-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WmppivLOZytfVK+SxWUFQZQsDFDAKlP0SqVK5x0Gz3SoxOlqwlDnysZyr1h7DFbh f2q+1kmjmqC7+fE2ENWU6w== 0000912057-02-019923.txt : 20020513 0000912057-02-019923.hdr.sgml : 20020513 ACCESSION NUMBER: 0000912057-02-019923 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MADISON BANCSHARES GROUP LTD CENTRAL INDEX KEY: 0000846809 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 232512079 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17539 FILM NUMBER: 02644259 BUSINESS ADDRESS: STREET 1: 1767 SENTRY PARKWAY W CITY: BLUE BELL STATE: PA ZIP: 19422 BUSINESS PHONE: 2156411111 MAIL ADDRESS: STREET 1: 1767 SENTRY PARKWAY WEST CITY: BLUE BELL STATE: PA ZIP: 19422 10QSB 1 a2079485z10qsb.txt QUARTERLY REPORT 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: MARCH 31, 2002 -------------- 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 May 1, 2002. PART 1 ITEM 1 - FINANCIAL STATEMENTS SEE ANNEX A 2 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. For a discussion of specific risks relating to Madison Bancshares Group, Ltd. business and operations please refer to the section entitled "risk factors" set forth in the Company's annual report on Form 10-KSB for the year ended December 31, 2001. 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 March 31, 2002 and 2001. The Bank commenced operations in August 1989. CAPITAL RESOURCES The total shares of common stock outstanding at March 31, 2002 and December 31, 2001 were 2,091,320, respectively. The book value of the Company's common stock at December 31, 2001 was $5.38 per share and at March 31, 2002 was $5.37 per share. The chart below depicts certain capital ratios applicable to state chartered Federal Reserve member banks and bank holding companies. The Company's actual capital ratios at March 31, 2002 and December 31, 2001, respectively, each of which exceeded the levels required to be classified "adequately capitalized" under applicable regulatory guidelines.
REGULATORY ACTUAL ACTUAL RATIO MINIMUM MAR. 31, 2002 DEC. 31, 2001 ----- ---------- ------------- ------------- Qualifying Total Capital to Risk Weighted Assets 8.00% 13.28% 13.42% Tier 1 Capital, net of intangibles to Risk Weighted Assets 4.00% 11.41% 11.57% Tier 1 Leverage Ratio of Capital to Total Adjusted Average Assets 4.00% 8.09% 8.31%
3 The Company's capital-to-assets ratio was 6.17% as of December 31, 2001 as compared to 5.95% as of March 31, 2002. Management anticipates that the capital-to-assets ratio will decline in future periods as the Company's assets continue to grow. For the quarter ended March 31, 2002, the Company's average return on equity was 2.14%, and its return on average assets was .13%. The Company's average return on equity as of December 31, 2001 was (.16%), and its return on average assets was (.01%). LIQUIDITY 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 Management 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. Interest rate sensitivity is measured by the difference between interest-earning assets and interest-bearing liabilities which mature or reprice within a specific time interval ("Gap"). A positive gap indicates that interest-earning assets exceed interest-bearing liabilities within a given interval. A positive gap position results in increased net interest income when rates increase and the opposite when rates decline. At March 31, 2002, the risk management review included an "earnings at risk" analysis as well as a "risk sensitivity" analysis. In a static rate environment, net interest income would be approximately $8,637,000 at the end of one year. The Company is in a negative gap position. Accordingly, if rates fell 200 basis points, net interest income would decrease by 6.3%, or would be approximately $8,092,000 at the end of a one year period. A rise in rates by 200 basis points would represent a net interest income increase of 4.8%, or would be approximately $9,055,000 at the end of a one year period due to the current negative gap position of the Company. Management attempts to structure the Balance Sheet to provide for the repricing of assets and liabilities in approximately equal amounts. 4 RESULTS OF OPERATIONS As of March 31, 2002 outstanding loan receivables in connection with loans made to 1,768 loan accounts totaled $146,892,440 (excluding allowance for loan losses and deferred loan fees and inclusive of loans held for sale). The following table set forth a comparative breakdown of the Company's loans outstanding at March 31, 2002 and December 31, 2001, respectively. LOANS
