<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, 2000
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.
2,091,320 shares of Issuer's Common Stock, par value $1 per share, issued
and outstanding as of November 10, 2000.
<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) reliance on existing management personnel; and (vi)
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 and nine months ended
September 30, 2000 and 1999. The Bank commenced operations in
August, 1989.
ANALYSIS OF FINANCIAL CONDITION
As of September 30, 2000, the Company held deposits aggregating
$151,206,946, representing an increase of approximately 16% from
deposits of $130,338,463 held at December 31, 1999. Of the deposits
held at September 30, 2000, $23,769,839, or approximately 16%, were
non-interest-bearing deposits. At September 30, 2000 total deposit
accounts numbered 12,413 and outstanding loans receivable in connection
with loans made to 1,736 loan accounts totaled approximately
$142,007,557 (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, 2000 and
December 31, 1999, respectively.
<PAGE>
DEPOSIT LIABILITIES
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
% of % of
Type of Account Balance Portfolio Balance Portfolio
--------------- ------- --------- ------- ---------
<S> <C> <C> <C> <C>
Non-Interest bearing (1) $ 23,769,839 16% $ 20,540,071 16%
Interest bearing (2) 14,513,522 10 12,704,649 10
Money Market (3) 15,401,963 10 15,205,159 12
Savings (4) 8,729,255 6 8,150,269 6
CD's Under 100M (5) 50,554,683 33 40,498,507 31
CD's Over 100M (6) 38,237,684 25 33,239,808 25
------------ --- ------------ ---
Totals $151,206,946 100% $130,338,463 100%
============ === ============ ===
</TABLE>
[two pie charts comparing the percentages
of September 30, 2000 and December 31, 1999]
<PAGE>
LOANS OUTSTANDING
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
% of % of
Type of Account Balance Portfolio Balance Portfolio
--------------- ------- --------- ------- ---------
<S> <C> <C> <C> <C>
Real Estate Loans, Mortgages (1) $ 23,289,649 16% $ 24,652,775 19%
Commercial Loans (2) 97,781,949 69 89,988,247 69
Consumer Loans (3) 11,666,981 8 9,592,584 8
Residential Loans Held for
Sale (4) 9,268,978 7 5,418,972 4
------------ --- ------------- ---
Totals $142,007,557 100% $129,652,578 100%
============ === ============ ===
</TABLE>
[two pie charts comparing the percentages
of September 30, 2000 and December 31, 1999]
RESULTS OF OPERATIONS
For the nine months ended September 30, 2000, the Company had net
income of $273,987, or $.15 per share, as compared to net income of
$643,929 or $.35 per share during the nine months ended September
30, 1999. For the quarter ended September 30, 2000, the Company had
a net income of $123,146 or $.06 per share as compared to $280,221,
or $.16 per share for the quarter ended September 30, 1999. The
decrease in net income from the quarter and nine months ended
September 30, 2000 was primarily attributable to the increased
expense resulting from two new branch openings. The additional
staffing at the corporate office to manage the asset growth of the
Bank also impacted the operating expenses of the Bank.
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 September 30, 1999, through
September 30, 2000:
[graph with the following plot points]
<TABLE>
<CAPTION>
Sep Oct Nov Dec Jan Feb Mar Apr
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Int Inc 684,434 710,556 687,962 761,202 690,176 683,167 738,253 681,036
Tot Non Int Exp 744,670 725,940 775,288 843,062 865,537 796,222 802,187 771,780
<CAPTION>
May Jun July Aug Sep
<S> <C> <C> <C> <C> <C>
Net Int Inc 760,940 784,353 730,514 704,531 675,321
Tot Non Int Exp 909,835 957,056 946,585 928,328 928,135
</TABLE>
The Company's net interest income, after provision for loan losses
increased 14% to $6,016,662 for the nine months ended September 30,
2000 as compared to $5,290,129 for the nine months ended September
30, 1999. The Company's net interest income, after provision for
loan losses, increased 5% to $1,976,464 for the quarter ended
September 30, 2000 as compared to $1,883,297 for the quarter ended
September 30, 1999. Interest income increased 17% to $11,228,880 for
the nine months ended September 30, 2000, as compared to $9,573,682
for the nine months ended September 30, 1999. For the quarter ended
September 30, 2000 the Company's interest income increased 17% to
$3,869,853 from $3,312,414 for the quarter ended September 30, 1999.
