##### 



Exhibit 13
 ANNUAL REPORT TO SECURITY HOLDERS
 38




---



##### 



Corporate Profile
  
 Table of Contents
 Letter to Shareholders
    
    
    2Financial Highlights
    
    
    3Selected Consolidated Financial
Information
    
    
    4Managements Discussion and Analysis
    
    
    6Independent Auditors Report
    
    
    21Consolidated Statements of
Financial Condition
    
    
    22Consolidated Statements of Income
    
    
    23Consolidated Statements of Changes in
Stockholders Equity
    
    
    24Consolidated Statements of Cash Flows
    
    
    25Notes to Consolidated Financial
Statements
    
    
    26
 39




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##### 



To Our Shareholders,
     Sincerely,/s/ Paul ZogasPaul ZogasChairman and President 40




---



##### 



FINANCIAL HIGHLIGHTS
 Year Ended June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in Thousands)Total assets
    
    $
    130,817
    
    
    
    138,979
    
    
    
    153,560
    
    
    
    159,976
    
    
    $
    150,589Loans receivable, net
    
    
    92,545
    
    
    
    94,829
    
    
    
    94,543
    
    
    
    93,300
    
    
    
    86,087Mortgage-backed securities
    
    
    1,684
    
    
    
    1,920
    
    
    
    2,942
    
    
    
    6,272
    
    
    
    10,360Cash and cash equivalents
    
    
    11,260
    
    
    
    36,710
    
    
    
    50,497
    
    
    
    49,421
    
    
    
    32,921Investment securities
    
    
    21,022
    
    
    
    1,311
    
    
    
    1,234
    
    
    
    6,389
    
    
    
    16,306Deposits
    
    
    115,971
    
    
    
    124,836
    
    
    
    140,437
    
    
    
    147,490
    
    
    
    138,444Stockholders equity
    
    
    13,296
    
    
    
    12,697
    
    
    
    11,742
    
    
    
    11,056
    
    
    
    10,397For the Period:Net interest income
    
    $
    5,170
    
    
    
    5,135
    
    
    
    4,635
    
    
    
    4,554
    
    
    
    4,448Net income
    
    
    1,011
    
    
    
    1,203
    
    
    
    1,043
    
    
    
    690
    
    
    
    866Per Common Share:Book value per share
outstanding
    
    $
    35.68
    
    
    
    34.08
    
    
    
    31.51
    
    
    
    29.67
    
    
    
    28.56Earnings per share outstandingbasic
    
    $
    2.71
    
    
    
    3.23
    
    
    
    2.80
    
    
    
    1.88
    
    
    
    2.38diluted
    
    $
    2.71
    
    
    
    3.23
    
    
    
    2.80
    
    
    
    1.88
    
    
    
    2.36Financial Ratios:Stockholders equity to
total assets
    
    
    10.16
    %
    
    
    9.14
    
    
    
    7.65
    
    
    
    6.91
    
    
    
    6.90Non-performing assets to
total assets
    
    
    .25
    %
    
    
    .27
    
    
    
    .04
    
    
    
    .30
    
    
    
    .11Net charge-offs to total loans
    
    
    .04
    %
    
    
    .01
    
    
    
    .02
    
    
    
    
    
    
    
    .03Net interest margin
    
    
    4.06
    %
    
    
    3.71
    
    
    
    3.13
    
    
    
    3.05
    
    
    
    3.19Operating expenses to
average assets
    
    
    3.41
    %
    
    
    3.07
    
    
    
    2.93
    
    
    
    2.96
    
    
    
    2.88Return on average assets
    
    
    .76
    %
    
    
    .83
    
    
    
    .67
    
    
    
    .44
    
    
    
    .59Return on average
Stockholders equity
    
    
    7.78
    %
    
    
    9.89
    
    
    
    9.05
    
    
    
    6.41
    
    
    
    8.64
 41




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##### 



SELECTED CONSOLIDATED FINANCIAL INFORMATION
 SELECTED FINANCIAL CONDITION DATA:
 At June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(In Thousands)Total assets
    