MARCH 31, 2002 DECEMBER 31, 2001 % of % of TYPE OF ACCOUNT BALANCE PORTFOLIO BALANCE PORTFOLIO --------------- ------------ ------------ ------------ ------------ Real Estate Loans, Mortgages $ 20,673,182 14% $ 20,451,044 13% Commercial Loans 102,275,058 70 103,567,398 66 Consumer Loans 12,045,038 8 11,896,030 7 Residential Loans Held for Sale 11,899,162 8 22,077,508 14 ------------ --- ------------ --- Totals $146,892,440 100% $157,991,980 100% ============ === ============ ===
ALLOWANCE FOR LOAN LOSSES - The provision for loan losses charged to expense is based upon past loan and loss experience and an evaluation of losses in the current loan portfolio, including the evaulation of impaired loans. Management continues to utilize a blended general portfolio allocation with segregated pools of loans and a specific loan-by-loan allocation mirroring bank regulatory classifications. Each classified credit is assigned a specific reserve allocation based upon the severity of its classification and its specific characteristics (i.e., industry, type of project, nature of collateral). General reserve allocations are also established against the unclassified major segments of the loan portfolio, as well as against unfunded commitments and exposures resulting from the issuance of letters of credit. Each quarter a comprehensive loan portfolio analysis is performed, and reserves are adjusted at such times to more adequately reflect the Bank's exposure in its loan portfolio. Additionally, the evaluation considers past loss experience, current economic conditions, the results of the most recent regulatory examination, and other relevant factors. As of December 31, 2001, the Company had $1,125,181 of allowance for loan losses, which represents .83% of outstanding loan receivables, excluding residential loans held for sale. During the first quarter of 2002, the Company added $87,500 to the allowance for loan losses. There were no charge-offs as of March 31, 2002 and recoveries were $1,800. The allowance for loan loss reserve was $1,214,481 or .90% of total loan receivables as of March 31, 2002. The principal amount of non-accrual loans at March 31, 2002 totaled $1,080,960 as compared to 5 $1,086,183 as of December 31, 2001. A substantial portion of the non-accrual loans are partially or fully secured and in the process of collection. The allowance for loan losses will be adjusted in the subsequent quarters of 2002 to cover any known losses or any losses reasonably expected in the portfolio as reflected with current economic condition. REAL ESTATE OWNED - At December 31, 2001, real estate owned totaled $350,393 as compared to $351,935 at March 31, 2002. Real estate owned consists of two properties which are both up for sale with third-party real estate agents and the sale price of each property is greater than the current carrying value. DEPOSITS - At March 31, 2002, the Company held deposits aggregating $171,140,583, which reflects an increase over deposits of $164,769,017 held at December 31, 2001. Of the $171,140,583 deposits held at March 31, 2002, $32,579,836, or approximately 19%, were non-interest bearing deposits. Total deposit accounts numbered 11,598 at March 31, 2002. The following table and graph set forth a comparative breakdown of the Company's deposits outstanding for the quarter ended March 31, 2002 and year ended December 31, 2001. DEPOSITS
MARCH 31, 2002 DECEMBER 31, 2001 % of % of TYPE OF ACCOUNT BALANCE PORTFOLIO BALANCE PORTFOLIO --------------- ------------ ------------ ------------ ------------ Non-Interest Bearing $ 32,579,836 19% $ 30,026,869 18% Interest Bearing 18,110,689 11 17,105,710 10 Money Market 24,192,838 14 19,635,229 12 Savings 11,096,414 6 10,180,956 6 CD's Under $100,000 43,008,580 25 45,168,939 28 CD's Over $100,000 42,152,226 25 42,651,314 26 ------------ --- ------------ --- Totals $171,140,583 100% $164,769,017 100% ============ === ============ ===
