Exhibit 13

                        ANNUAL REPORT TO SECURITYHOLDERS



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                                Corporate Profile
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Midland Capital Holdings  Corporation (the "Company") is a Delaware  corporation
that was organized in 1998 by Midland Federal Savings and Loan  Association (the
"Association"  or "Midland  Federal")  for the  purpose of  becoming  its thrift
institution   holding  company.   Both  the  Company  and  the  Association  are
headquartered  in  Bridgeview,  Illinois,  a southwest  suburb of  Chicago.  The
Association was incorporated  July 18, 1914 with the goal of providing  personal
financial  services and home mortgage  loans to  communities  located within the
southwest  side of the city of Chicago.  The Company  continues  to fulfill that
role today with two branch  banking  offices  located in the  Brighton  Park and
Marquette  Park  neighborhoods  of the city of Chicago,  a branch banking office
located in Homer  Glen,  Illinois,  a  southwest  suburb of Chicago and its home
office in  Bridgeview,  Illinois.  Midland  Federal also operates a wholly owned
subsidiary,  Midland  Service  Corporation.  Common  stock  in  Midland  Capital
Holdings  Corporation is traded on the Electronic Bulletin Board of the National
Association of Securities Dealers.
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Table of Contents

Letter to Shareholders.......................  2

Financial Highlights.........................  3

Selected Consolidated Financial
  Information................................  4

Management's Discussion and Analysis.........  6

Independent Auditor's Report................. 21

Consolidated Statements of
  Financial Condition........................ 22

Consolidated Statements of Income............ 23

Consolidated Statements of Changes in
  Stockholders' Equity....................... 24

Consolidated Statements of Cash Flows........ 25

Notes to Consolidated Financial
  Statements................................. 26



<PAGE>


To Our Shareholders,

     Midland Capital Holdings Corporation completed its fiscal year ended June
30, 2003 with earnings of $690,000, or $1.88 per diluted common share. The
Company achieved strong growth in its retail franchise during fiscal 2003. The
Company's assets totaled $160 million at June 30, 2003, a year-end record. The
increase in total assets was driven by another year of growth in the Company's
lending operations to $93.3 million in total loans at fiscal year end, also a
record level. Total deposits increased to a record year-end level of $147.5
million and total stockholders' equity rose to a record $11.1 million, resulting
in a book value per common share of $29.67 at June 30, 2003.

     Asset quality continued to be strong in fiscal 2003 with non-performing
loans totaling .52% of total loans at June 30, 2003 and the Company's allowance
for loan losses amounting to 84.8% of total non-performing loans at fiscal year
end. Also at June 30, 2003, the Company's ratio of stockholders' equity to total
assets equaled 6.91% and its banking subsidiary, Midland Federal, continued to
meet all of the regulatory capital requirements as a "well capitalized"
institution during fiscal 2003.

     As a result of the Company's positive financial performance the Board of
Directors increased the amount of cash dividends paid to $0.60 per common share
in fiscal 2003.

     Finally, June 30, 2003 marks the tenth anniversary of Midland Federal
Savings' conversion from a federal mutual savings and loan association to a
federal stock savings and loan association and its initial public offering of
common stock, priced at $10.00 per share. I wish to thank all of those original
investors who are still shareholders in Midland Capital Holdings Corporation
today, and all of our other shareholders who have participated in our growth and
prosperity. We look forward to continued success in the coming year.

                                                          Sincerely,

                                                          /s/ Paul Zogas
                                                          ----------------------
                                                          Paul Zogas
                                                          Chairman and President


<PAGE>





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                              FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------


                                              Year Ended June 30,
                                    2003     2002     2001     2000     1999
                                 ____________________________________________

                                            (Dollars in Thousands)

Total assets.................... $159,976  150,589 $142,496  137,225  117,373
Loans receivable, net...........   93,300   86,087   68,486   53,030   49,349
Mortgage-backed securities......    6,272   10,360   17,310   21,854   15,882
Cash and cash equivalents.......   49,421   32,921   20,719   32,666   35,020
Investment securities ..........    6,389   16,306   31,338   25,033   25,092
Deposits........................  147,490  138,444  131,504  126,870  120,225
Stockholders' equity............   11,056   10,397    9,662    9,257    8,996

For the Period:
  Net interest income........... $  4,554    4,448    3,661    3,510    3,154
  Net income ...................      690      866      379      372      365

Per Common Share:
  Book value per share
    outstanding................. $  29.67    28.56    26.55    25.43    24.71

  Earnings per share outstanding
    basic....................... $   1.88     2.38     1.04     1.02     1.00
    diluted..................... $   1.88     2.36     1.03     1.01      .99

Financial Ratios:
  Stockholders' equity to
    total assets................     6.91%    6.90     6.78     6.75     6.91
  Non-performing assets to
    total assets................      .30%     .11      .16      .21      .38
  Net charge-offs to total loans      .00%     .03      .04       --      .06
  Net interest margin...........     3.05%    3.19     2.73     2.65     2.73
  Operating expenses to
    average assets..............     2.96%    2.90     2.85     2.75     3.01
  Return on average assets......      .44%     .59      .27      .27      .30
  Return on average
    Stockholders' equity........     6.41%    8.69     4.01     4.12     4.08




                                       3

<PAGE>

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                   SELECTED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------------------------------------------


SELECTED FINANCIAL CONDITION DATA:
                                                   At June 30,
                                    2003     2002     2001     2000     1999
                                 ____________________________________________

                                                 (In Thousands)

Total assets.................... $159,976  150,589  142,496  137,225  130,193
Loans receivable, net...........   93,300   86,087   68,486   53,030   49,349
Mortgage-backed securities......    6,272   10,360   17,310   21,854   15,882
Cash and cash equivalents.......   49,421   32,921   20,719   32,666   35,020
Investment securities ..........    6,389   16,306   31,338   25,033   25,092
Deposits........................  147,490  138,444  131,504  126,870  120,225
Stockholders' equity............ $ 11,056   10,397    9,662    9,257    8,996


SELECTED OPERATIONS DATA:                     Year Ended June 30,
                                    2003     2002     2001     2000     1999
                                 ____________________________________________

                                                 (In Thousands)

Total interest income........... $  7,278    8,282    8,975    8,473    7,333
Total interest expense..........    2,724    3,834    5,314    4,963    4,179
                                 --------  -------  -------  -------  -------
Net interest income.............    4,554    4,448    3,661    3,510    3,154

Provision for loan losses.......       60       15       --       --       --
                                 --------  -------  -------  -------  -------
  Net interest income after
    provision for loan losses...    4,494    4,433    3,661    3,510    3,154

Non-interest income:
Loan related fees and charges...      542      429      269      198      300
Deposit related fees............      512      514      481      500      529
Commission income...............       70       74       73       64      105
Income from real estate owned...       --       --        1        7       89
Profit on sale of loans.........       27       44        7       36       45
Other income....................       57       67       87       75       87
                                 --------  -------  -------  -------  -------
Total non-interest income.......    1,208    1,128      918      880    1,155
                                 --------  -------  -------  -------  -------


Non-interest expense:
Staffing costs..................    2,627    2,381    2,163    1,956    2,008
Occupancy and equipment expense.      773      745      713      721      576
Deposit insurance premiums......       24       24       26       47       64
Advertising expense.............       58       57       82      119       93
Data processing fees............      207      209      195      176      200
Legal, audit and examination....      141      125      139      140      145
Other expense...................      820      707      686      680      671
                                 --------  -------  -------  -------  -------
  Total non-interest expense....    4,650    4,248    4,004    3,839    3,757
                                 --------  -------  -------  -------  -------

Income before income taxes......    1,052    1,313      575      551      552
Provision for income taxes......      362      447      196      179      187
                                 --------  -------  -------  -------  -------

Net income ..................... $    690      866      379      372      365
                                 ========  =======  =======  =======  =======


                                       4

<PAGE>


--------------------------------------------------------------------------------
                   SELECTED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------------------------------------------


SELECTED FINANCIAL RATIOS:
                                        At or For the Year Ended June 30,
                                    2003     2002     2001     2000     1999
                                 ____________________________________________

Performance Ratios:
Return on average assets........     .44%     .59      .27      .27      .30
Return on average stockholders'
  equity........................    6.41%    8.69     4.01     4.12     4.08

Interest rate spread during
  period........................    2.85%    2.89     2.30     2.28     2.34
Net interest margin (1).........    3.05%    3.19     2.73     2.65     2.73
Ratio of operating expenses to
  average total assets..........    2.96%    2.90     2.85     2.75     3.01
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities..  111.07%  110.76   110.86   109.87   110.64

Asset Quality Ratios:
Non-performing assets to
  total assets..................     .30%     .11      .16      .21      .38
Allowance for loan losses to
  non-performing loans..........   84.80%  213.29   104.63    78.91    88.96
Allowance for loan losses to
  total loans...................     .44%     .41      .52      .69      .74

Capital Ratios:
Stockholders' equity to
  total assets..................    6.91%    6.90     6.78     6.75     6.91
Average stockholders' equity to
  average assets................    6.85%    6.80     6.73     6.47     7.33


(1)  Net interest income divided by average interest-earning assets.



                                       5
<PAGE>


                           MANAGEMENT'S DISCUSSION AND
                       ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS


Forward-Looking Statements

When used in this filing 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 in the Company's market area, changes in
policies by regulatory agencies, fluctuations in the amounts of and relationship
between long and short term 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 reorganization, 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 June 30, 2003
there were 372,600 shares of the Company's common stock outstanding.

The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest income earned on its loan,
mortgage-backed securities, and investment portfolios and its cost of

                                       6

<PAGE>

funds, consisting of the interest paid on its deposits. In addition, to a lesser
extent, the Company's operating results are affected by non-interest income and
non-interest expense. Non-interest expense includes operating expenses
consisting primarily of employee salaries and benefits, office occupancy
expenses, equipment costs, federal deposit insurance premiums, and other general
and administrative expenses. Operational results are also affected by general
economic conditions (particularly changes in interest rates), competition,
government policies and actions of regulatory agencies.

The Company's operating philosophy is to provide, in a safe and profitable
manner, financial services to families and local businesses in the communities
served by its four offices. The Company's immediate 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. Consistent with its operating philosophy, the Company
focuses upon 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. The Company also
invests in mortgage-backed securities, investment securities consisting
primarily of U.S. government and agency obligations and liquid assets in an
effort to supplement loan production and manage interest rate risk.


                        MANAGEMENT OF INTEREST RATE RISK

An evaluation of the interest rate risk position of a financial institution may
involve an examination of the sensitivity of the institution's balance sheet to
changes in interest rates and the capacity of the institution to absorb losses
resulting from movements in interest rates. The sensitivity of an institution's
balance sheet depends upon the composition of the institution's assets and
liabilities. The Company manages interest rate risk by analyzing the extent to
which its assets and liabilities are interest rate sensitive and then developing
strategies to reduce the vulnerability of its operations to changes in interest
rates.

Management uses analytical tools provided by the Office of Thrift Supervision
("OTS") to measure and predict the Association's level of interest rate risk
under a variety of market scenarios. In evaluating an institution's interest
rate risk profile, the OTS focuses on Net Portfolio Value ("NPV"), which is a
proxy for the economic value, or net present value, of an institution's worth.
NPV is defined as the present value of assets, less the present value of
liabilities, plus the net present value of off balance sheet contracts.

Certain shortcomings are inherent in the methodology described in the above
interest rate risk measurements. Measuring changes in NPV requires certain
assumptions that may oversimplify the manner in which actual yields and costs
respond to changes in market interest rates. For example, the model assumes that
the actual composition of the Association's interest sensitive assets and
liabilities remain constant over the period being measured. In addition, the
model assumes that a particular change in interest rates is reflected uniformly
across the yield curve regardless of the duration to maturity or re-pricing of
specific assets and liabilities. Also, the model does not take into account the
impact of changing interest rates on the credit quality of the underlying
assets. Finally, the model does not attempt to measure the impact of a change in
interest rates on a company's results of operations or net interest income.
Accordingly, although the NPV measurement provides an

                                       7
<PAGE>

indication of the Association's interest rate risk exposure at a particular
point in time, such measurement is not intended to, and does not provide, a
precise forecast of the effect of the changes in market interest rates on the
Association's financial position and actual results will likely differ from the
NPV presented below. The results of the OTS's NPV model are monitored by
management and presented to the Board of Directors quarterly.

The interest rate risk policy of the Association includes Board approved limits
on interest rate risk that are defined in terms of net portfolio value. These
limits specify the minimum NPV Ratio that the Board is willing to allow under
current interest rates and for a range of six hypothetical interest rate
scenarios of plus and minus 100, 200 and 300 basis points from the actual term
structure of interest rates observed at quarter end. The Association uses a
variety of tools to limit interest rate risk. First, the Association maintains a
relatively high level of liquidity and has focused its investment activities on
cash equivalents and short and intermediate term securities. Second, the
Association has focused a portion of its residential lending and investments on
adjustable-rate mortgages ("ARMs") and mortgage-backed securities which
generally both re-price within one year, although the Association continues to
originate long term fixed-rate mortgages in recognition of market demand in the
current interest rate environment and the potential for increased margin. Third,
the Association seeks to maintain a large percentage of its deposit liabilities
in passbook and transaction accounts, which are considered to be relatively
resistant to changes in interest rates.

