Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-54081

MADISON BANCORP, INC.

(Exact name of registrant as specified in its charter)


Maryland		27-258073

(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

9649 Belair Road, Suite 300, Baltimore, Maryland		21236

(Address of principal executive offices)		(Zip Code)

(410) 529-7400

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 12, 2010, there were 608,116 shares of the registrant’s common stock outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MADISON BANCORP, INC AND SUBSIDIARIES

Consolidated Statements of Financial Condition

September 30, 2010 and March 31, 2010


	September 30,		March 31,
	2010		2010
	(Unaudited)		(Audited)
Assets
Assets
Cash and cash equivalents	$	20,003,910	$	13,354,975
Certificates of deposit		964,785		956,972
Investment securities available-for-sale		35,340,883		33,480,669
Investment securities held-to-maturity		1,566,273		2,283,707
Federal Home Loan Bank stock, at cost		242,500		242,500
Loans receivable, net		88,773,453		90,336,475
Property and equipment, net		3,893,418		3,983,182
Ground rents, net		470,580		477,273
Other real estate owned		434,000		0
Accrued interest receivable		429,708		430,549
Deferred income taxes		0		5,828
Prepaid expenses and other assets		1,530,780		1,337,364

Total Assets	$	153,650,290	$	146,889,494

Liabilities and Equity

Liabilities
Deposits:
Noninterest bearing	$	6,196,096	$	5,267,672
Interest bearing		137,550,760		131,697,595

Total Deposits		143,746,856		136,965,267
Advances from borrowers for taxes and insurance		279,880		557,686
Deferred income taxes		129,437		0
Other liabilities		240,763		303,514

Total Liabilities		144,396,936		137,826,467


Equity
Retained earnings		8,886,235		8,903,564
Accumulated other comprehensive income		367,119		159,463

Total Equity		9,253,354		9,063,027

Total Liabilities and Equity	$	153,650,290	$	146,889,494

The accompanying notes are an integral part of these consolidated financial statements.

MADISON BANCORP, INC AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

Six and Three Months Ended September, 2010 and 2009


	Three Months Ended						Six Months Ended
	September 30						September 30
	2010			2009			2010			2009
Interest Revenue
Interest and fees on loans	$	1,265,518		$	1,268,025		$	2,537,874		$	2,518,789
Investment securities available-for-sale		200,660			221,650			442,963			423,176
Investment securities held-to-maturity		22,056			197,487			47,635			233,701
Interest-bearing deposits		11,823			9,301			19,296			17,413
Other		266			508			422			508

Total Interest Revenue		1,500,323			1,696,971			3,048,190			3,193,587

Interest Expense
Interest on deposits:
Time		558,564			725,701			1,137,712			1,559,502
Savings		19,751			34,909			40,451			74,255
NOW and money market demand accounts		2,941			6,262			5,906			14,242
Other interest expense		6			11			40			48

Total Interest Expense		581,262			766,883			1,184,109			1,648,047

Net Interest Income		919,061			930,088			1,864,081			1,545,540
Provision for Loan Losses		60,315			70,000			111,674			110,000

Net Interest Income after Provision for Loan Losses		858,746			860,088			1,752,407			1,435,540

Noninterest Revenue
Gain (Loss) on disposal of property		0			0			0			(1,182	)
Gain on sale of investment securities		27,459			(4,087	)		56,378			(4,057	)
Other than temporary impairment of securities		0			(150,000	)		0			(150,000	)
Other		84,897			70,163			163,370			129,982

Total Noninterest Revenue		112,356			(83,924	)		219,748			(25,257	)

Noninterest Expenses
Salaries and employee benefits		471,693			495,901			948,845			988,999
Occupancy & equipment expense		266,800			251,822			542,518			504,777
Advertising		1,733			3,092			3,546			6,354
Audit and accounting		33,145			23,441			66,990			40,836
FDIC premiums and OTS assessments		100,096			76,829			197,398			225,376
Data processing		44,815			54,728			98,087			97,224
Stationary and postage		16,992			22,774			36,780			43,211
Other operating expenses		52,825			46,668			95,320			116,305

Total Noninterest Expenses		988,099			975,255			1,989,484			2,023,082

Loss Before Income Taxes		(16,997	)		(199,091	)		(17,329	)		(612,799	)
Income Tax Expense (Benefit)		0			0			0			0
Net Loss	$	(16,997	)	$	(199,091	)	$	(17,329	)	$	(612,799	)


Basic earnings per common share		N/A			N/A			N/A			N/A

Diluted earnings per common share		N/A			N/A			N/A			N/A

The accompanying notes are an integral part of these consolidated financial statements.

MADISON BANCORP, INC AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended September 30, 2010 and 2009


	September 30, 2010			September 30, 2009
Cash flows from Operating Activities
Net loss	$	(17,329	)	$	(612,799	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization (accretion) of investment securities		29,940			(137,916	)
Decrease in net deferred loan costs		(13,759	)		(16,811	)
Provision for loan losses		111,674			110,000
Loss on sale of ground rents		593			0
(Gain) Loss on sale of investment securities		(56,378	)		4,087
Other than temporary impairment charge		0			150,000
(Gain) Loss on disposal of property and equipment		0			1,182
Depreciation and amortization		115,644			133,348
Changes in operating assets and liabilities:
Refundable income taxes		0			198,037
Accrued interest receivable		841			48,769
Prepaid expenses and other assets		(193,416	)		(115,788	)
Other liabilities		(62,751	)		(9,834	)

Net Cash provided by (used in) operating activities		(84,941	)		(247,725	)


