##### 









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 June 30,
    2002                                     
|          
|o          |  | 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(State or Other
    Jurisdiction of Incorporation or Organization) |  | 59-3720289(I.R.S. Employer
    Identification No.)

35388 U.S. Highway 19, North

Palm Harbor, Florida 34684





(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
o

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

|                                              |  |                                                 
|--------------------------------------------- |  | ------------------------------------------------
|Common stock, par value $.01 per share(class) |  | 1,509,324 sharesOutstanding at
    July 15, 2002



---






---



##### 



MADISON BANCSHARES, INC.

INDEX

|                              |                                                                       |                                                                                                                        |    |       |     | 
|----------------------------- | --------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | -- | ----- | --- | 
|                              |                                                                       | Page                                                                                                                  
|                              |                                                                       |                                                                                                                       
|PART I. FINANCIAL INFORMATION |                                                                       |                                                                                                                        |    |      
|                              | Item 1. Financial Statements                                          |                                                                                                                        |    |       |    
|                              |                                                                       | Condensed Consolidated Balance Sheets 
    At June 30, 2002 (unaudited) and At December 31,
    2001                  |    |       | 2   | 
|                              |                                                                       | Condensed Consolidated Statements of
    Earnings  Three and Six Months ended June 30,
    2002 and 2001 (unaudited)  |    |       | 3   | 
|                              |                                                                       | Condensed Consolidated Statement of Changes in
    Stockholders Equity Six Months Ended June 30, 2002
    (unaudited) |    |       | 4   | 
|                              |                                                                       | Condensed Consolidated Statements of Cash
    Flows  Six Months Ended June 30, 2002 and 2001
    (unaudited)          |    |       | 5   | 
|                              |                                                                       | Notes to Condensed Consolidated Financial
    Statements (unaudited)                                                   |    |       | 6-8 | 
|                              |                                                                       | Review by Independent Certified Public Accountants                                                                     |    |       | 9   | 
|                              |                                                                       | Report on Review by Independent Certified Public
    Accountants                                                       |    |       | 10  | 
|                              | Item 2. Managements Discussion and
    or Plan of Operations         |                                                                                                                        |    | 11-15 |    
|                              | Item 3. Quantitative and Qualitative
    Disclosure about Market Risk |                                                                                                                        |    | 16    |    
|PART II. OTHER INFORMATION    |                                                                       |                                                                                                                        |    |      
|                              | Item 1. Legal Proceedings                                             |                                                                                                                        |    | 16    |    
|                              | Item 2. Changes in Securities and Use of
    Proceeds                 |                                                                                                                        |    | 16    |    
|                              | Item 4. Submission of Matters to a Vote
    of Security Holders       |                                                                                                                        |    | 17    |    
|                              | Item 6. Exhibits and Reports on
    Form 8-K                          |                                                                                                                        |    | 18    |    
|SIGNATURES                    |                                                                       |                                                                                                                        | 19 |      

1



---



##### 



MADISON BANCSHARES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance
Sheets

(Dollars in thousands, except share
amounts)


|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |        |         | 
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------------ | ------- |  | ------- | ------ | ------- | 
|                                                                                 |                                                                                                                                     | June 30,                   |         | December 31,
|                                                                                 |                                                                                                                                     | 2002                       |         | 2001        
|                                                                                 |                                                                                                                                     |                            |         |             
|                                                                                 |                                                                                                                                     | (unaudited)                |         |             
|Assets                                                                           |                                                                                                                                     |                            |         |              |         |  |         |       
|Cash and due from banks                                                          |                                                                                                                                     | $                          | 5,033   |              |         |  | 2,440   |       
|Interest-bearing deposits with banks                                             |                                                                                                                                     |                            | 45      |              |         |  | 33      |       
|Federal funds sold                                                               |                                                                                                                                     |                            | 225     |              |         |  | 328     |       
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 |                                                                                                                                     | Cash and cash equivalents  |         |              | 5,303   |  |         |        | 2,801   | 
|Securities available for sale                                                    |                                                                                                                                     |                            | 28,299  |              |         |  | 20,882  |       
|Loans, net of allowance for loan losses of $1,868
    in 2002 and $1,477 in 2001 |                                                                                                                                     |                            | 149,839 |              |         |  | 137,601 |       
|Accrued interest receivable                                                      |                                                                                                                                     |                            | 746     |              |         |  | 712     |       
|Premises and equipment, net                                                      |                                                                                                                                     |                            | 3,455   |              |         |  | 2,888   |       
|Federal Home Loan Bank of Atlanta stock, at cost                                 |                                                                                                                                     |                            | 765     |              |         |  | 618     |       
|Deferred tax asset                                                               |                                                                                                                                     |                            | 205     |              |         |  | 250     |       
|Other assets                                                                     |                                                                                                                                     |                            | 938     |              |         |  | 779     |       
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 |                                                                                                                                     | $                          | 189,550 |              |         |  | 166,531 |       
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|Liabilities and Stockholders
    Equity                                         |                                                                                                                                     |                            |         |              |         |  |         |       
|Liabilities:                                                                     |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 | Noninterest-bearing demand deposits                                                                                                 |                            |         | 18,486       |         |  |         | 11,164 |        
|                                                                                 | Savings, NOW and money-market deposits                                                                                              |                            |         | 61,169       |         |  |         | 53,727 |        
|                                                                                 | Time deposits                                                                                                                       |                            |         | 80,475       |         |  |         | 72,193 |        
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 |                                                                                                                                     | Total deposits             |         |              | 160,130 |  |         |        | 137,084 | 
|                                                                                 | Federal Home Loan Bank advances                                                                                                     |                            |         | 10,000       |         |  |         | 12,200 |        
|                                                                                 | Other borrowings                                                                                                                    |                            |         | 3,719        |         |  |         | 1,801  |        
|                                                                                 | Official checks                                                                                                                     |                            |         | 913          |         |  |         | 1,736  |        
|                                                                                 | Accrued expenses and other liabilities                                                                                              |                            |         | 1,544        |         |  |         | 1,457  |        
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 |                                                                                                                                     | Total liabilities          |         |              | 176,306 |  |         |        | 154,278 | 
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|Stockholders equity:                                                            |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 | Preferred stock, $0.01 par value, authorized
    1,000,000 shares; none issued or outstanding                                       |                            |         |             |         |  |         |       |        
|                                                                                 | Common stock, $0.01 par value, authorized
    4,000,000 shares; issued and outstanding 1,509,324 and 1,493,971
    in 2002 and 2001 |                            |         | 15           |         |  |         | 15     |        
|                                                                                 | Additional paid-in capital                                                                                                          |                            |         | 12,833       |         |  |         | 12,653 |        
|                                                                                 | Retained earnings (accumulated deficit)                                                                                             |                            |         | 297          |         |  |         | (355   | )      
|                                                                                 | Accumulated other comprehensive income (loss)                                                                                       |                            |         | 99           |         |  |         | (60    | )      
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 |                                                                                                                                     | Total stockholders equity |         |              | 13,244  |  |         |        | 12,253  | 
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       
|                                                                                 |                                                                                                                                     | $                          | 189,550 |              |         |  | 166,531 |       
|                                                                                 |                                                                                                                                     |                            |         |              |         |  |         |       

See Accompanying Notes to Condensed Consolidated
Financial Statements.