The interest rate sensitivity of the Association's net portfolio value is shown
in the following table, which shows the NPV and projected change in the NPV of
the Association at June 30, 2003 assuming an instantaneous and sustained 300
basis point change in market interest rates, measured in 100 basis point
increments. As of June 30, 2003, due to the current level of interest rates, the
OTS did not provide NPV estimates for decreases in interest rates greater than
100 basis points.

                           NET PORTFOLIO VALUE      NPV AS % OF ASSETS
                           -------------------      ------------------

Change in Rates   $ Amount  $ Change  % Change      NPV Ratio  Change
---------------   --------  --------  --------      ---------  ------

(Basis Points)  (Thousands)
   +300 bp         10,741    -5,657      -35           6.62   -316 bp
   +200 bp         13,027    -3,371      -21           7.92   -186 bp
   +100 bp         15,228    -1,170      - 7           9.14   - 64 bp
      0 bp         16,398         -        -           9.78
   -100 bp         15,734      -664      - 4           9.42   - 36 bp


                      FINANCIAL CONDITION AT JUNE 30, 2003

At June 30, 2003 total assets of the Company increased by $9.4 million to $160.0
million from $150.6 million at June 30, 2002. This increase was the result of
increases in loans receivable and cash equivalents that were funded by
reductions in investment securities and mortgage-backed securities as well as a
$9.1 million increase in deposits to $147.5 million at June 30, 2003.

Loans receivable, including loans held for sale, increased $7.2 million to $93.3
million at June 30, 2003. The Company originated $55.8 million of loans during
the year ended June 30, 2003 compared to loan originations of

                                       8
<PAGE>


$41.8 million during the prior fiscal year. The higher loan origination volume
in fiscal 2003 was due in part to an increase in mortgage refinancing activity
as a result of the decline in interest rates that began in January 2001.
Offsetting loan originations in the current fiscal year were loan repayments of
$46.7 million as well as loan sales of $1.9 million. There were no new purchases
of mortgage-backed securities during fiscal 2003 and the balance of
mortgage-backed securities decreased by $4.1 million to $6.3 million at June 30,
2003 due to repayments and amortization.

Investment securities available for sale remained stable at $6.4 million at June
30, 2003. Gross unrealized gains in the available for sale portfolio were
$409,000 at June 30, 2003 compared to gross unrealized gains of $301,000 at June
30, 2002, reflecting the positive impact of lower interest rates. The balance of
investment securities classified as held to maturity was reduced to zero during
fiscal 2003 due to the maturity of the entire portfolio. The weighted average
remaining term to maturity of the Company's investment securities portfolio at
June 30, 2003 was 2.5 years compared to 1.6 years at June 30, 2002.

The Company increased the balance of cash and cash equivalents by $16.5 million
to $49.4 million at June 30, 2003 from $32.9 million at June 30, 2002 in
anticipation of an increase in economic activity and upward pressure on interest
rates in fiscal 2004. The increase in cash equivalents was funded by the
reduction in mortgage-backed securities and the maturity of the investment
securities held to maturity portfolio, discussed above.

Non-performing assets consisted of $482,000 in non-accruing loans at June 30,
2003 compared to $164,000 at June 30, 2002. The allowance for loan losses
increased by $60,000 at June 30, 2003, as a result of $60,000 in loan loss
provisions during fiscal 2003. Non-accruing loans at June 30, 2003 consisted of
$472,000 in seven single-family residential mortgage loans and $10,000 in
non-mortgage loans. At June 30, 2003 the Company's ratio of allowance for loan
losses to non-performing loans was 84.80% compared to 213.29% at June 30, 2002.
Management believes that the current allowance for loan losses is adequate to
cover probable accrued losses in the portfolio.

Deposits for the year ended June 30, 2003 increased $9.1 million to $147.5
million as a result of interest credited to deposits in the amount of $2.6
million as well as actual deposit inflows, net of withdrawals, in the amount of
$6.5 million. The net increase in deposits is primarily attributed to
competitive pricing of deposit liabilities including non-certificate of deposit
accounts which may be less sensitive to interest rate risk. The increase in
deposits is the result of an $4.8 million increase in passbook deposit accounts,
a $3.1 million increase in certificate of deposit accounts and a $1.7 million
increase in demand deposit accounts, offset by a $355,000 decrease in NOW
accounts and a $145,000 decrease in money market accounts.

Stockholders' equity increased $659,000, or 6.3%, to $11.1 million at June 30,
2003 from $10.4 million at June 30, 2002. The increase in stockholders' equity
was due to net income of $690,000, proceeds from the exercise of stock options
in the amount of $97,000, option related tax benefits of $22,000 and an increase
in other comprehensive income of $71,000 offset by the payment of cash dividends
in the amount of $221,000.




                                       9
<PAGE>



                              RESULTS OF OPERATIONS

The Company's operating results depend primarily on the level of its net
interest income and non-interest income as well as the level of its operating
expenses. Net interest income depends upon the volume of interest-earning assets
and interest-costing liabilities and the interest rate earned or paid on them.
The Company receives non-interest income in the form of fees charged for
services related to transaction and other deposit accounts. Fee income is also
generated by the Company's loan origination and loan brokerage operations, as
well as its loan servicing operations in the form of late payment and loan
servicing fees. Personnel costs, office occupancy and equipment expenses and
deposit insurance premiums comprise the largest components of the Company's
non-interest expense.

The following table presents, for the periods indicated, the total dollar
amounts of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent adjustments
were made. All average balances are monthly average balances and include
non-accruing loans.




                                       10

<PAGE>



<TABLE>
<CAPTION>



                                               Year Ended June 30,
                     ________________________________________________________________________

                              2003                     2002                     2001
                     ______________________   ______________________   ______________________

                     Average Interest Yield   Average Interest Yield   Average Interest Yield
                     Balance  Earned/  and    Balance  Earned/  and    Balance  Earned/  and
                               Paid   Rates             Paid   Rates             Paid   Rates
                     ________ _______ _____   ________ _______ _____   ________ _______ _____

Interest-Earning                              (Dollars in Thousands)
<S>              <C> <C>       <C>    <C>     <C>       <C>    <C>     <C>       <C>    <C>
  Assets:
Loans receivable (1) $ 90,852  5,738  6.32%   $ 78,998  5,446  6.89%   $ 58,371  4,305  7.39%
Mortgage-backed
  securities........    7,947    448  5.61      13,656    875  6.40      19,088  1,299  6.81
Investment and other
  securities........   11,384    518  4.46      26,639  1,476  5.54      28,686  1,698  5.92
Interest-bearing
  deposits..........   38,071    523  1.41      19,449    441  2.27      27,059  1,619  5.98
FHLB stock..........      931     51  5.50         817     44  5.43         750     54  7.27
    Total interest-   -------  -----          -------- ------          -------- ------
      earning assets  149,185  7,278  4.89     139,559  8,282  5.93     133,954  8,975  6.70
Non-interest earning           -----                   ------                   ------
  assets............    8,067                    7,800                    7,042
                     --------                 --------                 --------
    Total assets     $157,252                 $147,359                 $140,996
                     ========                 ========                 ========

Interest-Bearing
  Liabilities:
Certificates of
  deposit........... $ 59,052  1,540  2.61%   $ 57,235  2,189  3.82%   $ 61,012  3,413  5.59%
Passbook accounts...   53,651    849  1.58      48,179  1,152  2.39      41,960  1,267  3.02
Money market and
  NOW accounts......   21,609    335  1.55      20,592    493  2.40      17,860    634  3.55
    Total interest-  --------  -----          -------- ------          -------- ------
      bearing
      liabilities...  134,312  2,724  2.03     126,006  3,834  3.04     120,832  5,314  4.40
Non-interest bearing          ------                   ------                   ------
  deposits             10,554                    9,763                    9,485
Other liabilities       1,615                    1,565                    1,182
                     --------                 --------                 --------
  Total liabilities   146,481                  137,334                  131,499
Stockholders' equity   10,771                   10,025                    9,497
                     --------                 --------                 --------

    Liabilities and
      stockholders'
      equity         $157,252                 $147,359                 $140,996
                     ========                 ========                 ========

Net earning assets.. $ 14,873                 $ 13,553                 $ 13,122
                     ========                 ========                 ========

Net-interest income           $4,554                   $4,448                   $3,661
                              ======                   ======                   ======

Net-interest rate spread              2.85%                    2.89%                    2.30%
                                      =====                    =====                    =====
Net-interest margin                   3.05%                    3.19%                    2.73%
                                      =====                    =====                    =====

Average interest-earning
  assets to average
  interest-bearing liabilities      111.07%                  110.76%                  110.86%
                                    =======                  =======                  =======
</TABLE>

(1)  Calculated net of deferred yield adjustments, loan discounts, loans in
     process and loss reserves.

                                       11
<PAGE>



     The following table presents, for the period indicated, the dollar amount
     of changes in interest income and interest expense for major components of
     interest-earning assets and interest-bearing liabilities. It distinguishes
     between the increase related to higher outstanding balances and that due to
     the unprecedented levels and volatility of interest rates. For each
     category of interest-earning assets and interest-bearing liabilities,
     information is provided on changes attributable to (i) changes in volume
     (changes in average volume multiplied by old rate), (ii) changes in rate
     (changes in rate multiplied by old average volume) and (iii) changes in
     rate-volume (changes in rate multiplied by the change in average volume).


<TABLE>
<CAPTION>
                                              Year Ended June 30,

                      _____________________________________________________________________

                              2003   vs.   2002                      2002   vs.   2001
                      _________________________________      ______________________________


                         Increase (decrease) due to             Increase (decrease) due to

                      _________________________________      ______________________________

                                      Rate/                                 Rate/

                     Volume    Rate   Volume     Net     Volume     Rate    Volume     Net
                     ------    ----   ------     ---     ------     ----    ------     ---

                                            (Dollars in Thousands)
<S>                  <C>    <C>       <C>    <C>         <C>      <C>        <C>     <C>
Interest-Earning
  Assets:
Loans Receivable.... $ 817  $ (457)   $(68)  $   292     $1,522   $  (281)   $(100)  $1,141
Mortgage-backed
  securities........  (366)    (105)    44      (427)      (369)      (77)      22     (424)
Investment and other
  securities........  (845)    (264)   151      (958)      (121)     (109)       8     (222)
Interest-bearing
  deposits..........   422     (174)  (166)       82       (455)   (1,005)     282   (1,178)

FHLB stock..........     6        1     --         7          5       (14)      (1)     (10)
Total interest-      -----  -------   ----   -------     ------   -------    -----  -------
      earning assets $  34  $  (999)  $(39)  $(1,004)    $  582   $(1,486)   $ 211  $  (693)
                     -----  -------   ----   -------     ------   -------    -----  -------
Interest-Bearing
  Liabilities:
Certificates of
  deposit........... $  69  $  (696)  $(22)  $  (649)    $ (211)  $(1,080)   $  67  $(1,224)

Passbook accounts...   131     (390)   (44)     (303)       188      (264)     (39)    (115)

Money market and
  NOW accounts......    24     (174)    (8)     (158)        97      (206)     (32)    (141)
Total interest-      -----  -------   ----   -------     ------   -------    -----  -------
      bearing liab-
      ilities....... $ 224  $(1,260)  $(74)  $(1,110)    $   74   $(1,550)   $  (4) $(1,480)
                     -----  -------   ----   -------     ------   -------    -----  -------
Net change in net
  interest income...                         $   106                                $   787
                                             =======                                =======
</TABLE>


                                       12
<PAGE>



                         COMPARISON OF OPERATING RESULTS
                           FOR THE FISCAL YEARS ENDED
                         JUNE 30, 2003 AND JUNE 30, 2002

The Company had net income of $690,000 in fiscal 2003 compared to net income of
$866,000 for fiscal 2002. The decrease in net income is attributable to a
$402,000 increase in non-interest expense and a $45,000 increase in provision
for loan losses offset by a $106,000 increase in net interest income, an $80,000
increase in non-interest income and an $85,000 decrease in income taxes.

Net interest income increased $106,000 to $4.5 million in fiscal 2003 from $4.4
million in fiscal 2002. The average balance of net earning assets increased $1.3
million to $14.9 million in fiscal 2003 from $13.6 million in the prior fiscal
year. The increase in the average balance of net earning assets was offset by a
decrease in interest rate spread to 2.85% for fiscal 2003 compared to 2.89% for
the prior fiscal year. Net interest margin also decreased in fiscal 2003 to
3.05% from 3.19% in fiscal 2002.

