Midland Capital Holdings Corp (Other) (10KSB)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB


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

For the Fiscal Year Ended June 30, 2007


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 1-14343

MIDLAND CAPITAL HOLDINGS CORPORATION

(Name of Small Business Issuer in its Charter)


Delaware		36-4238089

(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

8929 South Harlem Avenue
Bridgeview, Illinois		60455

(Address of Principal Executive Offices)		Zip Code

Registrant’s telephone number, including area code: (708) 598-9400

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share
(Title of Class)

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o

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 twelve 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

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. þ

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

The Issuer had $698,000 in net income for the fiscal year ended June 30, 2007.

As of June 30, 2007, there were issued and outstanding 372,600 shares of the Issuer’s Common Stock. The Issuer’s voting stock is not regularly and actively traded, and there are no regularly quoted bid and asked prices for the Issuer’s voting stock. Accordingly, the Issuer is unable to determine the aggregate market value of the voting stock held by non-affiliates.

DOCUMENTS INCORPORATED BY REFERENCE

PARTS II and IV of Form 10-KSB — Annual Report to Stockholders for the Fiscal Year Ended June 30, 2007 and certain parts of Proxy Statement for 2007 Annual Meeting of Stockholders.

PART III of Form 10-KSB — Proxy Statement for the 2007 Annual Meeting of Stockholders.

TABLE OF CONTENTS


PART I
	Item 1. Description of Business
	Item 2. Description of Property
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Common Equity and Related Stockholder Matters
	Item 6. Management’s Discussion and Analysis or Plan of Operation
	Item 7. Financial Statements
	Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 8A. Controls and Procedures
	Item 8B. Other Information
PART III
	Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
	Item 10. Executive Compensation
	Item 11. Security Ownership of Certain Beneficial Owners and Management
	Item 12. Certain Relationships and Related Transactions
PART IV
	Item 13. Exhibits
	Item 14. Principal Accountant Fees and Services
SIGNATURES
Exhibit 13
Exhibit 21
Exhibit 31.1
Exhibit 32.1

PART I

Item 1. Description of Business

Midland Capital Holdings Corporation, which we refer to as Midland Capital, is a Delaware corporation which was organized in 1998 by Midland Federal Savings and Loan Association, which we refer to as Midland Federal, for the purpose of becoming a thrift institution holding company. Midland Capital and Midland Federal are headquartered in Bridgeview, Illinois.

The principal asset of Midland Capital is the outstanding stock of Midland Federal. Midland Capital presently has no separate operations and its business consists only of the business of Midland Federal. All references to Midland Capital, unless otherwise indicated, at or before July 23, 1998 refer to Midland Federal.

Midland Federal has been principally engaged in the business of attracting deposits from the general public and using such deposits to originate residential mortgage and, to a lesser extent, consumer, multi-family, and other loans in its primary market area. Midland Federal also has substantial investments in short term U.S. governmental agency obligations and, to a lesser extent, mortgage-backed securities and investment securities.

Midland Federal’s primary market area consists of southwest Chicago, and the southwest suburban communities of Bridgeview, Oak Lawn, Palos Hills, Hickory Hills, Burbank, Chicago Ridge, Homer Glen, Lockport, Orland Park and Lemont which it serves through its main office in Bridgeview and three branch offices in southwest Chicago. Its deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation. At June 30, 2007, Midland Federal had $124.9 million of assets, deposits of $109.7 million and stockholders equity of $13.7 million.

The main offices of Midland Capital and Midland Federal are located at 8929 South Harlem Avenue, Bridgeview, Illinois 60455 and their telephone number at that address is (708) 598-9400.

Forward-Looking Statements

When used in this Form 10-KSB and in future filings by Midland Capital with the SEC, in Midland Capital’s press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases “will likely result”, “are expected to”, “will continue”, “is anticipated”, “estimate”, “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, including but not limited to changes in economic conditions in Midland Capital’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans, real estate values and competition in Midland Capital’s market area, all or some of which could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Midland Capital wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made and are subject to the above-stated qualifications in any event. Midland Capital wishes to advise readers that the factors listed above could affect Midland Capital’s financial performance and could cause Midland Capital’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

Midland Capital does not undertake and specifically declines any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Lending Activities

General . The principal lending activity of Midland Federal has been the origination for its portfolio of conventional first mortgage real estate loans secured by owner occupied one- to four-family residential property. Midland Federal also originates consumer, multi-family, non-residential real estate, construction and other loans.

Loan originations come primarily from walk-in customers, continued business from customers and referrals from local real estate brokers. Midland Federal’s loan originators earn a base salary plus commissions based upon first mortgage loans generated by the originator. All completed loan applications are reviewed by Midland Federal’s salaried loan officers. As part of the application process, information is obtained concerning the income, financial condition, employment and credit history of the applicant. If multi-family or commercial real estate is involved, information is also obtained concerning cash flow after debt service. Loan applications are analyzed based on Midland Federal’s credit underwriting guidelines as well as, in the case of residential loans, the guidelines issued by the Federal Home Loan Mortgage Corporation.

Midland Federal has established correspondent lending relationships with other lenders in order to take applications which either do not conform to its underwriting guidelines or are mortgage loan products that it does not offer, such as FHA and VA insured mortgage loans. In consideration of a loan broker fee paid by the lender to Midland Federal, it processes the loan application and forwards a completed loan application package to the lender, who underwrites and originates the loan.

All real estate loans are appraised by independent fee appraisers approved by the Board of Directors. Midland Federal obtains current financial statements in connection with the underwriting process as well as annual financial statements for borrowers with loans secured by commercial real estate.

Residential real estate loans are generally approved by the Loan Committee in amounts up to $500,000. Residential real estate loans may also be approved by the Chief Lending Officer in amounts up to $350,000 or the President in amounts up to $425,000, and then ratified by the Loan Committee or the Board of Directors. Residential real estate loans in amounts over $500,000 must be approved by the Board of Directors. Non-residential real estate loans are generally approved by the Board of Directors. Non-residential real estate loans may also be approved by the President in amounts up to $500,000 and then ratified by the Board of Directors. The Chief Lending Officer and the President each have approval authority for any consumer loans.

Midland Federal generally requires, in connection with the origination of real estate loans, fire and casualty insurance coverage, as well as flood insurance where appropriate, to protect its interest. The cost of this insurance coverage is paid by the borrower. Midland Federal also requires title insurance coverage on all real estate loans except for second mortgage loans in amounts of less than $25,000 for which loans it only requires that good and marketable title be verified by an independent title search. The cost of title insurance coverage is paid for by the borrower, except in the case of second mortgage loans for which Midland Federal may, from time to time, absorb such costs for promotional purposes.

The aggregate amount of loans that Midland Federal is permitted to make under applicable federal regulations to any one borrower, including related entities, and the aggregate amount that it could have invested in any one real estate project is generally the greater of 15% of unimpaired capital and surplus or $500,000. See “Regulation — Federal Regulation of Savings Associations.”

At June 30, 2007, Midland Federal had five borrowers with outstanding loan balances in excess of $500,000. The borrowers’ loans totaled $3.7 million and were secured by single-family residences and multi-family buildings. The highest concentration of loans to one borrower as of June 30, 2007 was $1.5 million. These loans were current and performing in accordance with their terms at June 30, 2007. See “— Non-Performing Assets, Classified Assets, Loan Delinquencies and Defaults.”

Loan and Mortgage-backed Securities Portfolio Composition . The following table sets forth information concerning the composition of Midland Federal’s loan and mortgage-backed securities portfolios in dollar amounts and in percentages as of the dates indicated.


	June 30,
	2007						2006						2005
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in Thousands)
Real Estate Loans
One-to four-family ⁽¹⁾ :
Held for investment	$	79,749			93.90	%	$	88,618			95.55	%	$	91,558			96.46	%
Available for sale		1,012			1.19			843			0.91			250			0.26
Multi-family		1,610			1.90			1,642			1.77			1,125			1.19
Non-Residential		1,839			2.17			750			0.81			805			0.85

Total real estate loans		84,210			99.16			91,853			99.04			93,738			98.76


Other Loans
Consumer Loans:
Deposit accounts		126			0.14			188			0.20			269			0.28
Student		108			0.13			161			0.18			247			0.26
Automobile		296			0.34			355			0.38			448			0.47
Credit card		188			0.22			149			0.16			189			0.20
Other		1			0.00			2			0.00			12			0.01

Total consumer loans		719			0.83			855			0.92			1,165			1.22


Commercial business loans		5			0.01			38			0.04			17			0.02

Total loans receivable		84,934			100.00	%		92,746			100.00	%		94,920			100.00	%


Less
Loans in process		7						172						25
Deferred yield adjustments		(364	)					(407	)					(405	)
Allowance for uncollected interest		14						20						14
Allowance for loan losses		420						416						457

Loans receivable, net	$	84,857					$	92,545					$	94,829


Mortgage-backed securities:
FHLMC	$	898			60.88	%	$	1,065			63.24	%	$	1,219			63.49	%
FNMA		577			39.12			615			36.52			680			35.42
GNMA		—			—			4			0.24			21			1.09
Total mortgage-backed securities		1,475			100.00	%		1,684			100.00	%		1,920			100.00	%

Net discounts		—						—						—

Net mortgage-backed securities	$	1,475					$	1,684					$	1,920


⁽¹⁾		Includes $3,707 of home equity loans and lines of credit at June 30, 2007.

