<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: June 30, 1999
---------------------------------------------
Commission file number 0-17539
---------------
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.
1,567,669 shares of Issuer's Common Stock, par value $1 per share, issued
and outstanding as of August 4, 1999.
<PAGE>
PART 1
ITEM 1 - FINANCIAL STATEMENTS
SEE ANNEX A
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report contains "forward-looking" statements. Madison
Bancshares Group, Ltd. is including this statement for the express
purpose of availing itself of the protections of the safe harbor
provided by the Private Securities Litigation Reform Act of 1995
with respect to all such forward-looking statements. Examples of
forward-looking statements include, but are not limited to (a)
projections of changes in capital-to-assets ratio, (b) statements
of plans and objectives of the Company or its management or Board
of Directors, (c) statements of future economic performance and
(d) statements of assumptions underlying other statements and
statements about the Company or its business. In order to comply
with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward looking
statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's
business include: (i) the ability of the Company to implement its
growth strategy and manage growth; (ii) the adequacy of allowances
for loan losses and possible continued growth in delinquency
ratios; (iii) the effect of the Company's comparatively high
operating expenses and high efficiency ratios; (iv) credit risks
related to operating activities; (v) possible adverse effect of
failure to resolve "millennium bug" or "year 2000" issues; (vi)
reliance on existing management personnel; and (vii) risks
relating to federal and state government regulation.
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
June 30, 1999 and 1998. The Bank commenced operations in August,
1989.
ANALYSIS OF FINANCIAL CONDITION
As of June 30, 1999, the Company held deposits aggregating
$140,557,680, representing an increase of approximately 6% from
deposits of $132,594,518 held at December 31, 1998. Of the
deposits held at June 30, 1999, $25,501,022, or approximately 18%,
were non-interest-bearing deposits. At June 30, 1999 total deposit
accounts numbered 10,315 and outstanding loans receivable in
connection with loans made to 1,698 loan accounts totaled
approximately $122,947,615 (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 June 30, 1999 and December 31, 1998,
respectively.
<PAGE>
<TABLE>
<CAPTION>
DEPOSIT LIABILITIES
June 30, 1999 December 31, 1998
% of % of
Type of account Balance Portfolio Balance Portfolio
--------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
Non-Interest bearing (1) 25,501,022 18% 23,423,200 18%
Interest bearing (2) 12,252,254 9 11,785,117 9
Money Market (3) 22,212,470 16 17,109,125 13
Savings (4) 8,971,099 6 11,089,034 8
CD's Under 100M (5) 39,058,724 28 38,136,009 29
CD's Over 100M (6) 32,562,111 23 31,052,033 23
-------------- ------ -------------- -------
Totals $140,557,680 100% $132,594,518 100%
-------------- ------ -------------- -------
</TABLE>
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
<PAGE>
<TABLE>
<CAPTION>
LOANS OUTSTANDING
June 30, 1999 December 31, 1998
% of % of
TYPE OF ACCOUNT BALANCE PORTFOLIO BALANCE PORTFOLIO
<S> <C> <C> <C> <C>
Real Estate Loans, Mortgages(1) $ 29,549,843 24% $ 33,743,039 27%
Commercial Loans (2) 77,589,324 63 72,425,657 57
Consumer Loans (3) 9,552,678 8 9,235,390 7
Residential Loans Held for
Sale (4) 6,255,770 5 11,593,638 9
-------------- ------ -------------- --------
Totals $122,947,615 100% $126,997,724 100%
-------------- ------ -------------- --------
</TABLE>
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
RESULTS OF OPERATIONS
For the six months ended June 30, 1999, the Company had net income
of $363,708, or $.23 per share, as compared to net income of
$175,719 or $.12 per share during the six months ended June 30,
1998. For the quarter ended June 30, 1999, the Company had a net
income of $216,960 or $.14 per share as compared to a loss of
($12,311), or ($.01) per share for the quarter ended June 30,
1998. The increase in net income from the quarter and six months
ended June 30, 1999 was primarily attributable to profits relating
to the operations of the Bank's Mortgage Department and increased
asset growth.
ANALYSIS OF NET INTEREST INCOME
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.