INTEREST INCOME
Interest income decreased $1.0 million in fiscal 2003 to $7.3 million. This
decrease in interest income resulted from a decrease in the average yield earned
on interest earning assets to 4.89% in fiscal 2003 from 5.93% in fiscal 2002.
The decrease in the average yield earned on interest earning assets was offset
by a $9.6 million increase in the average balance of interest earning assets to
$149.2 million in fiscal 2003 from $139.6 million in fiscal 2002.

Interest on loans receivable increased $293,000, or 5.4%, in fiscal 2003 to $5.7
million compared with fiscal 2002. The increase in interest income was
attributed to an $11.9 million increase in the average outstanding balance of
net loans receivable to $90.9 million in fiscal 2003 from $79.0 million in
fiscal 2002. The increase in the average outstanding balance of loans receivable
was offset by a decrease in the average yield earned on loans receivable to
6.32% in fiscal 2003 from 6.89% in fiscal 2002 due to prepayments and lower
yielding originations in a low interest rate environment.

Interest on mortgage-backed securities decreased $427,000, or 48.8%, to $448,000
in fiscal 2003 compared with fiscal 2002. The decrease in interest income was
attributed to a $5.7 million decrease in the average outstanding balance of
mortgage-backed securities to $8.0 million in fiscal 2003 from $13.7 million in
fiscal 2002 as well as a decrease in the average yield earned on mortgage-backed
securities to 5.61% in fiscal 2003 from 6.40% in fiscal 2002.

Interest earned on investment securities decreased $958,000, or 64.9%, to
$518,000 in fiscal 2003. The decrease in interest income resulted from a $15.2
million decrease in the average outstanding balance of investment securities to
$11.4 million in fiscal 2003 from $26.6 in fiscal 2002 as well as a decrease in
the average yield earned on investment securities to 4.46% in fiscal 2003
compared to 5.54% in fiscal 2002.

Interest earned on interest bearing deposits increased $82,000, or 18.5%, to
$523,000 in fiscal 2003 compared with fiscal 2002. The increase in interest
income is attributed to an $18.7 million increase in the average outstanding
balance of interest bearing deposits to $38.1 million in fiscal 2003 from


                                       13
<PAGE>

$19.4 million in fiscal 2002. The increase in the average outstanding balance of
interest bearing deposits was offset by a decrease in the average yield earned
on interest bearing deposits to 1.41% in fiscal 2003 from 2.27% in fiscal 2002.
The Company increased its average balance of interest bearing deposits during
fiscal 2003 in anticipation of an increase in economic activity and upward
pressure on interest rates in fiscal 2004. The increase in interest bearing
deposits in fiscal 2003 was partly funded by the $15.2 million decrease in the
average outstanding balance of investment securities, discussed above.

INTEREST EXPENSE
Interest expense decreased $1.1 million, or 28.9%, to $2.7 million in fiscal
2003 from $3.8 million in fiscal 2002. The decrease in interest expense in
fiscal 2003 was the result of a decrease in the average yield paid on interest
costing deposits to 2.03% in fiscal 2003 compared to 3.04% in fiscal 2002. The
decrease in the average yield paid on interest costing deposits was offset by an
$8.3 million increase in the average outstanding balance of interest costing
deposits to $134.3 million in fiscal 2003 from $126.0 million in fiscal 2002.
The decrease in the average yield paid on interest costing deposits is primarily
attributed to the general decline in interest rates that occurred between the
two periods.

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. After considering non-performing loans, the high
concentration of one-to-four family mortgage loans in the loan portfolio, the
level and nature of its charge offs and recoveries and the strong housing
market, the Company made $60,000 in loan loss provisions during fiscal 2003. The
allowance for loan losses totaled $410,000, or .44% of total loans, at June 30,
2003, compared to $350,000, or .41% of total loans, at June 30, 2002.
Non-accruing loans totaled $482,000 at June 30, 2003 compared to $164,000 at
June 30, 2002. The Company's ratio of allowance for loan losses to
non-performing loans was 84.8% at June 30, 2003 compared to 213.29% at June 30,
2002. The $410,000 allowance for loan losses at June 30, 2003 was determined by
the Company to be consistent with its policy for the establishment and
maintenance of adequate levels of loan loss reserves.

At June 30, 2003, the Company was aware of no regulatory directives or
suggestions that the Company make additional provisions for losses on loans.
Although the Company believes its allowance for loan losses is at a level that
it considers to be adequate to provide for probable accrued losses, there can be
no assurance that such losses will not exceed the estimated amounts.

NON-INTEREST INCOME
Non-interest income increased $80,000 to $1.2 million in fiscal 2003 from $1.1
million in fiscal 2002. The increase in non-interest income in fiscal 2003 is
primarily attributed to a $113,000 increase in loan fees and service charges,
offset by a $17,000 decrease in profit on the sale of loans. The increase in
loan fees and service charges in the fiscal 2003 is attributed to an increase in
loan origination activity compared to the prior fiscal year.


                                       14

<PAGE>


NON-INTEREST EXPENSE
Non-interest expense increased $402,000 to $4.6 million in fiscal 2003 from $4.2
million in the prior fiscal year. The primary factors for the increase in
non-interest expense in fiscal 2003 were a $246,000 increase in staffing costs,
a $28,000 increase in office occupancy and equipment expense, a $27,000 increase
in computer software and support expense and a $16,000 increase in professional
fees. The increase in staffing costs in fiscal 2003 is primarily attributed to a
$76,000 increase in loan origination commissions, due to an increase in lending
volume and a $94,000 increase in employee benefit costs which was primarily due
to higher pension costs as a result of an unfavorable investment market and
higher medical benefits compared with the prior fiscal year. The increase in
computer software and support expense is primarily attributed to the conversion
to a new computer network operating system during fiscal 2003.

INCOME TAXES
Provisions for income taxes decreased by $85,000 to $362,000 in fiscal 2003 from
$447,000 in fiscal 2002 primarily due to the decrease in operating income in the
current fiscal year as compared to the prior year.


                         COMPARISON OF OPERATING RESULTS
                           FOR THE FISCAL YEARS ENDED
                         JUNE 30, 2002 AND JUNE 30, 2001

The Company had net income of $866,000 in fiscal 2002 compared to net income of
$379,000 for fiscal 2001. The increase in net income is attributable to a
$787,000 increase in net interest income and a $210,000 increase in non-interest
income offset by a $244,000 increase in non-interest expense, a $15,000 increase
in provision for loan losses and a $251,000 increase in income taxes.

Net interest income increased $787,000 to $4.4 million in fiscal 2002 from $3.7
million in fiscal 2001. The average balance of net earning assets increased
$431,000 to $13.6 million in fiscal 2002 from $13.1 million in the prior fiscal
year. Net interest margin and interest rate spread increased in fiscal 2002 to
3.19% and 2.89%, respectively, from 2.73% and 2.30%, respectively, in fiscal
2001. The increases in net interest income, net interest margin and interest
rate spread that occurred in the current fiscal year were attributable to a
decline in the Company's aggregate funding costs that exceeded the aggregate
decline in earning assets yields.

INTEREST INCOME
Interest income decreased $694,000 in fiscal 2002 to $8.3 million. This decrease
in interest income resulted from a decrease in the average yield earned on
interest earning assets to 5.93% in fiscal 2002 from 6.70% in fiscal 2001. The
decrease in the average yield earned on interest earning assets was offset by a
$5.6 million increase in the average balance of interest earning assets to
$139.6 million in fiscal 2002 from $134.0 million in fiscal 2001.

Interest on loans receivable increased $1.1 million, or 26.5%, in fiscal 2002 to
$5.4 million compared with fiscal 2001. The increase in interest income was
attributed to a $20.6 million increase in the average outstanding balance of net
loans receivable to $79.0 million in fiscal 2002 from $58.4 million in fiscal
2001. The increase in the average outstanding balance of loans

                                       15
<PAGE>

receivable was offset by a decrease in the average yield earned on loans
receivable to 6.89% in fiscal 2002 from 7.39% in fiscal 2001.

Interest on mortgage-backed securities decreased $424,000, or 32.7%, to $875,000
in fiscal 2002 compared with fiscal 2001. The decrease in interest income was
attributed to a $5.4 million decrease in the average outstanding balance of
mortgage-backed securities to $13.7 million in fiscal 2002 from $19.1 million in
fiscal 2001 as well as a decrease in the average yield earned on mortgage-backed
securities to 6.40% in fiscal 2002 from 6.81% in fiscal 2001.

Interest earned on investment securities decreased $222,000, or 13.1%, to $1.5
million in fiscal 2002. The decrease in interest income resulted from a $2.0
million decrease in the average outstanding balance of investment securities to
$26.6 million from the prior fiscal year as well as a decrease in the average
yield earned on investment securities to 5.54% in fiscal 2002 compared to 5.92%
in fiscal 2001.

Interest earned on interest bearing deposits decreased $1.2 million, or 72.7%,
to $441,000 in fiscal 2002 compared with fiscal 2001. The decrease in interest
income is attributed to a $7.6 million decrease in the average outstanding
balance of interest bearing deposits to $19.5 million in fiscal 2002 from $27.1
million in fiscal 2001 as well as a decrease in the average yield earned on
interest bearing deposits to 2.27% in fiscal 2002 from 5.98% in fiscal 2001. The
Company reduced its average balance of interest bearing deposits during fiscal
2002 in response to the downward pressure on interest rates that occurred in
calendar 2001.

INTEREST EXPENSE
Interest expense decreased $1.5 million, or 27.9%, to $3.8 million in fiscal
2002 from $5.3 million in fiscal 2001. The decrease in interest expense in
fiscal 2002 was the result of a decrease in the average yield paid on interest
costing deposits to 3.04% in fiscal 2002 compared to 4.40% in fiscal 2001. The
decrease in the average yield paid on interest costing deposits was offset by a
$5.2 million increase in the average outstanding balance of interest costing
deposits to $126.0 million in fiscal 2002 compared to fiscal 2001. The decrease
in the average yield paid on interest costing deposits is primarily attributed
to the general decline in interest rates as well as a shift in the Company's
deposit liability mix out of higher yielding certificate of deposit accounts and
into lower yielding core deposit accounts.

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. After considering the positive trend in the level of
non-performing loans, the high concentration of one-to-four family mortgage
loans in the loan portfolio, the level and nature of its charge offs and
recoveries and the strong housing market, the Company made $15,000 in loan loss
provisions during fiscal 2002. The allowance for loan losses totaled $350,000,
or .41% of total loans, at June 30, 2002 compared to $359,000, or .52% of total
loans, at June 30, 2001. Non-accruing loans totaled $164,000 at June 30, 2002
compared to $344,000 at June 30, 2001. The Company's ratio of allowance for loan
losses to non-performing loans was 213.29% at June 30, 2002 compared to 104.63%
at June 30, 2001. The $350,000 allowance for loan losses at June 30,

                                       16
<PAGE>


2002 was determined by the Company to be consistent with its policy for the
establishment and maintenance of adequate levels of loan loss reserves.

At June 30, 2002, the Company was aware of no regulatory directives or
suggestions that the Company make additional provisions for losses on loans.
Although the Company believes its allowance for loan losses is at a level that
it considers to be adequate to provide for probable accrued losses, there can be
no assurance that such losses will not exceed the estimated amounts.

NON-INTEREST INCOME
Non-interest income increased $210,000 to $1.1 million in fiscal 2002 from
$918,000 in fiscal 2001. The increase in non-interest income in fiscal 2002 is
primarily attributed to a $160,000 increase in loan fees and service charges, a
$37,000 increase in profit on the sale of loans and a $33,000 increase in
deposit related fees offset by the elimination of $15,000 in profit on the sale
of assets in fiscal 2001. The increase in loan fees and service charges in
fiscal 2002 is attributed to an increase in loan origination activity compared
to the prior fiscal year.

NON-INTEREST EXPENSE
Non-interest expense increased $244,000 to $4.2 million in fiscal 2002 compared
with the prior fiscal year. The primary factors for the increase in non-interest
expense were a $218,000 increase in staffing costs, a $32,000 increase in office
occupancy and equipment expense, a $14,000 increase in data processing fees as
well as $14,000 in non-recurring charges from losses on demand deposit
overdrafts. These increases in non-interest expense were offset by a $26,000
decrease in advertising expense, a $19,000 decrease in professional fees and a
$14,000 decrease in computer software and support expense. The increase in
staffing costs was primarily the result of an $80,000 increase in loan
origination commissions, due to an increase in lending volume, a $92,000
increase in employee benefit costs, primarily due to higher pension costs during
the current fiscal year, and a $46,000 increase in bonus compensation expense
compared with the prior fiscal year.

INCOME TAXES
Provisions for income taxes increased by $251,000 to $447,000 in fiscal 2002
from $196,000 in fiscal 2001 primarily due to the increase in operating income
in the current fiscal year as compared to the prior year.