The following table shows the composition of Midland Federal’s loan portfolio by fixed and adjustable-rate at the dates indicated.


	June 30,
	2007						2006						2005
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in Thousands)
Fixed-Rate Loans
Real Estate:
One-to four-family	$	73,781			86.87	%	$	78,961			85.14	%	$	81,686			86.06	%
Multi-family		853			1.01			872			0.94			415			0.44
Non-Residential		217			0.26			522			0.56			574			0.61

Total real estate loans		74,851			88.14			80,355			86.64			82,675			87.11

Consumer		610			0.71			692			0.74			906			0.95

Total fixed-rate loans		75,461			88.85			81,047			87.38			83,581			88.06


Adjustable-Rate Loans
Real estate:
One-to four-family		6,980			8.22			10,500			11.32			10,122			10.66
Multi-family		757			0.89			770			0.83			710			0.53
Non-Residential		1,622			1.91			228			0.25			231			0.24

Total real estate loans		9,359			11.02			11,498			12.40			11,063			11.65

Consumer		109			0.12			163			0.18			259			0.27
Commercial business		5			0.01			38			0.04			17			0.02

Total adjustable-rate loans		9,473			11.15			11,699			12.62			11,339			11.94

Total loans receivable		84,934			100.00	%		92,746			100.00	%		94,920			100.00	%


Less
Loans in process		7						172						25
Deferred yield adjustments		(364	)					(407	)					(405	)
Allowance for uncollected interest		14						20						14
Allowance for loan losses		420						416						457

Loans receivable, net	$	84,857					$	92,545					$	94,829

As of June 30, 2007, there were no concentrations of loans in any types of industry which exceeded 10% of Midland Federal’s total loans that are not included as a loan category in the preceding table.

The following schedule illustrates the contractual maturity of Midland Federal’s loan portfolio at June 30, 2007. Mortgages which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. The schedule does not reflect the effects of possible prepayments or enforcements of due-on-sale clauses or interest rate adjustments.


						Multi-Family and										Commercial
	One-to-Four Family					Commercial					Consumer					Business					Total
			Weighted					Weighted					Weighted					Weighted					Weighted
			Average					Average					Average					Average					Average
(Dollars in Thousands)	Amount		Rate			Amount		Rate			Amount		Rate			Amount		Rate			Amount		Rate
Due During Years Ending June 30,
2008 ⁽¹⁾	$	474		6.81	%	$	—		—	%	$	212		10.82	%	$	5		0.00	%		691		7.99	%
2009		284		7.70	%		—		—	%		119		6.32	%		—		—	%		403		7.29	%
2010		458		7.74	%		—		—	%		128		5.81	%		—		—	%		586		7.32	%
2011 to 2012		1,577		7.70	%		1,138		7.65	%		189		6.89	%		—		—	%		2,904		7.63	%
2013 to 2016		3,030		5.97	%		—		—	%		71		7.58	%		—		—	%		3,101		6.01	%
2017 to 2031		28,032		5.72	%		294		5.75	%		—		—	%		—		—	%		28,326		5.72	%
2032 and following	$	46,906		5.86	%		2,017		7.29	%	$	—		—	%		—		—	%		48,923		5.92	%


	$	80,761				$	3,449				$	719				$	5				$	84,934		5.95	%


⁽¹⁾		Includes demand loans, loans having no stated maturity and overdraft loans.

The total amount of loans due after June 30, 2008 which have predetermined interest rates is approximately $74.97 million, while the total amount of loans due after such date which have floating or adjustable interest rates is approximately $9.27 million.

One- to Four-Family Residential Real Estate Lending

Midland Federal’s primary lending activity has been the origination and purchase of permanent loans secured by mortgages on owner-occupied one- to four-family residences. At June 30, 2007, $80.8 million or 95.1% of our gross loan portfolio consisted of permanent loans on one- to four-family residences. All of these loans were secured by properties located in the State of Illinois, with a substantial majority located in Midland Federal’s primary market area.

Historically, Midland Federal originated for retention in its own portfolio 30-year fixed-rate loans secured by one- to four-family residential real estate. Beginning in the early 1980s, in order to reduce its exposure to changes in interest rates, Midland Federal began to originate adjustable-rate mortgages (“ARMs”) and shorter term fixed rate loans, subject to market conditions and consumer preference. However, as a result of continued consumer demand, Midland Federal has continued to originate for retention in its portfolio primarily fixed-rate-residential loans, although in amounts and at rates which are monitored for compliance with Midland Federal’s asset/liability management policy.

Most of Midland Federal’s fixed rate residential loans have terms up to 30 years although approximately 2% of Midland Federal’s fiscal 2007 originations had terms of 15 year or less. Midland Federal establishes interest rates on its fixed rate residential loans based on published agency pricing, an analysis of its asset/liability needs and competitive factors.

Midland Federal’s current one- to four-family residential ARMs are fully amortizing loans with contractual maturities of up to 30 years. The interest rates on substantially all the ARMs originated by Midland Federal are subject to adjustment at one-year intervals. Midland Federal’s ARM products generally carry interest rates which are reset to a stated margin over the one-year U.S. Treasury Rate. Adjustments in the interest rate of Midland Federal’s ARMs are generally limited to 2% at any adjustment date and 6% over the life of the loan. At June 30, 2007, the total balance of one- to four-family ARMs was $7.0 million, or 8.2% of our gross loan portfolio.

From time to time, Midland Federal will make owner-occupied one- to four-family construction loans for a six-month interest only term, which Midland Federal will convert to a permanent mortgage for a fee generally of one point. Midland Federal requires the interest on such loans during the construction term to be paid or placed in escrow when the loan is funded.

Midland Federal’s one- to four-family residential loan portfolio includes home equity lines of credit, which were funded in the amount of $2.1 million at June 30, 2007, and home equity loans, which were $1.6 million at June 30, 2007. Our unfunded commitments on home equity lines of credit totaled $3.3 million at June 30, 2007. Midland Federal’s home equity lines of credit are five year interest-only balloon loans secured by second liens on the property, and are made in amounts of up to 75% of the appraised value of the property (including first lien amounts). Midland Federal’s home equity loans are three to 15 year fixed-rate loans secured by second liens on the property, and are made in amounts up to 80% of the appraised value of the property (including first lien amounts).Midland Federal’s fixed rate residential loans are generally underwritten and documented to permit their sale in the secondary market. Midland Federal evaluates both the borrower’s ability to make principal and interest payments and the value of the property that will secure the loan. Midland Federal generally originates residential mortgage loans with loan-to-value ratios of up to 80%, although the Board of Directors has authorized originations of mortgage loans with loan-to-value ratios up to 95%. On any mortgage loan exceeding an 80% loan-to-value ratio at the time of origination, Midland Federal generally requires private mortgage insurance on the excess.

Midland Federal’s residential mortgage loans customarily include “due-on-sale” clauses, which are provisions that give Midland Federal the right to declare a loan immediately due and payable in the event the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid.

Multi-Family Residential Lending

Midland Federal’s multi-family residential portfolio at June 30, 2007 included $1.6 million in loans secured by residential buildings with 5 or more units located in Midland Federal’s primary market area. Midland Federal originates primarily adjustable-rate, multi-family real estate loans. Rates on Midland Federal’s adjustable-rate, multi-family real estate loans generally adjust in a manner consistent with Midland Federal’s ARMs.

Multi-family real estate loans are generally underwritten in amounts of up to 75% of the appraised value of the underlying property. Midland Federal’s underwriting procedures for multi-family generally require verification of the borrower’s credit history, income and financial statements, banking relationships, references and income projections for the property. Personal guarantees are generally obtained for Midland Federal’s multi-family real estate loans.

Midland Federal monitors the cash flow and operating performance of borrowers through inspection of collateral, calls on borrowers, inspection of business premises and evaluation of interim financial statements.

Multi-family residential real estate loans generally present a higher level of risk than loans secured by one- to four-family residences. The risk is greater due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family residential real estate is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed), the borrower’s ability to repay the loan may be impaired.