<PAGE>
The graph below sets forth the Bank's interest income and interest
expense growth for the period from June 30, 1998, through June 30,
1999:
[GRAPHIC OMITTED]
The Company's net interest income, after provision for loan losses
increased 31% to $3,406,832 for the six months ended June 30, 1999
as compared to $2,595,478 for the six months ended June 30, 1998.
Interest income increased 20% to $6,261,268 for the six months
ended June 30, 1999, as compared to $5,229,878 for the six months
ended June 30, 1998. For the quarter ended June 30, 1999 the
Company's interest income increased 23% to $3,180,462 from
$2,596,151 for the quarter ended June 30, 1998. Interest expense
on deposits and borrowed funds increased from $2,404,400 for the
six months ended June 30, 1998, to $2,589,436 for the six months
ended June 30, 1999, an 8% increase.
Interest income on investment securities relates to interest on
U.S. Government Obligations and Federal Agency Obligations.
Interest income on U.S. Government Obligations for the six months
ended June 30, 1999 was $77,503 as compared to $85,096 for the six
months ended June 30, 1998. For the quarter ended June 30, 1999,
interest income on U.S. Government Obligations was $54,616 as
compared to $37,332 at June 30, 1998. The increase for the quarter
resulted in more funds being invested in securities due to
increased liquidity from deposit growth.
Interest income on other securities is comprised primarily of
interest income on Municipal Bonds, Debt Securities, Federal Home
Loan Bank stock dividends and Federal Reserve Bank stock
dividends. Interest income on other securities for the six months
ended June 30, 1999, was $102,649 as compared to $45,853 for the
six months ended June 30, 1998. For the quarters ended June 30,
1999 and 1998 interest income was $81,339 and $23,342,
<PAGE>
respectively. The increase in interest income on other securities
is due to the Bank investing in more Federal Reserve Stock and a
$2,000,000 investment in other debt securities.
Interest income on temporary investments represents federal funds
sold. For the six months and quarter ended June 30, 1999, interest
income on federal funds sold was $238,571 and $132,286 as compared
to $229,022 and $94,264 for the six months and quarter ended June
30, 1998. As a result of deposit growth, the Bank is able to
increase its interest income on federal funds sold by deploying
these additional deposits in overnight investments.
Total interest and fees on loans as of June 30, 1999 was
$5,842,545 as compared to $4,869,907 for the six months ended June
30, 1998. For the quarter ended June 30, 1999 interest and fees on
loans was $2,912,221 as compared to $2,441,213 for the quarter
ended June 30, 1998. The Bank experienced approximately 14% loan
growth from June 30, 1998 to June 30, 1999 while the yield on the
portfolio remained constant during this same period.
The increase in interest income was due primarily to growth in
loans. The increase in interest expense was due to growth in
deposits, as the graph below depicts. Interest expense for the six
months ended June 30, 1999 represented 41% of gross interest
income or $2,589,436, as compared to $2,404,400 or 46% of gross
interest income for the six months ended June 30, 1998. For the
quarter ended June 30, 1999, interest expense was $1,317,847 as
compared to $1,185,654 for the quarter ended June 30, 1998.
[GRAPHIC OMITTED]
<PAGE>
PROVISION FOR LOAN LOSSES
For the six months and quarter ended June 30, 1999, the Bank added
to its provision for loan losses $265,000 and $145,000,
respectively. During the six months and quarter ended June 30,
1998, the Bank added $230,000 and $110,000 to its provision for
loan losses, respectively.
As of December 31, 1998, the Bank had $1,111,817 in its allowance
for loan losses, representing .96% of outstanding loans
receivable. During the first six months ended June 30, 1999 the
Bank added $265,000 to the reserve. Loans charged off against the
reserve during second quarter of 1999 amounted to $72,000. There
were recoveries to previously charged off loans during the six
months ended June 30, 1999 of $1,000. The allowance for loan loss
reserve was $1,297,558 at June 30, 1999, representing 1.11% 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.
Other real estate owned at June 30, 1999 totaled $263,056. This
property is a commercial building in Upper Darby, Pennsylvania.
The property is currently listed for sale with a realtor and was
appraised for $300,000. Management continues to monitor and
evaluate the Bank's exposure on this property.