                         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 June 30, 2003 the
Association had commitments to originate $6.7 million in single family mortgage
loans and commitments to sell $367,000 in loans. 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


                                       17
<PAGE>

fund or refinance, on a timely basis, its material commitments and long-term
liabilities. The Company's liquidity, represented by cash and cash equivalents,
is a combination of its operating, investing and financing activities. These
activities are summarized in the following table for the years ended June 30,
2003 and 2002.


                                                      For the Year
                                                     Ended June 30,
                                                ______________________
                                                  2003          2002
                                                ________      ________
                                                (Dollars in Thousands)

Net income.............................         $   690        $   866
Adjustments to reconcile net income
  to net cash provided by
  operating activities.................             546            393
Net cash provided by                            -------        -------
  operating activities.................           1,236          1,259
Net cash provided by
  investing activities.................           6,328          4,054
Net cash provided by
  financing activities.................           8,936          6,889
Net change in cash and                          -------        -------
  cash equivalents.....................          16,500         12,202
Cash and cash equivalents at
  beginning of period..................          32,921         20,719
Cash and cash equivalents at                    -------        -------
  end of period........................         $49,421        $32,921
                                                =======        =======

At June 30, 2003 Midland Federal had tangible and core capital of $9.4 million,
or 5.88% of adjusted total assets, which was approximately $7.0 million and $4.6
million above the minimum requirements for capital adequacy purposes in effect
on that date of 1.5% and 3.0%, respectively, of adjusted total assets.

At June 30, 2003 Midland Federal had total capital of $9.8 million and
risk-weighted assets of $81.9 million, or total capital of 12.0% of
risk-weighted assets. This amount was approximately $3.3 million above the 8.0%
requirement for capital adequacy purposes in effect on that date.


                       IMPACT OF NEW ACCOUNTING STANDARDS

The following 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 summary of some of the recent pronouncements made by the
Financial Accounting Standards Board ("FASB"), which are of particular interest
to financial institutions.

In September 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3,


                                       18
<PAGE>

"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This
Statement is effective for exit or disposal activities that are initiated after
December 31, 2002. Adoption of this statement did not have a material effect on
the Company's consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46 "Consolidation of
Variable Interest Entities", which provides new accounting guidance on when to
consolidate a variable interest entity. A variable interest entity exists when
either the total equity investment at risk is not sufficient to permit the
entity to finance its activities by itself, or the equity investors lack one of
three characteristics associated with owning a controlling financial interest.
Those characteristics include the direct or indirect ability to make decisions
about an entity's activities through voting rights or similar rights, the
obligation to absorb the expected loss of an entity if they occur, and the right
to receive the expected residual return of the entity if they occur. The Company
does not expect that the adoption of this Interpretation will have a material
impact on its consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". The Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative hedging activities under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". In general, this Statement
should be applied prospectively. The Company does not expect that the
application of this Statement will materially impact its consolidated financial
statements.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". This Statement
established standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
Statement is effective for financial statements entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. Adoption of this Statement is not expected
to have a material effect on the Company's consolidated financial statements.


                     IMPACT OF INFLATION AND CHANGING PRICES

The Consolidated Financial Statements and Notes thereto presented herein have
been prepared in accordance with Generally Accepted Accounting Principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of the Company's operations. Unlike most industrial
companies, nearly all of the assets and liabilities of the Company are monetary
in nature. As a result, interest rates have a greater impact on the Company's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services.



                                       19
<PAGE>


                                  COMMON STOCK

As of June 30, 2003, there were approximately 60 holders of record of the
Company's common stock and 372,600 shares of issued and outstanding common
stock. The Company's common stock is quoted on the Electronic Bulletin Board of
the National Association of Securities Dealers, Inc. under the symbol "MCPH".

The following table sets forth, for the periods shown, the high and low prices
of the common stock and cash dividends per share declared. The prices reflect
inter-dealer quotations without retail mark-up, mark-down or commissions and do
not necessarily represent actual transactions.


                                                          Cash dividends
Quarter ended               High              Low            declared
-------------               ----              ---            --------

September 30, 2001         $25.00           $25.00            $0.10

December 31, 2001           20.00            16.00             0.12

March 31, 2002              19.88            18.00             0.12

June 30, 2002               26.75            20.25             0.12

September 30, 2002          27.00            21.55             0.15

December 31, 2002           26.85            22.00             0.15

March 31, 2003              32.00            28.75             0.15

June 30, 2003               31.50            28.50             0.15


Dividend payment decisions are made with consideration of a variety of factors
including earnings, financial condition, market considerations and regulatory
restrictions.


                                       20

<PAGE>






















































                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Midland Capital Holdings Corporation
Bridgeview, Illinois

      We have audited the consolidated statements of financial condition of
Midland Capital Holdings Corporation and subsidiaries as of June 30, 2003 and
2002, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ending June 30, 2003. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Midland
Capital Holdings Corporation and subsidiaries at June 30, 2003 and 2002, and the
results of their operations and their cash flows for each of the three years in
the period ending June 30, 2003, in conformity with generally accepted
accounting principles.


/s/ Cobitz, VandenBerg & Fennessy
    -----------------------------

July 30, 2003
Palos Hills, Illinois
<PAGE>

                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

                 Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>
                                                                         June 30,
                                                              ----------------------------
                                                                  2003            2002
                                                              ------------     -----------
<S>                                                           <C>              <C>
Assets

Cash and amounts due from depository institutions             $  3,742,724       4,439,811
Interest-bearing deposits                                       45,678,341      28,481,627
                                                              ------------     -----------
    Total cash and cash equivalents                             49,421,065      32,921,438
Investment securities, held to maturity (fair value:
  2002 - $10,182,850) (note 2)                                          --      10,026,708
Investment securities available for sale,
  at fair value (note 3)                                         6,388,900       6,279,537
Mortgage-backed securities, held to maturity (fair value:
  2003 - $6,425,722; 2002 - $10,553,233) (note 4)                6,272,466      10,359,768
Loans receivable (net of allowance
  for loan losses: 2003 - $409,560;
  2002 - $350,260) (note 5)                                     92,932,253      85,346,846
Loans receivable held for sale (note 6)                            367,300         739,806
Stock in Federal Home Loan Bank of Chicago                         996,200         896,600
Accrued interest receivable (note 7)                               448,762         649,856
Office properties and equipment - net (note 8)                   2,607,389       2,816,584
Prepaid expenses and other assets (note 9)                         542,049         551,805
                                                              ------------     -----------

    Total assets                                               159,976,384     150,588,948
                                                              ============     ===========

Liabilities and Stockholders' Equity

Liabilities:
Deposits (note 10)                                             147,489,604     138,443,669
Advance payments by borrowers for taxes
  and insurance                                                    998,779         985,144
Other liabilities (note 11)                                        431,854         763,580
                                                              ------------     -----------
    Total liabilities                                          148,920,237     140,192,393
                                                              ------------     -----------

Stockholders' 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 June 30, 2003 and
  363,975 shares at June 30, 2002                                    3,726           3,640
Additional paid-in capital                                       3,395,580       3,276,855
Retained earnings - substantially restricted                     7,387,034       6,917,305
Accumulated other comprehensive income,
  net of income taxes                                              269,807         198,755
                                                              ------------     -----------
    Total stockholders' equity (notes 15 and 16)                11,056,147      10,396,555
                                                              ------------     -----------

Commitments and contingencies (notes 17 and 18)

    Total liabilities and stockholders' equity                $159,976,384     150,588,948
                                                              ============     ===========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

                        Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                         Years Ended June 30,
                                                --------------------------------------
                                                   2003           2002          2001
                                                ----------     ---------     ---------
<S>                                             <C>            <C>           <C>
Interest income:
  Interest on loans                             $5,738,429     5,445,564     4,304,925
  Interest on mortgage-backed securities           447,705       874,514     1,299,368
  Interest on investment securities                517,552     1,475,782     1,697,770
  Interest on interest-bearing deposits            523,067       441,318     1,618,946
  Dividends on FHLB stock                           51,330        44,411        54,446
                                                ----------     ---------     ---------
    Total interest income                        7,278,083     8,281,589     8,975,455
                                                ----------     ---------     ---------

Interest expense:
  Interest on deposits (note 10)                 2,724,478     3,834,055     5,314,492
                                                ----------     ---------     ---------
    Total interest expense                       2,724,478     3,834,055     5,314,492
                                                ----------     ---------     ---------

    Net interest income before
      provision for loan losses                  4,553,605     4,447,534     3,660,963
Provision for loan losses                           60,000        15,000            --
                                                ----------     ---------     ---------
    Net interest income after
      provision for loan losses                  4,493,605     4,432,534     3,660,963
                                                ----------     ---------     ---------

Non-interest income:
  Loan fees and service charges                    541,800       429,092       268,804
  Commission income                                 70,254        73,868        73,242
  Profit on sale of loans (note 6)                  27,128        43,819         7,368
  Profit on sale of real estate owned - net             --            --           911
  Deposit related fees                             512,245       514,388       481,031
  Other income                                      56,938        66,901        87,378
                                                ----------     ---------     ---------
    Total non-interest income                    1,208,365     1,128,068       918,734
                                                ----------     ---------     ---------

Non-interest expense:
  Staffing costs (notes 12 and 13)               2,627,468     2,380,528     2,162,800
  Advertising                                       58,195        56,711        82,213
  Occupancy and equipment expenses (note 8)        772,573       745,486       712,872
  Data processing                                  206,745       209,141       195,330
  Federal deposit insurance premiums                23,753        24,238        25,548
  Legal, audit and examination services            141,113       124,521       139,672
  Other                                            819,667       707,223       685,701
                                                ----------     ---------     ---------
    Total non-interest expense                   4,649,514     4,247,848     4,004,136
                                                ----------     ---------     ---------

  Income before income taxes                     1,052,456     1,312,754       575,561
Provision for income taxes (note 14)               362,273       446,414       196,307
                                                ----------     ---------     ---------

      Net income                                $  690,183       866,340       379,254
                                                ==========     =========     =========

Earnings per share - basic                      $     1.88          2.38          1.04
                                                ==========     =========     =========

Earnings per share - diluted                    $     1.88          2.36          1.03
                                                ==========     =========     =========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                      Accumulated       Common
                                                     Additional                          Other           Stock
                                        Common        Paid-In         Retained       Comprehensive      Awarded
                                        Stock         Capital         Earnings           Income          by BIP           Total
                                        ------       ----------      ----------      -------------     ---------       -----------
<S>                                     <C>          <C>              <C>                <C>             <C>            <C>
Balance at June 30, 2000                $3,640       3,274,654        5,948,332           42,704         (12,613)        9,256,717
                                        ------       ---------       ----------        ---------       ---------       -----------

 Comprehensive income:
  Net income                                                            379,254                                            379,254
  Other comprehensive income,
    net of tax:
   Unrealized holding gain
    during the year                                                                      120,281                           120,281
                                                                     ----------        ---------                       -----------

 Total comprehensive income                                             379,254          120,281                           499,535

  Tax benefit related to
   employee stock plan                                   2,201                                                               2,201

  Amortization of award of BIP stock                                                                      12,613            12,613

  Dividends declared on
   common stock ($.30 per share)                                       (109,193)                                          (109,193)
                                        ------       ---------       ----------        ---------       ---------       -----------

Balance at June 30, 2001                 3,640       3,276,855        6,218,393          162,985              --         9,661,873
                                        ------       ---------       ----------        ---------       ---------       -----------

 Comprehensive income:
  Net income                                                            866,340                                            866,340
  Other comprehensive income,
    net of tax:
   Unrealized holding gain
    during the year                                                                       35,770                            35,770
                                                                     ----------        ---------                       -----------

 Total comprehensive income                                             866,340           35,770                           902,110

  Dividends declared on
   common stock ($.46 per share)                                       (167,428)                                          (167,428)
                                        ------       ---------       ----------        ---------       ---------       -----------

Balance at June 30, 2002                 3,640       3,276,855        6,917,305          198,755              --        10,396,555
                                        ------       ---------       ----------        ---------       ---------       -----------

 Comprehensive income:
  Net income                                                            690,183                                            690,183
  Other comprehensive income,
    net of tax:
   Unrealized holding gain
    during the year                                                                       71,052                            71,052
                                                                     ----------        ---------                       -----------

 Total comprehensive income                                             690,183           71,052                           761,235

  Exercise of stock options                 86          96,945                                                              97,031

  Tax benefit related to
    stock options exercised                             21,780                                                              21,780

  Dividends declared on
   common stock ($.60 per share)                                       (220,454)                                          (220,454)
                                        ------       ---------       ----------        ---------       ---------       -----------