Consumer Lending

Management believes that consumer loans help Midland Federal expand its customer base and create stronger ties to its existing customer base. In addition, because consumer loans generally have shorter terms to maturity and carry higher rates of interest than do residential loans, they can be valuable asset/liability management tools.

Midland Federal offers a variety of secured consumer loans, including educational loans (which are guaranteed from a State agency), automobile loans and loans secured by savings deposits. In addition, Midland Federal offers unsecured consumer loans through its Visa credit card program. Midland Federal currently originates substantially all of its consumer loans in its principal market area.

Consumer loan terms vary according to the type of collateral, term of the loan and creditworthiness of the borrower. The underwriting standards employed by Midland Federal for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of the applicant’s ability to meet payments on the proposed loan along with other existing obligations. In addition to the creditworthiness of the applicant, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

Student loans are originated by Midland Federal in compliance with the guidelines established by the Illinois Student Assistance Commission (“ISAC”). Under this program, ISAC is notified when a loan becomes 60 to 120 days delinquent and a default claim notice is filed with ISAC when a loan becomes 270 days delinquent. The default claim is considered for payment by ISAC when a loan is delinquent for more than 360 days. As of June 30, 2007, student loans amounted to $108,000, or 0.13%, of Midland Federal’s gross loan portfolio.

Midland Federal also originates consumer loans secured by used and, to a lesser extent, new automobiles in its primary market area. Underwriting standards employed by Midland Federal in connection with these loans include a review of the borrowers’ creditworthiness, verification of collateral value and perfection of a lien against the collateral. Midland Federal requires vehicle insurance on all loans secured by automobiles. At June 30, 2007, Midland Federal had $296,000, or 0.34%, of its gross loan portfolio in automobile loans.

Lines of credit extended through Midland Federal’s Visa credit card program are offered in amounts up to $10,000. Midland Federal requires a credit card application, verifies employment and obtains a credit report on all credit card applicants. At June 30, 2007, Midland Federal had $188,000, or 0.22%, of its gross loan portfolio in credit card loans.

Consumer loans may entail greater risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable assets such as automobiles. In such cases, any repossessed collateral for defaulted consumer loans may not provide adequate sources of repayment for the outstanding loan balances as a result of the greater likelihood of damage, loss or depreciation. In addition, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. Although the level of delinquencies in Midland Federal’s consumer loan portfolio has generally been low, there can be no assurance that delinquencies will not increase in the future.

Commercial Real Estate Lending

Midland Federal maintains a portion of its portfolio in permanent loans secured by commercial real estate. Midland Federal’s commercial real estate portfolio consists of loans on a variety of non-residential property, including an automobile repair center and office properties. The terms of the commercial real estate loans that we have recently originated have generally been similar to those of our multifamily residential loans. Commercial real estate loans generally carry risks similar to those described above with respect to multifamily residential loans. At June 30, 2007, $1.8 million, or 2.2%, of Midland Federal’s gross loan portfolio consisted of permanent loans secured by commercial real estate.

In the future, Midland Federal intends to continue to engage in a modest level of commercial real estate lending, subject to regulatory restrictions. In view of the risk generally associated with commercial real estate lending, there can be no assurance that Midland Federal will not experience delinquencies on its commercial real estate portfolio.

Mortgage-Backed Securities

Midland Federal has a portfolio of mortgage-backed securities totaling $1.5 million at June 30, 2007. All of Midland Federal’s mortgage-backed securities are pass-through certificates issued by federal agencies.

Midland Federal utilizes its mortgage-backed securities to supplement loan production and to meet its asset/liability management objectives. Mortgage-backed securities can also serve as collateral for borrowings and, through repayments, as a source of liquidity. For information regarding the carrying and fair values of Midland Federal’s mortgage-backed securities portfolio, see Note 3 of the Notes to Financial Statements in the Annual Report to Stockholders filed as Exhibit 13 hereto. See “Regulation.”

The following table sets forth the contractual maturities of Midland Federal’s mortgage-backed securities at June 30, 2007. It should be noted that, due to prepayments, the actual maturity of Midland Federal’s long-term mortgage-backed securities will likely be significantly shorter than the contractual maturities.


	Due In						Balance Outstanding
	1 to 5		6 to 20		Over 20
	Years		Years		Years		Fixed		Adjustable
	(In Thousands)
Federal Home Loan Mortgage Corporation	$	—	$	820	$	78	$	—	$	898
Federal National Mortgage Association		—		577		—		—		577
Total	$	—	$	1,489	$	78	$	—	$	1,475

Loan Originations, Purchases and Sales

Real estate loans are originated by Midland Federal’s staff of salaried loan officers. In addition, Midland Federal utilizes commissioned loan originators. Loan applications are taken at each office, processed in Midland Federal’s main office and then submitted to the Chief Lending Officer, the President or the Loan Committee for approval.

Midland Federal’s ability to originate loans is dependent upon the relative customer demand for loans in its market. Demand is also affected by the interest rate environment. Loan sales consist of loans sold to the Illinois Housing Development Authority and other lenders under various government programs as well as sales of fixed rate one-to-four family mortgage loans in the secondary market in order to reduce interest rate risk.

The following tables set forth our loan and mortgage-backed securities activity for the periods indicated.


	Year Ended June 30,
	2007			2006			2005
	(In Thousands)
Originations by type:
Adjustable-Rate:
Real estate – one- to- four family	$	2,498		$	5,437		$	5,905
Real estate – multi-family		—			318			222
Non-Residential		1,330			225			—
Non-real estate – consumer		—			—			15

Total adjustable rate		3,828			5,980			6,142

Fixed-Rate:
Real estate – one- to- four family		12,440			15,479			14,943
Real estate – multi-family		—			575			—
Non-Residential		—			—			—
Non-real estate – consumer		829			934			1,196

Total fixed-rate		13,269			16,988			16,139

Total loans originated		17,097			22,968			22,281


Sales and Repayments :
Real estate loans sold		(7,877	)		(5,145	)		(1,823	)
Principal repayments		(17,031	)		(19,998	)		(20,261	)


Net (decrease) increase	$	(7,811	)	$	(2,175	)		197


Mortgage-backed securities :
Purchased		—			—		$	—
Sold		—			—			—
Amortization and repayments		(209	)		(236	)	$	(1,022	)


Net decrease	$	(209	)	$	(236	)	$	(1,022	)

Non-Performing Assets, Classified Assets, Loan Delinquencies and Defaults

When a borrower fails to make a required payment on a loan, Midland Federal attempts to cause the deficiency to be cured by contacting the borrower. A notice is mailed to the borrower and late charges are assessed after a payment is 30 days past due. Five days after the late notice is mailed, the Loan Service Counselor/Collector will contact the borrower by telephone. After a payment is 60 days past due, the Loan Service Counselor/Collector conducts a personal interview with the borrower after which if the loan continues to be delinquent, it is referred to the Loan Service Manager. After the 90th day of delinquency, Midland Federal institutes action to foreclose on the property or to acquire it by deed in lieu of foreclosure. If foreclosed on, real property is sold at a public sale and may be purchased by Midland Federal. A decision as to whether and when to initiate foreclosure proceedings is based on such factors as the amount of the outstanding loan in relation to the original indebtedness and the current value of the property, the extent of delinquency and the borrower’s ability and willingness to cooperate in curing delinquencies. Generally, when a loan becomes delinquent 90 days or more, Midland Federal will place the loan on a non-accrual status and, as a result, previously accrued interest income on the loan is taken out of current income. Future interest income is recognized on a cash basis. The loan will remain on a non-accrual status as long as the loan is 90 days delinquent, unless a repayment plan is being followed.

The amounts presented represent the total remaining principal balances of the related loans, rather than actual payment amounts which are overdue and are reflected as a percentage of total loans. The following table sets forth information concerning delinquent mortgage and other loans at June 30, 2007 and June 30, 2006. The balances included in the table do not reflect specific reserves.


	At June 30, 2007
	Loans Delinquent For:
	30-59 days							60-89 days							90 days and over							Total
	Number		Amount		Percent			Number		Amount		Percent			Number		Amount		Percent			Number		Amount		Percent
												(Dollars in Thousands)
Real estate:
One-to four-family		11	$	918		1.15	%		2	$	128		0.16	%		4	$	484		0.61	%		17	$	1,530		1.92	%
Consumer		—		—		—			—		—		—	%		4		27		3.67	%		4		27		3.67	%

Total		11	$	918		1.08	%		2	$	128		0.15	%		8	$	511		0.60	%		21	$	1,557		1.83	%


	At June 30, 2006
	Loans Delinquent For:
	30-59 days							60-89 days							90 days and over							Total
	Number		Amount		Percent			Number		Amount		Percent			Number		Amount		Percent			Number		Amount		Percent
												(Dollars in Thousands)
Real estate:
One-to four-family		12	$	1,107		1.24	%		1	$	50		0.05	%		4	$	295		0.33	%		17	$	1,452		1.62	%
Consumer		—		—		—			—		—		—	%		6		64		7.49	%		6		64		7.49	%

Total		12	$	1,107		1.19	%		1	$	50		0.05	%		10	$	359		0.39	%		23	$	1,516		1.63	%

The table below sets forth the amounts and categories of non-performing assets in Midland Federal’s loan portfolio. Loans are placed on non-accrual status when the collection of principal and/or interest becomes doubtful, generally when the loan is delinquent 90 days or more. For all of the indicated periods, the Company had no accruing loans 90 or more days delinquent. Foreclosed assets include assets acquired in settlement of loans.