Interest expense on deposits and borrowed funds increased from
$3,923,553 for the nine months ended September 30, 1999, to
$4,932,218 for the nine months ended September 30, 2000, a 26%
increase. The increases in interest income and interest expense are
due to the loan and deposit and investment growth of the Bank and
the increased yields on the loan and deposit portfolios.
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 nine months ended September 30,
2000 was $844,937 as compared to $217,683 for the nine months ended
September 30, 1999. For the quarter ended September 30, 2000, interest
income on U.S. Government Obligations was $281,885 as compared to
$140,180 at September 30, 1999. The increase for the quarter and year
to date resulted from funds invested in securities due to increased
liquidity from deposit growth.
<PAGE>
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 nine months ended
September 30, 2000, was $202,836 as compared to $173,388 for the
nine months ended September 30, 1999. For the quarters ended
September 30, 2000 and September 30, 1999 interest income was
$58,996 and $70,739, respectively. The increase in interest income
on other securities for the nine months ended is due to the Bank
investing in more Federal Reserve Stock and a $2,000,000 investment
in other debt securities. The decrease for the quarter ended
September 30, 2000 is due to a decrease in Federal Home Loan Bank
dividends as compared to the quarter ended September 30, 1999.
Interest income on temporary investments represents federal funds
sold for the nine months ended September 30, 2000, this interest
income was $40,275 as compared to $329,024 for the nine months ended
September 30, 1999. For the quarters ended September 30, 2000 and
September 30, 1999, income on temporary investments was $15,274 and
$90,453, respectively. The decrease in interest on temporary
investments for the quarter represents the deployment of the funds
into longer term investments of U.S. Government and Agency
Securities.
Total interest and fees on loans for the nine months ended September
30, 2000 was $10,140,832 as compared to $8,853,587 for the nine months
ended September 30, 1999. For the quarter ended September 30, 2000
interest and fees on loans was $3,513,698 as compared to $3,011,042 for
the quarter ended September 30, 1999. The Bank experienced
approximately 14% loan growth from September 30, 1999 to September 30,
2000 and an increase of approximately .35% yield on the portfolio
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 nine months ended
September 30, 2000 represented 44% of gross interest income or
$4,932,218, as compared to $3,923,553 or 41% of gross interest income
for the nine months ended September 30, 1999. For the quarter ended
September 30, 2000, interest expense was $1,793,389 as compared to
$1,334,117 for the quarter ended September 30, 1999.
<PAGE>
[graph with the following plot points]
<TABLE>
<CAPTION>
Sep Oct Nov Dec Jan Feb Mar Apr
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans 124,409,594 130,288,713 130,023,724 129,652,577 128,067,795 128,654,920 130,872,850 134,684,442
Deposits 136,346,333 142,626,817 138,462,568 130,423,177 130,574,122 133,264,889 139,421,749 140,353,813
<CAPTION>
May Jun July Aug Sep
<S> <C> <C> <C> <C> <C>
Loans 135,276,524 141,727,704 142,543,368 142,014,101 141,947,556
Deposits 141,561,302 151,589,799 156,138,999 154,999,059 151,208,946
</TABLE>
PROVISION FOR LOAN LOSSES
For the nine months and quarter ended September 30, 2000, the Bank
added to its provision for loan losses $280,000 and $100,000,
respectively. During the nine months and quarter ended September 30,
1999, the Bank added $360,000 and $95,000 to its provision for loan
losses, respectively.
As of December 31, 1999, the Bank had $1,262,256 in its allowance for
loan losses, representing .99% of outstanding loans receivable. During
the nine months ended September 30, 2000 the Bank added $280,000 to the
reserve. Loans charged off against the reserve during third quarter of
2000 amounted to $139,087. There were recoveries to previously charged
off loans during the nine months ended September 30, 2000 of $14,331.
The allowance for loan loss reserve was $1,417,500 at September 30,
2000, representing 1.00% 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 September 30, 2000 totaled $532,242. This
consists of one property in Drexel Hill, Pennsylvania and one property
in West Chester, Pennsylvania. Both properties are currently listed for
sale with a realtor and management continues to monitor and evaluate
the Bank's exposure on this property. It is management's opinion that
minimal losses, if any, are expected.
