##### Table of Contents





U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

|              |  |                                                                                  
|------------- |  | ---------------------------------------------------------------------------------
|(Mark One)    |  |                                                                                  
|             
|             
|             
|             
|BOX WITH AN X |  | Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
|             
|             
|             
|             
|              |  | For the quarterly period ended September 30, 2001                                
|             
|             
|             
|             
|EMPTY BOX     |  | Transition report under Section 13 or 15(d) of the Exchange Act                  
|             
|             
|             
|             
|              |  | For the transition period from_______to_______                                   
|             
|             
|             
|             
|              |  | Commission file number 0-32867                                                   

MADISON BANCSHARES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 59-3720289                          
|                                                               |  |                                     
|(State or Other Jurisdiction
of Incorporation or Organization) |  | (I.R.S. Employer
Identification No.)

35388 U.S. Highway 19, NorthPalm Harbor, Florida 34684(Address of Principal Executive Offices)

(727) 786-3888(Issuers Telephone Number, Including Area Code)

N.A.(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:

YES   EMPTY BOX      NO   BOX WITH AN X   (went effective August 7, 2001)

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date;

|                                       |  |                                
|-------------------------------------- |  | -------------------------------
|Common stock, par value $.01 per share |  | 1,493,971 shares               
|(class)                                |  | Outstanding at October 11, 2001





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TABLE OF CONTENTS



|                              |                                                                                          |                                                                                 |  |  |  |  |  | 
|----------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                            
|                              |                                                                                          | Condensed Consolidated Balance Sheets                                          
|                              |                                                                                          | Condensed Consolidated Statements of Earnings (Unaudited)                      
|                              |                                                                                          | Condensed Consolidated Statement of Changes in Stockholders Equity (Unaudited)
|                              |                                                                                          | Condensed Consolidated Statements of Cash Flows (Unaudited)                    
|                              |                                                                                          | Notes to Condensed Consolidated Financial Statements (Unaudited)               
|                              |                                                                                          | Review by Independent Certified Public Accountants                             
|                              |                                                                                          | Report on Review by Independent Certified Public Accountants                   
|                              | Item 2.  Managements Discussion and Analysis                      or Plan of Operations
|                              | Item 3.  Quantitative and Qualitative Disclosures About Market Risk                     
|PART II.  OTHER INFORMATION  
|                              | Item 6.  Exhibits and Reports on Form 8-K                                               
|SIGNATURES                   



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##### Table of Contents



MADISON BANCSHARES, INC.
INDEX

|                               |  |         |    |                                                                                                                      |  |      
|------------------------------ |  | ------- | -- | -------------------------------------------------------------------------------------------------------------------- |  | -----
|                               |  |         |    |                                                                                                                      |  | Page 
|                               |  |         |    |                                                                                                                      |  |      
|PART I.  FINANCIAL INFORMATION |  |        
|                              
|                              
|                              
|                              
|                               |  | Item 1. |    | Financial Statements                                                                                                 |  |      
|                              
|                              
|                              
|                              
|                               |  |         |    | Condensed Consolidated Balance Sheets -
At September 30, 2001 (unaudited) and At December 31, 2000                   |  | 2    
|                              
|                              
|                              
|                              
|                               |  |         |    | Condensed Consolidated Statements of Earnings -
Three and Nine Months ended September 30, 2001 and 2000 (unaudited)  |  | 3    
|                              
|                              
|                              
|                              
|                               |  |         |    | Condensed Consolidated Statement of Changes in Stockholders Equity
Nine Months Ended September 30, 2001 (unaudited) |  | 4    
|                              
|                              
|                              
|                              
|                               |  |         |    | Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and 2000 (unaudited)          |  | 5    
|                              
|                              
|                              
|                              
|                               |  |         |    | Notes to Condensed Consolidated Financial Statements (unaudited)                                                     |  | 6-8  
|                              
|                              
|                              
|                              
|                               |  |         |    | Review by Independent Certified Public Accountants                                                                   |  | 9    
|                              
|                              
|                              
|                              
|                               |  |         |    | Report on Review by Independent Certified Public Accountants                                                         |  | 10   
|                              
|                              
|                              
|                              
|                               |  | Item 2. |    | Managements Discussion and Analysis or Plan of Operations                                                           |  | 11-15
|                              
|                              
|                              
|                              
|                               |  | Item 3. |    | Quantitative and Qualitative Disclosure about Market Risk                                                            |  | 16   
|                              
|                              
|                              
|                              
|PART II.  OTHER INFORMATION    |  |        
|                              
|                              
|                              
|                              
|                               |  | Item 6. |    | Exhibits and Reports on Form 8-K                                                                                     |  | 16   
|                              
|                              
|                              
|                              
|SIGNATURES                     |  |         | 17

1



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##### Table of Contents



MADISON BANCSHARES, INC.

PART I.  FINANCIAL INFORMATION







Item 1.  Financial Statements

Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)




|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |        |         | 
|-------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------------- | ------- | ------------ | ------- | ------ | ------- | 
|                                                                                 |                                                                                                                            |                            |         | September 30, |         | December 31,
|                                                                                 |                                                                                                                            |                            |         |               |         |             
|Assets                                                                           |                                                                                                                            | 2001                       |         | 2000         
|                                                                                 |                                                                                                                            |                            |         |              
|                                                                                 |                                                                                                                            |                            |         | (unaudited)   |         |              |         |       
|Cash and due from banks                                                          |                                                                                                                            | $                          | 3,434   |               |         |              | 2,282   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Interest-bearing deposits with banks                                             |                                                                                                                            |                            | 62      |               |         |              | 87      |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Federal funds sold                                                               |                                                                                                                            |                            | 951     |               |         |              | 303     |       
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                 | Cash and cash equivalents                                                                                                  |                            |         | 4,447         |         |              |         | 2,672  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Securities available for sale                                                    |                                                                                                                            |                            | 11,193  |               |         |              | 14,480  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Securities held to maturity (market value of $10,272 in 2001 and
$9,261 in 2000) |                                                                                                                            |                            | 10,558  |               |         |              | 10,525  |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Loans, net of allowance for loan losses of $1,394 in 2001
and $966 in 2000       |                                                                                                                            |                            | 137,152 |               |         |              | 114,113 |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Accrued interest receivable                                                      |                                                                                                                            |                            | 770     |               |         |              | 851     |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Premises and equipment, net                                                      |                                                                                                                            |                            | 2,980   |               |         |              | 3,032   |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Federal Home Loan Bank of Atlanta stock, at cost                                 |                                                                                                                            |                            | 509     |               |         |              | 483     |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Deferred tax asset                                                               |                                                                                                                            |                            | 85      |               |         |              | 122     |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Other assets                                                                     |                                                                                                                            |                            | 909     |               |         |              | 823     |       
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                 |                                                                                                                            | $                          | 168,603 |               |         |              | 147,101 |       
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                 | Liabilities and Stockholders Equity                                                                                       |                            |         |               |         |              |         |        |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Liabilities:                                                                     |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Noninterest-bearing demand deposits                                                                                        |                            |         | 11,951        |         |              |         | 9,605  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Savings, NOW and money-market deposits                                                                                     |                            |         | 50,529        |         |              |         | 45,219 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Time deposits                                                                                                              |                            |         | 80,587        |         |              |         | 79,051 |        
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                 |                                                                                                                            | Total deposits             |         |               | 143,067 |              |         |        | 133,875 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Federal Home Loan Bank advances                                                                                            |                            |         | 10,000        |         |              |         | 250    |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other borrowings                                                                                                           |                            |         | 1,006         |         |              |         |       |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Official checks                                                                                                            |                            |         | 898           |         |              |         | 1,205  |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cash dividend declared                                                                                                     |                            |         | 75            |         |              |         |       |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other liabilities                                                                                                          |                            |         | 1,633         |         |              |         | 832    |        
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                 |                                                                                                                            | Total liabilities          |         |               | 156,679 |              |         |        | 136,162 | 
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|Stockholders equity:                                                            |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Preferred stock, $.01 par value, authorized 1,000,000 shares; none
issued or outstanding                                   |                            |         |              |         |              |         |       |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Common stock, $.01 par value, authorized 4,000,000 shares;
issued and outstanding 1,491,656 and 1,420,696 in 2001 and 2000 |                            |         | 15            |         |              |         | 14     |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Additional paid-in capital                                                                                                 |                            |         | 12,634        |         |              |         | 12,032 |        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accumulated deficit                                                                                                        |                            |         | (705          | )       |              |         | (770   | )      
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Accumulated other comprehensive income (loss)                                                                              |                            |         | (20           | )       |              |         | (337   | )      
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                 |                                                                                                                            | Total stockholders equity |         |               | 11,924  |              |         |        | 10,939  | 
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       
|                                                                                 |                                                                                                                            | $                          | 168,603 |               |         |              | 147,101 |       
|                                                                                 |                                                                                                                            |                            |         |               |         |              |         |       

