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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20552


                                   FORM 10-KSB

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 [FEE REQUIRED]

          For the fiscal year ended June 30, 2000

                                       OR

[ ]  TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [NO FEE REQUIRED]

          For the transition period from ____________ to ____________

                         Commission File Number 1-14343

                      MIDLAND CAPITAL HOLDINGS CORPORATION
                 (Name of Small Business Issuer in its Charter)

     Delaware                                                   36-4238089
(State or Other Jurisdiction of                               (I.R.S. Employer
Incorporation or Organization)                            identification Number)

8929 South Harlem Avenue
 Bridgeview, Illinois                                              60455
(Address of Principal Executive Offices)                          Zip Code

         Issuer's telephone number, including area code: (708) 598-9400

         Securities Registered Under Section 12(b) of the Exchange Act:

                                      None

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

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

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past twelve  months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days. YES X NO

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

     The Issuer had  $372,000  in net income for the fiscal  year ended June 30,
2000.

     As of June 30, 2000,  there were issued and  outstanding  363,975 shares of
the Issuer's  Common  Stock.  The Issuer's  voting  stock is not  regularly  and
actively traded,  and there are no regularly quoted bid and asked prices for the
Issuer's  voting  stock.  Accordingly,  the  Issuer is unable to  determine  the
aggregate market value of the voting stock held by non-affiliates.

                       DOCUMENTS INCORPORATED BY REFERENCE

     PARTS II and IV of Form  10-KSB - Annual  Report  to  Stockholders  for the
Fiscal Year Ended June 30, 2000.

     PART III of Form 10-KSB - Proxy  Statement  for the 2000 Annual  Meeting of
Stockholders.
--------------------------------------------------------------------------------


                                        1

<PAGE>

                                     PART I


Item 1.  Description of Business
--------------------------------

     Midland  Capital  Holdings   Corporation  (the  "Company")  is  a  Delaware
corporation  which was  organized  in 1998 by Midland  Federal  Savings and Loan
Association (the "Association" or "Midland Federal") for the purpose of becoming
a thrift  institution  holding  company.  The  Company and the  Association  are
headquartered in Bridgeview,  Illinois. The Association began operations in 1914
as a state-chartered mutual savings institution. In 1982, the Association became
a federal mutual savings and loan association.

     On June 30, 1993, the Association  completed a conversion to the stock form
of organization.  In that conversion,  the Association  issued 345,000 shares of
common stock,  raising net proceeds of approximately  $3.1 million.  On July 23,
1998, the Association became a wholly-owned subsidiary of the Company.

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

     Midland Federal has been principally  engaged in the business of attracting
deposits  from  the  general   public  and  using  such  deposits  to  originate
residential mortgage and, to a lesser extent,  consumer,  multi-family and other
loans in its primary  market area.  The  Association  has also made  substantial
investments  in  mortgage-backed  securities,  investment  securities and liquid
assets.

     The Association's  primary market area consists of southwest  Chicago,  and
the southwest suburban communities of Bridgeview, Oak Lawn, Palos Hills, Hickory
Hills, Burbank, Chicago Ridge, Lockport,  Orland Park and Lemont which it serves
through its main office in  Bridgeview  and three  branch  offices in  southwest
Chicago. Its deposits are insured up to applicable limits by the Federal Deposit
Insurance  Corporation  ("FDIC").  At June 30, 2000,  Midland Federal had $137.2
million of assets,  deposits of $126.9 million and  stockholders  equity of $9.3
million.

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

Forward-Looking Statements
--------------------------

         When used in this Form 10-KSB and in future filings by the Company with
the  Securities  and Exchange  Commission  (the "SEC"),  in the Company's  press
releases or other public or shareholder  communications,  and in oral statements
made with the approval of an authorized  executive officer, the words or phrases
"will likely  result",  "are expected to", "will  continue",  "is  anticipated",
"estimate",   "project"  or  similar   expressions   are  intended  to  identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform  Act of 1995.  Such  statements  are  subject  to  risks  and
uncertainties,  including  but not limited to changes in economic  conditions in
the

                                        2

<PAGE>



Company's market area, changes in policies by regulatory agencies,  fluctuations
in  interest  rates,   demand  for  loans  in  the  Company's  market  area  and
competition,  all or  some  of  which  could  cause  actual  results  to  differ
materially  from  historical   earnings  and  those  presently   anticipated  or
projected.  The Company wishes to caution readers not to place undue reliance on
any such  forward-looking  statements,  which speak only as of the date made and
are subject to the above-stated  qualifications in any event. The Company wishes
to advise  readers  that the factors  listed  above could  affect the  Company's
financial  performance  and could cause the Company's  actual results for future
periods to differ  materially  from any opinions or  statements  expressed  with
respect to future periods in any current statements.

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

Lending Activities
------------------

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

     Loan originations come primarily from walk-in customers, continued business
from customers and referrals from local real estate brokers through contact with
the Association's staff of loan originators.  The Association's loan originators
earn a base  salary  plus  commission  based  upon  first  mortgage  loan  sales
generated by the originator. All completed loan applications are reviewed by the
Association's  salaried  loan  officers.  As  part of the  application  process,
information is obtained concerning the income,  financial condition,  employment
and credit history of the applicant.  If  multi-family or commercial real estate
is  involved,  information  is also  obtained  concerning  cash flow  after debt
service.   The  quality  of  loan   applications   are  analyzed  based  on  the
Association's credit underwriting guidelines as well as the guidelines issued by
the Federal Home Loan Mortgage Corporation  ("FHLMC"),  depending on the type of
loan  involved.   The   Association  has   established   correspondent   lending
relationships  with other lenders in order to take applications  which either do
not conform to the  Association's  underwriting  guidelines or are mortgage loan
products  that are not  offered by the  Association,  such as FHA and VA insured
mortgage loans. In  consideration of a loan broker fee paid by the lender to the
Association,  the  Association  processes  the loan  application  and forwards a
completed loan application package to the lender, who underwrites and originates
the loan.

     All real estate loans are appraised by independent fee appraisers  approved
by the Board of Directors. The Association obtains audited financial statements,
and current unaudited financial statements where appropriate,  as well as annual
financial statements for borrowers with loans secured by commercial real estate.

     Residential real estate loans are generally  approved by the Loan Committee
in amounts up to $350,000. Residential real estate loans may also be approved by
the Chief Lending Officer in

                                        3

<PAGE>



amounts up to  $200,000  or the  President  in amounts up to  $252,700  and then
ratified  by the Loan  Committee  or the Board of  Directors.  Residential  real
estate  loans  in  amounts  over  $350,000  must be  approved  by the  Board  of
Directors. Non-residential real estate loans are generally approved by the Board
of  Directors.  Non-residential  real  estate  loans may also be approved by the
President in amounts up to $252,700 and then ratified by the Board of Directors.
The Chief Lending Officer and the President each have approval authority for any
consumer loans.

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

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

     At June 30, 2000,  the  Association  had two borrowers  with an outstanding
loan  balances in excess of $500,000.  One loan totaled  $1.1  million,  and was
secured by a 43 unit  multi-family  residential  property  in the  Association's
market area. This loan was made prior to the imposition of the regulatory limits
described above, and is  grandfathered.  The other loan totaled $638,000 and was
secured by a single family  residence.  Both loans are current and performing in
accordance  with their terms at June 30, 2000.  See "--  Non-Performing  Assets,
Classified Assets, Loan Delinquencies and Defaults."


                                        4

<PAGE>



     Loan and Mortgage-backed  Securities Portfolio  Composition.  The following
table sets forth  information  concerning the  composition of the  Association's
loan  and  mortgage-backed  securities  portfolios  in  dollar  amounts  and  in
percentages as of the dates indicated.
<TABLE>


                                                                                           June 30,
                                                         ---------------------------------------------------------------------------
                                                                    2000                     1999                      1998
                                                         ---------------------------------------------------------------------------
                                                            Amount       Percent   Amount      Percent       Amount      Percent
                                                         ---------------------------------------------------------------------------
                                                                                     (Dollars in Thousands)
<S>                                                         <C>            <C>    <C>            <C>          <C>           <C>
Real Estate Loans
-----------------
 One- to four-family.....................................   $49,545       91.84%  $46,032       92.28%      $35,030        87.82%
 Multi-family............................................     1,640        3.04     1,713        3.43         1,790         4.49
 Non-residential.........................................       440        0.82       223        0.45           244         0.61
 Construction............................................       486        0.90       ---         ---           450         1.13
                                                         ----------      ------   -------      ------       -------       ------
    Total mortgage loans.................................    52,111       96.60    47,968       96.16        37,514        94.05
                                                           --------      ------   -------      -------      -------       ------

Other Loans
-----------
 Consumer Loans:
  Deposit accounts.......................................       277        0.51       274        0.55           464         1.16
  Student................................................     1,016        1.88     1,167        2.34         1,316         3.30
  Automobile.............................................       323        0.60       274        0.55           372         0.93
  Credit card............................................        97        0.18        85        0.17            73         0.19
  Other..................................................        81        0.15        58        0.11            76         0.19
                                                         ----------      -------  -------      ------       -------        -----
     Total consumer loans................................     1,794        3.32     1,858        3.72         2,301         5.77
                                                          ---------      -------  --------     ------       -------        -----

  Commercial business loans..............................        41        0.08        58        0.12           71          0.18
                                                         ----------      -------  -------      ------       ------        ------
     Total loans receivable..............................    53,946      100.00%   49,884      100.00%      39,886        100.00%
                                                           --------      ======   -------      ======       ------        ======

Less
----
 Loans in process........................................       414                     4                       41
 Deferred yield adjustments..............................      (128)                  (95)                      17
 Allowance for uncollected interest......................       261                   260                      262
 Allowance for loan losses...............................       369                   366                      394
                                                         ----------               -------                  -------
     Loans receivable, net...............................   $53,030               $49,349                  $39,172
                                                            =======               =======                  =======

Mortgage-backed securities:
  FHLMC..................................................   $17,341       79.00%  $10,245       64.53%     $14,256         68.49%
  FNMA...................................................     4,375       19.93     5,318       33.49        6,147         29.53
  GNMA...................................................       219        1.00       295        1.86          389          1.87
  Collateralized mortgage obligation.....................        15        0.07        19        0.12           24          0.11
                                                         ----------      -------  -------      ------      -------        ------
    Total mortgage-backed securities.....................    21,950      100.00%   15,877      100.00%      20,816        100.00%
                                                                         ======                ======                     ======
  Net premiums (discounts)...............................       (96)                    5                       29
                                                         ----------               -------                  -------
  Net mortgage-backed securities.........................   $21,854               $15,882                  $20,845
                                                            =======               =======                  =======

</TABLE>

                                        5

<PAGE>



         The following  table shows the  composition of the  Association's  loan
portfolio by fixed and adjustable-rate at the dates indicated.
<TABLE>

                                                                                         June 30,
                                                          --------------------------------------------------------------------------
                                                                    2000                     1999                    1998
                                                          --------------------------------------------------------------------------
                                                             Amount       Percent     Amount      Percent     Amount      Percent
                                                          --------------------------------------------------------------------------
                                                                                    (Dollars in Thousands)
<S>                                                         <C>            <C>       <C>           <C>        <C>          <C>
Fixed-Rate Loans
----------------
Real Estate:
  One- to four-family..................................... $44,038        81.63%    $42,988        86.18%    $32,057       80.37%
  Multi-family............................................     214         0.40         216         0.43         217        0.54
  Non-residential.........................................     280         0.52          49         0.10          58         .15
                                                          --------       ------     -------       ------      ------      ------
      Total real estate loans.............................  44,532        82.55      43,253        86.71      32,332       81.06
                                                          --------       ------     -------       ------      ------      ------
  Consumer................................................     465         0.86         393         0.79         507        1.27
                                                          --------       ------     -------       ------      ------      ------
     Total fixed-rate loans...............................  44,997        83.41      43,646        87.50      32,839       82.33
                                                          --------       ------     -------       ------      ------      ------

Adjustable-Rate Loans
--------------------
Real estate:
  One- to four-family.....................................   5,507        10.21       3,044         6.10       2,973        7.45
  Multi-family............................................   1,426         2.64       1,497         3.00       1,573        3.94
  Non-residential.........................................     160         0.30         174         0.35         186        0.47
  Construction............................................     486         0.90         ---          ---         450        1.13
                                                          --------       ------     -------       ------     -------      ------
     Total real estate loans..............................   7,579        14.05       4,715         9.45       5,182       12.99
                                                          --------       ------     -------       ------     -------      ------
  Consumer................................................   1,329         2.46       1,465         2.93       1,794        4.50
  Commercial business.....................................      41         0.08          58         0.12          71        0.18
                                                          --------       ------     -------       ------     -------      ------
     Total adjustable-rate loans..........................   8,949        16.59       6,238        12.50       7,047       17.67
                                                          --------       ------     -------       -------    -------      ------
     Total loans, net.....................................  53,946       100.00%     49,884       100.00%     39,886      100.00%
                                                                         ======                   ======                  ======

Less:
----
  Loans in process........................................     414                        4                       41
  Deferred yield adjustments..............................    (128)                     (95)                      17
  Allowance for uncollected interest......................     261                      260                      262
  Allowance for loan losses...............................     369                      366                      394
                                                          --------                  -------                  -------
     Loans receivable, net................................ $53,030                  $49,349                  $39,172
                                                           =======                  =======                  =======



                                        6

<PAGE>



     The following  schedule  illustrates  the interest rate  sensitivity of the
Association's  loan portfolio at June 30, 2000.  Mortgages which have adjustable
or renegotiable  interest rates are shown as maturing in the period during which
the  contract  is due.  The  schedule  does not  reflect the effects of possible
prepayments or enforcement of due-on-sale clauses or interest rate adjustments.




                                           Real Estate
                     -------------------------------------------------------
                                           Multi-Family      Construction or                        Commercial
                     One- to Four-Family   and Commercial    Development         Consumer           Business               Total
                     --------------------------------------------------------------------------------------------------------------
                              Weighted            Weighted          Weighted            Weighted          Weighted         Weighted
                              Average             Average           Average             Average           Average          Average
                     Amount   Rate       Amount   Rate     Amount   Rate       Amount   Rate      Amount  Rate      Amount Rate
                    ----------------------------------------------------------------------------------------------------------------
                                                                           (Dollars in Thousands)
Due During Years
Ending June 30,
----------------
<S>                   <C>      <C>      <C>       <C>      <C>     <C>        <C>        <C>      <C>     <C>      <C>         <C>
2001(1)..............$   332   8.90%    $  764    10.01%   $486    10.50%     $  456     8.91%     $41    ---%     $ 2,079     9.51%
2002.................     98   8.62        ---      ---     ---      ---         120     7.58      ---    ---          218     8.05
2003.................    427   8.94        ---      ---     ---      ---         263     7.46      ---    ---          690     8.38
2004 to 2005.........  1,422   8.51        262     8.61     ---      ---         391     8.03      ---    ---        2,075     8.43
2006 to 2009.........  4,272   7.59      1,054     9.08     ---      ---         405     7.83      ---    ---        5,731     7.88
2010 to 2024......... 17,358   7.36        ---      ---     ---      ---         159     9.04      ---    ---       17,517     7.38
2025 and following... 25,636   7.37        ---      ---     ---      ---         ---      ---      ---    ---       25,636     7.37
                     --------           ------              ----               -----               ---             -------
                     $49,545            $2,080              $486               $1,794              $41             $53,946     7.56%
                     =======            ======              ====               ======              ===             =======
</TABLE>


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


     The total amount of loans due after June 30, 2001 which have  predetermined
interest rates is  approximately  $44.63 million while the total amount of loans
due after  such  date  which  have  floating  or  adjustable  interest  rates is
approximately $7.23 million.



                                       7

<PAGE>



One- to Four-Family Residential Real Estate Lending
---------------------------------------------------
     The  Association's  primary  lending  activity has been the origination and
purchase of  permanent  loans  secured by mortgages  on  owner-occupied  one- to
four-family  residences.  At June 30,  2000,  $49.5  million  or  91.8%,  of the
Association's  gross loan  portfolio  consisted  of  permanent  loans on one- to
four-family  residences.  Most of these loans were secured by properties located
in  the  State  of  Illinois,   with  a  substantial  majority  located  in  the
Association's primary market area. At June 30, 2000,  approximately $708,000 was
secured by one-to four-family residential properties located in Florida.

     Historically, Midland Federal originated for retention in its own portfolio
30-year fixed-rate loans secured by one- to four-family residential real estate.
Beginning  in the early  1980s,  in order to reduce its  exposure  to changes in
interest  rates,  Midland Federal began to originate  adjustable-rate  mortgages
("ARMs"),  subject to market conditions and consumer  preference.  However, as a
result of continued consumer demand,  Midland Federal has continued to originate
for retention in its portfolio  fixed-rate  residential  loans in amounts and at
rates which are monitored for compliance with the Association's  asset/liability
management policy.  From time to time, the Association will make  owner-occupied
one- to four-family construction loans for a six-month interest only term, which
the Association will convert to a permanent  mortgage for a fee generally of one
point.  The  Association   requires  the  interest  on  such  loans  during  the
construction term to be paid or placed in escrow when the loan is funded.

     The  Association's  current one- to four-family  residential ARMs are fully
amortizing  loans with  contractual  maturities of up to 30 years.  The interest
rates on substantially all the ARMs originated by Midland Federal are subject to
adjustment at one-year intervals. The Association's ARM products generally carry
interest  rates  which  are  reset to a stated  margin  over the  one-year  U.S.
Treasury Rate.  Adjustments in the interest rate of the  Association's  ARMs are
generally limited to 2% at any adjustment date and 6% over the life of the loan.
At June  30,  2000,  the  total  balance  of one- to  four-family  ARMs was $5.5
million, or 10.2% of the Association's gross loan portfolio.

     The  Association  also  originates  home equity  lines of credit which were
funded in the amount of $783,000 at June 30, 2000, and home equity loans,  which
were $1.8 million at June 30, 2000. Unfunded commitments on home equity lines of
credit totaled $581,000 at June 30, 2000. The Association's home equity lines of
credit are five year interest-only  balloon loans secured by second liens on the
property,  and are  made in  amounts  up to 75% of the  appraised  value  of the
property (including first lien amounts). The Association's home equity loans are
three to 15 year fixed-rate  loans secured by second liens on the property,  and
are made in amounts up to 80% of the appraised value of the property  (including
first lien amounts).

     The  Association's   residential  loans  are  generally   underwritten  and
documented  to  permit  their  sale in the  secondary  market.  The  Association
evaluates  both the borrower's  ability to make principal and interest  payments
and the  value of the  property  that will  secure  the  loan.  Midland  Federal
generally originates  residential mortgage loans with loan-to-value ratios of up
to 80%, although the

                                        8

<PAGE>



Board  of  Directors  has  authorized   originations   of  mortgage  loans  with
loan-to-value  ratios  of up to  90%.  On any  mortgage  loan  exceeding  an 80%
loan-to-value  ratio  at the  time of  origination,  Midland  Federal  generally
requires private mortgage insurance on the excess.

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

Multi-Family Residential Lending
--------------------------------
     The Association's  multi-family residential portfolio includes $1.6 million
in loans secured by residential buildings (5 or more units) located primarily in
the  Association's  primary market area. The  Association  originates  primarily
adjustable-rate,  multi-family  real estate  loans.  Rates on the  Association's
adjustable-rate,  multi-family  real estate loans  generally  adjust in a manner
consistent with the Association's ARMs.

     Multi-family real estate loans are generally  underwritten in amounts of up
to  70%  of the  appraised  value  of the  underlying  property.  Appraisals  on
properties securing multi-family real estate loans originated by the Association
are  performed  by a  qualified  appraiser  at the time  the  loan is  made.  In
addition,   the   Association's   underwriting   procedures   generally  require
verification of the borrower's credit history,  income and financial statements,
banking  relationships,  references  and income  projections  for the  property.
Personal  guarantees are generally  obtained for the Association's  multi-family
real estate loans.

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

     Midland  Federal had six  multi-family  real  estate  loans  totaling  $1.6
million at June 30, 2000. The net amount of such loans which was  non-performing
at June 30, 2000 was $38,000. See "-- Non-Performing Assets,  Classified Assets,
Loan   Delinquencies  and  Defaults"  for  a  discussion  of  the  Association's
non-performing, multi-family residential loans.

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


                                        9

<PAGE>



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

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

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

     Student  loans are  originated by Midland  Federal in  compliance  with the
guidelines  established by the Illinois  Guaranteed Loan Program ("IGLP").  As a
result,  any loans  that  become  delinquent  30-90  days are sold to IGLP.  The
Association's  student  loan volume may decline in the future as a result of new
legislative  proposals  that  the  U.S.  government  provide  direct  loans  for
education.  As of June 30, 2000,  student loans amounted to $1.0 million or 1.9%
of the Association's gross loan portfolio.