NON-INTEREST INCOME
Other income increased 290% to $1,737,594 for the six months ended
June 30, 1999, which was primarily comprised of gains on sales of
mortgage loans in the secondary market, as compared to $444,993
during the same period in 1998. The increase was due to gains on
sale of mortgage loans through the Bank's Mortgage Department
which was established in June, 1998. For the quarter ended June
30, 1999, other income increased 33% to $920,636 from $213,589 for
the quarter ended June 30, 1998, primarily due to gains on sale of
mortgage loans.
NON-INTEREST EXPENSE
During the six months ended June 30, 1999, non-interest expense
increased 63% to $4,496,277 as compared to $2,766,508 during the
same period in 1998. Of this amount, $2,632,938, or approximately
59%, was attributable to salary and related employee benefits as
compared to $1,349,616 or approximately 49% during the first six
months of 1998. For the quarter ended June 30, 1999, non-interest
expense totaled $2,265,750 as compared to $1,500,397 during the
same quarter of 1998, an increase of 51%. Salary and employee
related benefits expense was $1,364,478 for the quarter ended June
30, 1999 as compared to $696,326 during the same period in 1998, a
96% increase. The increase in salary and related expenses was due
to increased
<PAGE>
staffing for branch expansion and primarily the establishment of
the Bank's Mortgage Department and payments of commissions from
sale of mortgage loans.
Combined occupancy and equipment expenses for the six months ended
June 30, 1999 were $694,066 as compared to $533,565, a 30%
increase, during the same period in 1998. For the quarter ended
June 30, 1999, occupancy and equipment expenses were $344,627 as
compared to $279,874 for the quarter ended June 30, 1998. The
increase was due to annual increases in rent expenses, the lease
of additional space at the Bank's main office for the Mortgage
Department and the addition of two new branches since June 30,
1998.
For the six months ended June 30, 1999, computer expense totaled
$165,436 as compared to $157,280 for the six months ended June 30,
1998. For the quarter ended June 30, 1999, computer expense
totaled $80,879 as compared to $85,061 for the quarter ended June
30, 1998. This slight decrease for the quarter ended June 30, 1999
compared to June 30, 1998, is due to expenses incurred in June of
1998 with a bankwide computer conversion and costs associated with
the Bank's Mortgage Department.
For the six months ended June 30, 1999, legal expense totaled
$68,875 as compared to $53,086 for the six months ended June 30,
1998, a 30% increase. For the quarter ended June 30, 1999 legal
expenses totaled $42,952 as compared to $31,670 for the quarter
ended June 30, 1998. Legal expense increased due to loan and
collection expenses related to the non-accrual loans and certain
collection related expenses that the Company incurred.
For the six months ended June 30, 1999, business development
expenses increased 85% to $175,853 as compared to $95,214 for the
six months ended June 30, 1998. For the quarter ended June 30,
1999, business development expenses increased 105% to $103,980 as
compared to $50,605 for the quarter ended June 30, 1998. The
increased expense was directly attributed to a higher level of
community involvement and sales promotions in connection with
branch expansion.
For the six months ended June 30, 1999, stationary and supplies
expense was $100,007 as compared to $79,496 for the six months
ended June 30, 1998. The increase of approximately 26% is due to
the assets and volume growth of the Bank. For the quarter ended
June 30, 1999, supplies expense was $46,632 as compared to $51,980
for the quarter ended June 30, 1998. The decrease in stationary
and supplies expense for the quarter ended June 30, 1999 compared
to the quarter ended June 30, 1998, is not anticipated in the
future operations of the Bank and was merely a timing difference
in the re-order of ongoing supplies. As the Bank's assets and
volume grow, this expense is expected to increase.
For the six months ended June 30, 1999, other operating expenses
totaled $479,384, or approximately 11% of total other expenses, as
compared to $340,047, or 12%, during the same period in 1998. For
the quarter ended
<PAGE>
June 30, 1999, these expenses totaled $212,892 as compared to
$214,318 for the quarter ended June 30, 1998. Other operating
expenses were comprised primarily of business promotional
materials, telephone, fidelity insurance premium, shares and loan
taxes, ATM expenses, accounting fees, loan expenses, and other
nominal miscellaneous expenses, as well as the contra expenses
related to FASB 91 costs on loan origination. The increase in
other operating expenses are ATM expenses increasing by
approximately $9,000, telephone expense increases of
approximately $13,000, postage and freight expense increasing by
approximately $34,000, and loans expense increasing by
approximately $20,000. Other expenses increased marginally to the
rate of growth and volume of the Bank.
