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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-QSB þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2005 OR 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  Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
    
    36-4238089
(I.R.S. Employer
Identification Number)
 8929 S. Harlem Avenue, Bridgeview, Illinois
(Address of Principal Executive Offices)
    
    60455
(Zip Code)
 Issuers telephone number, including area code: (708) 598-9400 Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15
(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes þ No o Transitional Small Business Disclosure Format. Yes o No þ Indicate the number of shares of each of the Issuers classes of common stock as of the latest
practicable date: Common Stock, par value $.01
(Title of Class) As of May 13, 2005, the Issuer had
372,600 shares of Common Stock issued and outstanding.




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MIDLAND CAPITAL HOLDINGS CORPORATION  
 PAGEPart I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition -
March 31, 2005 (unaudited) and June 30, 2004
    
    
    1Consolidated Statements of Earnings -
Three months ended March 31, 2005 and 2004 and
Nine months ended March 31, 2005 and 2004 (unaudited)
    
    
    2Consolidated Statements of Changes in Stockholders Equity -
Nine months ended March 31, 2005 (unaudited)
    
    
    3Consolidated Statements of Cash Flows - Nine months
ended March 31, 2005 and 2004 (unaudited)
    
    
    4Notes to Consolidated Financial Statements
    
    
    5-6Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    7-15Item 3. Controls and Procedures
    
    
    16Part II. OTHER INFORMATION
    
    
    17Item 1. Legal Proceedings
    
    
    17Item 2. Changes in Securities
    
    
    17Item 3. Defaults Upon Senior Securities
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    17Index to Exhibits
    
    
    18Computation of Per Share EarningsCertificationSection 906 Certification




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MIDLAND CAPITAL HOLDINGS CORPORATIONAND SUBSIDIARIES 
 Part I  FINANCIAL INFORMATION 
 Item 1. FINANCIAL STATEMENTS 
 Consolidated Statements of Financial Condition
 March 31,
    
    
    June 30,2005
    
    
    2004(Unaudited)AssetsCash and amounts due from depository institutions
    
    $
    3,152,807
    
    
    
    3,786,039Interest-bearing deposits
    
    
    33,783,638
    
    
    
    46,710,590Total cash and cash equivalents
    
    
    36,936,445
    
    
    
    50,496,629Investment securities available for sale, at fair value
    
    
    1,254,063
    
    
    
    1,234,375Mortgage-backed securities, held to maturity (fair value:March 31, 2005 - $2,097,923;June 30, 2004 - $2,980,932)
    
    
    2,072,030
    
    
    
    2,941,517Loans receivable (net of allowance for loan losses:March 31, 2005 - $458,430;June 30, 2004 - $459,472)
    
    
    96,232,622
    
    
    
    93,961,360Loans receivable held for sale
    
    
    156,500
    
    
    
    581,500Stock in Federal Home Loan Bank of Chicago
    
    
    1,108,600
    
    
    
    1,061,800Office properties and equipment, net
    
    
    2,286,307
    
    
    
    2,376,025Accrued interest receivable
    
    
    381,911
    
    
    
    359,702Prepaid expenses and other assets
    
    
    599,373
    
    
    
    547,453Total assets
    
    $
    141,027,851
    
    
    
    153,560,361Liabilities and Stockholders EquityLiabilities:Deposits
    
    $
    127,466,415
    
    
    
    140,436,704Advance payments by borrowers for taxes and insurance
    
    
    777,304
    
    
    
    954,259Other liabilities
    
    
    529,069
    
    
    
    427,084Total liabilities
    
    
    128,772,788
    
    
    
    141,818,047Stockholders equity:Preferred stock, $.01 par value: authorized 50,000 shares; none outstanding
    
    
    
    
    
    
    Common stock, $.01 par value: authorized 600,000
shares; issued and outstanding 372,600 shares

at March 31, 2005 and June 30, 2004
    
    
    3,726
    
    
    
    3,726Additional paid-in capital
    
    
    3,395,580
    
    
    
    3,395,580Retained earnings  substantially restricted
    
    
    8,676,564
    
    
    
    8,176,334Accumulated other comprehensive income, net of income taxes
    
    
    179,193
    
    
    
    166,674Total stockholders equity
    
    
    12,255,063
    
    
    
    11,742,314Total liabilities and stockholders equity
    
    $
    141,027,851
    
    
    
    153,560,361
 See accompanying notes to consolidated financial statements. -1-




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MIDLAND CAPITAL HOLDINGS CORPORATIONAND SUBSIDIARIES 
 Consolidated Statements of Earnings Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004(Unaudited)
    
    
    (Unaudited)Interest income:Interest on loans
    
    $
    1,378,263
    
    
    
    1,341,351
    
    
    
    4,135,905
    
    
    
    4,184,675Interest on mortgage-backed securities
    
    
    19,908
    
    
    
    46,639
    
    
    
    68,413
    
    
    
    166,667Interest on investment securities
    
    
    18,990
    
    
    
    18,990
    
    
    
    56,969
    
    
    
    99,267Interest on interest-bearing deposits
    
    
    202,838
    
    
    
    110,519
    
    
    
    524,902
    
    
    
    335,789Dividends on FHLB stock
    
    
    15,010
    
    
    
    16,731
    
    
    
    46,882
    
    
    
    50,332Total interest income
    
    
    1,635,009
    
    
    
    1,534,230
    
    
    
    4,833,071
    
    
    