    $
    130,817
    
    
    
    138,379
    
    
    
    153,560
    
    
    
    159,976
    
    
    
    150,589Loans receivable, net
    
    
    92,545
    
    
    
    94,829
    
    
    
    94,543
    
    
    
    93,300
    
    
    
    86,087Mortgage-backed securities
    
    
    1,684
    
    
    
    1,920
    
    
    
    2,942
    
    
    
    6,272
    
    
    
    10,360Cash and cash equivalents
    
    
    11,260
    
    
    
    36,710
    
    
    
    50,497
    
    
    
    49,421
    
    
    
    32,921Investment securities
    
    
    21,022
    
    
    
    1,311
    
    
    
    1,234
    
    
    
    6,389
    
    
    
    16,306Deposits
    
    
    115,971
    
    
    
    124,836
    
    
    
    140,437
    
    
    
    147,490
    
    
    
    138,444Stockholders equity
    
    $
    13,296
    
    
    
    12,697
    
    
    
    11,742
    
    
    
    11,056
    
    
    
    10,397
  Year Ended June 30,2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In Thousands)Total interest income
    
    $
    6,821
    
    
    
    6,506
    
    
    
    6,340
    
    
    
    7,278
    
    
    
    8,282Total interest expense
    
    
    1,651
    
    
    
    1,371
    
    
    
    1,706
    
    
    
    2,724
    
    
    
    3,834Net interest income
    
    
    5,170
    
    
    
    5,135
    
    
    
    4,554
    
    
    
    4,448Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    60
    
    
    
    15Net interest income after
provision for loan losses
    
    
    5,170
    
    
    
    5,135
    
    
    
    4,574
    
    
    
    4,494
    
    
    
    4,433Non-interest income:Loan related fees and charges
    
    
    250
    
    
    
    239
    
    
    
    399
    
    
    
    542
    
    
    
    429Deposit related fees
    
    
    446
    
    
    
    432
    
    
    
    473
    
    
    
    512
    
    
    
    514Commission income
    
    
    51
    
    
    
    56
    
    
    
    70
    
    
    
    70
    
    
    
    74Gain on sale of loans
    
    
    64
    
    
    
    26
    
    
    
    102
    
    
    
    27
    
    
    
    44Gain on sale of investment
    
    
    35
    
    
    
    329
    
    
    
    
    
    
    
    
    
    
    
    Gain on satisfaction of
foreclosure judgments
    
    
    
    
    
    
    
    
    
    
    433
    
    
    
    
    
    
    
    Other income
    
    
    53
    
    
    
    62
    
    
    
    86
    
    
    
    57
    
    
    
    67Total non-interest income
    
    
    899
    
    
    
    1,144
    
    
    
    1,563
    
    
    
    1,208
    
    
    
    1,128Non-interest expense:Staffing costs
    
    
    2,614
    
    
    
    2,578
    
    
    
    2,635
    
    
    
    2,627
    
    
    
    2,381Occupancy and equipment expense
    
    
    654
    
    
    
    635
    
    
    
    729
    
    
    
    773
    
    
    
    745Deposit insurance premiums
    
    
    16
    
    
    
    20
    
    
    
    22
    
    
    
    24
    
    
    
    24Advertising expense
    
    
    65
    
    
    
    66
    
    
    
    70
    
    
    
    58
    
    
    
    57Data processing fees
    
    
    198
    
    
    
    204
    
    
    
    213
    
    
    
    207
    
    
    
    209Legal, audit and examination
    
    
    147
    
    
    
    136
    
    
    
    161
    
    
    
    141
    
    
    
    125Other expense
    
    
    848
    
    
    
    813
    
    
    
    744
    
    
    
    820
    
    
    
    707Total non-interest expense
    
    
    4,542
    
    
    
    4,452
    
    
    
    4,574
    
    
    
    4,650
    
    
    
    4,248Income before income taxes
    
    
    1,527
    
    
    
    1,827
    
    
    
    1,563
    
    
    
