##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark one)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ______________ to _____________
 Commission file number: 0-54081
 MADISON BANCORP, INC.
 
 Maryland
    
    27-258073(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer Identification No.)9649 Belair Road, Suite 300, Baltimore, Maryland
    
    21236(Address of principal executive offices)
    
    (Zip Code)
 (410) 529-7400
 
 Not Applicable
 
 o þ
 o o
  Large accelerated
filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)

Accelerated
filer o 
Smaller reporting company þ o þ




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##### Table of Contents



EXPLANATORY NOTE
   1




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##### 



MADISON BANCORP, INC.
  
 Table of Contents
 Page 
No.Part I. Financial InformationItem 1.
    
    Financial Statements (Unaudited)Consolidated Statements of Financial Condition as of June 30, 2010 (unaudited) and
March 31, 2010
    
    
    3Consolidated Statements of Operations for the Three Months Ended June 30, 2010
and 2009 (unaudited)
    
    
    4Consolidated Statement of Changes in Equity for the Three Months Ended June 30,
2010 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2010
and 2009 (unaudited)
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    19Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4.
    
    Controls and Procedures
    
    
    23Part II. Other InformationItem 1.
    
    Legal Proceedings
    
    
    23Item 1A.
    
    Risk Factors
    
    
    23Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.
    
    Defaults Upon Senior Securities
    
    
    23Item 4.
    
    Removed and Reserved
    
    
    23Item 5.
    
    Other Information
    
    
    23Item 6.
    
    Exhibits
    
    
    24Signatures
    
    
    25EX-31.1EX-32.0
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 MADISON BANCORP, INC AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, 2010 and March 31, 2010
 JUNE 30,
    
    March 31,2010
    
    2010(Unaudited)
    
    (Audited)AssetsAssetsCash and cash equivalents
    
    $
    21,874,232
    
    
    $
    13,354,975Certificates of deposit
    
    
    960,780
    
    
    
    956,972Investment securities available-for-sale
    
    
    29,259,920
    
    
    
    33,480,669Investment securities held-to-maturity
    
    
    1,819,058
    
    
    
    2,283,707Federal Home Loan Bank stock, at cost
    
    
    242,500
    
    
    
    242,500Loans receivable, net
    
    
    90,189,147
    
    
    
    90,336,475Property and equipment, net
    
    
    3,928,630
    
    
    
    3,983,182Ground rents, net
    
    
    477,273
    
    
    
    477,273Accrued interest receivable
    
    
    421,751
    
    
    
    430,549Deferred income taxes
    
    
    0
    
    
    
    5,828Prepaid expenses and other assets
    
    
    1,525,489
    
    
    
    1,337,364Total Assets
    
    $
    150,698,780
    
    
    $
    146,889,494Liabilities and EquityLiabilitiesDeposits:Noninterest-bearing
    
    $
    5,200,624
    
    
    $
    5,267,672Interest-bearing
    
    
    134,919,244
    
    
    
    131,697,595Total Deposits
    
    
    140,119,868
    
    
    
    136,965,267Advances from borrowers for taxes
and insurance
    
    
    942,847
    
    
    
    557,686Deferred income taxes
    
    
    126,716
    
    
    
    0Other liabilities
    
    
    243,176
    
    
    
    303,514Total Liabilities
    
    
    141,432,607
    
    
    
    137,826,467EquityRetained earnings
    
    
    8,903,232
    
    
    
    8,903,564Accumulated other comprehensive income
    
    
    362,941
    
    
    
    159,463Total Equity
    
    
    9,266,173
    
    
    
    9,063,027Total Liabilities and Equity
    
    $
    150,698,780
    
    
    $
    146,889,494
  3




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MADISON BANCORP, INC AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 2010 and 2009
 JUNE 30,
    
    June 30,2010
    
    2009Interest RevenueInterest and fees on loans
    
    $
    1,272,356
    
    
    $
    1,250,764Investment securities available-for-sale
    
    
    242,303
    
    
    
    201,526Investment securities held-to-maturity
    
    
    25,579
    
    
    
    36,214Interest-bearing deposits
    
    
    7,473
    
    
    
    8,112Other
    
    
    156
    
    
    
    0Total Interest Revenue
    
    
    1,547,867
    
    
    
    1,496,616Interest ExpenseInterest on deposits:Time
    
    
    579,148
    
    
    
    833,801Savings
    
    
    20,700
    
    
    