See Accompanying Notes to Condensed Consolidated Financial Statements.

2



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##### Table of Contents



MADISON BANCSHARES, INC.

Condensed Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share amounts)




|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |       |       | 
|-------------------------- | ----------------------------------- | --------------------------------------------------- | ---- | ------------------ | ----- | ----------------- | ---- | ----- | ----- | ---- | ---- | ----- | ----- |  | ---- | ----- | ----- | 
|                           |                                     |                                                     |      | Three Months Ended |       | Nine Months Ended
|                           |                                     |                                                     |      | September 30,      |       | September 30,    
|                           |                                     |                                                     |      |                    |       |                  
|                           |                                     |                                                     |      | 2001               |       | 2000              |      | 2001  |       | 2000
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |     
|Interest income:           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                          
|                          
|                          
|                          
|                           | Loans                               |                                                     | $    | 2,777              |       |                   |      | 2,407 |       |      |      | 8,036 |       |  |      | 6,732 |      
|                          
|                          
|                          
|                          
|                           | Securities available for sale       |                                                     |      | 147                |       |                   |      | 240   |       |      |      | 498   |       |  |      | 747   |      
|                          
|                          
|                          
|                          
|                           | Securities held to maturity         |                                                     |      | 121                |       |                   |      | 152   |       |      |      | 326   |       |  |      | 469   |      
|                          
|                          
|                          
|                          
|                           | Other interest-earning assets       |                                                     |      | 42                 |       |                   |      | 27    |       |      |      | 285   |       |  |      | 73    |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Total interest income                               |      |                    | 3,087 |                   |      |       | 2,826 |      |      |       | 9,145 |  |      |       | 8,021 | 
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|Interest expense:          |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                          
|                          
|                          
|                          
|                           | Deposits                            |                                                     |      | 1,437              |       |                   |      | 1,461 |       |      |      | 4,599 |       |  |      | 3,899 |      
|                          
|                          
|                          
|                          
|                           | Borrowed funds                      |                                                     |      | 119                |       |                   |      | 33    |       |      |      | 269   |       |  |      | 230   |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Total interest expense                              |      |                    | 1,556 |                   |      |       | 1,494 |      |      |       | 4,868 |  |      |       | 4,129 | 
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Net interest income                                 |      |                    | 1,531 |                   |      |       | 1,332 |      |      |       | 4,277 |  |      |       | 3,892 | 
|                          
|                          
|                          
|                          
|Provision for loan losses  |                                     |                                                     | 191  |                    |       |                   | 86   |       |       |      | 349  |       |       |  | 283  |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Net interest income after provision for loan losses |      |                    | 1,340 |                   |      |       | 1,246 |      |      |       | 3,928 |  |      |       | 3,609 | 
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|Noninterest income:        |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                          
|                          
|                          
|                          
|                           | Service charges on deposit accounts |                                                     |      | 114                |       |                   |      | 122   |       |      |      | 347   |       |  |      | 305   |      
|                          
|                          
|                          
|                          
|                           | Gain on sale of securities          |                                                     |      |                   |       |                   |      |      |       |      |      | 23    |       |  |      |      |      
|                          
|                          
|                          
|                          
|                           | Other                               |                                                     |      | 60                 |       |                   |      | 70    |       |      |      | 179   |       |  |      | 175   |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Total noninterest income                            |      |                    | 174   |                   |      |       | 192   |      |      |       | 549   |  |      |       | 480   | 
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|Noninterest expenses:      |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                          
|                          
|                          
|                          
|                           | Employee compensation and benefits  |                                                     |      | 606                |       |                   |      | 557   |       |      |      | 1,772 |       |  |      | 1,706 |      
|                          
|                          
|                          
|                          
|                           | Occupancy and equipment             |                                                     |      | 170                |       |                   |      | 138   |       |      |      | 488   |       |  |      | 416   |      
|                          
|                          
|                          
|                          
|                           | Data processing expense             |                                                     |      | 64                 |       |                   |      | 55    |       |      |      | 188   |       |  |      | 166   |      
|                          
|                          
|                          
|                          
|                           | Professional fees                   |                                                     |      | 78                 |       |                   |      | 35    |       |      |      | 127   |       |  |      | 84    |      
|                          
|                          
|                          
|                          
|                           | Federal deposit insurance premium   |                                                     |      | 6                  |       |                   |      | 6     |       |      |      | 19    |       |  |      | 18    |      
|                          
|                          
|                          
|                          
|                           | Other expense                       |                                                     |      | 269                |       |                   |      | 192   |       |      |      | 700   |       |  |      | 655   |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Total noninterest expenses                          |      |                    | 1,193 |                   |      |       | 983   |      |      |       | 3,294 |  |      |       | 3,045 | 
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Earnings before income taxes                        |      |                    | 321   |                   |      |       | 455   |      |      |       | 1,183 |  |      |       | 1,044 | 
|                          
|                          
|                          
|                          
|Income taxes               |                                     |                                                     | 118  |                    |       |                   | 170  |       |       |      | 440  |       |       |  | 388  |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|                           |                                     | Net earnings                                        |      | $                  | 203   |                   |      |       | 285   |      |      |       | 743   |  |      |       | 656   | 
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|Basic earnings per share   |                                     | $                                                   | 0.14 |                    |       |                   | 0.19 |       |       |      | 0.50 |       |       |  | 0.44 |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|Diluted earnings per share |                                     | $                                                   | 0.13 |                    |       |                   | 0.19 |       |       |      | 0.48 |       |       |  | 0.44 |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      
|Dividends per share        |                                     | $                                                   | 0.05 |                    |       |                   |     |       |       |      | 0.05 |       |       |  | 0.06 |      
|                           |                                     |                                                     |      |                    |       |                   |      |       |       |      |      |       |       |  |      |      

See Accompanying Notes to Condensed Consolidated Financial Statements.