6 INCOME AND EXPENSE For the three months ended March 31, 2002, the Company incurred a net income of $60,174 or $0.03 per share (diluted), as compared to a net loss of ($18,820) or ($.01) per share (diluted) during the three months ended March 31, 2001. The increase was attributed to the Company's efforts in implementing a budget program to decrease expenses. Also in the first quarter of 2001, there were expenses associated with the branch opening in Jenkintown that were not incurred in the first quarter of 2002. INTEREST AND FEES ON LOANS - Total interest and fees on loans at March 31, 2002 was $2,948,305 compared to $3,364,082 at March 31, 2001, representing a 12% decrease. The Company experienced a 3% average loan growth while the yield on the portfolio decreased from 9.51% to 8.10%. The decrease in loan yields is a result of the falling interest rate environment affecting immediate repricing of 35% of the Company's loan portfolio. This will affect the Company's earnings until such time that the interest-bearing fixed rate liabilities mature and are repriced. This will occur over the next 12 months, and at such time the Company's interest margin will be corrected. INTEREST INCOME ON INVESTMENT SECURITIES - Interest income on investment securities relates primarily to interest on U.S. Government Obligations. Interest income for U.S. Government Obligations of $88,247 for the three months ended March 31, 2002 decreased 60% from $220,833 for the three months ended March 31, 2001. The decrease was due to the decline in interest rates, resulting in certain callable bonds the Company invested in to be called. INTEREST INCOME ON OTHER SECURITIES - Interest income on other securities is comprised primarily of dividends from investments of Federal Home Loan Stock and other debt securities. For the three months ended March 31, 2002 other securities income was $63,253 as compared to $73,590 for the three months ended March 31, 2001. The slight decrease was due to decreased dividend payments on the Federal Home Loan Bank Stock. OTHER INTEREST INCOME - Interest income on temporary investments represents federal funds sold. For the three months ended March 31, 2002, interest income on federal funds sold was $55,284 as compared to $35,457 for the three months ended March 31, 2001, a 56% increase. The increase was a direct result of the Company retaining liquid funds to satisfy the loan demand arising out of a falling interest rate environment. 7 ANALYSIS OF NET INTEREST INCOME Net interest income, which is 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 Company's net interest income and non-interest expense growth from March 31, 2001 through March 31, 2002:
Mar Apr May Jun Jul Aug Sep Oct Nov Dec --- --- --- --- --- --- --- --- --- --- Net Int Inc 671,207 725,904 682,772 114,642 715,890 701,698 728,238 743,495 671,580 738,976 Tot Non Int Exp 1,037,470 1,005,831 1,050,546 1,055,478 1,096,750 1,135,907 1,099,483 1,181,656 1,097,601 1,424,869 Jan Feb Mar --- --- --- Net Int Inc 614,379 595,595 705,565 Tot Non Int Exp 1,186,509 993,938 1,112,280
The Company's net interest income, after provision for loan losses, for the quarters ended March 31, 2002 and March 31, 2001 was $1,818,341 and $1,862,238, respectively. Total interest income was $3,155,089 for the quarter ended March 31, 2002, as compared to $3,693,962 for the quarter ended March 31, 2001. Interest expense on deposits and borrowings was $1,249,248 for the three months ended March 31, 2002, as compared to $1,741,724 for the three months ended March 31, 2001. 8 The graph below sets forth the Company's loan and deposit growth from March 31, 2001 through March 31, 2002:
Mar Apr May Jun Jul Aug Sep Oct Nov --- --- --- --- --- --- --- --- --- Loans 144,385,465 149,757,518 151,596,412 148,215,287 150,129,251 150,499,445 156,720,866 156,832,418 166,274,429 Deposits 154,911,754 156,877,831 157,509,800 160,614,398 161,658,253 159,732,994 163,720,590 162,704,132 167,317,614 Dec Jan Feb Mar --- --- --- --- Loans 157,891,981 148,859,997 152,120,884 146,892,440 Deposits 164,804,372 167,246,786 170,040,594 171,168,864
INTEREST EXPENSE - Interest expense of $1,249,248 represented 40% of total interest income for the three months ended March 31, 2002, as compared to $1,741,724 or 47% of total interest income for the three months ended March 31, 2001. The 28% decrease in interest expense from March 31, 2001 to March 31, 2002 is attributed to the eleven declines in interest rates. The average cost of funds decreased from 5.16% at March 31, 2001 to 3.48% at March 31, 2002. NON-INTEREST EXPENSE - For the quarter ended March 31, 2002, non-interest expenses were $3,326,033 as compared to $2,884,609 during the first quarter of 2001, which is a 15% increase. Of this amount, $1,990,464, or approximately 60% of total other expenses was attributed to salary and related employee benefits as compared to $1,640,868, or 57% of total other expenses during the first quarter of 2001. The increase was primarily due to increased staffing to accommodate the Company's opening of an additional branch in Jenkintown in January 2001 and increased staffing to accommodate the bank's