    4,836,730Interest expense:Interest on deposits
    
    
    332,686
    
    
    
    398,178
    
    
    
    1,015,622
    
    
    
    1,346,808Total interest expense
    
    
    332,686
    
    
    
    398,178
    
    
    
    1,015,622
    
    
    
    1,346,808Net interest income
    
    
    1,302,323
    
    
    
    1,136,052
    
    
    
    3,817,449
    
    
    
    3,489,922Provision for loan losses
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    45,000Net interest income after provision
for loan losses
    
    
    1,302,323
    
    
    
    1,121,052
    
    
    
    3,817,449
    
    
    
    3,444,922Non-interest income:Loan fees and service charges
    
    
    38,182
    
    
    
    49,347
    
    
    
    180,806
    
    
    
    323,449Commission income
    
    
    16,689
    
    
    
    15,674
    
    
    
    41,932
    
    
    
    53,300Profit on sale of loans
    
    
    2,150
    
    
    
    90,657
    
    
    
    16,002
    
    
    
    101,769Deposit related fees
    
    
    104,226
    
    
    
    112,372
    
    
    
    324,076
    
    
    
    362,610Gain on satisfaction of
foreclosure judgments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    433,285Other income
    
    
    18,114
    
    
    
    17,241
    
    
    
    47,707
    
    
    
    62,118Total non-interest income
    
    
    179,361
    
    
    
    285,291
    
    
    
    610,523
    
    
    
    1,336,531Non-interest expense:Staffing costs
    
    
    640,335
    
    
    
    641,939
    
    
    
    1,937,629
    
    
    
    2,005,955Advertising
    
    
    15,171
    
    
    
    15,749
    
    
    
    48,766
    
    
    
    52,728Occupancy and equipment expenses
    
    
    162,714
    
    
    
    178,788
    
    
    
    484,275
    
    
    
    563,561Data processing
    
    
    57,004
    
    
    
    55,156
    
    
    
    156,254
    
    
    
    158,931Federal deposit insurance premiums
    
    
    4,864
    
    
    
    5,535
    
    
    
    15,124
    
    
    
    16,978Other
    
    
    221,999
    
    
    
    216,897
    
    
    
    689,234
    
    
    
    684,054Total non-interest expense
    
    
    1,102,087
    
    
    
    1,114,064
    
    
    
    3,331,282
    
    
    
    3,482,207Income before income taxes
    
    
    379,597
    
    
    
    292,279
    
    
    
    1,096,690
    
    
    
    1,299,246Income tax provision
    
    
    129,089
    
    
    
    99,375
    
    
    
    372,900
    
    
    
    441,744Net income
    
    $
    250,508
    
    
    
    192,904
    
    
    
    723,790
    
    
    
    857,502Earnings per share (basic)
    
    $
    .67
    
    
    
    .52
    
    
    
    1.94
    
    
    
    2.30Earnings per share (diluted)
    
    $
    .67
    
    
    
    .52
    
    
    
    1.94
    
    
    
    2.30Dividends declared per common share
    
    $
    .20
    
    
    
    .17
    
    
    
    .60
    
    
    
    .51
 See accompanying notes to consolidated financial statements. -2-




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MIDLAND CAPITAL HOLDINGS CORPORATIONAND SUBSIDIARIES 
 Consolidated Statements of Changes in Stockholders Equity (Unaudited) AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Paid-In
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalance at June 30, 2004
    
    $
    3,726
    
    
    
    3,395,580
    
    
    
    8,176,334
    
    
    
    166,674
    
    
    
    11,742,314Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    723,790
    
    
    
    
    
    
    
    723,790Other comprehensive
income, net of tax:Unrealized holding gain
during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,519
    
    
    
    12,519Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    723,790
    
    
    
    12,519
    
    
    
    736,309Dividends declared on common
stock ($0.60 per share)
    
    
    
    
    
    
    
    
    
    
    (223,560
    )
    
    
    
    
    
    
    (223,560
    )Balance at March 31, 2005
    
    $
    3,726
    
    
    
    3,395,580
    
    
    
    8,676,564
    
    
    
    179,193
    
    
    
    12,255,063
 See accompanying notes to consolidated financial statements. -3-




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MIDLAND CAPITAL HOLDINGS CORPORATIONAND SUBSIDIARIES 
 Consolidated Statements of Cash Flows (Unaudited) Nine Months EndedMarch 31,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    723,790
    
    
    
    857,502Adjustments to reconcile net income to net cash from
operating activities:Depreciation
    
    
    161,240
    
    
    
    212,401Net (accretion) amortization on securities
    
    
    (1,988
    )
    
    
    (9,902
    )Provision for loan losses
    
    
    
    
    
    
    45,000Federal Home Loan Bank stock dividend
    
    
    (46,800
    )
    
    
    (50,200
    )Proceeds from sale of loans held for sale
    
    
    1,140,050
    
    
    
    1,054,761Origination of loans held for sale
    
    
    (715,050
    )
    
    
    (687,461
    )Profit on sale of loans
    
    
    (4,346
    )
    
    
    (101,769
    )(Increase) decrease in accrued interest receivable
    
    
    (22,209
    )
    
    
    66,803Increase (decrease) in accrued interest payable
    
    
    493
    
    
    
    (6,243
    )Decrease in deferred income on loans
    
    
    (14,987
    )
    
    
    (246,490
    )(Increase) decrease in other assets
    
    
    (54,024
    )
    