3



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##### Table of Contents



MADISON BANCSHARES, INC.

Condensed Consolidated Statement of Changes in Stockholders Equity (Unaudited)




Nine Months Ended September 30, 2001
(In thousands)

|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |     | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------ | - | ------ | - | ------- |  | ----------- | - | ------ |  | ----- | --- | ------- |  | ----------- | --- |  |  | ------ | --- | 
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  | Accumulated |     |  |  |       
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  | Other       |     |  |  |       
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  | Compre-     |     |  |  |       
|                                          |                                                                                                  |   |        |   |         |  | Additional  |   |        |  |       |     | hensive |  |             |     | 
|                                          |                                                                                                  |   | Common |   | Paid-in |  | Accumulated |   | Income |  |       |     |        
|                                          |                                                                                                  |   | Stock  |   | Capital |  | Deficit     |   | (Loss) |  | Total
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |      
|Balance at December 31, 2000              |                                                                                                  | $ | 14     |   |         |  | 12,032      |   |        |  | (770  | )   |         |  | (337        | )   |  |  | 10,939 |    
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |    
|Comprehensive income:                     |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |    
|                                         
|                                         
|                                         
|                                         
|                                          | Net earnings (unaudited)                                                                         |   |        |  |         |  |             |  |        |  |       | 743 |         |  |             |    |  |  |        | 743 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Net change in unrealized loss on
securities available for sale, net of
taxes of $173 (unaudited) |   |        |  |         |  |             |  |        |  |       |    |         |  |             | 317 |  |  |        | 317 | 
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |    
|Comprehensive income (unaudited)          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  | 1,060  |    
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |    
|Stock dividend (unaudited)                |                                                                                                  |   | 1      |   |         |  | 602         |   |        |  | (603  | )   |         |  |            |     |  |  |       |    
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |    
|Cash dividend declared (unaudited)        |                                                                                                  |   |       |   |         |  |            |   |        |  | (75   | )   |         |  |            |     |  |  | (75    | )  
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |    
|Balance at September 30, 2001 (unaudited) |                                                                                                  | $ | 15     |   |         |  | 12,634      |   |        |  | (705  | )   |         |  | (20         | )   |  |  | 11,924 |    
|                                          |                                                                                                  |   |        |   |         |  |             |   |        |  |       |     |         |  |             |     |  |  |        |    

See Accompanying Notes to Condensed Consolidated Financial Statements.

4



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##### Table of Contents



MADISON BANCSHARES, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)




|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |         |     |       |         |  
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | ------------ | -------------------------------------------------------------------------------- | ---------------------------------------------------- | --- | ----------------- | ------- | ------- | --- | ----- | ------- | -
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     | Nine Months Ended
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     | September 30,    
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                  
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     | 2001              |         | 2000   
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|Cash flows from operating activities:             |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net earnings                                                                                                              |              | $                                                                                | 743                                                  |     |                   |         | 656     |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Adjustments to reconcile net earnings to net cash provided by
operating activities:                                       |              |                                                                                  |                                                      |     |                   |         |         |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Provision for loan losses                                                        |                                                      |     | 349               |         |         |     | 283   |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Depreciation and amortization                                                    |                                                      |     | 267               |         |         |     | 207   |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Amortization of discounts and premiums on securities and deferred loan
fees, net |                                                      |     | 1                 |         |         |     | 59    |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Credit for deferred income taxes                                                 |                                                      |     | (136              | )       |         |     | (123  | )      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Decrease (increase) in accrued interest receivable                               |                                                      |     | 81                |         |         |     | (15   | )      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | (Increase) decrease in other assets                                              |                                                      |     | (86               | )       |         |     | 213   |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Increase in official checks and other liabilities                                |                                                      |     | 494               |         |         |     | 1,583 |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Gain on sale of securities available for sale                                    |                                                      |     | (23               | )       |         |     |      |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Gain on sale of loans                                                            |                                                      |     | 6                 |         |         |     | 13    |        
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  |                                                                                                                           |              |                                                                                  | Net cash provided by operating activities            |     |                   | 1,696   |         |     |       | 2,876   |  
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|Cash flows from investing activities:             |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net increase in loans                                                                                                     |              |                                                                                  | (25,095                                              | )   |                   |         | (18,250 | )  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Securities held to maturity principle repayments                                                                          |              |                                                                                  | 20                                                   |     |                   |         | 693     |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Securities available for sale principle repayments                                                                        |              |                                                                                  | 1,369                                                |     |                   |         | 710     |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net proceeds from sales of securities available for sale                                                                  |              |                                                                                  | 2,427                                                |     |                   |         |        |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net purchase of premises and equipment                                                                                    |              |                                                                                  | (215                                                 | )   |                   |         | (523    | )  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Purchase of Federal Home Loan Bank stock                                                                                  |              |                                                                                  | (26                                                  | )   |                   |         | (6      | )  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Proceeds from sale of loans                                                                                               |              |                                                                                  | 1,651                                                |     |                   |         | 2,206   |    
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  |                                                                                                                           |              |                                                                                  | Net cash used in investing activities                |     |                   | (19,869 | )       |     |       | (15,170 | )
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|Cash flows from financing activities:             |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net increase in deposits                                                                                                  |              |                                                                                  | 9,192                                                |     |                   |         | 17,779  |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net increase (decrease) in Federal Home Loan Bank advances                                                                |              |                                                                                  | 9,750                                                |     |                   |         | (6,275  | )  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Net increase in other borrowings                                                                                          |              |                                                                                  | 1,006                                                |     |                   |         |        |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash dividends paid                                                                                                       |              |                                                                                  |                                                     |     |                   |         | (77     | )  
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Issuance of common stock                                                                                                  |              |                                                                                  |                                                     |     |                   |         | 13      |    
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  |                                                                                                                           |              |                                                                                  | Net cash provided by financing activities            |     |                   | 19,948  |         |     |       | 11,440  |  
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  |                                                                                                                           |              |                                                                                  | Net increase (decrease) in cash and cash equivalents |     |                   | 1,775   |         |     |       | (854    | )
|                                                 
|                                                 
|                                                 
|                                                 
|Cash and cash equivalents at beginning of period  |                                                                                                                           |              | 2,672                                                                            |                                                      |     |                   | 3,366   |        
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|Cash and cash equivalents at end of period        |                                                                                                                           | $            | 4,447                                                                            |                                                      |     |                   | 2,512   |        
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|Supplemental disclosure of cash flow information: |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash paid during the period for:                                                                                          |              |                                                                                  |                                                      |     |                   |         |         |    
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                                                                                           |              | Interest                                                                         |                                                      | $   | 4,841             |         |         |     | 3,965 |        
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  |                                                                                                                           | Income taxes |                                                                                  | $                                                    | 555 |                   |         |         | 464 |      
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|Noncash transactions:                             |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Loans reclassified to foreclosed real estate                                                                              |              | $                                                                                |                                                     |     |                   |         | 225     |    
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  | Accumulated other comprehensive income (loss), net change in
unrealized loss on securities available for sale, net of tax |              | $                                                                                | 317                                                  |     |                   |         | (162    | )  
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  | Cash dividend declared                                                                                                    |              | $                                                                                | 75                                                   |     |                   |         |        |    
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        
|                                                  | Stock dividends                                                                                                           |              | $                                                                                | 603                                                  |     |                   |         | 479     |    
|                                                  |                                                                                                                           |              |                                                                                  |                                                      |     |                   |         |        

See Accompanying Notes to Condensed Consolidated Financial Statements.