growth. OCCUPANCY EXPENSES - Occupancy expenses of $410,404 accounted for 12% of total non-interest expenses for the three months ended March 31, 2002. This was an increase of 4% over the same period in 2001. The increased occupancy expenses are directly attributed to the additional space the Bank leased to accommodate the branch expansion as well as additional space to support the internal growth of the Bank. Occupancy expense for the three months ended March 31, 2001 was $393,067 or 14% of total non-interest expenses. EQUIPMENT EXPENSES - Equipment expenses of $145,553 for the three months ended March 31, 2002 represented a decrease of 2% from $148,000 for the three months ended March 31, 2001. 9 BUSINESS DEVELOPMENT EXPENSES - Business development expenses for the quarter ended March 31, 2002 were $48,447 as compared to $92,113 for the quarter ended March 31, 2001, a 47% decrease. The decrease was a direct result of budget cuts in an effort to control costs as a result of prior earnings results. OTHER OPERATING - Other operating expenses are comprised of advertising, accounting, auto and travel, insurance and examinations, postage and freight, data processing fees, printing and supplies and Pennsylvania Shares Tax payments. Other operating expenses for the three months ended March 31, 2002 were $731,165, or 22% of total non-interest expenses. During the three months ended March 31, 2001 other operating expenses were $610,561 or 21% of total non-interest expenses. Income tax expense for the quarter ended March 31, 2002 was $51,463. There was no income tax expense for the quarter ended March 31, 2001 due to the Company's net loss. CRITICAL ACCOUNTING POLICIES In management's opinion, the most critical accounting policy impacting the Company's financial statement is the evaluation of the allowance for loan losses. Management carefully monitors the credit quality of the loan portfolio and makes estimates about the amount of credit losses that have been incurred at each financial statement date. Management evaluates the fair value of collateral supporting the impaired loans using independent appraisals and other measures of fair value. This process involves subjective judgments and assumptions and is subject to change based on factors that may be outside the control of the Company. 10 PART II - OTHER INFORMATION ITEMS 1 THROUGH 5 Not Applicable. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Filed PAGE NUMBER IN SEQUENTIAL EXHIBIT NUMBER NUMBERING SYSTEM - -------------- ---------------- 3(a) Amended and Restated Articles of Incorporation of the Company* N/A 3(b) Amended and Restated Bylaws of the Company** N/A 4(c) Form of Warrant of the Company*** N/A 10(a) Lease Agreement, dated February 5, 2002, by and between Madison Bancshares Group, Ltd. and Blue Bell Office Campus Associates**** N/A 10(b) Madison Bancshares Group, Ltd. 1997 Stock Option Plan***** N/A 10(c) Amended and Restated Declaration of Trust of Madison Capital Trust I dated July 13, 1998.****** N/A 10(d) Indenture between Madison Bancshares Group, Ltd. and Christiana Bank and Trust Company, as Trustee, dated July 13, 1998.****** N/A 10(e) Capital Securities Guarantee between Madison Bancshares Group, Ltd. and Christiana Bank and Trust Company, as Trustee, dated July 13, 1998.****** N/A - ------------- * Incorporated by reference from Exhibit No. 3 to the Registration Statement on Form S-1 of the Company, as amended, Registration No. 33-22492. ** Incorporated by reference from Exhibit No. 3 to the Registration Statement on Form S-1 of the Company, as amended, Registration No. 33-22492. 11 *** Incorporated by reference from Exhibit No. 4 to the Registration Statement on Form S-1 of the Company, as amended, Registration No. 33-22492. **** Incorporated by reference from Exhibit 10(a) to the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. ***** Incorporated by reference from Exhibit A to the Company's 1997 Definitive Proxy Statement, dated April 18, 1997. ****** Incorporated by reference from Exhibit No. 10 to the Company's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 1998. All other schedules and exhibits are omitted because they are not applicable or the required information is set out in the financial statements or the notes thereto. (b) Reports on Form 8-K None. 12 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 President ------------------------------ E. Cheryl Hinkle Senior Vice President Date Executed: May ___, 2002 13 ANNEX A MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