     The Association  also  originates  consumer loans secured by automobiles in
its primary market area.  Underwriting  standards employed by the Association in
connection with these loans include a review of the borrowers' creditworthiness,
verification  of  collateral   value  and  perfection  of  a  lien  against  the
collateral.  The Association  requires vehicle insurance on all loans secured by
automobiles.  At June 30, 2000,  the  Association  had $323,000,  or .60% of its
gross loan portfolio in automobile loans.

     Lines of credit extended through the Association's Visa credit card program
is generally limited to $10,000. The Association obtains an application from the
borrower,  a credit  report on the borrower and verifies  employment  for credit
card  borrowers.  At June 30, 2000, the  Association  had $97,000 or .18% of its
gross loan portfolio in credit card loans.

     Consumer loans may entail  greater risk than  residential  mortgage  loans,
particularly  in the case of consumer  loans which are  unsecured  or secured by
rapidly  depreciable assets such as automobiles.  In such cases, any repossessed
collateral  for defaulted  consumer  loans may not provide  adequate  sources of
repayment  for  the  outstanding  loan  balances  as a  result  of  the  greater
likelihood  of  damage,  loss  or  depreciation.   In  addition,  consumer  loan
collections are dependent on the borrower's continuing financial stability,  and
thus are more likely to be affected by adverse personal

                                       10

<PAGE>



circumstances.  Furthermore,  the application of various federal and state laws,
including federal and state bankruptcy and insolvency laws, may limit the amount
which can be recovered on such loans. Although the level of delinquencies in the
Association's  consumer loan  portfolio has generally  been low, there can be no
assurance that delinquencies will not increase in the future.

Commercial Real Estate Lending
------------------------------
     Midland  Federal  maintains a portion of its  portfolio in permanent  loans
secured by commercial  real estate.  The  Association's  commercial  real estate
portfolio consists of loans on a variety of non-residential property,  including
an automobile repair center and churches. At June 30, 2000, $440,000, or .82% of
the Association's  gross loan portfolio  consisted of permanent loans secured by
commercial real estate.  In the future,  the Association  intends to continue to
engage  in a  modest  level  of  commercial  real  estate  lending,  subject  to
regulatory  restrictions.  Management  intends that any future  commercial  real
estate loans carry adjustable interest rates and a loan-to-value ratio of 70% or
less.  Nevertheless,  in  view  of the  significant  amount  of  risk  generally
associated with  commercial real estate lending,  there can be no assurance that
the Association will not experience  delinquencies on its commercial real estate
portfolio.

Mortgage-Backed Securities
--------------------------
     Midland Federal has a substantial  portfolio of mortgage-backed  securities
totaling  $21.9  million  at  June  30,  2000.   Midland  Federal  utilizes  its
mortgage-backed  securities  to  supplement  loan  production  and to  meet  its
asset/liability management objectives. Mortgage-backed securities can also serve
as collateral for borrowings and, through repayments,  as a source of liquidity.
For  information  regarding  the carrying  and fair values of Midland  Federal's
mortgage-backed  securities  portfolio,  see Note 4 of the  Notes  to  Financial
Statements in the Annual Report to Stockholders  filed as Exhibit 13 hereto. See
"Regulation."

     The  following  table  sets  forth  the   contractual   maturities  of  the
Association's  mortgage-backed  securities  at June 30, 2000. It should be noted
that, due to  prepayments,  the actual maturity of the  Association's  long term
mortgage-backed  securities  will  likely  be  significantly  shorter  than  the
contractual maturities.

<TABLE>
                                                                   Due in                    Balance Outstanding
                                                    ---------------------------------------------------------------
                                                      1 to 5      6 to 20     Over 20
                                                       Years       Years       Years        Fixed      Adjustable
                                                    ---------------------------------------------------------------
<S>                                                   <C>           <C>         <C>         <C>          <C>
Federal Home Loan Mortgage Corporation..............  $11,239       $1,752      $4,256      $11,239      $6,008
Federal National Mortgage Association...............      403        3,217         753        1,353       3,020
Government National Mortgage Association............      ---          219         ---          219         ---
Collateralized Mortgage Obligations.................      ---           15         ---           15         ---
                                                      -------       ------      ------      -------      ------
     Total..........................................  $11,642       $5,203      $5,009      $12,826      $9,028
                                                      =======       ======      ======      =======      ======
</TABLE>



                                       11

<PAGE>



Loan Originations, Purchases and Sales
--------------------------------------
     Real estate loans are  originated  by Midland  Federal's  staff of salaried
loan  officers.  In addition,  in order to increase loan volumes,  commencing in
1995, the Association hired commissioned loan originators. Loan applications are
taken at each  office,  processed  in the  Association's  main  office  and then
submitted to the Chief Lending Officer,  the President or the Loan Committee for
approval.


     While the Association originates both adjustable-rate and fixed-rate loans,
its ability to originate  loans is dependent upon the relative  customer  demand
for  loans  in  its  market.  Demand  is  also  affected  by the  interest  rate
environment. The Association has not purchased loans in recent years. During the
years ended June 30,  2000,  1999 and 1998,  the  Association  sold loans to the
Illinois  Housing  Development  Authority  and  other  lenders,   under  various
programs.

     The  following  tables set forth the  Association's  loan  origination  and
mortgage-backed  securities  purchases,  sales and principal  repayments for the
periods indicated.
<TABLE>

                                                                Year Ended June 30,
                                                      -------------------------------------

                                                          2000         1999          1998
                                                      -------------------------------------
                                                               (Dollars in Thousands)
<S>                                                     <C>        <C>            <C>
Loans receivable:
 Adjustable-Rate:
 Real estate - one- to four-family...................  $  2,864   $      784     $     239
                  - construction.....................       486          ---           408
 Non-real estate - consumer..........................       946        1,031         1,450
                                                       --------   ----------     ---------
          Total adjustable rate......................     4,296        1,815         2,097
                                                       --------   ----------     ---------
 Fixed-Rate:
 Real estate - One- to four-family...................    10,357       22,503        14,916
 Non-residential.....................................       243          ---           ---
 Non-real estate - consumer..........................       600          528           493
                                                       --------  -----------     ---------
          Total fixed-rate...........................    11,200       23,031        15,409
                                                       --------    ---------     ---------
          Total loans originated.....................    15,496       24,846        17,506
                                                       --------    ---------     ---------

 Real estate loans sold..............................    (3,173)      (3,298)       (2,197)
 Transfer of loans to foreclosed real estate.........       ---          ---           (58)
 Principal repayments................................    (8,261)     (11,549)       (9,804)
                                                       --------    ---------     ---------

 Net increase........................................  $  4,062    $   9,999     $   5,447
                                                       ========    =========     =========
Mortgage-backed securities:
 Mortgage-backed securities purchased................  $ 10,007    $   1,102      $  4,592
 Mortgage-backed securities sold.....................       ---          ---           ---
 Amortization and repayments.........................    (4,035)      (6,065)       (5,663)
                                                       --------   ----------      --------

 Net increase (decrease).............................  $  5,972    $  (4,963)      $(1,071)
                                                       ========    =========       =======
</TABLE>


     The  Association's  total loan  originations  decreased from the prior year
primarily  as a result of higher  interest  rates  which  decreased  demand  for
mortgage loans, including mortgage loan refinancing.


                                       12

<PAGE>



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

                                       13

<PAGE>



     The amounts presented  represent the total remaining  principal balances of
the related loans,  rather than actual payment amounts which are overdue and are
reflected  as a  percentage  of total  loans.  The  following  table  sets forth
information  concerning delinquent mortgage and other loans at June 30, 2000 and
June 30,  1999.  The  balances  included  in the table do not  reflect  specific
reserves.


<TABLE>
                                                             At June 30, 2000
                                                             Loans Delinquent For:
                        ------------------------------------------------------------------------------------------------------------
                                  30 - 59 days          60 - 89 days                90 days and over                  Total
                        ------------------------------------------------------------------------------------------------------------
                         Number  Amount  Percent    Number   Amount  Percent    Number   Amount   Percent    Number  Amount  Percent
                        ------------------------------------------------------------------------------------------------------------
                                                                     (Dollars in Thousands)
<S>                      <C>     <C>     <C>       <C>      <C>     <C>         <C>      <C>     <C>          <C>     <C>      <C>
Real estate:
  One- to four-family...  10     $593    1.20%       2       $122    0.24%        4      $232     0.47%       16     $  947    1.91%
  Multi-family.......... ---      ---     ---      ---        ---     ---         3       155     9.45         3        155    9.45
Non-residential......... ---      ---     ---        1         19    4.32       ---       ---      ---         1         19    4.32
Consumer................ ---      ---     ---        1          6    0.33        13        54     3.01        14         60    3.34
Commercial business..... ---      ---     ---      ---        ---     ---         7         4     9.76         7          4    9.76
                                 ----              ---       ----               ---      ----               ----     ------
   Total..............    10     $593    1.10%       4       $147    0.27%       27      $445     0.83%       41     $1,185    2.20%
                         ===     ====              ===       ====               ===      ====               ====     ======
</TABLE>


<TABLE>

                                                                    At June 30, 1999
                                                                    Loans Delinquent For:
                          ----------------------------------------------------------------------------------------------------------
                                   30 - 59 days                 60 - 89 days               90 days and over           Total
                          ----------------------------------------------------------------------------------------------------------
                          Number  Amount   Percent     Number   Amount  Percent    Number  Amount  Percent    Number  Amount Percent
                          ----------------------------------------------------------------------------------------------------------
                                                                        (Dollars in Thousands)
<S>                        <C>    <C>      <C>         <C>       <C>     <C>        <C>     <C>     <C>         <C>     <C>     <C>
Real estate:
  One- to four-family..... 14     $763     1.66%         5       $221     .48%       3      $162      .35%      22    $1,146   2.49%
  Multi-family............---      ---      ---        ---        ---     ---        3       194    11.35        3       194  11.35
Consumer..................  2       12      .65        ---        ---     ---        2         1      .05        4        13    .70
Commercial business.......---      ---      ---        ---        ---     ---       13        24    41.38       13        24  41.38
                          ---     ----                 ---       ----              ---      ----               ---    ------
  Total..................  16     $775     1.55%         5       $221     .44%      21      $381     0.77%      42    $1,377   2.76%
                          ===     ====                 ===       ====              ===      ====               ====   ======
</TABLE>





                                       14

<PAGE>



     The table  below sets forth the amounts and  categories  of  non-performing
assets,  shown net of specific  reserves,  in the Association's  loan portfolio.
Loans are placed on non-accrual  status when the collection of principal  and/or
interest  becomes  doubtful,  generally  when the loan is  delinquent 90 days or
more. Foreclosed assets include assets acquired in settlement of loans.
<TABLE>


                                                                        At June 30,
                                                      -------------------------------------------
                                                           2000             1999            1998
                                                      -------------------------------------------
                                                                   (Dollars in Thousands)
<S>                                                        <C>               <C>           <C>
Non-Accruing Loans:
  One- to four-family................................      $232              $162         $  220
  Multi-family.......................................        38                38             38
  Consumer...........................................        13               ---              2
   Commercial business...............................         1                24              3
                                                           ----              ----         ------
     Total...........................................       284               224            263
                                                           ----              ----         ------

Accruing loans delinquent 90 days or more:
  Multi-family.......................................       ---               ---            ---
                                                           ----              ----         ------
     Total...........................................       ---               ---            ---
                                                           ----              ----         ------

Foreclosed Assets:
  One- to four-family................................       ---               276            747
                                                           ----              ----         ------
     Total...........................................       ---               276            747
                                                           ----              ----         ------

Total non-performing assets..........................      $284              $500         $1,010
                                                           ====              ====         ======

Total as a percentage of total assets................       .21%              .38%           .86%
                                                           ====              ====          =====
</TABLE>


     As of June 30, 2000, there were no  concentrations of loans in any types of
industry  which  exceeded  10% of the  Association's  total  loans  that are not
included as a loan category in the preceding table.

     For the fiscal year ended June 30, 2000,  gross interest income which would
have been recorded had the  non-accruing  loans been current in accordance  with
their original terms amounted to $9,000,  which interest  income was not accrued
into interest income for the fiscal year ended June 30, 2000.

     Non-Accruing  Loans. As of June 30, 2000,  non-accruing  multi-family loans
consisted of one loan in the amount of $38,000  secured by a five unit  property
located in Chicago,  Illinois.  Nonaccruing  one- to-four  family loans  totaled
$232,000  and  consisted  of four  loans  secured by  properties  located in the
Association's primary market area.

     As of June 30, 2000, there were no other loans not included in the table or
discussed  above where known  information  about the possible credit problems of
borrowers  caused  management  to have  serious  doubts as to the ability of the
borrower to comply with  present  loan  repayment  terms and which may result in
disclosure of such loans in the future.

     Classified   Assets.   Federal   regulations   require  that  each  savings
institution  classify  its own  assets  on a  regular  basis.  In  addition,  in
connection with examinations of savings institutions, OTS

                                       15

<PAGE>



and Federal Deposit Insurance  Corporation (the "FDIC") examiners have authority
to identify  problem assets and, if appropriate,  require them to be classified.
There are three classifications for problem assets: "substandard," "doubtful" or
"loss." An asset is considered  "substandard" if it is inadequately protected by
the  current net worth and paying  capacity of the obligor or of the  collateral
pledged,  if  any.  "Substandard"  assets  include  those  characterized  by the
"distinct  possibility" that the savings association will sustain "some loss" if
the deficiencies are not corrected.  Assets classified as "doubtful" have all of
the  weaknesses  inherent  in those  classified  "substandard,"  with the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable."  Assets  classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
which do not currently  expose the savings  association  to  sufficient  risk to
warrant  classification  in one of the  aforementioned  categories,  but possess
weaknesses, are required to be designated "special mention" by management.

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

     In connection  with the filing of its periodic  reports with the OTS and in
accordance with its classification of assets policy,  the Association  regularly
reviews the assets in its  portfolio  to  determine  whether any assets  require
classification  in  accordance  with  applicable  regulations.  On the  basis of
management's  review  of its  assets,  at June 30,  2000,  the  Association  had
classified a total of $394,000 of its assets as  substandard,  none as doubtful,
$146,000 as loss (which have been fully reserved), and none as special mention.

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

     The Company incurred no loan charge-offs  during fiscal 2000. During fiscal
2000, the Company increased its general allowance for loan losses to $185,000 at
fiscal year end from  $178,000 at the prior fiscal year end. At fiscal year end,
the $185,000 general  allowance for loan losses was determined by the Company to
be consistent with its policy for the  establishment and maintenance of adequate
levels of general loan loss  allowances.  The $7,000  increase in the  Company's
general

                                       16

<PAGE>



allowance  for loan  losses  during  fiscal  2000 was the  result of  $48,000 in
recoveries from fully reserved loans which loss reserves were  transferred  from
specific  allowance to general and $3,000 in  recoveries  from loans  previously
charged  off.  These loan loss  recoveries  were offset by $44,000 in loans that
were  specifically  reserved out of the general allowance for loan losses during
the current  fiscal year.  Although  management  believes  that it uses the best
information available to determine the allowances,  unforeseen market conditions
could result in adjustments and net earnings could be significantly  affected if
circumstances differ substantially from the assumptions used in making the final
determination.  Future  additions to the  Association's  allowances  will be the
result of periodic  loan,  property  and  collateral  reviews and thus cannot be
predicted in advance. At June 30, 2000 the Association had a total allowance for
losses on loans of $369,000 or .68% of total  loans.  See Note 5 of the Notes to
Financial  Statements in the Annual Report to  Stockholders  filed as Exhibit 13
hereto.

     The following table sets forth an analysis of the  Association's  allowance
for loan losses.

<TABLE>
                                                                 Year Ended June 30,
                                                      ------------------------------------------
                                                           2000         1999          1998
                                                      ------------------------------------------
                                                               (Dollars in Thousands)

<S>                                                         <C>          <C>           <C>
Balance at beginning of period.......................       $366         $394         $ 551

Charge-offs:
 One- to four-family.................................        ---          ---           ---
 Consumer............................................        ---            7           ---
 Commercial business.................................        ---           23           ---
                                                           -----         ----         -----
                                                             ---           30           ---
                                                           -----         ----         -----
Recoveries:
 One- to four-family.................................        ---          ---           ---
 Consumer............................................          3            2             3
                                                           -----         ----         -----
     Total recoveries................................          3            2             3
                                                           -----         ----         -----

Net charge-offs......................................          3          (28)            3
Additions charged to operations......................        ---          ---          (160)
                                                           -----         ----         -----
Balance at end of period.............................       $369         $366         $ 394
                                                            ====         ====         =====

Ratio of net charge-offs during the period to
 average loans outstanding during the period.........        ---%         .06%          ---%

Ratio of net charge-offs during the period to
 average non-performing assets.......................        ---%        2.68%          ---%

Allowance for loan losses to
 non-performing loans(1).............................      65.24%       79.66%        57.16%

Allowance for loan losses to total loans.............        .69%         .74%         1.00%
</TABLE>

--------------
(1)  General  valuation  allowances  to  non-performing  loans (net of  specific
allowances).



                                       17

<PAGE>



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

                                                                  June 30,
                                 -----------------------------------------------------------------------------

                                           2000                     1999                    1998
                                 -----------------------------------------------------------------------------
                                              Percent                  Percent                  Percent
                                              of Loans                 of Loans                 of Loans
                                              in Each                  in Each                  in Each
                                              Category                 Category                 Category
                                              to Total                 to Total                 to Total
                                   Amount      Loans        Amount      Loans       Amount       Loans
                                 -----------------------------------------------------------------------------
                                                           (Dollars in Thousands)
<S>                                 <C>          <C>        <C>          <C>       <C>           <C>
One- to four-family..............   $102        91.84%      $ 70         92.28%    $ 78          87.82%
Multi-family.....................    126         3.04        166          3.43      208           4.49
Non-residential..................      1         0.82        ---          0.45      ---            .61
Construction.....................    ---         0.90        ---           ---      ---           1.13
Consumer.........................     67         3.32         35          3.72       48           5.77
Commercial business..............      3         0.08        ---          0.12      ---            .18
Unallocated......................     70          ---         95           ---       60            ---
                                    ----       ------       ----        ------     ----         ------
     Total.......................   $369       100.00%      $366        100.00%    $394         100.00%
                                    ====       ======       ====        ======     ====         ======
</TABLE>


Investment Activities
---------------------
     As a part of its asset/liability management strategy and as a response to a
relatively high level of competition for loans and low level of loan demand, the
Association  invests in various  types of liquid  assets,  short and medium term
government   securities  as  well  as  smaller  amounts  of  other  assets.  The
Association  is required by federal  regulations to maintain a minimum amount of
liquid assets that may be invested in specified securities and is also permitted
to make certain other security investments.  The Association maintains liquidity
in excess  of  regulatory  requirements.  Cash flow  projections  are  regularly
reviewed and updated to assure that adequate  liquidity is provided.  As of June
30, 2000,  the  Association's  liquidity  ratio  (specified  liquid  assets as a
percentage of net withdrawable savings and current borrowings) was 52.9%.

     At June 30,  2000,  the  Association's  interest-bearing  deposits in other
financial  institutions totaled $29.6 million, or 21.6% of its total assets, and
investment securities totaled $25.0 million, or 18.2% of its total assets. As of
such date, the Association also had a $728,000 investment in the common stock of
the FHLB of Chicago in order to satisfy the  requirement  for membership in this
institution.  At June 30, 2000, the average term to maturity or repricing of the
investment securities portfolio was approximately two years.



                                       18

<PAGE>



     The  following  table  sets  forth  the  composition  of the  Association's
investment portfolio at the dates indicated.