Income tax expense for the six months and quarter ended June 30,
1999 was $284,441 and $155,541 as compared to $98,244 and $26,000
for the six months and quarter ended June 30, 1998. The tax
provision increased due to the increased net income of the Bank.
CAPITAL RESOURCES
The total number of shares of common stock outstanding on June 30,
1999 was 1,567,669 as compared to 1,562,018 at December 31, 1998.
During the second quarter of 1999, 5,651 shares of common stock
were issued in conjunction with the exercise of warrants to one
former Director. The book value per share of the Company's common
stock at December 31, 1998 was $6.05, as compared to $6.25 per
share at June 30, 1999.
During the six month period, January 1, 1999 to June 30, 1999, the
Company's total assets increased by approximately $8,482,674 or
approximately 6% to $156,408,537.
The chart below depicts various capital ratios applicable to state
chartered Federal Reserve member banks and compares the Bank's
actual ratios at June 30, 1999 and December 31, 1998,
respectively, each of which exceeded the levels required for a
bank to be classified as "Adequately Capitalized".
<TABLE>
<CAPTION>
Regulatory Actual Actual
Ratio Minimum 12/31/98 6/30/99
----- ---------- -------- -------
<S> <C> <C> <C>
Qualifying Total Capital to
Risk Weighted Assets 8.0% 10.72% 11.37%
Tier 1 Capital, net of intangibles
to Risk Weighted Assets 4.0% 9.71% 10.17%
Tier 1 Leverage Ratio of Capital to
Total Adjusted Average Assets 4.0% 8.26% 7 .38%
</TABLE>
The Company's capital-to-assets ratio decreased from 6.39% as of
December 31, 1998 to 6.27% as of June 30, 1999. The decrease in
the capital-to-assets
<PAGE>
ratio for the six months and quarter ended June 30, 1999, was
attributable to the growth in assets. Management anticipates that
its capital-to-assets ratio will decline in future periods as the
Company's core assets continue to grow. The Company's average
return on equity for the year ended December 31, 1998, was 5.13%;
and its return on average assets was .34%. For the six month
period ended June 30, 1999, the Company's average return on
equity was 7.56% and its return on average assets was .50%. The
increase in the Company's return on average equity and average
assets is directly attributable to the increased net income of
the Bank.
LIQUIDITY
The Bank's liquidity, represented by cash and cash equivalents, is
a product of its cash flows from operations. The Bank's primary
sources of funds are deposits, borrowings, amortization and
maturities of outstanding loans, sales of loans, maturities of
investment securities and other short-term investments and income
from operations. Changes in the cash flows of these instruments
are greatly influenced by economic conditions and competition. The
Bank attempts to balance supply and demand by managing the pricing
of its loan and deposit products consistent with the conservative
operating philosophy of its management and board of directors. Any
excess funds are invested in overnight and other short-term
interest-earning accounts. The Bank generates cash flow through
the retail deposit market, its traditional funding source, for use
in investing activities. In addition, the Bank may utilize
borrowings such as Federal Home Loan Bank advances for liquidity
or profit enchancement. At June 30, 1999, the Bank had no
outstanding advances.
The primary use of funds is to meet ongoing loan and investment
commitments, to pay maturing certificates of deposits and savings
withdrawals and expenses related to general operations of the
Bank. At June 30, 1999, the total approved loan commitments
outstanding amounted to approximately $10 million. At the same
date, commitments under unused lines of credit and the unadvances
portion of commercial credit lines amounted to approximately
$35,917,000. Certificates of deposit scheduled to mature in one
year or less at June 30, 1999 totaled $56,012,000. Investment
securities totaled $11,137,000 at June 30, 1999, of which
$1,503,000 are scheduled to mature or reprice in one year or less.
Management believes that a significant portion of maturing
deposits will remain with the Bank. The Bank anticipates that it
will continue to have sufficient cash flows to meet its current
and future commitments.
