:
        Interest                                                            $ 896,582                   $ 829,929
                                                                            =========                   =========

        Income taxes                                                        $   7,601                   $  19,516
                                                                            =========                   =========

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
   Unrealized (loss) on securities available for sale                      $  (15,032)                 $  (65,920)
                                                                           ==========                  ==========

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

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

         <S>                                                                      <C>                         <C>
         US government & federal agencies                                         $5,283,421                  $4,687,181
         Obligations of state & political subdivisions                               958,794                     959,610
                                                                                  ----------                  ----------
                                                                                  $6,242,215                  $5,646,791
                                                                                  ==========                  ==========
<CAPTION>
                                                                                  Fair Value                  Fair Value
                                                                                  ----------                  ----------

         US government & federal agencies                                         $5,119,876                  $4,541,063
         Obligations of state & political subdivisions                               932,435                     942,396
                                                                                  ----------                  ----------
                                                                                  $6,052,311                  $5,483,459
                                                                                  ==========                  ==========

<CAPTION>


                                                                              March 31, 2000           December 31, 1999
         Available for Sale                                                   Amortized Cost              Amortized Cost
         ------------------                                                   --------------              --------------

         US government & federal agencies                                         $4,412,726                  $4,115,468
         Mortgage backed securities                                                   14,687                      15,042
         Obligations of state & political subdivisions                               566,310                     567,007
         Other Securities                                                            580,350                     580,350
                                                                                  ----------                  ----------
                                                                                  $5,574,073                  $5,277,867
                                                                                  ==========                  ==========
<CAPTION>
                                                                                  Fair Value                  Fair Value
                                                                                  ----------                  ----------

         US government & federal agencies                                         $4,226,546                  $3,944,510
         Mortgage backed securities                                                   15,316                      15,765
         Obligations of state & Political                                            539,792                     540,132
         subdivisions                                                                580,350                     580,350
                                                                                  ----------                  ----------
         Other Securities                                                         $5,362,004                  $5,080,757
                                                                                  ==========                  ==========
</TABLE>

                                                            7
<PAGE>
<TABLE>
4.       The consolidated entity's loan portfolio is composed of the following:
<CAPTION>

                                                                              March 31, 2000           December 31, 1999
                                                                              --------------           -----------------

         <S>                                                                     <C>                         <C>
         Commercial                                                              $44,003,236                 $40,374,011
         Real estate-mortgage                                                     14,285,892                  14,353,721
         Real estate-construction                                                 10,729,688                   9,759,118
         Installment loans to individuals                                         11,013,999                  10,809,485
                                                                                 -----------                 -----------
                                                                                 $80,032,815                 $75,296,335
         Less:  allowance for loan losses                                            802,138                     769,410
                                                                                 -----------                 -----------
         Loans, net                                                              $79,230,677                 $74,526,925
                                                                                 ===========                 ===========

         The  company  had  non-accrual  loans,  which  were  excluded  from the
         impaired loan  disclosure  under FASB 114, which amounted to $71,087 on
         March 31, 2000 and $40,541 on December 31, 1999.


5.       Reserve for Loan Losses:
<CAPTION>
                                                                              March 31, 2000           December 31, 1999
                                                                              --------------           -----------------

         Balance, beginning                                                        $ 769,410                   $ 754,597
         Provision charged to operating expense                                       73,400                     260,000
         Recoveries                                                                    8,487                      27,505
         Loan losses charged to the allowance                                        (49,159)                   (272,692)
                                                                                 -----------                 -----------
         Balance, ending                                                           $ 802,138                    $769,410
                                                                                 ===========                 ===========


6.       Earnings Per Share

         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>
                                                                            3/31/00                       3/31/99
                                                                            -------                       -------
                                                                                   Per Share                     Per Share
                                                                     Shares         Amount          Shares         Amount
                                                                     ------         ------          ------         ------
         Basic earnings per share                                  2,050,764        $   .14       2,062,524        $  .11
                                                                                    =======                        ======
         Effect of dilutive securities:
              Stock options                                           20,379                         43,958
                                                                   ---------        -------       ---------        ------
         Diluted earnings per share                                2,071,143        $   .14       2,106,482        $  .11
                                                                   =========        =======       =========        ======
</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  $101.1  million,  net  loans of $77.9  million,  total
         deposits  of $87.8  million  and  total  stockholders'  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"),  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 three months ending March 31, 2000 increased
         $8,788,623  or 8.5% since  December  31, 1999.  This  increase in total
         assets  resulted  from a  $4,703,752  or 6.3%  increase  in  loans,  an
         increase in federal  funds sold of  $5,384,000 or 81.4% and an increase
         of  $876,671  or 8.2% in  securities.  This  equates to an  increase in
         earning assets of $11,140,740 or 12.1% in the three months ending March
         31, 2000.