	At June 30,
	2007			2006			2005
	(Dollars in Thousands)

Non-Accruing Loans:
One- to four-family	$	485		$	295		$	316
Multi-family		—			—			—
Consumer		26			32			64
Commercial business		—			—			—

Total non-performing assets		511			327			380


Foreclosed Assets:		—			—			—
Total		—			—			—


Total non-performing assets	$	511		$	327		$	380


Total as a percentage of total assets		0.41	%		0.25	%		0.27	%

As of June 30, 2007, non-accruing one-to-four family loans totaled $485,000 and consisted of four loans secured by properties located in Midland Federal’s primary market area.

For the fiscal year ended June 30, 2007, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $15,900, which interest income was not accrued into interest income for the fiscal year ended June 30, 2007.

As of June 30, 2007, there were no other loans not included in the table or discussed above where known information about the possible credit problems of borrowers caused management to have serious doubts as to the ability of the borrower to comply with present loan repayment terms and which may result in disclosure of such loans in the future.

Classified Assets . Federal regulations require that each savings institution classify its own assets on a regular basis. In addition, in connection with examinations of savings institutions, OTS and Federal Deposit Insurance Corporation examiners have authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the savings association will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets

classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the savings association to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses, are required to be designated “special mention” by management.

When a savings association classifies problem assets as either substandard or doubtful, it may establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but unlike specific allowances, have not been allocated to particular problem assets. When a savings association classifies problem assets as a “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An association’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS which may order the establishment of additional general or specific loss allowances.

In connection with the filing of its periodic reports with the OTS and in accordance with its classification of assets policy, Midland Federal regularly reviews the assets in its portfolio to determine whether any assets require classification in accordance with applicable regulations. On the basis of management’s review of its assets, at June 30, 2007, Midland Federal had classified a total of $713,000 of its assets as substandard, none as doubtful, none as loss and $26,000 as special mention.

Allowance for Losses on Loans and Real Estate

The allowance for loan losses is established through a provision for loan losses based on management’s evaluation of the risks inherent in its loan portfolio and changes in the nature and volume of its loan activity. Such evaluation, which includes a review of all loans where full collectibility may not be reasonably assured, considers among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for a loan loss allowance adequate to cover probable accrued losses in the portfolio.

Midland Capital’s allowance for loan losses increased by $4,000 to $420,000 at June 30, 2007 from $416,000 at the prior fiscal year end. At fiscal year end, the $420,000 in general allowance for loan losses was determined by Midland Capital to be consistent with its policy for the establishment and maintenance of adequate levels of general loan loss allowances. The $4,000 increase in loan loss allowances was the result of net loan recoveries. Although management believes that it uses the best information available to determine the allowances, unforeseen market conditions could result in adjustments and net earnings could be significantly affected if circumstances differ substantially from the assumptions used in making the final determination. Future additions to Midland Federal’s allowances will be the result of periodic loan, property and collateral reviews and thus cannot be predicted in advance. At June 30, 2007 Midland Federal had a total allowance for losses on loans of $420,000 or 0.49% of total loans. See Note 4 of the Notes to Financial Statements in the Annual Report to Stockholders filed as Exhibit 13 hereto.

The following table sets forth an analysis of Midland Federal’s allowance for loan losses.


	Year Ended June 30,
	2007			2006			2005
	(Dollars in Thousands)

Balance at beginning of period	$	416		$	457		$	460


Charge-offs:
One- to four-family		—			—			—
Consumer		2			43			3
Commercial business		—			—			—

Total charge-offs		2			43			3


Recoveries:
One- to four-family		—			—			—
Consumer		6			2			—

Total recoveries		6			2			—


Net charge-offs		4			(41	)		(3	)
Additions charged to operations		—			—			—

Balance at end of period	$	420		$	416		$	457


Ratio of net charge-offs during the year to average loans outstanding during the period		—	%		0.04	%		—	%

Ratio of net charge-offs during the year to average non-performing assets		—	%		13.35	%		1.35	%

Allowance for loan losses to non-performing loans		82.22	%		127.27	%		120.06	%

Allowance for loan losses to total loans		0.49	%		0.45	%		0.48	%

The following table presents the portions of the allowance for loan losses applicable to each loan category.


	June 30,
	2007					2006					2005
			Percent of					Percent of					Percent of
			Loans in					Loans in					Loans in
			Each					Each					Each
			Category to					Category					Category to
			Total					to Total					Total
	Amount		Loans			Amount		Loans			Amount		Loans
	(Dollars in Thousands)

One- to four-family	$	186		95.09	%	$	140		96.46	%	$	154		96.72	%
Multi-family		3		1.90			3		1.77			2		1.19
Non-residential		4		2.17			2		0.81			2		0.85
Consumer		3		0.83			3		0.92			4		1.22
Commercial business		—		0.01			1		0.04			—		0.02
Unallocated		224		—			267		—			295		—

Total	$	420		100.00	%	$	416		100.00	%	$	457		100.00	%

Investment Activities

As a part of its asset/liability management strategy, its liquidity policy, and as a response to a high level of competition for loans and low level of loan demand in parts of Midland Federal’s market area, Midland Federal invests in various types of liquid assets, short and medium term government securities as well as smaller amounts of other assets.

At June 30, 2007, Midland Federal’s interest-bearing deposits in other financial institutions totaled $11.2 million, or 9.0% of its total assets, and investment securities totaled $21.0 million, or 16.8% of its total assets. As of such date, Midland Federal also had a $1.1 million investment in the common stock of the FHLB of Chicago in order to satisfy the requirement for membership in this institution. At June 30, 2007, the average term to maturity or repricing of the investment securities portfolio was approximately 7.9 months due to the large balance of short-term U.S. Treasury Bills.

The following table sets forth the composition of Midland Federal’s investment portfolio at the dates indicated.


	At June 30,
	2007				2006				2005
	Carrying		Fair		Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value		Value		Value
	(In Thousands)

Investment Securities:
U.S. government securities	$	21,020	$	21,020	$	20,821	$	21,022	$	983	$	1,311
FHLB – Chicago stock		1,148		1,148		1,148		1,148		1,124		1,124

Total investment securities	$	22,168	$	22,168	$	21,969	$	22,170	$	2,107	$	2,435


Interest-bearing deposits:

FHLB daily investment	$	6,234	$	6,234	$	3,488	$	3,488	$	3,909	$	3,909
Other daily investments		4,998		4,998		5,567		5,567		30,160		30,160

Total interest-bearing deposits	$	11,232	$	11,232	$	9,055	$	9,055	$	34,069	$	34,069

The composition and maturities of the investment securities portfolio, excluding FHLB of Chicago stock, are indicated in the following table.


	June 30, 2006
	1 Year or		1 to 5		Over 10		Total Investment
	Less		Years		Years		Securities
											Weighted
	Book		Book		Book		Book		Fair		Average
	Value		Value		Value		Value		Value		Yield
	(Dollars in Thousands)
U.S. government securities	$	19,841	$	—	$	1,179	$	21,020	$	21,020		—

	$	19,841	$	—	$	1,179	$	21,020	$	21,020		5.24	%

Sources of Funds

General . Deposit accounts have traditionally been the principal source of Midland Federal’s funds for use in lending and for other general business purposes. In addition to deposits, Midland Federal derives funds from loan repayments and cash flows generated from operations. Scheduled loan payments are a relatively stable source of funds, while deposit inflows and outflows and the related cost of such funds have varied. Borrowings may be used on a short-term basis to compensate for seasonal reductions in deposits or deposit inflows at less than projected levels and may be used on a longer term basis to support expanded lending activities.

Deposits . Midland Federal attracts principally short-term and intermediate-term deposits from Midland Federal’s primary market area. Midland Federal offers regular passbook accounts, NOW accounts, money market deposit accounts, fixed interest rate certificates of deposit with varying maturities and rates including certificates of deposit with balances in excess of $100,000.