    
    93,881Increase (decrease) in other liabilities
    
    
    101,492
    
    
    
    88,062Net cash provided by operating activities
    
    
    1,267,661
    
    
    
    1,316,345Cash flows from investing activities:Proceeds from repayments of mortgage backed securities,
held to maturity
    
    
    870,756
    
    
    
    2,467,520Proceeds from maturities of investment securities,
available for sale
    
    
    
    
    
    
    5,000,000Loan disbursements
    
    
    (16,686,784
    )
    
    
    (33,062,983
    )Loan repayments
    
    
    14,430,509
    
    
    
    33,151,847Proceeds from sale of loans
    
    
    
    
    
    
    316,450Property and equipment expenditures
    
    
    (71,522
    )
    
    
    (33,947
    )Net cash provided (for) by investing activities
    
    
    (1,457,041
    )
    
    
    7,838,887Cash flows from financing activities:Deposit account receipts
    
    
    286,705,343
    
    
    
    301,153,736Deposit account withdrawals
    
    
    (300,634,980
    )
    
    
    (309,307,632
    )Interest credited to deposit accounts
    
    
    959,348
    
    
    
    1,268,544Payment of dividends
    
    
    (223,560
    )
    
    
    (190,026
    )Decrease in advance payments by borrowers
for taxes and insurance
    
    
    (176,955
    )
    
    
    (398,676
    )Net cash provided for financing activities
    
    
    (13,370,804
    )
    
    
    (7,474,054
    )Net change in cash and cash equivalents
    
    
    (13,560,184
    )
    
    
    1,681,178Cash and cash equivalents at beginning of period
    
    
    50,496,629
    
    
    
    49,421,065Cash and cash equivalents at end of period
    
    $
    36,936,445
    
    
    
    51,102,243Cash paid during the period for:Interest
    
    $
    1,015,129
    
    
    
    1,353,051Income taxes
    
    
    337,329
    
    
    
    417,883
 See accompanying notes to consolidated financial statements. -4-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES 
 Notes to Consolidated Financial Statements Note A  Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with
instructions to Form 10-QSB and therefore, do not include information or footnotes necessary for
fair presentation of financial condition, results of operations and changes in financial position
in conformity with accounting principles generally accepted in the United States of America.
However, in the opinion of management, all adjustments (which are normal and recurring in nature)
necessary for a fair presentation have been included. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The results of operations for the three months and nine
months ended March 31, 2005 are not necessarily indicative of the results that may be expected for
the entire year. Note B  Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of Midland
Capital Holdings Corporation (the Company) and its wholly-owned subsidiary, Midland Federal
Savings and Loan Association (the Association) and the Associations wholly-owned subsidiaries,
Midland Federal Service Corporation, Midland Insurance Services, Inc. and Bridgeview Development
Company. All significant intercompany accounts and transactions have been eliminated in
consolidation. Note C  Earnings Per Share Earnings per share for the three month and nine month periods ended March 31, 2005 and 2004 were
determined by dividing net income for the period by the weighted average number of shares of common
stock outstanding (see Exhibit 11 attached). Stock options are regarded as common stock
equivalents and are therefore considered in diluted earnings per share calculations. Common stock
equivalents are computed using the treasury stock method. Note D  Industry Segments The Company operates principally in the thrift industry through its subsidiary savings and loan.
As such, substantially all of the Companys revenues, net income, identifiable assets and capital
expenditures are related to thrift operations. Note E  Effect of New Accounting Pronouncements In March 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force on Issue
03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments
(EITF 03-1). EITF 03-1 provides guidance for determining when an investment is considered
impaired, whether that impairment is other-than-temporary, and measuring an impairment loss. An
investment is considered impaired if the fair value of the investment is less than its cost.
Generally, an impairment is considered other-than-temporary unless: (a) the investor has the
ability an intent to hold an investment for a reasonable period of time sufficient for a forecasted
recovery of fair value up to (or beyond) the cost of the investment; and (b) evidence indicating
that the cost of the investment is recoverable within a reasonable period to time outweighs
evidence to the contrary. If impairment is determined to be other-than-temporary, then an
impairment loss is recognized equal to the difference between the investments cost and its fair
value. The guidance also includes accounting considerations subsequent to recognition of an
other-than-temporary impairment and requires disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. -5-




