---



U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



(Mark One)



|x | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended March 31, 2004



| ̈ | 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      |  | (I.R.S. Employer   
|of Incorporation or Organization) |  | Identification No.)



2122 Palm Harbor
Boulevard

Palm Harbor, Florida 34683

(Address of Principal Executive Offices)



(727) 786-3888

(Issuers Telephone Number, Including Area Code)



(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 x    NO ̈



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 $.008 per share |  | 2,171,261 shares             
|(class)                                 |  | Outstanding at April 15, 2004



Transitional Small
Business Format (Check One):    YES ̈NO x



---



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



INDEX



|                                                                                                                            |  |      
|--------------------------------------------------------------------------------------------------------------------------- |  | -----
|                                                                                                                            |  | Page 
|                                                                                                                            | 
|PART I. FINANCIAL INFORMATION                                                                                               |  |      
|                                                                                                                            | 
|Item 1. Financial Statements                                                                                                |  |      
|                                                                                                                            | 
|Condensed Consolidated Balance Sheets - At March 31, 2004 (unaudited) and At December 31, 2003                              |  | 2    
|                                                                                                                            | 
|Condensed Consolidated Statements of Earnings - Three Months ended March 31, 2004 and 2003 (unaudited)                      |  | 3    
|                                                                                                                            | 
|Condensed Consolidated Statements of Changes in Stockholders Equity Three Months Ended March 31, 2004 and 2003 (unaudited) |  | 4    
|                                                                                                                            | 
|Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2004 and 2003 (unaudited)                    |  | 5    
|                                                                                                                            | 
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                            |  | 6-9  
|                                                                                                                            | 
|Review by Independent Accountants                                                                                           |  | 10   
|                                                                                                                            | 
|Independent Accountants Report                                                                                             |  | 11   
|                                                                                                                            | 
|Item 2. Managements Discussion and Analysis or Plan of Operation                                                           |  | 12-16
|                                                                                                                            | 
|Item 3. Controls and Procedures                                                                                             |  | 17   
|                                                                                                                            | 
|PART II. OTHER INFORMATION                                                                                                  |  |      
|                                                                                                                            | 
|Item 1. Legal Proceedings                                                                                                   |  | 17   
|                                                                                                                            | 
|Item 6. Exhibits and Reports on Form 8-K                                                                                    |  | 18   
|                                                                                                                            | 
|SIGNATURES                                                                                                                  |  | 19   



1



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)



|                                                                                                                            |  |               |         |                  |        
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ---------------- | -------
|                                                                                                                            |  | March 31,2004 |         | December 31,2003
|                                                                                                                            |  | (Unaudited)   |         |                 
|Assets                                                                                                                      |  |               |         |                  |        
|Cash and due from banks                                                                                                     |  | $             | 5,129   |                  | 5,229  
|Interest-bearing deposits with banks                                                                                        |  |               | 337     |                  | 195    
|Federal funds sold                                                                                                          |  |               | 3,113   |                  | 788    
|                                                                                                                            |  |               |         |                  |        
|Cash and cash equivalents                                                                                                   |  |               | 8,579   |                  | 6,212  
|                                                                                                                            |  |               |         |                  |        
|Securities available for sale                                                                                               |  |               | 21,521  |                  | 20,454 
|Loans, net of allowance for loan losses of $2,460 in 2004 and $2,449 in 2003                                                |  |               | 176,819 |                  | 169,367
|Accrued interest receivable                                                                                                 |  |               | 719     |                  | 704    
|Premises and equipment, net                                                                                                 |  |               | 5,342   |                  | 5,083  
|Federal Home Loan Bank of Atlanta stock, at cost                                                                            |  |               | 859     |                  | 1,316  
|Deferred tax asset                                                                                                          |  |               | 239     |                  | 510    
|Other assets                                                                                                                |  |               | 1,088   |                  | 1,263  
|                                                                                                                            |  |               |         |                  |        
|                                                                                                                            |  | $             | 215,166 |                  | 204,909
|                                                                                                                            |  |               |         |                  |        
|Liabilities and Stockholders Equity                                                                                        |  |               |         |                  |        
|Liabilities:                                                                                                                |  |               |         |                  |        
|Noninterest-bearing demand deposits                                                                                         |  |               | 22,562  |                  | 24,938 
|Savings, NOW and money-market deposits                                                                                      |  |               | 72,403  |                  | 63,437 
|Time deposits                                                                                                               |  |               | 75,324  |                  | 67,870 
|                                                                                                                            |  |               |         |                  |        
|Total deposits                                                                                                              |  |               | 170,289 |                  | 156,245
|                                                                                                                            |  |               |         |                  |        
|Federal Home Loan Bank advances                                                                                             |  |               | 17,000  |                  | 26,125 
|Other borrowings                                                                                                            |  |               | 4,370   |                  | 3,030  
|Official checks                                                                                                             |  |               | 4,027   |                  | 1,448  
|Accrued expenses and other liabilities                                                                                      |  |               | 1,830   |                  | 1,335  
|                                                                                                                            |  |               |         |                  |        
|Total liabilities                                                                                                           |  |               | 197,516 |                  | 188,183
|                                                                                                                            |  |               |         |                  |        
|Stockholders equity:                                                                                                       |  |               |         |                  |        
|Preferred stock, $0.01 par value, authorized 1,000,000 shares; none issued or outstanding                                   |  |               |        |                  |       
|Common stock, $.008 par value, authorized 5,000,000 shares; issued and outstanding 2,171,261 and 2,047,865 in 2004 and 2003 |  |               | 17      |                  | 16     
|Additional paid-in capital                                                                                                  |  |               | 15,001  |                  | 14,371 
|Retained earnings                                                                                                           |  |               | 2,449   |                  | 2,196  
|Accumulated other comprehensive income                                                                                      |  |               | 183     |                  | 143    
|                                                                                                                            |  |               |         |                  |        
|Total stockholders equity                                                                                                  |  |               | 17,650  |                  | 16,726 
|                                                                                                                            |  |               |         |                  |        
|                                                                                                                            |  | $             | 215,166 |                  | 204,909
|                                                                                                                            |  |               |         |                  |        