<TABLE>

                                                                           At June 30,
                                             ---------------------------------------------------------------------
                                                      2000                     1999                    1998
                                             ---------------------------------------------------------------------
                                              Carrying      Fair       Carrying      Fair      Carrying      Fair
                                                Value       Value       Value       Value       Value       Value
                                             ---------------------------------------------------------------------
<S>                                            <C>        <C>           <C>        <C>         <C>         <C>
Investment Securities:
 U.S. government securities.................  $20,969     $21,025      $20,971     $21,063     $21,185     $21,226
 U.S. agency securities.....................    4,000       3,914        4,000       3,969         ---         ---
 FHLB - Chicago stock.......................      728         728          636         636         554         554
                                              -------     -------      -------     -------     -------     -------
   Total investment securities..............  $25,697     $25,667      $25,607     $25,668     $21,739     $21,780
                                              =======     =======      =======     =======     =======     =======

Interest-bearing deposits:

 FHLB daily investment......................  $17,625     $17,625      $19,723     $19,723     $18,522     $18,522
 Other daily investments....................   12,005      12,005       11,364      11,364      10,816      10,816
                                              -------     -------     --------    --------     -------     -------
  Total interest-bearing deposits...........  $29,630     $29,630      $31,087     $31,087     $29,338     $29,338
                                              =======     =======      =======     =======     =======     =======
</TABLE>


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

                                                                    June 30, 2000
                                             ----------------------------------------------------------------------
                                               1 Year      1 to 5       Over        Total Investment
                                               or Less      Years     10 Years         Securities
                                             ----------------------------------------------------------------------
                                                                                                          Weighted
                                                Book        Book        Book        Book        Fair       Average
                                                Value       Value      Value       Value       Value        Yield
                                             ----------------------------------------------------------------------
                                                                 (Dollars in Thousands)
<S>                                            <C>       <C>            <C>        <C>          <C>          <C>
U.S. government and agency securities.......  $9,999     $13,992        $978      $24,969      $24,939       5.63%
</TABLE>


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

     Deposits.    The   Association   attracts   principally    short-term   and
intermediate-term  deposits  from the  Association's  primary  market area.  The
Association offers regular passbook accounts, NOW accounts, money market deposit
accounts,  fixed interest rate certificates of deposit with varying  maturities,
and negotiated rate $100,000 jumbo certificates of deposit ("Jumbo CDS").

                                       19

<PAGE>



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

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

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

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

<TABLE>
                                                                      Year Ended June 30,
                                                      ------------------------------------------------------------------------------
                                                            2000             1999             1998
                                                      ------------------------------------------------------------------------------
<S>                                                       <C>               <C>            <C>
Opening balance......................................    $ 120,225        $ 107,762        $ 102,973
Deposits.............................................      438,125          388,101          360,039
Withdrawals..........................................     (436,191)        (379,590)        (358,909)
                                                         ---------        ---------        ---------
Balance before interest credited.....................      122,159          116,273          104,103
Interest credited....................................        4,712            3,952            3,659
                                                         ---------        ---------        ---------
Ending balance.......................................    $ 126,871        $ 120,225        $ 107,762
                                                         =========        =========        =========

Net increase.........................................    $   6,646       $   12,463        $   4,789
                                                         =========       ==========        =========

Percent increase.....................................         5.53%           11.57%            4.65%
                                                             =====            =====           ======
</TABLE>



                                       20

<PAGE>



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

<TABLE>
                                                                         June 30,
                                        --------------------------------------------------------------------------
                                                  2000                      1999                     1998
                                        --------------------------------------------------------------------------
                                                       Percent                   Percent                 Percent
                                           Amount      of Total      Amount     of Total      Amount     of Total
                                        --------------------------------------------------------------------------

Interest Rate Range:
--------------------
<S>                                       <C>           <C>          <C>           <C>       <C>           <C>
Passbook accounts....................... $  42,814      33.75%      $ 43,456       36.15%    $ 40,716      37.78%
NOW accounts............................     9,829       7.75          8,755        7.28        8,266       7.67
Money market accounts...................     8,364       6.59          5,343        4.44        3,706       3.44
Non-interest bearing deposits...........     9,109       7.18          9,278        7.72        7,823       7.26
                                         ---------      -----       --------       -----     --------      -----
  Total non-certificates................    70,116      55.27         66,832       55.59       60,511      56.15
                                         ---------      -----       --------       -----     --------      -----
</TABLE>


<TABLE>
Certificates:
--------------
<S>                                        <C>           <C>            <C>         <C>         <C>        <C>
Interest rate range:
 4.00 - 4.99%...........................    16,284      12.83         36,937       30.72          ---        ---
 5.00 - 5.99%...........................    36,309      28.62         16,456       13.69       47,151      43.75
 6.00 - 6.99%...........................     4,162       3.28           ---          ---          100        .10
                                         ---------     ------       --------      ------     --------     ------
   Total certificates...................    56,755      44.73         53,393       44.41       47,251      43.85
                                         ---------     ------       --------      ------     --------     ------
   Total deposits.......................  $126,871     100.00%      $120,225      100.00%    $107,762     100.00%
                                          ========     ======       ========      ======     ========     ======
</TABLE>

         The  following  table  shows  rate  and  maturity  information  for the
Association's time deposits as of June 30, 2000.

<TABLE>

                                             4.00-          5.00-           6.00-                        Percent
                                             4.99           5.99            6.99           Total        of Total
                                        ------------------------------------------------------------------------
                                                                   (Dollars in Thousands)

Certificate Accounts Maturing
in Quarter Ending:
<S>                                     <C>             <C>             <C>               <C>              <C>
September 30, 2000..................... $  9,616        $11,868        $     47          $21,531          37.94%
December 31, 2000......................    2,870         13,870           2,027           18,767          33.06
March 31, 2001.........................    2,570          7,049           1,214           10,833          19.09
June 30, 2001..........................      179          2,547             868            3,594           6.33
September 30, 2001.....................      397             65             ---              462           0.81
December 31, 2001......................      218             87               6              311           0.55
March 31, 2002.........................      255             55             ---              310           0.55
June 30, 2002..........................      179             76             ---              255           0.45
September 30, 2002.....................      ---            447             ---              447           0.79
December 31, 2002......................      ---            245             ---              245           0.43
                                        --------        -------        --------          -------         ------
     Total............................. $ 16,284        $36,309        $  4,162          $56,755         100.00%
                                        ========        =======        ========          =======         ======

     Percent of total..................    28.69%         63.98%           7.33%          100.00%
                                           =====          =====            ====           ======
</TABLE>


                                       21
<PAGE>



     The following table indicates the amount of the Association's  certificates
of deposit and other  deposits by time  remaining  until maturity as of June 30,
2000.
<TABLE>

                                                                              Maturity
                                                    ---------------------------------------------------------
                                                                   Over        Over        Over
                                                     3 Months     3 to 6      6 to 12       12
                                                      or Less     Months      Months      Months       Total
                                                    ---------------------------------------------------------
                                                                       (Dollars in Thousands)
<S>                                                  <C>         <C>          <C>          <C>         <C>
Certificates of deposit less than $100,000.........  $19,460     $15,822     $12,859      $1,558      $49,699

Certificate of deposit of $100,000 or more.........    2,071       2,945       1,568         472        7,056
                                                     -------     -------     -------      ------      -------

   Total certificates of deposit...................  $21,531     $18,767     $14,427      $2,030      $56,755
                                                     =======     =======     =======      ======      =======
</TABLE>


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

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

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

Service Corporation
-------------------
     Federal  associations  generally  may  invest  up to 2% of their  assets in
service corporations, plus an additional 1% of assets if for community purposes.
In  addition,  federal  associations  may  invest up to 50% of their  regulatory
capital in  conforming  loans to their  service  corporations.  In  addition  to
investments  in service  corporations,  federal  associations  are  permitted to
invest an unlimited

                                       22

<PAGE>



amount in operating  subsidiaries  engaged solely in activities  which a federal
association may engage in directly.

     Midland Federal has one service  corporation,  Midland Service Corporation,
located in Bridgeview,  Illinois, which was organized by the Association in 1976
to act as a holding company for the Association's  other  subsidiaries.  At June
30, 2000, Midland Federal's equity investment in Midland Service Corporation was
approximately $169,000. During fiscal 2000, Midland Service Corporation recorded
a loss of $12,000.

     Midland Service  Corporation owns MS Insurance  Agency, an insurance agency
which provides insurance products to customers of Midland Federal and to members
of the general  public in Midland  Federal's  market  area.  Insurance  products
offered by this agency, include credit life, health, homeowners' and disability.
MS Insurance Agency had a loss of $17,000 for the 2000 fiscal year, all of which
is included in the Midland Service Corporation income amounts reported above.

                                   REGULATION

     General.  Midland  Federal  is  a  federally  chartered  savings  and  loan
association,  the deposits of which are federally insured and backed by the full
faith and  credit  of the U. S.  government.  Accordingly,  Midland  Federal  is
subject  to  broad  federal  regulation  and  oversight  extending  to  all  its
operations. The Association is a member of the FHLB of Chicago and is subject to
certain  limited  regulation  by the Board of Governors  of the Federal  Reserve
System  ("Federal  Reserve  Board").  Midland Federal is a member of the Savings
Association Insurance Fund ("SAIF"), which together with the Bank Insurance Fund
(the "BIF") are the two deposit  insurance  funds  administered by the FDIC, and
the deposits of Midland  Federal are insured by the FDIC. As a result,  the FDIC
has certain regulatory and examination authority over the Association.

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

     Federal Regulation of Savings Associations. The OTS has extensive authority
over the operations of savings associations.  As part of this authority, Midland
Federal is  required  to file  periodic  reports  with the OTS and is subject to
periodic  examinations  by the  OTS and  the  FDIC.  The  last  OTS  examination
commenced on June 21, 1999 using  financial  data as of March 31, 1999,  and the
last regular OTS and FDIC joint  examination  was on June 30,  1993.  When these
examinations  are  conducted by the OTS and the FDIC,  the examiners may require
the Association to provide for higher general or specific loan loss reserves.

     All savings associations are subject to semi-annual assessments, based upon
the savings  associations total assets. The Association's paid assessment during
the fiscal year ended June 30, 2000 was $37,000.

     The  OTS  also  has  extensive   enforcement  authority  over  all  savings
institutions,  including Midland Federal.  This enforcement  authority includes,
among other  things,  the  ability to assess  civil  money  penalties,  to issue
cease-and-desist  or  removal  orders and to  initiate  injunctive  actions.  In
general,  these enforcement  actions may be initiated for violations of laws and
regulations and unsafe

                                       23

<PAGE>



or unsound  practices.  Other  actions or  inactions  may  provide the basis for
enforcement action, including misleading or untimely reports filed with the OTS.
Except under  certain  circumstances,  public  disclosure  of final  enforcement
actions by the OTS is required.

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

     The Association's  permissible lending limit for  loans-to-one-borrower  is
equal to the  greater of  $500,000  or 15% of  unimpaired  capital  and  surplus
(except for loans fully secured by certain  readily  marketable  collateral,  in
which case this limit is increased to 25% of unimpaired capital and surplus). At
June 30, 2000, the  Association's  lending limit under this restriction was $1.3
million.  The  Association  is  in  compliance  with  the  loans-to-one-borrower
limitation.

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

     Insurance  of Accounts and  Regulation  by the FDIC.  Midland  Federal is a
member of the SAIF,  which is  administered  by the FDIC.  Savings  deposits are
insured up to applicable  limits by the FDIC and such insurance is backed by the
full faith and credit of the U. S.  government.  As  insurer,  the FDIC  imposes
deposit insurance  premiums and is authorized to conduct  examinations of and to
require  reporting  by  FDIC-insured  institutions.  It also  may  prohibit  any
FDIC-insured  institution  from engaging in any activity the FDIC  determines by
regulation or order to pose a serious risk to the SAIF or the BIF. The FDIC also
has the authority to initiate enforcement actions against savings  associations,
after giving the OTS an opportunity  to take such action,  and may terminate the
deposit  insurance  if it  determines  that the  institution  has  engaged or is
engaging  in  unsafe  or  unsound  practices,  or  is in an  unsafe  or  unsound
condition.

     The FDIC's  deposit  insurance  premiums are assessed  through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
"well-capitalized"  (i.e.,  a core capital ratio of at least 5%, a ratio of core
capital to risk- weighted  assets of at least 6% and a risk-based  capital ratio
of at least  10%) and  considered  healthy  would pay the lowest  premium  while
institutions that are less than "adequately  capitalized"  (i.e., a core capital
or core  capital to  risk-based  capital  ratios of less than 4% or a risk-based
capital ratio of less than 8%) and considered of substantial supervisory concern
would pay the highest premium.  Risk classification of all insured  institutions
will be made by the FDIC for each semi-annual assessment period.

                                       24

<PAGE>




     The FDIC is  authorized  to increase  assessment  rates,  on a  semi-annual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed  from  the U. S.  Treasury  or for  any  other  reason  deemed
necessary by the FDIC.

     In order to equalize the deposit  insurance  premium schedules for BIF- and
SAIF- insured  institutions,  the FDIC imposed a one-time special  assessment on
all SAIF-assessable deposits pursuant to federal legislation passed on September
30, 1996. The Association's special assessment,  which was $674,061, was paid in
November 1996. At fiscal year end 2000, the premium  schedule for BIF- and SAIF-
insured  institutions  ranged from 0 to 27 basis points, and both BIF- and SAIF-
insured  institutions  are  required  to  pay  a  Financing  Corporation  (FICO)
assessment,  in order to fund the  interest  on bonds  issued to resolve  thrift
failures  in the  1980s,  equal to 2.08 basis  points for each $100 in  domestic
deposits.  These assessments,  which may be revised based upon the level of BIF-
and SAIF-  deposits,  will  continue  until the bonds  mature in the years  2017
through 2019.

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

     The  capital  regulations  require  tangible  capital  of at least  1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   stockholders'   equity  and  retained  income,   and  certain
noncumulative  perpetual  preferred stock and related income.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights,  must be deducted from tangible capital for calculating  compliance with
the requirement.  Further, any unrealized holding gains or losses, net of income
taxes,  on securities  classified as available for sale in accordance  with SFAS
No. 115 are excluded from regulatory capital calculations. At June 30, 2000, the
Association had retained  mortgage  servicing assets and an unrealized gain, net
of tax, under SFAS No. 115 in the amount of $43,000.

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


                                       25

<PAGE>



     At June 30, 2000, the Association had tangible capital of $8.9 million,  or
6.48% of adjusted total assets,  which is  approximately  $6.9 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.

     The capital  standards  also require  core capital  equal to at least 3% of
adjusted  total  assets  (as  defined by  regulation).  Core  capital  generally
consists  of  tangible  capital  plus  certain  intangible   assets,   including
supervisory goodwill (which is phased-out over a five-year period) and a limited
amount of purchased credit card  relationships and purchased  mortgage servicing
rights.  As a result  of the  prompt  corrective  action  provisions  of  FDICIA
discussed below, a savings  association must maintain a core capital ratio of at
least  4% to be  considered  "adequately  capitalized"  unless  its  supervisory
condition  is such to allow it to  maintain a 3% ratio.  At June 30,  2000,  the
Association had retained  mortgage  servicing assets which were subject to these
tests.

     At June 30, 2000, the  Association  had core capital equal to $8.9 million,
or 6.48% of  adjusted  total  assets,  which is $4.8  million  above the minimum
leverage ratio requirement of 3% in effect on that date.

          The OTS risk-based  requirement  requires savings associations to have
total capital of at least 8% of risk-weighted  assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital and general  valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the  risk-based  requirement  only to the extent of core capital.  At
June 30,  2000,  Midland  Federal  had no capital  instruments  that  qualify as
supplementary capital and $185,000 of general loss reserves, which was less than
1.25% of risk-weighted assets.

     Certain  exclusions from capital and assets are required to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal holdings of qualifying capital instruments.  There was $15,000 equity
investments at June 30, 2000.

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

     OTS regulations also require that every savings  association with more than
normal  interest  rate risk  exposure  to deduct  from its  total  capital,  for
purposes of determining compliance with such requirement, an amount equal to 50%
of its  interest-rate  risk  exposure  multiplied  by the  present  value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings  association,  greater  than 2% of the  present  value of its
assets,  based upon a  hypothetical  200 basis  point  increase  or  decrease in
interest rates (whichever results in a greater decline). Net portfolio

                                       26

<PAGE>



value is the present value of expected cash flows from assets,  liabilities  and
off-balance  sheet  contracts.  The rule will not become effective until the OTS
evaluates the process by which savings  associations may appeal an interest rate
risk deduction determination.  It is uncertain as to when this evaluation may be
completed.  Any savings  association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement  unless the
OTS determines otherwise.

     On June 30,  2000,  the  Association  had  total  capital  of $9.1  million
(including $8.9 million in core capital and $185,000 of qualifying  general loss
reserves) and  risk-weighted  assets of $45.8 million or total capital of 19.90%
of risk-weighted  assets.  This amount was $5.4 million above the 8% requirement
in effect on that date.

     The OTS and the  FDIC  are  authorized  and,  under  certain  circumstances
required,  to take certain actions against  associations that fail to meet their
capital requirements. Effective December 19, 1992, the federal banking agencies,
including   the  OTS,  were  given   additional   enforcement   authority   over
undercapitalized depository institutions.  The OTS is generally required to take
action  to  restrict  the  activities  of  an   "undercapitalized   association"
(generally  defined to be one with less than  either a 4% core  ratio,  a Tier 1
risked-based  capital  ratio  or an  8%  risk-based  capital  ratio).  Any  such
association  must  submit a  capital  restoration  plan and  until  such plan is
approved by the OTS may not increase its assets,  acquire  another  institution,
establish a branch or engage in any new  activities,  and generally may not make
capital   distributions.   The  OTS  is  authorized  to  impose  the  additional
restrictions that are applicable to significantly undercapitalized associations.

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

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

     Any undercapitalized association is also subject to the general enforcement
activity of the OTS and the FDIC,  including  the  appointment  of a receiver or
conservator.

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


                                       27

<PAGE>



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

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

     Savings  associations  proposing to make any capital distribution need only
submit  written  notice to the OTS 30 days prior to such  distribution.  Savings
associations  that do not,  or would  not meet  their  current  minimum  capital
requirements following a proposed capital distribution, however, must obtain OTS
approval  prior  to  making  such  distribution.  The  OTS  may  object  to  the
distribution  during that 30-day  notice  period  based on safety and  soundness
concerns. See "-- Regulatory Capital Requirements."

     Liquidity.  All  savings  associations,   including  Midland  Federal,  are
required  to  maintain  an average  daily  balance of liquid  assets  equal to a
certain  percentage of the sum of its average daily balance of net  withdrawable
deposit accounts and borrowings payable in one year or less. For a discussion of
what the Association includes in liquid assets, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" in the Annual Report to Stockholders filed as Exhibit 13 hereto. This
liquid asset ratio  requirement  may vary from time to time (between 4% and 10%)
depending   upon   economic   conditions   and  savings  flows  of  all  savings
associations.  At the  present  time,  the  minimum  liquid  asset  ratio is 4%.
Penalties may be imposed upon  associations  for  violations of the liquid asset
ratio requirement.  At June 30, 2000, the Association was in compliance with the
requirement, with an overall liquid asset ratio of 52.9%.

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

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

                                       28

<PAGE>



     Qualified  Thrift  Lender Test.  All savings  associations,  including  the
Association,  are  required to meet a qualified  thrift  lender  ("QTL") test to
avoid certain  restrictions  on their  operations.  This test requires a savings
association  to have  at  least  65% of its  portfolio  assets  (as  defined  by
regulation) in qualified thrift investments for nine out of every 12 months on a
rolling basis.  As an alternative,  the savings  association may maintain 60% of
its assets in those assets specified in Section 7701(a)(19) of the 1986 Internal
Revenue Code, as amended.  Under either test, such assets  primarily  consist of
residential  housing  related  loans  and  investments.  At June  30,  2000  the
Association met the test and has always met the test since its effectiveness.

     Any savings  association  that fails to meet the QTL test must convert to a
national bank charter,  unless it requalifies as a QTL and thereafter  remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF. If an association  that fails the test has not yet  requalified and has
not converted to a national bank, its new investments and activities are limited
to those permissible for both a savings  association and a national bank, and it
is limited to national bank branching rights in its home state. In addition, the
association is immediately  ineligible to receive any new FHLB borrowings and is
subject to national  bank limits for payment of dividends.  If such  association
has not requalified or converted to a national bank within three years after the
failure, it must divest all investments and cease all activities not permissible
for a national bank. In addition,  it must repay promptly any  outstanding  FHLB
borrowings, which may result in prepayment penalties.

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

     The federal banking agencies,  including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's  compliance
with the CRA. Due to the heightened attention being given to the CRA in the past
few years,  the  Association  may be  required  to devote  additional  funds for
investment and lending in its local community.  The Association was examined for
CRA  compliance  in  2000  and  received  a  rating  of  "unsatisfactory."   The
Association is  intensifying  its efforts to improve its  performance  under the
CRA.

     Transactions  with Affiliates.  Generally,  transactions  between a savings
association or its  subsidiaries  and its affiliates are required to be on terms
as  favorable  to  the  association  as  transactions  with  non-affiliates.  In
addition,  certain of these  transactions  are restricted to a percentage of the
association's  capital.  Affiliates of Midland Federal include any company which
is under common control with the Association. In addition, a savings association
may not lend to

                                       29

<PAGE>



any affiliate  engaged in activities not  permissible for a bank holding company
or acquire the securities of most affiliates. The Association's subsidiaries are
not deemed affiliates, however; the OTS has the discretion to treat subsidiaries
as affiliates on a case-by-case basis.

