Madison National Bancorp, Inc. Reports Second Quarter 2010 Results Highlighted by Solid Earnings

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Performance Highlights

Solid Earnings: Net income for the second quarter was $208,303 or $.06 per share compared with a net loss of $778,298 or $.21 per share for the first quarter of 2010.
Improved Capital Strength: The Bank’s leverage ratio and tier one risk based capital ratio were 9.33% and 11.07% at June 30th, respectively, in compliance with all numerical requirements to qualify as a well capitalized institution.
Balance Sheet: Assets totaled $305.1 million at June 30, 2010, up $19.2 million, or 6.7%, from June 30, 2009.
Net Interest Income Growth: Second quarter 2010 net interest income was $2.8 million, an increase of 12.3% compared to $2.5 million for the second quarter of 2009. On a year to date basis, net interest income grew by $1.2 million, or 26.1%.
Allowance for Loan Losses: The allowance for loan losses of $5.0 million at June 30, 2010 represents an increase of $864,000 versus June 30, 2009 and now stands at 2.02% of gross loans.

HAUPPAUGE, N.Y.--(BUSINESS WIRE)-- Madison National Bancorp, Inc. (“Madison”, “the Company”)(stock symbol MNBZ,OTCBB), the parent company of Madison National Bank, today reported its financial results for the quarter ended June 30, 2010, highlighted by the Company’s solid earnings, strong net interest margin and continued capital strength.

Solid Quarterly Earnings

Net income for the quarter ended June 30, 2010 was $208,303, or $.06 per share compared to a loss of $778,298 or $.21 per share on a linked quarter basis. On a year to date basis, net interest income grew by $1.2 million, or 26.1%.

Improved Capital Strength

The Bank’s tier one leverage capital ratio at June 30, 2010 was 9.33% and represents an increase of 31 basis points from March 31, 2010. The Bank’s tier one risk based capital ratio at June 30, 2010 was 11.07%, or an increase of seven basis points from March 31, 2010.

Balance Sheet

Total assets for the quarter decreased by $3.1 million, or 1.0%, to $305.1 million. On a year-over-year basis, total assets grew by $19.2 million, or 6.7%. Cash and cash equivalents increased by $14.3 million, total securities declined by $2.3 million, and net loans decreased by $15.6 million during the quarter. Funding liabilities declined by $3.6 million during the quarter primarily in certificates of deposit.

Asset growth on a year-over-year basis was funded through growth in organic deposits of approximately $16.7 million, or 8.2%, and through long term borrowings of $4.5 million from the Federal Home Loan Bank of New York. The company’s overall average cost of interest bearing liabilities decreased from 2.55% for the quarter ended June 2009 to 1.99% for the current quarter. More importantly, given the bank's retail focus, the cost of deposits for the 2nd quarter of 2010 decreased to 1.76% from 2.44%, a decrease of 28%, from the same quarter of 2009.

Loan Portfolio and Asset Quality

Non-accrual loans and leases totaled $12.4 million or 5.0% of loans and leases outstanding at June 30, 2010 versus $9.3 million or 3.5% at March 31, 2010. A charge-off of $79,486 was recorded during the second quarter of 2010 and represents the write-down of one loan. The Bank continues to be proactive in managing its loan portfolio and aggressively addressing any issues arising during this difficult credit cycle. The Bank experienced no loan charge-offs during 2009.

During the quarter, the Bank closed on the sale of two pools of multi-family loans, at par, totaling $20.7 million. These sales afford the Company the benefit of reducing its concentration in commercial real estate loans and providing financial flexibility in repositioning its balance sheet. The Bank will continue to focus its efforts on originating commercial loans and building business banking relationships in 2010.

During the second quarter of 2010, the Bank recorded no provision for loan losses due to the decline in the portfolio from the multi-family loan sales. Net of charge-offs, the allowance for loan losses decreased by approximately $80,000 to end the quarter at $5.0 million or 2.02% of gross loans. On a year-over-year basis, the allowance for loan losses has increased by $864,000 and 21 basis points relative to gross loans.