    39,346NOW and money market demand accounts
    
    
    2,965
    
    
    
    7,980Other interest expense
    
    
    34
    
    
    
    37Total Interest Expense
    
    
    602,847
    
    
    
    881,164Net Interest Income
    
    
    945,020
    
    
    
    615,452Provision for Loan Losses
    
    
    51,359
    
    
    
    40,000Net Interest Income after Provision for
Loan Losses
    
    
    893,661
    
    
    
    575,452Noninterest RevenueGain (Loss) on disposal of property
    
    
    0
    
    
    
    (1,182
    )Gain on sale of investment securities
    
    
    28,919
    
    
    
    30Other than temporary impairment of securities
    
    
    0
    
    
    
    0Other
    
    
    78,473
    
    
    
    59,819Total Noninterest Revenue
    
    
    107,392
    
    
    
    58,667Noninterest ExpensesSalaries and employee benefits
    
    
    477,152
    
    
    
    493,098Occupancy & equipment expense
    
    
    275,718
    
    
    
    252,955Advertising
    
    
    1,813
    
    
    
    3,262Audit and accounting
    
    
    33,845
    
    
    
    17,395FDIC premiums and OTS assessments
    
    
    97,302
    
    
    
    148,547Data processing
    
    
    53,272
    
    
    
    42,496Stationary and postage
    
    
    19,788
    
    
    
    20,437Other operating expenses
    
    
    42,495
    
    
    
    69,637Total Noninterest Expenses
    
    
    1,001,385
    
    
    
    1,047,827Loss Before Income Taxes
    
    
    (332
    )
    
    
    (413,708
    )Income Tax Expense (Benefit)
    
    
    0
    
    
    
    0Net Loss
    
    $
    (332
    )
    
    $
    (413,708
    )
  4




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MADISON BANCORP, INC AND SUBSIDIARIES
Consolidated Statement of Changes in Equity (Unaudited)
Three Months Ended June 30, 2010
 AccumulatedOtherRetained
    
    
    Comprehensive
    
    
    TotalEarnings
    
    
    Income
    
    
    EquityBalance April 1, 2010
    
    $
    8,903,564
    
    
    $
    159,463
    
    
    $
    9,063,027Comprehensive income:Net (Loss)
    
    
    (332
    )
    
    
    
    
    
    
    (332
    )Net unrealized gain on available for sale
securities, net of tax effect of $132,544
    
    
    
    
    
    
    203,478
    
    
    
    203,478Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    203,145Balance June 30, 2010
    
    $
    8,903,232
    
    
    $
    362,941
    
    
    $
    9,266,173
  5




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MADISON BANCORP, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended June 30, 2010 and 2009
 JUNE 30, 2010
    
    
    June 30, 2009Cash flows from Operating ActivitiesNet loss
    
    
    ($332
    )
    
    
    ($413,708
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Amortization (accretion) of investment securities
    
    
    (1,373
    )
    
    
    15,057Decrease in net deferred loan costs
    
    
    (4,304
    )
    
    
    (8,760
    )Provision
for loan and ground rent losses
    
    
    51,359
    
    
    
    40,000(Gain) Loss on sale of investment securities
    
    
    (28,919
    )
    
    
    (30
    )Other than temporary impairment charge
    
    
    0
    
    
    
    0(Gain) Loss
on disposal of property and equipment
    
    
    0
    
    
    
    1,182Depreciation and amortization
    
    
    57,383
    
    
    
    65,600Changes in operating assets and liabilities:Accrued interest receivable
    
    
    8,798
    
    
    
    19,620Prepaid expenses and other assets
    
    
    (188,125
    )
    
    
    (43,969
    )Other liabilities
    
    
    (60,338
    )
    
    
    4,021Net Cash provided by (used in) operating activities
    
    
    (165,851
    )
    
    
    (320,987
    )Cash flows from Investing ActivitiesIncrease in loans receivable, net
    
    
    100,273
    
    
    
    (396,725
    )Increase in certificates of deposit, net
    
    
    (3,808
    )
    
    
    (950,000
    )Principal payments on HTM securities
    
    
    201,007
    
    
    
    227,479Principal payments on AFS securities
    
    
    1,523,056
    
    
    
    1,710,256Proceeds from maturing investment securities
    
    
    3,097,000
    
    
    
    5,100,000Proceeds from sales investment securities
    
    
    2,733,052
    
    
    
    0Purchases of investment securities
    
    
    (2,502,403
    )
    