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Note E  Effect of New Accounting Pronouncements (continued) With the release of FASB Staff Position (FSP) EITF 03-1 on September 30, 2004, the FASB staff
delayed the effective date of the other-than-temporary impairment evaluation guidance of EITF 03-1
(which was initially to be applied prospectively to all current and future investments in interim
and annual reporting periods beginning after June 15, 2004). FSP EITF 03-1 delays the effective
date of the measurement and recognition guidance until certain implementation issues are addressed
and a final FSP providing implementation guidance is issued. The amount of any
other-than-temporary impairment that may need to be recognized in the future will be dependent on
market conditions, the occurrence of certain events or changes in circumstances relative to an
investee, the final guidance issued by the FASB, and the Companys intent and ability to hold the
impaired investments at the time of the valuation. In December 2004, the FASB issued Statement No. 123 (revised 2004), Shared-Based Payment (SFAS
No. 123R). SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based
Compensation, supersedes APB 25, and amends FASB Statement No. 95, Statement of Cash Flows.
SFAS No. 123R establishes standards for the accounting for transactions in which an entity (i)
exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for
goods or services that are based on the fair value of the entitys equity instruments or that may
be settled by the issuance of the equity instruments. SFAS No. 123R eliminates the ability to
account for stock-based compensation using APB 25 and requires that such transactions be recognized
as compensation cost in the income statement based on their fair values on the date of the grant.
The effective date of SFAS No. 123R is the beginning of the Companys next fiscal year that begins
after December 15, 2005. SFAS No. 123R permits companies to adopt the recognition requirements
using either a modified prospective method or a modified retrospective method. Under the
modified prospective method, compensation cost is recognized in the financial statements
beginning with the effective date, based on the requirements of SFAS No. 123R for all shared-based
payments granted after that date, and based on the requirements of SFAS No. 123R for all unvested
awards granted prior to the effective date of SFAS No. 123R. Under the modified retrospective
method, the requirements are the same as under the modified prospective method, but also permits
entities to restate financial statements of previous periods based on pro forma disclosures made in
accordance with SFAS No. 123. The Company currently expects to adopt SFAS No. 123R effective July 1, 2006. The Company currently
uses the intrinsic value method as permitted by APB 25 to account for its shared-based payments to
employees, and as such, generally recognizes no compensation expense for employee stock options.
Accordingly, adopting of SFAS No. 123R will result in the Company recording compensation cost for
employee stock options. Future levels of compensation cost recognized related to shared-based
compensation awards may be impacted by new awards and/or modification, repurchases, and
cancellations of existing awards before and after the adoption of this standard. The foregoing does not constitute a comprehensive summary of all material changes or developments
affecting the manner in which the Company keeps its books and records and performs its financial
accounting responsibilities. It is intended only as a particular interest to financial
institutions. Note F  Subsequent Event


In March 2005, the shareholders of Intrieve, Incorporated, (Intrieve) the Associations data
processing provider, approved the sale and merger of Intrieve into Harland Financial Solutions,
Inc., a wholly owned subsidiary of John H. Harland Company. This transaction closed in April 2005.
As a shareholder of Intrieve, the Association received $344,000 in cash on its $15,000 investment,
resulting in a gain of $329,000, which will be recorded in the fourth quarter of the Companys
fiscal year ended June 30, 2005. -6-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS When used in this Form 10-QSB and in future filings by the Company with the Securities and Exchange
Commission, in the Companys press releases or other public or shareholder communications, or in
oral statements made with the approval of an authorized executive officer, the words or phrases
would be, will allow, intends to, 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 and real estate values nationally and in the Companys market area, changes
in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the
Companys market area and competition, all or some of which could cause actual results to differ
materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and advises readers that various factors,
including regional and national economic conditions, substantial changes in levels of market
interest rates, credit and other risks of lending and investment activities and competitive and
regulatory factors, could affect the Companys financial performance and could cause the Companys
actual results for future periods to differ materially from those anticipated or projected. The Company does not undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events or circumstances after
the date of such statements. GENERAL Midland Capital Holdings Corporation (the Company) is a Delaware corporation that was organized
for the purpose of becoming the thrift holding company for Midland Federal Savings and Loan
Association (the Association or Midland Federal). The Association converted from a federal
mutual savings and loan association to a federal stock savings and loan association on June 30,
1993 (the Conversion). In the Conversion, 345,000 shares of common stock, par value of $.01 per
share, of the Association were sold in an initial public offering for an aggregate consideration of
$3.45 million. On July 23, 1998, as a result of a re-organization, the Association became a wholly
owned subsidiary of the Company, and each outstanding share of common stock of the Association
became, by
operation of law, one share of common stock of the Company. At March 31, 2005, there were 372,600
shares of the Companys common stock outstanding. The principal asset of the Company is the outstanding stock of the Association. The Company
presently has no separate operations and its business consists only of the business of the
Association and its subsidiaries. Midland Federal has been principally engaged in the business of
attracting deposits from the general public and using such deposits to originate one to four family
residential mortgage loans, and to a lesser extent, consumer, multi-family and other loans in its
primary market area. The Association also has made substantial investments in mortgage-backed
securities, investment securities and liquid assets. Midland Federal also operates a wholly-owned
subsidiary, Midland Federal Service Corporation that owns and operates Midland Insurance Services,
Inc., a full service retail insurance agency. -7-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES GENERAL (continued) The Associations primary market area consists of Southwest Chicago, and the southwest suburban
communities of Bridgeview, Oak Lawn, Palos Hills, Hickory Hills, Justice, Burbank, Chicago Ridge,
Homer Glen, Lockport, Orland Park and Lemont. The Company serves these communities through its
main office in Bridgeview, two branch banking offices in southwest Chicago and a third branch
banking office in Homer Glen, Illinois. The Associations deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation (FDIC). At March 31, 2005, Midland Federals
capital ratios exceeded all of its regulatory capital requirements with both tangible and core
capital ratios of 7.52% and a risk-based capital ratio of 13.83%. FINANCIAL CONDITION At March 31, 2005, total assets of the Company decreased by $12.6 million to $141.0 million from
$153.6 million at June 30, 2004. Loans receivable, including loans available for sale, increased
$1.8 million to $96.4 million at March 31, 2005. The Company originated $17.4 million of primarily
fixed rate loans during the nine months ended March 31, 2005 compared to loan originations of $33.8
million during the prior year period. The lower loan origination volume in the current nine month
period was due in part to a decrease in the amount of mortgage refinancing activity. Offsetting
loan originations in the current nine month period were loan repayments of $14.4 million as well as
loan sales of $1.1 million. There were no new purchases of mortgage-backed securities during the
nine months ended March 31, 2005 and as a result, the balance of mortgage-backed securities
decreased by $869,000 to $2.1 million due to repayments and amortization. The balance of investment securities available for sale remained stable and totaled $1.3 million at
March 31, 2005 compared to $1.2 million at June 30, 2004. Gross unrealized gains in the available
for sale portfolio were $272,000 at March 31, 2005 compared to gross unrealized gains of $253,000
at June 30, 2004, reflecting the positive impact of lower long term interest rates. The weighted
average remaining term to maturity of the Companys total investment securities portfolio at March
31, 2005 was 11.9 years. The Company decreased the balance of cash and cash equivalents by $13.6 million to $36.9 million at
March 31, 2005 from $50.5 million at June 30, 2004 to fund the decline in deposit liabilities
discussed below. Non-performing assets consisted of $302,000 in non-accruing loans at March 31, 2005 compared to
$55,000 at June 30, 2004. Non-accruing loans at March 31, 2005 consisted of $245,000 in
one-to-four family residential mortgage loans and $57,000 in non-mortgage
loans. The allowance for loan losses decreased by $1,000 to $459,000 at March 31, 2005 as a result
of net loan charge offs. The Company made no loan loss provision during the nine months ended
March 31, 2005. At March 31, 2005 the Companys ratio of allowance for loan losses to
non-performing loans was 151.69% compared to 829.00% at June 30, 2004. Management believes that
the current allowance for loan losses is adequate to cover probable accrued losses in the
portfolio. -8-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES FINANCIAL CONDITION (continued) The following table sets forth the amounts and categories of non-performing assets in the Companys
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. Foreclosed assets, if
any, include assets acquired in settlement of loans. March 31,
    