The Bank's Asset/Liability Management Committee, comprised of the
members of the Bank's Executive Committee and its Treasurer, are
responsible for managing the liquidity position and interest rate
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 Committee is to optimize net
interest margin in an ever changing rate environment.
<PAGE>
Due to the nature of the Company's business, some degree of
interest rate risk is inherent and appropriate. Management
attempts to manage the level of earnings exposure arising from
interest rate movements.
Management attempts to structure the Balance Sheet to provide for
repricing of assets and liabilities in approximately equal
amounts. In the opinion of the Company's management, the effect of
any future inflation, reflected in a higher costs of funds
environment, would be minimal since the Bank has the ability to
quickly increase yields on its interest earning assets (primarily
short term investments and commercial loans) through the matching
of funds.
At June 30, 1999, the risk management review included an "earnings
at risk" analysis as well as a "risk sensitivity" analysis.
Potential monthly net revenue change indicated that in a static
rate environment, increased earnings would be approximately $8,400
annually. If rates fell 200 basis points, monthly revenues a year
from now would increase approximately $24,400 and a rise in rates
by 200 basis points would represent a monthly decrease in revenues
a year from now of approximately $10,600. Management believes that
any impact will not be significant.
YEAR 2000 MATTERS
The "Year 2000" issue is the result of computer programs being
written using two digits rather than four to define the applicable
year. Any of the Company's computer programs that have
time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions or operations,
including, among other things, a temporary inability to process
transactions and engage in similar normal business activities.
The Company has undertaken a comprehensive upgrade of its computer
systems for Year 2000 compliance, which included the completion in
June, 1998 of a conversion of the Bank's computer systems to
systems that meet Year 2000 requirements. Testing was done in the
third and fourth quarters of 1998 to ensure year 2000 readiness.
The Company is currently on schedule with its year 2000 efforts
and plans to continue to allocate appropriate resources to ensure
company-wide compliance.
The total cost to the Company of these Year 2000 Compliance
activities has not been and is not anticipated to be material to
its financial position or results of operations in any given year.
These costs and the date on which the Company plans to complete
the Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability
of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ from those plans.
Based upon current information, the Company continues to believe
that its Year 2000 expenditures for 1999 will be approximately
$50,000.
<PAGE>
The Company has requested that significant vendors, suppliers and
its third party data processing service advise the Company in
writing of their Year 2000 readiness, including actions to be
compliant if they are not already compliant. Although responses
from certain vendors have not yet been received, the Company
believes that most of its significant vendors and suppliers are
substantially compliant, and its third party provider is
compliant. The Company will continue to monitor this situation.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2
CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On June 22, 1999 the Company held its Annual Meeting of
Shareholders. As of the record date the total number of votes
eligible to cast at the Annual Meeting was 1,567,669. The
following proposals were presented for a vote by the company's
stockholders:
PROPOSAL I - Election of Four (4) Class II Directors.
PROPOSAL II - Ratification of the Appointment of Deloitte &
Touche LLP as the Company's independent auditors for the
1999 fiscal year.
(b) At the Company's Annual Meeting, all nominees were re-elected
to a three year term.
(c) PROPOSAL I. ELECTION OF DIRECTORS. Four directors were
nominated by the Company to stand for re-election to the
Board. As set forth below each of the Company's nominees
were re-elected.
<TABLE>
<CAPTION>
Name of Nominee Votes For Votes Withheld Abstain
--------------- --------- -------------- -------
<S> <C> <C> <C>
Peter DePaul 1,070,471 2,846 0
Arnold M. Katz 1,070,471 2,846 0
Lorraine C. King, MD 1,070,471 2,846 0
Michael O'Donoghue 1,070,471 2,846 0
</TABLE>
<PAGE>
PROPOSAL II. RATIFICATION OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE 1999 FISCAL YEAR.
<TABLE>
<CAPTION>
Votes For Votes Withheld Abstain
--------- -------------- -------
<S> <C> <C>
1,073,317 0 0
</TABLE>
ITEM 5 OTHER INFORMATION
NOTICE RELATING TO SHAREHOLDER PROPOSALS UNDER RULE 14A-4
A shareholder of the Company may wish to have a proposal presented
at the 2000 Annual Meeting of Shareholders, but not have such
proposal included in the Company's proxy statement and form of
proxy relating to that meeting. If notice of any such proposal is
not received by the Company at the address appearing on the first
page of this Report by March 5, 2000 then such proposal shall be
deemed "untimely" for purposes of Rule 14a-4(c) promulgated under
the Exchange Act and, therefore, the Company will have the right
to exercise discretionary voting authority with respect to such
proposal.