2



---



##### 



MADISON BANCSHARES, INC.

Condensed Consolidated Statements of Earnings
(Unaudited)

(In thousands, except per share
amounts)


|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |       |       |       | 
|------------------------- | ----------------------------------- | ------------------------------------------------------- | -------------------------- | ---------------- | ----- | ----- | --- | ----- | ----- | ----- | --- | ----- | ----- | ----- | --- | ----- | ----- | ----- | 
|                          |                                     |                                                         |                            |                 
|                          |                                     | Three Months Ended                                      |                            | Six Months Ended
|                          |                                     | June 30,                                                |                            | June 30,        
|                          |                                     |                                                         |                            |                 
|                          |                                     | 2002                                                    |                            | 2001             |       | 2002  |     | 2001 
|                          |                                     |                                                         |                            |                  |       |       |     |      
|Interest income:          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          | Loans                               |                                                         | $                          | 2,709            |       |       |     | 2,644 |       |       |     | 5,324 |       |       |     | 5,259 |      
|                          | Securities available for sale       |                                                         |                            | 349              |       |       |     | 165   |       |       |     | 599   |       |       |     | 351   |      
|                          | Securities held to maturity         |                                                         |                            |                 |       |       |     | 109   |       |       |     |      |       |       |     | 205   |      
|                          | Other interest-earning assets       |                                                         |                            | 20               |       |       |     | 165   |       |       |     | 64    |       |       |     | 242   |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     |                                                         | Total interest income      |                  |       | 3,078 |     |       |       | 3,083 |     |       |       | 5,987 |     |       |       | 6,057 | 
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|Interest expense:         |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          | Deposits                            |                                                         |                            | 1,006            |       |       |     | 1,571 |       |       |     | 2,056 |       |       |     | 3,162 |      
|                          | Borrowed funds                      |                                                         |                            | 138              |       |       |     | 115   |       |       |     | 264   |       |       |     | 150   |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     |                                                         | Total interest expense     |                  |       | 1,144 |     |       |       | 1,686 |     |       |       | 2,320 |     |       |       | 3,312 | 
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     | Net interest income                                     |                            |                  | 1,934 |       |     |       | 1,397 |       |     |       | 3,667 |       |     |       | 2,745 |      
|Provision for loan losses |                                     |                                                         | 290                        |                  |       |       | 79  |       |       |       | 399 |       |       |       | 158 |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     | Net interest income after provision for loan
    losses |                            |                  | 1,644 |       |     |       | 1,318 |       |     |       | 3,268 |       |     |       | 2,587 |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|Noninterest income:       |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          | Service charges on deposit accounts |                                                         |                            | 120              |       |       |     | 115   |       |       |     | 233   |       |       |     | 233   |      
|                          | Other service charges and fees      |                                                         |                            | 39               |       |       |     | 26    |       |       |     | 73    |       |       |     | 60    |      
|                          | Gain on sale of securities          |                                                         |                            | 4                |       |       |     |      |       |       |     | 4     |       |       |     | 23    |      
|                          | Other                               |                                                         |                            | 46               |       |       |     | 31    |       |       |     | 62    |       |       |     | 60    |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     |                                                         | Total noninterest income   |                  |       | 209   |     |       |       | 172   |     |       |       | 372   |     |       |       | 376   | 
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|Noninterest expenses:     |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          | Employee compensation and benefits  |                                                         |                            | 714              |       |       |     | 579   |       |       |     | 1,423 |       |       |     | 1,166 |      
|                          | Occupancy and equipment             |                                                         |                            | 176              |       |       |     | 163   |       |       |     | 348   |       |       |     | 318   |      
|                          | Data processing expense             |                                                         |                            | 67               |       |       |     | 63    |       |       |     | 132   |       |       |     | 124   |      
|                          | Professional fees                   |                                                         |                            | 31               |       |       |     | 25    |       |       |     | 62    |       |       |     | 49    |      
|                          | Federal deposit insurance premium   |                                                         |                            | 6                |       |       |     | 7     |       |       |     | 12    |       |       |     | 13    |      
|                          | Other expense                       |                                                         |                            | 231              |       |       |     | 211   |       |       |     | 470   |       |       |     | 431   |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     |                                                         | Total noninterest expenses |                  |       | 1,225 |     |       |       | 1,048 |     |       |       | 2,447 |     |       |       | 2,101 | 
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     | Earnings before income taxes                            |                            |                  | 628   |       |     |       | 442   |       |     |       | 1,193 |       |     |       | 862   |      
|Income taxes              |                                     |                                                         | 238                        |                  |       |       | 165 |       |       |       | 450 |       |       |       | 322 |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          |                                     | Net earnings                                            |                            | $                | 390   |       |     |       | 277   |       |     |       | 743   |       |     |       | 540   |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|Earnings per share:       |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          | Basic earnings per share            |                                                         | $                          | .26              |       |       |     | .19   |       |       |     | .50   |       |       |     | .36   |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|                          | Diluted earnings per share          |                                                         | $                          | .24              |       |       |     | .18   |       |       |     | .47   |       |       |     | .35   |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      
|Dividends per share       |                                     | $                                                       | .06                        |                  |       |       |    |       |       |       | .06 |       |       |       |    |      
|                          |                                     |                                                         |                            |                  |       |       |     |       |       |       |     |       |       |       |     |      

See Accompanying Notes to Condensed Consolidated
Financial Statements.

3



---



##### 



MADISON BANCSHARES, INC.