Deposit account terms vary, according to the minimum balance required, the time period the funds must remain on deposit and the interest rate, among other factors. Midland Federal has not actively sought deposits outside of its primary market area.

The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates, competition and Midland Federal’s pricing policies and capital requirements. Midland Federal regularly evaluates the internal cost of funds, surveys rates offered by competing institutions, reviews its cash flow requirements for liquidity and executes rate changes when deemed appropriate.

Midland Federal has utilized high quality service and promotion in an attempt to attract and retain passbook and transaction accounts. Midland Federal believes that some of these accounts may be somewhat less interest rate sensitive and, in certain interest rate environments, carry lower interest charges than certificate accounts. While there are costs associated with offering transaction accounts, Midland Federal believes that the fee income and enhanced spread outweigh any additional administrative expense. Midland Federal does not have any brokered deposits and has no present intention to accept or solicit such deposits.

The following table sets forth the savings flows at Midland Federal during the periods indicated.


	Year Ended June 30,
	2007			2006			2005
	(Dollars in Thousands)
Opening balance	$	115,971		$	124,836		$	140,437
Deposits		313,331			353,793			380,517
Withdrawals		(321,479	)		(364,207	)		(397,415	)

Balance before interest credited		107,823			114,422			123,539
Interest credited		1,922			1,549			1,297


Ending balance	$	109,745		$	115,971		$	124,836

Net decrease	$	(6,226	)	$	(8,865	)	$	(15,601	)

Percent decrease		(5.37	)%		(7.10	)%		(11.11	)%

The following table sets forth the dollar amount of savings deposits in the various types of deposit programs offered by Midland Federal at the dates indicated.


	June 30,
	2007					2006					2005
			Percent of					Percent of					Percent of
	Amount		Total			Amount		Total			Amount		Total
	(Dollars in Thousands)

Passbook accounts	$	43,694		39.81	%	$	48,439		41.77	%	$	52,859		42.34	%
NOW accounts		10,032		9.14			10,855		9.36			12,029		9.64
Money market accounts		3,751		3.42			5,106		4.40			6,108		4.89
Non-interest bearing deposits		9,971		9.09			11,783		10.16			13,528		10.84

Total non-certificates		67,448		61.46			76,183		65.69			84,524		67.71


Certificates:

Interest rate range:
1.01 – 2.00%		—		—			818		0.70			14,589		11.68
2.01 – 3.00%		2,142		1.95			8,212		7.08			23,220		18.60
3.01 – 4.00%		20,536		18.71			21,533		18.57			2,503		2.01
4.01 – 5.00%		5,961		5.43			6,768		5.84			—		—
5.01 – 6.00%		13,658		12.45			2,457		2.12			—		—


Total certificates		42,297		38.54			39,788		34.31			40,312		32.29

Total deposits	$	109,745		100.00	%	$	115,971		100.00	%	$	124,836		100.00	%

The following table shows rate and maturity information for Midland Federal’s time deposits as of June 30, 2007.


	2.01-		3.01-		4.01-		5.01-					Percent of
	3.00%		4.00%		5.00%		6.00%		Total			Total

Certificate Accounts Maturing in Quarter Ending:

September 30, 2007	$	1,643	$	5,425		1,802		4,860	$	13,730			32.46	%
December 31, 2007		499		7,229		2,197		2,895		12,820			30.31
March 31, 2008		—		2,932		1,203		3,132		7,267			17.18
June 30, 2008		—		1,846		286		2,305		4,437			10.49
September 30, 2008		—		695		102		142		939			2.22
December 31, 2008		—		754		207		109		1,070			2.53
March 31, 2009		—		684		149		32		865			2.05
June 30, 2009		—		481		—		183		664			1.57
September 30, 2009		—		292		15		—		307			0.72
December 31, 2009		—		198		—		—		198			0.47


Total	$	2,142	$	20,536		5,961		13,658	$	42,297			100.00	%


Percent of total		5.07		48.55		14.09		32.29		100.00	%

The following table indicates the amount of Midland Federal’s certificates of deposit and other deposits by time remaining until maturity as of June 30, 2007.


	Maturity
			Over		Over		Over
	3 Months		3 to 6		6 to 12		12
	or Less		Months		Months		Months		Total
	(In Thousands)

Certificates of deposit less than $100,000	$	10,221	$	9,070	$	9,697	$	2,408	$	31,396

Certificate of deposit of $100,000 or more		3,509		3,750		2,007		1,635		10,901


Total certificates of deposit	$	13,730	$	12,820	$	11,704	$	4,043	$	42,297

Borrowings

Midland Federal’s other available sources of funds include advances from the Federal Home Loan Bank (“FHLB”) of Chicago and collateralized borrowings. As a member of the FHLB of Chicago, Midland Federal is required to own capital stock in the FHLB of Chicago and is authorized to apply for advances from the FHLB of Chicago. Each FHLB credit program has its own interest rate, which may be fixed or variable, and range of maturities. The FHLB of Chicago may prescribe the acceptable uses for these advances, as well as limitations on the size of the advances and repayment provisions. Midland Federal has not had significant borrowings in recent years.

Competition

Midland Federal faces strong competition in originating loans and in attracting deposits. Competition in originating loans comes primarily from other thrift institutions, commercial banks and mortgage bankers which make loans secured by real estate located in Midland Federal’s primary market area. Midland Federal competes for loans principally on the basis of the interest rates and loan fees it charges, the types of loans it originates and the quality of service it provides to borrowers.

Midland Federal faces substantial competition in attracting deposits from other thrift institutions, commercial banks, money market and mutual funds, credit unions and other investment vehicles. The ability of Midland Federal to attract and retain deposits depends on its ability to provide an investment opportunity that satisfies the requirements of investors as to rate of return, liquidity, risk and other factors. Midland Federal competes for these deposits by offering a variety of deposit accounts at competitive rates and convenient business hours. Midland Federal estimates its share of deposits in its primary market area to be less than 3%.

Service Corporation

Federal associations generally may invest up to 2% of their assets in service corporations, plus an additional 1% of assets if for community purposes. In addition, federal associations may invest up to 50% of their regulatory capital in conforming loans to their service corporations. In addition to investments in service corporations, federal associations are permitted to invest an unlimited amount in operating subsidiaries engaged solely in activities which a federal association may engage in directly.

Midland Federal has one service corporation, Midland Federal Service Corporation, located in Bridgeview, Illinois, which was organized to act as a holding company for Midland Federal’s other subsidiaries. At June 30, 2007, Midland Federal’s equity investment in Midland Federal Service Corporation was approximately $242,000. During fiscal 2007, Midland Federal Service Corporation recorded a loss of $3,000.

Midland Federal Service Corporation owns Midland Insurance Services, Inc., an insurance agency which provides insurance products to customers of Midland Federal and to members of the general public in Midland Federal’s market area. Insurance products offered by this agency, include credit life, health, homeowners’ and disability. Midland Insurance Services, Inc. had a loss of $3,000 for the 2007 fiscal year, all of which is included in the Midland Federal Service Corporation income amounts reported above.

REGULATION

General . Midland Federal is a federally chartered savings and loan association, the deposits of which are federally insured and backed by the full faith and credit of the U. S. government. Accordingly, Midland Federal is subject to broad federal regulation and oversight extending to all its operations. Midland Federal is a member of the FHLB of Chicago and is subject to certain limited

regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”). Midland Federal is a member of the Deposit Insurance Fund (“DIF”) which is the deposit insurance fund administered by the FDIC, and the deposits of Midland Federal are insured by the FDIC. As a result, the FDIC has certain regulatory and examination authority over Midland Federal. Midland Federal’s primary federal regulator is the OTS.

Certain of these regulatory requirements and restrictions are discussed below or elsewhere in this document.

Federal Regulation of Savings Associations . The OTS has extensive authority over the operations of savings associations. As part of this authority, Midland Federal is required to file periodic reports with the OTS and is subject to periodic examinations by the OTS. When these examinations are conducted, the examiners may require Midland Federal to provide for higher general or specific loan loss reserves. Midland Federal is also subject to back-up examination by the FDIC.

All savings associations are subject to an OTS assessment, based upon the savings association’s total assets which are payable semi-annually. The OTS also has extensive enforcement authority over all savings institutions. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound banking practices. Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the OTS. Except under certain circumstances, public disclosure of final enforcement actions by the OTS is required.

In addition, the investment and lending authority of Midland Federal is prescribed by federal laws and regulations, and it is prohibited from engaging in any activities not permitted by such laws and regulations. For instance no savings association may invest in corporate debt securities not rated in one of the four highest rating categories by a nationally recognized rating organization. Further, the permissible level of investment by federal associations in loans secured by non-residential real property may not exceed 400% of regulatory capital, except with approval of the OTS. Midland Federal is in compliance with each of these restrictions.