On June 11, 2010, the Bank entered into a Formal Agreement (“the Agreement”) with the United States Comptroller of the Currency (“OCC”). The OCC is the primary regulator for national banks. The Agreement centers around limiting loan portfolio growth commensurate with increases in Bank capital. Further, the Bank will provide to the OCC its process to manage its concentration of commercial real estate loans, which for Madison, primarily relates to its multi-family loan portfolio. Management is pleased with the performance of this portfolio as it is significantly comprised of rent-controlled and rent-stabilized apartment buildings in the boroughs of New York City. Management believes that this portfolio will continue to provide the Company with traditionally safe credit quality, greater liquidity and an enhanced interest-rate-risk profile. The Board of Directors and Executive Management are confident in aligning the Company’s long term business plans with the objectives of the OCC.

In a joint statement, Madison’s Co-Chairmen, Daniel L. Murphy and Michael P. Puorro stated, “As economic indicators continue to send mixed signals regarding the timing of the national recovery, we are pleased to report that our second quarter yielded positive income results, expanded capital and reserve coverage, and strong liquidity. We believe Madison is well positioned with its capital base along with ample liquid resources to prosper when economic conditions begin to evidence sustainable stability.”

About Madison National Bank

With assets of $305.1 million at June 30, 2010, Madison National Bank is a locally owned and operated commercial bank, focusing on highly personalized and efficient services and products, responsive to local needs. Management and the Board of Directors is comprised of a select group of successful local businessmen and women who are committed to the success of the Company by knowing and understanding Long Island’s financial needs and opportunities. Backed by state-of-the-art technology, Madison offers a full range of modern financial services. Madison employs a complete suite of consumer and commercial banking products and services, including multifamily and commercial mortgages, construction loans, home equity lines of credit, business loans and lines of credit. Madison also offers 24-hour ATM service with no fees attached, free checking with interest, telephone banking, the most advanced technologies in internet banking for our consumer and business customers, safe deposit boxes and much more. Madison National Bank maintains its corporate offices in Hauppauge, New York and currently operates three New York branch offices in Merrick, Melville, and Massapequa.

Madison National Bank is a member of the Federal Deposit Insurance Corporation and is an Equal Housing/Equal Opportunity Lender. For further information, call 631-348-6999 or visit the Company’s website at www.madisonnational.com.

Forward-Looking Statements

This release may contain certain "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and may be identified by the use of such words as "may," "believe," "expect," "anticipate," "should," "plan," "estimate," "predict," "continue," and "potential" or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Madison National Bank. Any or all of the forward-looking statements in this release and in any other public statements made by Madison National Bank may turn out to be incorrect. They can be affected by inaccurate assumptions Madison National Bank might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Madison National Bank does not intend to update any of the forward-looking statements after the date of this release or to conform these statements to actual events.



MADISON NATIONAL BANCORP, INC.
STATEMENTS OF CONDITION
(Unaudited)

	June 30,2010			March 31, 2010			June 30,2009
ASSETS
Cash and cash equivalents	$	30,299,548		$	15,984,571		$	14,317,604

Debt and Equity Securities available for sale		3,790,500			3,726,700			12,431,812
Securities held to maturity		14,440,304			16,778,563			18,477,145
Total securities		18,230,804			20,505,263			30,908,957

Loans, net of deferred loan fees and costs		249,244,399			264,973,233			230,654,993
Less: allowance for loan losses		(5,028,514	)		(5,108,000	)		(4,165,000	)
Loans, net		244,215,885			259,865,233			226,489,993

Other assets		12,346,481			11,882,831			14,205,399
Total Assets	$	305,092,718		$	308,237,898		$	285,921,953

LIABILITIES AND SHAREHOLDERS' EQUITY
Total Deposits	$	220,541,090		$	224,107,078		$	203,822,312
Federal Home Loan Bank Advances		53,500,000			53,500,000			49,000,000
Other Liabilities		699,317			570,923			2,689,226
Total Liabilities		274,740,407			278,178,001			255,511,538

Total Shareholders' Equity		30,352,310			30,059,897			30,410,417
Total Liabilities and Shareholders' Equity	$	305,092,717		$	308,237,898		$	285,921,955