See
Accompanying Notes to Condensed Consolidated Financial Statements.



2



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Earnings (Unaudited)

(In thousands, except per share amounts)



|                                                    |  |                              |       |      |      
|--------------------------------------------------- |  | ---------------------------- | ----- | ---- | -----
|                                                    |  | Three Months Ended March 31,
|                                                    |  | 2004                         |       | 2003
|Interest income:                                    |  |                              |       |      |      
|Loans                                               |  | $                            | 2,689 |      | 2,837
|Securities available for sale                       |  |                              | 200   |      | 220  
|Other interest-earning assets                       |  |                              | 16    |      | 19   
|                                                    |  |                              |       |      |      
|Total interest income                               |  |                              | 2,905 |      | 3,076
|                                                    |  |                              |       |      |      
|Interest expense:                                   |  |                              |       |      |      
|Deposits                                            |  |                              | 710   |      | 875  
|Borrowed funds                                      |  |                              | 179   |      | 145  
|                                                    |  |                              |       |      |      
|Total interest expense                              |  |                              | 889   |      | 1,020
|                                                    |  |                              |       |      |      
|Net interest income                                 |  |                              | 2,016 |      | 2,056
|                                                    |  |                              |       |      |      
|Provision for loan losses                           |  |                              | 18    |      | 122  
|                                                    |  |                              |       |      |      
|Net interest income after provision for loan losses |  |                              | 1,998 |      | 1,934
|                                                    |  |                              |       |      |      
|Noninterest income:                                 |  |                              |       |      |      
|Service charges on deposit accounts                 |  |                              | 160   |      | 180  
|Other service charges and fees                      |  |                              | 61    |      | 58   
|Loan brokerage fees                                 |  |                              | 6     |      | 57   
|Gain on sale of deposit accounts                    |  |                              |      |      | 200  
|Other                                               |  |                              | 8     |      | 7    
|                                                    |  |                              |       |      |      
|Total noninterest income                            |  |                              | 235   |      | 502  
|                                                    |  |                              |       |      |      
|Noninterest expenses:                               |  |                              |       |      |      
|Employee compensation and benefits                  |  |                              | 823   |      | 901  
|Occupancy and equipment                             |  |                              | 215   |      | 203  
|Data processing                                     |  |                              | 73    |      | 78   
|Professional fees                                   |  |                              | 48    |      | 47   
|Advertising                                         |  |                              | 31    |      | 36   
|Stationary and supplies                             |  |                              | 41    |      | 32   
|Consulting and outside service fees                 |  |                              | 32    |      | 31   
|Other expense                                       |  |                              | 211   |      | 219  
|                                                    |  |                              |       |      |      
|Total noninterest expenses                          |  |                              | 1,474 |      | 1,547
|                                                    |  |                              |       |      |      
|Earnings before income taxes                        |  |                              | 759   |      | 889  
|                                                    |  |                              |       |      |      
|Income taxes                                        |  |                              | 289   |      | 338  
|                                                    |  |                              |       |      |      
|Net earnings                                        |  | $                            | 470   |      | 551  
|                                                    |  |                              |       |      |      
|Earnings per share:                                 |  |                              |       |      |      
|Basic earnings per share                            |  | $                            | 0.22  |      | 0.27 
|                                                    |  |                              |       |      |      
|Diluted earnings per share                          |  | $                            | 0.22  |      | 0.26 
|                                                    |  |                              |       |      |      
|Dividends declared per share                        |  | $                            | 0.10  |      |     
|                                                    |  |                              |       |      |      



See
Accompanying Notes to Condensed Consolidated Financial Statements.



3



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Changes in Stockholders Equity



Three Months Ended March 31, 2004 and 2003

(Dollars in thousands)