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

     Federal Reserve  System.  The Federal Reserve Board requires all depository
institutions  to maintain  non-interest  bearing  reserves at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking  accounts)  and  non-personal  time  deposits.  At June  30,  2000  the
Association  was in  compliance  with these reserve  requirements.  The balances
maintained to meet the reserve requirements imposed by the Federal Reserve Board
may be used to satisfy  liquidity  requirements  that may be imposed by the OTS.
See "--Liquidity."

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

     Federal Home Loan Bank System.  The  Association is a member of the FHLB of
Chicago,  which is one of 12 regional FHLBs that  administers the home financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and procedures established by the board of directors of the FHLB. These policies
and  procedures  are  subject to the  regulation  and  oversight  of the Federal
Housing  Finance  Board.  All  advances  from the FHLB are  required to be fully
secured by sufficient  collateral  as  determined by the FHLB. In addition,  all
long-term advances are required to provide funds for residential home financing.
While a member of the FHLB of Chicago at June 30, 2000, the  Association had not
entered into a credit  arrangement  with the FHLB of Chicago and, as such, could
not obtain funds from the FHLB of Chicago.

     As a member,  Midland Federal is required to purchase and maintain stock in
the FHLB of Chicago.  At June 30,  2000  Midland  Federal  had  $728,000 in FHLB
stock,  which  was in  compliance  with this  requirement.  In past  years,  the
Association has received substantial  dividends on its FHLB stock. Over the past
five  calendar  years  such  dividends  have  averaged  6.70% and were 6.69% for
calendar year 1999.

     Under  federal  law,  the  FHLBs  are  required  to  provide  funds for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an

                                       30

<PAGE>



adverse effect on the value of FHLB stock in the future. A reduction in value of
the Association's FHLB stock may result in a corresponding  reduction in Midland
Federal's capital.

     For the year ended June 30, 2000,  dividends paid by the FHLB of Chicago to
Midland Federal totaled $46,000,  which was a $9,000 increase over the amount of
dividends  received in fiscal year 1999. The $13,000  dividend  received for the
quarter ended June 30, 2000 reflects an annualized  rate of 7.25%, or .56% above
the rate for calender year 1999.

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

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

     To the extent  earnings  appropriated  to a savings  institutions  bad debt
reserves for  "qualifying  real property  loans" and deducted for federal income
tax purposes  exceed the allowable  amount of such reserves  computed  under the
experience method and to the extent of the institution's  supplemental  reserves
for losses on loans, such excess may not, without adverse tax  consequences,  be
utilized  for  the  payment  of  cash  dividends  or  other  distributions  to a
shareholder (including distributions on redemption,  dissolution or liquidation)
or for any other  purpose  (except  to absorb bad debt  losses).  As of June 30,
2000,  the  Association's  excess for tax purposes  totaled  approximately  $1.1
million.

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

     The Company and its  consolidated  subsidiaries  have never been audited by
the IRS with respect to federal  income tax returns.  The statute of limitations
has passed for tax years  ending on or prior to June 30,  1997,  for the Company
and its consolidated subsidiaries.

     Illinois Taxation.  The Company and its subsidiaries file separate Illinois
income tax  returns.  For  Illinois  income tax  purposes,  the  Company and its
subsidiaries  are taxed at an effective rate equal to 7.18% of Illinois  taxable
income.  For these purposes,  "Illinois  Taxable Income" generally means federal
taxable  income,  subject to certain  adjustments  (including  the  addition  of
interest income on state and municipal obligations and the exclusion of interest
income on United States Treasury obligations). The exclusion of income on United
States  Treasury  obligations  has the  effect  of  reducing  significantly  the
Illinois taxable income of savings associations.

                                       31

<PAGE>




Impact of New Accounting Standards

     Accounting for Derivative  Instruments and for Hedging Activities.  In June
1998,  the FASB issued  Statement  of  Financial  Accounting  Standards  No. 133
"Accounting for Derivative  Instruments and for Hedging  Activities"  ("SAFS No.
133") which is effective  for fiscal years  beginning  after June 15, 1999.  The
statement  requires all  derivatives to be recorded on the balance sheet at fair
value.  It also  establishes  "special  accounting" for hedges of changes in the
fair value of assets,  liabilities  or firm  commitments  (fair  value  hedges),
hedges of the variable cash flows of forecasted transactions (cash flow hedges),
and  hedges  of  foreign  currency  exposures  of  net  investments  in  foreign
operations.  To the extent the hedge is considered  highly  effective,  both the
change in the fair value of the  derivative  and the change in the fair value of
the hedged item are recognized (offset) in earnings in the same period.  Changes
in the fair value of  derivatives  that do not meet the criteria of one of these
three hedge categories are included in income.

     Accounting for Derivative  Instruments in Hedging  Activities - Deferral of
the Effective Date of SFAS No. 133. In September 1999, the FASB issued Statement
of Financial Accounting Standards No. 137 ("SFAS No. 137"), entitled "Accounting
for Derivative  Instruments  in Hedging  Activities -- Deferral of the Effective
Date of FASB Statement No. 133".  SFAS No. 137 defers the effective date of SFAS
No. 133 from years  beginning  after June 15, 1999 to all fiscal quarters in all
fiscal years  beginning  after June 15, 2000.  Management  does not believe that
adoption  of  SFAS  No.  133  will  have a  material  impact  on  the  Company's
consolidated financial condition or results of operations.

     The foregoing does not constitute a  comprehensive  summary of all material
changes or  developments  affecting  the manner in which the  Company  keeps its
books and records and performs its financial accounting responsibilities.  It is
intended only as a summary of some of the recent pronouncements made by the FASB
which are of particular interest to financial institutions.

                                   MANAGEMENT

Employees
---------

     At June 30, 2000, the Association had a total of 42 full-time employees and
47 part-time employees.  None of the Association's  employees are represented by
any collective bargaining group.  Management considers its employee relations to
be good.

Item 2.  Description of Property
--------------------------------
Offices
-------

     Midland  Federal  owns the  building  and land for its main  office at 8929
South Harlem Avenue,  Bridgeview,  Illinois.  This office has 18,000 square feet
and a net book value of $953,000 at June 30, 2000. The Association also has a 99
year  easement on land  adjacent to its main  office  which  expires in the year
2078. The Association owns the building and land for its two branch

                                       32

<PAGE>



offices in Chicago at 4040 South  Archer  Avenue in Brighton  Park and 2657 West
69th Street in Marquette Park which have 5,000 and 2,500 square feet and $49,000
and $25,000 net book values at June 30, 2000, respectively.

     The  Association  has had a lease on vacant land located in Homer Township,
Illinois  since  1989.  During  the year ended June 30,  2000,  the  Association
purchased this property for $180,500.

     During July 1998, the Association entered into a lease for retail space and
additional  vacant land at the same location in Homer  Township,  Illinois.  The
Association  established a full service branch banking facility at this location
which opened for business  during May 1999. The net book value of remodeling and
leasehold  improvement  costs at this  32,846  square  foot  location  amount to
approximately $516,000 at June 30, 2000.

Computer Equipment
------------------

     The  Association's  recordkeeping  activities  are maintained on an on-line
basis  with  an  independent   service  bureau.  The  Association's   accounting
activities  are  maintained on an in-house  computer.  The net book value of the
Association's computer equipment at June 30, 2000 was $347,000.

Item 3.  Legal Proceedings
--------------------------

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

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

     No  matter  was  submitted  to a vote  of  security  holders,  through  the
solicitation  of proxies or  otherwise,  during the three  months ended June 30,
2000.

                                     PART II


Item 5.  Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------

     Pages  21 and 49 of the  2000  Annual  Report  to  Stockholders  is  herein
incorporated by reference.

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

     Pages 6 through 21  of the 2000  Annual  Report to  Stockholders  is herein
incorporated by reference.


                                       33

<PAGE>



Item 7.  Financial Statements
-----------------------------

     Pages 23 through 47 of the 2000 Annual  Report to  Stockholders  are herein
incorporated by reference.

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

     There  have been no  changes  in or  disagreements  with the  Association's
accountants on accounting and financial disclosure matters.



                                       34

<PAGE>



                                    PART III


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

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

Item 10.  Executive Compensation
--------------------------------

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

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

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

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

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



                                       35

<PAGE>



                                     PART IV


Item 13.  Exhibits and Reports on Form 8-K
------------------------------------------
         (a) Exhibits:
         ------------
<TABLE>
                                                                                               Reference to
                                                                                               Prior Filing
Regulation                                                                                      or Exhibit
S-K Exhibit                                                                                  Number Attached
  Number                      Document                                                           Hereto
----------      -----------------------------------------------------------------------      -----------------
    <S>          <C>                                                                              <C>
     2          Plan of acquisition, reorganization, arrangement, liquid, or succession            None
     3          Articles of Incorporation and Bylaws....................................           ***
     4          Instruments defining the rights of security holders,
                including indentures:
                 Common Stock Certificate...............................................           ***
     9          Voting trust agreement..................................................           None
    10          Material contracts:
                 Employee Stock Ownership Plan..........................................           ***
                 1993 Stock Option and Incentive Plan...................................            **
                 Employment Agreements..................................................           ***
                 Recognition and Retention Plan.........................................           ***
                 401(k) Retirement/Savings Plan.........................................           ***
    11          Statement re computation of per share earnings..........................           ****
    13          Annual Report to Security Holders.......................................           13
    16          Letter on change in certifying accountant...............................          None
    18          Letter on change in accounting principles...............................          None
    21          Subsidiaries of Registrant..............................................            21
    22          Published report regarding matters submitted to vote of security holders          None
    23          Consent of Experts and Counsel..........................................           None
    24          Power of Attorney.......................................................      Not required
    27          Financial Data Schedule.................................................           27
    99          Additional Exhibits                                                               None
</TABLE>

--------------------

     *Filed on January 15, 1993 as an exhibit to the Association's  initial Form
AC.

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

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

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

         (b) Reports on Form 8-K:

         No reports on Form 8-K have been filed  during the  three-month  period
ended June 30, 2000.


                                       36

<PAGE>



                                   SIGNATURES

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

                                          MIDLAND CAPITAL HOLDINGS CORPORATION


Date:  September 28, 2000                 By:/s/Paul M. Zogas
                                             ----------------------------------
                                             Paul M. Zogas
                                             Chairman, President and Chief
                                              Executive Officer
                                             (Duly Authorized Representative)

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



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

Date: September 28, 2000                    Date: September 28, 2000


/s/ Jonas Vaznelis                         /s/ Richard Taylor
----------------------------------         -------------------------------------
Jonas Vaznelis, Director                   Richard Taylor, Director and Vice
                                           Predsident

Date: September 28, 2000                   Date:  September 28, 2000


/s/ Michael J. Kukanza                     /s/ Algerd Brazis
----------------------------------         -------------------------------------
Michael J. Kukanza, Director               Algerd Brazis, Director

Date: September 28, 2000                   Date:  September 28, 2000



                                       37

<PAGE>














                                   Exhibit 13

<PAGE>


--------------------------------------------------------------------------------
                  Corporate Profile
-------------------------------------------------------------------------------

     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 founded in 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,  its home office in Bridgeview,  Illinois
and a branch  banking office located in Homer  Township,  Illinois,  a southwest
suburb of Chicago.  Midland  Federal also  operates a wholly  owned  subsidiary,
Midland  Service   Corporation.   Common  stock  in  Midland  Capital   Holdings
Corporation is traded on the "pink sheets"  published by the National  Quotation
Bureau, Inc.
--------------------------------------------------------------------------------


     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................. 23

     Consolidated Statements of
       Financial Condition........................ 24

     Consolidated Statements of Income............ 25

     Consolidated Statements of Changes in
       Stockholders' Equity....................... 26

     Consolidated Statements of Cash Flows........ 27

     Notes to Consolidated Financial
       Statements................................. 28



<PAGE>

To Our Shareholders,

         The Company  completed fiscal 2000 with earnings of $372,000,  or $1.01
per diluted share and a record book value of $25.43 per common share.  This year
marked our first full year of operations  at the  Company's  newest full service
branch banking facility in Homer Township, Illinois.

         The Company continued to build upon its core banking business in fiscal
2000 with a 6% increase in total deposits to $126.9 million,  a year-end record.
The Company's  lending  operations  achieved  growth of 7% in total loans during
fiscal 2000, our fifth consecutive  annual increase in the loan portfolio.  As a
result of the sale of the Company's  remaining  real estate owned  properties in
fiscal  2000,  non-performing  assets  continued to decline and amounted to just
 .21% of total assets at fiscal year end. The Company also continued to build its
capital base with  stockholders'  equity totaling $9.3 million,  also a year-end
record.  At June 30, 2000 the Company's ratio of  stockholders'  equity to total
assets was 6.75% and its banking subsidiary,  Midland Federal, continued to meet
all of the regulatory capital  requirements as a 'well capitalized'  institution
during fiscal 2000.

         Fiscal  2000 was a  challenging  year for the  financial  industry as a
result of several  interest rate increases  implemented  by the Federal  Reserve
Board  designed  to  slow  the  nation's  economy  to a  level  consistent  with
non-inflationary  growth.  The impact of these policies will continue to be felt
in the coming year as the industry  adjusts to higher  interest rates and weaker
loan demand.  I would like to thank all our  shareholders for their support this
year and we look forward to your continued support in the coming year.

                                   Sincerely,


                                   Paul Zogas
                                   Chairman and President



<PAGE>



--------------------------------------------------------------------------------
                              FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>

                                              Year Ended June 30,
                                    2000     1999     1998     1997     1996
                                 --------------------------------------------

                                            (Dollars in Thousands)
<S>                                <C>       <C>       <C>    <C>      <C>
Total assets.................... $137,225  130,193  117,373  111,678  116,460
Loans receivable, net...........   53,030   49,349   39,173   33,392   32,776
Mortgage-backed securities......   21,854   15,882   20,845   21,936   27,410
Cash and cash equivalents.......   32,667   35,020   31,994   30,903   30,918
Investment securities ..........   25,033   25,092   21,185   21,058   21,033
Deposits........................  126,870  120,225  107,762  102,973  107,914
Stockholders' equity............    9,257    8,996    8,768    7,971    7,740

For the Period:
  Net interest income........... $  3,510    3,154    3,147    3,124    3,186
  Net income ...................      372      365      595      296      575

Per Common Share:
  Book value per share
    outstanding................. $  25.43    24.71    24.09    22.99    22.32

  Earnings per share outstanding
    basic....................... $   1.02     1.00     1.68      .85     1.66
    diluted..................... $   1.01      .99     1.66      .83     1.64

Financial Ratios:
  Stockholders' equity to
    total assets................     6.75%    6.91     7.47     7.14     6.65
  Non-performing assets to
    total assets................      .21%     .38      .86      .86     1.90
  Net charge-offs to total loans       --      .06       --      .13      .21
  Net interest margin...........     2.65%    2.73     3.01     2.96     2.96
  Operating expenses to
    average assets (1)..........     2.75%    3.01     2.90     2.72     2.69
  Return on average assets (2)..      .27%     .30      .54      .66      .50
  Return on average
    stockholders' equity (2)....     4.12%    4.08     7.11     9.21     7.62

</TABLE>



(1)  Exclusive  of real  estate  owned  expenses  and  losses  and FDIC  special
     assessment.
(2)  Exclusive of FDIC special assessment in the 1997 period.



                                        3
<PAGE>




--------------------------------------------------------------------------------
                   SELECTED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
<TABLE>

SELECTED FINANCIAL CONDITION DATA:
                                                   At June 30,
                                    2000     1999     1998     1997     1996
                                 --------------------------------------------

                                                 (In Thousands)
<S>                               <C>        <C>     <C>      <C>      <C>
Total assets.................... $137,225  130,193  117,373  111,678  116,460
Loans receivable, net...........   53,030   49,349   39,173   33,392   32,776
Mortgage-backed securities......   21,854   15,882   20,845   21,936   27,410
Cash and cash equivalents.......   32,667   35,020   31,994   30,903   30,918
Investment securities ..........   25,033   25,092   21,185   21,058   21,033
Deposits........................  126,870  120,225  107,762  102,973  107,914
Stockholders' equity............ $  9,257    8,996    8,768    7,971    7,740

</TABLE>

<TABLE>
SELECTED OPERATIONS DATA:                     Year Ended June 30,
                                    2000     1999     1998     1997     1996
                                 --------------------------------------------

                                                 (In Thousands)
<S>                                <C>       <C>       <C>     <C>       <C>
Total interest income........... $  8,473    7,333    7,016    7,034    7,228
Total interest expense..........    4,963    4,179    3,869    3,910    4,042
                                  -------  -------  -------  -------  -------
Net interest income.............    3,510    3,154    3,147    3,124    3,186

Provision for loan losses
  (recoveries)..................       --       --     (160)      --       --
                                  -------- -------- -------  -------  -------
  Net interest income after
    provision for loan losses...    3,510    3,154    3,307    3,124    3,186

Non-interest income:
Loan related fees and charges...      198      300      238      146      102
Deposit related fees............      500      529      596      613      597
Commission income...............       64      105       95       69       81
Income from real estate owned...        7       89       70       57       36
Profit on sale of loans.........       36       45       29       11       --
Other income....................       75       87       88      229       80
                                  -------  -------  -------  -------- -------
Total non-interest income.......      880    1,155    1,116    1,125      896
                                  -------  -------  -------  -------  -------
Non-interest expense:
Staffing costs..................    1,956    2,008    1,789    1,670    1,546
Occupancy and equipment expense.      721      576      475      452      449
Deposit insurance premiums......       47       64       63      142      239
FDIC special assessment.........       --       --       --      674       --
Real estate owned expenses......        5       82      261       98      129
Other expense...................    1,110    1,027      902      816      833
                                  -------  -------  -------  -------  -------
  Total non-interest expense....    3,839    3,757    3,490    3,852    3,196
                                  -------  -------  -------  -------  -------

Income before income taxes......      551      552      933      397      886
Provision for income taxes......      179      187      338      101      311
                                  -------  -------  -------  -------  -------

Net income ..................... $    372      365      595      296      575
                                  =======  =======  =======  =======  =======
</TABLE>

                                       4


<PAGE>
--------------------------------------------------------------------------------
                   SELECTED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
<TABLE>

SELECTED FINANCIAL RATIOS:
                                        At or For the Year Ended June 30,
                                    2000     1999     1998     1997     1996
                                 --------------------------------------------
<S>                                <C>       <C>       <C>       <C>     <C>
Performance Ratios:
Return on average assets (1)....     .27%     .30      .54      .66      .50
Return on average stockholders'
  equity (1)....................    4.12%    4.08     7.11     9.21     7.62

Interest rate spread during
  period (2)....................    2.57%    2.65     2.92     2.91     2.90
Net interest margin (3).........    2.65%    2.73     3.01     2.96     2.96
Ratio of operating expenses to
  average total assets (4)......    2.75%    3.01     2.90     2.72     2.69
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities..  109.87%  110.64   110.25   108.76   108.34

Asset Quality Ratios:
Non-performing assets to
  total assets..................     .21%     .38      .86      .86     1.90
Allowance for loan losses to
  non-performing loans (5)......   65.24%   79.66    57.16   274.39    22.00
Allowance for loan losses to
  total loans...................     .69%     .74     1.00     1.62     1.78

Capital Ratios:
Stockholders' equity to
  total assets..................    6.75%    6.91     7.47     7.14     6.65
Average stockholders' equity to
  average assets................    6.47%    7.33     7.52     6.81     6.61

</TABLE>

(1)  Exclusive of FDIC special assessment.
(2)  Interest  rate  spread  for  the  period  shown   includes  the  impact  of
     non-interest bearing demand deposits.
(3)  Net  interest  income  divided  by  average  interest-earning  assets.
(4)  Exclusive of real estate owned expenses and losses and FDIC special
     assessment.
(5)  General  valuation  allowances  to  non-performing  loans (net of  specific
     allowances).


                                       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  in the  Company's  market  area,  changes in policies by  regulatory
agencies,  fluctuations  in interest  rates,  demand for loans in the  Company's
market area and competition,  all or some of which could cause actual results to
differ  materially from historical  earnings and those presently  anticipated or
projected.

The Company  wishes to caution  readers not to place undue  reliance on any such
forward-looking  statements,  which speak only as of the date made,  and advises
readers  that  various  factors,   including   regional  and  national  economic
conditions,  substantial  changes in levels of market interest rates, credit and
other risks of lending and investment  activities and competitive and regulatory
factors,  could affect the Company's  financial  performance and could cause the
Company's  actual  results for future  periods to differ  materially  from those
anticipated or projected.

The Company does not undertake,  and specifically  disclaims any obligation,  to
update any  forward-looking  statements to reflect  occurrences or unanticipated
events or circumstances after the date of such statements.