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed
Page Number in
Exhibit Number Sequential Numbering System
3 Amended and Restated Articles *
of Incorporation, as amended, and
Amended and Restated Bylaws of
the Issuer
10 (1) Amended and Restated Declaration ----
of Trust of Madison Capital Trust I
dated July 13, 1998.
(2) Indenture between Madison Bancshares
Group, Ltd. and Christiana Bank and
Trust Company), as Trustee, dated
July 13, 1998.
(3) Capital Securities Guarantee between Madison
Bancshares Group, Ltd. and Christiana Bank
and Trust Company), as Trustee, dated
July 13, 1998.
27 Financial Data Schedule ----
(b) Reports on Form 8-K
On May 28, 1998, the Company filed a Current Report on Form
8-K reporting the declaration of a 20% stock dividend by the
Company's Board of Directors, payable June 17, 1998 to
shareholders of record as of June 3, 1998.
- --------------------
* Incorporated by reference from the Issuer's Registration Statement on
Form S-1 No. 33-27146
<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.
------------------------------
Vito A. DeLisi
Executive Vice President
------------------------------
E. Cheryl Hinkle
Senior Vice President
Date Executed: August , 1999
<PAGE>
ANNEX A
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------------- -------------------------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS:
Cash and amounts due from banks $ 8,174,443 $ 7,793,484
Federal funds sold 12,200,000 7,500,000
-------------------- -------------------------
Total cash and cash equivalents 20,374,443 15,293,484
INVESTMENT SECURITIES:
Held to maturity (fair value- 1999,
$3,072,587; 1998, $1,613,597) 3,071,165 1,602,493
Available for sale (amortized cost; 1999, $7,056,588;
1998, $1,000,046) 7,016,938 1,010,000
Federal Home Loan Bank Stock 726,000 527,300
Federal Reserve Bank Stock 323,400 176,400
LOANS (Net of allowance for loan losses - 1999, $1,297,558;
1998, $1,111,817) 115,058,120 113,819,315
MORTGAGE LOANS HELD FOR SALE 6,255,770 11,593,638
REAL ESTATE OWNED 263,056 734,089
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 1,560,781 1,583,473
ACCRUED INTEREST RECEIVABLE 1,110,313 1,076,682
OTHER ASSETS 648,551 508,989
-------------------- -------------------------
TOTAL $ 156,408,537 $ 147,925,863
-------------------- -------------------------
-------------------- -------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Noninterest-bearing demand deposits $ 25,501,022 23,423,200
Interest-bearing demand deposits 12,252,254 11,785,117
Savings deposits 8,971,099 11,089,034
Money market deposits 22,212,470 17,109,125
Time deposits 71,620,835 69,188,042
-------------------- -------------------------
Total deposits 140,557,680 132,594,518
GUARANTEED PREFERRED BENEFICIAL INTEREST IN
SUBORDINATED DEBT 5,000,000 5,000,000
ACCRUED INTEREST PAYABLE 785,190 804,222
ACCRUED EXPENSES AND OTHER LIABILITIES 260,177 76,731
-------------------- -------------------------
Total Liabilities 146,603,047 138,475,471
-------------------- -------------------------
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, 1,567,669 in
1999 and 1,562,018 in 1998 1,567,669 1,562,018
Capital surplus 7,581,912 7,563,433
Accumulated earnings 682,078 318,371
Accumulated other comprehensive income (loss) (26,169) 6,570
-------------------- -------------------------
Total shareholders' equity 9,805,490 9,450,392
-------------------- -------------------------
TOTAL $ 156,408,537 $ 147,925,863
-------------------- -------------------------
-------------------- -------------------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999 AND JUNE 30, 1998
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- ------------------------------
1999 1998 1999 1998
--------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,912,221 $ 2,441,213 $ 5,842,545 $ 4,869,907
Interest and dividends on investment securities:
US Government obligations 54,616 37,332 77,503 85,096
Other securities 81,339 23,342 102,649 45,853
Interest on temporary investments 132,286 94,264 238,571 229,022
--------------- -------------- ------------ ------------
3,180,462 2,596,151 6,261,268 5,229,878
--------------- -------------- ------------ ------------