Cash flows from Investing Activities
Increase (decrease) in loans receivable, net		1,031,107			202,915
Increase in certificates of deposit, net		(7,813	)		(951,719	)
Principal payments on HTM securities		310,513			445,641
Principal payments on AFS securities		4,155,638			3,173,876
Proceeds from maturing investment securities		7,117,000			8,845,000
Proceeds from sales investment securities		3,758,167			0
Purchases of investment securities		(16,114,739	)		(13,370,467	)
Purchase of property and equipment		(25,880	)		(121,124	)
Proceeds from sale of ground rents		6,100			11,750

Net cash used in investing activities		230,093			(1,764,128	)


Cash flow from Financing Activities
Increase (decrease) in:
Deposits, net		6,781,589			6,848,942
Advances from borrowers, net		(277,806	)		(291,871	)

Net cash provided by financing activities		6,503,783			6,557,071


Increase (Decrease) in Cash and Cash Equivalents		6,648,935			4,545,218

Cash and Cash Equivalents, Beginning of Period		13,354,975			16,321,326

Cash and Cash Equivalents, End of Period	$	20,003,910		$	20,866,544

Supplemental disclosure:
Loans transferred to other real estate owned	$	434,000			0

Note 1: Activities and Summary of Significant Accounting Policies

Madison Bancorp, Inc. (Company) was incorporated on May 20, 2010 as the holding company for Madison Square Federal Savings Bank (Bank) in conjunction with the Bank’s plan of conversion from mutual to stock form of ownership. On October 6, 2010, in accordance with a Plan of Conversion adopted by its Board of Directors and approved by its members, the Bank converted from a mutual savings bank to a stock savings bank and became the wholly owned subsidiary of the Company. The conversion was accomplished through the sale and issuance of 608,116 shares of common stock at a price of $10.00 per share, through which the Company received proceeds of approximately $5,350,000, net of offering expenses of approximately $730,000. In connection with the conversion, the Bank’s Board of Directors adopted an employee stock ownership plan (ESOP) which subscribed for 7% of the sum of the number of shares, or 42,568 shares of common stock sold in the offering. Accordingly, the reported results for the three months and six months ended September 30, 2010 and 2009 related solely to the operations of the Bank. All material intercompany accounts and transaction have been eliminated in consolidation.

In accordance with Office of Thrift Supervision (OTS) regulations, upon the completion of the conversion, the Bank restricted retained earnings by establishing a liquidation account. The liquidation account will be maintained for the benefit of eligible account holders who continue to maintain their accounts at the Bank after conversion. The liquidation account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation account. In the event of a complete liquidation of the Bank, and only in such event, each account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the adjusted qualifying account balances then held. The Bank may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount.

The Company had no assets at September 30, 2010. The interim financial statement presented in this report includes only the financial information of the Bank.

Madison Square Federal Savings Bank (the “Bank”) was incorporated in 1870 under the laws of the State of Maryland. The Bank is a federally chartered mutual savings bank engaged in banking and related services primarily in the Baltimore Metropolitan area. Significant accounting policies followed by the Bank are presented below.

The foregoing consolidated financial statements are unaudited; however, in the opinion of management we have included all adjustments (comprising only normal recurring accruals) necessary for a fair presentation of the results of the interim period. We derived the balances as of March 31, 2010 from audited financial statements. These statements should be read in conjunction with Madison Bancorp’s financial statements and accompanying notes included in Madison Bancorp’s Registration Statement on Form S-1, as amended, with the US Securities and Exchange Commission which was declared effective August 12, 2010. We have made no significant changes to Madison Bancorp’s accounting policies as disclosed in the Form S-1.

Principles of consolidation: The consolidated financial statements include the accounts of the Bank and its subsidiary, Madison Financial Services Corporation (MFSC). MFSC is engaged in the business of insurance brokerage services primarily in the Baltimore Metropolitan area. All significant accounts and intercompany transactions have been eliminated.

Subsequent Events — We evaluated subsequent events after September 30, 2010 through November 9, 2010, the date this report was available to be issued. On October 6, 2010 we completed our planned conversion as described in Note 1.

Note 3: Investment Securities

The amortized cost and estimated fair value of investment securities at September 30 and March 31, 2010 are summarized as follows:


			Gross		Gross
			Unrealized		Unrealized		Estimated
	Amortized Cost		Gains		Losses		Fair Value
	September 30, 2010

Investment securities available-for-sale:
U.S. government agencies	$	4,604,570	$	4,808		0	$	4,609,378
Brokered certificates of deposit		3,573,685		0		3,991		3,569,694
Mortgage-backed securities (Agency)		26,556,374		616,138		10,701		27,161,811

	$	34,734,629	$	620,946	$	14,692	$	35,340,883


Investment securities held-to-maturity:
Mortgage-backed securities (Agency)	$	971,765	$	35,880	$	3,875	$	1,003,770
Mortgage-backed securities (Nonagency)		594,508		34,964		150,011		479,461

	$	1,566,273	$	70,844	$	153,886	$	1,483,231


			Gross		Gross
			Unrealized		Unrealized		Estimated
	Amortized Cost		Gains		Losses		Fair Value
	March 31, 2010
Investment securities available-for-sale:
U.S. government agencies	$	4,499,222	$	15,793	$	1,150	$	4,513,865
Brokered certificates of deposit		2,670,928		0		6,425		2,664,503
Mortgage-backed securities (Agency)		26,010,952		341,079		49,730		26,302,301

	$	33,181,102	$	356,872	$	57,305	$	33,480,669


Investment securities held-to-maturity:
Mortgage-backed securities (Agency)	$	1,177,893	$	34,377	$	6,606	$	1,205,664
Mortgage-backed securities (Nonagency)		1,105,814		86,774		174,963		1,017,625

	$	2,283,707	$	121,151	$	181,569	$	2,223,289

Note 4: Loans Receivable

Loans receivable consist of the following at September 30, 2010 and March 31, 2010, respectively:


	September 30,			March 31,
	2010			2010
Loans secured by mortgages:
Residential
1-4 Single family	$	59,231,571		$	62,875,698
Multifamily		1,704,380			1,736,945
Commercial		11,793,585			11,597,811
Land		5,948,731			4,849,495
Lines of credit		1,464,038			1,407,436
Residential construction		2,973,571			2,395,528


		83,115,876			84,862,913

Consumer		1,037,129			1,203,106

Commercial		5,058,804			4,755,553


Total loans receivable		89,211,809			90,821,572
Net deferred costs		106,144			119,903
Allowance for loan losses		(544,500	)		(605,000	)


Loans receivable, net	$	88,773,453		$	90,336,475

Note 5: Allowance for Loan Losses

The activity in the allowance for loan losses and information regarding nonaccrual loans is as follows:


	Six Months						Six Months
	Ended						Ended
	September 30,			Year Ended			September 30,
	2010			March 31, 2010			2009
Balance — Beginning of Year	$	605,000		$	379,500		$	379,500
Provision for loan losses		111,674			242,074			110,000
Recoveries		1,641			-0-			400
Charge Offs		(173,815	)		(16,574	)		(400	)

Balance — End of Year	$	544,500		$	605,000		$	489,500


	September 30,			March 31,
	2010			2010
Nonaccrual loans	$	70,493		$	680,112
Allowance for loan loss as percentage of nonaccrual loans		772.40	%		88.96	%
Interest on nonaccrual loans	$	7,605		$	22,705

Note 6: Fair Value Measurements

Accounting guidance defines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. These standards have also established a three-level hierarchy for fair value measurements based upon the inputs to the valuation of an asset or liability.

	•		Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities.

	•		Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

	•		Level 3 — Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the Bank’s own estimates about the assumptions that market participants would use to value the asset or liability.

Investment securities available-for-sale are the only financial assets measured at fair value on a recurring basis. As of September 30, 2010 and March 31, 2010, the fair values were measured using the following methodologies:


	September 30, 2010
	Total		Level 1		Level 2		Level 3

Investment securities available-for-sale	$	35,340,918	$	8,669,808	$	26,067,962	$	603,148


	March 31, 2010
	Total		Level 1		Level 2		Level 3

Investment securities available-for-sale	$	33,480,669	$	956,772	$	32,520,274	$	3,623

No other financial assets or liabilities are measured at fair value on a recurring or nonrecurring basis. As of March 31, 2010, the Bank owned a mortgage backed agency security measured using a Level 3 methodology. During the quarter ended September 30, 2010, the Bank purchased a U.S. government security measured using a Level 3 methodology. The change in the unrealized gain on the security was recorded in comprehensive income. It was not recorded in the net loss for the year.

Note 6: Fair Value Measurements (Continued)

The estimated fair values of financial instruments at September 30, 2010 and March 31, 2010 are as follows:


	September 30, 2010				March 31, 2010
	(in thousands)				(in thousands)
	Book Value		Fair Value		Book Value		Fair Value
Assets:
Cash and cash equivalents	$	20,004	$	20,004	$	13,355	$	13,355
Certificates of deposit		965		965		957		957
Investment securities		36,907		36,824		35,764		35,704
Loans, net		88,773		88,854		90,336		90,249

Total financial assets	$	146,649	$	146,647	$	140,412	$	140,265


	September 30, 2010				March 31, 2010
	(in thousands)				(in thousands)
	Book Value		Fair Value		Book Value		Fair Value
Liabilities:
Deposits	$	143,747	$	145,313	$	136,965	$	140,111
Advanced payments by borrowers for taxes and insurance		280		280		558		558

Total financial liabilities	$	144,027	$	145,593	$	137,523	$	140,669

The following methods and assumptions were used to estimate the fair value disclosures for financial instruments as of September 30, 2010 and March 31, 2010:

Cash and cash equivalents: The amounts reported at cost approximate the fair value of these assets.

Investment securities held-to-maturity: The fair values are based on the quoted market values or values of securities with similar rates and terms. The fair values are provided to the Bank by a third party.

Loans, net: We estimate the fair value of loans by discounting future cash flows using current rates for which we would make similar loans to borrowers with similar credit histories.

Deposits: The fair value of demand deposits and savings accounts is the amount payable on demand. We estimate the fair value of fixed maturity certificates of deposits using the rates currently offered for deposits of similar remaining maturities.

Note 7: Accounting Standards Updates

Accounting Standards Updates (ASU) No. 2009-16, “Transfers and Servicing (Topic- 860)-Accounting for Transfers of Financial Assets” amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. ASU 2009-16 also requires additional disclosures about all continuing involvement with transferred financial assets including information about gains and losses resulting from transfers during the period. The provisions of ASU 2009-16 became effective on January 1, 2010 and did not have a significant impact on our consolidated results of operations or financial position.

ASU No. 2009-17, “Consolidations (Topic 810)-Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” amends prior guidance to change how a company determines when an entity that is sufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. ASU 2009-17 requires additional disclosures about the reporting entity’s involvement with variable interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the entity’s financial statements. As further discussed below, ASU No. 2010-10, “Consolidations (Topic 810),” deferred the effective date of ASU 2009-17 for a reporting entity’s interests in investment companies. The provisions of ASU 2009-17 became effective on January 1, 2010 and they did not have a material impact on our consolidated results of operations or financial position.

ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820)-Improving Disclosures About Fair Value Measurements” requires expanded disclosures related to fair value measurements including (i) the amounts of significant transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy and the reasons for the transfers, (ii) the reasons for transfers of assets or liabilities in or out of Level 3 of the fair value hierarchy, with significant transfers disclosed separately, (iii) the policy for determining when transfers between the levels of the fair value hierarchy are recognized and (iv) for recurring fair value measurements of assets and liabilities in Level 3 of the fair value hierarchy, a gross presentation of information about purchases, sales, issuances and settlements. ASU 2010-06 further clarifies that (i) companies should provide fair value measurement disclosures for each class of assets and liabilities (rather than major category), which would generally be a subset of assets or liabilities within a line item in the statement of financial position and (ii) companies should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. ASU No. 2010-06 requires the disclosures related to the gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy beginning January 1, 2011. The remaining disclosure requirements and clarifications made by ASU 2010-06 became effective on January 1, 2010.

ASU No. 2010-10, “Consolidations (Topic 810)-Amendments for Certain Investment Funds” defers the effective date of the amendments to the consolidation requirements made by ASU 2009-17 to a company’s interest in an entity (i) that has all of the attributes of an investment company, as specified under ASC Topic 946, “Financial Services-Investment Companies,” or (ii) for which it is industry practice to apply measurement principles of financial reporting that are consistent with those in ASC Topic 946. As a result of the deferral, companies are not required to apply the ASU 2009-17 amendments to the Subtopic 810-10 consolidation requirements to its interest in an entity that meets the criteria to qualify for the deferral. ASU 2010-10 also clarifies that any interest held by a related party should be treated as though it is an entity’s own interest when evaluating the criteria for determining whether such interest represents a variable interest.

ASU 2010-10 also clarifies that companies should not use a quantitative calculation as the sole basis for evaluating whether a decision maker’s or service provider’s fee is variable interest. The provisions of ASU 2010-10 became effective as of January 1, 2010 and did not have a material impact on our consolidated results of operations or financial position.

Note 7: Accounting Standards Updates (Continued)

ASU No. 2010-11, “Derivatives and Hedging (Topic 815)-Scope Exception Related to Embedded Credit Derivatives” clarifies that the only form of an embedded credit derivative that is exempt from embedded derivative bifurcation requirement are those that relate to the subordination of one financial instrument to another. Entities that have contracts containing an embedded credit derivative feature in a form other than subordination may need to separately account for the embedded credit derivative feature. The provisions of ASU 2010-11 will be effective on July 1, 2010. We do not anticipate that it will have a material impact on our consolidated results of operations or financial position.

ASU No. 2010-20, “Receivables (Topic 310)-Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” requires entities to provide disclosures designed to facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses, and (iii) the changes and reasons for those changes in the allowance for credit losses. Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systemic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment. The required disclosures include, among other things, a carry forward of the allowance for credit losses as well as information about modified, impaired, nonaccrual and past due loans, and credit quality indicators. ASU 2010-20 will become effective for financial statements as of March 31, 2011 as it relates to disclosures required as of the end of the reporting period. Disclosures that relate to activity during a reporting period will be required for financial statements that include periods beginning on or after April, 2011.

Note 8: Commitment and Financial Instruments with Off-Balance-Sheet Credit Risk

In the normal course of business, the Bank has various outstanding commitments and contingent liabilities that are not reflected in the accompanying financial statements. Loan commitments and lines of credit are agreements to lend to a customer as long as there is no violation of any condition to the contract. Mortgage loan commitments generally have fixed interest rates, fixed expiration dates, and may require payment of a fee. Other loan commitments generally have fixed interest rates. Commitments to purchase loans do not represent future cash requirements, as it is unlikely all loans will be closed prior to the expiration of the commitment. Lines of credit generally have variable interest rates. Such lines do not represent future cash requirements because it is unlikely that all customers will draw upon their lines in full at any time. Letters of credit are commitments issued to guarantee the performance of a customer to a third party.

The Bank’s maximum exposure to credit loss in the event of nonperformance by the customer is the contractual amount of the credit commitment. Loan commitments, lines of credit, and letters of credit are made on the same terms, including collateral, as outstanding loans. Management is not aware of any accounting loss to be incurred by funding these loan commitments.

At September 30, 2010 the Bank had outstanding firm commitments to originate or purchase loans as follows:


Mortgage loans commitments — fixed rate	$	2,416,000
Mortgage loans commitments — variable rate		3,823,000
Commitments to originate nonmortgage loans		110,000
Commitments to purchase loans		739,000
Unused equity lined of credit (variable rate)		1,611,000
Commercial and consumer lines of credit		753,000
Standby letters of credit		376,000

Total	$	9,828,000

As of September 30, 2010 the Bank had a commitment to sell a loan in the amount of $450,000.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Safe Harbor Statement for Forward-Looking Statements

This report may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts; rather they are statements based on the Company’s current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Bank’s actual results, performance and achievements being materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; the quality and composition of the loan and investment securities portfolio; loan demand; deposit flows; competition; and changes in accounting principles and guidelines. Additional factors that may affect our results are discussed beginning on page 13 of the Company’s prospectus dated August 12, 2010 under the section titled “Risk Factors.” These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company assumes no obligation and disclaims any obligation to update any forward-looking statements.

Critical Accounting Policies

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. The following represent our critical accounting policies:

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance monthly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectability of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic or other conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of Thrift Supervision, as an integral part of its examination process, periodically reviews our allowance for loan losses and may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Fair Value of Investments. Securities are characterized as available for sale or held to maturity based on management’s ability and intent regarding such investment at acquisition. On an ongoing basis, management must estimate the fair value of its investment securities based on information and assumptions it deems reliable and reasonable, which may be quoted market prices or if quoted market prices are not available, fair values extrapolated from the quoted prices of similar instruments. Based on this information, an assessment must be made as to whether any decline in the fair value of an investment security should be considered an other-than-temporary impairment and recorded in non-interest revenue as a loss on investments. The determination of such impairment is subject to a variety of factors, including management’s judgment and experience.