5



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##### Table of Contents



MADISON BANCSHARES, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)






|1. |  | General.On June 19, 2001, the shareholders of Madison Bank (the Bank)
approved a plan of corporate reorganization under which the Bank would
become a wholly-owned subsidiary of Madison BancShares, Inc. (the Holding
Company) (collectively, the Company). This transaction became
effective on September 4, 2001. Initially, the only activity of the
Holding Company is the operation of the Bank. This corporate
reorganization was accounted for similar to a pooling of interests. All
previously issued $1.10 par value common shares of the Bank were exchanged
on a one for one basis for $.01 par value common shares of the Holding
Company. The Bank is a state-chartered commercial bank incorporated under
the laws of the State of Florida. The deposits of the Bank are insured by
the Federal Deposit Insurance Corporation. The Bank currently provides a
variety of banking services to small and middle-market businesses and
individuals through its three banking offices located in Pinellas County,
Florida and one banking office in Pasco County, Florida.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | In the opinion of the management of the Company, the accompanying
condensed consolidated financial statements contain all adjustments
(consisting principally of normal recurring accruals) necessary to
present fairly the financial position at September 30, 2001, the results
of operations for the three- and nine-month periods ended September 30,
2001 and 2000 and cash flows for the nine-month periods ended September
30, 2001 and 2000. The results of operations and other data for the
three- and nine-month periods ended September 30, 2001 are not
necessarily indicative of results that may be expected for the year
ending December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|2. |  | Loan Impairment and Loan Losses.Loans identified as impaired during the
nine-months ended September 30, 2001 are as follows. There were no loans
identified as impaired during the nine months ended September 30, 2000 (in
thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|                                                        |                                          |   |                   |   | 
|------------------------------------------------------- | ---------------------------------------- | - | ----------------- | - | 
|                                                        |                                          |   | Nine Months Ended
|                                                        |                                          |   | September 30,    
|                                                        |                                          |   | 2001             
|                                                        |                                          |   |                  
|Gross loans with no related allowance, at end of period |                                          | $ | 1,230             |  
|                                                        |                                          |   |                   |  
|                                                        | Average net investment in impaired loans |   | $                 | 5 | 
|                                                        |                                          |   |                   |  
|Interest income recognized on impaired loans            |                                          | $ |                  |  
|                                                        |                                          |   |                   |  
|Interest income received on impaired loans              |                                          | $ |                  |  
|                                                        |                                          |   |                   |  

The activity in the allowance for loan losses is as follows (in thousands):

|                               |  |                    |       |                   |  |      |     |      |  |  |       |  |  |  |      |  
|------------------------------ |  | ------------------ | ----- | ----------------- |  | ---- | --- | ---- |  |  | ----- |  |  |  | ---- | -
|                               |  | Three Months Ended |       | Nine Months Ended
|                               |  | September 30,      |       | September 30,    
|                               |  |                    |       |                  
|                               |  | 2001               |       | 2000              |  | 2001 |     | 2000
|                               |  |                    |       |                   |  |      |     |     
|Balance at beginning of period |  | $                  | 1,196 |                   |  |      | 869 |      |  |  | 966   |  |  |  | 801  |  
|                              
|                              
|                              
|                              
|Provision for loan losses      |  |                    | 191   |                   |  |      | 86  |      |  |  | 349   |  |  |  | 283  |  
|                              
|                              
|                              
|                              
|Net recoveries (charge-offs)   |  |                    | 7     |                   |  |      | (25 | )    |  |  | 79    |  |  |  | (154 | )
|                               |  |                    |       |                   |  |      |     |      |  |  |       |  |  |  |      |  
|Balance at end of period       |  | $                  | 1,394 |                   |  |      | 930 |      |  |  | 1,394 |  |  |  | 930  |  
|                               |  |                    |       |                   |  |      |     |      |  |  |       |  |  |  |      |  

(continued)

6



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##### Table of Contents



MADISON BANCSHARES, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|3. |  | Other Borrowings.In 2001, the Company obtained a $2.5 million line of
credit from another financial institution. The line of credit is secured
by all the stock of the Bank. On September 30, 2001, the balance was
$956,000. Also during the nine months ended September 30, 2001, the
Company entered into repurchase agreements with one customer. On
September 30, 2001 the repurchase agreement amounted to approximately
$50,000 and was secured by $1.9 million in Bank owned securities.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|4. |  | Earnings Per Share (EPS).The following is a reconciliation of the
numerators and denominators of the basic and diluted earnings per share
computations. All per share amounts reflect the five percent stock
dividends declared on May 15, 2001, May 15, 2000 and December 20, 2000.
(Dollars are in thousands, except per share amounts.)                                                                                                                                                    

|                               |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |      | 
|------------------------------ | --------------------------------------------------------------------- |  | -------------------------------- | --- | ------ |  | --------- | --------- | -------- |  | ------ | ---- | ------ |  | --------- | --- | ----- |  |  | --------- |  |  | - | ---- | 
|                               |                                                                       |  | Three Months Ended September 30,
|                               |                                                                       |  |                                 
|                               |                                                                       |  | 2001                             |     | 2000  
|                               |                                                                       |  |                                  |     |       
|                               |                                                                       |  |                                  |     |        |  | Weighted- |           | Per      |  |        |      |        |  | Weighted- |     | Per  
|                               |                                                                       |  |                                  |     |        |  | Average   |           | Share    |  |        |      |        |  | Average   |     | Share
|                               |                                                                       |  | Earnings                         |     | Shares |  | Amount    |           | Earnings |  | Shares |      | Amount
|                               |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |       
|Basic EPS:                     |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|                              
|                              
|                              
|                              
|                               | Net earnings available to
common stockholders                         |  | $                                | 203 |        |  |           | 1,491,656 |          |  | $      | 0.14 |        |  | $         | 285 |       |  |  | 1,481,264 |  |  | $ | 0.19 | 
|                               |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|Effect of dilutive securities- |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|                               | Incremental shares from assumed
conversion of options                 |  |                                  |    |        |  |           | 61,401    |          |  |        |      |        |  |           |    |       |  |  | 23,613    |  |  |   |      | 
|                               |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|Diluted EPS:                   |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|                              
|                              
|                              
|                              
|                               | Net earnings available to
common stockholders
and assumed conversions |  | $                                | 203 |        |  |           | 1,553,057 |          |  | $      | 0.13 |        |  | $         | 285 |       |  |  | 1,504,877 |  |  | $ | 0.19 | 
|                               |                                                                       |  |                                  |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     