    
    June 30,2005
    
    
    2004(Dollars in Thousands)Non-Accruing Loans:One-to-four family
    
    $
    245
    
    
    $
    36Multi-family
    
    
    
    
    
    
    Consumer
    
    
    57
    
    
    
    19Commercial business
    
    
    
    
    
    
    Total non-performing loans
    
    $
    302
    
    
    $
    55Foreclosed Assets:One-to-four family
    
    
    
    
    
    
    Total foreclosed assets
    
    
    
    
    
    
    Total non-performing assets
    
    $
    302
    
    
    $
    55Total as a percentage of total assets
    
    
    0.21
    %
    
    
    0.04
    %
 As of March 31, 2005, there were no loans not included in the above table 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. -9-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES FINANCIAL CONDITION (continued) The following table sets forth an analysis of the Companys allowance for loan losses. Nine Months EndedMarch 31,2005
    
    
    2004(Dollars in Thousands)Balance at beginning of period
    
    $
    460
    
    
    $
    410Charge-offs:One-to-four family loans
    

    
    
    
    
    
    Consumer loans
    
    
    1
    
    
    
    10Commercial business loans
    
    
    
    
    
    
    8Total charge-offs
    
    
    1
    
    
    
    18Recoveries:One-to-four family loans
    
    
    
    
    
    
    Multi-family loans
    
    
    
    
    
    
    Consumer loans
    
    
    
    
    
    
    Total recoveries
    
    
    
    
    
    
    Net (charge-offs) recoveries
    
    
    (1
    )
    
    
    (18
    )Additions charged to operations
    
    
    
    
    
    
    45Balance at end of period
    
    $
    459
    
    
    $
    437Ratio of net charge-offs during the period to
average loans outstanding during the period
    
    
    .01
    %
    
    
    .02
    %Ratio of net charge-offs during the period to
average non-performing assets
    