<PAGE>
NON-INTEREST INCOME
Other income decreased 7% to $2,318,165 for the nine months ended
September 30, 2000, which was primarily comprised of gains on sales of
mortgage loans in the secondary market, as compared to $2,504,531
during the same period in 1999. For the quarter ended September 30,
2000, other income increased 33% to $1,018,352 from $766,937 for the
quarter ended September 30, 1999. The increase in other income for the
quarters and nine months ended September 30, 2000, was due to gains on
sales of mortgage loans and increased service charge income on deposit
accounts.
NON-INTEREST EXPENSE
During the nine months ended September 30, 2000, non-interest expense
increased 17% to $7,919,764 as compared to $6,750,031 during the same
period in 1999. Of this amount, $4,526,893, or approximately 57%, was
attributable to salary and related employee benefits as compared to
$3,901,660 or approximately 58% during the first nine months of 1999.
For the quarter ended September 30, 2000, non-interest expense totaled
$2,805,964 as compared to $2,253,754 during the same quarter of 1999,
an increase of 25%. Salary and employee related benefits expense was
$1,620,625 for the quarter ended September 30, 2000 as compared to
$1,268,722 during the same period in 1999, a 28% increase. The increase
in salary and related expenses was due to increased staffing for branch
expansion as well as additional corporate staff additions.
Combined occupancy and equipment expenses for the nine months ended
September 30, 2000 were $1,331,210 as compared to $1,047,391, a 27%
increase, during the same period in 1999. For the quarter ended
September 30, 2000, occupancy and equipment expenses were $502,118 as
compared to $353,325 for the quarter ended September 30, 1999. The
increase was due to annual increases in rent expenses and the lease of
additional space for two new branches.
For the nine months ended September 30, 2000, computer expense totaled
$304,269 as compared to $252,568 for the nine months ended September
30, 1999. For the quarter ended September 30, 2000, computer expense
totaled $101,962 as compared to $87,132 for the quarter ended September
30, 1999. This increase was due to growth in volume of accounts and
transactions processed.
For the nine months ended September 30, 2000, legal expense totaled
$111,912 as compared to $103,441 for the nine months ended September
30, 1999, an 8% increase. For the quarter ended September 30, 2000
legal expenses totaled $40,280 as compared to $34,566 for the quarter
ended September 30, 1999. Legal expense includes the expenses incurred
related to loans as well as corporate legal needs of the Company.
<PAGE>
For the nine months ended September 30, 2000, business development
expenses decreased 8% to $236,362 as compared to $256,715 for the nine
months ended September 30, 1999. For the quarter ended September 30,
2000, business development expenses decreased 16% to $68,105 as
compared to $80,862 for the quarter ended September 30, 1999. The
decreased expense was attributable to less outside business development
activities.
For the nine months ended September 30, 2000, stationary and supplies
expense was $164,783 as compared to $152,217 for the nine months ended
September 30, 1999. The increase of approximately 8% is due to the
assets and volume growth of the Bank. For the quarter ended September
30, 2000, supplies expense was $47,567 as compared to $52,210 for the
quarter ended September 30, 1999. The decrease in stationary and
supplies expense for the quarter ended September 30, 2000 compared to
the quarter ended September 30, 1999, is due to the increased supply
orders in the third quarter of 1999 to prepare for year 2000
contingency back-up of supplies.
For the nine months ended September 30, 2000, other operating expenses
totaled $1,244,335, or approximately 16% of total other expenses, as
compared to $1,036,039, or 15%, during the same period in 1999. For the
quarter ended September 30, 2000, these expenses totaled $425,307 as
compared to $376,937 for the quarter ended September 30, 1999. 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 $24,000, telephone expense
increases of approximately $17,000 and loans expense increasing by
approximately $37,000. Other expenses increased marginally to the rate
of growth and volume of the Bank.
Income tax expense for the nine months and quarter ended September 30,
2000 was $141,076 and $65,706 as compared to $400,700 and $116,259 for
the nine months and quarter ended September 30, 1999. The tax provision
decrease is due to the earnings decrease of the Company.
CAPITAL RESOURCES
The total number of shares of common stock outstanding on September 30,
2000 was 2,091,320 as compared to 1,747,947 at December 31, 1999.
During the first nine months ending September 30, 2000, 8,373 shares of
common stock were issued in conjunction with the exercise of warrants
to one Director and 335,000 shares of common stock issued in
conjunction with a private placement to four Directors. (See Item 2.
Changes in Securities and Use of Proceeds). The book value per share of
the Company's common stock at December 31, 1999 was $5.88, as compared
to $6.00 per share at September 30, 2000.