Midland Federal’s permissible lending limit for loans-to-one-borrower is equal to the greater of $500,000 or 15% of capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of capital and surplus). At June 30, 2007, Midland Federal’s lending limit under this restriction was $1.7 million. Midland Federal is in compliance with the loans-to-one-borrower limitation.

The OTS, as well as the other federal banking agencies, has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, internal controls and audit systems, interest rate risk exposure and compensation and other employee benefits. Any institution which fails to comply with these standards must submit a capital compliance plan. A failure to submit a plan or to comply with an approved plan will subject the institution to further enforcement action.

Insurance of Accounts and Regulation by the FDIC . Deposit accounts at Midland Federal are insured by the DIF of the FDIC. Midland Federal’s deposits, therefore, are subject to FDIC deposit insurance assessments and the FDIC has adopted a risk-based system for determining deposit insurance assessments. Under this system, FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification. Institutions assigned to higher risk classifications (that is, institutions that pose a higher risk of loss to their respective deposit insurance funds) pay assessments at higher rates than institutions that pose a lower risk. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. In addition, the FDIC can impose special assessments in certain instances. The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. An institution’s deposit insurance assessments may increase or decrease depending on the risk assessment classification to which it is assigned by the FDIC. Any increase in insurance assessments could have an adverse effect on Midland Federal’s earnings.

Regulatory Capital Requirements . Federally insured savings associations, such as Midland Federal, are required to maintain a minimum level of regulatory capital. The OTS has established capital standards, including a tangible capital requirement, a leverage ratio (or core capital) requirement and a risk-based capital requirement applicable to such savings associations. These capital requirements must be generally as stringent as the comparable capital requirements for national banks. The OTS is also authorized to impose capital requirements in excess of these standards on individual associations on a case-by-case basis.

The capital regulations require tangible capital of at least 1.5% of adjusted total assets (as defined by regulation). Tangible capital generally includes common stockholders’ equity and retained income, and certain noncumulative perpetual preferred stock and related income. In addition, all intangible assets, other than a limited amount of purchased mortgage servicing rights, must be deducted from tangible capital for calculating compliance with the requirement. Further, any unrealized holding gains or losses, net of income taxes, on securities classified as available for sale in accordance with SFAS No. 115 are excluded from regulatory capital calculations. At June 30, 2007, Midland Federal had deductible retained mortgage servicing assets and an unrealized gain, net of tax, under SFAS No. 115 in the amount of $214,000.

The OTS regulations establish special capitalization requirements for savings associations that own subsidiaries. In determining compliance with the capital requirements, all subsidiaries engaged solely in activities permissible for national banks or engaged in certain other activities solely as agent for its customers are “includable” subsidiaries that are consolidated for capital purposes in proportion to Midland Federal’s level of ownership. For excludable subsidiaries the debt and equity investments in such subsidiaries are deducted from assets and capital.

At June 30, 2007, Midland Federal had tangible capital of $11.1 million, or 8.85% of adjusted total assets, which is approximately $9.2 million above the minimum requirement of 1.5% of adjusted total assets in effect on that date.

The capital standards also require core capital or Tier 1 Capital equal to at least 3% of adjusted total assets (as defined by regulation). Core capital generally consists of tangible capital plus certain intangible assets, including supervisory goodwill and a limited amount of purchased credit card relationships and purchased mortgage servicing rights. As a result of the prompt corrective action provisions, discussed below, a savings association must maintain a core capital ratio of at least 4% to be considered “adequately capitalized” unless its supervisory condition is such so as to allow it to maintain a 3% ratio. At June 30, 2007, Midland Federal had retained mortgage servicing assets which were subject to these tests.

At June 30, 2007, Midland Federal had core capital equal to $11.1 million, or 8.85% of adjusted total assets, which is $7.3 million above the minimum leverage ratio requirement of 3% in effect on that date. In addition, on such date Midland Federal had Tier 1 Risked-Based Capital equal to $11.1 million or 20.44% of Risk-Weighted Assets, which is $8.9 million above the requirement of 4% on effect on that date.

The OTS risk-based requirement requires savings associations to have total capital of at least 8% of risk-weighted assets. Total capital consists of core capital, as defined above and supplementary capital. Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets and up to 45% of pretax unrealized gains, net of unrealized losses, on available for sale equity securities. Supplementary capital may be used to satisfy the risk-based requirement only to the extent of core capital. At June 30, 2007, Midland Federal had no capital instruments that qualify as supplementary capital, $420,000 of general loss reserves, which was less than 1.25% of risk-weighted assets and $47,000 of allowable pretax net unrealized gains on available for sale equity securities.

Certain exclusions from capital and assets are required to be made for the purpose of calculating total capital. Such exclusions consist of equity investments (as defined by regulation) and that portion of land loans and nonresidential construction loans in excess of an 80% loan-to-value ratio and reciprocal holdings of qualifying capital instruments. There were $1,000 in equity investments at June 30, 2007.

In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset. For example, the OTS has assigned a risk weight of 50% for prudently underwritten permanent one- to four-family first lien mortgage loans not more than 90 days delinquent and having a loan-to-value ratio of not more than 80% at origination unless the loan amount in excess of such ratio is insured by an insurer approved by the FNMA or FHLMC.

OTS regulations also require that every savings association with more than normal interest rate risk exposure to deduct from its total capital, for purposes of determining compliance with such requirement, an amount equal to 50% of its interest-rate risk exposure multiplied by the present value of its assets. This exposure is a measure of the potential decline in the net portfolio value of a savings association, greater than 2% of the present value of its assets, based upon a hypothetical 200 basis point increase or decrease in interest rates (whichever results in a greater decline). Net portfolio value is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The rule will not become effective until the OTS evaluates the process by which

savings associations may appeal an interest rate risk deduction determination. It is uncertain as to when this evaluation may be completed. Any savings association with less than $300 million in assets and a total capital ratio in excess of 12% is exempt from this requirement unless the OTS determines otherwise.

On June 30, 2007, Midland Federal had total capital of $11.6 million (including $11.1 million in core capital and $420,000 of qualifying general loss reserves) and risk-weighted assets of $54.3 million or total capital of 21.30% of risk-weighted assets. This amount was $7.2 million above the 8% requirement in effect on that date.

The OTS and the FDIC are authorized and, under certain circumstances required, to take certain actions against associations that fail to meet their capital requirements. The OTS is generally required to take action to restrict the activities of an “undercapitalized association” (generally defined to be one with less than either a 4% core ratio, a 4% Tier 1 risk based capital ratio, a Tier 1 risked-based capital ratio or an 8% risk-based capital ratio). Any such association must submit a capital restoration plan and until such plan is approved by the OTS may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions. The OTS is authorized to impose the additional restrictions that are applicable to significantly undercapitalized associations.

Any savings association that fails to comply with its capital plan or is “significantly undercapitalized” (i.e., Tier 1 or Tier 1 risk-based or core capital ratios of less than 3% or a risk-based capital ratio of less than 6%) must be subject to one or more of additional specified actions and operating restrictions, which may cover all aspects of its operations and include a forced merger or acquisition of Midland Federal.

An association that becomes “critically undercapitalized” (i.e., a tangible capital ratio of 2% or less) is subject to further mandatory restrictions on its activities in addition to those applicable to significantly undercapitalized associations. In addition, the OTS must appoint a receiver (or conservator with the concurrence of the FDIC) for a savings association, with certain limited exceptions, within 90 days after it becomes critically undercapitalized. Any undercapitalized association is also subject to the general enforcement activity of the OTS and the FDIC, including the appointment of a receiver or conservator.

The imposition by the OTS or the FDIC of any of these measures on Midland Federal may have a substantial adverse effect on Midland Federal’s operations and profitability and the value of its stock. If the OTS or the FDIC require an association such as Midland Federal, to raise additional capital through the issuance of stock or other capital instruments such issuance may result in the dilution in the percentage of ownership of Midland Federal.

Limitations on Dividends and Other Capital Distributions . OTS regulations impose various restrictions on savings associations with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account. OTS regulations also prohibit a savings association from declaring or paying any dividends or from repurchasing any of its stock if, as a result, the regulatory capital of Midland Federal would be reduced below the amount required to be maintained for the liquidation account established in connection with its mutual to stock conversion.

Generally, savings associations, such as Midland Federal, that before and after the proposed distribution remain well-capitalized, may make capital distributions during any calendar year equal to 100% of net income for the year-to-date plus retained net income for the two preceding years that is available for dividend. However, an institution deemed to be in need of more than normal supervision by the OTS may have its dividend authority restricted by the OTS. Midland Federal may pay dividends in accordance with this general authority.