|                               |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |      | 
|------------------------------ | --------------------------------------------------------------------- |  | ------------------------------- | --- | ------ |  | --------- | --------- | -------- |  | ------ | ---- | ------ |  | --------- | --- | ----- |  |  | --------- |  |  | - | ---- | 
|                               |                                                                       |  | Nine Months Ended September 30,
|                               |                                                                       |  |                                
|                               |                                                                       |  | 2001                            |     | 2000  
|                               |                                                                       |  |                                 |     |       
|                               |                                                                       |  |                                 |     |        |  | Weighted- |           | Per      |  |        |      |        |  | Weighted- |     | Per  
|                               |                                                                       |  |                                 |     |        |  | Average   |           | Share    |  |        |      |        |  | Average   |     | Share
|                               |                                                                       |  | Earnings                        |     | Shares |  | Amount    |           | Earnings |  | Shares |      | Amount
|                               |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |       
|Basic EPS:                     |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|                              
|                              
|                              
|                              
|                               | Net earnings available to
common stockholders                         |  | $                               | 743 |        |  |           | 1,491,656 |          |  | $      | 0.50 |        |  | $         | 656 |       |  |  | 1,480,582 |  |  | $ | 0.44 | 
|                               |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|Effect of dilutive securities- |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|                               | Incremental shares from assumed
conversion of options                 |  |                                 |    |        |  |           | 56,611    |          |  |        |      |        |  |           |    |       |  |  | 23,368    |  |  |   |      | 
|                               |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|Diluted EPS:                   |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     
|                              
|                              
|                              
|                              
|                               | Net earnings available to
common stockholders
and assumed conversions |  | $                               | 743 |        |  |           | 1,548,267 |          |  | $      | 0.48 |        |  | $         | 656 |       |  |  | 1,503,950 |  |  | $ | 0.44 | 
|                               |                                                                       |  |                                 |     |        |  |           |           |          |  |        |      |        |  |           |     |       |  |  |           |  |  |   |     

(continued)

7



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##### Table of Contents



MADISON BANCSHARES, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|4. |  | Earnings Per Share (EPS), Continued.Shares not included in the
computations of diluted earnings per share because the option exercise
price was not less than the average market price are as follows:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               |  |           |        |       |  |        |           |         |  |  |           |  |  |  |           | 
|---------------------------------------------- |  | --------- | ------ | ----- |  | ------ | --------- | ------- |  |  | --------- |  |  |  | --------- | 
|                                               |  | Number of |        | Price |  | Year   |           | Year   
|                                               |  | Shares    |        | Range |  | Issued |           | Expires
|                                               |  |           |        |       |  |        |           |        
|For the three months ended-
September 30, 2000 |  |           | 36,000 |       |  | $      | 7.67-9.16 |         |  |  | 1999-2000 |  |  |  | 2009-2010 | 
|                                              
|                                              
|                                              
|                                              
|For the nine months ended-
September 30, 2000  |  |           | 36,000 |       |  | $      | 7.67-9.16 |         |  |  | 1999-2000 |  |  |  | 2009-2010 | 



|5. |  | Regulatory Capital.The Bank is required to maintain certain minimum
regulatory capital requirements. The following is a summary at September
30, 2001 of the regulatory capital requirements and the Banks actual
capital on a percentage basis:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                              |  |        |       |             |  |            |      |  
|--------------------------------------------- |  | ------ | ----- | ----------- |  | ---------- | ---- | -
|                                              |  |        |       |             |  | Regulatory
|                                              |  | Actual |       | Requirement
|                                              |  |        |       |            
|Total capital to risk-weighted assets         |  |        | 10.29 | %           |  |            | 8.00 | %
|                                             
|                                             
|                                             
|                                             
|Tier I capital to risk-weighted assets        |  |        | 9.28  | %           |  |            | 4.00 | %
|                                             
|                                             
|                                             
|                                             
|Tier I capital to total assets-leverage ratio |  |        | 7.84  | %           |  |            | 4.00 | %



|6. |  | Cash Dividend Declared.On September 20, 2001, the Board of Directors of
the Holding Company declared a $0.5 cash dividend to be paid to
shareholders of record on October 31, 2001 payable on November 15, 2001.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8



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##### Table of Contents



MADISON BANCSHARES, INC.

Review by Independent Certified Public Accountants




Hacker, Johnson & Smith PA, independent certified public accountants, has made
a limited review of the financial data as of September 30, 2001, and for the
three- and nine-month periods ended September 30, 2001 and 2000 presented in
this document, in accordance with standards established by the American
Institute of Certified Public Accountants.

Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.

9



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##### Table of Contents



Report on Review by Independent Certified Public Accountants




The Board of Directors
Madison BancShares, Inc.
Palm Harbor, Florida:

We have reviewed the accompanying condensed consolidated balance sheet of
Madison BancShares, Inc. and Subsidiary (the Company) as of September 30,
2001, the related condensed consolidated statements of earnings for the three-
and nine- month periods ended September 30, 2001 and 2000, the related
condensed consolidated statement of changes in stockholders equity for the
nine- month period ended September 30, 2001 and the related condensed
consolidated statements of cash flows for the nine-month periods ended
September 30, 2001 and 2000. These financial statements are the responsibility
of the Companys management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with accounting principles generally
accepted in the United States of America.

We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the consolidated balance
sheet as of December 31, 2000, and the related consolidated statements of
earnings, changes in stockholders equity and cash flows for the year then
ended (not presented herein); and in our report dated February 7, 2001 we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2000, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.

/s/ Hacker, Johnson & Smith PA
HACKER, JOHNSON & SMITH PA
Tampa, Florida
October 11, 2001

10



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##### Table of Contents



MADISON BANCSHARES, INC.

Item 2.  Managements Discussion and Analysis
or Plan of Operations




General



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On June 19, 2001, the shareholders of Madison Bank (the Bank) approved a
plan of corporate reorganization under which the Bank would become a
wholly-owned subsidiary of Madison BancShares, Inc. (the Holding Company).
This transaction became effective on September 4, 2001. Initially, the only
activity of the Holding Company is the operations of the Bank. This
corporate reorganization was accounted for similar to a pooling of interests.
All previously issued $1.10 par value common shares of the Bank were
exchanged on a one for one basis for $.01 par value common shares of the
Holding Company. The Bank is a state-chartered commercial bank incorporated
under the laws of the State of Florida. The deposits of the Bank are insured
by the Federal Deposit Insurance Corporation. The Bank currently provides a
variety of banking services to small and middle-market businesses and
individuals through its three banking offices located in Pinellas County,
Florida and one banking office in Pasco County, Florida.

Liquidity and Capital Resources



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys primary source of cash during the nine months ended September
30, 2001 was from net deposit inflows of $9.2 million, an increase in Federal
Home Loan Bank advances and other borrowings of $10.8 million and proceeds
from the sale of securities available for sale of $2.4 million. Cash was
used primarily to originate loans, net of principal repayments, totaling
$25.1 million. At September 30, 2001, the Company had outstanding
commitments to originate loans totaling $1.6 million. At September 30, 2001,
the Bank exceeded its regulatory liquidity requirements.

The following rates are presented for the dates and periods indicated:

|                                                                                                |  |               |      |              |  |               |      |             |  |  |      |  
|----------------------------------------------------------------------------------------------- |  | ------------- | ---- | ------------ |  | ------------- | ---- | ----------- |  |  | ---- | -
|                                                                                                |  | Nine Months   |      |              |  |               |      | Nine Months
|                                                                                                |  | Ended         |      | Year Ended   |  | Ended        
|                                                                                                |  | September 30, |      | December 31, |  | September 30,
|                                                                                                |  | 2001          |      | 2000         |  | 2000         
|                                                                                                |  |               |      |              |  |              
|Average equity as a percentage
of average assets                                                |  |               | 7.28 | %            |  |               | 7.40 | %           |  |  | 7.42 | %
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Equity to total assets at end of period                                                         |  |               | 7.07 | %            |  |               | 7.44 | %           |  |  | 7.23 | %
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Return on average assets (1)                                                                    |  |               | 0.62 | %            |  |               | 0.68 | %           |  |  | 0.64 | %
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Return on average equity (1)                                                                    |  |               | 8.48 | %            |  |               | 9.19 | %           |  |  | 8.56 | %
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Noninterest expenses to average assets (1)                                                      |  |               | 2.74 | %            |  |               | 2.88 | %           |  |  | 2.95 | %
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Nonperforming loans and foreclosed real estate as
a percentage of total assets at end of period |  |               | 0.73 | %            |  |               |     | %           |  |  |     | %



---

|(1) |  | Annualized for the nine months ended September 30.
|--- |  | --------------------------------------------------

11



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##### Table of Contents



MADISON BANCSHARES, INC.