Interest expense:
Interest on:
Demand deposits 63,829 45,141 122,972 93,043
Savings and money market deposits 202,762 162,475 370,188 316,394
Time deposits 938,756 978,038 1,871,276 1,993,275
Guaranteed preferred beneficial interest in
subordinated debt 112,500 0 225,000 0
Federal funds purchased 0 0 0 1,688
--------------- -------------- ------------ ------------
1,317,847 1,185,654 2,589,436 2,404,400
--------------- -------------- ------------ ------------
Net interest income before provision for loan losses 1,862,615 1,410,497 3,671,832 2,825,478
Provision for loan losses 145,000 110,000 265,000 230,000
--------------- -------------- ------------ ------------
Net interest income after provision for loan losses 1,717,615 1,300,497 3,406,832 2,595,478
--------------- -------------- ------------ ------------
Other noninterest income:
Gain on sale of mortgage loans 739,741 12,484 1,360,710 16,780
Service charges on deposit accounts 143,404 168,786 317,087 363,271
Other 37,491 32,319 59,797 64,942
--------------- -------------- ------------ ------------
Total noninterest income 920,636 213,589 1,737,594 444,993
--------------- -------------- ------------ ------------
Other noninterest expenses:
Salary and employee benefits 1,346,478 696,325 2,632,938 1,349,616
Occupancy 231,498 208,616 485,400 401,248
Equipment 113,129 71,258 208,666 132,317
Computer processing 80,879 85,061 165,436 157,280
Deposit insurance 18,830 2,613 26,774 6,794
Legal 42,952 31,670 68,875 53,086
Professional fees (2,039) 26,275 25,475 41,639
Business development 103,980 50,605 175,853 95,214
Office and stationary supplies 46,632 51,980 100,007 79,496
Director fees 35,950 50,625 71,250 85,375
Advertising 21,939 11,051 30,959 24,396
Amortization of debt issuance costs 12,630 0 25,260 0
Other operating 212,892 214,318 479,384 340,047
--------------- -------------- ------------ ------------
Total noninterest expenses 2,265,750 1,500,397 4,496,277 2,766,508
--------------- -------------- ------------ ------------
Income before income taxes 372,501 13,689 648,149 273,963
Provision for income taxes 155,541 26,000 284,441 98,244
--------------- -------------- ------------ ------------
Net income (loss) $ 216,960 $ (12,311) $ 363,708 $ 175,719
--------------- -------------- ------------ ------------
--------------- -------------- ------------ ------------
Net income (loss) per common share - basic $ 0.14 $ (0.01) $ 0.23 $ 0.12
--------------- -------------- ------------ ------------
--------------- -------------- ------------ ------------
Net income (loss) per common share - diluted $ 0.13 $ (0.01) $ 0.22 $ 0.11
--------------- -------------- ------------ ------------
--------------- -------------- ------------ ------------
Weighted average number of shares - basic 1,567,669 1,540,860 1,564,859 1,522,956
-------------- -------------- ------------ ------------
--------------- -------------- ------------ ------------
Weighted average number of shares - diluted 1,649,333 1,639,303 1,649,512 1,622,247
-------------- -------------- ------------ ------------
--------------- -------------- ------------ ------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Operating activities:
Net income $ 363,708 $ 175,719
Adjustments for non-cash items included in net income:
Depreciation and amortization 155,789 97,641
Provision for loan losses 265,000 230,000
Net amortization of bond premium/discount 1,348 1,206
Amortization of deferred fees & costs, net 136,787 12,925
Gain on sale of mortgages held for sale (1,360,710) (16,780)
Changes in assets and liabilities which provided (used) cash:
Mortgage loans held for resale 6,698,578 307,680
Interest receivable (33,631) (198,023)
Other assets (139,562) (153,468)
Accrued interest payable (19,032) 265,185
Accrued expenses and other liabilities 183,446 (34,211)
------------ -------------
Net cash provided by operating activities 6,251,721 687,874
------------ -------------
Investing activities:
Purchase of investment securities available for sale (6,039,698)
Purchase of investment securities held to maturity (2,200,000)
Purchase of Federal Home Loan Bank stock (198,700) (47,500)
Purchase of Federal Reserve Bank stock (147,000)