                                     GENERAL

Midland Capital Holdings  Corporation (the "Company") is a Delaware  corporation
that was  organized in 1998 for the purpose of becoming  the thrift  institution
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 March 19, 1998 the Board of Directors of the Association  adopted a
proposal  to  reorganize  the  Association   into  a  holding  company  form  of
organization  in accordance with a Merger  Agreement and Plan of  Reorganization
(the  "Reorganization").  The holding company reorganization was approved by the
Association's  shareholders  on July 15, 1998 and became  effective  on July 23,
1998. As a result of the  Reorganization,  the Association became a wholly owned
subsidiary of Midland Capital Holdings  Corporation,  and each outstanding share
of common  stock of the  Association  became,  by operation of law, one share of
common stock of Midland  Capital  Holdings  Corporation.  At June 30, 2000 there
were 363,975 shares of the Company's common stock outstanding.

                                       6

<PAGE>
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 funds,
consisting of the interest paid on its deposits and borrowings.  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, 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 makes substantial investments
in mortgage-backed  securities,  investment  securities  consisting primarily of
U.S. government and agency obligations and liquid assets in an effort to control
interest rate risk.


                        MANAGEMENT OF INTEREST RATE RISK

An  evaluation  of the interest  rate risk  position of a financial  institution
typically entails 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.  OTS
measures an  institution's  vulnerability to interest rate risk by examining the
"Pre-Shock  NPV Capital  Ratio",  the  "Post-Shock  NPV  Capital  Ratio" and the
"Sensitivity  Measure". The Pre-Shock NPV Capital Ratio is the leverage ratio of
equity-to-assets  expressed in present value terms and is calculated by dividing
an  institution's  base-case  NPV by  the  present  value  of  its  assets.  The
Post-Shock NPV Capital Ratio, also referred to as the "Exposure Measure",  is an
estimate  of  what  an  institution's   NPV  capital  ratio  would  be  after  a
hypothetical  adverse 200 basis point shock in interest  rates.  The Sensitivity
Measure gauges the magnitude of loss that an institution would suffer from a 200
basis point movement in interest rates. The Sensitivity Measure is calculated as
the  difference  between the Post Shock NPV Capital  Ratio and the Pre-Shock NPV
Capital  Ratio,  expressed in basis points.  The OTS Interest Rate Risk Exposure
Model  measures an  institution's  interest rate risk by  approximating  its NPV
under various market  interest rate scenarios which range from a 300 basis point
increase to a 300 basis point decrease in market interest rates.

                                       7

<PAGE>

Certain  shortcomings  are  inherent in the  methodology  described in the above
interest  rate risk  measurements.  Measuring  changes in NPV  requires  certain
assumptions  that may tend to 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. Also, 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.  Finally,  the model does not take into account
the impact of the Association's  business or strategic plans on the structure of
interest-earning assets and interest-bearing liabilities.  Accordingly, although
the NPV measurement  provides an 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  net interest income and will differ
from  actual  results.  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 has established  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 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 and the  potential  for
increased margin.  Second,  the Association  maintains a high level of liquidity
and has focused its  investment  activities  in cash  equivalents,  two year U.S
Treasury  Notes,  balloon  mortgage-backed   securities  and  intermediate  term
investments.  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  Association's  interest rate sensitivity of 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, 2000 assuming an  instantaneous  and sustained change in
market interest rates of 100, 200 and 300 basis points.

<TABLE>
                      NET PORTFOLIO VALUE          NPV AS % OF ASSETS

Change in Rates   $ Amount  $ Change  % Change      NPV Ratio  Change
---------------   --------  --------  --------      ---------  ------
<S>              <C>          <C>       <C>            <C>      <C>
(Basis Points)  (Thousands)
   +300 bp          6,482    -5,406      -45           4.83   -365 bp
   +200 bp          8,216    -3,673      -31           6.03   -244 bp
   +100 bp         10,045    -1,843      -16           7.27   -121 bp
      0 bp         11,888        --       --           8.47     -- bp
   -100 bp         13,481     1,593      +13           9.49   +101 bp
   -200 bp         14,543     2,655      +22          10.14   +167 bp
   -300 bp         16,669     4,781      +40          11.44   +296 bp

</TABLE>


                                       8

<PAGE>

                      FINANCIAL CONDITION AT JUNE 30, 2000

During the year ended June 30, 2000,  total  assets of the Company  increased by
$7.0  million to $137.2  million  from  $130.2  million at June 30,  1999.  This
increase  was  primarily  the result of an increase in deposits in the amount of
$6.6 million to $126.9 million at June 30, 2000. Net loans  receivable and loans
available  for sale  increased  $3.7 million to $53.0  million at June 30, 2000.
Loan  disbursements  totaled  $15.1  million in fiscal  2000  compared  to $24.9
million during the year ended June 30, 1999.  Principal payments to loans during
the year ended June 30, 2000  totaled  $8.3  million  compared to $11.5  million
during the year ended June 30, 1999. The balance of  mortgage-backed  securities
increased by $6.0 million to $21.9  million due to purchases of  mortgage-backed
securities  in the  amount  of  $10.0  million,  which  exceeded  repayments  of
mortgage-backed securities in the amount of $4.0 million during the fiscal year.
The $3.7 million  increase in net loans receivable and the $6.0 million increase
in  mortgage-backed  securities were funded by the $2.3 million decrease in cash
and cash  equivalents,  discussed  below,  as well as the  increase  in deposits
during the fiscal year.

In fiscal 2000 the Company  originated  $2.7 million in single  family  mortgage
loans in conjunction with the Illinois Housing Development  Authority's ("IHDA")
first  time home  buyers  program.  As  required  by the  program,  the  Company
completed the sale of $3.2 million of these loans to the IHDA in fiscal 2000 and
will continue to service these loans for the IHDA and these customers. In fiscal
2001 the Company  plans to continue to  participate  in the IHDA first time home
buyers  program as market  demands  warrant,  and to market its loan products to
local real estate brokers through Company loan origination personnel.

Cash and cash equivalents  decreased $2.3 million to $32.7 at June 30, 2000 from
$35.0 million at June 30, 1999.  The balance of investment  securities  remained
stable  at $25.0  million  at June 30,  2000.  The  weighted  average  remaining
maturity of the Company's  investment  securities portfolio at June 30, 2000 was
2.1 years.

Deposits  for the year ended June 30,  2000  increased  $6.6  million as deposit
activity of $438.1  million  and  interest  credited to deposit  accounts in the
amount of $4.7  million  exceeded  withdrawal  activity of $436.2  million.  The
increase in deposits is the result of a $3.3 million  increase in certificate of
deposit  accounts,  a $3.0 million  increase in money market accounts and a $1.1
million  increase  in NOW  accounts,  offset by a $642,000  decrease in passbook
deposit  accounts and a $169,000  decrease in demand deposit  accounts.  The net
increase in savings deposits is primarily  attributed to aggressive  pricing and
promotion  of both  certificate  of deposit  and money  market  accounts  at the
Company's new branch office location in Homer Township, Illinois.

Stockholders'  equity  increased  $261,000 to $9.3 million at June 30, 2000 from
$9.0  million  at June 30,  1999.  The  increase  in  stockholders'  equity  was
primarily due to earnings in the amount of $372,000  offset by dividends paid on
common  stock in the amount of $109,000 and a $37,000  decline in market  value,
net of income taxes, from securities classified 'available for sale'.

Non-performing  assets totaled $284,000 at June 30, 2000 as compared to $500,000
at June 30, 1999. Non-performing assets at June 30, 2000 consist of non-accruing
loans,  net of  specific  reserves.  At June 30,  2000  non-accruing  loans  are
comprised of $232,000 in four single family residential  mortgage loans, $38,000
in one multi-family residential mortgage loan and $14,000 in non-mortgage loans.
General   allowances   for  loan  losses   total   $185,000  or  65.24%  of  net
non-performing loans at June 30, 2000.

                                       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>
                                               Year Ended June 30,
                     ------------------------------------------------------------------------

                              2000                     1999                     1998
                     ----------------------   ----------------------   ----------------------




                     Average Interest Yield   Average Interest Yield   Average Interest Yield
                     Balance  Earned/  and    Balance  Earned/  and    Balance  Earned/  and
                               Paid   Rates             Paid   Rates             Paid   Rates
                     -------- ------- -----   -------- ------- -----   -------- ------- -----

                                              (Dollars in Thousands)
<S>                   <C>     <C>     <C>       <C>     <C>    <C>     <C>      <C>     <C>
Interest-Earning
  Assets:
Loans Receivable (1) $ 50,383 $3,691  7.33%     46,270 $3,442  7.44%   $ 34,701 $2,792  8.04%
Mortgage-backed
  securities........   21,688  1,409  6.49      18,457  1,214  6.58      23,065  1,552  6.73
Investment and other
  securities........   25,055  1,397  5.58      21,441  1,213  5.66      21,142  1,248  5.90
Interest-bearing
  deposits..........   34,785  1,930  5.59      28,826  1,426  4.95      25,234  1,387  5.50
FHLB stock..........      656     46  7.04         582     38  6.43         554     37  6.75
                      -------  -----  ----     -------  -----  ----     -------  -----  ----
    Total interest-
      earning assets $132,567 $8,473  6.39%   $115,576 $7,333  6.34%   $104,696 $7,016  6.70%
                      -------  -----  ----     -------  -----  ----     -------  -----  ----
</TABLE>


<TABLE>
<S>                    <C>     <C>    <C>      <C>      <C>    <C>      <C>     <C>     <C>
Interest-Bearing
  Liabilities:
Certificates of
  deposit........... $ 61,878 $3,120  5.04%   $ 50,000 $2,557  5.11%   $ 43,122 $2,330  5.40%
Passbook accounts...   42,507  1,286  3.03      41,323  1,229  2.97      40,097  1,185  2.96%
Money market and
  NOW accounts......   16,273    557  3.43      13,136    393  2.99      11,744    354  3.02%
                      -------  -----  ----     -------  -----  ----     -------  -----  ----
    Total interest-
      bearing lia-
      bilities...... $120,658 $4,963  4.11%   $104,459 $4,179  4.00%   $ 94,963 $3,869  4.07%
                      =======  -----  ----     =======  -----  ----     =======  -----  ----

Net earning assets.. $ 11,909                 $ 11,117                 $  9,733
                      =======                  =======                  =======

Net-interest income.          $3,510                   $3,154                   $3,147
                               =====                    =====                    =====

Net-interest rate
  spread (2)........                  2.28%                    2.34%                    2.63%
                                      ====                     ====                     ====

Net-interest margin.                  2.65%                    2.73%                    3.01%
                                      ====                     ====                     ====

Average interest-
  earning assets to
  average interest-
  bearing liabilities         109.87%                  110.64%                  110.25%
                              ======                   ======                   ======

</TABLE>


(1)  Calculated net of deferred yield  adjustments,  loan  discounts,  loans in
     process and loss reserves.
(2)  Net-interest  rate spread would be increased to 2.57%,  2.65% and 2.92% for
     the  periods  shown  if the  positive  impact  of the  average  balance  of
     non-interest  bearing demand  deposits  ($9,336,  $8,581 and $7,386 for the
     periods shown) is considered.
                                       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>

                                               Year Ended June 30,
                       ------------------------------------------------------------------
                             2000   vs.   1999                   1999   vs.   1998
                       ------------------------------      ------------------------------
                        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....  $  306   $( 52)  $( 5) $  249       $ 931   $(211)  $( 70)  $ 650
Mortgage-backed
  securities........     213    ( 15)   ( 3)    195        (310)   ( 35)      7    (338)
Investment and other
  securities........     204    ( 17)   ( 3)    184          18    ( 52)   (  1)   ( 35)
Interest-bearing
  deposits..........     295     173     36     504         197    (138)   ( 20)     39
FHLB stock..........       5       3     --       8           1      --      --       1
                        ----    ----   ----    ----        ----     ---     ---     ---
    Total interest-
      earning assets  $1,023   $  92  $  25  $1,140       $ 837   $(436)  $( 84)  $ 317
                       -----    ----   ----   -----        ----    ----    ----    ----
</TABLE>

<TABLE>
<S>                   <C>       <C>     <C>     <C>       <C>     <C>     <C>     <C>
Interest-Bearing
  Liabilities:
Certificates of
  deposit...........  $  607     (36)   ( 8) $  563       $ 372   $(125)  $ (20)  $ 227
Passbook accounts...      35      21      1      57          36       8      --      44
Money market and
  NOW accounts......      93      57     14     164          42    (  3)     --      39
                       -----    ----   ----   -----        -----   ----    ----    ----
    Total interest-
      bearing liab-
      ilities.......  $  735   $  42  $   7  $  784       $ 450   $(120)   $(20)  $ 310
                       -----    ----   ----   -----        ----     ---     ---    -----

Net change in net
  interest income...                         $  356                               $   7
                                              =====                                ====
</TABLE>

                                       12

<PAGE>


                         COMPARISON OF OPERATING RESULTS
                           FOR THE FISCAL YEARS ENDED
                         JUNE 30, 2000 AND JUNE 30, 1999

The Company had net income of $372,000 in fiscal 2000  compared to net income of
$365,000  for fiscal  1999.  The  increase  in net income is  attributable  to a
$356,000  increase in net interest income and an $8,000 decrease in income taxes
offset by a $275,000 decrease in non-interest  income and an $82,000 increase in
non-interest expense.

Net interest income before provision for loan losses increased  $356,000 to $3.5
million in fiscal 2000 from $3.2 million in fiscal 1999. The average  balance of
net earning assets increased $792,000 to $11.9 million in fiscal 2000 from $11.1
million in the prior fiscal year.  Net interest  margin and interest rate spread
decreased in fiscal 2000 to 2.65% and 2.57%, respectively, from 2.73% and 2.65%,
respectively,  in fiscal 1999,  primarily as a result of  increasing  short term
market interest rates and increased  competition for deposit  liabilities during
the current  fiscal year which  resulted  in a higher  average  cost of interest
bearing  liabilities.  The ratio of average  interest  earning assets to average
interest  bearing  liabilities  also  decreased  to 109.87% in fiscal  2000 from
110.64% in fiscal 1999.

INTEREST INCOME
Interest  income  increased  $1.1 million in fiscal 2000 to $8.5  million.  This
increase  in  interest  income  resulted  from a $17.0  million  increase in the
average balance of interest earning assets to $132.6 million in fiscal 2000 from
$115.6 million in fiscal 1999 as well as an increase in the average yield earned
on interest  earning assets to 6.39% in fiscal 2000 from 6.35% in fiscal 1999 as
a result of higher short term market interest rates.

Interest on loans receivable increased $249,000, or 7.2%, in fiscal 2000 to $3.7
million  compared  with  fiscal  1999.  The  increase  in  interest  income  was
attributed to a $4.1 million increase in the average  outstanding balance of net
loans  receivable  to $50.4  million in fiscal 2000 from $46.3 million in fiscal
1999. The increase in the average balance of net loans  receivable was partially
offset by a decrease in the average yield earned on loans receivable to 7.33% in
fiscal 2000 from 7.44% in fiscal 1999 as  repayments  of higher  yielding  loans
within the loan portfolio  were replaced with lower  yielding  loans  originated
over both the prior and current fiscal year.

Interest on mortgage-backed  securities  increased  $195,000,  or 16.0%, to $1.4
million in fiscal 2000  compared  with  fiscal  1999.  The  increase in interest
income was  attributed  to a $3.2  million  increase in the average  outstanding
balance of mortgage-backed securities to $21.7 million in fiscal 2000 from $18.5
million in fiscal 1999. The Company increased its investment in  mortgage-backed
securities  in  fiscal  2000 in order to  maintain  compliance  with  regulatory
requirements  regarding  qualified  thrift  lender  status.  The increase in the
average  outstanding  balance  of  mortgage-backed  securities  was  offset by a
decrease in the average yield earned on  mortgage-backed  securities to 6.49% in
fiscal 2000 from 6.58% in fiscal 1999.

Interest earned on investment securities increased $184,000, or 15.2%, in fiscal
2000. The increase in interest income  resulted from a $3.6 million  increase in
the average outstanding  balance of investment  securities to $25.1 million from
the prior  fiscal  year.  The  increase  in the average  outstanding  balance of
investment  securities  was offset by a decrease in the average  yield earned on
investment securities to 5.58% in fiscal 2000 compared to 5.66% in fiscal 1999.

                                       13

<PAGE>
Interest earned on interest bearing deposits  increased  $504,000,  or 35.4%, to
$1.9 million in fiscal 2000 compared with fiscal 1999.  The increase in interest
income is  attributed  to a $6.0  million  increase in the  average  outstanding
balance of interest  bearing deposits to $34.8 million in fiscal 2000 from $28.8
million in fiscal 1999 as well as an increase  in the  average  yield  earned on
interest bearing deposits to 5.59% in fiscal 2000 from 4.95% in fiscal 1999. The
Company  maintained its investments in interest  bearing deposits in response to
increasing higher short term market interest rates during 2000.

INTEREST EXPENSE
Interest expense  increased  $784,000,  or 18.8%, to $5.0 million in fiscal 2000
from $4.2  million in fiscal 1999.  The  increase in interest  expense in fiscal
2000 was the  result of a $16.2  million  increase  in the  average  outstanding
balance of  interest  costing  deposits  to $120.7  million in fiscal  2000 from
$104.5  million in fiscal 1999 as well as an increase in the average  yield paid
on interest costing deposits to 4.11% in fiscal 2000 compared to 4.00% in fiscal
1999.  The increase in savings  deposits is primarily  attributed  to aggressive
pricing and promotion of certificate  and money market  deposit  accounts by the
Company at its Homer Township branch banking facility.

PROVISIONS FOR LOSSES ON LOANS
The Company  maintains  an  allowance  for loan losses  based upon  management's
periodic  evaluation  of known and  inherent  risks in the loan  portfolio,  the
Company's  past  loan  loss  experience,  adverse  situations  that  may  affect
borrowers' ability to repay loans,  estimated value of the underlying collateral
and  current  and  expected  market  conditions.  The  Company  incurred no loan
charge-offs  during fiscal 2000.  During  fiscal 2000 the Company  increased its
general  allowance  for loan losses to $185,000 at fiscal year end from $178,000
at the prior fiscal year end. At fiscal year end, the $185,000 general allowance
for loan losses was  determined by the Company to be consistent  with its policy
for the  establishment  and  maintenance of adequate levels of general loan loss
allowances.  The $7,000  increase in the  Company's  general  allowance for loan
losses  during  fiscal 2000 was the result of $48,000 in  recoveries  from fully
reserved loans which loss reserves were transferred  from specific  allowance to
general and $3,000 in recoveries from loans  previously  charged off. These loan
loss recoveries were offset by $44,000 in loans that were specifically  reserved
out of the general allowance for loan losses during the current fiscal year.

At June  30,  2000,  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  potential  losses,  there can be no
assurance that such losses will not exceed the estimated amounts.


NON-INTEREST INCOME
Non-interest  income  decreased  $275,000  to  $880,000 in fiscal 2000 from $1.2
million in fiscal 1999.  The decrease in  non-interest  income in fiscal 2000 is
primarily attributed to a $102,000 decrease in loan fees and service charges, an
$82,000  decrease  in  income  from the sale and  rental  of real  estate  owned
properties,  a $41,000  decrease in commission  income and a $29,000 decrease in
deposit  related  fees.  The  decrease in loan fees and service  charges was the
result of decreased loan  brokerage  revenues and loan  origination  activity in
fiscal 2000 compared to fiscal 1999.  The decrease in commission  income was the
result of a decrease in the sale of annuity  products in fiscal 2000 compared to
the prior  fiscal year.  The decrease in deposit  related fees in fiscal 2000 is
attributed  to a  decrease  in the  level  of  demand  deposit  service  charges
resulting from decreased overdraft activity compared to the prior fiscal year.

                                       14

<PAGE>
NON-INTEREST EXPENSE
Non-interest  expense  increased $82,000 to $3.8 million in fiscal 2000 compared
with the prior fiscal year. The primary factors for the increase in non-interest
expense  were a $145,000  increase  in  occupancy  and  equipment  expense and a
$26,000 increase in advertising expense, as compared with the prior fiscal year.
These  increases in  non-interest  expense were offset by a $52,000  decrease in
staffing costs and a $24,000  decrease in data processing fees, as compared with
the prior fiscal year. The increase in office occupancy and advertising  expense
in fiscal 2000  reflected  the first full year of  operations  for the Company's
Homer Township,  Illinois branch banking facility,  which opened for business in
April 1999.  The  decrease in  staffing  costs was the result of a reduction  in
commissions  paid to the Company's staff loan  originators due to a reduction in
loan  originations  compared  with the prior fiscal  year.  The decrease in data
processing  fees in fiscal 2000 was the result of the  elimination  of a $38,000
de-conversion  fee incurred in the prior fiscal year when the Company  converted
its data processing systems to another service provider.