Comparison of Financial Condition at September 30, 2010 and March 31, 2010

Assets. Total assets increased from $146.9 million at March 31, 2010 to $153.7 million at September 30, 2010. The increase was primarily due to increases in cash and cash equivalents and investment securities available-for-sale, which were partially offset by a decrease in loans receivable and investment securities held-to-maturity.

Loans. Net loans receivable decreased by $1.6 million, or 1.7%, from $90.3 million at March 31, 2010 to $88.8 million at September 30, 2010, primarily as a result of the net effect of a $3.6 million decrease in residential mortgage loans, a $196,000 increase in commercial real estate loans, a $1.1 million increase in land loans, a $578,000 increase in residential construction loans, a $166,000 decrease in consumer loans and a $303,000 increase in commercial loans. The decrease in residential mortgage loans was primarily a result of borrowers refinancing of loans elsewhere and normal principal reductions.

Cash and Securities. Cash and cash equivalents increased by $6.6 million, or 49.8%, from $13.4 million at March 31, 2010 to $20.0 million at September 30, 2010, as excess liquidity was invested in short-term securities including overnight deposits. Our securities available-for-sale increased by $1.8 million, or 5.6%, from $33.5 million at March 31, 2010 to $35.3 million at September 30, 2010, as the result of purchases of various investments and mortgage backed securities which were partially offset by certain securities being called or having matured and sales of selected securities. Our securities held-to-maturity decreased by $717,000, or 31.4%, to $1.6 million at September 30, 2010 from $2.3 million at March 31, 2010. The decrease reflects a $206,000 decrease in agency mortgage-backed securities, as repayments were received, and a decrease of $511,000 in non-agency mortgage-backed securities, as principal payments were received and the sales of certain downgraded securities. Proceeds from the sale of available-for-sale securities and held-to-maturity securities were $3.7 million and $262,000, respectively, resulting in gross gains of $100,000 and gross losses of $43,000, respectively. At September 30, 2010, we also held a $243,000 investment in the common stock of the Federal Home Loan Bank of Atlanta.

Ground Rent. Our balance in ground rents remained stable.

Deposits. Total deposits increased by $6.7 million to $143.7 million at September 30, 2010 from $137.0 million at March 31, 2010. Balances of noninterest-bearing deposits increased to $6.2 million at September 30, 2010 from $5.3 million at March 31, 2010. Interest-bearing deposits increased by $5.9 million to $137.6 million at September 30, 2010 compared to $131.7 million at March 31, 2010. A majority of the increase related to proceeds held in escrow for the stock conversion of approximately $4.8 million at September 30, 2010. In addition, deposit balances have been reflecting incremental increases despite our lowering of rates on deposits.

Borrowings. We had no borrowings at September 30, 2010 or March 31, 2010.

Results of Operations for the Three Months Ended September 30, 2010 and 2009

Overview. Our net loss was $17,000 for the three months ended September 30, 2010, compared to a net loss of $190,000 for the three months ended September 30, 2009. The net loss for the 2010 quarter included improvements in many categories but primarily the absence of other than temporary impairment charges.

Net Interest Income. Net interest income decreased to $919,000 for the three months ended September 30, 2010 as compared to $930,000 for the three months ended September 30, 2009. The decrease in net interest income is primarily attributable to the recognition of approximately $150,000 of discount accretion on our investment securities held-to-maturity during the quarter ended September 30, 2009. We did not accrete the discount on the securities received in the redemption in kind for several months as we evaluated the portfolio. Our interest rate spread was 2.55% for the three months ended September 30, 2009 compared to 2.49% at September 30, 2010.

Interest on loans decreased by $2,000. The average balance of loans increased by $432,000 to $89.4 million for the three months ended September 30, 2010 from $89.0 million for the three months ended September 30, 2009. The average yield on loans decreased to 5.66% for the three months ended September 30, 2010 from 5.70% for the three months ended September 30, 2009.

Interest on securities available-for-sale decreased by $21,000 for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009, caused by an 82 basis point decrease in the average yield offset by a $5.6 million increase in the average balance of investment securities available-for-sale. Interest on securities held-to-maturity was $22,000 for the three months ended September 30, 2010 as compared to $197,000 for the three months ended September 30, 2009, due to a $1.2 million decrease in the average balance of securities held-to-maturity. The decreased yield during the three months ended September 30, 2010 was related to slower accretion of the discount related to these securities. As reported earlier we recognized approximately $150,000 of discount accretion on our investment securities held-to-maturity during the quarter ended September 30, 2009. We did not accrete the discount on the securities received in the redemption in kind for several months as we evaluated the portfolio.

Interest on cash and cash equivalents was $12,000 for the three months ended September 30, 2010 as compared to $9,000 for the three months ended September 30, 2009, as a result of increases in the average yield and the stable average balance of cash and cash equivalents.

Interest on total deposits decreased to $581,000 for the three months ended September 30, 2010 from $767,000 for the three months ended September 30, 2009, as a 66 basis point decrease in the average cost of interest-bearing deposits offset a $6.2 million increase in the average balance of interest-bearing deposits. Interest on NOW and money market accounts decreased by $3,000 to $3,000 for the three months ended September 30, 2010 due to the decrease in the average cost of the deposits.

Average Balance and Yields. The following table for the three months ended September 30, 2010 presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Amortization of net deferred loan fees is included in interest income on loans and is insignificant. No tax equivalent adjustments were made. Non-accruing loans have been included in the table as loans carrying a zero yield.