Balance at June 30, 2003                $3,726       3,395,580        7,387,034          269,807              --        11,056,147
                                        ======       =========       ==========        =========       =========       ===========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                              Years Ended June 30,
                                                               -----------------------------------------------
                                                                   2003              2002             2001
                                                               -------------     ------------     ------------
<S>                                                            <C>               <C>              <C>
Cash flows from operating activities:
  Net income                                                   $     690,183          866,340          379,254
  Adjustments to reconcile net income to net cash
   from operating activities:
    Depreciation                                                     316,663          322,450          314,158
    Amortization of premiums and discounts on securities               7,427          (22,618)         (70,946)
    Amortization of cost of stock benefit plan                            --               --           12,613
    Federal Home Loan Bank stock dividend                            (51,100)         (44,200)         (54,200)
    Profit on sale of real estate owned                                   --               --             (911)
    Provision for loan losses                                         60,000           15,000               --
    Proceeds from sale of loans held for sale                      1,902,945        3,160,571          534,044
    Origination of loans held for sale                            (1,530,439)      (3,449,100)        (985,744)
    Profit on sale of loans                                          (27,128)         (43,819)          (7,368)
    Decrease (increase) in accrued interest receivable               201,094          255,278         (254,180)
    (Decrease) increase in accrued interest payable                  (10,666)         (11,023)           1,689
    Decrease in deferred income on loans                             (23,163)        (140,684)         (90,246)
    Decrease in other assets                                             281           62,140           40,796
    (Decrease) increase in other liabilities                        (299,980)         289,074           45,220
                                                               -------------     ------------     ------------
Net cash provided by (for) operating activities                    1,236,117        1,259,409         (135,821)
                                                               -------------     ------------     ------------

Cash flows from investing activities:
    Proceeds from repayments of mortgage-backed securities,
      held to maturity                                             4,104,875        6,977,487        4,581,712
    Purchase of investment securities, held to maturity                   --               --      (10,089,131)
    Proceeds from maturities of investment securities,
      held to maturity                                            10,000,000       10,080,000       10,000,000
    Purchase of investment securities, available for sale                 --       (4,998,531)     (10,000,000)
    Proceeds from maturities and early redemption of
      investment securities, available for sale                           --       10,000,000        4,000,000
    Purchase of Federal Home Loan Bank stock                         (48,500)         (69,700)              --
    Purchase of loans                                                     --               --       (1,007,054)
    Loan disbursements                                           (54,341,935)     (38,379,056)     (26,086,272)
    Loan repayments                                               46,720,391       21,216,903       12,189,692
    Property and equipment expenditures                             (107,468)        (772,709)        (100,422)
                                                               -------------     ------------     ------------
Net cash provided by (for) investing activities                    6,327,363        4,054,394      (16,511,475)
                                                               -------------     ------------     ------------

Cash flows from financing activities:
    Deposit receipts                                             431,628,993      421,210,595      423,622,786
    Deposit withdrawals                                         (425,169,131)    (417,924,197)    (424,011,728)
    Interest credited to deposit accounts                          2,586,073        3,653,606        5,022,131
    Proceeds from exercise of stock options                           97,031               --               --
    Payment of dividends                                            (220,454)        (167,428)        (109,193)
    Increase in advance payments
      by borrowers for taxes and insurance                            13,635          116,388          175,454
                                                               -------------     ------------     ------------
Net cash provided by financing activities                          8,936,147        6,888,964        4,699,450
                                                               -------------     ------------     ------------

Net change in cash and cash equivalents                           16,499,627       12,202,767      (11,947,846)
Cash and cash equivalents at beginning of year                    32,921,438       20,718,671       32,666,517
                                                               -------------     ------------     ------------

Cash and cash equivalents at end of year                       $  49,421,065       32,921,438       20,718,671
                                                               =============     ============     ============

Cash paid during the year for:
    Interest                                                   $   2,735,144        3,845,078        5,312,803
    Income taxes                                                     580,143          161,654          178,054
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

1)    Summary of Significant Accounting Policies

      Midland Capital Holdings Corporation (the "Company") is a Delaware
      corporation incorporated in April, 1998 for the purpose of becoming the
      unitary thrift holding company for Midland Federal Savings and Loan
      Association (the "Association"). The reorganization transaction was
      completed pursuant to a Merger Agreement and Plan of Reorganization
      adopted by the Association's Board of Directors on March 19, 1998 and
      approved by the Association's shareholders on July 15, 1998. The effective
      date of the reorganization was July 23, 1998. As a result of the
      reorganization transaction, each outstanding share of common stock of the
      Association became, by operation of law, one share of common stock of the
      Company.

      The accounting and reporting policies of the Company and its subsidiaries
      conform to generally accepted accounting principles and to general
      practice within the thrift industry. The preparation of financial
      statements in conformity with generally accepted accounting principles
      requires management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and disclosure 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 following is a
      description of the more significant policies which the Company follows in
      preparing and presenting its consolidated financial statements.

      Principles of Consolidation

      The consolidated financial statements include the accounts of the Company,
      and its wholly owned subsidiary, Midland Federal Savings and Loan
      Association and the Association's wholly-owned subsidiaries, Midland
      Service Corporation, MS Insurance Agency and Bridgeview Development
      Company. Significant intercompany transactions and balances have been
      eliminated in consolidation.

      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.

      Investment Securities, Available for Sale

      Investment securities available for sale are recorded in accordance with
      Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting
      for Certain Investments in Debt and Equity Securities". SFAS No. 115
      requires the use of fair value accounting for securities available for
      sale or trading and retains the use of the amortized cost method for
      securities the Company has the positive ability and intent to hold to
      maturity.

      SFAS No. 115 requires the classification of debt and equity securities
      into one of three categories: held to maturity, available for sale, or
      trading. Held to maturity securities are measured at amortized cost.
      Unrealized gains and losses for trading securities are included in income.
      Unrealized holding gains and losses on available for sale securities are
      excluded from income and reported net of taxes as a separate component of
      stockholders' equity.

      The Company has designated certain investments in U.S. Government and
      Agency securities as available for sale, and has recorded these
      investments at their current fair value. Premiums and discounts are
      amortized and accreted into income over the remaining life of the security
      using the level yield method. Unrealized gains and losses are recorded in
      a valuation account which is included, net of income taxes, as a separate
      component of stockholders' equity. Gains and losses on the sale of these
      securities are determined using the specific identification method and are
      reflected in earnings when realized.

<PAGE>

1)    Summary of Significant Accounting Policies (continued)

      Investment Securities and Mortgage-Backed Securities, Held to Maturity

      These securities are carried at cost, adjusted for amortization of
      premiums and accretion of discounts over the term of the security using
      the level yield method. These securities are not carried at fair value
      because the Company has both the ability and the intent to hold them to
      maturity.

      Loans Receivable and Related Fees

      Loans are stated at the principal amount outstanding, net of loans in
      process, net deferred yield adjustments and the allowance for losses.
      Interest on loans is credited to income as earned and accrued only if
      deemed collectible. Loans are placed on nonaccrual status when, in the
      opinion of management, the full timely collection of principal or interest
      is in doubt. As a general rule, the accrual of interest is discontinued
      when principal or interest payments become 90 days past due or earlier if
      conditions warrant. When a loan is placed on nonaccrual status, previously
      accrued but unpaid interest is charged against current income.

      Loan origination fees and certain direct loan origination costs are
      deferred in accordance with SFAS No. 91 "Accounting for Nonrefundable Fees
      and Costs Associated with Originating or Acquiring Loans and Initial
      Direct Costs of Leases". This statement requires that loan origination
      fees and direct loan origination costs for a completed loan be netted and
      then deferred and recognized as an adjustment to yield over the
      contractual life of the loan.

      The Company has adopted the provisions of SFAS No. 114 "Accounting by
      Creditors for Impairment of a Loan" and SFAS No. 118 "Accounting by
      Creditors for Impairment of a Loan - Income Recognition and Disclosures".
      These statements apply to all loans that are identified for evaluation
      except for large groups of smaller-balance homogeneous loans that are
      collectively evaluated for impairment. These loans include, but are not
      limited to, credit card, residential mortgage and consumer installment
      loans. Of the loans which are to be evaluated for impairment, management
      has determined that there were no loans at June 30, 2003 and 2002, nor
      during the years ended June 30, 2003 and 2002, which met the definition of
      an impaired loan. A loan is considered impaired when it is probable that a
      creditor will be unable to collect contractual principal and interest due
      according to the contractual terms of the loan agreement.

      Loans Receivable Held for Sale

      That portion of loans receivable designated as held for sale are recorded
      at the lower of cost or fair value in accordance with SFAS No. 65
      "Accounting for Certain Mortgage Banking Activities". Unrealized declines
      in fair value are reflected as a charge to current earnings.

      Mortgage Servicing Rights

      The Company generally retains the right to service mortgage loans sold to
      others. The cost allocated to mortgage servicing rights has been
      recognized as a separate asset and is being amortized in proportion to and
      over the period of estimated net servicing income, using a method that
      approximates a level yield and taking into consideration prepayment of the
      underlying loans. Mortgage servicing rights are periodically evaluated for
      impairment based on the fair value of those rights. Fair values are
      estimated using discounted cash flows based on current market rates of
      interest. The carrying value of the Company's mortgage serving rights, in
      relation to estimated servicing values, and the related amortization is
      reviewed by management on a quarterly basis. See Note 6 for a discussion
      of the current year impact on financial position and results of
      operations.

<PAGE>

1)    Summary of Significant Accounting Policies (continued)

      Allowance for Loan Losses

      The determination of the allowance for loan losses involves material
      estimates that are susceptible to significant change in the near term. The
      allowance for loan losses is maintained at a level adequate to provide for
      losses through charges to operating expense. The allowance is based upon
      past loss experience and other factors which, in management's judgement,
      deserve current recognition in estimating losses. Such factors considered
      by management include growth and composition of the loan portfolio, the
      relationship of the allowance for losses to outstanding loans and economic
      conditions.

      Management believes that the allowance is adequate. While management uses
      available information to recognize losses on loans, future additions to
      the allowance may be necessary based on changes in economic conditions. In
      addition, various regulatory agencies, as an integral part of their
      examination process, periodically review the Company's allowance for loan
      losses. Such agencies may require the Company to recognize additions to
      the allowance based on their judgements about information available to
      them at the time of their examination.

      Depreciation

      Depreciation of office properties and equipment is accumulated on the
      straight line basis over estimated lives of the various assets. Useful
      lives are 25 to 40 years for office properties, 5 to 15 years for
      leasehold improvements and 3 to 10 years for furniture, fixtures and
      equipment.

      Income Taxes

      The Company files a consolidated federal income tax return with its
      subsidiaries. The provision for federal and state taxes on income is based
      on earnings reported in the financial statements. Deferred income taxes
      arise from the recognition of certain items of income and expense for tax
      purposes in years different from those in which they are recognized in the
      consolidated financial statements. Deferred tax assets and liabilities are
      recognized for the estimated future tax consequences attributable to
      differences between the financial statement carrying amount of existing
      assets and liabilities and their respective tax bases. Deferred tax assets
      and liabilities are measured using tax rates in effect for the year in
      which those temporary differences are expected to be recovered or settled.
      The effect on deferred tax assets and liabilities of a change in tax rates
      is recognized in income in the period that includes the enactment date.

      Consolidated Statements of Cash Flows

      For the purposes of reporting cash flows, the Company has defined cash and
      cash equivalents to include cash on hand, amounts due from depository
      institutions, interest-bearing deposits in other financial institutions
      and federal funds sold.

<PAGE>

1)    Summary of Significant Accounting Policies (continued)

      Earnings Per Share

      Earnings per share is determined by dividing net income for the period by
      the weighted average number of shares outstanding. Stock options are
      regarded as future common stock and are considered in the earnings per
      share calculations, and are the only adjustments made to average shares
      outstanding in computing diluted earnings per share.

      Weighted average shares used in calculating earnings per share are
      summarized below.