MADISON NATIONAL BANCORP, INC.
STATEMENTS OF INCOME
(Unaudited)

	Quarter to Date 6/30/10		Quarter to Date 6/30/09			Year to Date 6/30/10			Year to Date 6/30/09

Total interest income	$	4,077,538	$	4,038,634		$	8,500,523		$	7,909,598
Total interest expense		1,310,131		1,573,659			2,680,364			3,293,458
Net interest income		2,767,407		2,464,975			5,820,159			4,616,140
Provision for loan losses		0		2,270,000			2,200,000			2,590,000

Net interest income after provision for loan loss		2,767,407		194,975			3,620,159			2,026,140

Total non-interest income		102,363		372,051			374,034			607,209

Compensation and benefits		1,189,495		995,601			2,386,033			1,957,723
Occupancy and equipment		485,802		356,419			949,992			689,934
FDIC Assessment		130,174		210,000			233,557			324,573
Other operating expenses		661,194		490,522			1,254,530			944,592
Total non-interest expense		2,466,665		2,052,542			4,824,112			3,916,822

Income Before Taxes		403,105		(1,485,516	)		(829,919	)		(1,283,473	)

Provision for income taxes		194,802		(3,138,311	)		(259,924	)		(3,138,311	)
Net income	$	208,303	$	1,652,795		$	(569,995	)	$	1,854,839



	Quarter Ended 6/31/10		Quarter Ended 3/31/10			Quarter Ended 12/31/09			Quarter Ended 06/30/09

Total interest income	$	4,077,538	$	4,422,985		$	4,491,616		$	4,038,634
Total interest expense		1,310,132		1,370,233			1,533,649			1,573,659
Net interest income		2,767,406		3,052,752			2,957,967			2,464,975
Provision for loan losses		0		2,200,000			425,000			2,270,000

Net interest income after provision for loan loss		2,767,406		852,752			2,532,967			194,975

Total non-interest income		102,362		271,672			95,783			372,051

Compensation and benefits		1,189,495		1,196,538			1,166,725			995,601
Occupancy and equipment		485,802		464,190			446,329			356,419
FDIC Assessment		130,174		103,383			100,901			210,000
Other operating expenses		661,194		593,337			570,917			490,522
Total non-interest expense		2,466,665		2,357,448			2,284,872			2,052,542

Income Before Taxes		403,103		(1,233,024	)		343,878			(1,485,516	)

Provision for income taxes		194,802		(454,726	)		136,742			(3,138,311	)
Net income	$	208,301	$	(778,298	)	$	207,136		$	1,652,795

Basic Earnings per Share	$	0.06	$	(0.21	)	$	0.06		$	0.45

Diluted Earnings per Share	$	0.06	$	(0.21	)	$	0.06		$	0.45



MADISON NATIONAL BANCORP, INC.
STATEMENTS OF CONDITION
(Unaudited)

	June 30, 2010			March 31, 2010			June 30, 2009
Asset Quality
Allowance for Loan Losses	$	5,028,514		$	5,108,000		$	4,165,000
Nonperforming Loans	$	12,433,850		$	9,261,115		$	3,095,375
Nonperforming Loans/Total Loans		5.0	%		3.5	%		1.3	%
Charge-offs	$	79,486		$	2,427,000		$	-
Provision for Loan Loss	$	-		$	2,200,000		$	2,270,000
ALL/Loans, Gross		2.02	%		1.93	%		1.81	%

Capital
Shares Issue - Basic		3,685,800			3,685,800			3,685,800
Book Value per Share	$	8.23		$	8.16		$	8.53
Tier 1 Capital Ratio		9.33	%		9.02	%		10.70	%
Tier 1 Risk Based Capital Ratio		11.07	%		11.00	%		12.71	%


	Quarter Ended 6/30/10			Quarter Ended 3/31/10			Quarter Ended 6/30/09
Profitability
Yield on Average Earning Assets		5.70	%		5.85	%		5.94	%
Cost of Avg. Interest Bearing Liabilities		1.99	%		2.04	%		2.55	%
Net Spread		3.71	%		3.81	%		3.40	%
Net Margin		3.92	%		4.09	%		3.68	%