	Three Months Ended
	September 30,
	2010							2009
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Cost			Balance		Dividends		Cost

Assets:
Cash and cash equivalents	$	18,711,885	$	11,823		0.25	%	$	18,724,707	$	9,301		0.20	%
Investment securities held-to-maturity		1,721,390		22,056		5.13			2,895,728		197,487		27.28
Investment securities available-for-sale (1)		32,579,318		200,660		2.46			27,004,214		221,650		3.28
Loans receivable, net		89,443,600		1,265,518		5.66			89,011,410		1,268,025		5.70
Other interest-earning assets		242,500		266		0.44			242,500		508		0.84

Total interest-earning assets		142,698,693		1,500,323		4.21			137,878,559		1,696,971		4.92

Non-interest-earning assets		7,895,951							6,135,706

Total assets	$	150,594,644						$	144,014,265


Liabilities and equity:
Time deposits	$	103,960,612	$	558,564		2.15		$	99,109,236	$	725,701		2.93
NOW and money market accounts		7,841,863		2,941		0.15			7,879,946		6,262		0.32
Savings		23,266,692		19,751		0.34			21,927,211		34,909		0.64

Total interest-bearing deposits		135,069,167		581,256		1.72			128,916,393		766,872		2.38

Other interest-bearing liabilities		266,519		6		0			244,493		11		0.02

Total interest-bearing liabilities		135,335,686		581,262		1.72			129,160,886		766,883		2.37

Non-interest-bearing deposits		5,499,411							4,919,000
Other non-interest-bearing liabilities		499,604							534,847

Total liabilities		141,334,701							134,614,733

Total equity		9,259,943							9,399,532

Total liabilities and equity	$	150,594,644						$	144,014,265


Net interest income			$	919,061						$	930,088

Interest rate spread						2.49	%						2.55	%

Net interest margin						2.58	%						2.70	%

Average interest-earning assets to average interest-bearing liabilities						105.44	%						106.75	%

Provision for Loan Losses. Our provision for loan losses decreased from $70,000 for the three months ended September 30, 2009 to $61,000 for the three months ended September 30, 2010. At September 30, 2010, the allowance for loan losses was $544,500, or 0.61% of the total loan portfolio, compared to $605,000, or 0.67% of the total loan portfolio, at March 31, 2010. Nonaccrual loans amounted to $69,000 and $680,000 at September 30, 2010 and March 31, 2010, respectively. There was one loan transferred to other real estate owned (REO) in the three months ended September 30, 2010 in the amount of $434,000 after a charge off of $174,000. The loan was previously classified as nonaccrual with a specific reserve. During the quarter there was a foreclosure sale, and the property was transferred at its fair market value. There was a recovery of $2,000 during the six months ended September 30, 2010.

Noninterest Revenue. Noninterest revenue increased for the three months ended September 30, 2010 to $112,000 as compared to an $84,000 loss for the three months ended September 30, 2009. The increase during the 2010 period was primarily due to the gain on sale of certain non-agency and available-for-sale securities and increased fee income from the sale of non-deposit products. In addition, the results for the three months ended September 30, 2009 included an other than temporary impairment charge of $150,000.

Noninterest Expenses. Noninterest expense increased by $13,000 or 1.3% from $975,000 for the three months ended September 30, 2009 to $988,000 for the three months ended September 30, 2010, primarily due to increases in occupancy and equipment expenses, audit and accounting expenses, and FDIC premiums, which were partially offset by decreases in salaries and employee benefits, and data processing expenses.

Income Tax Expense. For the three months ended September 30, 2010, and September 30, 2009 we incurred no income tax expense.

Results of Operations for the Six Months Ended September 30, 2010 and 2009

Overview. Our net loss was $17,000 for the six months ended September 30, 2010, compared to a net loss of $613,000 for the six months ended September 30, 2009. The net loss for the 2010 year to date period included improvements in many categories but primarily increases in net interest income and no additional other than temporary impairment charges.

Net Interest Income. Our net interest income benefited from falling interest rates during the six months ended September 30, 2010. Net interest income increased to $1.9 million for the six months ended September 30, 2010 as compared to $1.5 million for the six months ended September 30, 2009. The increase in net interest income is primarily attributable to a 44 basis point increase in our interest rate spread from 2.10% for the six months ended September 30, 2009 to 2.54% for the six months ended September 30, 2010, as we continued to take advantage of decreasing market interest rates to reduce our cost of funds while limiting the decrease in yields earned on our assets. Also contributing to the increase in net interest income was a $4.9 million increase in the average balance of interest-earning assets.

Interest on loans increased by $19,000, primarily due to an increase in the average balance of loans, and due to a slight decrease in the average yield. The average balance of loans increased by $782,000 to $89.8 million for the six months ended September 30, 2010 from $89.0 million for the six months ended September 30, 2009. The average yield on loans decreased to 5.65% for the six months ended September 30, 2010 from 5.66% for the six months ended September 30, 2009.

Interest on securities available-for-sale increased by $20,000 for the six months ended September 30, 2010 as compared to the six months ended September 30, 2009, caused by a 61 basis point decrease in the average yield offset by a $7.3 million increase in the average balance of investment securities available-for-sale. Interest on securities held-to-maturity was $47,000 for the six months ended September 30, 2010 as compared to $234,000 for the six months ended September 30, 2009 due to the recognition of approximately $150,000 of discount accretion on our investment securities held-to-maturity during the quarter ended September 30, 2009. We did not accrete the discount on the securities received in the redemption in kind for several months as we evaluated the portfolio. The decreased yield during the six months ended September 30, 2010 was related to slower accretion of the discount related to these securities.

Interest on cash and cash equivalents was $19,000 for the six months ended September 30, 2010 as compared to $17,000 for the six months ended September 30, 2009, as a result of decreases in the average balance of cash and cash equivalents offset by a slight increase in the average yield.