During the nine month period ended September 30, 2000, the Company's
total assets increased by approximately $16,969,367, or approximately
11%, to $172,811,777.
<PAGE>
The chart below depicts certain capital ratios applicable to state
chartered Federal Reserve member banks and bank holding companies. The
Company's actual ratios at September 30, 2000 and December 31, 1999,
respectively, each of which exceeded the levels required to be
classified as "adequately capitalized" under applicable regulatory
guidelines.
<TABLE>
<CAPTION>
Regulatory Actual Actual
Ratio Minimum 12/31/99 9/30/00
----- ------- -------- -------
<S> <C> <C> <C>
Qualifying Total Capital to
Risk Weighted Assets 8.0% 14.57% 15.53%
Tier 1 Capital, net of intangibles
to Risk Weighted Assets 4.0% 12.16% 13.76%
Tier 1 Leverage Ratio of Capital to
Total Adjusted Average Assets 4.0% 8.96% 10.27%
</TABLE>
The Company's capital-to-assets ratio increased from 6.60% as of
December 31, 1999 to 7.26% as of September 30, 2000. The increase in
the capital-to-assets ratio for the nine months and quarter ended
September 30, 2000, was attributable to the Private Placement and
issuance of 335,000 shares of common stock (see item 2. Changes in
Securities and Use of Proceeds). 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, 1999, was 9.39%; and its return on
average assets was .61%. For the nine month period ended September 30,
2000, the Company's average return on equity was 2.46% and its return
on average assets was .17%. The significant decrease in the Company's
return on average equity and average assets is directly attributable to
the increased branch expansion that the Company has planned. This
negative impact on earnings should be temporary in nature and will
reverse as the branches start growing and obtain a market share in
their specific markets and branch expansion is complete.
The chart below depicts certain capital ratios applicable to state
chartered Federal Reserve member banks. The Bank's actual ratios at
September 30, 2000 and December 31, 1999, respectively, each of which
exceeded the levels required for a bank to be classified as "adequately
capitalized" under applicable regulatory guidelines.
<TABLE>
<CAPTION>
Regulatory Actual Actual
Ratio Minimum 12/31/99 9/30/00
----- ------- -------- -------
<S> <C> <C> <C>
Qualifying Total Capital to
Risk Weighted Assets 8.0% 13.02% 13.82%
Tier 1 Capital, net of intangibles
to Risk Weighted Assets 4.0% 11.92% 12.69%
Tier 1 Leverage Ratio of Capital to
Total Adjusted Average Assets 4.0% 9.06% 9.31%
</TABLE>
<PAGE>
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 enhancement. At September 30, 2000, the Bank had $2,500,000 in
borrowed funds.
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
September 30, 2000, the total approved loan commitments outstanding
amounted to approximately $18 million. At the same date, commitments
under unused lines of credit and the unadvances portion of commercial
credit lines amounted to approximately $16,117,336. Certificates of
deposit scheduled to mature in one year or less at September 30, 2000
totaled $73,424,029. Investment securities totaled $21,488,950 at
September 30, 2000, of which $2,479,714 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.
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 September 30, 2000, 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 $673,900 annually. If rates
fell 200 basis points, monthly revenues a year from now would increase
approximately $679,800 and a
<PAGE>
rise in rates by 200 basis points would represent a monthly decrease in
revenues a year from now of approximately $642,900. Management believes
that any impact will not be significant.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2 CHANGES IN SECURITIES
(c) On June 28, 2000, the Company sold an aggregate of 175,000 shares
of its Common Stock to three Directors for aggregate consideration of
$1,006,250. On September 18, 2000 a family trust affiliated with a
fourth Director purchased an aggregate of 160,000 shares of its Common
Stock for aggregate consideration of $920,000. There were no
underwriters involved in connection with the foregoing sales nor were
any underwriting discounts or other commissions paid. The Company
issued the securities in reliance upon the exemption afforded by
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(b) None.
ITEM 5 OTHER INFORMATION
None.
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed
<TABLE>
<CAPTION>
Page Number in
Exhibit Number Sequential Numbering System
-------------- ---------------------------
<S> <C>
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.**
(4) The amended and restated Madison Bancshares
Ltd. 1997 Stock Option Plan. ***
27 Financial Data Schedule --
</TABLE>
--------------------
* Incorporated by reference from the Issuer's Registration Statement on Form
S-1 No. 33-27146
** Incorporated by reference from the Issuer's Quarterly Report on Form
10QSB for the quarter ended September 30, 1998.