                                                       Years Ended June 30,
                                                   ----------------------------
                                                     2003      2002      2001
                                                   --------   -------   -------
      Weighted average number of common shares
        outstanding used in basic EPS calculation   367,283   363,975   363,975
      Add common stock equivalents for shares
        issuable under Stock Option Plans                --     3,882     2,542
                                                   --------   -------   -------

      Weighted average number of shares
        outstanding adjusted for common
        stock equivalents                           367,283   367,857   366,517
                                                   ========   =======   =======

      Net income                                   $690,183   866,340   379,254
      Basic earnings per share                     $   1.88      2.38      1.04
      Diluted earnings per share                   $   1.88      2.36      1.03

<PAGE>

2)    Investment Securities, Held to Maturity

      Investment securities, held to maturity, are summarized as follows:

<TABLE>
<CAPTION>
                                                               Gross          Gross
                                            Amortized       Unrealized      Unrealized         Fair
                                               Cost            Gains          Losses           Value
                                           -----------      ----------      ----------       ----------
<S>                                        <C>                <C>                   <C>      <C>
      June 30, 2002

      Federal Home Loan Mortgage
       Corporation notes                   $ 2,527,981         48,594               --        2,576,575
      Federal National Mortgage
       Association notes                     7,498,727        107,548               --        7,606,275
                                           -----------        -------       ----------       ----------

                                           $10,026,708        156,142               --       10,182,850
                                           ===========        =======       ==========       ==========

      Weighted average interest rate              6.14%
                                           ===========
</TABLE>

      The contractual maturity of investment securities held to maturity are
      summarized as follows:

                                                           June 30, 2002
                                                   -----------------------------
                                                    Amortized            Fair
      Term to Maturity                                Cost              Value
                                                   -----------        ----------

      Due in one year or less                      $10,026,708        10,182,850
                                                   ===========        ==========

<PAGE>

3)    Investment Securities, Available for Sale

      Investment securities available for sale are recorded at fair value in
      accordance with SFAS No. 115. This portfolio is summarized as follows:

<TABLE>
<CAPTION>
                                                              Gross         Gross
                                            Amortized      Unrealized     Unrealized         Fair
                                               Cost           Gains         Losses           Value
                                           -----------     ----------     ----------       ----------
<S>                                        <C>               <C>                  <C>      <C>
      June 30, 2003

      Federal National Mortgage
        Association notes                  $4,999,220         29,680              --       5,028,900
      United States Treasury bond             980,881        379,119              --       1,360,000
                                           ----------        -------       ---------       ---------

                                           $5,980,101        408,799              --       6,388,900
                                           ==========        =======       =========       =========

      Weighted average interest rate             4.23%
                                           ==========

      June 30, 2002

      Federal National Mortgage
        Association notes                  $4,998,470         75,755              --       5,074,225
      United States Treasury bond             979,923        225,389              --       1,205,312
                                           ----------        -------       ---------       ---------

                                           $5,978,393        301,144              --       6,279,537
                                           ==========        =======       =========       =========

      Weighted average interest rate             4.23%
                                           ==========
</TABLE>

      The contractual maturity of investment securities available for sale are
      summarized as follows:

<TABLE>
<CAPTION>
                                              June 30, 2003                    June 30, 2002
                                        --------------------------       -------------------------
                                         Amortized         Fair          Amortized         Fair
      Term to Maturity                     Cost            Value           Cost            Value
                                        ----------       ---------       ---------       ---------
<S>                                     <C>              <C>             <C>             <C>
      Due in one year or less           $4,999,220       5,028,900              --              --
      Due after one year through
         two years                              --              --       4,998,470       5,074,225
      Due after ten years through
        fifteen years                      980,881       1,360,000         979,923       1,205,312
                                        ----------       ---------       ---------       ---------

                                        $5,980,101       6,388,900       5,978,393       6,279,537
                                        ==========       =========       =========       =========
</TABLE>

      There were no sales of investment securities available for sale during any
      of the periods presented. The change in net unrealized gains and losses
      during the current year of $107,655, net of the tax effect of $36,603,
      resulted in a $71,052 credit to stockholders' equity.

<PAGE>

4)    Mortgage-Backed Securities, Held to Maturity

      Mortgage-backed securities, held to maturity, are summarized as follows:

<TABLE>
<CAPTION>
                                                               Gross          Gross
                                            Amortized        Unrealized     Unrealized         Fair
                                               Cost            Gains          Losses           Value
                                           -----------       ----------     ----------       ----------
<S>                                        <C>                <C>                   <C>      <C>
      June 30, 2003

      Participation certificates:
         FHLMC - Adjustable rate           $ 2,520,373         49,507               --        2,569,880
         FNMA  - Adjustable rate               988,737         20,388               --        1,009,125
         FHLMC - Fixed rate                  2,262,411         42,735               --        2,305,146
         FNMA  - Fixed rate                    434,080         37,617               --          471,697
         GNMA  - Fixed rate                     66,865          3,009               --           69,874
                                           -----------        -------       ----------       ----------

                                           $ 6,272,466        153,256               --        6,425,722
                                           ===========        =======       ==========       ==========

      Weighted average interest rate              5.09%
                                           ===========

      June 30, 2002

      Participation certificates:
         FHLMC - Adjustable rate           $ 3,584,665         57,652               --        3,642,317
         FNMA  - Adjustable rate             1,460,768         11,253               --        1,472,021
         FHLMC - Fixed rate                  4,708,821        106,419               --        4,815,240
         FNMA  - Fixed rate                    504,372         15,151               --          519,523
         GNMA  - Fixed rate                     92,404          2,908               --           95,312
      Investment in collateralized
        mortgage obligations:
         FHLMC                                   8,738             82               --            8,820
                                           -----------        -------       ----------       ----------

                                           $10,359,768        193,465               --       10,553,233
                                           ===========        =======       ==========       ==========

      Weighted average interest rate              5.70%
                                           ===========
</TABLE>

<PAGE>

5)    Loans Receivable

      Loans receivable are summarized as follows:

                                                          June 30,
                                               -----------------------------
                                                   2003              2002
                                               ------------      -----------
      Mortgage loans:
         One-to-four family                    $ 89,424,113       81,802,668
         Multi-family                             1,993,811        1,222,125
         Non-residential                            686,662          934,697
         Construction                               250,000               --
                                               ------------      -----------

      Total mortgage loans                       92,354,586       83,959,490
                                               ------------      -----------

      Other loans:
         Loans on deposit accounts                  292,747          397,170
         Auto loans                                 336,332          320,556
         Education loans                            658,326          821,986
         Credit card loans                          138,652          116,532
         Other                                       15,215           19,750
                                               ------------      -----------

      Total other loans                           1,441,272        1,675,994
                                               ------------      -----------

      Commercial business loans                      18,933            7,926
                                               ------------      -----------

      Total loans receivable                     93,814,791       85,643,410
                                               ------------      -----------

      Less:
         Loans in process                           617,066           67,229
         Net deferred yield adjustments            (406,725)        (379,501)
         Allowance for uncollected interest         262,637          258,576
         Allowance for loan losses                  409,560          350,260
                                               ------------      -----------

      Loans receivable, net                    $ 92,932,253       85,346,846
                                               ============      ===========

      Weighted average interest rate                   6.22%            6.91%
                                               ============      ===========

      Activity in the allowance for loan losses is summarized as follows:

                                                   Years Ended June 30,
                                           -----------------------------------
                                              2003         2002         2001
                                           ---------     --------     --------

      Balance, beginning of year           $ 350,260      359,445      368,885
      Provision for loan losses               60,000       15,000           --
      Recoveries previously charged-off           --       14,361       14,047
      Charge-offs                               (700)     (38,546)     (23,487)
                                           ---------     --------     --------

      Balance, end of year                 $ 409,560      350,260      359,445
                                           =========     ========     ========

      Delinquent loans (loans having payments past due ninety days or more) at
      June 30, 2003 amounted to $482,758 or .5% of total loans in force.
      Comparable figures for 2002 were $164,221 or .2% of total loans.

      Loans to directors and executive officers aggregated $619,675 at June 30,
      2003 and $643,167 at June 30, 2002. Such loans are made on substantially
      the same terms as those for other loan customers.

<PAGE>

6)    Loans Receivable Held for Sale

      The Company sells loans in the secondary market under various programs.
      During the years ended June 30, 2003, 2002 and 2001, the Company sold
      first mortgage loans totaling $1,902,945, $3,160,571 and $534,044 in the
      secondary market. The Company retained the servicing on these loans.
      Proceeds from the sale of these loans during the years ended June 30,
      2003, 2002 and 2001 were $1,902,945, $3,160,571 and $534,044 with no gain
      or loss realized on those sales. In addition, the Company recorded a gain
      of $27,128, $43,819 and $7,368 for the years ended June 30, 2003, 2002 and
      2001 on loan sales from the establishment of a mortgage servicing right
      asset. During the years ended June 30, 2003, 2002 and 2001, the Company
      amortized $42,322, $19,468 and $14,879 of mortgage servicing rights
      against current servicing fee income.

      As of June 30, 2003, $367,300 of newly originated fixed rate thirty year
      original term loans qualifying for sale into the secondary market were
      classified in this portfolio. Loans held for sale are valued at the lower
      of cost or fair value in accordance with generally accepted accounting
      principles. There were no recognized, but unrealized, losses at June 30,
      2003 and 2002.

      At June 30, 2003, 2002 and 2001, loans serviced for others amounted to
      $9,398,448, $11,277,638 and $8,840,358 respectively.

7)    Accrued Interest Receivable

      Accrued interest receivable is summarized as follows:

                                                           June 30,
                                                   -----------------------
                                                     2003            2002
                                                   --------        -------

      Investment securities                        $ 56,918        220,617
      Mortgage-backed securities                     35,916         66,262
      Loans receivable                              355,928        362,907
      Other investments                                  --             70
                                                   --------        -------

                                                   $448,762        649,856
                                                   ========        =======

<PAGE>

8)    Office Properties and Equipment

      Office properties and equipment are summarized as follows:

                                                           June 30,
                                                   -----------------------
                                                      2003          2002
                                                   ----------    ---------

      Land                                         $  416,595      416,595
      Buildings                                     2,331,939    2,329,939
      Easement for parking lot and driveway           223,050      223,050
      Leasehold improvements - Homer Glen             579,253      579,253
      Furniture, fixtures and equipment             2,822,007    2,716,539
                                                   ----------    ---------
                                                    6,372,844    6,265,376
      Less accumulated depreciation                 3,765,455    3,448,792
                                                   ----------    ---------

                                                   $2,607,389    2,816,584
                                                   ==========    =========

      Depreciation of office properties and equipment for the years ended June
      30, 2003, 2002 and 2001 amounted to $316,663, $322,450 and $314,158
      respectively.

      During July 1998, the Association entered into a lease for retail space
      and vacant land in Homer Glen, Illinois. The retail space is leased for a
      period of ten years with a single ten year renewal option. The vacant land
      is leased for ten years with eight successive ten year renewal options and
      is contiguous to both the leased retail space and land previously
      purchased by the Association.

      The Association established a full service branch banking facility at this
      location. Rent expense at the Homer Glen, Illinois location for the years
      ended June 30, 2003, 2002 and 2001 amounted to $49,045, $46,495 and
      $44,587 respectively. Rent expense includes charges for real estate taxes
      and insurance, and other costs of occupancy relating to common areas
      shared with other tenants.

      Minimum rental commitments under the above leases, exclusive of future
      escalation charges for real estate taxes, insurance and occupancy costs
      are approximately as follows:

            Year ended June 30, 2004                           $ 41,173
            Year ended June 30, 2005                             43,213
            Year ended June 30, 2006                             45,357
            Thereafter through June 30, 2009                    145,474

<PAGE>

9)    Prepaid Expenses and Other Assets

      Prepaid expenses and other assets consist of the following:

                                                             June 30,
                                                       -------------------
                                                         2003        2002
                                                       --------    -------

      Prepaid federal insurance premiums               $  5,851      5,975
      Prepaid insurance                                  77,976     27,372
      Other prepaid expenses                            122,621    123,937
      Mortgage servicing rights                          97,791    112,985
      Deferred federal income tax benefit - net (a)     119,533    155,961
      Accounts receivable and other assets              118,277    125,575
                                                       --------    -------

                                                       $542,049    551,805
                                                       ========    =======

      (a)   Significant components of the deferred tax assets and liabilities
            are as follows:

                                                          June 30,
                                                    -------------------
                                                      2003        2002
                                                    --------    -------
            Deferred tax assets:
              Tax basis of office building in
                excess of book basis                $412,833    433,160
              Book allowance for loan losses         139,070    118,908
                                                    --------    -------

               Total deferred tax assets             551,903    552,068
                                                    --------    -------

            Deferred tax liabilities:
              Loan fees deferred for financial
                reporting purposes, net of costs     150,049    135,652
              Accelerated tax depreciation            27,766     42,719
              Tax allowance for loan losses               --     11,992
              FHLB stock dividends                    82,314     64,940
              Mortgage servicing rights               33,249     38,415
              Unrealized gain on securities
               available for sale                    138,992    102,389
                                                    --------    -------

               Total deferred tax liabilities        432,370    396,107
                                                    --------    -------

               Net deferred tax benefit             $119,533    155,961
                                                    ========    =======

<PAGE>

10)   Deposits

      Deposit accounts are summarized as follows:

                                                               June 30,
                                                      --------------------------
                                                          2003           2002
                                                      ------------   -----------

      Passbook accounts                               $ 56,420,273    51,591,976
      NOW accounts                                      13,785,293    14,139,895
      Money market accounts                              7,648,455     7,792,826
      Non-interest bearing demand deposit accounts      11,647,108     9,997,978
                                                      ------------   -----------

                                                        89,501,129    83,522,675
                                                      ------------   -----------
      Certificates of deposit by interest rate:
        0.75 - 2.00%                                    32,769,520            --
        2.01 - 3.00                                     15,204,130    40,560,981
        3.01 - 4.00                                      8,615,367     7,647,105
        4.01 - 5.00                                      1,141,162     2,669,730
        5.01 - 6.00                                        258,296     3,943,178
        6.01 - 7.00                                             --       100,000
                                                      ------------   -----------

                                                        57,988,475    54,920,994
                                                      ------------   -----------

                                                      $147,489,604   138,443,669
                                                      ============   ===========

      The weighted average rate on deposit accounts at June 30, 2003 and 2002
      was 1.38% and 2.23% respectively.