Interest on total deposits decreased to $1.2 million for the six months ended September 30, 2010 from $1.6 million for the six months ended September 30, 2009, as an 81 basis point decrease in the average cost of interest-bearing deposits more than offset a $5.9 million increase in the average balance of interest-bearing deposits. Interest on NOW and money market accounts decreased by $8,000 to $6,000 for the six months ended September 30, 2010 due to the decrease in the average cost of the deposits.

Average Balance and Yields. The following table for the six months ended September 30, 2010 presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances have been calculated using daily balances. Amortization of net deferred loan fees is included in interest income on loans and is insignificant. No tax equivalent adjustments were made. Non-accruing loans have been included in the table as loans carrying a zero yield.


	Six Months Ended
	September 30,
	2010							2009
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Cost			Balance		Dividends		Cost

Assets:
Cash and cash equivalents	$	16,475,542	$	19,296		0.23	%	$	18,613,636	$	17,413		0.19	%
Investment securities held-to-maturity		1,977,524		47,635		4.82			3,010,652		233,701		15.52
Investment securities available-for-sale (1)		33,145,032		442,963		2.67			25,821,783		423,176		3.28
Loans receivable, net		89,788,089		2,537,874		5.65			89,006,436		2,518,789		5.66
Other interest-earning assets		242,500		422		0.35			242,500		508		0.42

Total interest-earning assets		141,628,687		3,048,190		4.30			136,695,007		3,193,587		4.67

Non-interest-earning assets		7,660,945							6,369,135

Total assets	$	149,289,632						$	143,064,142


Liabilities and equity:
Time deposits	$	102,500,840	$	1,137,712		2.22		$	98,121,165	$	1,559,502		3.18
NOW and money market accounts		7,689,100		5,906		0.15			7,765,058		14,242		0.37
Savings		23,473,812		40,451		0.34			21,847,520		74,255		0.68

Total interest-bearing deposits		133,663,752		1,184,069		1.77			127,733,743		1,647,999		2.58

Other interest-bearing liabilities		517,899		40		0.02			501,143		48		0.02

Total interest-bearing liabilities		134,181,651		1,184,109		1.76			128,234,886		1,648,047		2.57

Non-interest-bearing deposits		5,524,164							4,846,556
Other non-interest-bearing liabilities		426,770							505,929

Total liabilities		140,132,585							133,587,371

Total equity		9,157,047							9,476,771

Total liabilities and equity	$	149,289,632						$	143,064,142


Net interest income			$	1,864,081						$	1,545,540

Interest rate spread						2.54	%						2.10	%

Net interest margin						2.63	%						2.26	%

Average interest-earning assets to average interest-bearing liabilities						105.55	%						106.60	%

Provision for Loan Losses. Our provision for loan losses increased from $110,000 for the six months ended September 30, 2009 to $112,000 for the six months ended September 30, 2010. At September 30, 2010, the allowance for loan losses was $544,500, or 0.61% of the total loan portfolio, compared to $605,000, or 0.67% of the total loan portfolio, at March 31, 2010. Nonaccrual loans amounted to $69,000 and $680,000 at September 30, 2010 and March 31, 2010, respectively. There was one loan transferred to other real estate owned (REO) in the six months ended September 30, 2010 in the amount of $434,000 after a charge off of $174,000. The loan was previously classified as nonaccrual with a specific reserve. During the quarter there was a foreclosure sale, and the property was transferred at its Fair Market value. There was a recovery of $2,000 during the six months ended September 30, 2010.

Noninterest Revenue. Noninterest revenue increased for the six months ended September 30, 2010 to $220,000 as compared to a loss of $25,000 for the six months ended September 30, 2009. The increase during the 2010 period was primarily due to the gain on sale of certain non-agency and available-for-sale securities and increased fee income from the sale of non-deposit products. In addition, the results for the six months ended September 30, 2009 included an other than temporary impairment charge of $150,000.

Noninterest Expenses. Noninterest expenses decreased by $34,000 from $2.02 million for the six months ended September 30, 2009 to $1.99 million for the six months ended September 30, 2010, primarily due to reductions in compensation expense, FDIC insurance premiums and other operation expense, which was partially offset by increases in occupancy and audit and accounting expenses.

Income Tax Expense. For the six months ended September 30, 2010, and September 30, 2009 we incurred no income tax expense.

Liquidity and Capital Resources

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds available to meet short-term liquidity needs consist of deposit inflows, loan repayments and maturities and sales of investment securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets available to meet short-term liquidity needs based upon our assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-earning deposits and securities and (iv) the objectives of our asset/liability management policy. We do not have long-term debt or other financial obligations that would create long-term liquidity concerns.

Our most liquid assets are cash and cash equivalents and interest-bearing deposits. The level of these assets depends on our operating, financing, lending and investing activities during any given period. At September 30, 2010, cash and cash equivalents totaled $20.0 million. Securities classified as available-for-sale, amounting to $35.3 million, and interest-bearing deposits in banks of $1.0 million at September 30, 2010, provide additional sources of liquidity. Our liquidity has increased as customers have sought the safety of FDIC insured deposits. In addition, at September 30, 2010, we had the ability to borrow a total of approximately $29.5 million from the Federal Home Loan Bank of Atlanta. At September 30, 2010, we had no Federal Home Loan Bank advances outstanding.

At September 30, 2010 we had $9.8 million in commitments to extend credit outstanding. Certificates of deposit due within one year of September 30, 2010 totaled $45.0 million, or 43.9% of certificates of deposit. We believe the large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods due to the recent low interest rate environment and local competitive pressures. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before September 30, 2011. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our primary investing activities are the origination of loans and the purchase of securities. Our primary financing activity is activity in deposit accounts. Deposit flows are affected by the overall level of interest rates, the interest rates and product offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract deposits.