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

Six Months Ended June 30, 2002

(In thousands)


|                                     |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  |        |     | 
|------------------------------------ | --------------------------------------------------------------------------------------------------- | ------ | -- | ---------- |  | ------------ | ------ | ------------- |  | ----- | ---- | --- |  |  | --- | --- |  |  | ------ | --- | 
|                                     |                                                                                                     |        |    |            |  |              |        | Accumulated   |  |      
|                                     |                                                                                                     |        |    |            |  | Retained     |        | Other         |  |      
|                                     |                                                                                                     |        |    | Additional |  | Earnings     |        | Comprehensive |  |      
|                                     |                                                                                                     | Common |    | Paid-in    |  | (Accumulated |        | Income        |  |      
|                                     |                                                                                                     | Stock  |    | Capital    |  | Deficit)     |        | (Loss)        |  | Total
|                                     |                                                                                                     |        |    |            |  |              |        |               |  |      
|Balance at December 31, 2001         |                                                                                                     | $      | 15 |            |  |              | 12,653 |               |  |       | (355 | )   |  |  | (60 | )   |  |  | 12,253 |    
|                                     |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  |        |    
|                                    
|Comprehensive income:                |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  |        |    
|                                     | Net earnings (unaudited)                                                                            |        |    |           |  |              |        |              |  |       |      | 743 |  |  |     |    |  |  |        | 743 | 
|                                    
|                                     | Net change in unrealized gain on securities
    available for sale, net of taxes of $97 (unaudited) |        |    |           |  |              |        |              |  |       |      |    |  |  |     | 159 |  |  |        | 159 | 
|                                     |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  |        |    
|                                    
|Comprehensive income (unaudited)     |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  | 902    |    
|                                     |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  |        |    
|                                    
|Sale of common stock (unaudited)     |                                                                                                     |        |   |            |  |              | 180    |               |  |       |     |     |  |  |    |     |  |  | 180    |    
|                                    
|Cash dividend paid (unaudited)       |                                                                                                     |        |   |            |  |              |       |               |  |       | (91  | )   |  |  |    |     |  |  | (91    | )  
|                                     |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  |        |    
|                                    
|Balance at June 30, 2002 (unaudited) |                                                                                                     | $      | 15 |            |  |              | 12,833 |               |  |       | 297  |     |  |  | 99  |     |  |  | 13,244 |    
|                                     |                                                                                                     |        |    |            |  |              |        |               |  |       |      |     |  |  |     |     |  |  |        |    

See Accompanying Notes to Condensed Consolidated
Financial Statements.

4



---



##### 



MADISON BANCSHARES, INC.

Condensed Consolidated Statements of Cash
Flows (Unaudited)

(In thousands)


|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |         |         |  
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ----- | ------- | ------- | - | ----- | ------- | ------- | -
|                                                  |                                                                                                                                   |                                                                                     
|                                                  |                                                                                                                                   | Six Months Ended                                                                    
|                                                  |                                                                                                                                   | June 30,                                                                            
|                                                  |                                                                                                                                   |                                                                                     
|                                                  |                                                                                                                                   | 2002                                                                                 |       | 2001   
|                                                  |                                                                                                                                   |                                                                                      |       |        
|Cash flows from operating activities:             |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  | Net earnings                                                                                                                      |                                                                                      | $     | 743     |         |   |       | 540     |        
|                                                  | Adjustments to reconcile net earnings to net cash
    provided by operating activities:                                           |                                                                                      |       |         |         |   |       |         |        
|                                                  |                                                                                                                                   | Provision for loan losses                                                            |       |         | 399     |   |       |         | 158     |  
|                                                  |                                                                                                                                   | Depreciation and amortization                                                        |       |         | 183     |   |       |         | 174     |  
|                                                  |                                                                                                                                   | Amortization of discounts and premiums on
    securities and deferred loan fees, net |       |         | (56     | ) |       |         | 12      |  
|                                                  |                                                                                                                                   | Credit for deferred income taxes                                                     |       |         | (52     | ) |       |         | (79     | )
|                                                  |                                                                                                                                   | (Increase) decrease in accrued interest receivable                                   |       |         | (34     | ) |       |         | 52      |  
|                                                  |                                                                                                                                   | Increase in other assets                                                             |       |         | (159    | ) |       |         | (27     | )
|                                                  |                                                                                                                                   | Decrease in official checks, accrual expenses and
    other liabilities              |       |         | (736    | ) |       |         | (181    | )
|                                                  |                                                                                                                                   | Gain on sale of securities available for sale                                        |       |         | (4      | ) |       |         | (23     | )
|                                                  |                                                                                                                                   | Gain on sale of loans                                                                |       |         |        |   |       |         | (6      | )
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  |                                                                                                                                   | Net cash provided by operating activities                                            |       |         | 284     |   |       |         | 620     |  
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|Cash flows from investing activities:             |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  | Net increase in loans                                                                                                             |                                                                                      |       | (12,660 | )       |   |       | (14,291 | )      
|                                                  | Securities held to maturity principle repayments                                                                                  |                                                                                      |       |        |         |   |       | 15      |        
|                                                  | Purchase of securities available for sale                                                                                         |                                                                                      |       | (12,119 | )       |   |       |        |        
|                                                  | Securities available for sale principle repayments                                                                                |                                                                                      |       | 3,037   |         |   |       | 641     |        
|                                                  | Net proceeds from sales of securities available
    for sale                                                                      |                                                                                      |       | 2,004   |         |   |       | 2,427   |        
|                                                  | Net purchase of premises and equipment                                                                                            |                                                                                      |       | (750    | )       |   |       | (129    | )      
|                                                  | Purchase of Federal Home Loan Bank stock                                                                                          |                                                                                      |       | (147    | )       |   |       | (25     | )      
|                                                  | Proceeds from sale of loans                                                                                                       |                                                                                      |       |        |         |   |       | 541     |        
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  |                                                                                                                                   | Net cash used in investing activities                                                |       |         | (20,635 | ) |       |         | (10,821 | )
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|Cash flows from financing activities:             |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  | Net increase in deposits                                                                                                          |                                                                                      |       | 23,046  |         |   |       | 3,035   |        
|                                                  | Net (decrease) increase in Federal Home Loan
    Bank advances                                                                    |                                                                                      |       | (2,200  | )       |   |       | 9,750   |        
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  | Net increase in other borrowings                                                                                                  |                                                                                      |       | 1,918   |         |   |       | 350     |        
|                                                  | Proceeds from sale of stock                                                                                                       |                                                                                      |       | 180     |         |   |       |        |        
|                                                  | Cash dividends paid                                                                                                               |                                                                                      |       | (91     | )       |   |       |        |        
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  |                                                                                                                                   | Net cash provided by financing activities                                            |       |         | 22,853  |   |       |         | 13,135  |  
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  |                                                                                                                                   | Net increase in cash and cash equivalents                                            |       |         | 2,502   |   |       |         | 2,934   |  
|Cash and cash equivalents at beginning of period  |                                                                                                                                   |                                                                                      | 2,801 |         |         |   | 2,672 |        
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|Cash and cash equivalents at end of period        |                                                                                                                                   | $                                                                                    | 5,303 |         |         |   | 5,606 |        
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|Supplemental disclosure of cash flow information: |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  | Cash paid during the period for:                                                                                                  |                                                                                      |       |         |         |   |       |         |        
|                                                  |                                                                                                                                   | Interest                                                                             |       | $       | 2,336   |   |       |         | 3,278   |  
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  |                                                                                                                                   | Income taxes                                                                         |       | $       | 662     |   |       |         | 358     |  
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|Noncash transactions:                             |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  | Accumulated other comprehensive income (loss),
    net change in unrealized gain on securities available for sale,
    net of tax |                                                                                      | $     | 159     |         |   |       | 275     |        
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        
|                                                  | Stock dividends                                                                                                                   |                                                                                      | $     |        |         |   |       | (603    | )      
|                                                  |                                                                                                                                   |                                                                                      |       |         |         |   |       |        

See Accompanying Notes to Condensed Consolidated
Financial Statements.