    
    (7,699,631
    )Purchase of
property and equipment
    
    
    (2,831
    )
    
    
    (88,311
    )(Purchases) redemptions of FHLB Stock
    
    
    0
    
    
    
    0Proceeds from sale of property
    
    
    0
    
    
    
    0Proceeds from sale of ground rents
    
    
    0
    
    
    
    6,900Net cash used in investing activities
    
    
    5,145,346
    
    
    
    (2,090,032
    )Cash flow from Financing ActivitiesIncrease (decrease) in:Deposits, net
    
    
    3,154,601
    
    
    
    2,348,615Advances from borrowers, net
    
    
    385,161
    
    
    
    373,166Net cash provided by financing activities
    
    
    3,539,762
    
    
    
    2,721,781Increase
(Decrease) in Cash and Cash Equivalents
    
    
    8,519,257
    
    
    
    310,762Cash and Cash Equivalents, Beginning of Period
    
    
    13,354,975
    
    
    
    16,321,326Cash and Cash Equivalents, End of Period
    
    $
    21,874,232
    
    
    $
    16,632,088
  6




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Note 1: Activities and Summary of Significant Accounting Policies
   Form S-1
 Principles of consolidation
 Use of estimates
 Cash and cash equivalents
 Certificates of deposit
 Investment securities
  7




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Note 1: Activities and Summary of Significant Accounting Policies (Continued)
    Federal Home Loan Bank stock
 Loans receivable and the allowance for loan losses
   8




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Note 1: Activities and Summary of Significant Accounting Policies (Continued)
   Property and equipment
 Ground rents
 Income taxes
 Comprehensive income
  2010
    
    2009Unrealized holding gains (losses) on securities available-for-sale
    
    $
    364,941
    
    
    $
    (116,418
    )Reclassification adjustment for losses realized in income
    
    
    (28,919
    )
    
    
    (30
    )Net unrealized gains
    
    
    336,022
    
    
    
    (116,448
    )Tax effect
    
    
    132,544
    
    
    
    (45,933
    )Net-of-tax amount
    
    $
    203,478
    
    
    $
    (70,515
    )
 9




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Note 1: Activities and Summary of Significant Accounting Policies (Continued)
  June 30, 2010
    
    March 31, 2010Unrealized gain on investment securities available-for sale
    
    $
    599,357
    
    
    $
    299,567Unrealized loss on impaired investment security held-to-maturity
    
    
    -0-
    
    
    
    (36,233
    )Accumulated other comprehensive income before tax effect
    
    
    599,357
    
    
    
    263,334Tax effect
    
    
    (236,416
    )
    
    
    (103,871
    )Accumulated other comprehensive income
    
    $
    362,941
    
    
    $
    159,463
 Subsequent
Events -
 Note 2: Plan of Conversion and Change in Corporate Form
     10




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Note 3: Supplemental Disclosure for Earnings per Share
  11




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Note 4: Investment Securities
  Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    EstimatedCost
    
    Gains
    
    Losses
    
    Fair ValueJune 30, 2010Investment securities available-for-sale:U.S. government agencies
    
    $
    3,650,000
    
    
    $
    4,376
    
    
    $
    1
    
    
    $
    3,654,375Brokered certificates of deposit
    
    
    2,675,344
    
    
    
    -0-
    
    
    
    6,326
    
    
    
    2,669,018Mortgage-backed securities (Agency)
    
    
    22,335,221
    
    
    
    602,704
    
    
    
    1,398
    
    
    
    22,936,527$
    28,660,565
    
    
    $
    607,080
    
    
    $
    7,725
    
    
    $
    29,259,920Investment securities held-to-maturity:Mortgage-backed securities (Agency)
    
    $
    1,042,148
    
    
    $
    34,209
    
    
    $
    4,987
    
    
    $
    1,071,370Mortgage-backed securities (Nonagency)
    
    
    776,910
    
    
    
    43,785
    
    
    
    159,939
    
    
    
    660,756$
    1,819,058
    
    
    $
    77,994
    
    
    $
    164,926
    
    
    $
    1,732,126
 Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    EstimatedCost
    
    Gains
    
    Losses
    
    Fair ValueMarch 31, 2010Investment securities available-for-sale:U.S. government agencies
    
    $
    4,499,222
    
    
    $
    15,793
    
    
    $
    1,150
    
    
    $
    4,513,865Brokered certificates of deposit
    
    
    2,670,928
    
    
    
    -0-
    
    
    
