<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: September 30, 1996
Commission file number 0-1739
----------------
MADISON BANCSHARES GROUP, LTD.
- -------------------------------------------------------------------------------
(Exact Name of Small Business Issue as Specified In Its Charter)
Pennsylvania 23-2512079
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1767 Sentry Parkway West, Blue Bell, PA 19422
------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(215) 641-1111
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter periods 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
--- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date.
971,360 shares of Issuer's Common Stock, par value $1 per share, issued and
outstanding as of November 4, 1996.
1
<PAGE>
PART 1
ITEM 1 - FINANCIAL STATEMENTS
SEE ANNEX A
2
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Presented herein are the results of operations of Madison Bancshares
Group, Ltd. (the "Company") and its wholly owned subsidiary, The
Madison Bank (the "Bank"), for the quarters ended September 30, 1996
and 1995, respectively.
CAPITAL RESOURCES
The total shares of common stock outstanding on September 30, 1996
was 971,360 as compared to 897,574 at December 31, 1995. On May 5,
1995, 58,728 shares were issued in connection with a 7% stock
dividend declared on April 18, 1995. On February 15, 1996 an
additional 67,185 shares were issued in connection with a 7-1/2%
stock dividend declared on January 11, 1996. The book value per
share of the Company's common stock on December 31, 1995, was $7.66
and at September 30, 1996, was $8.07, after giving effect to the
stock dividend.
During the nine month period, January 1, 1996 to September 30, 1996,
the Bank's total assets increased by approximately $8.8 million or
approximately 10% to $100,085,770.
The chart below depicts various capital ratios applicable to state-
chartered Federal Reserve member banks and compares the Bank's actual
ratios at September 30, 1996 and December 31, 1995, respectively,
which exceeded the levels required for a bank to be classified as
well-capitalized.
Regulatory Actual Actual
Ratio Minimum 12/31/95 9/30/96
----- ---------- -------- -------
Qualifying Total Capital to
Risk Weighted Assets 8.0% 10.75% 11.75%
Tier 1 Capital, net of intangibles
to Risk Weighted Assets 4.0% 9.75% 10.62%
Tier 1 Leverage Ratio of Capital to
Total Adjusted Average Assets 4.0% 9.05% 8.33%
The Company's capital-to-assets ratio decreased from 8.62% as of
December 31, 1995 to 8.30% as of September 30, 1996. The decrease in
the capital-to-assets ratio for the quarter ended September 30, 1996,
was attributable to the faster rate of asset growth versus retained
earnings. Management anticipates that its capital-to-assets ratio
will decline in future periods as the Company's assets continue to
grow. The Company's average return on equity as of December 31,
1995, was 7.73%; and its return on average assets was .70%. As of
September 30, 1996, the Company's return on average equity was 7.28%
and its return on average assets was .58%.
3
<PAGE>
LIQUIDITY
The Bank's Asset/Liability Management Committee, comprised of the
members of the Bank's Executive Committee and its Treasurer, is
responsible for managing the liquidity position and interest
sensitivity of the Bank. The Committee's function is to balance the
Bank's interest-sensitive assets and liabilities, while providing
adequate liquidity for projected needs. The primary objective of the
Asset/Liability Management Committee is to maximize net interest
margin in an ever changing rate environment.
Management continues to believe that short-term market instruments,
such as 90-day United States Treasury bills, federal funds, and a
combination of fixed rate and floating rate commercial loans are the
most appropriate means to meet the Bank's liquidity needs.
Management is able to quickly increase yields on its interest earning
assets, primarily floating rate loans. As a result, the effect of
increases in interest rates generally, reflecting a higher cost of
funds, is minimal due to the asset-sensitive position the Bank has
structured through its asset-liability management strategy. As of
September 30, 1996, the Bank's net interest spread was approximately
3.96% as compared to 4.20% at December 31, 1995. The recent decrease
in the net interest spread reflects the effect of a decrease in
interest rates. As a result of the asset sensitive position of the
Bank's balance sheet in the immediately repriceable category, loans
and federal funds were priced downward and the Bank's liabilities were
repriced over a 9 month period and are continuing to be repriced. At
September 30, 1996, the risk managment review indicates that if
interest rates change, going forward, the general effect of the Bank's
gap position within a one year period would be a plus or minus
(+ or -) $53,000 effect on profits, or .06 basis points. In the event
that interest rates further decline, the effect on the Company's gap
position would be negative. Management believes that any impact will
not be significant
RESULTS OF OPERATIONS
As of September 30, 1996, the Company held deposits aggregating
$81,141,557, which reflects a decrease from deposits held at December
31, 1995 of $82,870,620. The 2% decline in deposits was the result of
the Bank not renewing Certificates of Deposit bearing rates that were
higher than the Bank was then offering. As a result, the Bank
increased its borrowings. Of the $81,141,557 deposits held at
September 30, 1996, $16,660,023, or approximately 21%, were non-
interest bearing deposits. Total deposit accounts numbered 5,392 at
September 30, 1996. As of the same date, outstanding loans receivable
in connection with loans made to 1,177 loan accounts totaled
approximately $85,148,983 (excluding loan loss reserve and deferred
loan fees). The following tables and graphs set forth a comparative
breakdown of the Company's deposits and loans outstanding as of
September 30, 1996 and December 31, 1995, respectively.