|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|----------------------------------------------------------------------------------------------- |  | ------------ | -- | -------------------------- | ------ | ----------------- | ----- | - | ---------------------------------------- | --- | ----- | ------ | -
|                                                                                                |  | Common Stock |    | Additional Paid-in Capital |        | Retained Earnings |       |   | Accumulated Other Compre- hensive Income |     | Total |       
|Balance at December 31, 2002                                                                    |  | $            | 16 |                            | 14,148 |                   | 149   |   |                                          | 245 |       | 14,558 |  
|Comprehensive income:                                                                           |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Net earnings (unaudited)                                                                        |  |              |   |                            |       |                   | 551   |   |                                          |    |       | 551    |  
|Net change in unrealized gain on securities available for sale, net of taxes of $15 (unaudited) |  |              |   |                            |       |                   |      |   |                                          | 20  |       | 20     |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Comprehensive income (unaudited)                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       | 571    |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Exercise of common stock options (3,888 shares) (unaudited)                                     |  |              |   |                            | 25     |                   |      |   |                                          |    |       | 25     |  
|Common stock issued as compensation (2,000 shares) (unaudited)                                  |  |              |   |                            | 31     |                   |      |   |                                          |    |       | 31     |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Balance at March 31, 2003 (unaudited)                                                           |  | $            | 16 |                            | 14,204 |                   | 700   |   |                                          | 265 |       | 15,185 |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Balance at December 31, 2003                                                                    |  | $            | 16 |                            | 14,371 |                   | 2,196 |   |                                          | 143 |       | 16,726 |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Comprehensive income:                                                                           |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Net earnings (unaudited)                                                                        |  |              |   |                            |       |                   | 470   |   |                                          |    |       | 470    |  
|Net change in unrealized gain on securities available for sale, net of taxes of $24 (unaudited) |  |              |   |                            |       |                   |      |   |                                          | 40  |       | 40     |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Comprehensive income (unaudited)                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       | 510    |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Exercise of common stock options (121,396 shares) (unaudited)                                   |  |              | 1  |                            | 598    |                   |      |   |                                          |    |       | 599    |  
|Common stock issued as compensation (2,000 shares) (unaudited)                                  |  |              |   |                            | 32     |                   |      |   |                                          |    |       | 32     |  
|Cash dividend accrued (unaudited)                                                               |  |              |   |                            |       |                   | (217  | ) |                                          |    |       | (217   | )
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  
|Balance at March 31, 2004 (unaudited)                                                           |  | $            | 17 |                            | 15,001 |                   | 2,449 |   |                                          | 183 |       | 17,650 |  
|                                                                                                |  |              |    |                            |        |                   |       |   |                                          |     |       |        |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



4



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)



|                                                                                                                   |  |                              |        |   |      |         |  
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------------- | ------ | - | ---- | ------- | -
|                                                                                                                   |  | Three Months Ended March 31, |       
|                                                                                                                   |  | 2004                         |        |   | 2003 |        
|Cash flows from operating activities:                                                                              |  |                              |        |   |      |         |  
|Net earnings                                                                                                       |  | $                            | 470    |   |      | 551     |  
|Adjustments to reconcile net earnings to net cash provided by operating activities:                                |  |                              |        |   |      |         |  
|Provision for loan losses                                                                                          |  |                              | 18     |   |      | 122     |  
|Depreciation and amortization                                                                                      |  |                              | 108    |   |      | 103     |  
|Provision (credit) for deferred income taxes                                                                       |  |                              | 247    |   |      | (9      | )
|Amortization of discounts and premiums on deferred loan fees, net                                                  |  |                              | 47     |   |      | 104     |  
|Increase in accrued interest receivable                                                                            |  |                              | (15    | ) |      | (41     | )
|Decrease in other assets                                                                                           |  |                              | 175    |   |      | 176     |  
|Decrease (increase) in official checks, accrual expenses and other liabilities                                     |  |                              | 2,857  |   |      | (105    | )
|Gain on sale of deposit accounts                                                                                   |  |                              |       |   |      | (200    | )
|Common stock issued as compensation                                                                                |  |                              | 32     |   |      | 31      |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Net cash provided by operating activities                                                                          |  |                              | 3,939  |   |      | 732     |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Cash flows from investing activities:                                                                              |  |                              |        |   |      |         |  
|Net increase in loans                                                                                              |  |                              | (7,517 | ) |      | (8,580  | )
|Purchase of securities available for sale                                                                          |  |                              | (1,963 | ) |      |        |  
|Securities available for sale principle repayments                                                                 |  |                              | 960    |   |      | 2,509   |  
|Net purchase of premises and equipment                                                                             |  |                              | (367   | ) |      | (303    | )
|Redemption (purchase) of Federal Home Loan Bank stock                                                              |  |                              | 457    |   |      | (301    | )
|                                                                                                                   |  |                              |        |   |      |         |  
|Net cash used in investing activities                                                                              |  |                              | (8,430 | ) |      | (6,675  | )
|                                                                                                                   |  |                              |        |   |      |         |  
|Cash flows from financing activities:                                                                              |  |                              |        |   |      |         |  
|Cash paid in connection with sale of deposit accounts                                                              |  |                              |       |   |      | (11,497 | )
|Net increase in deposits                                                                                           |  |                              | 14,044 |   |      | 5,190   |  
|Net increase in other borrowings                                                                                   |  |                              | 1,340  |   |      | 802     |  
|Net proceeds from Federal Home Loan Bank advances                                                                  |  |                              |       |   |      | 3,500   |  
|Repayments of Federal Home Loan Bank advances                                                                      |  |                              | (9,125 | ) |      |        |  
|Proceeds from exercise of common stock options                                                                     |  |                              | 599    |   |      | 25      |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Net cash provided by (used in) financing activities                                                                |  |                              | 6,858  |   |      | (1,980  | )
|                                                                                                                   |  |                              |        |   |      |         |  
|Net increase (decrease) in cash and cash equivalents                                                               |  |                              | 2,367  |   |      | (7,923  | )
|Cash and cash equivalents at beginning of period                                                                   |  |                              | 6,212  |   |      | 10,890  |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Cash and cash equivalents at end of period                                                                         |  | $                            | 8,579  |   |      | 2,967   |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Supplemental disclosure of cash flow information:                                                                  |  |                              |        |   |      |         |  
|Cash paid during the period for:                                                                                   |  |                              |        |   |      |         |  
|Interest                                                                                                           |  | $                            | 869    |   |      | 1,046   |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Income taxes                                                                                                       |  | $                            | 23     |   |      | 105     |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Noncash transaction-                                                                                               |  |                              |        |   |      |         |  
|Accumulated other comprehensive income, net change in unrealized gain on securities available for sale, net of tax |  | $                            | 40     |   |      | 20      |  
|                                                                                                                   |  |                              |        |   |      |         |  
|Cash dividend accrued                                                                                              |  | $                            | 217    |   |      |        |  
|                                                                                                                   |  |                              |        |   |      |         |  