March 31, 2002 December 31, 2001 -------------- ----------------- ASSETS CASH AND CASH EQUIVALENTS: Cash and amounts due from banks $ 6,850,847 $ 13,333,676 Federal funds sold 14,500,000 1,000,000 ------------- ------------- Total cash and cash equivalents 21,350,847 14,333,676 INVESTMENT SECURITIES: Held to maturity (fair value - 2002, $170,587; 2001, $570,433) 170,000 570,000 Available for sale (amortized cost - 2002, $15,657,071; 2001, $5,150,265) 15,604,112 5,224,008 Federal Home Loan Bank Stock 897,000 897,000 Federal Reserve Bank Stock 323,400 323,400 LOANS (Net of allowance for loan losses - 2002, $1,214,481; 2001, $1,125,181) 133,380,390 134,302,135 MORTGAGE LOANS HELD FOR SALE 11,899,162 22,077,508 REAL ESTATE OWNED 351,935 350,393 FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 2,170,630 2,151,507 ACCRUED INTEREST RECEIVABLE 1,024,112 939,148 OTHER ASSETS 1,048,363 767,997 DEFERRED INCOME TAXES 533,474 445,202 ------------- ------------- TOTAL $ 188,753,425 $ 182,381,974 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY DEPOSITS: Noninterest-bearing demand deposits $ 32,579,836 $ 30,026,869 Interest-bearing demand deposits 18,110,689 17,105,710 Savings deposits 11,096,414 10,180,956 Money market deposits 24,192,838 19,635,229 Time deposits 85,160,806 87,820,253 ------------- ------------- Total deposits 171,140,583 164,769,017 GUARANTEED PREFERRED BENEFICIAL INTEREST IN SUBORDINATED DEBT 5,000,000 5,000,000 ACCRUED INTEREST PAYABLE 919,818 880,328 ACCRUED EXPENSES AND OTHER LIABILITIES 466,845 483,001 ------------- ------------- Total Liabilities 177,527,246 171,132,346 ------------- ------------- 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, 2002 and 2001, 2,091,320 shares 2,091,320 2,091,320 Capital surplus 10,331,332 10,331,332 Accumulated deficit (1,161,520) (1,221,693) Accumulated other comprehensive loss (34,953) 48,669 ------------- ------------- Total shareholders' equity 11,226,179 11,249,628 ------------- ------------- TOTAL $ 188,753,425 $ 182,381,974 ============= =============
See note to consolidated financial statements. A-2 MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME FOR THE PERIODS ENDED MARCH 31, 2002 AND 2001 (Unaudited)
2002 2001 ----------- ----------- Interest income: Interest and fees on loans $ 2,948,305 $ 3,364,082 Interest and dividends on investment securities: US Government obligations 88,247 220,833 Other securities 63,253 73,590 Interest on temporary investments 55,284 35,457 ----------- ----------- 3,155,089 3,693,962 ----------- ----------- Interest expense: Interest on: Demand deposits 21,782 59,549 Savings and money market deposits 125,009 189,808 Time deposits 989,957 1,351,545 Guaranteed preferred beneficial interest in subordinated debt 112,500 112,500 Federal funds purchased & other interest -- 28,322 ----------- ----------- 1,249,248 1,741,724 ----------- ----------- Net interest income before provision for loan losses 1,905,841 1,952,238 Provision for loan losses 87,500 90,000 ----------- ----------- Net interest income after provision for loan losses 1,818,341 1,862,238 ----------- ----------- Other noninterest income: Gain on sale of mortgage loans 1,310,740 762,813 Service charges on deposit accounts 245,085 172,155 Other 63,504 68,583 ----------- ----------- Total noninterest income 1,619,329 1,003,551 ----------- ----------- Other noninterest expenses: Salary and employee benefits 1,990,464 1,640,868 Occupancy 410,404 393,067 Equipment 145,553 148,000 Computer processing 189,370 117,497 Deposit insurance 9,535 9,080 Legal 41,128 23,237 Professional fees 19,220 45,989 Business development 48,447 92,113 Office and stationary supplies 44,019 37,939 Director fees 28,475 26,050 Advertising 6,337 14,465 Amortization of debt issuance costs 12,630 12,630 Other operating 380,451 323,674 ----------- ----------- Total noninterest expenses 3,326,033 2,884,609 ----------- ----------- (Loss) Income before income taxes 111,637 (18,820) Provision for income taxes 51,463 -- ----------- ----------- Net (loss) income $ 60,174 $ (18,820) =========== =========== Net income (loss) per common share - basic $ 0.03 $ (0.01) =========== =========== Net income (loss) per common share - diluted $ 0.03 $ (0.01) =========== =========== Weighted average number of shares - basic 2,091,320 2,091,320 =========== =========== Weighted average number of shares - diluted 2,146,096 2,140,278 =========== ===========
See note to consolidated financial statements. A-3 MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited)