4
<PAGE>
DEPOSIT LIABILITIES
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
% of % of
Type of Account Balance Portfolio Balance Portfolio
--------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Non-Interest bearing (1) 16,660,023 21% 14,452,481 17%
Interest bearing (2) 3,395,811 4 3,262,291 4
Money Market (3) 12,717,696 16 16,376,099 20
Savings (4) 4,798,566 6 4,900,299 6
CD's Under 100M (5) 23,677,836 29 18,992,236 23
CD's Over 100M (6) 19,891,625 24 24,887,214 30
----------- --- ----------- ---
Totals $81,141,557 100% $82,870,620 100%
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
[GRAPH]
LOANS OUTSTANDING
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
% of % of
Type of Account Balance Portfolio Balance Portfolio
- --------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Real Estate Loans, Mortgages(1) $40,621,425 48% $32,000,817 44%
Commercial Loans (2) 36,220,449 42 34,201,976 47
Consumer Loans (3) 7,840,103 9 6,004,835 8
Residential Loans Held for Sale (4) 467,006 1 500,540 1
----------- --- ----------- ---
Totals $85,148,983 100% $72,708,168 100%
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>
[GRAPH]
5
<PAGE>
Net interest income, the difference between the interest earned on loans
and other investments and the interest paid on deposits and other
borrowings, is the primary source of the Bank's and the Company's
earnings.
The graph below sets forth the Bank's interest income and interest
expense growth for the period from September 30, 1995 through September
30, 1996:
[GRAPH]
For the nine months ended September 30, 1996, the Company had a profit
of $415,624, or $.43 per share. For the nine months ended September 30,
1995, the Company had a profit of $419,412 or $.43 per share. For the
quarter ended September 30, 1996, the Company had a profit of $154,710
or $.16 per share as compared to $149,870, or $.16 per share for the
quarter ended September 30, 1995. The flat earnings for the quarter and
nine months ended September 30, 1996 compared to September 30, 1995 is
attributable to certain non-recurring expenses related to the proxy
solicitation for the annual shareholders meeting held in May, 1996.
The Bank's net interest income for the nine months ended September 30,
1996 and September 30, 1995, after provision for loan losses,was
$3,108,763 and $2,563,448, respectively. Interest income was $5,910,707
for the nine months ended September 30, 1996, as compared to $4,948,368
for the nine months ended September 30, 1995. For the quarters ended
September 30, 1996 and 1995, the Bank's interest income was $2,014,278
and $1,753,607, representing an increase of 15%. Interest expense on
deposits and borrowed funds increased from $2,142,920, at September 30,
1995 to $2,504,444 as of September 30, 1996, representing an increase of
17%.
6
<PAGE>
The increase in interest income was due primarily to growth in loans, as
the graph below depicts.
[GRAPH]
As of December 31, 1995, the Bank had a $750,318 allowance for loan
losses representing 1.03% of outstanding loans receivable. Loans
charged off against the reserve for the nine months ended September 30,
1996 amounted to $282,573, and recoveries were $71,981. During the nine
months of 1996, the Bank added $297,500 to the reserve bringing total
reserves to $837,226 which represented .98% of outstanding loans
receivable. Management believes that the allowance for loan losses is
reasonable and adequate to cover any known losses or any losses
reasonably expected in the portfolio. Management has determined that
loans totaling $1,506,509 were "impaired" and the related allowance for
loan losses on such loans, previously established, was approximately
$267,217.