      The aggregate amount of certificates of deposit with a minimum
      denomination of $100,000 was $11,521,000 and $9,134,000 at June 30, 2003
      and 2002, respectively.

      A summary of certificates of deposit by maturity is as follows:

                                                        June 30,
                                              ----------------------------
                                                  2003             2002
                                              -----------       ----------

      Within 12 months                        $54,859,232       53,223,962
      12 months to 24 months                    2,176,027        1,253,284
      24 months to 36 months                      953,216          443,748
                                              -----------       ----------

         Total                                $57,988,475       54,920,994
                                              ===========       ==========

      Interest expense on deposits consists of the following:

                                                Years Ended June 30,
                                       ------------------------------------
                                          2003          2002         2001
                                       ----------    ---------    ---------

      Passbook accounts                $  849,284    1,152,317    1,267,635
      Certificate accounts              1,539,654    2,188,361    3,412,921
      NOW and money market accounts       335,540      493,377      633,936
                                       ----------    ---------    ---------

         Total                         $2,724,478    3,834,055    5,314,492
                                       ==========    =========    =========

<PAGE>

11)   Other Liabilities

      Other liabilities consist of the following:

                                                           June 30,
                                                    ----------------------
                                                      2003           2002
                                                    --------       -------

      Accrued interest on deposits                  $ 14,621        25,287
      Accrued real estate taxes                      135,111       134,093
      Accrued federal income taxes                    26,000       265,477
      Other accrued expenses                         180,100       150,872
      Outstanding bank drafts                         37,871        39,200
      Other accounts payable                          38,151       148,651
                                                    --------       -------

                                                    $431,854       763,580
                                                    ========       =======

12)   Retirement Plans and Other Employee Benefits

      The Association participates in the Financial Institution's Retirement
      Fund, a tax-qualified pension trust, which covers all eligible employees.
      The Plan meets the criteria of a multiemployer pension plan as defined in
      Financial Accounting Standards Board Statement No. 87, "Employers'
      Accounting for Pensions" and as such, does not make separate actuarial
      valuations with respect to each employer, nor does it segregate plan
      assets. The practice with respect to multiemployer plans has been to
      accept employer's contributions that are paid as its expense for
      accounting purposes. A contribution of $157,362, $106,874 and $10,542 were
      paid and expensed by the Association for the years ended June 30, 2003,
      2002 and 2001, respectively.

      In addition, the Association established a qualified defined contribution
      plan (401(k) Plan) which covers all full-time employees having a minimum
      of twelve months of service and who are at least twenty-one years of age.
      Eligible employees may contribute from 2% to 15% of their monthly
      salaries. The Association will contribute an amount equal to 50%, 75% or
      100% of the monthly contribution up to 3% of salary, depending upon years
      of employment. Employer contributions to the Plan amounted to $37,734,
      $36,948 and $34,900 for the years ended June 30, 2003, 2002 and 2001,
      respectively.

<PAGE>

13)   Stock Option Plan

      In conjunction with the Conversion, the Company adopted the 1993 Stock
      Option and Incentive Plan (the "Stock Option Plan") for the benefit of the
      senior officers and directors of the Company. The number of shares of
      common stock authorized under the Stock Option Plan was 34,500, equal to
      10.0% of the total number of shares issued in the Conversion. Grantees of
      the remaining outstanding shares at June 30, 2002 were awarded 10-year
      options to acquire shares at the market price on the date the options were
      granted. Future grants are determined by the Board of Directors at option
      prices that are not less than the fair market value of the stock at the
      grant date and expire no later than ten years from the date of grant. All
      options granted under the Stock Option Plan become exercisable
      immediately. The following is an analysis of the stock option activity for
      each of the years in the three year period ended June 30, 2003 and the
      stock options outstanding at the end of the respective periods:

                                                      Exercise Price
                                                --------------------------
                                      Number
      Options                        of Shares     Per Share       Total
                                     ---------  --------------    --------

      Outstanding at June 30, 2000     8,625    $  10.00-16.25    $ 97,031
      Granted                              0
      Exercised                            0
                                      ------

      Outstanding at June 30, 2001     8,625       10.00-16.25      97,031
      Granted                              0
      Exercised                            0
                                      ------

      Outstanding at June 30, 2002     8,625       10.00-16.25      97,031
      Granted                              0
      Exercised                       (8,625)    (10.00-16.25)     (97,031)
                                      ------    --------------    --------

      Outstanding at June 30, 2003        --    $           --    $     --
                                      ======    ==============    ========

      Options available for future
        grants at June 30, 2003        6,900
                                      ======

      The Company accounts for its stock options in accordance with Accounting
      Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees"
      ("APB 25"). Under APB 25, as the exercise price of the Company's employee
      stock options equals the market price of the underlying stock on the date
      of grant, no compensation expense is recognized.

      The Company has implemented SFAS No. 123 "Accounting for Stock-Based
      Compensation". The Company will retain its current accounting method for
      its stock based compensation plans. This statement will only result in
      additional disclosures for the Company, and as such, its adoption is not
      expected to have a material impact on the Company's financial condition or
      its results of operations.

      The following summarizes the pro forma net income and earnings per shares
      as if the fair value method of accounting for stock-based compensation
      plans had been utilized:

                                                       Years Ended June 30,
                                                  ------------------------------
                                                    2003        2002       2001
                                                  --------    -------    -------

      Net income (as reported)                    $690,183    866,340    379,254
      Pro forma net income                         690,183    866,340    379,254

      Earnings per share - diluted (as reported)  $   1.88       2.36       1.03
      Pro forma diluted earnings per share            1.88       2.36       1.03

      The pro forma results presented above may not be representative of the
      effects reported in pro form net income for future years.

<PAGE>

14)   Income Taxes

      As a result of legislation that changed the method used by many thrifts to
      calculate their bad debt reserve for federal income tax purposes, the
      Association must recapture that portion of the reserve that exceeds the
      amount that could have been taken under the experience method for tax
      years beginning after December 31, 1987. The legislation also requires
      thrifts to account for bad debts for federal income tax purposes on the
      same basis as commercial banks for tax years beginning after December 31,
      1995. The recapture is occurring over a six year period. The commencement
      of the recapture by the Association was delayed two years as the
      Association met certain residential lending requirements. For the three
      years ended June 30, 2003, the Association recaptured approximately
      $114,000 in excess bad debt reserves resulting in tax payments of
      approximately $39,000 which were previously accrued. The pre-1988 reserve
      provisions are subject only to recapture requirements if the Association
      no longer qualifies as a thrift. Tax bad debt deductions accumulated prior
      to 1988 by the Association and included in retained earnings total
      approximately $1,100,000. No deferred income taxes have been provided for
      these bad debt deductions and no recapture of these amounts is
      anticipated.

                                               Years Ended June 30,
                                         --------------------------------
                                           2003         2002        2001
                                         --------     -------     -------

      Current                            $362,448     421,495     157,546
      Deferred (benefit)                     (175)     24,919      38,761
                                         --------     -------     -------

                                         $362,273     446,414     196,307
                                         ========     =======     =======

      A reconciliation of the statutory federal income tax rate to effective
      income tax rate is as follows:

                                               Years Ended June 30,
                                         --------------------------------
                                           2003         2002        2001
                                         --------     -------     -------

      Statutory federal income tax rate      34.0%       34.0%       34.0%
      Other                                    .4          --          .1
                                         --------     -------     -------

      Effective income tax rate              34.4%       34.0%       34.1%
                                         ========     =======     =======

      Deferred federal income tax expense (benefit) consists of the following
      tax effects of timing differences:

                                               Years Ended June 30,
                                         --------------------------------
                                           2003         2002        2001
                                         --------     -------     -------

      Loan fees net of costs             $ 14,397      38,900      38,299
      Depreciation                          5,374      (2,098)      9,173
      FHLB stock dividends                 17,374      15,028      18,428
      Book loan loss provision in
        excess of tax deduction           (20,162)    (23,198)    (19,045)
      Recapture of bad debt reserve       (11,992)    (11,992)    (11,992)
      Mortgage servicing rights            (5,166)      8,279       3,898
                                         --------     -------     -------

                                         $   (175)     24,919      38,761
                                         ========     =======     =======

<PAGE>

15)   Regulatory Capital Requirements

      The Association is subject to various regulatory capital requirements
      administered by the federal banking agencies. Failure to meet minimum
      total requirements can initiate certain mandatory and possible additional
      discretionary actions by regulators that, if undertaken, could have a
      direct material effect on the Association's financial statements. Under
      capital adequacy guidelines and the regulatory framework for prompt
      correction action, the Association must meet specific capital guidelines
      that involve quantitative measures of the Association's assets,
      liabilities, and certain off-balance-sheet items as calculated under
      regulatory accounting practices. The Association's capital amounts and
      classification are also subject to quantitative judgments by the
      regulators about components, risk weightings, and other factors.

      Quantitative measures established by regulation to ensure capital adequacy
      require all savings institutions to maintain minimum amounts and ratios,
      set forth in the table below of the total risk-based, tangible and core
      capital, as defined in the regulations. Management believes, as of June
      30, 2003, that the Association meets all capital adequacy requirements to
      which it is subject.

      The Association, according to federal regulatory standards, is
      well-capitalized under the regulatory framework for prompt corrective
      action. To be categorized as adequately capitalized, the Association must
      maintain minimum total risk-based, tangible, and core ratios as set forth
      in the table. There are no conditions or events since that notification
      that management believes have changed the institution's category.

      At June 30, 2003 and 2002, the Association's actual capital amounts and
      ratios, minimum amounts and ratios required for capital adequacy purposes
      and minimum amounts and ratios to meet the well-capitalized criteria under
      prompt corrective action provisions, are as follows:

<TABLE>
<CAPTION>
                                                                                   To Be Well-
                                                                                Capitalized Under
                                                          For Capital           Prompt Corrective
                                  Actual               Adequacy Purposes        Action Provisions
                          --------------------        -------------------      -------------------
                            Amount       Ratio          Amount      Ratio        Amount      Ratio
                          ----------     -----        ----------    -----      ----------    -----
<S>                       <C>            <C>          <C>            <C>       <C>           <C>
      June 30, 2003

      Tangible            $9,422,982      5.88%       $2,404,000     1.50%     $      N/A      N/A%
      Core                 9,422,982      5.88         4,808,000     3.00       8,013,000     5.00
      Risk-based           9,817,542     11.98         6,555,000     8.00       8,194,000    10.00

      June 30, 2002

      Tangible            $9,295,261      6.15%       $2,269,000     1.50%     $      N/A      N/A%
      Core                 9,295,261      6.15         4,537,000     3.00       7,562,000     5.00
      Risk-based           9,630,521     11.90         6,474,000     8.00       8,092,000    10.00
</TABLE>

<PAGE>

15)   Regulatory Capital Requirements (continued)

<TABLE>
<CAPTION>
                                                 Tangible            Core           Risk-based
                                                 Capital            Capital           Capital
                                               -----------        ----------        ----------
<S>                                            <C>                 <C>               <C>
      June 30, 2003

      Stockholders' equity                     $ 9,702,568         9,702,568         9,702,568
      Unrealized gain on securities
        available for sale, net of taxes          (269,807)         (269,807)         (269,807)
      Retained mortgage servicing rights            (9,779)           (9,779)           (9,779)
      General loss allowances                           --                --           409,560
      Direct equity investments                         --                --           (15,000)
                                               -----------        ----------        ----------

      Regulatory capital computed              $ 9,422,982         9,422,982         9,817,542
                                               ===========        ==========        ==========
</TABLE>

      A reconciliation of the Association's equity capital at June 30, 2003 is
      as follows:

      Stockholders' equity                                   $ 11,056,147
      Less Company stockholders' equity not available
       for regulatory capital                                  (1,353,579)
                                                             ------------

      Stockholders' equity of the Association                $  9,702,568
                                                             ============

<TABLE>
<CAPTION>
                                                 Tangible            Core           Risk-based
                                                 Capital            Capital           Capital
                                               -----------        ----------        ----------
<S>                                            <C>                 <C>               <C>
      June 30, 2002

      Stockholders' equity                     $ 9,505,314         9,505,314         9,505,314
      Unrealized gain on securities
       available for sale, net of taxes           (198,755)         (198,755)         (198,755)
      Retained mortgage servicing rights           (11,298)          (11,298)          (11,298)
      General loss allowances                           --                --           350,260
      Direct equity investments                         --                --           (15,000)
                                               -----------        ----------        ----------

      Regulatory capital computed              $ 9,295,261         9,295,261         9,630,521
                                               ===========        ==========        ==========
</TABLE>

      A reconciliation of the Association's equity capital at June 30, 2002 is
      as follows:

      Stockholders' equity                                   $ 10,396,555
      Less Company stockholders' equity not available
       for regulatory capital                                    (891,241)
                                                             ------------

      Stockholders' equity of the Association                $  9,505,314
                                                             ============

<PAGE>

16)   Stockholders' Equity

      As part of the Conversion, the Association established a liquidation
      account for the benefit of all eligible depositors who continue to
      maintain their deposit accounts in the Association after conversion. In
      the unlikely event of a complete liquidation of the Association, each
      eligible depositor will be entitled to receive a liquidation distribution
      from the liquidation account, in the proportionate amount of the then
      current adjusted balance for deposit accounts held, before distribution
      may be made with respect to the Association's capital stock. The
      Association may not declare or pay a cash dividend on, or repurchase any
      of, its capital stock if the effect thereof would cause the retained
      earnings of the Association to be reduced below the amount required for
      the liquidation account. Except for such restrictions, the existence of
      the liquidation account does not restrict the use or application of
      retained earnings.