Results of Operations

The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of the
Company from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest income; (iv) interest-rate spread;
and (v) net interest margin.

|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |      |      | 
|-------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------ | ------ | -------------------------------- | ------- | --------- | ----- | -------- | ----- | ------- | ---- | --------- | ---- | ------ | ------ | -------- | ------- | ------- | ----- | ----- | ----- |  | ---- | ---- | ---- | 
|                                                                                 |                                             |                                            |        | Three Months Ended September 30,
|                                                                                 |                                             |                                            |        |                                 
|                                                                                 |                                             |                                            |        | 2001                             |         | 2000     
|                                                                                 |                                             |                                            |        |                                  |         |          
|                                                                                 |                                             |                                            |        |                                  |         |           |       | Interest |       | Average |      |           |      |        |        | Interest |         | Average
|                                                                                 |                                             |                                            |        | Average                          |         | and       |       | Yield/   |       | Average |      | and       |      | Yield/
|                                                                                 |                                             |                                            |        | Balance                          |         | Dividends |       | Rate     |       | Balance |      | Dividends |      | Rate  
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |       
|                                                                                 |                                             |                                            |        | (Dollars in thousands)          
|Interest-earning assets:                                                         |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Loans                                       |                                            | $      | 130,862                          |         |           |       | 2,777    |       |         |      | 8.49      | %    |        | $      | 104,710  |         |         |       | 2,407 |       |  |      | 9.19 | %   
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Securities                                  |                                            |        | 22,089                           |         |           |       | 268      |       |         |      | 4.85      |      |        |        | 29,099   |         |         |       | 392   |       |  |      | 5.39 |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other interest-earning assets (1)           |                                            |        | 4,219                            |         |           |       | 42       |       |         |      | 3.98      |      |        |        | 1,461    |         |         |       | 27    |       |  |      | 7.39 |     
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total interest-earning assets              |        |                                  | 157,170 |           |       |          | 3,087 |         |      |           | 7.86 |        |        |          | 135,270 |         |       |       | 2,826 |  |      |      | 8.36 | 
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Noninterest-earning assets                                                       |                                             |                                            | 6,777  |                                  |         |           |       |          |       |         |      |           |      |        | 6,433  |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total assets                               |        | $                                | 163,947 |           |       |          |       |         |      |           |      |        |        | $        | 141,703 |         |       |       |       |  |      |      |      | 
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Interest-bearing liabilities:                                                    |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Savings, NOW, money-market
deposit accounts |                                            |        | 50,361                           |         |           |       | 299      |       |         |      | 2.37      |      |        |        | 45,330   |         |         |       | 388   |       |  |      | 3.42 |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Time deposits                               |                                            |        | 76,629                           |         |           |       | 1,138    |       |         |      | 5.94      |      |        |        | 70,984   |         |         |       | 1,073 |       |  |      | 6.05 |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other interest-bearing liabilities (2)      |                                            |        | 10,006                           |         |           |       | 119      |       |         |      | 4.76      |      |        |        | 1,850    |         |         |       | 33    |       |  |      | 7.14 |     
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total interest-bearing liabilities         |        |                                  | 136,996 |           |       |          | 1,556 |         |      |           | 4.54 |        |        |          | 118,164 |         |       |       | 1,494 |  |      |      | 5.06 | 
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Noninterest-bearing deposits                                                     |                                             |                                            | 13,539 |                                  |         |           |       |          |       |         |      |           |      |        | 11,589 |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Noninterest-bearing liabilities                                                  |                                             |                                            | 1,535  |                                  |         |           |       |          |       |         |      |           |      |        | 1,630  |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Stockholders equity                                                             |                                             |                                            | 11,877 |                                  |         |           |       |          |       |         |      |           |      |        | 10,320 |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total liabilities and
stockholders equity |        | $                                | 163,947 |           |       |          |       |         |      |           |      |        |        | $        | 141,703 |         |       |       |       |  |      |      |      | 
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Net interest income                                                              |                                             |                                            |        |                                  |         | $         | 1,531 |          |       |         |      |           |      |        |        |          |         | $       | 1,332 |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Interest-rate spread (3)                                                         |                                             |                                            |        |                                  |         |           |       |          |       |         | 3.32 | %         |      |        |        |          |         |         |       |       |       |  | 3.30 | %   
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Net interest margin (4)                                                          |                                             |                                            |        |                                  |         |           |       |          |       |         | 3.90 | %         |      |        |        |          |         |         |       |       |       |  | 3.94 | %   
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Ratio of average interest-earning assets to
average interest-bearing liabilities |                                             |                                            | 1.15   |                                  |         |           |       |          |       |         |      |           |      |        | 1.15   |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                  |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     



---

|(1) |  | Includes Federal Home Loan Bank stock, federal funds sold and
interest-bearing deposits.                                                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes securities sold under agreements to repurchase, Federal Home
Loan Bank advances and other borrowings.                                           
|   
|(3) |  | Interest-rate spread represents the difference between the average yield
on interest-earning assets and the average rate of interest-bearing
liabilities.
|   
|(4) |  | Net interest margin is net interest income divided by average
interest-earning assets.                                                                   

12



---



##### Table of Contents



MADISON BANCSHARES, INC.

The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of the
Company from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest income; (iv) interest-rate spread;
and (v) net interest margin.