    
    .46
    %
    
    
    5.34
    %Allowance for loan losses to non-performing loans
at end of period
    
    
    151.69
    %
    
    
    327.58
    %Allowance for loan losses to total loans
at end of period
    
    
    0.47
    %
    
    
    0.47
    %
 The Company was aware of no regulatory directives or suggestions that the Association make
additional provisions for losses on loans. Although the Company believes its allowance for loan
losses is at a level that it considers adequate to provide for probable accrued losses in the
portfolio, there can be no assurance that such losses will not exceed the estimated amounts. Deposits for the nine months ended March 31, 2005 decreased $13.0 million as a result of net
withdrawals in the amount of $13.9 million offset by interest credited to deposits in the amount of
$959,000. The net decrease in deposits is primarily attributed to managements deposit pricing
controls as well as increased pricing competition for interest costing deposits in the current
rising interest rate environment. Also, management did not price deposits aggressively in light of
paucity of investment opportunities and the possibility of near term rate increases. The decrease
in deposits is the result of a $6.2 million decrease in certificate of deposit accounts, a $5.3
million decrease in passbook deposit accounts, a $1.3 million decrease in money market accounts and
a $348,000 decrease in NOW accounts offset by a $260,000 increase in demand deposit accounts. -10-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES FINANCIAL CONDITION (continued) Stockholders equity increased $513,000, or 4.4%, to $12.3 million at March 31, 2005 from $11.7
million at June 30, 2004. The increase in stockholders equity was due to net income of $724,000
and an increase in accumulated other comprehensive income of $13,000 offset by the payment of cash
dividends in the amount of $224,000. RESULTS OF OPERATIONS The Company had net income of $251,000 for the quarter ended March 31, 2005 compared to net income
of $193,000 for the quarter ended March 31, 2004. The increase in net income in the current
quarter is the result of a $166,000 increase in net interest income, a $15,000 decrease in
provision for loan losses and a $12,000 decrease in non-interest expense offset by a $106,000
decrease in non-interest income and a $30,000 increase in income taxes. For the nine months ended March 31, 2005 the Company had net income of $724,000 compared to net
income of $858,000 for the nine months ended March 31, 2004. Net income in the nine months ended
March 31, 2004 was increased by the collection of non-accruing loan interest in the amount of
$218,000, a $433,000 gain from the satisfaction of deficiency judgments (both as a result of loan
workout agreements) and an $87,000 gain on the sale of a non-performing loan, without recourse.
The current nine month period also included the collection of non-accruing loan interest from a
loan workout agreement in the amount of $45,000. Exclusive of the after tax impact of these items
in both periods, net income for the nine months ended March 31, 2005 would have been $694,000,
compared to net income of $370,000 for the nine months ended March 31, 2004. The Companys interest rate spread increased to 3.66% for the quarter ended March 31, 2005 from
2.96% for the prior year quarter. The increase in interest rate spread was due to an increase in
the average yield earned on interest earning assets to 4.81% in the quarter ended March 31, 2005
from 4.18% in the prior year quarter as well as a decrease in the Companys average cost of
interest costing deposits to 1.15% in the quarter ended March 31, 2005 from 1.22% in the prior year
quarter. The average balance of net earning assets (average interest earning assets minus average
interest bearing liabilities) also increased by $4.0 million to $20.3 million compared with the
prior year period. For the nine months ended March 31, 2005, interest rate spread increased to 3.50% compared to 2.98%
in the prior year nine month period. Interest rate spread increased in the nine months ended March
31, 2005 compared with the prior year period as a result of both an increase in yields on interest
earning assets and a decrease in the average yield
paid on interest costing deposits. The increase in spread was due in part to deposit pricing
discipline as well as an increase in the proportion of the Companys assets consisting of loans.
The average balance of net earning assets in the nine months ended March 31, 2005 increased by $3.3
million to $19.5 million compared with the prior year period. Interest Income Interest income increased $101,000, or 6.2%, for the quarter ended March 31, 2005 as compared to
the same period last year. The increase in interest income is attributed to an increase in the
average yield earned on interest earning assets which offset a decline in the average outstanding
balance of interest earning assets. The average yield on interest earning assets increased to
4.81% for the quarter ended March 31, 2005 from 4.18% in the prior year quarter. The average
outstanding balance of interest earning assets decreased by $11.0 million to $135.9 million for the
quarter ended March 31, 2005 compared to $146.9 million for the quarter ended March 31, 2004 due
primarily to a decline in cash equivalents. -11-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES Interest Income (continued) For the nine months ended March 31, 2005, interest income remained stable at $4.8 million compared
with the prior year period as an increase in the average yield earned on interest earning assets
offset a decrease in the average outstanding balance of interest earning assets. The average yield
on interest earning assets increased to 4.62% for the nine months ended March 31, 2005 compared to
4.34% for the year earlier period. The average outstanding balance of interest earning assets
decreased by $9.1 million to $139.5 million for the nine months ended March 31, 2005 from $148.6
million for the prior year period. Interest on loans receivable increased $37,000, or 2.8%, in the quarter ended March 31, 2005,
compared with the prior year quarter, as a result of a $2.8 million increase in the average
outstanding balance of loans receivable to $96.3 million. The increase in the average outstanding
balance of loans receivable offset a slight decline in the average yield earned on loans receivable
to 5.72% for the quarter ended March 31, 2005 from 5.74% for the prior year period. Interest on mortgage-backed securities decreased $27,000, or 57.3%, for the quarter ended March 31,
2005 from the comparable quarter in 2004. The decrease in interest income is attributed to a
decrease in the average balance of mortgage-backed securities due to repayments as well as a
decrease in the average yield earned on mortgage-backed securities. For the quarter ended March
31, 2005, the average balance of mortgage-backed securities decreased $1.9 million to $2.1 million
from $4.0 million in the prior year quarter. The average yield earned on mortgage-backed
securities also decreased to 3.74% for the quarter ended March 31, 2005 from 4.71% for the quarter
ended March 31, 2004. The decrease in the average yield earned on mortgage-backed securities was
primarily the result of the repayment at maturity of higher yielding balloon mortgage-backed
securities in the portfolio. Interest earned on investment securities remained stable at $19,000 for the quarter ended March 31,
2005 compared with the prior year period. There was no change in the composition of securities in
the investment portfolio between the two periods, however, due to a decline in the fair value of
the securities in the portfolio, the average yield earned on investment securities increased to
5.98% for the quarter ended March 31, 2005 compared to 5.83% for the year earlier period and the
average outstanding balance of investment securities decreased by $33,000 to $1.3 million for the
quarter ended March 31, 2005 from the prior year period. Interest earned on interest bearing deposits increased $92,000, or 83.5%, for the quarter ended
March 31, 2005 from the 2004 quarter. The increase in interest income is attributed to an increase
in the average yield earned on interest bearing deposits. For the quarter ended March 31, 2005,
the average yield earned on interest bearing deposits increased to 2.31% from 0.94% for the quarter
ended March 31, 2004. The increase in the average yield earned on interest bearing deposits was
offset by a $12.1 million decrease in the average balance of interest bearing deposits to $35.1
million from $47.2 million in the 2004 quarter. The Company decreased its balance of interest
bearing deposits in order to fund the $13.0 million decrease in deposit liabilities, discussed
above. -12-