    6,425
    
    
    
    2,664,503Mortgage-backed securities (Agency)
    
    
    26,010,952
    
    
    
    341,079
    
    
    
    49,730
    
    
    
    26,302,301$
    33,181,102
    
    
    $
    356,872
    
    
    $
    57,305
    
    
    $
    33,480,669Investment securities held-to-maturity:Mortgage-backed securities (Agency)
    
    $
    1,177,893
    
    
    $
    34,377
    
    
    $
    6,606
    
    
    $
    1,205,664Mortgage-backed securities (Nonagency)
    
    
    1,105,814
    
    
    
    86,774
    
    
    
    174,963
    
    
    
    1,017,625$
    2,283,707
    
    
    $
    121,151
    
    
    $
    181,569
    
    
    $
    2,223,289
 12




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Note
4: Investment Securities (Continued)
  Held-to-maturity
    
    Available-for-saleAmortized
    
    
    
    
    
    AmortizedCost
    
    Fair Value
    
    Cost
    
    Fair ValueAmounts maturing in:One year or less
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    1,895,344
    
    
    $
    1,896,901After one year through five years
    
    
    -0-
    
    
    
    -0-
    
    
    
    4,430,000
    
    
    
    4,426,492After five years through ten years
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-After ten years
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0--0-
    
    
    
    -0-
    
    
    
    6,325,344
    
    
    
    6,323,393Mortgage-backed securities (Agency)
    
    
    1,042,148
    
    
    
    1,071,370
    
    
    
    22,335,221
    
    
    
    22,936,527Mortgage-backed securities
(Nonagency)
    
    
    776,910
    
    
    
    660,756
    
    
    
    -0-
    
    
    
    -0-$
    1,819,058
    
    
    $
    1,732,126
    
    
    $
    28,660,565
    
    
    $
    29,259,920
  13




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Note 5: Loans Receivable
  6/30/10
    
    3/31/10Loans secured by mortgages:Residential1-4 Single family
    
    $
    61,522,004
    
    
    $
    62,875,698Multifamily
    
    
    1,720,482
    
    
    
    1,736,945Commercial
    
    
    11,823,730
    
    
    
    11,597,811Land
    
    
    5,134,942
    
    
    
    4,849,495Lines of credit
    
    
    1,229,352
    
    
    
    1,407,436Residential construction
    
    
    3,190,888
    
    
    
    2,395,52884,621,398
    
    
    
    84,862,913Consumer
    
    
    1,170,792
    
    
    
    1,203,106Commercial
    
    
    4,939,358
    
    
    
    4,755,553Total loans receivable
    
    
    90,731,548
    
    
    
    90,821,572Net deferred costs
    
    
    115,599
    
    
    
    119,903Allowance for loan losses
    
    
    (658,000
    )
    
    
    (605,000
    )Loans receivable, net
    
    $
    90,189,147
    
    
    $
    90,336,475
 Note 6: Allowance for Loan Losses
  Quarter Ended
    
    Year Ended
    
    Quarter EndedJune 30, 2010
    
    March 31, 2010
    
    June 30, 2009Balance  Beginning of Year
    
    $
    605,000
    
    
    $
    379,500
    
    
    $
    379,500Provision for loan losses
    
    
    51,359
    
    
    
    242,074
    
    
    
    40,000Recoveries
    
    
    1,641
    
    
    
    -0-
    
    
    
    400Charge Offs
    
    
    -0-
    
    
    
    (16,574
    )
    
    
    -0-Balance  End of Year
    
    $
    658,000
    
    
    $
    605,000
    
    
    $
    399,900
  14




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Note 7: Fair Value Measurements
  
    
    Level 1  Valuation is based on quoted prices in active markets for
identical assets and liabilities.
    
    Level 2  Valuation is determined from quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar
instruments in markets that are not active or by model-based techniques in
which all significant inputs are observable in the market.
    