Other real estate owned at September 30, 1996 represents an original
loan balance of $75,000, secured by a junior lien collateral mortgage on
a property located in Bryn Mawr, Pennsylvania. The loan balance has
since been reduced to $59,000 and payments continue to be made on a
monthly basis. The property was sold at sheriff's sale and management
purchased the property in order to protect the bank's lien position,
resulting in a carrying value on such property in the amount of $555,539
at September 30, 1996. Subsequent to the close of the third quarter,
the bank has entered into a lease purchase agreement for a consideration
of $575,000.
For the nine months ended September 30, 1996, non-interest expenses were
$2,805,950 as compared to $2,219,545 during the same period in 1995. Of
this amount, $1,281,148, or approximately 46%, was attributable to
salary and related employee benefits as compared to $1,081,868, or 49%
during the first nine months of fiscal 1995.
7
<PAGE>
For the quarter ended September 30, 1996, non-interest expense totaled
$964,956 as compared to $748,409 during the same quarter of 1995, an
increase of 29%. Salary expenses were $448,313 for the third quarter of
1996 as compared to $382,946 in the third quarter of 1995. The increase
in salary and related expenses was due to increased staffing for the two
new branches the Bank has opened since September 1995.
Occupancy and equipment expenses combined for the nine months ended
September 30, 1996 were $547,497 as compared to $357,756 during the same
period in 1995. For the quarter ended September 30, 1996, occupancy and
equipment expenses were $194,665 as compared to $117,762 for the quarter
ended September 30, 1995. The increase was due to annual increases in
rent expenses and the addition of the two new branches.
For the nine months ended September 30, 1996, other operating expenses
totaled $499,006, or approximately 18% of total other expenses, as
compared to $312,103, or 14%, during the same period in 1995. Proxy
related expenses totaled $90,000 of the other operating expenses for the
nine months ended September 30, 1996. The expense is anticipated to be
a non-recurring expense and is a result of the proxy contest with
respect to the Company's Annual Meeting which resulted in additional
expense for legal and outside advisory services. For the quarter ended
September 30, 1996, other operating expenses totaled $160,656 as
compared to $115,377 for the quarter ended September 30, 1995. The
overall increase in operating expenses was due to the increased growth
of the Bank and the addition of two branches. Other operating expenses
were comprised primarily of professional fees, Director fees, business
promotion expense, telephone, fidelity insurance premium, and shares and
loan taxes.
Income tax expense for the nine months and quarter ended September 30,
1996 was $228,140 and $80,665, respectively, as compared to $222,161 and
$90,944, respectively, for the nine months and quarter ended September
30, 1995.
Interest income on federal funds sold decreased from $14,723 for the
quarter ended September 30, 1995 to $4,066 for the quarter ended
September 30, 1996. For the nine months ended September 30, 1995
interest income on federal funds sold was $35,554 or 0.7% of gross
interest income as compared to $64,949 or 1.1% of gross interest income
for the nine months ended September 30, 1996. Interest income on
investment securities for the quarter and nine months ended September
30, 1995 was $96,746 and $396,999, respectively. For the quarter and
nine months ended September 30, 1996 interest income on investment
securities was $101,182 and $277,165, respectively. The decrease was a
direct result of an increase in the funding of loans versus investment
in secondary investments.
During the quarter ended September 30, 1996, interest and fees on loans
was $1,909,030 as compared to $1,642,138 in 1995. For the nine months
ended September 30, 1996, and September 30, 1995, interest income on
loans was
8
<PAGE>
$5,568,593, or 94% of gross interest income, and $4,515,815 or 91%
of gross interest income, respectively. The increase in interest
income on loans is due to the overall growth in the portfolio.
Other income of $340,951 for the period from January 1, 1996, to
September 30, 1996, was primarily comprised of service charges on
deposit accounts and gains on sales of mortgage loans in the secondary
market. During the same period in 1995, other income totaled $297,670.
The increase was due to refinancings of mortgage loans and growth in
service charges on deposit accounts. For the quarter ended September
30, 1996, other income was $129,401 as compared to $96,425 for the
quarter ended September 30, 1995, an increase of $32,976 which was
primarily due to growth of service charges on deposit accounts.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not Applicable.
ITEM 2 CHANGES IN SECURITIES
Not Applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 OTHER INFORMATION
On or about August 5, 1996 The Madison Bank opened its fourth branch
located at 600 W. Lancaster Avenue, Strafford, Pennsylvania.