Capital Management. We are subject to various regulatory capital requirements administered by the Office of Thrift Supervision, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At September 30, 2010, we exceeded all of our regulatory capital requirements and were considered “well capitalized” under regulatory guidelines.

The capital from our pending stock offering will significantly increase our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of lending activities. Our financial condition and results of operations will be enhanced by the capital from the offering, resulting in increased net interest-earning assets and revenue. However, the large increase in equity resulting from the capital raised in the offering will, initially, have an adverse impact on our return on equity. Following the offering, we may use capital management tools such as cash dividends and common share repurchases. However, under Office of Thrift Supervision regulations, we will not be allowed to repurchase any shares during the first year following the offering, except to fund the restricted stock awards under the equity benefit plan after its approval by shareholders, unless extraordinary circumstances exist and we receive regulatory approval.

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, unused lines of credit and letters of credit. For information about our loan commitments, unused lines of credit and letters of credit, see note 8 of the notes to unaudited consolidated financial statements set forth above in Item 1.

For the three months ended September 30, 2010, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

This item is not applicable as the Company is a smaller reporting company.

Item 4. Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not involved in any pending legal proceedings. The Bank is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. The Bank’s management believes that such routine legal proceedings, in the aggregate, are immaterial to the Bank’s financial condition and results of operations.

Item 1A. Risk Factors

For information regarding the Company’s risk factors, see “Risk Factors” in the Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on June 11, 2010. As of September 30, 2010, the risk factors of the Company have not changed materially from those disclosed in the prospectus.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The effective date of the Company’s Registration Statement on Form S-1 (File No. 333-167455) was August 12, 2010. The offering was consummated on October 6, 2010 with the sale of $6,081,160 of securities registered pursuant to the Registration Statement. Sandler O’Neill & Partners, L.P. acted as marketing agent for the offering. The class of securities registered was common stock, par value $0.01 per share. The aggregate of such securities registered was $9,257,500 of common stock. The amount of securities sold in the offering was $6,081,160, or 608,116 shares, of common stock, all of which shares were sold to certain depositors of the Bank and the Bank’s employee stock ownership plan at a price per share of $10.00 for aggregate proceeds of $6,081,160. As of September 30, 2010, the expenses paid or incurred in connection with the stock offering are $740,000, including expenses paid to the marketing agent of $211,500, attorney and accounting fees of $323,000, and other expenses of $205,500. The net proceeds resulting from the offering after deducting all expenses related to the offering were $5,341,160. The net proceeds have initially been invested in securities and cash and cash equivalents.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. [Removed and Reserved]

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits


	3.1			Articles of Incorporation of Madison Bancorp, Inc. (1)

	3.2			Bylaws of Madison Bancorp, Inc. (2)

	4.0			Form of Stock Certificate of Madison Bancorp, Inc. (3)

	31.1			Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer

	32.0			Section 1350 Certification


(1)		Incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-167455), as amended, initially filed with the Securities and Exchange Commission on June 11, 2010.

(2)		Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-167455), as amended, initially filed with the Securities and Exchange Commission on June 11, 2010.

(3)		Incorporated herein by reference to Exhibit 4 to the Company’s Registration Statement on Form S-1 (File No. 333-167455), as amended, initially filed with the Securities and Exchange Commission on June 11, 2010.


				Accumulated
				Other
	Retained			Comprehensive		Total
	Earnings			Income		Equity
Balance March 31, 2010	$	8,903,564		$	159,463	$	9,063,027
Comprehensive income:
Net (Loss)		(17,329	)				(17,329	)

Net unrealized gain on available for sale securities, net of tax effect of $135,265					207,656		207,656


Total comprehensive income							190,327


Balance September 30, 2010	$	8,886,235		$	367,119	$	9,253,354


	MADISON BANCORP, INC.
Dated: November 12, 2010	By:	/s/ Michael P. Gavin
		Michael P. Gavin
		President and Chief Executive Officer, Chief Financial Officer and Director (principal executive officer and principal financial and accounting officer)


	By:	/s/ Michael P. Gavin
		Michael P. Gavin
		President and Chief Executive Officer, Chief Financial Officer and Director (principal executive officer and principal financial and accounting officer)

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	Page
	No.

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

Consolidated Statements of Financial Condition as of September 30, 2010 (unaudited) and March 31, 2010		2

Consolidated Statements of Operations for the Six and Three Months Ended September 30, 2010 and 2009 (unaudited)		3

Consolidated Statement of Changes in Equity for the Six Months Ended September 30, 2010 (unaudited)		4

Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2010 and 2009 (unaudited)		5

Notes to Unaudited Consolidated Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3. Quantitative and Qualitative Disclosures About Market Risk		23

Item 4. Controls and Procedures		23

Part II. Other Information

Item 1. Legal Proceedings		24

Item 1A. Risk Factors		24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24

Item 3. Defaults Upon Senior Securities		24

Item 4. [Removed and Reserved]		24

Item 5. Other Information		24

Item 6. Exhibits		24

Signatures		25

Exhibit 31.1
Exhibit 32.0


	Held-to-maturity				Available-for-sale
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value

Amounts maturing in:
One year or less	$	-0-	$	-0-	$	924,685	$	926,257
After one year through five years		-0-		-0-		7,002,748		7,001,887
After five years through ten years		-0-		-0-		250,822		250,928
After ten years		-0-		-0-		-0-		-0-

		-0-		-0-		8,178,255		8,179,072

Mortgage-backed securities (Agency)		971,765		1,003,770		26,556,374		27,161,811
Mortgage-backed securities (Nonagency)		594,508		479,461		-0-		-0-

	$	1,566,273	$	1,483,231	$	34,734,629	$	35,340,883