See
Accompanying Notes to Condensed Consolidated Financial Statements.



5



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited)



|1. | General. Madison BancShares, Inc. (the Holding Company) owns 100% of the outstanding common stock of Madison Bank (the Bank) (collectively, the
Company). The only significant activity of the Holding Company is the operation of the Bank. 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 two banking offices located in Pinellas County, Florida and one banking office in
Pasco County, Florida.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 March 31, 2004 and the
results of operations and cash flows for the three-month periods ended March 31, 2004 and 2003. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the year ending
December 31, 2004.



|2. | Loan Impairment and Loan Losses.Loans identified as impaired are as follows (in thousands):
|-- | -------------------------------------------------------------------------------------------



|                                                                         |  |                             |     |      |      
|------------------------------------------------------------------------ |  | --------------------------- | --- | ---- | -----
|                                                                         |  | Three MonthsEnded March 31,
|                                                                         |  | 2004                        |     | 2003
|Gross loans with related allowance for losses recorded, at end of period |  | $                           | 190 |      | 2,707
|Less: Allowance on these loans                                           |  |                             | 19  |      | 273  
|                                                                         |  |                             |     |      |      
|Net investment in impaired loans, at end of period                       |  | $                           | 171 |      | 2,434
|                                                                         |  |                             |     |      |      
|Average investment in impaired loans                                     |  | $                           | 193 |      | 2,707
|                                                                         |  |                             |     |      |      
|Interest income recognized on impaired loans                             |  | $                           | 3   |      | 54   
|                                                                         |  |                             |     |      |      
|Interest income received on impaired loans                               |  | $                           | 3   |      | 54   
|                                                                         |  |                             |     |      |      



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



|                               |  |                             |       |   |      |       |  
|------------------------------ |  | --------------------------- | ----- | - | ---- | ----- | -
|                               |  | Three MonthsEnded March 31, |      
|                               |  | 2004                        |       |   | 2003 |      
|Balance at beginning of period |  | $                           | 2,449 |   |      | 2,058 |  
|Provision for loan losses      |  |                             | 18    |   |      | 122   |  
|Charge-offs                    |  |                             | (15   | ) |      | (6    | )
|Recoveries                     |  |                             | 8     |   |      | 11    |  
|                               |  |                             |       |   |      |       |  
|Balance at end of period       |  | $                           | 2,460 |   |      | 2,185 |  
|                               |  |                             |       |   |      |       |  



(continued)



6



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|2. | Loan Impairment and Loan Losses, Continued.Nonaccrual and past due loans were as follows (in thousands):
|-- | --------------------------------------------------------------------------------------------------------





|                                                 |  |              |     |      |      
|------------------------------------------------ |  | ------------ | --- | ---- | -----
|                                                 |  | At March 31,
|                                                 |  | 2004         |     | 2003
|Nonaccrual loans                                 |  | $            | 190 |      | 2,707
|Past due ninety days or more, but still accruing |  |              |    |      |     
|                                                 |  |              |     |      |      
|                                                 |  | $            | 190 |      | 2,707
|                                                 |  |              |     |      |      



|3. | Earnings Per Share (EPS).Earnings per share (EPS) of common stock has been computed on the basis of the weighted-average number of shares of
common stock outstanding. Outstanding stock options are considered dilutive securities for purposes of calculating diluted EPS which is computed using the treasury stock method. All per share amounts reflect the five-for-four stock split declared in
April, 2003. The following table presents the calculations of EPS (dollars in thousands, except per share amounts).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                      |  |                              |     |                          |           |                  |   |          |  |                          |     |                  |           |  |   |    
|--------------------------------------------------------------------- |  | ---------------------------- | --- | ------------------------ | --------- | ---------------- | - | -------- |  | ------------------------ | --- | ---------------- | --------- |  | - | ---
|                                                                      |  | Three Months Ended March 31,
|                                                                      |  | 2004                         |     | 2003                    
|                                                                      |  | Earnings                     |     | Weighted- Average Shares |           | Per Share Amount |   | Earnings |  | Weighted- Average Shares |     | Per Share Amount
|Basic EPS:                                                            |  |                              |     |                          |           |                  |   |          |  |                          |     |                  |           |  |   |    
|Net earnings available to common stockholders                         |  | $                            | 470 |                          | 2,096,995 |                  | $ | .22      |  | $                        | 551 |                  | 2,020,859 |  | $ | .27
|                                                                      |  |                              |     |                          |           |                  |   |          |  |                          |     |                  |           |  |   |    
|Effect of dilutive securities-                                        |  |                              |     |                          |           |                  |   |          |  |                          |     |                  |           |  |   |    
|Incremental shares from assumed conversion of options                 |  |                              |    |                          | 36,370    |                  |   |          |  |                          |    |                  | 123,796   |  |   |    
|                                                                      |  |                              |     |                          |           |                  |   |          |  |                          |     |                  |           |  |   |    
|Diluted EPS:                                                          |  |                              |     |                          |           |                  |   |          |  |                          |     |                  |           |  |   |    
|Net earnings available to common stockholders and assumed conversions |  | $                            | 470 |                          | 2,133,365 |                  | $ | .22      |  | $                        | 551 |                  | 2,144,655 |  | $ | .26
|                                                                      |  |                              |     |                          |           |                  |   |          |  |                          |     |                  |           |  |   |    