                                       9
<PAGE>

         Allowance for Loan Losses
         -------------------------

         The allowance for loan losses, as of March 31, 2000, was $802,138. This
         is an increase of $32,728 or 4.3% since  December 31, 1999.  This gives
         the bank a 1.00%  allowance for loan losses to total loans.  Management
         has  completed  an  analysis  on the  reserve  and feels the reserve is
         adequate.

         Liabilities
         -----------

         Total  deposits for the three months  ending March 31, 2000,  increased
         $8,647,970  or 9.3%  since  December  31,  1999.  Non-interest  bearing
         deposits increased by $3,114,964 or 24.1% and interest bearing deposits
         increased  by  $5,533,006  or  6.9%.   Non-interest   bearing  deposits
         represented  15.7% of total  deposits as of March 31, 2000, as compared
         to 13.9% at 1999 year end. Savings and money market deposits were 31.8%
         of total  deposits at the 2000 first quarter  mark,  which was a slight
         decrease from 32.1% on December 31, 1999.

         Stockholders' Equity
         --------------------

         Total equity has increased by $307,813 or 3.3% since December 31, 1999.
         The increase was due to the net of a first quarter  profit of $292,733,
         and an increase in unrealized  losses on securities  available for sale
         of $9,920 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  $2,165,157 for the three months ending March
         31, 2000,  $225,977 or 11.7% higher than the three months  ending March
         31, 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 three months ending March 31, 2000 was
         $913,239,  $85,225 or 10.3% higher than the three  months  ending March
         31, 1999.  Interest on deposits  increased by $85,349 or 10.4% over the
         same  period in 1999.  This was the  result of an overall  increase  in
         deposits.


                                       10
<PAGE>

         Net Interest Income
         -------------------

         Net  interest  income for the three  months  ending  March 31, 2000 was
         $1,251,918, $140,752 or 12.7% higher than the three months ending March
         31, 1999. This was the result of an increase in our earning assets. The
         net interest margin  declined  slightly in the first quarter of 2000 to
         5.12% from the average for 1999 of 5.21.

         Other Income
         ------------

         Total  other  income for the three  months  ending  March 31,  2000 was
         $203,159, $4,065 or 2.0% 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 three  months  ending March 31, 2000 were
         $946,628, $64,996 or 7.4% higher than the three months ending March 31,
         1999.  Salary  expense  increased  $9,366  or  2.0%,   postage  expense
         increased $4,084 or 14.8%, furniture and equipment expense decreased by
         $12,469 or 14.5%, ATM expense increased $19,673 or 63.4% and stationery
         and  supplies  increased  $9,270 or 27.8% over the same period in 1999.
         Telephone  costs  were  $28,144,   an  increase  of  91.2%.   The  Bank
         experienced  a net  recovery of $13,623 from  overdrafts  for the first
         quarter.  This  compares to a $19,642 net chargeoff for the same period
         of 1999.  The net  increase  in other  expenses  is in part a result of
         additional  staffing  to  handle  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 67.25% for the first quarter of
         1999 to 64.71% for the same period of 2000.

         Net Income
         ----------

         Net income for the three  months  ending  March 31,  2000 was  $292,733
         compared to $236,488 in the same period in 1999. This is an increase of
         $56,245 or 23.8% over the same period of 1999. The provision for income
         taxes  expense  increased  $10,176 from $132,140 in 1999 to $142,316 in
         2000. The return on assets was 1.10% for the first three months of 2000
         as  compared  to 1.09% for the year of 1999.  For the first  quarter of
         2000 the return on equity was 12.23% up  slightly  from the 1999 annual
         percent of 12.20%.


                                       11
<PAGE>

         Liquidity and Capital Resources
         -------------------------------

         The liquidity  position in the past 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
         March 31, 2000, the loan to deposit ratio was 78.47%.

                           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).

                                       12

<PAGE>

               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
               constructed  a permanent  structure to house the branch office at
               1014 South Main Street,  Woodstock,  Virginia, filed herein (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.


          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 - N/A

          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:  March 31, 2000                            /s/ Donald L. Unger
                                         --------------------------------------
                                         DONALD L. UNGER
                                         PRINCIPAL EXECUTIVE OFFICER



DATE:  March 31, 2000                              /s/ Frederick A. Board
                                         --------------------------------------
                                         FREDERICK A. BOARD
                                         PRINCIPAL FINANCIAL OFFICER




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