5



---



##### 



MADISON BANCSHARES, INC.

Notes to Condensed Consolidated Financial
Statements (Unaudited)

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

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 June 30, 2002, the results of operations for
the three-and six-month periods ended June 30, 2002 and
2001 and cash flows for the six-month periods ended
June 30, 2002 and 2001. The results of operations and other
data for the three- and six-month periods ended June 30,
2002 are not necessarily indicative of results that may be
expected for the year ending December 31, 2002.

2. Loan Impairment and Loan Losses.Loans identified as impaired during the six-months ended
June 30, 2002 are as follows. There were no loans
identified as impaired during the six months ended June 30,
2001 (in thousands):

|                                                           |  |          |       |  
|---------------------------------------------------------- |  | -------- | ----- | -
|                                                           |  | June 30,
|                                                           |  | 2002    
|                                                           |  |         
|Gross loans with related allowance for losses
    recorded |  | $        | 4,102 |  
|                                                          
|Less: Allowance on these loans                             |  |          | (410  | )
|                                                           |  |          |       |  
|                                                          
|Net investment in impaired loans                           |  | $        | 3,692 |  
|                                                           |  |          |       |  

|                                             |  |                    |       |                  |  |  |       | 
|-------------------------------------------- |  | ------------------ | ----- | ---------------- |  |  | ----- | 
|                                             |  | Three Months Ended |       | Six Months Ended
|                                             |  | June 30,           |       | June 30,        
|                                             |  | 2002               |       | 2002            
|                                             |  |                    |       |                 
|Average net investment in impaired loans     |  | $                  | 2,316 |                  |  |  | 1,898 | 
|                                             |  |                    |       |                  |  |  |       | 
|                                            
|Interest income recognized on impaired loans |  | $                  |      |                  |  |  | 3     | 
|                                             |  |                    |       |                  |  |  |       | 
|                                            
|Interest income received on impaired loans   |  | $                  |      |                  |  |  | 3     | 
|                                             |  |                    |       |                  |  |  |       | 

On July 9, 2002, an impaired loan with a
balance of approximately $1.4 million was transferred to
foreclosed real estate. Management believes there will be no
loss on the disposition of this property.

(continued)

6



---



##### 



MADISON BANCSHARES, INC.

Notes to Condensed Consolidated Financial
Statements (Unaudited), Continued

2. Loan Impairment and Loan Losses,
Continued.The activity in the allowance for loan losses
is as follows (in thousands):

|                               |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       | 
|------------------------------ |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  |  | ----- | - |  |  | ----- | 
|                               |  |                    |       |                 
|                               |  | Three Months Ended |       | Six Months Ended
|                               |  | June 30,           |       | June 30,        
|                               |  |                    |       |                 
|                               |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                               |  |                    |       |                  |  |      |       |     
|Balance at beginning of period |  | $                  | 1,571 |                  |  |      | 1,099 |      |  |  | 1,477 |   |  |  | 966   | 
|Provision for loan losses      |  |                    | 290   |                  |  |      | 79    |      |  |  | 399   |   |  |  | 158   | 
|Charge-offs                    |  |                    |      |                  |  |      |      |      |  |  | (21   | ) |  |  |      | 
|Recoveries                     |  |                    | 7     |                  |  |      | 18    |      |  |  | 13    |   |  |  | 72    | 
|                               |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       | 
|Balance at end of period       |  | $                  | 1,868 |                  |  |      | 1,196 |      |  |  | 1,868 |   |  |  | 1,196 | 
|                               |  |                    |       |                  |  |      |       |      |  |  |       |   |  |  |       | 

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.
For 2002 and 2001, 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 5% stock dividends declared on May 15,
2001. The following tables present the calculations of EPS
(dollars in thousands, except per share amounts).

|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |     | 
|------------------------------- | ------------------------------------------------------------------------- | -------- | - | --------- |  | ------ |  | --------- |  | --------- | - | ------ |  |  | - | --- |  |  |  | --------- |  |  | - | --- | 
|                                |                                                                           |          |   |          
|                                |                                                                           | 2002     |   | 2001     
|                                |                                                                           |          |   |          
|                                |                                                                           |          |   | Weighted- |  | Per    |  |           |  | Weighted- |   | Per   
|                                |                                                                           |          |   | Average   |  | Share  |  |           |  | Average   |   | Share 
|                                |                                                                           | Earnings |   | Shares    |  | Amount |  | Earnings  |  | Shares    |   | Amount
|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |       
|Three Months Ended
    June 30: |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|Basic EPS:                      |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                                | Net earnings available to common stockholders                             |          | $ | 390       |  |        |  | 1,506,716 |  |           | $ | .26    |  |  | $ | 277 |  |  |  | 1,491,656 |  |  | $ | .19 | 
|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                               
|Effect of dilutive securities  |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                                | Incremental shares from assumed conversion of
    options                 |          |   |          |  |        |  | 99,811    |  |           |   |        |  |  |   |    |  |  |  | 59,343    |  |  |   |     | 
|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                               
|Diluted EPS:                    |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                                | Net earnings available to common stockholders and
    assumed conversions |          | $ | 390       |  |        |  | 1,606,527 |  |           | $ | .24    |  |  | $ | 277 |  |  |  | 1,550,999 |  |  | $ | .18 | 
|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                               
|Six Months Ended
    June 30:   |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|Basic EPS:                      |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                                | Net earnings available to common stockholders                             |          | $ | 743       |  |        |  | 1,501,263 |  |           | $ | .50    |  |  | $ | 540 |  |  |  | 1,491,656 |  |  | $ | .36 | 
|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|Effect of dilutive securities  |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                                | Incremental shares from assumed conversion of
    options                 |          |   |          |  |        |  | 94,777    |  |           |   |        |  |  |   |    |  |  |  | 53,464    |  |  |   |     | 
|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                               
|Diluted EPS:                    |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    
|                                | Net earnings available to common stockholders and
    assumed conversions |          | $ | 743       |  |        |  | 1,596,040 |  |           | $ | .47    |  |  | $ | 540 |  |  |  | 1,545,120 |  |  | $ | .35 | 
|                                |                                                                           |          |   |           |  |        |  |           |  |           |   |        |  |  |   |     |  |  |  |           |  |  |   |    

(continued)

7



---



##### 



MADISON BANCSHARES, INC.