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MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES Interest Income (continued) For the nine months ended March 31, 2005 interest on loans receivable decreased $49,000, or 1.2%,
compared with the prior year period. The decrease in interest income was primarily attributed to a
decrease in the average yield earned on loans receivable to 5.74% for the nine months ended March
31, 2005 compared to 6.00% for the nine months ended March 31, 2004. The primary factor for the
decrease in the average yield earned on loans receivable was the collection of $45,000 of
non-accruing loan interest in the current period as compared to the collection of $218,000 of
non-accruing loan interest in the prior year period, as discussed above. The decrease in the
average yield on loans receivable was partially offset by a $3.1 million increase in the average
outstanding balance of net loans receivable to $96.1 million for the nine months ended March 31,
2005 from $93.0 million for the nine months ended March 31, 2004. For the nine months ended March 31, 2005 interest earned on mortgage backed securities decreased
$98,000 to $68,000. The decrease in interest income is attributed to a decrease in the average
outstanding balance of mortgage-backed securities as well as a decrease in the average yield earned
on mortgage-backed securities. The average outstanding balance of mortgage-backed securities
decreased by $2.2 million to $2.4 million for the nine months ended March 31, 2005 from $4.6
million in the 2004 period. The average yield earned on mortgage-backed securities also decreased
to 3.85% for the nine months ended March 31, 2005 from 4.86% for the comparable prior year period. For the nine months ended March 31, 2005 interest earned on investment securities decreased $42,000
to $57,000. The decrease in interest income is attributed to a $1.7 million decrease in the
average outstanding balance of investment securities to $1.3 million for the nine months ended
March 31, 2005 from $3.0 million in the prior year period. The decrease in the average outstanding
balance of investment securities was offset by an increase in the average yield earned on
investment securities to 5.96% for the nine months ended March 31, 2005 from 4.49% in the
comparable prior year period. For the nine months ended March 31, 2005 interest earned on interest bearing deposits increased
$189,000 from the year earlier period. The increase in interest income was primarily due to an
increase in the average yield earned on interest bearing deposits to 1.81% for the nine months
ended March 31, 2005 from 0.95% for the prior year period. The increase in the average yield
earned on interest bearing deposits offset a decrease in the average outstanding balance of
interest bearing deposits to $38.7 million for the nine months ended March 31, 2005 from $47.0
million for the comparable prior year period. Interest Expense Interest expense decreased $65,000, or 16.4%, for the quarter ended March 31, 2005 compared with
the prior year quarter. The decrease in interest expense is the result of a decline in the average
outstanding balance of interest costing deposits as well as a decrease in the average yield paid on
interest costing deposits. For the quarter ended March 31, 2005 the average outstanding balance of
interest costing deposits decreased by $15.0 million to $115.6 million from $130.6 million for the
prior year quarter and the average yield paid on interest costing deposits decreased to 1.15% from
1.22% for the quarter ended March 31, 2004. For the nine months ended March 31, 2005 interest expense decreased $331,000 to $1.0 million from
$1.3 million for the prior year period. The decrease in interest expense in the nine month period
is also the result of declines in both the average outstanding balance of interest costing deposits
and the average yield paid on interest costing deposits. For the nine months ended March 31, 2005
the average outstanding balance of interest costing deposits decreased by $12.3 million to $120.1
million and the average yield paid on interest costing deposits decreased to 1.13% from 1.36% for
the nine months ended March 31, 2004 due to a decrease in the proportion of certificate of deposit
accounts. -13-




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##### Table of Contents



MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES Provisions for Losses on Loans The Company maintains an allowance for loan losses based upon managements periodic evaluation of
probable accrued losses in the portfolio based on known and inherent risks in the loan portfolio,
the Companys past loan loss experience, adverse situations that may affect borrowers ability to
repay loans, estimated value of the underlying collateral and current and expected market
conditions. The allowance for loan loses totaled $459,000, or .47% of total loans, at March 31,
2005 compared to $460,000, or .49% of total loans, at June 30, 2004. The $1,000 decrease in the
Companys allowance for loan losses during the current nine month period was the result of net loan
charge offs. At March 31, 2005, after consideration of the high concentration of one-to-four
family mortgage loans in the loan portfolio, peer data, current economic conditions, trends in the
portfolio, the low level of loan charge offs and the strong housing market, the $459,000 allowance
for loan losses was determined by the Company to be sufficient to cover probable accrued losses in
the loan portfolio consistent with its policy for the establishment and maintenance of adequate
levels of loan loss reserves. As a result, the Company made no loan loss provision during the nine
months ended March 31, 2005. Non-Interest Income Non-interest income decreased $106,000 to $179,000 in the quarter ended March 31, 2005 from
$285,000 in the quarter ended March 31, 2004. The decrease in non-interest income was primarily
the result of an $87,000 gain on the sale of a non-performing loan, without recourse, in the prior
year quarter. Non-interest income also decreased as a result of an $11,000 decrease in loan fees
and service charges and an $8,000 decrease in deposit related fees. For the nine months ended March 31, 2005 non-interest income decreased $726,000 to $611,000 from
$1.3 million in the prior year period. The decrease in non-interest income was primarily the
result of a $433,000 gain from the satisfaction of deficiency judgments and the $87,000 gain on the
non-performing loan sale, discussed above, both of which occurred in the prior year period.
Non-interest income in the current nine month period also decreased as a result of a $143,000
decrease in loan fees and service charges, a $39,000 decrease in deposit related fees and an
$11,000 decrease in commission income. The decrease in loan fees and service charges in the
current nine month period is attributed to a decrease in loan origination activity from the prior
year period due to a reduction in loan refinancing activity. Non-Interest Expense Non-interest expense decreased $12,000 to $1.1 million in the quarter ended March 31, 2005 compared
to the prior year quarter. The decrease in non-interest expense is primarily the result of a
$16,000 decrease in office occupancy expense, a $5,000 decrease in professional fees and a $2,000
decrease in data processing fees, offset by a $15,000 increase in computer software and support
expense. Staffing costs declined slightly to $640,000 from $642,000 in the prior year quarter
despite a $10,000 increase in employee medical and pension benefits. The decrease in office
occupancy expense is primarily attributed to an $11,000 decrease in depreciation expense. For the nine months ended March 31, 2005 non-interest expense decreased $151,000 to $3.3 million
from $3.5 million in the prior year period. The primary factors for the decrease in non-interest
expense in the current nine month period were a $79,000 decrease in office occupancy expense, a
$68,000 decrease in staffing costs, an $18,000 decrease in professional fees and a $3,000 decrease
in data processing fees offset by a $24,000 increase in computer software and support expense. The
decrease in staffing costs is primarily attributed to an $88,000 decrease in loan origination
commissions offset by a $56,000 increase in costs for employee medical and pension benefits. The
decrease in office occupancy expense is primarily the result of a $51,000 decrease in depreciation
expense. -14-