*** Incorporated by reference from the Issuer's Proxy Statement dated April
18, 1997.
<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
Executive Vice President
/s/ E. Cheryl Hinkle
------------------------------
E. Cheryl Hinkle
Senior Vice President
Date Executed: November 14, 2000
<PAGE>
ANNEX A
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS:
Cash and amounts due from banks $ 6,366,026 $ 2,588,835
Federal funds sold 500,000
------------- -------------
Total cash and cash equivalents 6,366,026 3,088,835
INVESTMENT SECURITIES:
Held to maturity (fair value - 2000, $2,570,347;
1999, $2,567,857) 2,570,047 2,570,106
Available for sale (amortized cost; 2000, $18,056,563;
1999, $17,055,709) 17,832,803 16,749,747
Federal Home Loan Bank Stock 762,700 750,000
Federal Reserve Bank Stock 323,400 323,400
LOANS (Net of allowance for loan losses - 2000, $1,417,500;
1999, $1,262,256) 131,025,725 122,635,380
MORTGAGE LOANS HELD FOR SALE 9,160,659 5,418,972
REAL ESTATE OWNED 532,242 577,039
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 2,001,633 1,661,814
ACCRUED INTEREST RECEIVABLE 1,317,577 1,281,928
OTHER ASSETS 918,965 785,189
------------- -------------
TOTAL $ 172,811,777 $ 155,842,410
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Noninterest-bearing demand deposits $ 23,769,839 $ 20,540,071
Interest-bearing demand deposits 14,513,522 12,704,649
Savings deposits 8,729,255 8,150,269
Money market deposits 15,401,963 15,205,159
Time deposits 88,792,367 73,738,315
------------- -------------
Total deposits 151,206,946 130,338,463
BORROWED FUNDS 2,500,000 9,000,000
GUARANTEED PREFERRED BENEFICIAL INTEREST IN
SUBORDINATED DEBT 5,000,000 5,000,000
ACCRUED INTEREST PAYABLE 1,407,458 960,268
ACCRUED EXPENSES AND OTHER LIABILITIES 146,773 261,148
------------- -------------
Total Liabilities 160,261,177 145,559,879
------------- -------------
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, 2000 2,091,320; and 1999 1,747,947 2,091,320 1,747,947
Capital surplus 10,340,586 8,745,557
Accumulated earnings (deficit) 264,949 (9,038)
Accumulated other comprehensive income (loss) (146,255) (201,935)
------------- -------------
Total shareholders' equity 12,550,600 10,282,531
------------- -------------
TOTAL $ 172,811,777 $ 155,842,410
============= =============
</TABLE>
See notes to consolidated financial statements
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net income $ 273,987 $ 643,929
Adjustments for non-cash items included in net income:
Depreciation and amortization 372,241 234,810
Provision for loan losses 280,000 360,000
Net amortization of bond premium/discount (27,317) 9,263
Amortization of deferred fees & costs, net (40,617) (117,845)
Gain on sale of mortgages held for sale (1,648,604) (1,966,390)
Changes in assets and liabilities which provided (used) cash:
Interest receivable (35,649) (18,787)
Mortgage loans held for resale (2,093,083) 10,162,159
Other assets (171,666) (146,247)
Accrued expenses and other liabilities (114,375) 179,235
Accrued interest payable 447,190 273,178
------------ ------------
Net cash provided by (used in) operating activities (2,757,893) 9,613,305
------------ ------------
Investing activities:
Purchase of investment securities available for sale 1,000,000 (16,039,698)
Purchase of investment securities held to maturity (2,200,000)
Purchase of Federal Home Loan Bank stock (12,700) (198,700)
Purchase of Federal Reserve Bank stock (147,000)
Proceeds from maturity of investment securities
avilable for sale 730,000
Net change in loans to customers (10,629,728) (5,804,895)
Purchase of furniture, equipment and leasehold improvements (674,170) (194,417)
Net change in real estate owned 44,797 372,184
Proceeds from maturity of investment held to maturity 500,000
------------ ------------
Net cash used in investing activities (10,271,801) (22,982,526)
------------ ------------
Financing activities:
Increase in demand, savings and time deposits 20,868,483 3,748,403
Increase (decrease) in borrowed funds (6,500,000) 5,000,000
Exercise of stock warrants 32,152 24,130
Issuance of common stock 1,906,250
------------ ------------
Net cash provided by financing activities 16,306,885 8,772,533
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,277,191 (4,597,688)