Any savings association that is a subsidiary of a holding company and proposes to make any capital distribution need only submit written notice to the OTS 30 days prior to such distribution. Savings associations that do not, or would not meet their current minimum capital requirements following a proposed capital distribution, however, must obtain OTS approval prior to making such distribution. The OTS may object to the distribution during that 30-day notice period based on supervisory concerns. See “— Regulatory Capital Requirements.”

Accounting . An OTS policy statement applicable to all savings associations clarifies and re-emphasizes that the investment activities of a savings association must be in compliance with approved and documented investment policies and strategies, and must be accounted for in accordance with GAAP. Under the policy statement, management must support its classification of and accounting for loans and securities (i.e., whether held for investment, sale or trading) with appropriate documentation.

OTS accounting regulations, which may be made more stringent than GAAP, require that transactions be reported in a manner that best reflects their underlying economic substance and inherent risk and that financial reports must incorporate any other accounting regulations or orders prescribed by the OTS. Midland Federal is in compliance with these rules.

Qualified Thrift Lender Test . All savings associations, including Midland Federal, are required to meet a qualified thrift lender test to avoid certain restrictions on their operations. This test requires a savings association to have at least 65% of its portfolio assets (as defined by regulation) in qualified thrift investments for nine out of every 12 months on a rolling basis. As an alternative, the savings association may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the 1986 Internal Revenue Code, as amended. Under either test, such assets primarily consist of residential housing related loans and investments. At June 30, 2007 Midland Federal was in compliance with the test.

Any savings association that fails to meet the QTL test must convert to a national bank charter, unless it requalifies as a QTL and thereafter remains a QTL. If an association that fails the test has not yet requalified and has not converted to a national bank, its new investments and activities are limited to those permissible for both a savings association and a national bank, and it is limited to national bank branching rights in its home state. In addition, Midland Federal is immediately ineligible to receive any new FHLB borrowings and is subject to national bank limits for payment of dividends. If such association has not requalified or converted to a national bank within three years after the failure, it must divest all investments and cease all activities not permissible for a national bank.

Community Reinvestment Act . Under the Community Reinvestment Act, every FDIC insured institution has a continuing and affirmative obligation consistent with safe and sound banking practices to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the OTS, in connection with the examination of Midland Federal, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as a merger or the establishment of a branch, by Midland Federal. An unsatisfactory rating may be used as the basis for the denial of an application such as a branch or merger application by the OTS.

Due to the heightened attention being given to the CRA in the past few years, Midland Federal may be required to devote additional funds for investment and lending in its local community. Midland Federal was last examined for CRA compliance in 2007 and received a rating of “satisfactory.”

Transactions with Affiliates and Insiders . Generally, transactions between a savings association or its subsidiaries and its affiliates are required to be on terms as favorable to Midland Federal as transactions with non-affiliates. In addition, certain of these transactions are restricted to a percentage of Midland Federal’s capital. Affiliates of Midland Federal include any company which is under common control with Midland Federal as well as Midland Federal’s parent holding company. In addition, a savings association may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the securities of most affiliates. Midland Federal’s subsidiaries are not deemed affiliates. However, the OTS has the discretion to treat subsidiaries as affiliates on a case-by-case basis.

Certain transactions with directors, officers or controlling persons are also subject to regulations enforced by the OTS. These regulations impose restrictions on loans to such persons and their related interests. Among other things, such loans must be made on terms substantially the same as for loans to unaffiliated persons.

Anti-Money Laundering . For years, FDIC insured institutions, such as Midland Federal, have been required to establish anti-money laundering programs. In 2001, the USA PATRIOT Act was enacted. This Act significantly enhanced the powers of the federal government and law enforcement organizations to combat terrorism, organized crime and money laundering. While the Act imposed additional anti-money laundering requirements on FDIC insured institutions, these additional requirements are not material to Midland Federal’s operations.

Aside from the above, the Act also requires the federal banking regulators to assess the effectiveness of an institution’s anti-money laundering program in connection with merger and acquisition transactions. Failure to maintain an effective anti-money laundering program is grounds for the denial of merger or acquisition transactions.

Holding Company Regulation

Midland Capital is a grandfathered unitary savings and loan holding company subject to regulatory oversight by the OTS. As such, Midland Capital is required to register and file reports with the OTS and is subject to regulation and examination by the OTS. In addition, the OTS has enforcement authority over Midland Capital and its non-savings association subsidiaries which also permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings association.

As a grandfathered unitary savings and loan holding company, Midland Capital generally is not subject to activity restrictions. If Midland Capital acquires control of another savings association as a separate subsidiary, it would become a multiple savings and loan holding company, and the activities of Midland Capital and any of its subsidiaries (other than Midland Federal or any other FDIC-insured savings association) would become subject to such restrictions unless such other associations each qualify as a QTL and were acquired in a supervisory acquisition.

If Midland Federal fails the QTL test, Midland Capital must obtain the approval of the OTS prior to continuing after such failure, directly or through its other subsidiaries, any business activity other than those approved for multiple savings and loan holding companies or their subsidiaries. In addition, within one year of such failure Midland Capital must register as, and will become subject to, the restrictions applicable to bank holding companies. The activities authorized for a bank holding company are more limited than are the activities authorized for a unitary or multiple savings and loan holding company. See “- Qualified Thrift Lender Test.”

Midland Capital must obtain approval from the OTS before acquiring control of any other FDIC-insured association. Such acquisitions are generally prohibited if they result in a multiple savings and loan holding company controlling savings associations in more than one state. However, such interstate acquisitions are permitted based on specific state authorization or in a supervisory acquisition of a failing savings association.

Federal Securities Law . The stock of Midland Capital is registered with the SEC under the Securities Exchange Act of 1934, as amended. Midland Capital is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the SEC under the Exchange Act.

Midland Capital stock held by persons who are affiliates (generally officers, directors and principal stockholders) of Midland Capital may not be resold without registration or unless sold in accordance with certain resale restrictions. If Midland Capital meets specified current public information requirements, each affiliate of Midland Capital is able to sell in the public market, without registration, a limited number of shares in any three-month period.

Federal Reserve System . The Federal Reserve Board requires all depository institutions to maintain non-interest bearing reserves at specified levels against their transaction accounts (primarily checking, NOW and Super NOW checking accounts) and non-personal time deposits. At June 30, 2006 Midland Federal was in compliance with these reserve requirements.

Savings associations are authorized to borrow from the Federal Reserve Bank “discount window,” but Federal Reserve Board regulations require associations to exhaust other reasonable alternative sources of funds, including FHLB borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System . Midland Federal is a member of the FHLB of Chicago which is one of 12 regional FHLBs that administers the home financing credit function of savings associations. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the board of directors of the FHLB. These policies and procedures are subject to the regulation and oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing. While a member of the FHLB of Chicago at June 30, 2007, Midland Federal had not entered into a credit arrangement with the FHLB of Chicago and, as such, could not obtain funds from the FHLB of Chicago.

As a member, Midland Federal is required to purchase and maintain stock in the FHLB of Chicago. At June 30, 2007 Midland Federal had $1.1 million in FHLB stock, which was in compliance with this requirement. In past years, Midland Federal has received substantial dividends on its FHLB stock. Over the past five calendar years the dividend rate averaged 5.13% and was 3.075% for calendar year 2006.

Under federal law, the FHLBs are required to provide funds for the resolution of troubled savings associations and to contribute to low and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low and moderate income housing projects. These contributions have affected adversely the level of FHLB dividends paid and could continue to do so in the future. These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in value of Midland Federal’s FHLB stock may result in a corresponding reduction in its capital.

For the year ended June 30, 2007, dividends paid by the FHLB of Chicago to Midland Federal totaled $35,000, which was a $7,000 decrease from the amount of dividends received in fiscal year 2006. The $8,000 dividend received in the quarter ended June 30, 2007 reflects an annualized rate of 2.80%, or 0.275% below the rate for calendar year 2006.

Federal Taxation . Savings institutions that met certain definitional tests relating to the composition of assets and other conditions prescribed by the Internal Revenue Code of 1986, as amended, had been permitted to establish reserves for bad debts and to make annual additions which could, within specified formula limits, be taken as a deduction in computing taxable income for federal income tax purposes. As a result of tax legislation enacted in 1996, the amount of the bad debt reserve deduction is now computed under the experience method.

In addition to the regular income tax, corporations, including savings institutions generally are subject to a minimum tax. An alternative minimum tax is imposed at a minimum tax rate of 20% on alternative minimum taxable income, which is the sum of a corporation’s regular taxable income (with certain adjustments) and tax preference items, less any available exemption. The alternative minimum tax is imposed to the extent it exceeds the corporation’s regular income tax and net operating losses can offset no more than 90% of alternative minimum taxable income.