INCOME  TAXES
Provisions for income taxes  decreased by $8,000 to $179,000 in fiscal 2000 from
$187,000 in fiscal 1999  primarily due to a decreased  amount of  non-deductible
items in the current year as compared to the prior year.


                         COMPARISON OF OPERATING RESULTS
                           FOR THE FISCAL YEARS ENDED
                         JUNE 30, 1999 AND JUNE 30, 1998

The Company had net income of $365,000 in fiscal 1999  compared to net income of
$595,000 for fiscal 1998. The decrease in net income is primarily  attributed to
a $267,000  increase in  non-interest  expense and the elimination of a $160,000
recovery of loan loss  provisions  in the prior year period  offset by a $39,000
increase in  non-interest  income and a $151,000  reduction in the provision for
income taxes.

Net interest income before provision for loan losses remained  approximately the
same in fiscal 1999 and 1998,  totaling $3.2 million in both years.  The average
balance of net earning assets  increased $1.4 million to $11.1 million in fiscal
1999 from $9.7  million  in the prior  fiscal  year.  Net  interest  margin  and
interest rate spread decreased in fiscal 1999 to 2.73% and 2.65%,  respectively,
from 3.01% and 2.92%, respectively,  in fiscal 1998, as a result of lower market
interest  rates during the current  fiscal year.  The ratio of average  interest
earning assets to average interest bearing  liabilities  increased to 110.63% in
fiscal 1999 from 110.25% in fiscal 1998.

INTEREST INCOME
Interest income increased $317,000 in fiscal 1999 to $7.3 million. This increase
in interest income resulted from a $10.9 million increase in the average balance
of interest  earning assets to $115.6 million in fiscal 1999 from $104.7 million
in fiscal  1998.  The  increase in the average  outstanding  balance of interest
earnings  assets was partially  offset by a decrease in the average yield earned
on interest  earning assets to 6.34% in fiscal 1999 from 6.70% in fiscal 1998 as
a result of lower market interest rates.

                                       15


<PAGE>

Interest on loans  receivable  increased  $650,000,  or 23.3%, in fiscal 1999 to
$3.4  million  compared  with fiscal 1998.  The increase in interest  income was
attributed to an $11.6 million  increase in the average  outstanding  balance of
net loans  receivable  to $46.3  million in fiscal  1999 from  $34.7  million in
fiscal  1998.  The  increase  in loans was the result of a 42%  increase in loan
originations  which more than offset a 24% increase in loan  repayments and loan
sales during the current fiscal year. The increase in the average balance of net
loans  receivable was partially offset by a decrease in the average yield earned
on loans receivable to 7.44% in fiscal 1999 from 8.04% in fiscal 1998.

Interest on mortgage-backed  securities  decreased  $338,000,  or 21.7%, to $1.2
million in fiscal 1999  compared  with  fiscal  1998.  The  decrease in interest
income was  primarily  attributed  to a $4.6  million  reduction  in the average
outstanding  balance of  mortgage-backed  securities  to $18.5 million in fiscal
1999 from $23.1  million in fiscal  1998 as well as to a decrease in the average
yield earned on mortgage-backed securities to 6.58% in fiscal 1999 from 6.73% in
fiscal 1998.

Interest earned on investment  securities  decreased $35,000, or 2.8%, in fiscal
1999. The decrease in interest income resulted  primarily from a decrease in the
average yield on investment securities to 5.66% in fiscal 1999 compared to 5.90%
in fiscal 1998.

Interest earned on interest  bearing  deposits  increased  $39,000,  or 2.8%, in
fiscal 1999.  The increase in interest  income is  attributed  to a $3.6 million
increase in the average  outstanding  balance of  interest  bearing  deposits to
$28.8  million in fiscal 1999 from $25.2  million in fiscal 1998 which  offset a
decrease in the average  yield earned on interest  bearing  deposits to 4.95% in
fiscal 1999 from 5.50% in fiscal 1998. The Company maintained its investments in
interest  bearing  deposits in response to the  potential  for higher short term
market interest rates at the end of fiscal 1999 and into fiscal 2000.

INTEREST EXPENSE
Interest expense  increased  $310,000,  or 8.0%, to $4.2 million in fiscal 1999.
The increase in interest  expense in fiscal 1999 was  primarily  the result of a
$9.5 million  increase in the average  outstanding  balance of interest  costing
deposits  to $104.5  million in fiscal  1999 from $95.0  million in fiscal  1998
which was  partially  offset by a decrease in the average yield paid on interest
costing  deposits to 4.00% in fiscal 1999 compared to 4.07% in fiscal 1998.  The
increase in savings deposits is primarily  attributed to aggressive  pricing and
promotion of certificate of deposit accounts by the Company.

                                       16


<PAGE>
PROVISIONS FOR LOSSES ON LOANS
The Company  maintains  an  allowance  for loan losses  based upon  management's
periodic  evaluation  of known and  inherent  risks in the loan  portfolio,  the
Company's  past  loan  loss  experience,  adverse  situations  that  may  affect
borrowers' ability to repay loans,  estimated value of the underlying collateral
and current and expected market conditions. The Company incurred $30,000 in loan
charge-offs  during fiscal 1999.  During  fiscal 1999 the Company  increased its
general  allowance  for loan losses to $178,000 at fiscal year end from $150,000
at the prior fiscal year end. At fiscal year end, the $178,000 general allowance
for loan losses was  determined by the Company to be consistent  with its policy
for the  establishment  and  maintenance of adequate levels of general loan loss
allowances.  The $28,000  increase in the Company's  general  allowance for loan
losses  during  fiscal 1999 was the result of $54,000 in  recoveries  from fully
reserved loans which loss reserves were transferred  from specific  allowance to
general and $2,000 in recoveries from loans  previously  charged off. These loan
loss recoveries were offset by $28,000 in loans that were charged off out of the
general allowance for loan losses during the current fiscal year.

At June  30,  1999,  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  potential  losses,  there can be no
assurance that such losses will not exceed the estimated amounts.

NON-INTEREST INCOME
Non-interest  income increased  $39,000 to $1.2 million in fiscal 1999 from $1.1
million in fiscal 1998.  The increase in  non-interest  income in fiscal 1999 is
primarily  attributed to a $63,000 increase in loan fees and service charges,  a
$22,000 profit on the sale of real estate owned  properties,  a $16,000 increase
in profit on sale of loans and an $11,000  increase in  commission  income.  The
increase  in loan fees and  service  charges  was the result of  increased  loan
brokerage  revenues  and loan  origination  activity in fiscal 1999  compared to
fiscal 1998,  as discussed  above.  The  increase in  commission  income was the
result of an increase in the sale of annuity products in fiscal 1999 compared to
the prior fiscal year.  These increases in non-interest  income were offset by a
$67,000  decrease in deposit  related fees in fiscal 1999  compared to the prior
fiscal year.  The decrease in deposit  related fees in fiscal 1999 is attributed
to a decrease in the level of demand  deposit  service  charges  resulting  from
decreased  overdraft activity compared to the prior fiscal year. Deposit related
fees also  declined as a result of the  implementation  of new customer  account
data  processing  systems in the fiscal  second  quarter  which  system  changes
negatively impacted fee income while these system changes were implemented.

NON-INTEREST EXPENSE
Non-interest  expense increased $267,000 to $3.8 million in fiscal 1999 compared
to $3.5 million in the prior fiscal year.  The primary  factors for the increase
in non-interest  expense were a $220,000  increase in staffing costs, a $101,000
increase in occupancy  and  equipment  expense,  a $52,000  increase in computer
software and support expense and a $47,000  increase in data processing fees, as
compared with the prior fiscal year.  These  increases in  non-interest  expense
were offset by a $165,000  reduction in provision for loss on real estate owned,
a $21,000  reduction  in legal  expense and a $14,000  reduction  in real estate
owned expenses in fiscal 1999 compared with the prior year period.  The increase
in  non-interest  expense in fiscal 1999 is primarily  attributed to the opening
and  operations  of the Company's  fourth  banking  facility in Homer  Township,
Illinois.  Non-interest  expense also increased as a result of the conversion of
the Company's  on-line  customer  account data processing and certain other data
processing  and  computer  systems to a new  service  provider in fiscal 1999 in
order to bring mission  critical data processing and computer  systems into year
2000 compliance.

INCOME TAXES
Provisions  for income  taxes  decreased  by $151,000 to $187,000 in fiscal 1999
from $338,000 in fiscal 1998. The decreased income tax provision for fiscal 1999
was due  primarily  to the  decrease in  operating  income as compared to fiscal
1998.

                                       17


<PAGE>

                         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.  In addition,  the  Association  may borrow
funds from the Federal Home Loan Bank of Chicago (the "FHLB").

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. The OTS requires members of
the FHLB system to maintain  minimum  levels of liquid assets.  OTS  regulations
currently require the Association to maintain an average daily balance of liquid
assets  equal to at  least 4% of the sum of its  average  daily  balance  of net
withdrawable  deposit  accounts and  borrowings  payable in one year or less. At
June 30, 2000, the Association's  regulatory  liquidity ratio was 52.9%. At such
date, the Association had commitments to originate $1.4 million in single family
mortgage loans and no commitments to either purchase or sell 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 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,
2000 and 1999.

<TABLE>

                                                      For the Year
                                                     Ended June 30,
                                                ----------------------
                                                  2000          1999
                                                --------      --------
                                                (Dollars in Thousands)
<S>                                              <C>            <C>
Net income.............................         $   372        $   365
Adjustments to reconcile net income
  to net cash provided by
  operating activities.................             713            308
                                                 ------         ------
Net cash provided by
  operating activities.................           1,085            673
Net cash provided for
  investing activities.................         (10,098)       (10,124)
Net cash provided by
  financing activities.................           6,659         12,477
                                                 ------         -------
Net change in cash and
  cash equivalents.....................          (2,354)         3,026
Cash and cash equivalents at
  beginning of period..................          35,020         31,994
                                                 ------         ------
Cash and cash equivalents at
  end of period........................         $32,666        $35,020
                                                 ======         ======

</TABLE>


At June 30, 2000 Midland  Federal had tangible and core capital of $8.9 million,
or 6.48% of adjusted total assets, which was approximately $6.9 million and $4.8
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,  2000  Midland  Federal  had  total  capital  of $9.1  million  and
risk-weighted   assets  of  $45.8  million,   or  total  capital  of  19.90%  of
risk-weighted  assets. This amount was approximately $5.4 million above the 8.0%
requirement for capital adequacy purposes in effect on that date.

                                       18

<PAGE>



                       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 June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133 ("SFAS 133"),  entitled  "Accounting for Derivative  Instruments and Hedging
Activities",  which is effective for fiscal years beginning after June 15, 1999.
SFAS 133 requires all  derivatives  to be recorded on the balance  sheet at fair
value.  It also  establishes  "special  accounting" for hedges of changes in the
fair value of assets,  liabilities,  or firm  commitments  (fair value  hedges),
hedges of the variable cash flows of forecasted transactions (cash flow hedges),
and  hedges  of  foreign  currency  exposures  of  net  investments  in  foreign
operations.  To the extent the hedge is considered  highly  effective,  both the
change in the fair value of the  derivative  and the change in the fair value of
the hedged item are recognized (offset) in earnings in the same period.  Changes
in fair value of derivatives that do not meet the criteria of one of these three
hedge categories are included in income.

In September 1999, the FASB issued Statement of Financial  Accounting  Standards
No. 137 ("SFAS 137"), entitled "Accounting for Derivative Instruments in Hedging
Activities - Deferral of the Effective Date of FASB  Statements  no. 133".  SFAS
137 defers the effective  date of SFAS 133 from years  beginning  after June 15,
1999 to all fiscal  quarters of all fiscal years  beginning after June 15, 2000.
Management  does not  believe  that  adoption  of SFAS 133 will have a  material
impact  on  the  Company's   consolidated  financial  condition  or  results  of
operations.


                     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,  2000,  there  were  approximately  60  holders  of record of the
Company's  common  stock and  363,975  shares of issued and  outstanding  common
stock.  The Company's  common stock is quoted on the 'pink sheets'  published by
the National Quotation Bureau 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.

<TABLE>
                                                          Cash dividends
Quarter ended               High              Low            declared
-------------------         -----            -----        --------------
<S>                         <C>              <C>               <C>
September 30, 1998          30.25            23.00             0.075

December 31, 1998           26.38            22.00             0.075

March 31, 1999              23.00            23.00             0.075

June 30, 1999               22.00            20.50             0.075

September 30, 1999          21.00            19.50             0.075

December 31, 1999           19.88            15.75             0.075

March 31, 2000              17.00            13.75             0.075

June 30, 2000               14.00            13.25             0.075
</TABLE>


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


                                       20

<PAGE>


<TABLE>


Officers and Directors

Officers                                Directors
<S>                                     <C>
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

Muriel Kowalski                         Michael J. Kukanza
Assistant Vice President of             Principal in Compass Asset
the Company and the Association         Management, L.L.C.

Donna Chmiel                            Jonas Vaznelis
Internal Auditor of the                 Retired businessman and Committee
Company and the Association             member of the Board of Zoning Appeals
                                        for Beverly Shores, Indiana.
Lois Gajdorus
Assistant Vice President of
the Association
</TABLE>

                                       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 18,  2000,  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.
         Silver, Freedman & Taff, L.L.P.
         1100 New York Avenue, N.W.
         Washington, D.C. 20005-3934

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

                                       22
<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, 2000 and
1999,   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,  2000.  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, 2000 and 1999, and the
results of their  operations and their cash flows for each of the three years in
the  period  ending  June  30,  2000,  in  conformity  with  generally  accepted
accounting principles.





August 10, 2000
Palos Hills, Illinois

                                       23
<PAGE>


                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

                 Consolidated Statements of Financial Condition
<TABLE>

                                                                             June 30,
                                                                      ---------------------
                                                                        2000          1999
Assets                                                                  ----          ----
<S>                                                               <C>                <C>
Cash and amounts due from depository institutions                $  3,036,708      3,933,658
Interest-bearing deposits                                          29,629,809     31,086,638
                                                                -------------    -----------
   Total cash and cash equivalents                                 32,666,517     35,020,296
Investment securities,
held to maturity (fair value:
  2000 - $19,896,031; 1999 - $19,933,594) (note 2)                 19,990,723     19,994,152
Investment securities available for sale,
  at fair value (note 3)                                            5,042,710      5,098,307
Mortgage-backed securities, held to maturity (fair value:
  2000 - $21,508,988; 1999 - $15,938,491) (note 4)                 21,854,112     15,881,826
Loans receivable (net of allowance
  for loan losses:  2000 - $368,885;
  1999 - $365,863) (note 5)                                        53,030,170     48,914,195
Loans receivable held for sale (note 6)                                  -           435,150
Real estate owned, net                                                   -           276,372
Stock in Federal Home Loan Bank of Chicago                            728,500        636,000
Accrued interest receivable (note 7)                                  650,954        611,966
Office properties and equipment - net (note 8)                      2,580,061      2,594,050
Prepaid expenses and other assets (note 9)                            681,743        730,969
                                                                  -----------    -----------

   Total assets                                                   137,225,490    130,193,283
                                                                  ===========    ===========
</TABLE>


<TABLE>
Liabilities and Stockholders' Equity
<S>                                                               <C>             <C>
Liabilities:
Deposits (note 10)                                                126,870,476    120,224,584
Advance payments by borrowers for taxes
  and insurance                                                       693,302        570,814
Other liabilities (note 11)                                           404,995        402,356
                                                                  -----------    -----------
   Total liabilities                                              127,968,773    121,197,754
                                                                  -----------    -----------

Stockholders' Equity:
Preferred stock, $.01 par value: authorized
  1,000,000 shares; none outstanding                                     -               -
Common stock, $.01 par value: authorized
  5,000,000 shares; issued and outstanding
  363,975 shares at June 30, 2000 and 1999                             3,640           3,640
Additional paid-in capital                                         3,274,654       3,271,315
Retained earnings - substantially restricted                       5,948,332       5,685,591
Accumulated other comprehensive income,
  net of income taxes                                                 42,704          80,030
Common stock awarded by Bank Incentive Plan                          (12,613)        (45,047)
                                                                 -----------     -----------
   Total stockholders' equity (notes 15 and 16)                    9,256,717       8,995,529
                                                                 -----------     -----------

Commitments and contingencies (notes 17 and 18)

   Total liabilities and stockholders' equity                  $ 137,225,490     130,193,283
                                                                 ===========     ===========
</TABLE>




See accompanying notes to consolidated financial statements.

                                       24
<PAGE>


                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

                        Consolidated Statements of Income
<TABLE>

                                                          Years Ended June 30,
                                                  ----------------------------------
                                                   2000          1999          1998
                                                   ----          ----          ----
<S>                                             <C>             <C>           <C>
Interest income:
  Interest on loans                           $ 3,690,971     3,442,351     2,791,590
  Interest on mortgage-backed securities        1,408,639     1,214,401     1,551,940
  Interest on investment securities             1,397,537     1,212,855     1,247,576
  Interest on interest-bearing deposits         1,929,995     1,425,567     1,387,391
  Dividends on FHLB stock                          46,171        37,435        37,401
                                                ---------     ---------     ---------
    Total interest income                       8,473,313     7,332,609     7,015,898
                                                ---------     ---------     ---------

Interest expense:
  Interest on deposits (note 10)                4,963,447     4,179,051     3,868,946
                                                ---------     ---------     ---------
    Total interest expense                      4,963,447     4,179,051     3,868,946
                                                ---------     ---------     ---------

    Net interest income before provision
     for loan losses                            3,509,866     3,153,558     3,146,952
Provision for loan losses (recoveries) (note 5)      -             -         (160,000)
                                                ---------     ---------     ---------
    Net interest income after provision
     for loan losses                            3,509,866     3,153,558     3,306,952
                                                ---------     ---------     ---------

Non-interest income:
  Loan fees and service charges                   198,381       300,328       237,768
  Commission income                                64,205       105,116        94,572
  Profit on sale of loans (note 6)                 35,734        45,154        29,076
  Profit on sale of real estate owned - net         4,491        21,602          -
  Deposit related fees                            499,865       529,367       596,194
  Other income                                     77,734       153,777       158,233
                                                ---------     ---------     ---------
    Total non-interest income                     880,410     1,155,344     1,115,843
                                                ---------     ---------     ---------

Non-interest expense:
  Staffing costs (notes 12 and 13)              1,955,963     2,008,128     1,788,697
  Advertising                                     119,177        93,268        89,394
  Occupancy and equipment expenses (note 8)       720,895       576,094       474,947
  Data processing                                 175,752       199,828       152,830
  Federal deposit insurance premiums               47,428        64,047        63,090
  Legal, audit and examination services           139,952       145,364       161,005
  Real estate owned expense                         4,729        80,418        93,917
  Provision for loss on
   real estate owned (note 1)                        -            1,527       167,000
  Other                                           675,562       588,608       498,968
                                                ---------     ---------     ---------
    Total non-interest expense                  3,839,458     3,757,282     3,489,848
                                                ---------     ---------     ---------

  Income before income taxes                      550,818       551,620       932,947
Provision for income taxes (note 14)              178,884       186,901       338,354
                                                ---------     ---------     ---------

      Net income                              $   371,934       364,719       594,593
                                                =========     =========     =========


Earnings per share - basic                    $      1.02          1.00          1.68
                                                =========     =========     =========

Earnings per share - diluted                  $      1.01           .99          1.66
                                                =========     =========     =========


</TABLE>


See accompanying notes to consolidated financial statements.