Cash and cash equivalents, beginning of period 3,088,835 15,293,484
------------ ------------
Cash and cash equivalents, end of period $ 6,366,026 $ 10,695,796
============ ============
Supplemental disclosures of cash flow information:
Interest paid $ 4,485,028 $ 3,650,375
============ ============
Income taxes paid $ 143,000 $ 425,000
============ ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,513,698 $ 3,011,042 $10,140,832 $ 8,853,587
Interest and dividends on investment securities:
US Government obligations 281,885 140,180 844,937 217,683
Other securities 58,996 70,739 202,836 173,388
Interest on temporary investments 15,274 90,453 40,275 329,024
----------- ----------- ----------- -----------
3,869,853 3,312,414 11,228,880 9,573,682
----------- ----------- ----------- -----------
Interest expense:
Interest on:
Demand deposits 61,908 63,129 181,244 186,101
Savings and money market deposits 205,436 193,049 547,374 563,237
Time deposits 1,374,252 932,783 3,541,813 2,804,059
Federal funds purchased & other borrowings 39,293 32,656 324,287 32,656
Preferred trust securities 112,500 112,500 337,500 337,500
----------- ----------- ----------- -----------
1,793,389 1,334,117 4,932,218 3,923,553
----------- ----------- ----------- -----------
Net interest income before provision for loan losses 2,076,464 1,978,297 6,296,662 5,650,129
Provision for loan losses 100,000 95,000 280,000 360,000
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 1,976,464 1,883,297 6,016,662 5,290,129
----------- ----------- ----------- -----------
Other noninterest income:
Gain on sale of mortgage loans 775,257 605,680 1,648,604 1,966,390
Service charges on deposit accounts 233,293 157,923 572,691 475,010
Other 9,802 3,334 96,870 63,131
----------- ----------- ----------- -----------
Total noninterest income 1,018,352 766,937 2,318,165 2,504,531
----------- ----------- ----------- -----------
Other noninterest expenses:
Salary and employee benefits 1,620,625 1,268,722 4,526,893 3,901,660
Occupancy 343,965 232,643 918,929 718,043
Equipment 158,153 120,682 412,281 329,348
Computer processing 101,962 87,132 304,269 252,568
Deposit insurance 8,649 8,324 18,984 35,098
Legal 40,280 34,566 111,912 103,441
Professional fees 21,000 13,850 61,675 39,325
Business development 68,105 80,862 236,362 256,715
Office and stationary supplies 47,567 52,210 164,783 152,217
Advertising 13,752 19,206 84,747 50,165
Director fees 35,875 31,900 94,450 103,150
Amortization of debt issuance costs 12,630 12,630 37,890 37,890
Other operating 333,401 291,027 946,589 770,411
----------- ----------- ----------- -----------
Total noninterest expenses 2,805,964 2,253,754 7,919,764 6,750,031
----------- ----------- ----------- -----------
Income before income taxes 188,852 396,480 415,063 1,044,629
Provision for income taxes 65,706 116,259 141,076 400,700
----------- ----------- ----------- -----------
Net income (loss) $ 123,146 $ 280,221 $ 273,987 $ 643,929
=========== =========== =========== ===========
Net income per common share - basic $ 0.06 $ 0.16 $ 0.15 $ 0.37
=========== =========== =========== ===========
Net income per common share - diluted $ 0.06 $ 0.16 $ 0.15 $ 0.35
=========== =========== =========== ===========
Weighted average number of shares - basic 1,950,450 1,724,436 1,822,654 1,722,387
=========== =========== =========== ===========
Weighted average number of shares - diluted 2,000,006 1,807,287 1,863,204 1,816,720
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
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 three and nine month period ended September 30, 2000 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. Private Placement:
On June 28, 2000, the Company issued 175,000 shares of common stock and
on September 18, 2000 the Company issued 160,000 shares of common stock
at a market price of $5.75 per share in connection with a private
placement offering. This offering resulted in an increase of $1,906,250
in additional capital for the period ended September 30, 2000.
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 three and nine month periods ended September 30, 2000 was
$226,208 and $329,667, respectively. Comprehensive income for the three
and nine month periods ended September 30, 1999 was $266,928 and
$597,897, respectively.