|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |      |      | 
|-------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------ | ------ | ------------------------------- | ------- | --------- | ----- | -------- | ----- | ------- | ---- | --------- | ---- | ------ | ------ | -------- | ------- | ------- | ----- | ----- | ----- |  | ---- | ---- | ---- | 
|                                                                                 |                                             |                                            |        | Nine Months Ended September 30,
|                                                                                 |                                             |                                            |        |                                
|                                                                                 |                                             |                                            |        | 2001                            |         | 2000     
|                                                                                 |                                             |                                            |        |                                 |         |          
|                                                                                 |                                             |                                            |        |                                 |         |           |       | Interest |       | Average |      |           |      |        |        | Interest |         | Average
|                                                                                 |                                             |                                            |        | Average                         |         | and       |       | Yield/   |       | Average |      | and       |      | Yield/
|                                                                                 |                                             |                                            |        | Balance                         |         | Dividends |       | Rate     |       | Balance |      | Dividends |      | Rate  
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |       
|                                                                                 |                                             |                                            |        | (Dollars in thousands)         
|Interest-earning assets:                                                         |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Loans                                       |                                            | $      | 123,126                         |         |           |       | 8,036    |       |         |      | 8.70      | %    |        | $      | 100,607  |         |         |       | 6,732 |       |  |      | 8.92 | %   
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Securities                                  |                                            |        | 22,544                          |         |           |       | 824      |       |         |      | 4.87      |      |        |        | 29,774   |         |         |       | 1,216 |       |  |      | 5.45 |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other interest-earning assets (1)           |                                            |        | 7,827                           |         |           |       | 285      |       |         |      | 4.85      |      |        |        | 1,100    |         |         |       | 73    |       |  |      | 8.85 |     
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total interest-earning assets              |        |                                 | 153,497 |           |       |          | 9,145 |         |      |           | 7.94 |        |        |          | 131,481 |         |       |       | 8,021 |  |      |      | 8.13 | 
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Noninterest-earning assets                                                       |                                             |                                            | 6,861  |                                 |         |           |       |          |       |         |      |           |      |        | 6,250  |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total assets                               |        | $                               | 160,358 |           |       |          |       |         |      |           |      |        |        | $        | 137,731 |         |       |       |       |  |      |      |      | 
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Interest-bearing liabilities:                                                    |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Savings, NOW, money-market
deposit accounts |                                            |        | 47,975                          |         |           |       | 972      |       |         |      | 2.70      |      |        |        | 42,340   |         |         |       | 978   |       |  |      | 3.08 |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Time deposits                               |                                            |        | 79,169                          |         |           |       | 3,627    |       |         |      | 6.11      |      |        |        | 68,022   |         |         |       | 2,921 |       |  |      | 5.73 |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Other interest-bearing liabilities (2)      |                                            |        | 7,729                           |         |           |       | 269      |       |         |      | 4.64      |      |        |        | 4,729    |         |         |       | 230   |       |  |      | 6.48 |     
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total interest-bearing liabilities         |        |                                 | 134,873 |           |       |          | 4,868 |         |      |           | 4.81 |        |        |          | 115,091 |         |       |       | 4,129 |  |      |      | 4.78 | 
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Noninterest-bearing deposits                                                     |                                             |                                            | 12,711 |                                 |         |           |       |          |       |         |      |           |      |        | 10,821 |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Noninterest-bearing liabilities                                                  |                                             |                                            | 1,098  |                                 |         |           |       |          |       |         |      |           |      |        | 1,596  |          |         |         |       |       |       |  |      |     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Stockholders equity                                                             |                                             |                                            | 11,676 |                                 |         |           |       |          |       |         |      |           |      |        | 10,223 |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             | Total liabilities and
stockholders equity |        | $                               | 160,358 |           |       |          |       |         |      |           |      |        |        | $        | 137,731 |         |       |       |       |  |      |      |      | 
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Net interest income                                                              |                                             |                                            |        |                                 |         | $         | 4,277 |          |       |         |      |           |      |        |        |          |         | $       | 3,892 |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Interest-rate spread (3)                                                         |                                             |                                            |        |                                 |         |           |       |          |       |         | 3.13 | %         |      |        |        |          |         |         |       |       |       |  | 3.35 | %   
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Net interest margin (4)                                                          |                                             |                                            |        |                                 |         |           |       |          |       |         | 3.72 | %         |      |        |        |          |         |         |       |       |       |  | 3.95 | %   
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     
|Ratio of average interest-earning assets to
average interest-bearing liabilities |                                             |                                            | 1.14   |                                 |         |           |       |          |       |         |      |           |      |        | 1.14   |          |         |         |       |       |       |  |      |     
|                                                                                 |                                             |                                            |        |                                 |         |           |       |          |       |         |      |           |      |        |        |          |         |         |       |       |       |  |      |     



---

|(1) |  | Includes Federal Home Loan Bank stock, federal funds sold and
interest-bearing deposits.                                                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes securities sold under agreements to repurchase, Federal Home
Loan Bank advances and other borrowings.                                           
|   
|(3) |  | Interest-rate spread represents the difference between the average yield
on interest-earning assets and the average rate of interest-bearing
liabilities.
|   
|(4) |  | Net interest margin is net interest income divided by average
interest-earning assets.                                                                   

13



---



##### Table of Contents



MADISON BANCSHARES, INC.

Comparison of the Three-Month Periods Ended September 30, 2001 and 2000

General.Net earnings for the three-months ended September 30, 2001 were
$203,000 or $0.14 per basic and $0.13 per diluted share compared to
$285,000 or $0.19 per basic and diluted share for 2000. The decrease in
net earnings was due to an increase in noninterest expenses due to the
formation of the Holding Company and an increase in the provision for
loan losses.

Interest Income and Expense.Interest income increased by $261,000 to $3.1
million for the three-month period ended September 30, 2001 from $2.8
million for the three months ended September 30, 2000. Interest on loans
increased $370,000 to $2.8 million for the three-months ended September
30, 2001 compared to $2.4 million in 2000 due to an increase in the
average loan portfolio balance to $130.9 million from $104.7 million,
partially offset by a decrease in the weighted-average yield earned in
2001 to 8.49% from 9.19% in 2000. Interest on securities decreased for
the three months ended September 30, 2001 to $268,000 from $392,000 in
2000. The decrease was due to a decrease in the average balance to $22.1
million in 2001 from $29.1 million in 2000 and a decrease in the
weighted-average yield earned in 2001 to 4.85% from 5.39% in 2000.

Interest expense on deposits decreased $24,000 to $1.4 million for the
three-months ended September 30, 2001 from $1.5 million in 2000. The
decrease is due to a decrease in the average rate paid on deposits in 2001
to 4.53% from 5.03% in 2000, partially offset by an increase in the average
deposits in 2001 to $127.0 million compared to $116.3 million in 2000.

Provision for Loan Losses.The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type
of lending conducted by the Bank, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they
relate to the Banks market areas, and other factors related to the
collectibility of the Banks loan portfolio. The provision for loan
losses was $191,000 for the three-month period ended September 30, 2001
compared to $86,000 for the same period in 2000. The increase is
primarily due to the establishment of a reserve for a loan that was put
on nonaccrual during the three months ended September 30, 2001. The
allowance for loan losses is $1.4 million at September 30, 2001. While
management believes that its allowance for loan losses is adequate as of
September 30, 2001, future adjustments to the Banks allowance for loan
losses may be necessary if economic conditions differ substantially from
the assumptions used in making the initial determination.

Noninterest Income.Noninterest income decreased to $174,000 in 2001 from
$192,000 for the three- months ended September 30, 2000.

Noninterest Expense.Total noninterest expense increased to $1,193,000 for
the three-months ended September 30, 2001 from $983,000 for the
comparable period ended September 30, 2000, primarily due to an increase
in employee compensation and benefits and occupancy expense both relating
to the opening of one new office in the fourth quarter of 2000 and an
increase in professional fees due to the formation of the Holding
Company.

Income Taxes.The income tax provision for the three months ended September
30, 2001 was $118,000 or 36.8% of earnings before income taxes compared
to $170,000 or 37.4% for the period ended September 30, 2000.

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MADISON BANCSHARES, INC.

Comparison of the Nine-Month Periods Ended September 30, 2001 and 2000

General.Net earnings for the nine-months ended September 30, 2001 were
$743,000 or $0.50 per basic and $0.48 per diluted share compared to
$656,000 or $0.44 per basic and diluted share for 2000. The increase in
net earnings was due to an increase in net interest income and
noninterest income partially offset by a increase in noninterest
expenses.