(continued)



7



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|4. | Stock Options. The Company has stock option plans for certain officers and directors of the Company. The options vest over a five year period from date of grant and
are then exercisable for up to an eight year period. All per share amounts reflect the five-for-four stock split declared in April, 2003. A summary of stock option transactions follows ($ in thousands, except per share amounts):
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                         |  |                  |  |                               |            |                               |      |                       |      
|---------------------------------------- |  | ---------------- |  | ----------------------------- | ---------- | ----------------------------- | ---- | --------------------- | -----
|                                         |  | Number Of Shares |  | Range of PerShare OptionPrice |            | WeightedAveragePer SharePrice |      | AggregateOption Price
|Options outstanding at December 31, 2003 |  | 190,937          |  | $                             | 3.75-13.73 |                               | 6.22 |                       | 1,187
|Options exercised                        |  | 121,396          |  |                               | 3.75-12.92 |                               | 4.93 |                       | 599  
|                                         |  |                  |  |                               |            |                               |      |                       |      
|Options outstanding at March 31, 2004    |  | 69,541           |  | $                             | 5.27-13.73 |                               | 8.46 |                       | 588  
|                                         |  |                  |  |                               |            |                               |      |                       |      



The Company accounts
for their stock option plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25. No stock-based employee compensation cost is reflected in net earnings, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net earnings if the Company had applied the fair value recognition provisions of Statement of Financial
Accounting Standards No. 123 to stock-based employee compensation ($ in thousands, except per share amounts).



|                                                                                                                                       |  |                              |      |   |      |      |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | - | ---- | ---- | -
|                                                                                                                                       |  | Three Months Ended March 31, |     
|                                                                                                                                       |  | 2004                         |      |   | 2003 |     
|Net earnings, as reported                                                                                                              |  | $                            | 470  |   |      | 551  |  
|Deduct: Total stock-based employee compensation determined under the fair value based method for all awards, net of related tax
effect |  |                              | (13  | ) |      | (19  | )
|                                                                                                                                       |  |                              |      |   |      |      |  
|Proforma net earnings                                                                                                                  |  | $                            | 457  |   |      | 532  |  
|                                                                                                                                       |  |                              |      |   |      |      |  
|Earnings per share:                                                                                                                    |  |                              |      |   |      |      |  
|Basic, as reported                                                                                                                     |  | $                            | 0.22 |   |      | 0.27 |  
|                                                                                                                                       |  |                              |      |   |      |      |  
|Basic, proforma                                                                                                                        |  | $                            | 0.22 |   |      | 0.26 |  
|                                                                                                                                       |  |                              |      |   |      |      |  
|Diluted, as reported                                                                                                                   |  | $                            | 0.22 |   |      | 0.26 |  
|                                                                                                                                       |  |                              |      |   |      |      |  
|Diluted, proforma                                                                                                                      |  | $                            | 0.21 |   |      | 0.25 |  
|                                                                                                                                       |  |                              |      |   |      |      |  



There were no options
granted during the three months ended March 31, 2004 and 2003.



(continued)



8



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Notes to Condensed Consolidated Financial Statements (Unaudited), Continued



|5. | Regulatory Capital. The Bank is required to maintain certain minimum regulatory capital requirements. The following is a summary at March 31, 2004, of the regulatory
capital requirements and the Banks actual capital on a percentage basis:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                |  |        |   |  |                        |  
|----------------------------------------------- |  | ------ | - |  | ---------------------- | -
|                                                |  | Actual |   |  | Regulatory Requirement |  
|Total capital to risk-weighted assets           |  | 11.10  | % |  | 8.00                   | %
|Tier I capital to risk-weighted assets          |  | 9.85   | % |  | 4.00                   | %
|Tier I capital to total assets - leverage ratio |  | 9.16   | % |  | 4.00                   | %



|6. | Sale of Deposit Accounts. On February 7, 2003, the Company sold the deposit accounts at one of the banking offices in Pinellas County. Total deposits at this office
were $11.7 million and the Company realized a net pretax gain of $200,000. The office was closed effective with the closing of this transaction.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|7. | Reclassifications.Certain amounts in the 2003 condensed consolidated financial statements have been reclassified to conform to the 2004 presentation.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------



|8. | Merger/Sale.On March 19, 2004, Madison BancShares entered into an Agreement and Plan of Merger (the Merger Agreement) with Whitney Holding Corporation
(Whitney) pursuant to which Whitney agreed to acquire Madison. Under the terms of the Merger Agreement, each shareholder of Madison BancShares, Inc. will receive $29.89 per share in cash and/or Whitney common stock, but no more than 65%
of the total consideration will be in Whitney stock. Whitney is the parent company of Whitney National Bank which serves the five-state Gulf Coast region stretching from Houston, Texas into the panhandle of Florida. The acquisition is expected to be
completed in the third quarter of 2004. At December 31, 2003, Whitney had total assets of approximately $7.8 billion and stockholders equity of approximately $840 million.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Review by Independent Accountants



Hacker, Johnson
& Smith PA, independent accountants, has made a limited review of the financial data as of March 31, 2004, and for the three-month periods ended March 31, 2004 and 2003 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.