Notes to Condensed Consolidated Financial
Statements (Unaudited), Continued

4. Regulatory Capital.The
Bank is required to maintain certain minimum regulatory capital
requirements. The following is a summary at June 30, 2002
of the regulatory capital requirements and the Banks
actual capital on a percentage basis:

|                                                    |  |        |       |             |  |  |      |  
|--------------------------------------------------- |  | ------ | ----- | ----------- |  |  | ---- | -
|                                                    |  |        |       | Regulatory 
|                                                    |  | Actual |       | Requirement
|                                                    |  |        |       |            
|Total capital to risk-weighted assets               |  |        | 10.26 | %           |  |  | 8.00 | %
|Tier I capital to risk-weighted assets              |  |        | 9.12  | %           |  |  | 4.00 | %
|Tier I capital to total assets 
    leverage ratio |  |        | 8.03  | %           |  |  | 4.00 | %

8



---



##### 



MADISON BANCSHARES, INC.

Review by Independent Certified Public
Accountants

Hacker, Johnson & Smith PA, independent
certified public accountants, have made a limited review of the
financial data as of June 30, 2002, and for the three-and
six- month periods ended June 30, 2002 and 2001 presented
in this document, in accordance with standards established by
the American Institute of Certified Public Accountants.

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

9



---



##### 



Report on Review by Independent Certified
Public Accountants

The Board of Directors

Madison BancShares, Inc.


Palm Harbor, Florida:


We have reviewed the accompanying condensed
consolidated balance sheet of Madison BancShares, Inc. and
Subsidiary (the Company) as of June 30, 2002,
the related condensed consolidated statements of earnings for
the three- and six- month periods ended June 30, 2002 and
2001, the related condensed consolidated statement of changes in
stockholders equity for the six- month period ended
June 30, 2002 and the related condensed consolidated
statements of cash flows for the six-month periods ended
June 30, 2002 and 2001. These financial statements are the
responsibility of the Companys management.

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

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

We have previously audited, in accordance with
auditing standards generally accepted in the United States of
America, the consolidated balance sheet as of December 31,
2001, 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 25, 2002 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, 2001, is fairly stated, in
all material respects, in relation to the consolidated balance
sheet from which it has been derived.





HACKER, JOHNSON & SMITH PA

Tampa, Florida


July 11, 2002


10



---



##### 



MADISON BANCSHARES, INC.

Item 2. Managements Discussion and
Analysis

Or Plan of Operations


General

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

Liquidity and Capital Resources

The Companys primary source of cash during
the six months ended June 30, 2002 was from net deposit
inflows of $23.0 million. Cash was used primarily to originate
loans of $12.7 million and to purchase securities of $12.1
million. At June 30, 2002, the Company had outstanding
commitments to originate loans totaling $10.6 million.
Management believes that the Company has adequate resources to
fund all its commitments and that substantially all of its
existing commitments will be funded in 2002. At June 30,
2002, the Bank exceeded its regulatory liquidity requirements.

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

|                                                                                                    |  |            |       |              |  |            |      |   |  |   |      |  
|--------------------------------------------------------------------------------------------------- |  | ---------- | ----- | ------------ |  | ---------- | ---- | - |  | - | ---- | -
|                                                                                                    |  | Six Months |       |              |  | Six Months
|                                                                                                    |  | Ended      |       | Year Ended   |  | Ended     
|                                                                                                    |  | June 30,   |       | December 31, |  | June 30,  
|                                                                                                    |  | 2002       |       | 2001         |  | 2001      
|                                                                                                    |  |            |       |              |  |           
|Average equity as a percentage of average assets                                                    |  |            | 7.08  | %            |  |            | 7.37 | % |  |   | 7.24 | %
|                                                                                                   
|Equity to total assets at end of period                                                             |  |            | 6.99  | %            |  |            | 7.36 | % |  |   | 7.31 | %
|                                                                                                   
|Book value per share (2)                                                                            |  | $          | 8.78  |              |  | $          | 8.20 |   |  | $ | 7.88 |  
|                                                                                                   
|Return on average assets (1)                                                                        |  |            | 0.83  | %            |  |            | 0.67 | % |  |   | 0.68 | %
|                                                                                                   
|Return on average equity (1)                                                                        |  |            | 11.66 | %            |  |            | 9.11 | % |  |   | 9.41 | %
|                                                                                                   
|Noninterest expenses to average assets (1)                                                          |  |            | 2.72  | %            |  |            | 2.70 | % |  |   | 2.65 | %
|                                                                                                   
|Nonperforming loans and foreclosed real estate as
    a percentage of total assets at end of period |  |            | 2.16  | %            |  |            | 0.85 | % |  |   |     | %






|    |                                             
|--- | --------------------------------------------
|(1) | Annualized for the six months ended June 30.
|(2) | Adjusted for stock dividends.               

11



---



##### 



MADISON BANCSHARES, INC.