      In addition, the Association may not declare or pay cash dividends on or
      repurchase any of its shares of common stock if the effect thereof would
      cause stockholders' equity to be reduced below applicable regulatory
      capital maintenance requirements or if such declaration and payment would
      otherwise violate regulatory requirements.

      Unlike the Association, the Company is not subject to these regulatory
      restrictions on the payment of dividends to its stockholders. However, the
      Company's source of funds for future dividends may depend upon dividends
      received by the Company from the Association.

17)   Financial Instruments with Off-Balance Sheet Risk

      The Association is a party to various transactions with off-balance sheet
      risk in the normal course of business. These transactions are primarily
      commitments to originate loans and to extend credit on previously approved
      unused lines of credit. These financial instruments carry varying degrees
      of credit and interest-rate risk in excess of amounts recorded in the
      consolidated financial statements.

      Commitments to originate mortgage loans of $6,651,700 at June 30, 2003
      represents an amount which the Association plans to fund within the normal
      commitment period of 60 to 90 days. Of this amount, $6,169,800 are fixed
      rate commitments with rates ranging from 4.875% to 6.375% and $481,900 are
      in adjustable rate commitments. Because the credit worthiness of each
      customer is reviewed prior to extension of the commitment, the Association
      adequately controls their credit risk on these commitments, as it does for
      loans recorded on the balance sheet. The Association conducts all of its
      lending activities in the Chicagoland area. Management believes the
      Association has a diversified loan portfolio and the concentration of
      lending activities in these local communities does not result in an acute
      dependency upon economic conditions of the lending region.

      The Association has approved, but unused, equity lines of credit of
      approximately $1,705,000 at June 30, 2003. In addition, the Association
      has approved, but unused, credit card lines of credit amounting to
      approximately $393,000. The Association has also issued outstanding
      letters of credit totaling $98,650.

18)   Contingencies

      The Association is, from time to time, a party to certain lawsuits arising
      in the ordinary course of its business, wherein it enforces its security
      interest. Management believes that the Company and the Association are not
      engaged in any legal proceedings of a material nature at the present time.

19)   Subsequent Event

      At the July, 2003 Board of Directors' meeting, the Company declared a
      quarterly dividend of $.17 per share, totaling $63,342, payable August 14,
      2003 to shareholders of record as of August 4, 2003.

<PAGE>

20)   Disclosures About the Fair Value of Financial Instruments

      The following methods and assumptions were used to estimate the fair value
      of each class of financial instruments for which it is practicable to
      estimate that value:

      Cash and cash equivalents: For cash and interest-bearing deposits, the
      carrying amount is a reasonable estimate of fair value.

      Investment securities: Fair values for securities are based on quoted
      market prices as published in financial publications or on quotes from
      third-party brokers.

      Mortgage-backed securities: Fair values for mortgage-backed securities are
      based on the lower of quotes received from various third-party brokers.

      Loans receivable: The fair value for fixed and adjustable rate mortgage
      loans are estimated using discounted cash flow analyses, using interest
      rates currently being offered for loans with similar terms and collateral
      to borrowers of similar credit quality.

      Accrued interest receivable and payable: The carrying value of accrued
      interest receivable, net of the allowance for uncollected interest, and
      accrued interest payable approximates fair value due to the relatively
      short period of time between accrual and expected realization.

      Deposit liabilities: The fair value of demand deposits, savings accounts
      and money market deposits is the amount payable on demand at the reporting
      date. The fair value of fixed maturity certificates of deposit is
      estimated by discounting the future cash flows using the rates currently
      offered for deposits of similar original maturities.

      The fair value of the Association's off-balance-sheet instruments is
      nominal.

      The estimated fair value of the Association's financial instruments as of
      June 30, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                               June 30, 2003
                                                        ---------------------------
                                                          Carrying          Fair
                                                           Amount           Value
                                                        ------------    -----------
<S>                                                     <C>              <C>
      Financial assets:
        Cash and cash equivalents                       $ 49,421,065     49,421,065
        Investment securities, available for sale          6,388,900      6,388,900
        Mortgage-backed securities, held to maturity       6,272,466      6,425,722
        Loans receivable, gross                           94,182,091     97,467,000
        Accrued interest receivable                          448,762        448,762

      Financial liabilities:
        Deposits                                         147,489,604    148,054,000
        Accrued interest payable                              14,621         14,621

<CAPTION>
                                                               June 30, 2002
                                                        ---------------------------
                                                          Carrying          Fair
                                                           Amount           Value
                                                        ------------    -----------
<S>                                                     <C>              <C>
      Financial assets:
        Cash and cash equivalents                       $ 32,921,438     32,921,438
        Investment securities, held to maturity           10,026,708     10,182,850
        Investment securities, available for sale          6,279,537      6,279,537
        Mortgage-backed securities, held to maturity      10,359,768     10,553,233
        Loans receivable, gross                           86,383,216     88,327,000
        Accrued interest receivable                          649,856        649,856

      Financial liabilities:
        Deposits                                         138,443,669    138,744,000
        Accrued interest payable                              25,287         25,287
</TABLE>

<PAGE>

21)   Condensed Parent Company Only Financial Statements

      The following condensed statements of financial condition, as of June 30,
      2003 and 2002 and condensed statements of income and cash flows for the
      years ended June 30 2003, 2002 and 2001 for Midland Capital Holdings
      Corporation should be read in conjunction with the consolidated financial
      statements and the notes thereto.

                        Statements of Financial Condition

                                                          June 30,
                                                 -------------------------
                                                     2003          2002
                                                 -----------    ----------
      Assets

      Cash and cash equivalents                  $ 1,348,817       889,315
      Equity investment in the Association         9,418,301     9,292,099
      Prepaid expenses and other assets                8,103         6,666
                                                 -----------    ----------

                                                  10,775,221    10,188,080
                                                 -----------    ----------

      Liabilities and Stockholders' Equity

      Liabilities:
      Accrued taxes and other liabilities              3,341         4,740
                                                 -----------    ----------

      Stockholders' Equity:
      Common stock                                     3,726         3,640
      Additional paid-in capital                   3,381,120     3,262,395
      Retained earnings                            7,387,034     6,917,305
                                                 -----------    ----------

        Total stockholders' equity                10,771,880    10,183,340
                                                 -----------    ----------

                                                 $10,775,221    10,188,080
                                                 ===========    ==========

                              Statements of Income

<TABLE>
<CAPTION>
                                                         Years Ended June 30,
                                                 -----------------------------------
                                                    2003         2002         2001
                                                 ---------     --------     --------
<S>                                              <C>            <C>          <C>
      Interest income                            $  18,399       16,986       17,094
      Non-interest expense                          88,124       69,678       64,352
                                                 ---------     --------     --------

      Net loss before income tax benefit
       and equity in earnings of subsidiaries      (69,725)     (52,692)     (47,258)
      Benefit from income taxes                     23,706       17,915       16,068
                                                 ---------     --------     --------

      Net loss before equity in earnings
       of subsidiaries                             (46,019)     (34,777)     (31,190)
      Equity in earnings of subsidiaries           736,202      901,117      410,444
                                                 ---------     --------     --------

       Net income                                $ 690,183      866,340      379,254
                                                 =========     ========     ========
</TABLE>

<PAGE>

21)   Condensed Parent Company Only Financial Statements (continued)

                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                            Years Ended June 30,
                                                   -------------------------------------
                                                       2003          2002         2001
                                                   -----------     --------     --------
<S>                                                <C>             <C>          <C>
      Cash flows from operating activities:
        Net income                                 $   690,183      866,340      379,254
        Equity in earnings of the Association         (736,202)    (901,117)    (410,444)
        Decrease (increase) in prepaid expenses
          and other assets                              20,343       11,102      (17,768)
        (Decrease) increase in accrued taxes
          and other liabilities                         (1,399)       1,751      (44,938)
                                                   -----------     --------     --------

      Net cash provided for
        operating activities                           (27,075)     (21,924)     (93,896)
                                                   -----------     --------     --------

      Cash flows from financing activities:
        Proceeds from exercise of stock options         97,031           --           --
        Dividends received from Association            610,000      410,000      560,000
        Dividends paid on common stock                (220,454)    (167,428)    (109,193)
                                                   -----------     --------     --------

      Net cash provided by financing activities        486,577      242,572      450,807
                                                   -----------     --------     --------

      Net increase in cash and cash equivalents        459,502      220,648      356,911
      Cash and cash equivalents at
        beginning of year                              889,315      668,667      311,756
                                                   -----------     --------     --------

      Cash and cash equivalents at
        end of year                                $ 1,348,817      889,315      668,667
                                                   ===========     ========     ========
</TABLE>



Officers and Directors

Officers                                    Directors

Paul Zogas                          Paul Zogas
President,                          President, Chief Executive Officer,
Chief Executive Officer             Chief Financial Officer and
and Chief Financial Officer of      Chairman of the Board for
the Company and the Association     the Company and the Association

Charles Zogas                       Charles Zogas
Executive Vice President,           Executive Vice President,
Chief Operating Officer,            Chief Operating Officer,
Secretary and Treasurer of          Secretary and Treasurer
the Company and the Association

Richard Taylor                      Richard Taylor
Vice President, Trust Officer       Vice President, Trust Officer
and Assistant Secretary    of       and Assistant Secretary
the Company and the Association

Janice Cecott                       Algerd Brazis
Controller of the Company           Retired businessman and
and the Association                 Director, Knights of Lithuania
                                    Mid-America District

Donna Chmiel                        Michael J. Kukanza
Internal Auditor of the             Self-employed private investor
Company and the Association

Lois Gajdorus                       Jonas Vaznelis
Assistant Vice President            Retired businessman and Committee
of the Association                  member of the Board of Zoning Appeals
                                    for Beverly Shores, Indiana.
Linda Kolecki
Assistant Vice President
of the Association


                                       21
<PAGE>



Corporate Information

Investor Information
Midland Capital Holdings Corporation is the thrift holding company for Midland
Federal Savings and Loan Association. Shareholders, investors and analysts
interested in additional information may contact at the Corporate Office: Paul
Zogas, President, 8929 S. Harlem Avenue, Bridgeview, Illinois 60455.

Annual Report on Form 10-KSB
A copy of Midland Capital Holdings Corporation's Annual Report on Form 10-KSB
including financial statements, as filed with the SEC, is available without
charge by writing to our Corporate Office, Attn: Charles Zogas, Executive Vice
President, 8929 S. Harlem Avenue, Bridgeview, Illinois 60455.

Annual Meeting of Shareholders
The Annual Meeting of the Shareholders of Midland Capital Holdings Corporation
will be held at 2:00 p.m., October 22, 2003, at the Corporate Office of the
Company, 8929 S. Harlem Avenue, Bridgeview, Illinois. All shareholders are
cordially invited to attend.

Stock Transfer Agent
Midland Capital Holdings Corporation's transfer agent, Registrar and Transfer
Company, maintains all stockholder records and can assist with stock transfer
and registration, lost certificates or address change, changes or corrections in
social security or tax identification numbers, and 1099 tax reporting questions.
If you have questions, please contact the stock transfer agent in writing at the
address below:

         Registrar and Transfer Company
         10 Commerce Drive
         Cranford, New Jersey 07016-3572
         Attn: Corporate Relations

Corporate Counsel/Washington, D.C.
         Jenkens & Gilchrist, P.C.
         1919 Pennsylvania Avenue, N.W. - Suite 600
         Washington, D.C. 20006

Corporate Counsel/Chicago, Illinois
         Kamm & Shapiro, Ltd.
         230 West Monroe Street - Suite 1100
         Chicago, Illinois 60606

Independent Auditors
         Cobitz, VandenBerg & Fennessy
         9944 South Roberts Road - Suite 202
         Palos Hills, Illinois 60465



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