    Level 3  Valuation is derived from model-based techniques in which at
least one significant input is unobservable and based on the Banks own
estimates about the assumptions that market participants would use to value the
asset or liability.
  6/30/10Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities
available-for-sale
    
    $
    29,259,920
    
    
    $
    5,395,142
    
    
    $
    23,861,366
    
    
    $
    3,412
 3/31/10Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Investment securities
available-for-sale
    
    $
    33,480,669
    
    
    $
    956,772
    
    
    $
    32,520,274
    
    
    $
    3,623
   15




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Note 7: Fair Value Measurements (Continued)
  6/30/10
    
    3/31/10(in thousands)
    
    (in thousands)Book
    
    
    
    
    
    Book
    
    FairValue
    
    Fair Value
    
    Value
    
    ValueAssets:Cash and cash equivalents
    
    $
    21,874
    
    
    $
    21,874
    
    
    $
    13,355
    
    
    $
    13,355Certificates of deposit
    
    
    961
    
    
    
    961
    
    
    
    957
    
    
    
    957Investment securities
    
    
    31,079
    
    
    
    30,992
    
    
    
    35,764
    
    
    
    35,704Loans, net
    
    
    90,189
    
    
    
    94,795
    
    
    
    90,336
    
    
    
    90,249Total financial assets
    
    $
    144,103
    
    
    $
    148,622
    
    
    $
    140,412
    
    
    $
    140,265
 6/30/10
    
    3/31/10(in thousands)
    
    (in thousands)Book
    
    Fair
    
    Book
    
    FairValue
    
    Value
    
    Value
    
    ValueLiabilities:Deposits
    
    $
    140,120
    
    
    $
    143,200
    
    
    $
    136,965
    
    
    $
    140,111Advanced payments by borrowers for
taxes and insurance
    
    
    943
    
    
    
    943
    
    
    
    558
    
    
    
    558Total financial liabilities
    
    $
    141,063
    
    
    $
    144,143
    
    
    $
    137,523
    
    
    $
    140,669
  Cash and cash equivalents
 Investment securities held-to-maturity
 Loans, deposits and advanced payments by borrowers for taxes and
insurance
 16




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Note 8: Accounting Standards Updates
     17




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Note 8: Accounting Standards Updates (Continued)
    Note 9: Commitment and Financial Instruments with Off-Balance-Sheet Credit Risk
    Mortgage loans commitments  fixed rate
    
    $
    874,000Mortgage loans commitments  variable rate
    
    
    4,872,000Commitments to originate nonmortgage loans
    
    
    16,000Commitments to purchase loans
    
    
    756,000Unused equity lines of credit (variable rate)
    
    
    1,351,000Commercial and consumer lines of credit
    
    
    907,000Standby letters of credit
    
    
    398,000Total
    
    $
    9,174,000
 18




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operation
 Safe Harbor Statement for Forward-Looking Statements
   Critical Accounting Policies
  Allowance for Loan Losses.
 Fair Value of Investments.
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Comparison of Financial Condition at June 30, 2010 and March 31, 2010
 Assets.
 Loans.
 Securities.
 Ground Rent.
 Deposits.
 Borrowings.
 Results of Operations for the Three Months Ended June 30, 2010 and 2009
 Overview.
 Net Interest Income.
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Provision for Loan Losses.
 Managements Discussion and
Analysis of Financial Condition and Results of Operations  Risk Management  Analysis of
Non-performing and Classified Assets.
 Noninterest Revenue.
 Noninterest Expenses.
 Income Tax Expense.
 Liquidity and Capital Resources
 Liquidity Management.
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Capital Management.
  Off-Balance Sheet Arrangements.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4. Controls and Procedures
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
  
 Item 5. Other Information.
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Item 6. Exhibits
 3.1
    
    Articles of Incorporation of Madison Bancorp, Inc. (1)3.2
    
    Bylaws of Madison Bancorp, Inc. (2)4.0
    
    Form of Stock Certificate of Madison Bancorp, Inc. (3)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer32.0
    
    Section 1350 Certification
 
 (1)
    
    Incorporated herein by reference to Exhibit 3.1 to the Companys Registration
Statement on Form S-1 (File No. 333-167455), as amended, initially filed with the
Securities and Exchange Commission on June 11, 2010.(2)
    
    Incorporated herein by reference to Exhibit 3.2 to the Companys Registration
Statement on Form S-1 (File No. 333-167455), as amended, initially filed with the
Securities and Exchange Commission on June 11, 2010.(3)
    
    Incorporated herein by reference to Exhibit 4 to the Companys Registration
Statement on Form S-1 (File No. 333-167455), as amended, initially filed with the
Securities and Exchange Commission on June 11, 2010. 24




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SIGNATURES
  MADISON BANCORP, INC.Dated: September 24, 2010
    By:
    /s/ Michael P. GavinMichael P. GavinPresident and Chief Executive Officer,
Chief Financial Officer and Director
(principal executive officer and principal
financial and accounting officer) 25