                                       25
<PAGE>


                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity
<TABLE>


                                                                           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, 1997                $  3,467    3,073,664   4,942,077     61,375  (109,917)  7,970,666
                                          ------    ---------   ---------    -------   -------   ---------

 Comprehensive income:
  Net income                                                      594,593                          594,593
  Other comprehensive income,
    net of tax:
   Unrealized holding gain
    during the year                                                           83,724                83,724
                                                                ---------    -------             ---------

 Total comprehensive income                                       594,593     83,724               678,317

  Common stock issued in
   connection with stock
   options exercised                         173      189,577                                      189,750

  Tax benefit related to
   employee stock plan                                  3,074                                        3,074

  Amortization of award of BIP stock                                                    32,435      32,435

  Dividends declared on
   common stock ($.30 per share)                                 (106,605)                        (106,605)
                                          ------    ---------   ---------    -------   -------   ---------

Balance at June 30, 1998                   3,640    3,266,315   5,430,065    145,099   (77,482)  8,767,637
                                          ------    ---------   ---------    -------   -------   ---------

 Comprehensive income:
  Net income                                                      364,719                          364,719
  Other comprehensive income,
    net of tax:
   Unrealized holding loss
    during the year                                                          (65,069)              (65,069)
                                                                ---------    -------             ---------
 Total comprehensive income                                       364,719    (65,069)              299,650

  Tax benefit related to
   employee stock plan                                  5,000                                        5,000

  Amortization of award of BIP stock                                                    32,435      32,435

  Dividends declared on
   common stock ($.30 per share)                                 (109,193)                        (109,193)
                                          ------    ---------   ---------    -------   -------   ---------
Balance at June 30, 1999                   3,640    3,271,315   5,685,591     80,030   (45,047)  8,995,529
                                          ------    ---------   ---------    -------   -------   ---------

 Comprehensive income:
  Net income                                                      371,934                          371,934
  Other comprehensive income,
    net of tax:
   Unrealized holding loss
    during the year                                                          (37,326)              (37,326)
                                                                ---------    -------             ---------
 Total comprehensive income                                       371,934    (37,326)              334,608

  Tax benefit related to
   employee stock plan                                  3,339                                        3,339

  Amortization of award of BIP stock                                                    32,434      32,434

  Dividends declared on
   common stock ($.30 per share)                                 (109,193)                        (109,193)
                                          ------    ---------   ---------    -------   -------   ---------
Balance at June 30, 2000                $  3,640    3,274,654   5,948,332     42,704   (12,613)  9,256,717
                                          ======    =========   =========    =======   =======   =========
</TABLE>



See accompanying notes to consolidated financial statements.

                                       26
<PAGE>


                      MIDLAND CAPITAL HOLDINGS CORPORATION
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
<TABLE>


                                                                             Years Ended June 30,
                                                                 -------------------------------------------
                                                                     2000            1999            1998
                                                                     ----            ----            ----
<S>                                                            <C>                  <C>             <C>
Cash flows from operating activities:
  Net income                                                  $     371,934         364,719         594,593
  Adjustments to reconcile net income to net cash
   from operating activities:
    Depreciation                                                    311,378         203,398         148,118
    Amortization of premiums and discounts on securities            (49,270)          5,204          25,682
    Amortization of cost of stock benefit plan                       32,434          32,435          32,435
    Federal Home Loan Bank stock dividend                           (23,600)           -               -
    Profit on sale of real estate owned                              (4,491)        (21,602)           -
    Provision for loss on real estate owned                            -              1,527         167,000
    Provision for loan losses (recoveries)                             -               -           (160,000)
    Proceeds from sale of loans held for sale                     3,172,515       3,298,250       2,196,672
    Origination of loans held for sale                           (2,737,365)     (3,073,950)     (2,625,722)
    Profit on sale of loans                                         (35,734)        (45,154)        (29,076)
    (Increase) decrease in accrued interest receivable              (38,988)          7,498          18,832
    Increase in accrued interest payable                              5,101           4,731           4,672
    Decrease in deferred income on loans                            (26,666)       (114,528)        (79,462)
    Decrease in other assets                                        107,211           9,211          53,199
    Increase in other liabilities                                       877           1,396          13,332
                                                                -----------     -----------     -----------
Net cash provided by operating activities                         1,085,336         673,135         360,275
                                                                -----------     -----------     -----------

Cash flows from investing activities:
    Purchase of mortgage-backed securities, held to maturity    (10,007,275)     (1,101,593)     (4,610,445)
    Proceeds from repayments of mortgage-backed securities,
      held to maturity                                            4,071,981       6,049,456       5,663,017
    Purchase of investment securities, held to maturity          (9,985,251)     (9,996,325)     (9,987,650)
    Proceeds from maturities of investment securities,
      held to maturity                                           10,000,000      10,000,000      10,000,000
    Purchase of investment securities, available for sale              -         (4,000,000)           -
    Purchase of Federal Home Loan Bank stock                        (68,900)        (82,000)           -
    Loan disbursements                                          (12,348,587)    (21,806,872)    (14,927,543)
    Loan repayments                                               8,260,647      11,548,347       9,757,375
    Proceeds from sale of real estate owned                         276,472         495,425            -
    Property and equipment expenditures                            (297,389)     (1,230,163)       (127,379)
                                                                -----------     -----------     -----------
Net cash provided for investing activities                      (10,098,302)    (10,123,725)     (4,232,625)
                                                                -----------     -----------     -----------

Cash flows from financing activities:
    Proceeds from exercise of stock options                            -               -            189,750
    Deposit receipts                                            438,125,311     388,100,662     360,038,437
    Deposit withdrawals                                        (436,191,332)   (379,590,415)   (358,908,515)
    Interest credited to deposit accounts                         4,711,913       3,952,491       3,659,000
    Payment of dividends                                           (109,193)       (109,193)       (106,605)
    Increase in advance payments
      by borrowers for taxes and insurance                          122,488         123,146          91,903
                                                                -----------     -----------     -----------
Net cash provided by financing activities                         6,659,187      12,476,691       4,963,970
                                                                -----------     -----------     -----------

Net change in cash and cash equivalents                          (2,353,779)      3,026,101       1,091,620
Cash and cash equivalents at beginning of year                   35,020,296      31,994,195      30,902,575
                                                                -----------     -----------     -----------

Cash and cash equivalents at end of year                      $  32,666,517      35,020,296      31,994,195
                                                                ===========     ===========     ===========

Cash paid during the year for:
   Interest                                                   $   4,958,346       4,174,320       3,864,274
   Income taxes                                                      50,000         154,260         239,000
Non-cash investing activities:
   Transfer of loans to real estate owned                     $        -               -             58,022
                                                                ===========     ===========     ===========
</TABLE>





See accompanying notes to consolidated financial statements.

                                       27
<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.

                                       28
<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,  2000 and 1999,  nor during the years ended June 30, 2000 and 1999,
         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.

                                       29
<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.

         Real Estate Owned
         -----------------
         Real estate acquired through foreclosure or deed in lieu of foreclosure
         is carried at the lower of fair value minus  estimated costs to sell or
         the related loan  balance at the date of  foreclosure.  Valuations  are
         periodically  performed  by  management  and an  allowance  for loss is
         established  by a  charge  to  operations  if the  carrying  value of a
         property exceeds its fair value minus estimated costs to sell.

         Depreciation
         ------------
         Depreciation  of office  properties and equipment is accumulated on the
         straight line basis over estimated lives of the various assets.

         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.



                                       30
<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.
<TABLE>
                                                         Years Ended June 30,
                                                  ---------------------------------
                                                   2000          1999          1998
                                                   ----          ----          ----
          <S>                                     <C>            <C>            <C>
         Weighted average number of
           common shares outstanding used
           in basic EPS calculation               363,975       363,975       354,948
         Add common stock equivalents
           for shares issuable under
           Stock Option Plans                       2,937         4,634         4,262
                                                  -------       -------       -------

         Weighted average number of shares
           outstanding adjusted for common
           stock equivalents                      366,912       368,609       359,210
                                                  =======       =======       =======


         Net income                             $ 371,934       364,719       594,593
         Basic earnings per share               $    1.02          1.00          1.68
         Diluted earnings per share             $    1.01           .99          1.66
</TABLE>

                                       31
<PAGE>


2)       Investment Securities, Held to Maturity
         ---------------------------------------
         Investment securities, held to maturity, are summarized as follows:
<TABLE>
                                                     Gross       Gross
                                        Amortized  Unrealized  Unrealized     Fair
                                          Cost       Gains       Losses       Value
                                        ---------  ----------  ----------     -----
         June 30, 2000
          <S>                              <C>           <C>         <C>        <C>
         United States Treasury notes   $ 17,491,062      4,240     116,396   17,378,906
         Federal Home Loan Mortgage
          Corporation Reference note       2,499,661     17,464        -       2,517,125
                                          ----------     ------     -------   ----------

                                        $ 19,990,723     21,704     116,396   19,896,031
                                          ==========     ======     =======   ==========

         Weighted average interest rate         5.45%
                                                ====
         June 30, 1999

         United States Treasury notes   $ 19,994,152     16,492      77,050   19,933,594
                                          ==========     ======      ======   ==========

         Weighted average interest rate         5.31%
                                                ====
</TABLE>
         The contractual maturity of investment  securities held to maturity are
summarized as follows:
<TABLE>
                                           June 30, 2000            June 30, 1999
                                      ----------------------   -----------------------
                                          Amortized     Fair       Amortized     Fair
      Term to Maturity                      Cost        Value        Cost        Value
      ----------------                ----------------------   ------------------------
     <S>                                <C>            <C>          <C>         <C>
         Due in one year or less       $  9,998,419   9,926,562    9,997,571  10,014,063
         Due after one year through
           two years                      9,992,304   9,969,469    9,996,581   9,919,531
                                         ----------  ----------   ----------  ----------
                                       $ 19,990,723  19,896,031   19,994,152  19,933,594
                                         ==========  ==========   ==========  ==========
</TABLE>

3)       Investment Securities, Available for Sale
         -----------------------------------------
         Investment securities available for sale are recorded at fair value in
         accordance with SFAS No. 115. This portfolio issummarized as follows:
<TABLE>
                                                     Gross       Gross
                                        Amortized  Unrealized  Unrealized     Fair
                                          Cost       Gains       Losses       Value
                                        --------------------------------------------
         June 30, 2000
          <S>                           <C>            <C>         <C>       <C>
         Federal Home Loan Bank note    $4,000,000       -         86,040    3,913,960
         United States Treasury bond       978,007    150,743        -       1,128,750
                                         ---------    -------     -------    ---------

                                        $4,978,007    150,743      86,040    5,042,710
                                         =========    =======     =======    =========

         Weighted average interest rate       6.35%
                                              =====
</TABLE>

<TABLE>
         June 30, 1999
         -------------
          <S>                           <C>            <C>         <C>        <C>
         Federal Home Loan Bank note    $4,000,000       -         31,068    3,968,932
         United States Treasury bond       977,049    152,326        -       1,129,375
                                         ---------    -------     -------    ---------
                                        $4,977,049    152,326      31,068    5,098,307
                                         =========    =======     =======    =========

         Weighted average interest rate       6.35%
                                             =====
</TABLE>

         The  contractual  maturity of the Federal Home Loan Bank note is in the
         year 2002 and the  United  States  Treasury  bond is in the year  2016.
         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  $56,555,  net of the tax effect of
         $19,229, resulted in a $37,326 charge to stockholders' equity.

                                       32
<PAGE>


4)       Mortgage-Backed Securities, Held to Maturity
         --------------------------------------------
         Mortgage-backed   securities,  held  to  maturity,  are  summarized  as
         follows:
<TABLE>
                                                     Gross       Gross
                                        Amortized  Unrealized  Unrealized     Fair
                                          Cost       Gains       Losses       Value
                                   ---------------------------------------------------
         June 30, 2000
          <S>                             <C>            <C>         <C>        <C>
         Participation certificates:
            FHLMC - Adjustable rate     $  6,008,480     24,286      88,539    5,944,227
            FNMA  - Adjustable rate        3,019,797        457      76,072    2,944,182
            FHLMC - Fixed rate            11,238,964       -        219,719   11,019,245
            FNMA  - Fixed rate             1,353,692     15,052         589    1,368,155
            GNMA  - Fixed rate               218,517       -           -         218,517
         Investment in collateralized
         mortgage obligations:
         FHLMC                                14,662       -           -          14,662
                                          ----------    -------     -------   ----------
                                        $ 21,854,112     39,795     384,919   21,508,988
                                          ==========    =======     =======   ==========

         Weighted average interest rate         6.67%
                                                ====
</TABLE>


<TABLE>
         June 30, 1999
         --------------
         Participation certificates:
             <S>                          <C>            <C>          <C>       <C>
            FHLMC - Adjustable rate     $  7,795,118     75,402      64,833    7,805,687
            FNMA  - Adjustable rate        3,407,037     13,806       8,584    3,412,259
            FHLMC - Fixed rate             2,459,416        819        -       2,460,235
            FNMA  - Fixed rate             1,906,484     47,560       9,549    1,944,495
            GNMA  - Fixed rate               295,258      3,509       1,465      297,302
          Investment in collateralized
           mortgage obligations:
         FHLMC                                18,513      -           -           18,513
                                          ----------    -------     -------   ----------
                                        $ 15,881,826    141,096      84,431   15,938,491
                                          ==========    =======     =======   ==========

         Weighted average interest rate         6.45%
                                                ====
</TABLE>

                                       33
<PAGE>


5)       Loans Receivable
         ----------------
         Loans receivable are summarized as follows:
<TABLE>
                                                                      June 30,
                                                            -----------------------------
                                                                 2000          1999
                                                                 ----          ----
          <S>                                                   <C>           <C>
         Mortgage loans:
            One-to-four family                                $ 49,545,281    45,597,198
            Multi-family                                         1,639,506     1,712,534
            Non-residential                                        439,991       223,276
            Construction                                           486,000          -
                                                                ----------    ----------
         Total mortgage loans                                   52,110,778    47,533,008
                                                                ----------    ----------

         Other loans:
            Loans on deposit accounts                              277,306       273,589
            Auto loans                                             323,123       274,213
            Education loans                                      1,016,484     1,167,143
            Credit card loans                                       96,806        85,158
            Other                                                   80,523        58,029
                                                                ----------    ----------
         Total other loans                                       1,794,242     1,858,132
                                                                ----------    ----------
         Commercial business loans                                  41,491        58,022
                                                                 ----------    ----------
         Total loans receivable                                 53,946,511    49,449,162
                                                                ----------    ----------

         Less:
            Loans in process                                       413,919         4,510
            Net deferred yield adjustments                        (127,869)      (95,151)
            Allowance for uncollected interest                     261,406       259,745
            Allowance for loan losses                              368,885       365,863
                                                                ----------    ----------
         Loans receivable, net                                $ 53,030,170    48,914,195
                                                                ==========    ==========

         Weighted average interest rate                               7.56%         7.38%
                                                                      ====          ====
</TABLE>

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

<TABLE>
                                                          Years Ended June 30,
                                                   -------------------------------------
                                                       2000          1999          1998
                                                       ----          ----          ----
          <S>                                       <C>             <C>           <C>
         Balance, beginning of year                $ 365,863       393,884       551,509
         Provision for loan losses (recoveries)         -             -         (160,000)
         Recoveries previously charged-off             3,022         1,876         2,375
         Charge-offs                                    -          (29,897)         -
                                                     -------       -------       -------
         Balance, end of year                      $ 368,885       365,863       393,884
                                                     =======       =======       =======

</TABLE>

During the year ended June 30, 1998, the Association  revised its policy for the
establishment  and  maintenance of adequate levels of the allowance for loan and
lease losses  ("ALLL").  The loan loss recovery was the result of a reduction in
the ALLL to a level consistent with the Association's  revised policy based upon
as assessment of the level of risk inherent in the Association's loan portfolio.

Delinquent  loans (loans  having  payments past due ninety days or more) at June
30, 2000 amounted to $445,095 or .8% of total loans in force. Comparable figures
for 1999 were $380,537 or .8% of total loans.

Loans to directors and executive officers  aggregated  $424,464 at June 30, 2000
and $435,019 at June 30,  1999.  Such loans are made on  substantially  the same
terms as those for other loan customers.

                                       34
<PAGE>


6)       Loans Receivable Held for Sale
         -----------------------------

          The  Company  sells  loans  in  the  secondary  market  under  various
          programs.  During the years ended June 30,  2000,  1999 and 1998,  the
          Company sold first mortgage loans totaling $3,172,515,  $3,298,250 and
          $2,196,672 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, 2000,  1999 and 1998 were  $3,172,515,  $3,298,250  and
          $2,196,672  with no gain or loss realized on those sales. In addition,
          the Company  recorded a gain of  $35,734,  $45,154 and $29,076 for the
          years  ended  June 30,  2000,  1999 and  1998 on loan  sales  from the
          establishment  of a mortgage  servicing right asset in accordance with
          SFAS No. 122. During the years ended June 30, 2000, 1999 and 1998, the
          Company  amortized  $12,606,  $9,587 and $2,137 of mortgage  servicing
          rights against current servicing fee income.

          As of June 30, 2000,  there were no loans qualifying for sale into the
          secondary market.  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, 2000 and 1999.

          At June 30, 2000, 1999 and 1998, loans serviced for others amounted to
          $8,393,035, $6,353,747 and $3,841,991 respectively.

7)       Accrued Interest Receivable
         ---------------------------
         Accrued interest receivable is summarized as follows:
<TABLE>
                                                                      June 30,
                                                               ----------------------
                                                                 2000          1999
                                                               ----------------------
          <S>                                                  <C>             <C>
         Investment securities                                $ 258,177       246,509
         Mortgage-backed securities                             151,705       127,769
         Loans receivable                                       241,013       227,690
         Other investments                                           59         9,998
                                                                -------       -------
                                                              $ 650,954       611,966
                                                                =======       =======
</TABLE>


                                       35
<PAGE>


8)       Office Properties and Equipment
          ---------------------------------------
         Office properties and equipment are summarized as follows:
<TABLE>
                                                                      June 30,
                                                              --------------------------
                                                                 2000          1999
                                                              --------------------------
          <S>                                                    <C>            <C>
         Land                                                $   416,595       236,095
         Buildings                                             1,697,498     1,683,008
         Easement for parking lot and driveway                   223,050       223,050
         Leasehold improvements - Homer Township                 579,253       579,253
         Furniture, fixtures and equipment                     2,477,110     2,374,711
         Automobiles                                              17,993        17,993
                                                               ---------     ---------
                                                               5,411,499     5,114,110
         Less accumulated depreciation                         2,831,438     2,520,060
                                                               ---------     ---------
                                                             $ 2,580,061     2,594,050
                                                               =========     =========
</TABLE>


Depreciation  of office  properties  and  equipment for the years ended June 30,
2000, 1999 and 1998 amounted to $311,378, $203,398 and $148,118 respectively.

The  Association  has had a lease on  vacant  land  located  in Homer  Township,
Illinois  since  1989.  During  the year ended June 30,  2000,  the  Association
purchased this property for $180,500.

During July 1998,  the  Association  entered  into a lease for retail  space and
additional  vacant land at the same location in Homer  Township,  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 the land
purchased by the Association.

The  Association  established  a full service  branch  banking  facility at this
location which opened for business  during April 1999. Rent expense at the Homer
Township,  Illinois  location for the years ended June 30,  2000,  1999 and 1998
amounted to $61,314,  $43,641 and $17,256  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:

<TABLE>
                    <S>                                               <C>
                  Year ended June 30, 2001                          $  35,156
                  Year ended June 30, 2002                             36,910
                  Year ended June 30, 2003                             38,751
                  Thereafter through June 30, 2009                    334,557
</TABLE>

                                       36
<PAGE>


9)       Prepaid Expenses and Other Assets
          --------------------------------
         Prepaid expenses and other assets consist of the following:
<TABLE>
                                                                      June 30,
                                                               ----------------------
                                                                 2000          1999
                                                               ----------------------
          <S>                                                    <C>            <C>
         Prepaid federal insurance premiums                    $   6,722        16,265
         Prepaid insurance                                        63,436        27,910
         Other prepaid expenses                                  107,680       111,966
         Mortgage servicing rights                                96,145        73,017
         Overpayment of federal income tax                          -           74,277
         Deferred federal income tax benefit - net (a)           300,031       303,726
         Accounts receivable and other assets                    107,729       123,808
                                                                 -------       -------
                                                               $ 681,743       730,969
                                                                 =======       =======
</TABLE>


         (a)      The approximate tax effect of temporary  differences that give
                  rise to the  Company's net deferred tax asset at June 30, 2000
                  and 1999, under SFAS No. 109 is as follows:
<TABLE>
                                                              Assets    Liabilities     Net
                                                          ---------------------------------------
            June 30, 2000
            -------------
                    <S>                                     <C>            <C>       <C>
                  Loan fees deferred for financial
                    reporting purposes, net of costs      $    -        (58,453)    (58,453)
                  Accelerated depreciation for tax
                    purposes                                   -        (76,300)    (76,300)
                  Tax basis of office building in
                    excess of book basis                    473,816        -        473,816
                  Bad debt reserves established for
                    financial reporting purposes             76,665        -         76,665
                  Increases to tax bad debt reserves
                    since January 1, 1988                      -        (35,976)    (35,976)
                  Nondeductible incentive plan expense        6,451        -          6,451
                  Unrealized gain on securities
                    available for sale                         -        (21,999)    (21,999)
                  Other                                        -        (64,173)    (64,173)
                                                            -------     -------     -------
                    Total                                 $ 556,932    (256,901)    300,031
                                                            =======     =======     =======
</TABLE>

<TABLE>

            June 30, 1999
            -------------
                    <S>                                    <C>          <C>         <C>
                  Loan fees deferred for financial
                    reporting purposes, net of costs      $    -        (43,849)    (43,849)
                  Accelerated depreciation for tax
                    purposes                                   -        (88,478)    (88,478)
                  Tax basis of office building in
                    excess of book basis                    494,143        -        494,143
                  Bad debt reserves established for
                    financial reporting purposes             60,504        -         60,504
                  Increases to tax bad debt reserves
                    since January 1, 1988                      -        (58,992)    (58,992)
                  Nondeductible incentive plan expense        6,451        -          6,451
                  Unrealized gain on securities
                    available for sale                         -        (41,228)    (41,228)
                  Other                                        -        (24,825)    (24,825)
                                                            -------     -------     -------
              Total                                       $ 561,098    (257,372)    303,726
                                                            =======     =======     =======
</TABLE>

                                       37
<PAGE>


10)      Deposits
         --------
         Deposit accounts are summarized as follows:
<TABLE>
                                                                      June 30,
                                                            ----------------------------
                                                                 2000          1999
                                                            ----------------------------
          <S>                                                 <C>              <C>
         Passbook accounts                                   $ 42,814,177    43,455,797
         NOW accounts                                           9,828,378     8,754,952
         Money market accounts                                  8,364,031     5,343,706
      Non-interest bearing demand deposit accounts              9,109,078     9,277,757
                                                              -----------   -----------
                                                               70,115,664    66,832,212
         Certificates of deposit by original maturity:
           7-91 days                                            3,190,494     2,713,083
           6-11 months                                         24,309,788    24,554,159
           12-29 months                                        16,702,273    14,720,322
           30 months and over                                   7,538,238     7,552,838
           Jumbo                                                5,014,020     3,851,970
                                                              -----------   -----------
                                                               56,754,812    53,392,372
                                                              -----------   -----------
                                                            $ 126,870,476   120,224,584
                                                              ===========   ===========
</TABLE>


         The weighted average rate on deposit accounts at June 30, 2000 and 1999
was 3.93% and 3.61% respectively.