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##### Table of Contents



MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES Income Taxes Income taxes increased $30,000 to $129,000 in the quarter ended March 31, 2005 from $99,000 for the
prior year quarter as a result of the increase in operating income from the prior year quarter. For the nine months ended March 31, 2005 income taxes decreased $69,000 to $373,000 compared to
$442,000 in the prior year period. The decreased income tax provision was due primarily to the
decrease in operating income in the nine months ended March 31, 2005 as compared to the nine months
ended March 31, 2004. The effective income tax rate in all periods presented was 34.0%. LIQUIDITY AND CAPITAL RESOURCES The Companys principal sources of funds are deposits, loan and mortgage backed securities
repayments, proceeds from the maturities of investment securities and other funds provided by
operations. The Company maintains investments in liquid assets based upon managements assessment
of (i) the Companys need for funds, (ii) expected deposit flows, (iii) the yields available on
short-term liquid assets and (iv) the objectives of the Companys asset/liability management
program. At March 31, 2005 the Company had commitments to originate $2.3 million in loans, all of
which were one-to-four family loans as well as loans in process of $33,000 and unused lines of
credit of $3.4 million. At March 31, 2005 the Company also had commitments to sell $157,000 of
loans. Also on that date, the Company had $28.2 million of certificate of deposit accounts
maturing within one year. The Company uses its capital resources principally to meet its ongoing commitments to fund maturing
certificate of deposits and deposit withdrawals, fund existing and continuing loan commitments,
maintain its liquidity and meet operating expenses. The Company considers its liquidity and
capital reserves sufficient to meet its outstanding short and long-term needs. The Company expects
to be able to fund or refinance, on a timely basis, its material commitments and long-term
liabilities. At March 31, 2005, the Association had tangible and core capital of $10.6 million, or 7.52% of
adjusted total assets, which was approximately $8.5 million and $6.4 million above the minimum
requirements in effect on that date of 1.5% and 3.0%, respectively, of adjusted total assets. At March 31, 2005, the Association had total capital of $11.1 million (including $10.6 million in
core capital) and risk-weighted assets of $80.0 million, or total capital of 13.83% of
risk-weighted assets. This amount was $4.7 million above the 8.0% requirement in effect on that
date. -15-




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##### Table of Contents



MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES 
 Item 3. 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 communications between the Chief
Executive and Financial Officer and each department head to identify any new 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. Finally, the Chief
Executive and Financial Officer and certain of the Companys other Officers meet on a regular basis
to review the Companys financial statements and certain documents related to material
transactions. 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 control
over financial reporting. -16-




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##### Table of Contents



MIDLAND CAPITAL HOLDINGS CORPORATION 
 PART II  OTHER INFORMATION 
 Item 1. LEGAL PROCEEDINGS From time to time, the Association is a party to legal proceedings wherein it enforces its security
interest or is a defendant to certain lawsuits arising out of the ordinary course of its business.
Neither the Company nor the Association believes that it is a party to any legal proceedings which
if adversely determined would have a material adverse effect on its financial condition at this
time. 
 Item 2. CHANGES IN SECURITIES Not applicable. 
 Item 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 
 Item 5. OTHER INFORMATION Not applicable. 
 Item 6. EXHIBITS See Exhibit Index. -17-




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##### Table of Contents



INDEX TO EXHIBITS ExhibitNumber
    
    Description11
    
    Computation of Per Share Earnings31.1
    
    Rule 13a-14(a)/15d-14(a) Certification32.1
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 -18-




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SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. MIDLAND CAPITAL HOLDINGS CORPORATIONRegistrantDATE: May 13, 2005
    
    BY:
    
    /s/ Paul ZogasPaul ZogasPresident, Chief Executive Officerand Chief Financial OfficerDATE: May 13, 2005
    
    BY:
    
    /s/ Charles ZogasCharles ZogasExecutive Vice President andChief Operating Officer