10



---

Independent Accountants Report



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 March
31, 2004, and the related condensed consolidated statements of earnings, changes in stockholders equity and cash flows for the three-month periods ended March 31, 2004 and 2003. 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 of
the Company as of December 31, 2003, 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 January 15, 2004 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, 2003, 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

April 15, 2004



11



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Item 2. Managements Discussion and Analysis

or Plan of Operation



Forward Looking Statements



This document contains forward-looking statements as defined by Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve substantial risks and uncertainties. When used in this document, or in the documents incorporated by reference, the words
anticipate, believe, estimate, may, intend and expect and similar expressions are some of the forward-looking statements used in these documents. Actual results, performance, or
achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements. Factors which may cause results to change materially include competition, inflation, general economic conditions, changes in
interest rates, and changes in the value of collateral securing loans the Company has made, among other things.



General



Madison BancShares, Inc. (the Holding Company) owns 100% of the outstanding common stock of Madison Bank (the Bank) (collectively, the Company). The only significant activity of the
Holding Company is the operation of the Bank. The Bank is a state-chartered commercial bank incorporated under the laws of the State of Florida. The Bank deposits 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 two 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 three months ended March 31, 2004, was
from net deposit inflows of approximately $14.0 million, principle repayments of securities available for sale of approximately $1 million, increase in other borrowings of approximately $1.3 million and cash flows from operations of approximately
$3.9 million. Cash was used primarily to originate net loans of approximately $7.5 million and to repay Federal Home Loan Bank advances of approximately $9.1 million. At March 31, 2004, the Bank exceeded its regulatory liquidity requirements.



Off-Balance Sheet Arrangements and Aggregate Contractual Obligations



The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, unused lines of credit and construction loans and standby letters of credit. These instruments
involve, to varying degrees, elements of credit and interest-rate risk in excess of the amounts recognized in the condensed consolidated balance sheet. The contract amounts of those instruments reflect the extent of the Companys involvement in
particular classes of financial instruments.



The Companys exposure to
credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, unused lines of credit and construction loans and standby letters of credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.



12



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon,
the total committed amounts do not necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon
extension of credit, is based on managements credit evaluation of the counter party.



Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loans to customers.



A summary of the amounts of the
Companys financial instruments, which approximates fair value, with off-balance sheet risk at March 31, 2004, follows (in thousands):



|                                              |  |                 |       
|--------------------------------------------- |  | --------------- | ------
|                                              |  | Contract Amount
|Commitments to extend credit                  |  | $               | 16,843
|                                              |  |                 |       
|Unused lines of credit and construction loans |  | $               | 26,434
|                                              |  |                 |       
|Standby letters of credit                     |  | $               | 307   
|                                              |  |                 |       



Management believes that the Company
has adequate resources to fund all of its commitments and that substantially all its existing commitments will be funded within the next twelve months.



13



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Selected Financial Information



The following are presented for the dates and periods indicated:



|                                                                                                |  |                                 |       |   |                            |   |       |                                 |  |   |       |     
|----------------------------------------------------------------------------------------------- |  | ------------------------------- | ----- | - | -------------------------- | - | ----- | ------------------------------- |  | - | ----- | ----
|                                                                                                |  | Three MonthsEnded March 31,2004 |       |   | Year EndedDecember 31,2003 |   |       | Three MonthsEnded March 31,2003 | 
|Average equity as a percentage of average assets                                                |  |                                 | 8.39  | % |                            |   | 8.02  | %                               |  |   | 7.75  | %   
|Equity to total assets at end of period                                                         |  |                                 | 8.20  | % |                            |   | 8.16  | %                               |  |   | 7.89  | %   
|Book value per share(2)                                                                         |  | $                               | 8.13  |   |                            | $ | 8.17  |                                 |  | $ | 7.50  |     
|Return on average assets(1)                                                                     |  |                                 | .91   | % |                            |   | 1.11  | %                               |  |   | 1.15  | %(3)
|Return on average equity(1)                                                                     |  |                                 | 10.86 | % |                            |   | 13.82 | %                               |  |   | 14.81 | %(3)
|Noninterest expenses to average assets(1)                                                       |  |                                 | 2.86  | % |                            |   | 3.13  | %                               |  |   | 3.22  | %   
|Nonperforming loans and foreclosed real estate as a percentage of total assets at end of period |  |                                 | .09   | % |                            |   | .10   | %                               |  |   | 1.41  | %   



|(1) | Annualized for the three months ended March 31.
|--- | -----------------------------------------------



|(2) | Adjusted for the stock split.
|--- | -----------------------------



|(3) | Excluding the after tax gain on sale of deposit accounts during the period return on average
assets was .89% and the return of average equity was 11.48%.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