10
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed
Page Number in
Exhibit Number Sequential Numbering System
- -------------- ---------------------------
2 None ----
4 Amended and Restated Articles *
of Incorporation, as amended, and
Amended and Restated Bylaws of
the Issuer
10 Lease by and between The Madison
Bank and Michael A. Massarella,
Trustee, dated May 14, 1996 ----
11 Not Applicable ----
15 Not Applicable ----
18 Not Applicable ----
19 None ----
20 None ----
23 None ----
24 None ----
25 None ----
27 Financial Data Schedule ----
28 None ----
____________________
* Incorporated by reference from the Issuer's Registration Statement on
Form S-1 No. 33-27146
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Madison Bancshares Group, Ltd.
/s/ Vito A. DeLisi
______________________________
Vito A. DeLisi
President
/s/ E. Cheryl Hinkle
______________________________
E. Cheryl Hinkle
Vice President
Date Executed: November 12, 1996
12
<PAGE>
ANNEX A
-------
13
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
Cash and Cash Equivalents:
Cash and amounts due from banks $ 7,097,829 $ 3,788,002
Federal funds sold 0 6,685,000
------------- -------------
Total cash and cash equivalents 7,097,829 10,473,002
Investment Securities:
Held to maturity (fair value - 1996
$2,078,049; 1995 $4,213,449) 2,108,888 4,209,744
Available for sale (amortized cost
1996 $4,591,620; 1995 $2,945,533) 4,566,275 2,942,869
Loans (Net of allowance for loan losses -
1996, $837,226; 1995, $750,318) 83,686,580 71,257,282
Mortgage loans held for sale 467,006 500,540
Real Estate Owned 555,539 552,349
Furniture, Equipment and Leasehold Improvements 602,980 497,045
Accrued interest receivable 601,358 604,093
Other Assets 399,315 190,774
------------- -------------
TOTAL $ 100,085,770 $ 91,227,698
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 16,660,023 $ 14,452,481
Interest-bearing demand deposits 3,395,811 3,262,291
Savings deposits 4,798,566 4,900,299
Money market deposits 12,717,696 16,376,099
Time deposits 43,569,461 43,879,450
------------- -------------
Total Deposits 81,141,557 82,870,620
Borrowed Funds 10,210,000
Accrued Interest Payable 808,416 656,895
Accrued Expenses and Other Liabilities 86,349 307,468
------------- -------------
Total Liabilities 92,246,322 83,834,983
------------- -------------
Commitments
Shareholders Equity:
Preferred stock, $5 par value - authorized
5,000,000 shares; issued and outstanding,
0 shares.
Common stock, $1 par value - authorized
20,000,000 shares; issued and outstanding,
1996, 971,360 shares; 1995, 897,574 shares 971,360 897,574
Capital surplus 7,185,686 6,709,506
Accumulated deficit (300,871) (212,606)
Net unrealized losses on available for sale
securities (16,727) (1,759)
------------- -------------
Total shareholders' equity 7,839,448 7,392,715
------------- -------------
TOTAL $ 100,085,770 $ 91,227,698
------------- -------------
------------- -------------
</TABLE>
See notes to consolidated financial statements
14
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $1,909,030 $1,642,138 $5,568,593 $4,515,815
Interest and dividends on investment securities:
US Government obligations 58,443 77,238 193,084 338,358
Municipal bonds 12,217 12,244 36,673 36,753
Other securities 30,522 7,264 47,408 21,888
Interest on temporary investments 4,066 14,723 64,949 35,554
---------- ---------- ---------- ----------
2,014,278 1,753,607 5,910,707 4,948,368
---------- ---------- ---------- ----------
Interest expense:
Interest on:
Demand deposits 18,571 21,015 56,991 55,261
Savings and money market deposits 147,913 182,520 466,437 649,872
Time deposits 564,982 539,596 1,818,087 1,381,154
Federal Funds Purchased 131,882 2,678 162,929 56,633
---------- ---------- ---------- ----------
863,348 745,809 2,504,444 2,142,920
---------- ---------- ---------- ----------
Net interest income before provision for loan losses 1,150,930 1,007,798 3,406,263 2,805,448
Provision for loan losses 80,000 115,000 297,500 242,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 1,070,930 892,798 3,108,763 2,563,448
---------- ---------- ---------- ----------
Other noninterest income:
Gain on sale of mortgage loans 10,061 17,898 39,211 34,243
Service charges on deposit accounts 104,061 66,937 257,184 216,374
Gain on sale of investments 15,812
Other 15,279 11,590 44,556 31,241
---------- ---------- ---------- ----------
Total noninterest income 129,401 96,425 340,951 297,670
---------- ---------- ---------- ----------
Other noninterest expenses:
Salary and employee benefits 448,313 382,946 1,281,148 1,081,868
Occupancy 143,699 90,189 400,262 270,101
Equipment 50,966 27,573 147,235 87,655
Computer processing 54,161 41,880 155,502 127,798
Deposit insurance (3,626) 1,500 66,013
Legal 15,374 11,290 65,200 26,884