Interest Income and Expense.Interest income increased by $1.1 million to
$9.1 million for the nine-month period ended September 30, 2001 from $8.0
million for the nine months ended September 30, 2000. Interest on loans
increased $1.3 million to $8.0 million for the nine months ended
September 30, 2001 from $6.7 million in 2000 due to an increase in the
average loan portfolio balance to $123.1 million in 2001 from $100.6
million in 2000, partially offset by a decrease in the weighted-average
yield earned in 2001 to 8.70% from 8.92% in 2000. Interest on securities
decreased to $824,000 for the nine months ended September 30, 2001
compared to $1.2 million for the same period in 2000. The decrease was
due to a decrease in the average balance in 2001 to $22.5 million from
$29.8 million in 2000 and a decrease in the yield earned on securities
from 5.45% in 2000 to 4.87% in 2001. Interest on other interest-earning
assets increased to $285,000 in 2001 from $73,000 in 2000. The increase
was primarily due to an increase in the average balance in 2001 to $7.8
million from $1.1 million in 2000.

Interest expense on deposits increased $700,000 to $4.6 million for the
nine-months ended September 30, 2001 from $3.9 million in 2000. The
increase is due to an increase in average interest-bearing deposits in 2001
to $127.1 million from $110.4 million in 2000. Also, the weighted-average
rate paid on these deposits in 2001 increased to 4.82% from 4.71% in 2000.

Provision for Loan Losses.The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type
of lending conducted by the Bank, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they
relate to the Banks market areas, and other factors related to the
collectibility of the Banks loan portfolio. The provision for loan
losses was $349,000 for the nine-month period ended September 30, 2001
compared to $283,000 for the same period in 2000. The allowance for loan
losses is $1.4 million at September 30, 2001. While management believes
that its allowance for loan losses is adequate as of September 30, 2001,
future adjustments to the Banks allowance for loan losses may be
necessary if economic conditions differ substantially from the
assumptions used in making the initial determination.

Noninterest Income.Noninterest income increased to $549,000 in 2001 from
$480,000 for the nine- months ended September 30, 2000. Service charges
on deposit accounts increased in 2001 to $347,000 from $305,000 in 2000
due to pricing increases and growth in deposit accounts. Gains on the
sale of securities was $23,000 for the nine months ended September 30,
2001 compared to no gains recognized on the sale of securities during the
prior year period.

Noninterest Expense.Total noninterest expense increased to $3.3 million for
the nine-months ended September 30, 2001 from $3.0 million for the
comparable period ended September 30, 2000, primarily from increases in
employee compensation and benefits and occupancy expense resulting from
the opening of one new office in the fourth quarter of 2000 and an
increase in professional fees due to the formation of the Holding
Company.

Income Taxes.The income tax provision for the nine months ended September
30, 2001 was $440,000 or 37.2% of earnings before income taxes compared
to $388,000 or 37.2% for the period ended September 30, 2000.

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MADISON BANCSHARES, INC.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk




Market risk is the risk of loss from adverse changes in market prices and
rates. The Banks market risk arises primarily from interest rate risk
inherent in its lending and deposit taking activities. The Bank has no risk
related to trading accounts, commodities or foreign exchange.

Management actively monitors and manages its interest rate risk exposure. The
primary objective in managing interest-rate risk is to limit, within
established guidelines, the adverse impact of changes in interest rates on the
Banks net interest income and capital, while adjusting the Banks
asset-liability structure to obtain the maximum yield-cost spread on that
structure. Management relies primarily on its asset-liability structure to
control interest rate risk. However, a sudden and substantial increase in
interest rates could adversely impact the Banks earnings, to the extent that
the interest rates borne by assets and liabilities do not change at the same
speed, to the same extent, or on the same basis. There have been no
significant changes in the Banks market risk exposure since December 31, 2000.




PART II.  OTHER INFORMATION




Item 6.  Exhibits and Reports on Form 8-K



|(a) |  | Exhibits.The following exhibits are filed with or incorporated by
reference into this report. The exhibits were previously filed as a part
of the Companys Registration Statement on Form 10-SB as indicated and are
hereby incorporated by reference.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|            |  |                                                                                |  |     
|----------- |  | ------------------------------------------------------------------------------ |  | ----
|Exhibit No. |  | Description of Exhibit                                                         |  | Page
|            |  |                                                                                |  |     
|2           |  | Plan of acquisition, reorganization,
arrangement, liquidation, or succession   |  | NA  
|           
|           
|           
|           
|*     3.1   |  | Articles of Incorporation of Madison
BancShares, Inc.                          |  |     
|           
|           
|           
|           
|*     3.2   |  | Bylaws of Madison BancShares, Inc.                                             |  |     
|           
|           
|           
|           
|*     4     |  | Sample Stock Certificate for Madison
BancShares, Inc.                          |  |     
|           
|           
|           
|           
|*   10.1    |  | Employment Agreement of Henry Speight                                          |  |     
|           
|           
|           
|           
|*   10.2    |  | Employment Agreement of Robert McGivney                                        |  |     
|           
|           
|           
|           
|*   10.3    |  | Employment Agreement of David Paetzold                                         |  |     
|           
|           
|           
|           
|** 10.4     |  | Employment Agreement of Judith Gaffney                                         |  |     
|           
|           
|           
|           
|*   10.5    |  | Madison Bank Amended and Restated 1998 Key
Employee Stock Compensation Program |  |     
|           
|           
|           
|           
|*   10.6    |  | Madison Bank Amended and Restated 1998
Directors Stock Option Plan            |  |     
|           
|           
|           
|           
|11          |  | Statement re: Computation of per Share Earnings                                |  | 7   
|           
|           
|           
|           
|15          |  | Letter on Unaudited Interim Financial Information                              |  | NA  
|           
|           
|           
|           
|18          |  | Letter on Change in Accounting Principles                                      |  | NA  
|           
|           
|           
|           
|19          |  | Report furnished to Security Holders                                           |  | NA  
|           
|           
|           
|           
|22          |  | Published Report regarding Matters Submitted
to Vote                           |  | NA  
|           
|           
|           
|           
|** 23.1     |  | Consent of Accountants                                                         |  |     
|           
|           
|           
|           
|*   23.2    |  | Consent of Counsel                                                             |  |     
|           
|           
|           
|           
|24          |  | Power of Attorney                                                              |  | NA  
|           
|           
|           
|           
|*   99.1    |  | Plan of Reorganization of Madison Bank                                         |  |     
|           
|           
|           
|           
|*   99.2    |  | Proxy of Madison Bank                                                          |  |     

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---

|*  |  | These exhibits were filed with Madison BancShares Form 10-SB on June 6,
2001.                  
|-- |  | ------------------------------------------------------------------------------------------------
|  
|** |  | These exhibits were filed with Madison BancShares Amendment One to Form
10-SB on July 17, 2001.



|(b) |  | Reports on Form 8-K.There were no reports on Form 8-K filed during the
three months ended September 30, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------

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MADISON BANCSHARES, INC.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                       |  |                                         |  |                                                                                 
|---------------------- |  | --------------------------------------- |  | --------------------------------------------------------------------------------
|                       |  | MADISON BANCSHARES, INC.   (Registrant) |  |                                                                                 
|                      
|                       |  |                                         |  |                                                                                 
|                      
|Date: November 5, 2001 |  | By:                                     |  | /s/ Robert B. McGivney
Robert B. McGivney, President and Chief
Executive Officer
|                      
|                       |  |                                         |  |                                                                                 
|                      
|Date: November 5, 2001 |  | By:                                     |  | /s/ Henry O. Speight
Henry O. Speight, Chief Financial Officer and
Treasurer    

18