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

<TABLE>
                                                                        June 30,
                                                            -----------------------------
                                                                 2000            1999
                                                            -----------------------------
          <S>                                                 <C>               <C>
         Within 12 months                                    $  54,724,246    50,407,705
         12 months to 24 months                                  1,337,866     2,301,944
         24 months to 36 months                                    692,700       682,723
                                                                ----------    ----------
            Total                                            $  56,754,812    53,392,372
                                                                ==========    ==========

</TABLE>

         Interest expense on deposits consists of the following:
<TABLE>
                                                          Years Ended June 30,
                                                ---------------------------------------
                                                    2000           1999          1998
                                                ---------------------------------------
          <S>                                     <C>            <C>            <C>
         Passbook accounts                       $ 1,286,343     1,229,227     1,184,927
         Certificate accounts                      3,119,648     2,557,036     2,329,762
         NOW and money market accounts               557,456       392,788       354,257
                                                   ---------     ---------     ---------
        Total                                    $ 4,963,447     4,179,051     3,868,946
                                                   =========     =========     =========
</TABLE>


         The aggregate  amount of deposit accounts with a balance of $100,000 or
         greater was approximately $16,130,000 and $14,176,000, or approximately
         12.7% and 11.8% of total  deposit  balances  at June 30, 2000 and 1999,
         respectively.  Deposits  in excess of  $100,000  are not insured by the
         Federal Deposit Insurance Corporation.

                                       38
<PAGE>


11)      Other Liabilities
         -----------------
         Other liabilities consist of the following:
<TABLE>
                                                                      June 30,
                                                                -----------------------
                                                                   2000          1999
                                                                -----------------------
          <S>                                                     <C>             <C>
         Accrued interest on deposits                            $  34,621        29,520
         Accrued real estate taxes                                 123,578       125,795
         Accrued federal income taxes                               28,344          -
         Other accrued expenses                                    118,717       100,469
         Outstanding bank drafts                                    46,577        68,215
         Other accounts payable                                     53,158        78,357
                                                                   -------       -------
                                                                 $ 404,995       402,356
                                                                   =======       =======
</TABLE>

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 is considered a multi-employer  plan and as such,
          does not make  separate  actuarial  valuations  with  respect  to each
          employer,  nor does it segregate plan assets. The procedures  followed
          by the Retirement Fund meet the  requirements of Financial  Accounting
          Standards   Board  Statement  No.  87,   "Employers'   Accounting  for
          Pensions".  The practice with respect to multiemployer  plans has been
          to accept  employer's  contributions  that are paid as its expense for
          accounting purposes. There have been no contributions paid to the Plan
          for the  years  ended  June 30,  2000,  1999  and  1998 as the  amount
          necessary  to  fund  the  Plan  was  eliminated  by  previous   years'
          overfunding of the Plan.

          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  $32,974,  $36,660 and $34,580 for the years
          ended June 30, 2000, 1999 and 1998, respectively.

                                       39
<PAGE>


13)      Officer and Director Plans
         --------------------------
         Stock Option and Incentive 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, 2000 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,  2000  and  the  stock   options
          outstanding at the end of the respective periods:

<TABLE>
                                                                Exercise Price
                                                              -------------------------
                                                 Number
         Options                                of Shares       Per Share        Total
         -------                                ---------     -------------------------
          <S>                                     <C>            <C>             <C>
         Outstanding at June 30, 1997             25,875       10.00-16.25       286,781
         Granted                                       0
         Exercised                               (17,250)            11.00      (189,750)
                                                  ------       -----------       -------
         Outstanding at June 30, 1998              8,625       10.00-16.25        97,031
         Granted                                       0
         Exercised                                     0
                                                  ------       -----------       -------
         Outstanding at June 30, 1999              8,625       10.00-16.25        97,031
         Granted                                       0
         Exercised                                     0
                                                  ------       -----------       -------
         Outstanding at June 30, 2000              8,625     $ 10.00-16.25     $  97,031
                                                  ======       ===========       =======
         Exercisable at June 30, 2000              8,625     $ 10.00-16.25     $  97,031
                                                  ======       ===========       =======

         Options available for future
           grants at June 30, 2000                 6,900
                                                   =====
</TABLE>


As of June 30, 2000, the weighted average exercise price for options outstanding
was $11.25 with a weighted average remaining contractual life of 3.67 years.

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.

                                       40
<PAGE>


13)      Officer and Director Plans (continued)
         --------------------------------------

          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:
<TABLE>
                                                             Years Ended June 30,
                                                        --------------------------------
                                                           2000       1999       1998
                                                        --------------------------------
          <S>                                             <C>         <C>        <C>
         Net income (as reported)                        $ 371,934    364,719    594,593
         Pro forma net income                              371,934    364,719    594,593

         Earnings per share - diluted (as reported)         $ 1.01        .99       1.66
         Pro forma diluted earnings per share                 1.01        .99       1.66
</TABLE>


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

         Bank Incentive Plan
         -------------------

          In  conjunction  with  the  Conversion,  the  Company  formed  a  Bank
          Incentive  Plan  ("BIP"),  which was  authorized  to acquire 3% of the
          total number of shares of common stock issued in the  Conversion.  The
          10,350 shares were  purchased for $162,172 with funds  contributed  to
          the BIP from the Company. This plan was established to award shares to
          employees in key management  positions in order to provide them with a
          proprietary  interest in the Company and to  encourage  them to remain
          with the Company.  The shares have all been awarded and are vesting at
          a rate of 20% per year.

          The $162,172 contributed to the BIP is being amortized to compensation
          expense as the plan  participants  become vested in those shares.  For
          the years ended June 30,  2000,  1999 and 1998,  $32,434,  $32,435 and
          $32,435 had been amortized to expense.  The unamortized cost, which is
          comparable  to deferred  compensation,  is reflected as a reduction of
          stockholders' equity.

                                       41
<PAGE>


14)      Income Taxes
         ------------

          The Company has adopted SFAS No. 109 which  requires a change from the
          deferred  method to the  liability  method of  accounting  for  income
          taxes.   Under  the  liability  method,   deferred  income  taxes  are
          recognized  for the tax  consequences  of "temporary  differences"  by
          applying statutory tax rates applicable to future years to differences
          between  the  financial  statement  carrying  amounts and tax bases of
          existing assets and liabilities.

         Among the  provisions  of SFAS No. 109 which  impact the Company is the
         tax  treatment  of bad debt  reserves.  SFAS No.  109  provides  that a
         deferred  tax  asset  is to be  recognized  for  the bad  debt  reserve
         established  for financial  reporting  purposes and requires a deferred
         tax  liability to be recorded for increases in the tax bad debt reserve
         since January 1, 1988,  the effective  date of certain  changes made by
         The Tax Reform Act of 1986 to the calculation of savings  institutions'
         bad debt  deduction.  Accordingly,  retained  earnings at June 30, 2000
         includes approximately  $1,100,000 for which no deferred federal income
         tax  liability  has been  recognized.  The  provision  for income taxes
         consists of the following:
<TABLE>
                                                          Years Ended June 30,
                                                  -------------------------------------
                                                      2000          1999          1998
                                                  -------------------------------------
          <S>                                       <C>             <C>          <C>
         Current                                   $ 155,960       125,167       281,295
         Deferred                                     22,924        61,734        57,059
                                                     -------       -------       -------
                                                   $ 178,884       186,901       338,354
                                                     =======       =======       =======
</TABLE>



         A reconciliation  of the statutory federal income tax rate to effective
income tax rate is as follows:
<TABLE>
                                                          Years Ended June 30,
                                                  ------------------------------------
                                                      2000          1999          1998
                                                  -------------------------------------
          <S>                                          <C>            <C>          <C>
         Statutory federal income tax rate            34.0%         34.0%         34.0%
         Provision for loss on real estate owned        -             -            6.0
         Other                                        (1.5)          (.1)         (3.7)
                                                      ----          ----          ----
         Effective income tax rate                    32.5%         33.9%         36.3%
                                                      ====          ====          ====
</TABLE>


         Deferred  federal  income tax  expense  consists of the  following  tax
effects of timing differences:
<TABLE>
                                                          Years Ended June 30,
                                                  --------------------------------------
                                                      2000          1999          1998
                                                  --------------------------------------
          <S>                                      <C>                <C>          <C>
         Loan fees                                 $  14,604        34,299        23,650
         Depreciation                                  8,149        40,980        23,745
         Book loan loss recovery (in excess of)
        less than tax deduction                      (16,161)       (9,459)       44,920
         Recapture of bad debt reserve               (23,016)      (14,748)      (31,560)
         Other                                        39,348        10,662        (3,696)
                                                      ------        ------        ------
                                                   $  22,924        61,734        57,059
                                                      ======        ======        ======
</TABLE>


                                       42
<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, 2000, 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, 2000 and 1999, 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>
                                                                        To Be Well-
                                                                     Capitalized Under
                                                  For Capital        Prompt Corrective
                                Actual         Adequacy Purposes     Action Provisions
                           ---------------     -----------------     ----------------
                           Amount    Ratio       Amount   Ratio       Amount    Ratio
                           ---------------     -----------------     ----------------

         June 30, 2000
         -------------
         <S>               <C>          <C>       <C>       <C>       <C>        <C>
         Tangible        $ 8,940,569   6.48%   $ 2,070,000  1.50%   $    N/A      N/A %
         Core              8,940,569   6.48      4,140,000  3.00      6,900,000   5.00
         Risk-base         9,110,686  19.90      3,663,000  8.00      4,579,000  10.00

</TABLE>

<TABLE>
         June 30, 1999
         -------------
          <S>              <C>          <C>       <C>       <C>       <C>        <C>
         Tangible        $ 8,485,918   6.53%   $ 1,950,000  1.50%   $    N/A      N/A %
         Core              8,485,918   6.53      3,900,000  3.00      6,500,000   5.00
         Risk-base         8,648,872  20.54      3,368,000  8.00      4,210,000  10.00

</TABLE>

                                       43
<PAGE>


15)      Regulatory Capital Requirements (continued)
         --------------------------------------------
<TABLE>
                                                    Tangible      Core     Risk-based
                                                     Capital     Capital     Capital
                                                    ------------------------------------
         June 30, 2000
         -------------
          <S>                                       <C>          <C>         <C>
         Stockholders' equity                      $ 8,992,888   8,992,888   8,992,888
         Unrealized gain on securities
          available for sale, net of taxes             (42,704)    (42,704)    (42,704)
         Retained mortgage servicing rights             (9,615)     (9,615)     (9,615)
         General loss allowances                          -           -        185,117
         Direct equity investments                        -           -        (15,000)
                                                     ---------   ---------   ---------
         Regulatory capital computed               $ 8,940,569   8,940,569   9,110,686
                                                     =========   =========   =========
</TABLE>


         A reconciliation of the  Association's  equity capital at June 30, 2000
is as follows:
<TABLE>
          <S>                                                                 <C>
         Stockholders' equity                                                $ 9,256,717
         Less Company stockholders' equity not available
          for regulatory capital                                                (263,829)
                                                                              ----------
         Stockholders' equity of the Association                             $ 8,992,888
                                                                               =========
</TABLE>


<TABLE>
                                                    Tangible      Core     Risk-based
                                                     Capital     Capital     Capital
                                                  -------------------------------------
         June 30, 1999
         --------------
          <S>                                       <C>           <C>         <C>
         Stockholders' equity                      $ 8,849,622   8,849,622   8,849,622
         Unrealized gain on securities
          available for sale, net of taxes             (80,030)    (80,030)    (80,030)
         Net book value of real estate owned
          held greater than five years                (276,372)   (276,372)   (276,372)
         Retained mortgage servicing rights             (7,302)     (7,302)     (7,302)
         General loss allowances                          -           -        177,954
         Direct equity investments                        -           -        (15,000)
                                                     ---------   ---------   ---------
         Regulatory capital computed               $ 8,485,918   8,485,918   8,648,872
                                                     =========   =========   =========
</TABLE>



         A reconciliation of the  Association's  equity capital at June 30, 1999
is as follows:
<TABLE>
          <S>                                                                  <C>
         Stockholders' equity                                                $ 8,995,529
         Less Company stockholders' equity not available
          for regulatory capital                                                (145,907)
                                                                               ---------
         Stockholders' equity of the Association                             $ 8,849,622
                                                                               =========
</TABLE>


                                       44
<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 $1,392,300 at June 30, 2000
         represents  an amount  which the  Association  plans to fund within the
         normal  commitment  period of 60 to 90 days. All of the commitments are
         fixed  rates  ranging  from  7.875%  to  8.625%.   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  $581,000 at June 30, 2000. In addition,  the Association
         has  approved,  but unused,  credit card lines of credit  amounting  to
         approximately  $241,000.  The Association  has also issued  outstanding
         letters of credit totaling $55,000.

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 2000 Board of Directors'  meeting,  the Company  declared a
         quarterly dividend of $.075 per share, totaling $27,298, payable August
         17, 2000 to shareholders of record as of August 7, 2000.

                                       45
<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.

         Securities available for sale: Fair values for securities available for
         sale are  based on  quoted  market  prices as  published  in  financial
         publications or broker quotes.

         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.

         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, 2000 and 1999 are as follows:
<TABLE>
                                                                  June 30, 2000
                                                          --------------------------
                                                              Carrying       Fair
                                                               Amount        Value
                                                          --------------------------
          <S>                                               <C>             <C>
         Financial assets:
        Cash and cash equivalents                         $  32,666,517    32,666,517
        Investment securities, held to maturity              19,990,723    19,896,031
        Investment securities, available for sale             5,042,710     5,042,710
        Mortgage-backed securities, held to maturity         21,854,112    21,508,988
        Loans receivable, gross                              53,946,511    52,189,000

         Financial liabilities:
           Deposits                                         126,870,476   126,846,000
</TABLE>

<TABLE>
                                                                  June 30, 1999
                                                           ----------------------------
                                                              Carrying       Fair
                                                               Amount        Value
                                                            ---------------------------
            <S>                                             <C>            <C>
            Financial assets:
        Cash and cash equivalents                         $  35,020,296    35,020,296
        Investment securities, held to maturity              19,994,152    19,933,594
        Investment securities, available for sale             5,098,307     5,098,307
        Mortgage-backed securities, held to maturity         15,881,826    15,938,491
        Loans receivable, gross                              49,884,312    49,281,000

         Financial liabilities:
           Deposits                                         120,224,584   120,261,000

</TABLE>
                                       46
<PAGE>


21)      Condensed Parent Company Only Financial Statements
         --------------------------------------------------
         The following condensed statements of financial  condition,  as of June
         30, 2000 and 1999 and condensed statements of income and cash flows for
         the year ended June 30 2000 and for the  period  from July 23,  1998 to
         June 30, 1999 for Midland Capital Holdings  Corporation  should be read
         in conjunction with the consolidated financial statements and the notes
         thereto.

<TABLE>


                        Statements of Financial Condition

                                                                      June 30,
                                                               ------------------------
                                                                   2000          1999
                                                               ------------------------
         Assets
          <S>                                                    <C>            <C>
         Cash and cash equivalents                             $   311,756       138,575
         Equity investment in the Association                    8,950,538     8,805,719
         Prepaid expenses and other assets                            -           23,632
                                                                 ---------     ---------
                                                                 9,262,294     8,967,926




         Liabilities and Stockholders' Equity
         ------------------------------------
         Liabilities:
         ------------
         Accrued taxes and other liabilities                        47,927        16,300
                                                                 ---------     ---------

         Stockholders' Equity:
         --------------------
         Common stock                                                3,640         3,640
         Additional paid-in capital                              3,262,395     3,262,395
         Retained earnings                                       5,948,332     5,685,591
                                                                 ---------     ---------
           Total stockholders' equity                            9,214,367     8,951,626
                                                                 ---------     ---------
                                                               $ 9,262,294     8,967,926
                                                                 =========     =========
</TABLE>





                              Statements of Income
<TABLE>
                                                                           Period from
                                                              Year Ended  July 23, 1998
                                                                June 30,   to June 30,
                                                                 2000          1999
                                                              ---------------------------
          <S>                                                     <C>              <C>
         Interest income                                         $   5,640         2,920
         Non-interest expense                                       63,042        91,099
                                                                   -------       -------

         Net loss before income tax benefit
          and equity in earnings of subsidiaries                   (57,402)      (88,179)
         Benefit from income taxes                                  19,517        29,981
                                                                   -------       -------

         Net loss before equity in earnings
          of subsidiaries                                          (37,885)      (58,198)
         Equity in earnings of subsidiaries                        409,819       422,917
                                                                   -------       -------

          Net income                                             $ 371,934       364,719
                                                                   =======       =======
</TABLE>

                                       47
<PAGE>


21)      Condensed Parent Company Only Financial Statements (continued)


<TABLE>
                            Statements of Cash Flows


                                                                           Period from
                                                              Year Ended  July 23, 1998
                                                                June 30,   to June 30,
                                                                 2000          1999
                                                            ------------------------------
          <S>                                                    <C>             <C>
         Cash flows from operating activities:
           Net income                                          $ 371,934       364,719
           Equity in earnings of the Association                (409,819)     (422,917)
           (Increase) decrease in prepaid expenses
             and other assets                                     23,632       (23,632)
           Increase in accrued taxes
             and other liabilities                                31,627        16,300
                                                                 -------       -------
         Net cash provided by (for) operating activities          17,374       (65,530)
                                                                 -------       -------

         Cash flows from investing activities:
           Purchase of common stock of the Association              -           (4,000)
                                                                 -------       -------
         Net cash provided for investing activities                 -           (4,000)
                                                                 -------       -------

         Cash flows from financing activities:
           Dividends received from Association                   265,000       317,298
           Dividends paid on common stock                       (109,193)     (109,193)
                                                                 -------       -------

         Net cash provided by financing activities               155,807       208,105
                                                                 -------       -------

         Net increase in cash and cash equivalents               173,181       138,575
         Cash and cash equivalents at beginning of period        138,575          -
                                                                 -------       -------

         Cash and cash equivalents at end of period            $ 311,756       138,575
                                                                 =======       =======
</TABLE>
                                       48





<PAGE>


                                   Exhibit 21


<PAGE>

<TABLE>


                         SUBSIDIARIES OF THE REGISTRANT




                 Parent                                 Subsidiary                      Ownership               Organization
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                                          <C>                      <C>
Midland Capital Holdings                     Midland Federal Savings and Loan             100%                    Federal
Corporation                                            Association

Midland Federal Savings and Loan               Midland Service Corporation                100%                    Illinois
 Association

Midland Service Corporation                     MS Insurance Agency, Inc.                 100%                    Illinois

Midland Service Corporation                    Bridgeview Development Company             100%                    Illinois
</TABLE>


     The financial  statements of the Registrant are consolidated  with those of
its subsidiary.



<PAGE>




                                   EXHIBIT 27

                             FINANCIAL DATA SCHEDULE