Professional fees 14,000 21,965 47,880 66,765
Business development 31,276 32,673 88,233 80,595
Office and stationary supplies 31,087 14,537 70,965 52,532
Advertising 15,424 13,605 49,019 47,231
Other operating 160,656 115,377 499,006 312,103
---------- ---------- ---------- ----------
Total other noninterest expenses 964,956 748,409 2,805,950 2,219,545
---------- ---------- ---------- ----------
Income before income taxes 235,375 240,814 643,764 641,573
Provision for income taxes 80,665 90,944 228,140 222,161
---------- ---------- ---------- ----------
Net income $ 154,710 $ 149,870 $ 415,624 $ 419,412
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per common share $ .16 $ .16 $ .43 $ .43
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares 968,153 964,759 968,153 964,759
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements
15
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ------------------------
1996 1995 1996 1995
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 154,710 149,870 $ 415,624 $ 419,412
Adjustments for non-cash items
included in net income:
Depreciation on equipment 37,582 20,608 104,480 63,036
Provision for loan losses 80,000 115,000 297,500 242,000
Amortization of bond premium and
discount (2,619) (5,287) 6,613 (46,244)
Amortization of deferred fees &
costs, net (7,180) 19,766 (49,784) 98,580
Gain on sale of mortgage notes (10,061) (17,897) (39,211) (34,243)
Gain on sale of investments (15,812)
Provision for deferred taxes (64,048) (64,048)
Changes in assets and liabilities
which provided (used) cash:
Interest receivable 24,641 19,003 2,735 (10,037)
Mortgage loans held for resale 639,438 247,146 72,745 (452,219)
Other assets 70,238 7,222 (208,542) (5,277)
Accrued expenses and other
liabilities (229,078) 129,350 (221,119) 112,451
Accrued interest payable 359,703 (22,296) 151,521 277,585
---------- ---------- ---------- ----------
Net cash provided by operating
activities 1,117,374 598,437 532,562 585,184
---------- ---------- ---------- ----------
Cash flow from investing activities:
Proceeds from sale of investments
available for sale 4,041,138
Proceeds from maturity of investments:
Held to maturity 660,300 1,250,000 2,260,300 3,750,000
Available for sale 1,000,000 1,000,000 2,000,000
Purchase of investments available for
sale (2,804,431)
Net change in loans to customers (6,489,935) (4,243,486) (12,677,014) (15,568,536)
Cost capitalized for real estate
owned 15,290 (3,190) (554,527)
Purchase of furniture, equipment
and leasehold improvements (113,420) (84,085) (210,415) (125,957)
---------- ---------- ---------- ----------
Net cash used in investing activities (5,943,055) (2,062,281) 12,434,750) (6,457,882)
---------- ---------- ---------- ----------
Cash flow from financing activities:
Increase in demand, savings and
time deposits 3,961,588 2,558,741 (1,729,063) 10,517,887
Increase (decrease) in borrowed
funds 210,000 10,210,000 (3,675,000)
Proceeds from issuance of common
stock 46,078 50,000
---------- ---------- ---------- ----------
Net cash provided from financing
activities 4,171,588 2,558,741 8,527,015 6,892,887
---------- ---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents (654,093) 1,094,897 (3,375,173) 1,020,189
Cash and cash equivalents, beginning
of period 7,751,922 3,901,431 10,473,002 3,976,139
---------- ---------- ---------- ----------
Cash and cash equivalents, end of
period $7,097,829 $4,996,328 $7,097,829 $4,996,328
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Supplemental disclosures of cash
flow information:
Interest paid $ 719,786 $ 768,105 $2,352,923 $1,865,335
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Taxes paid $ 100,000 $ 65,000 $ 561,527 $ 130,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Supplemental disclosures of noncash
investing activities
Unrealized loss (gain) on available
for sale securities $ (3,773) $ (8,122) $ 14,968 $ 6,480
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements
16
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION:
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS WERE
PREPARED IN ACCORDANCE WITH INSTRUCTIONS FOR QUARTERLY REPORTS ON
FORM 10-Q AND, THEREFORE, DO NOT INCLUDE INFORMATION OR FOOTNOTES NECESSARY
FOR A COMPLETE PRESENTATION OF FINANCIAL CONDITION, RESULTS OF OPERATIONS,
SHAREHOLDERS' EQUITY AND CASH FLOWS IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES. HOWEVER, THE FINANCIAL STATEMENTS REFLECT ALL
ADJUSTMENTS WHICH IN THE OPINION OF MANAGEMENT ARE NECESSARY FOR FAIR
STATEMENT OF FINANCIAL RESULTS AND THAT ALL ADJUSTMENTS ARE OF A NORMAL
RECURRING NATURE. THE RESULTS OF OPERATIONS FOR THE NINE MONTH PERIODS
ENDED SEPTEMBER 30, 1996 AND 1995 ARE NOT NECESSARILY INDICATIVE OF THE
RESULTS WHICH MAY BE EXPECTED FOR THE ENTIRE FISCAL YEAR.