Proceeds from maturity of investment securities
available for sale 730,000 1,500,000
Net change in loans to customers (1,640,592) (4,607,011)
Purchase of furniture, equipment and leasehold improvements (133,097) (701,235)
Net change in real estate owned 471,033 (785)
------------ -------------
Net cash used in investing activities (9,158,054) (3,856,531)
------------ -------------
Financing activities:
Increase in demand, savings and time deposits 7,963,162 4,483,998
Decrease in borrowed funds (9,000,000)
Exercise of stock warrants 24,130 228,971
------------ -------------
Net cash provided by (used in) financing activities 7,987,292 (4,287,031)
------------ -------------
Net increase (decrease) in cash and cash equivalents 5,080,959 (7,455,688)
Cash and cash equivalents, beginning of period 15,293,484 23,444,986
------------ -------------
Cash and cash equivalents, end of period $ 20,374,443 $ 15,989,298
------------ -------------
------------ -------------
Supplemental disclosures of cash flow information:
Interest paid $ 2,608,468 $ 2,139,215
----------- -------------
------------ -------------
Income taxes paid $ 250,000 $ 172,000
----------- -------------
------------ -------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. Basis of presentation:
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for quarterly reports on Form
10-QSB 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 a fair presentation of financial results and that all
adjustments are of a normal recurring nature. The results of operations
for the six month periods ended June 30, 1999 is 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. (the Company) and its wholly owned subsidiary,
The Madison Bank (the Bank). All material intercompany balances and
transactions have been eliminated.
3. Net income per share:
Basic net income per share is based upon the weighted average number of
common shares outstanding, while diluted net income per share is based
upon the weighted average number of common shares outstanding and
common share equivalents that would arise from the exercise of stock
options and stock warrants.
4. Stock dividend:
On May 19, 1998, the Board of Directors declared a stock dividend in
the amount of twenty percent (20%), payable in shares of the Company's
common stock. Such dividend was payable on or about June 17, 1998 to
holders of the Company's shares of common stock on June 3, 1998. No
fractional shares were issued in connection with such dividend. Per
share computations reflect the changes in the number of shares
resulting from these dividends.
5. Comprehensive Income:
The Company adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income, effective January 1, 1998. The
statement requires disclosure of amounts from transactions and other
events which are currently excluded from the statement of operations
and are recorded directly to shareholders' equity. Comprehensive income
for the six month period ended June 30, 1999 and 1998 was $330,969 and
$176,643, respectively.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000846809
<NAME> MADISON BANCSHARES GROUP LTD.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 8,174
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 12,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,017
<INVESTMENTS-CARRYING> 3,071
<INVESTMENTS-MARKET> 3,073
<LOANS> 122,612
<ALLOWANCE> 1,298
<TOTAL-ASSETS> 156,408
<DEPOSITS> 140,558
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,045
<LONG-TERM> 5,000
0
0
<COMMON> 1,568
<OTHER-SE> 8,237
<TOTAL-LIABILITIES-AND-EQUITY> 156,408
<INTEREST-LOAN> 5,843
<INTEREST-INVEST> 180
<INTEREST-OTHER> 238
<INTEREST-TOTAL> 6,261
<INTEREST-DEPOSIT> 2,364
<INTEREST-EXPENSE> 2,589
<INTEREST-INCOME-NET> 3,672
<LOAN-LOSSES> 265
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,496
<INCOME-PRETAX> 648
<INCOME-PRE-EXTRAORDINARY> 648
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 364
<EPS-BASIC> .23
<EPS-DILUTED> .22
<YIELD-ACTUAL> 10.08
<LOANS-NON> 1,240
<LOANS-PAST> 1,667
<LOANS-TROUBLED> 266
<LOANS-PROBLEM> 1,596
<ALLOWANCE-OPEN> 1,112
<CHARGE-OFFS> 80
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 265
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,298
</TABLE>