To the extent earnings appropriated to a savings institutions bad debt reserves for “qualifying real property loans” and deducted for federal income tax purposes exceed the allowable amount of such reserves computed under the experience method and to the extent of the institution’s supplemental reserves for losses on loans, such excess may not, without adverse tax consequences, be utilized for the payment of cash dividends or other distributions to a shareholder (including distributions on redemption, dissolution or liquidation) or for any other purpose (except to absorb bad debt losses). As of June 30, 2007, Midland Federal’s excess for tax purposes totaled approximately $1.2 million.

Midland Capital and its subsidiaries file consolidated federal income tax returns on a fiscal year basis using the accrual method of accounting.

Midland Capital and its consolidated subsidiaries have never been audited by the IRS with respect to federal income tax returns. The statute of limitations has passed for tax years ending on or prior to June 30, 2004, for Midland Capital and its consolidated subsidiaries.

Illinois Taxation . Midland Capital and its subsidiaries file separate Illinois income tax returns. For Illinois income tax purposes, Midland Capital and its subsidiaries are taxed at an effective rate equal to 7.30% of Illinois taxable income. For these purposes, “Illinois Taxable Income” generally means federal taxable income, subject to certain adjustments (including the addition of interest income on state and municipal obligations and the exclusion of interest income on United States Treasury obligations). The exclusion of income on United States Treasury obligations has the effect of reducing significantly the Illinois taxable income of savings associations.

Employees

At June 30, 2007, Midland Federal had a total of 36 full-time employees and 54 part-time employees. None of Midland Federal’s employees are represented by any collective bargaining group. Management considers its employee relations to be good.

Item 2. Description of Property

Offices

Midland Federal owns the building and land for its main office at 8929 South Harlem Avenue, Bridgeview, Illinois. This office has 18,000 square feet and a net book value of $746,000 at June 30, 2007. Midland Federal also has an easement on land adjacent to its main office which expires in the year 2078. Midland Federal also owns the building and land for its two branch offices in Chicago at 4040 South Archer Avenue in Brighton Park and 2657 West 69th Street in Marquette Park which have 2,000 and 2,500 square feet and $518,000 and $16,000 net book values at June 30, 2007, respectively.

Midland Federal leases retail office space in Homer Glen, Illinois for a full service branch banking facility that it established in April 1999. The net book value of remodeling and leasehold improvements cost at this leased office facility was approximately $59,000 at June 30, 2007. Midland Federal also owns a parcel of land contiguous to this office for future expansion which it currently uses for a drive-up banking facility and parking with a net book value of $324,000 at June 30, 2007.

In addition, Midland Federal owns three ATMs located at its Bridgeview, Chicago/Brighton Park and Homer Glen offices.

Computer Equipment

Midland Federal’s recordkeeping activities are maintained on an on-line basis with an independent service bureau. Midland Federal’s accounting and loan origination activities are maintained on an in-house computer network. The net book value of Midland Federal’s computer equipment at June 30, 2007 was $134,000.

Item 3. Legal Proceedings

Midland Federal is, from time to time, a defendant to certain lawsuits arising in the ordinary course of its business. Midland Federal believes that there is no litigation pending which, if adversely determined, would have a material adverse effect on its financial condition.

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

No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the three months ended June 30, 2007.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Page 21 of the 2007 Annual Report to Stockholders is herein incorporated by reference.

Item 6. Management’s Discussion and Analysis or Plan of Operation

Pages 6 through 21 of the 2007 Annual Report to Stockholders is herein incorporated by reference.

Item 7. Financial Statements

Pages 22 through 45 of the 2007 Annual Report to Stockholders are herein incorporated by reference.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no changes in or disagreements with Midland Federal’s accountants on accounting and financial disclosure matters.

Item 8A. Controls and Procedures

The Company has adopted disclosure controls and procedures designed to facilitate the Company’s financial reporting. The disclosure controls currently consist of periodic communications among the Chief Executive and Financial Officer and each department head to identify any transactions, events, trends, risks or contingencies which may be material to the Company’s operations. In addition, the Chief Executive and Financial Officer and the Company’s independent auditors also meet on a quarterly basis and discuss the Company’s material accounting policies. The Company’s Chief Executive and Financial Officer has evaluated the effectiveness of these disclosure controls as of the end of the period covered by this report and found them to be adequate.

The Company maintains internal control over financial reporting. There have not been any significant changes in such internal control over financial reporting in the last quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Item 8B. Other Information

None

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act

Information concerning Directors of the Issuer is incorporated herein by reference from Midland Capital’s definitive proxy statement for the Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 10. Executive Compensation

Information concerning executive compensation is incorporated herein by reference from Midland Capital’s definitive proxy statement for the Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from Midland Capital’s definitive Proxy Statement for the Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of the fiscal year.

The following table sets forth information with respect to securities to be issued under Midland Capital’s equity compensation plans as of June 30, 2007.

(c)

Number of securities

remaining available

(a)

for future issuance

Number of securities

under equity

to be issued upon

(b)

compensation plans

exercise of

Weighted-average

[excluding

outstanding

exercise price of

securities

options, warrants and

outstanding options,

reflected in column

Plan Category

rights

warrants and rights

(a)]

Equity compensation plans approved by securities holders:

1. 1993 Stock Option and Incentive Plan.

1. None

1. N/A

1. 6,900

2. Recognition and Retention Plan

2. N/A

Equity compensation plans not approved by security holders

N/A

Total

None

N/A

None


(1)		Information regarding these plans is set forth under Item 10 to this Report.

(2)		Awards under this plan consist of restricted stock.

Item 12. Certain Relationships and Related Transactions

Information concerning relationships and transactions is incorporated herein by reference from Midland Capital’s definitive proxy statement for the Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of the fiscal year.

PART IV

Item 13. Exhibits


		Reference to Prior
		Filing
Regulation		or Exhibit
S-K Exhibit		Number Attached
Number	Document	Hereto
2	Plan of acquisition, reorganization, arrangement, liquid, or succession	None
3	Articles of Incorporation and Bylaws	**
4	Instruments defining the rights of security holders, including indentures:
	Common Stock Certificate	**
9	Voting trust agreement	None
10	Material contracts:
	Employee Stock Ownership Plan	**
	1993 Stock Option and Incentive Plan	*
	Employment Agreements	**
	Recognition and Retention Plan	*
	401(k) Retirement/Savings Plan	**
11	Statement re computation of per share earnings	***
13	Annual Report to Security Holders	13
14	Code of Ethics	****
16	Letter on change in certifying accountant	None
18	Letter on change in accounting principles	None
21	Subsidiaries of Registrant	21
22	Published report regarding matters submitted to vote of security holders	None
23	Consent of Experts and Counsel	None
24	Power of Attorney	Not required
31.1	Certification of Paul M. Zogas pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934	31.1
32.1	Certification of Paul M. Zogas pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003	32.1


*		Filed on March 19, 1993 as an exhibit to Midland Federal’s Pre-Effective Amendment No. One to the Form AC.

**		Filed on June 22, 1998 as exhibits to Midland Capital’s Registration Statement No. 333-57399 on Form S-4. All of such previously filed documents are hereby incorporated herein by reference in accordance with Item 601 of Regulation S-B.

***		See Note 1 of the Notes to be Consolidated Financial Statements included in the Annual Report under Exhibit 13.

****		Filed on September 28, 2004 as Exhibit 14 to Midland Capital’s Annual Report on Form 10-QSB for the year ended June 30, 2004.

Item 14. Principal Accountant Fees and Services

Information concerning principal accountant fees and services is incorporated herein by reference from the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held in 2007, which will be filed not later than 120 days following the close of the fiscal year end.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	MIDLAND CAPITAL HOLDINGS CORPORATION
Date: September 28, 2007	By:	/s/ Paul M. Zogas
		Paul M. Zogas
		Chairman, President and Chief Executive Officer ( Duly Authorized Representative )

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


/s/ Paul M. Zogas				/s/ Charles A. Zogas

Paul M. Zogas, Chairman, President and Chief Executive and Financial Officer (Principal Executive and Financial and Accounting Officer)				Charles A. Zogas, Director, Executive Vice President and Secretary

Date: September 28, 2007				Date: September 28, 2007

/s/ Jonas Vaznelis				/s/ Richard Taylor

Jonas Vaznelis, Director				Richard Taylor, Director and Vice President

Date: September 28, 2007

/s/ Michael J. Kukanza
Michael J. Kukanza, Director

EXHIBIT INDEX


Exhibit
No.		Description

13		Annual Report to Security Holders

21		Subsidiaries of Registrant

31.1		Certification of Paul M. Zogas pursuant to Rule 13a-14 under the Securities and Exchange Act of 1934

32.1		Certification of Paul M. Zogas pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2003

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