2002 2001 ------------ ------------ Operating activities: Net income (loss) $ 60,174 $ (18,820) Adjustments for non-cash items included in net income: Deferred income tax (45,193) Depreciation and amortization 129,341 144,873 Provision for loan losses 87,500 90,000 Net amortization of bond premium/discount 19,963 1,991 Amortization of deferred fees & costs, net (88,749) (114,185) Gain on sale of mortgages held for sale (1,310,740) (762,813) Loss on sale of real estate owned 21,288 Changes in assets and liabilities which (used) provided cash: Mortgage loans held for resale 11,489,086 (860,062) Accrued interest receivable (84,964) 266,487 Other assets (280,366) (176,543) Accrued interest payable 39,490 318,793 Accrued expenses and other liabilities (16,156) (128,598) ------------ ------------ Net cash provided by (used in) operating activities 9,999,386 (1,217,589) ------------ ------------ Investing activities: Purchase of investment securities available for sale (11,026,768) (2,000,000) Proceeds from maturity of investment securities 900,000 13,000,000 Net change in loans to customers 922,994 3,064,720 Purchase of furniture, equipment and leasehold improvements (148,465) (249,181) Costs capitalized for real estate owned (1,542) (1,287) Proceeds on sale of real estate owned 254,049 ------------ ------------ Net cash provided by (used in) investing activities (9,353,781) 14,068,301 ------------ ------------ Financing activities: Increase in demand, savings and time deposits 6,371,566 3,373,760 Repayment of borrowed funds (5,000,000) ------------ ------------ Net cash provided by (used in) financing activities 6,371,566 (1,626,240) ------------ ------------ Net increase in cash and cash equivalents 7,017,171 11,224,472 Cash and cash equivalents, beginning of year 14,333,676 6,886,426 ------------ ------------ Cash and cash equivalents, end of period $ 21,350,847 $ 18,110,898 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,209,758 $ 1,422,931 ============ ============ Income taxes paid $ -- $ -- ============ ============
See note to consolidated financial statements. A-4 MADISON BANCSHARES GROUP, LTD. AND SUBSIDIARY NOTE TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 accounting principles generally accepted in the United States of America. 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 month periods ended March 31, 2002 and 2001 are not necessarily indicative of the results which may be expected for the entire fiscal year. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of Madison Bancshares Group, Ltd. and its wholly owned subsidiary, The Madison Bank. All significant intercompany balances and transactions have been eliminated. 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. COMPREHENSIVE INCOME/(LOSS) - Amounts from transactions and other events which are currently excluded from the statement of operations and are recorded directly to shareholders' equity and are presented as a component of comprehensive income/(loss). Comprehensive income/(loss) for the three month periods ended March 31, 2002 and 2001 was ($83,622) and $47,417, respectively. ACCOUNTING PRONOUNCEMENTS ISSUED AND ADOPTED - In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 141, BUSINESS COMBINATIONS and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No. 142 addresses the initial recognition and measurement of intangible assets acquired outside of a business combination and the accounting for goodwill and other intangible assets subsequent to their acquisition. SFAS No. 142 provides that intangible assets with finite useful lives be amortized and that goodwill and intangible assets with indefinite lives will not be amortized, but will rather be tested at least annually for impairment. The Company Adopted SFAS No. 141 and No. 142 as of January 1, 2002. The adoption of these statements did not have any impact on the Company's financial position or the results of operations. In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. This statement addressed financial accounting and reporting for the impairment or disposal of long-lived assets. The statement supersedes SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, and the accounting and reporting provisions of the APB No. 30, REPORTING OF OPERATIONS-REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS. This statement is effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 as of January 1, 2002. The adoption of this statement did not have an impact on the Company's financial condition or results of operations. A-5 -----END PRIVACY-ENHANCED MESSAGE-----