2. PRINCIPLES OF CONSOLIDATION:
THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE ACCOUNTS OF MADISON
BANCSHARES GROUP, LTD. AND ITS WHOLLY OWNED SUBSIDIARY, MADISON BANK (THE
BANK). ALL MATERIAL INTERCOMPANY BALANCES AND TRANSACTIONS HAVE BEEN
ELIMINATED.
3. STOCK DIVIDENDS:
ON JANUARY 11, 1996, THE BOARD OF DIRECTORS DECLARED A 7-1/2% STOCK
DIVIDEND ON COMMON STOCK OUTSTANDING. THE DIVIDEND WAS PAID ON
FEBRUARY 15, 1996 TO SHAREHOLDERS OF RECORD ON JANUARY 31, 1996. THIS
RESULTED IN AN ADDITIONAL ISSUANCE OF 67,185 SHARES OF COMMON STOCK.
THE STOCK DIVIDENDS WERE RECORDED AT FAIR MARKET VALUE. AVERAGE SHARES
AND ALL PER SHARE AMOUNTS INCLUDED IN THE FINANCIAL STATEMENTS FOR 1996
AND 1995 ARE BASED ON THE INCREASED NUMBER OF SHARES GIVING RETROACTIVE
EFFECT TO THIS STOCK DIVIDEND.
4. PROVISION FOR INCOME TAXES:
THE PROVISION FOR INCOME TAXES IS COMPUTED IN ACCORDANCE WITH STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 109.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
9/30/96 9/30/95 9/30/96 9/30/95
---------------------- ----------------------
<S> <C> <C> <C> <C>
PROVISION FOR CURRENT INCOME TAXES $80,665 $186,261 $249,140 $286,209
PROVISION FOR DEFERRED INCOME TAXES 0 (95,317) (21,000) (64,048)
---------- ---------- ---------- --------
TOTAL $ 80,665 $ 90,944 $228,140 $222,161
---------- ---------- ---------- --------
---------- ---------- ---------- --------
</TABLE>
5. NET INCOME PER SHARE:
NET INCOME PER SHARE OF COMMON STOCK IS BASED UPON THE WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING DURING THE PERIOD OF 968,153 IN SEPTEMBER,
1996 AND 964,759 IN SEPTEMBER, 1995, AFTER GIVING EFFECT TO THE STOCK
ISSUANCE OF 6,601 SHARES IN EXERCISED OPTIONS AND PRIOR STOCK DIVIDENDS.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,098
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,566
<INVESTMENTS-CARRYING> 2,109
<INVESTMENTS-MARKET> 2,078
<LOANS> 82,849
<ALLOWANCE> 837
<TOTAL-ASSETS> 100,086
<DEPOSITS> 81,142
<SHORT-TERM> 10,210
<LIABILITIES-OTHER> 895
<LONG-TERM> 0
0
0
<COMMON> 971
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 100,086
<INTEREST-LOAN> 5,569
<INTEREST-INVEST> 277
<INTEREST-OTHER> 65
<INTEREST-TOTAL> 5,911
<INTEREST-DEPOSIT> 2,341
<INTEREST-EXPENSE> 2,504
<INTEREST-INCOME-NET> 3,406
<LOAN-LOSSES> 297
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,806
<INCOME-PRETAX> 644
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 416
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
<YIELD-ACTUAL> 9.08
<LOANS-NON> 773
<LOANS-PAST> 51
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,507
<ALLOWANCE-OPEN> 750
<CHARGE-OFFS> 283
<RECOVERIES> 72
<ALLOWANCE-CLOSE> 837
<ALLOWANCE-DOMESTIC> 837
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