Results of Operations

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

|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |      |      | 
|------------------------------------------------------------------------------------ | ------------------------------------------- | ------------------------------------------ | ------ | --------- | ------- | ------- | ----- | ------- | ----- | --------- | ---- | ------- | ---- |  | ------ | ------- | ------- | - | ----- | ----- | ----- |  | ---- | ---- | ---- | 
|                                                                                     |                                             |                                           
|                                                                                     |                                             | Three Months Ended June 30,               
|                                                                                     |                                             |                                           
|                                                                                     |                                             |                                            |        |          
|                                                                                     |                                             | 2002                                       |        | 2001     
|                                                                                     |                                             |                                            |        |          
|                                                                                     |                                             |                                            |        | Interest  |         | Average |       |         |       | Interest  |      | Average
|                                                                                     |                                             | Average                                    |        | and       |         | Yield/  |       | Average |       | and       |      | Yield/ 
|                                                                                     |                                             | Balance                                    |        | Dividends |         | Rate    |       | Balance |       | Dividends |      | Rate   
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |        
|                                                                                     |                                             |                                           
|                                                                                     |                                             | (Dollars in thousands)                    
|Interest-earning assets:                                                             |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     | Loans (1)                                   |                                            | $      | 145,374   |         |         |       | 2,709   |       |           |      | 7.45    | %    |  | $      | 121,934 |         |   |       | 2,644 |       |  |      | 8.67 | %   
|                                                                                     | Securities                                  |                                            |        | 29,672    |         |         |       | 349     |       |           |      | 4.71    |      |  |        | 22,508  |         |   |       | 274   |       |  |      | 4.87 |     
|                                                                                     | Other interest-earning assets (2)           |                                            |        | 3,197     |         |         |       | 20      |       |           |      | 2.50    |      |  |        | 13,884  |         |   |       | 165   |       |  |      | 4.75 |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total interest-earning assets              |        |           | 178,243 |         |       |         | 3,078 |           |      |         | 6.91 |  |        |         | 158,326 |   |       |       | 3,083 |  |      |      | 7.79 | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Noninterest-earning assets                                                           |                                             |                                            | 7,413  |           |         |         |       |         |       |           |      |         |      |  | 6,980  |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total assets                               |        | $         | 185,656 |         |       |         |       |           |      |         |      |  |        | $       | 165,306 |   |       |       |       |  |      |      |      | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Interest-bearing liabilities:                                                        |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     | Savings, NOW, money-market deposit accounts |                                            |        | 60,895    |         |         |       | 219     |       |           |      | 1.44    |      |  |        | 49,145  |         |   |       | 339   |       |  |      | 2.76 |     
|                                                                                     | Time deposits                               |                                            |        | 79,937    |         |         |       | 787     |       |           |      | 3.94    |      |  |        | 80,500  |         |   |       | 1,232 |       |  |      | 6.12 |     
|                                                                                     | Other interest-bearing liabilities (3)      |                                            |        | 13,863    |         |         |       | 138     |       |           |      | 3.98    |      |  |        | 10,206  |         |   |       | 115   |       |  |      | 4.51 |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total interest-bearing liabilities         |        |           | 154,695 |         |       |         | 1,144 |           |      |         | 2.96 |  |        |         | 139,851 |   |       |       | 1,686 |  |      |      | 4.82 | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Noninterest-bearing liabilities                                                      |                                             |                                            | 18,055 |           |         |         |       |         |       |           |      |         |      |  | 13,674 |         |         |   |       |       |       |  |      |     
|Stockholders equity                                                                 |                                             |                                            | 12,906 |           |         |         |       |         |       |           |      |         |      |  | 11,781 |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total liabilities and stockholders equity |        | $         | 185,656 |         |       |         |       |           |      |         |      |  |        | $       | 165,306 |   |       |       |       |  |      |      |      | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Net interest income                                                                  |                                             |                                            |        |           |         | $       | 1,934 |         |       |           |      |         |      |  |        |         |         | $ | 1,397 |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Interest-rate spread (4)                                                             |                                             |                                            |        |           |         |         |       |         |       |           | 3.95 | %       |      |  |        |         |         |   |       |       |       |  | 2.97 | %   
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Net interest margin (5)                                                              |                                             |                                            |        |           |         |         |       |         |       |           | 4.34 | %       |      |  |        |         |         |   |       |       |       |  | 3.53 | %   
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Ratio of average interest-earning assets to
    average interest-bearing liabilities |                                             |                                            | 1.15   |           |         |         |       |         |       |           |      |         |      |  | 1.13   |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     






|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                       

12



---



##### 



MADISON BANCSHARES, INC.

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

|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |      |      | 
|------------------------------------------------------------------------------------ | ------------------------------------------- | ------------------------------------------ | ------ | --------- | ------- | ------- | ----- | ------- | ----- | --------- | ---- | ------- | ---- |  | ------ | ------- | ------- | - | ----- | ----- | ----- |  | ---- | ---- | ---- | 
|                                                                                     |                                             |                                           
|                                                                                     |                                             | Six Months Ended June 30,                 
|                                                                                     |                                             |                                           
|                                                                                     |                                             |                                            |        |          
|                                                                                     |                                             | 2002                                       |        | 2001     
|                                                                                     |                                             |                                            |        |          
|                                                                                     |                                             |                                            |        | Interest  |         | Average |       |         |       | Interest  |      | Average
|                                                                                     |                                             | Average                                    |        | and       |         | Yield/  |       | Average |       | and       |      | Yield/ 
|                                                                                     |                                             | Balance                                    |        | Dividends |         | Rate    |       | Balance |       | Dividends |      | Rate   
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |        
|                                                                                     |                                             |                                           
|                                                                                     |                                             | (Dollars in thousands)                    
|Interest-earning assets:                                                             |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     | Loans (1)                                   |                                            | $      | 141,023   |         |         |       | 5,324   |       |           |      | 7.55    | %    |  | $      | 119,194 |         |   |       | 5,259 |       |  |      | 8.82 | %   
|                                                                                     | Securities                                  |                                            |        | 25,446    |         |         |       | 599     |       |           |      | 4.71    |      |  |        | 22,774  |         |   |       | 556   |       |  |      | 4.88 |     
|                                                                                     | Other interest-earning assets (2)           |                                            |        | 6,034     |         |         |       | 64      |       |           |      | 2.12    |      |  |        | 9,661   |         |   |       | 242   |       |  |      | 5.01 |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total interest-earning assets              |        |           | 172,503 |         |       |         | 5,987 |           |      |         | 6.94 |  |        |         | 151,629 |   |       |       | 6,057 |  |      |      | 7.99 | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Noninterest-earning assets                                                           |                                             |                                            | 7,569  |           |         |         |       |         |       |           |      |         |      |  | 6,904  |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total assets                               |        | $         | 180,072 |         |       |         |       |           |      |         |      |  |        | $       | 158,533 |   |       |       |       |  |      |      |      | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Interest-bearing liabilities:                                                        |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     | Savings, NOW, money-market deposit accounts |                                            |        | 58,753    |         |         |       | 427     |       |           |      | 1.45    |      |  |        | 46,761  |         |   |       | 673   |       |  |      | 2.88 |     
|                                                                                     | Time deposits                               |                                            |        | 78,729    |         |         |       | 1,629   |       |           |      | 4.14    |      |  |        | 80,460  |         |   |       | 2,489 |       |  |      | 6.19 |     
|                                                                                     | Other interest-bearing liabilities (3)      |                                            |        | 13,537    |         |         |       | 264     |       |           |      | 3.90    |      |  |        | 6,670   |         |   |       | 150   |       |  |      | 4.50 |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total interest-bearing liabilities         |        |           | 151,019 |         |       |         | 2,320 |           |      |         | 3.07 |  |        |         | 133,891 |   |       |       | 3,312 |  |      |      | 4.95 | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Noninterest-bearing liabilities                                                      |                                             |                                            | 16,304 |           |         |         |       |         |       |           |      |         |      |  | 13,168 |         |         |   |       |       |       |  |      |     
|Stockholders equity                                                                 |                                             |                                            | 12,749 |           |         |         |       |         |       |           |      |         |      |  | 11,474 |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             | Total liabilities and stockholders equity |        | $         | 180,072 |         |       |         |       |           |      |         |      |  |        | $       | 158,533 |   |       |       |       |  |      |      |      | 
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Net interest income                                                                  |                                             |                                            |        |           |         | $       | 3,667 |         |       |           |      |         |      |  |        |         |         | $ | 2,745 |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Interest-rate spread (4)                                                             |                                             |                                            |        |           |         |         |       |         |       |           | 3.87 | %       |      |  |        |         |         |   |       |       |       |  | 3.04 | %   
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Net interest margin (5)                                                              |                                             |                                            |        |           |         |         |       |         |       |           | 4.25 | %       |      |  |        |         |         |   |       |       |       |  | 3.62 | %   
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     
|Ratio of average interest-earning assets to
    average interest-bearing liabilities |                                             |                                            | 1.14   |           |         |         |       |         |       |           |      |         |      |  | 1.13   |         |         |   |       |       |       |  |      |     
|                                                                                     |                                             |                                            |        |           |         |         |       |         |       |           |      |         |      |  |        |         |         |   |       |       |       |  |      |     






|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.                                                                       

13



---



##### 



MADISON BANCSHARES, INC.