14



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



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 March 31, |                  
|                                                                                 |  | AverageBalance         |                      | 2004                         |                   | 2003  | 
|                                                                                 |  |                        | InterestandDividends |                              | AverageYield/Rate |       |  | AverageBalance |   | InterestandDividends |   | AverageYield/Rate | 
|                                                                                 |  | (Dollars in thousands) |                     
|Interest-earning assets:                                                         |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Loans(1)                                                                         |  | $                      | 170,752              |                              |                   | 2,689 |  | 6.30           | % |                      | $ | 156,199           |  |   | 2,837 |  | 7.27 | %
|Securities                                                                       |  |                        | 20,335               |                              |                   | 200   |  | 3.93           |   |                      |   | 22,786            |  |   | 220   |  | 3.86 |  
|Other interest-earning assets(2)                                                 |  |                        | 3,782                |                              |                   | 16    |  | 1.69           |   |                      |   | 3,967             |  |   | 19    |  | 1.92 |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Total interest-earning assets                                                    |  |                        | 194,869              |                              |                   | 2,905 |  | 5.96           |   |                      |   | 182,952           |  |   | 3,076 |  | 6.73 |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Noninterest-earning assets                                                       |  |                        | 11,392               |                              |                   |       |  |                |   |                      |   | 8,949             |  |   |       |  |      |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Total assets                                                                     |  | $                      | 206,261              |                              |                   |       |  |                |   |                      | $ | 191,901           |  |   |       |  |      |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Interest-bearing liabilities:                                                    |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Savings, NOW, money-market deposit accounts                                      |  |                        | 69,182               |                              |                   | 141   |  | .82            |   |                      |   | 65,673            |  |   | 188   |  | 1.15 |  
|Time deposits                                                                    |  |                        | 70,363               |                              |                   | 569   |  | 3.23           |   |                      |   | 74,687            |  |   | 687   |  | 3.68 |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Total interest-bearing deposits                                                  |  |                        | 139,545              |                              |                   | 710   |  | 2.04           |   |                      |   | 140,360           |  |   | 875   |  | 2.49 |  
|Other borrowings(3)                                                              |  |                        | 25,102               |                              |                   | 179   |  | 2.85           |   |                      |   | 16,926            |  |   | 145   |  | 3.43 |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Total interest-bearing liabilities                                               |  |                        | 164,647              |                              |                   | 889   |  | 2.16           |   |                      |   | 157,286           |  |   | 1,020 |  | 2.59 |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Noninterest-bearing liabilities                                                  |  |                        | 24,309               |                              |                   |       |  |                |   |                      |   | 19,735            |  |   |       |  |      |  
|Stockholders equity                                                             |  |                        | 17,305               |                              |                   |       |  |                |   |                      |   | 14,880            |  |   |       |  |      |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Total liabilities and stockholders equity                                       |  | $                      | 206,261              |                              |                   |       |  |                |   |                      | $ | 191,901           |  |   |       |  |      |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Net interest income                                                              |  |                        |                      |                              | $                 | 2,016 |  |                |   |                      |   |                   |  | $ | 2,056 |  |      |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Interest-rate spread(4)                                                          |  |                        |                      |                              |                   |       |  | 3.80           | % |                      |   |                   |  |   |       |  | 4.14 | %
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Net interest margin(5)                                                           |  |                        |                      |                              |                   |       |  | 4.14           | % |                      |   |                   |  |   |       |  | 4.50 | %
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                        | 1.18                 |                              |                   |       |  |                |   |                      |   | 1.16              |  |   |       |  |      |  
|                                                                                 |  |                        |                      |                              |                   |       |  |                |   |                      |   |                   |  |   |       |  |      |  



|(1) | Includes loans on nonaccrual status.
|--- | ------------------------------------



|(2) | Includes Federal Home Loan Bank stock, federal funds sold and interest-bearing deposits.
|--- | ----------------------------------------------------------------------------------------



|(3) | Includes securities sold under agreements to repurchase, Federal Home Loan Bank advances and
other borrowings.
|--- | --------------------------------------------------------------------------------------------------------------



|(4) | Interest-rate spread represents the difference between the average yield on interest-earning
assets and the average rate of interest-bearing liabilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Net interest margin is net interest income divided by average interest-earning assets.
|--- | --------------------------------------------------------------------------------------



15



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Comparison of the Three-Month Periods Ended March 31, 2004 and 2003



General. Net earnings for the three-months ended March 31,
2004, were $470,000 or $0.22 per basic and diluted share compared to $551,000 or $0.27 per basic and $0.26 per diluted share for 2003. The decrease in net earnings was primarily due to the $200,000 pretax gain from sale of deposits in 2003 with no
corresponding amount in 2004.



Interest Income and Expense.
Interest income decreased to $2.9 million for the three-month period ended March 31, 2004 from $3.1 million for the three months ended March 31, 2003. Interest on loans decreased to $2.7 million for the three-months ended March 31, 2004 compared to
$2.8 in 2003 due to a decrease in the weighted-average yield earned in 2004 to 6.30% from 7.27% in 2003 due to the lower interest rate environment which was partially offset by an increase in the average loan portfolio balance to $170.8 million from
$156.2 million in 2003. Interest on securities decreased for the three months ended March 31, 2004 to $200,000 from $220,000 in 2003. The decrease was due to a decrease in the average portfolio balance to $20.3 million in 2004 from $22.8 million in
2003, due to principal repayments on securities which was partially offset by an increase in the weighted-average yield earned in 2004 to 3.93% from 3.86% in 2003.



Interest expense on deposits decreased to $710,000 for the three-months ended March 31, 2004 from $875,000 in 2003. The decrease is due to a
decrease in the average rate paid on interest-bearing deposits in 2004 to 2.04% from 2.49% in 2003. Average interest-bearing deposits in 2004 decreased slightly to $139.5 million compared to $140.4 million in 2003.



Interest expense on other borrowings increased to $179,000 for the three-months ended March
31, 2004 from $145,000 for the three-months ended March 31, 2003. The increase is due to an increase in average other borrowings to $25.0 million in 2004 from $16.9 million in 2003, partially offset by a decrease in the weighted rate paid to 2.85%
in 2004 from 3.43% in 2003.



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 $18,000 for the
three-month period ended March 31, 2004 compared to $122,000 for the same period in 2003. The allowance for loan losses is $2.46 million at March 31, 2004. While management believes that its allowance for loan losses is adequate as of March 31,
2004, 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 $235,000 in 2004 from
$502,000 for the three- months ended March 31, 2003. The $267,000 decrease is primarily due to a $20,000 decrease in service charges on deposit accounts, a $51,000 decrease in loan brokerage fees due to less activity in the residential loan
production area and the gain of $200,000 on sale of deposit accounts recognized in 2003 with no corresponding amount in 2004.



Noninterest Expense. Total noninterest expense decreased to $1,474,000 for the three months ended March 31, 2004 from $1,547,000 for the comparable period
ended March 31, 2003, primarily due to a decrease in employee compensation and benefits of $78,000 due to lower staff levels and an increase in deferred cost due to increased loan volume.



Income Taxes. Income taxes for the three months ended March 31, 2004, was $289,000 or 38.1% of earnings before income taxes
compared to $338,000 or 38.0% for the period ended March 31, 2003.



16



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



Item 3. Controls and Procedures



|a. | Evaluation of disclosure controls and procedures. The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports
that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their
evaluation of those controls and procedures performed within 90 days of the filing date of this report, the Chief Executive and Chief Financial officers of the Company concluded that the Companys disclosure controls and procedures were
adequate.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b. | Changes in internal controls. The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent
to the date of the evaluation of those controls by the Chief Executive and Chief Financial officers.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



There are no material
pending legal proceeding to which Madison BancShares, Inc. and Subsidiary is a party or to which any of their property is subject.



17



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



PART II. OTHER INFORMATION, CONTINUED



Item 6. Exhibits and Reports on Form 8-K



|(a) | Exhibits. The following exhibits are filed with or incorporated by reference into this report.
|--- | ----------------------------------------------------------------------------------------------



|            |  |                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                       
|            | 
|*      2    |  | Plan of acquisition, reorganization, arrangement, liquidation, or succession                                                                 
|            | 
|*      3.1  |  | Articles of Incorporation of Madison BancShares, Inc.                                                                                        
|            | 
|*      3.2  |  | Bylaws of Madison BancShares, Inc. and Subsidiary                                                                                            
|            | 
|*      4    |  | Sample Stock Certificate for Madison BancShares, Inc.                                                                                        
|            | 
|*    10.2   |  | Employment Agreement of Robert McGivney                                                                                                      
|            | 
|*    10.3   |  | Employment Agreement of David Paetzold                                                                                                       
|            | 
|*    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                                                                          
|            | 
|**  10.7    |  | Employment Agreement of Otho B. Young, III                                                                                                   
|            | 
|***10.8     |  | Employment Agreement of Martin W. Gladysz                                                                                                    
|            | 
|31.1        |  | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            | 
|31.2        |  | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act                                         
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002



|* | These exhibits were filed with Madisons Form 10-SB on June 8, 2001.
|- | --------------------------------------------------------------------



|** | This exhibit was filed with Madisons Form 10-KSB on March 17, 2003.
|-- | --------------------------------------------------------------------



|*** | This exhibit was filed with Madisons Form 10-QSB on August 8, 2003.
|--- | --------------------------------------------------------------------



|(b) | Reports on Form 8-K.There was one Form 8-K filed during the three months ended March 31, 2004.
|--- | ----------------------------------------------------------------------------------------------



On January 13, 2004, Madison Bancshares, Inc. released earnings for the
twelve months ended December 31, 2003.



18



---

MADISON BANCSHARES, INC. AND SUBSIDIARY



SIGNATURES



In accordance with the requirements of
the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|      |  |              |  |                                                      |  |     |  |                                                          
|----- |  | ------------ |  | ---------------------------------------------------- |  | --- |  | ---------------------------------------------------------
|      |  |              |  | MADISON BANCSHARES, INC. AND SUBSIDIARY (Registrant)
|      |  |              |  |                                                     
|Date: |  | May 11, 2004 |  |                                                      |  | By: |  | /s/ Robert B. McGivney                                   
|      |  |              |  |                                                      |  |     |  |                                                          
|      |  |              |  |                                                      |  |     |  | Robert B. McGivney, President and Chief Executive Officer
|      |  |              |  |                                                     
|Date: |  | May 11, 2004 |  |                                                      |  | By: |  | /s/ Martin W. Gladysz                                    
|      |  |              |  |                                                      |  |     |  |                                                          
|      |  |              |  |                                                      |  |     |  | Martin W. Gladysz, Chief Financial Officer and Treasurer 



19