Comparison of the Three-Month Periods Ended
June 30, 2002 and 2001

General.Net
earnings for the three-months ended June 30, 2002 were
$390,000 or $.26 per basic and $.24 per diluted share compared
to $277,000 or $.19 per basic and $.18 per diluted share for
2001. The increase in net earnings was due to an increase in net
interest income, partially offset by an increase in noninterest
expenses and the provision for loan losses.

Interest Income and Expense.Interest income decreased by
$5,000 to $3,078,000 for the three-month period ended
June 30, 2002 from $3,083,000 for the three months ended
June 30, 2001. Interest on loans increased to $2.7 million
for the three-months ended June 30, 2002 compared to $2.6
million for 2001 due to an increase in the average loan
portfolio balance to $145.4 million from $121.9 million,
partially offset by a decrease in the weighted-average yield
earned in 2002 to 7.45% from 8.67% in 2001. Interest on
securities increased for the three months ended June 30,
2002 to $349,000 from $274,000 in 2001. The increase was due to
an increase in the average portfolio balance to $29.7 million in
2002 from $22.5 million in 2001, partially offset by a decrease
in the weighted-average yield earned in 2002 to 4.71% from 4.87%
in 2001. Interest on other interest-earning assets decreased
from $165,000 in 2001 to $20,000 in 2002. This decrease was due
to a decrease in the average balance of other interest-earning
assets from $13.9 million in 2001 to $3.2 million in 2002 and a
decrease in the yield earned on such assets from 4.75% in 2001
to 2.50% in 2002.

Interest expense on deposits decreased $565,000
to $1,006,000 for the three-months ended June 30, 2002 from
$1,571,000 in 2001. The decrease is due to a decrease in the
average rate paid on interest-bearing deposits in 2002 to 2.86%
from 4.85% in 2001, partially offset by an increase in the
average deposits in 2002 to $140.8 million compared to $129.6
million in 2001.

Interest expense on other borrowings increased to
$138,000 for the three-months ended June 30, 2002 from
$115,000 for the three-months ended June 30, 2001. The
increase is due to an increase in average other borrowings to
$13.9 million in 2002 from $10.2 million in 2001, partially
offset by a decrease in the weighted rate paid to 3.98% in 2002
from 4.51% in 2001.

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 $290,000 for the three-month period ended
June 30, 2002 compared to $79,000 for the same period in
2001. The allowance for loan losses is $1,868,000 at
June 30, 2002. While management believes that its allowance
for loan losses is adequate as of June 30, 2002, future
adjustments to the Banks allowance for loan losses may be
necessary if economic conditions differ substantially from the
assumptions used in making the initial determination.

Noninterest Income.Noninterest income increased to
$209,000 in 2002 from $172,000 for the three- months ended
June 30, 2001. The increase is primarily due to an increase
in service charges.

Noninterest Expense.Total noninterest expense
increased to $1,225,000 for the three-months ended June 30,
2002 from $1,048,000 for the comparable period ended
June 30, 2001, primarily due to an increase in employee
compensation and benefits and occupancy expense.

Income Taxes.The income tax provision for the
three months ended June 30, 2002 was $238,000 or 37.9% of
earnings before income taxes compared to $165,000 or 37.3% for
the period ended June 30, 2001.

14



---



##### 



MADISON BANCSHARES, INC.

Comparison of the Six-Month Periods Ended
June 30, 2002 and 2001

General.Net
earnings for the six-months ended June 30, 2002 were
$743,000 or $.50 per basic and $.47 per diluted share compared
to $540,000 or $.36 per basic and $.35 per diluted share for
2001. The increase in net earnings was due to an increase in net
interest income, partially offset by an increase in noninterest
expenses and the provision for loan losses.

Interest Income and Expense.Interest income decreased by
$70,000 to $5,987,000 for the six-month period ended
June 30, 2002 from $6,057,000 for the six months ended
June 30, 2001. Interest on loans increased to $5,324,000
for the six-months ended June 30, 2002 from $5,259,000 in
2001 due to an increase in the average loan portfolio balance to
$141.0 million from $119.2 million, partially offset by a
decrease in the weighted-average yield earned in 2002 to 7.55%
from 8.82% in 2001. Interest on securities increased for the six
months ended June 30, 2002 to $599,000 from $556,000 in
2001. The increase was due to an increase in the average balance
to $25.4 million in 2002 from $22.8 million in 2001, partially
offset by a decrease in the weighted-average yield earned in
2002 to 4.71% from 4.88% in 2001.

Interest from other interest-earning assets
decreased to $64,000 for the six-month period ending
June 30, 2002 compared to $242,000 earned in 2001. The
decrease was due to a decrease in the average balance to $6.0
million in 2002 from $9.7 million in 2001 and a decrease in the
rate earned to 2.12% in 2002 from 5.01% in 2001.

Interest expense on deposits decreased $1,106,000
to $2,056,000 for the six-months ended June 30, 2002 from
$3,162,000 in 2001. The decrease is due to a decrease in the
average rate paid on interest-bearing deposits in 2002 to 3.00%
from 4.97% in 2001, partially offset by an increase in the
average deposits in 2002 to $137.5 million compared to $127.2
million in 2001.

Interest expense on other borrowings increased to
$264,000 for the six-months ended June 30, 2002 from
$150,000 for the six-months ended June 30, 2001. The increase is
due to an increase in average other borrowings to $13.5 million
in 2002 from $6.7 million in 2001, partially offset by a
decrease in the weighted rate paid to 3.90% in 2002 from 4.50%
in 2001.

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 $399,000 for the six-month period ended
June 30, 2002 compared to $158,000 for the same period in
2001. The allowance for loan losses is $1,868,000 at
June 30, 2002. While management believes that its allowance
for loan losses is adequate as of June 30, 2002, 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
$372,000 in 2002 from $376,000 for the six- months ended
June 30, 2001. The decrease is primarily due to gains
realized on the sale of securities in 2001 of $23,000 compared
to $4,000 in 2002.

Noninterest Expense.Total noninterest expense
increased to $2,447,000 for the six-months ended June 30,
2002 from $2,101,000 for the comparable period ended
June 30, 2001, primarily due to an increase in employee
compensation and benefits and occupancy expense.

Income Taxes.The income tax provision for the
six months ended June 30, 2002 was $450,000 or 37.7% of
earnings before income taxes compared to $322,000 or 37.4% for
the period ended June 30, 2001.

15



---



##### 



MADISON BANCSHARES, INC.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

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

The Bank does not engage in trading or hedging
activities and does not invest in interest-rate derivatives or
enter into interest rate swaps. Management actively monitors and
manages its interest rate risk exposure. The primary objective
in managing interest-rate risk is to limit, within established
guidelines, the adverse impact of changes in interest rates on
the Banks net interest income and capital, while adjusting
the Banks asset-liability structure to obtain the maximum
yield-cost spread on that structure. Management relies primarily
on its asset-liability structure to control interest rate risk.
However, a sudden and substantial increase in interest rates
could adversely impact the Banks earnings, to the extent
that the interest rates borne by assets and liabilities do not
change at the same speed, to the same extent, or on the same
basis. There have been no significant changes in the Banks
market risk exposure since December 31, 2001.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 2. Changes in Securities and Use of
Proceeds

The following sales of shares of Madison
BancShares, Inc., common stock, par value $0.01 per share
(Madison BancShares Common Stock), were not
registered pursuant to the Securities Act of 1933, as amended
(the Securities Act), but were issued pursuant to
the exemptions indicated below:

On April 11, 2002, Maryann Aide, Revocable
Trust dated 12/1/99, a shareholder, purchased an aggregate of
2,500 shares of Madison BancShares Common Stock. These shares
were purchased at a per share price of $11.215. This transaction
was made in reliance on the exemption set forth in
Section 4(2) of the Securities Act.

On April 11, 2002, John E. Aide, Revocable
Trust dated 12/1/99, a shareholder, purchased an aggregate of
2,500 shares of Madison BancShares Common Stock. These shares
were purchased at a per share price of $11.215. This transaction
was made in reliance on the exemption set forth in
Section 4(2) of the Securities Act.

On May 6, 2002, Scott Grutchfield, an
officer of the Bank, purchased an aggregate of 5,363 shares of
Madison BancShares Common Stock. These shares were purchased at
a per share price of $13.45. This transaction was made in
reliance on the exemption set forth in Section 4(2) of the
Securities Act.

Proceeds from the sales of the above securities
were used for general corporate purposes.

16



---



##### 



MADISON BANCSHARES, INC.

PART II. OTHER INFORMATION,
CONTINUED

Item 4. Submission of Matters to a Vote
of Security Holders

The Annual Meeting of Shareholders (the
Annual Meeting) of Madison BancShares, Inc., was
held on April 23, 2002, to consider the election of seven
directors with terms expiring at the 2003 Annual Meeting and the
ratification of the independent auditors.

Proposal I

At the Annual Meeting, 1,232,256 shares were
present in person or by proxy. Listed below are the directors
that were elected at the Annual Meeting with a summary of the
votes cast for each nominee:

|                    |  |      |      |     |  |          |           |  |  |  |        | 
|------------------- |  | ---- | ---- | --- |  | -------- | --------- |  |  |  | ------ | 
|                    |  | Term |      | For |  | Withheld
|                    |  |      |      |     |  |         
|Robert W. Byrd      |  |      | 2003 |     |  |          | 1,218,582 |  |  |  | 13,674 | 
|George M. Cantonis  |  |      | 2003 |     |  |          | 1,218,582 |  |  |  | 13,674 | 
|Thomas A. Castriota |  |      | 2003 |     |  |          | 1,215,771 |  |  |  | 16,485 | 
|Wayne R. Coulter    |  |      | 2003 |     |  |          | 1,218,582 |  |  |  | 13,674 | 
|Melvin S. Cutler    |  |      | 2003 |     |  |          | 1,215,341 |  |  |  | 16,915 | 
|Robert B. McGivney  |  |      | 2003 |     |  |          | 1,215,341 |  |  |  | 16,915 | 
|Paul J. Wikle       |  |      | 2003 |     |  |          | 1,218,582 |  |  |  | 13,674 | 

Proposal II

The ratification of the independent auditors with
a summary of the vote cast as follows:

|                                         |  |     |           |          |  |         |        |  |  |  |       | 
|---------------------------------------- |  | --- | --------- | -------- |  | ------- | ------ |  |  |  | ----- | 
|                                         |  | For |           | Withheld |  | Against
|                                         |  |     |           |          |  |        
|Ratification of the independent auditors |  |     | 1,208,163 |          |  |         | 17,363 |  |  |  | 6,730 | 

17



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##### 



MADISON BANCSHARES, INC.

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                                                                                                             
|            | *4     |                        |  | Sample Stock Certificate for Madison BancShares,
    Inc.                                                                     
|            | *10.1  |                        |  | Employment Agreement of Henry Speight                                                                                         
|            | *10.2  |                        |  | Employment Agreement of Robert McGivney                                                                                       
|            | *10.3  |                        |  | Employment Agreement of David Paetzold                                                                                        
|            | **10.4 |                        |  | Employment Agreement of Judith Gaffney                                                                                        
|            | *10.5  |                        |  | Madison Bank Amended and Restated 1998 Key
    Employee Stock Compensation Program                                            
|            | *10.6  |                        |  | Madison Bank Amended and Restated 1998
    Directors Stock Option Plan                                                       
|            | 11     |                        |  | Statement regarding Computation of Per Share
    Earnings at Footnote 3 of the Condensed Consolidated Financial
    Statements
|            | **23.1 |                        |  | Consent of Accountants                                                                                                        
|            | *23.2  |                        |  | Consent of Counsel                                                                                                            
|            | *99.1  |                        |  | Plan of Reorganization of Madison Bank                                                                                        
|            | *99.2  |                        |  | Proxy of Madison Bank                                                                                                         






| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| | * | These exhibits were filed with Madisons
    BancShares Form 10-SB on June 6, 2001.

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

(b) Reports on Form 8-K.There were no reports on Form 8-K filed during the
three months ended June 30, 2002.

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##### 



MADISON BANCSHARES, INC.

SIGNATURES

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

|                    |  |                                                                                        
|------------------- |  | ---------------------------------------------------------------------------------------
|                    |  | MADISON BANCSHARES, INC.(Registrant)                                                   
|                   
|Date: July 26, 2002 |  | By: /s/ ROBERT B. MCGIVNEYRobert B. McGivney, President and Chief
    Executive Officer
|                   
|                   
|                   
|Date: July 26, 2002 |  | By: /s/ HENRY O. SPEIGHTHenry O. Speight, Chief Financial Officer
    and Treasurer    

19