    1,052
    
    
    
    1,313Provision for income taxes
    
    
    516
    
    
    
    624
    
    
    
    520
    
    
    
    362
    
    
    
    447Net income
    
    $
    1,011
    
    
    
    1,203
    
    
    
    1,043
    
    
    
    690
    
    
    
    866
 42




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##### 



SELECTED CONSOLIDATED FINANCIAL INFORMATION
 SELECTED FINANCIAL RATIOS:
 At or For the Year Ended June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002Performance Ratios:Return on average assets
    
    
    .76
    %
    
    
    .83
    
    
    
    .67
    
    
    
    .44
    
    
    
    .59Return on average stockholders
equity
    
    
    7.78
    %
    
    
    9.89
    
    
    
    9.05
    
    
    
    6.41
    
    
    
    8.64Interest rate spread during
period
    
    
    3.80
    %
    
    
    3.55
    
    
    
    2.98
    
    
    
    2.85
    
    
    
    2.89Net interest margin (1)
    
    
    4.06
    %
    
    
    3.71
    
    
    
    3.13
    
    
    
    3.05
    
    
    
    3.19Ratio of operating expenses to
average total assets
    
    
    3.41
    %
    
    
    3.07
    
    
    
    2.93
    
    
    
    2.96
    
    
    
    2.88Ratio of average interest-earning assets to average
interest-bearing liabilities
    
    
    119.67
    %
    
    
    116.91
    
    
    
    112.56
    
    
    
    111.07
    
    
    
    110.76Asset Quality Ratios:Non-performing assets to
total assets
    
    
    .25
    %
    
    
    .27
    
    
    
    .04
    
    
    
    .30
    
    
    
    .11Allowance for loan losses to
non-performing loans
    
    
    127.27
    %
    
    
    120.06
    
    
    
    829.00
    
    
    
    84.80
    
    
    
    213.29Allowance for loan losses to
total loans
    
    
    .45
    %
    
    
    .48
    
    
    
    .49
    
    
    
    .44
    
    
    
    .41Capital Ratios:Stockholders equity to
total assets
    
    
    10.16
    %
    
    
    9.14
    
    
    
    7.65
    
    
    
    6.91
    
    
    
    6.90Average stockholders equity to
average assets
    
    
    9.76
    %
    
    
    8.40
    
    
    
    7.37
    
    
    
    6.85
    
    
    
    6.80
 
 (1)
    
    Net interest income divided by average interest-earning assets. 43




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##### 



MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 Forward-Looking Statements
   GENERAL
    44




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##### 



MANAGEMENT OF INTEREST RATE RISK
      45




---



##### 



NET PORTFOLIO VALUE
    
    NPV AS % OF ASSETSChange in Rates
    
    $ Amount
    
    $ Change
    
    % Change
    
    NPV Ratio
    
    Change(Basis Points)
    
    (Thousands)+300 bp
    
    
    11,953
    
    
    
    -6,756
    
    
    
    -36
    %
    
    
    9.14
    %
    
    -440 bp+200 bp
    
    
    14,080
    
    
    
    -4,630
    
    
    
    -25
    %
    
    
    10.58
    %
    
    -296 bp+100 bp
    
    
    16,368
    
    
    
    -2,341
    
    
    
    -13
    %
    
    
    12.07
    %
    
    -147 bp0 bp
    
    
    18,710
    
    
    
    
    
    
    
    
    
    
    
    13.54
    %-100 bp
    
    
    20,614
    
    
    
    1,905
    
    
    
    10
    %
    
    
    14.69
    %
    
    +115 bp-200 bp
    
    
    20,784
    
    
    
    2,074
    
    
    
    11
    %
    
    
    14.77
    %
    
    +123 bp
 FINANCIAL CONDITION AT JUNE 30, 2006
    46




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##### 



47




---



##### 



RESULTS OF OPERATIONS
   48




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##### 



Year Ended June 30,2006
    
    
    2005
    
    
    2004Interest
    
    
    Yield
    
    
    
    
    
    
    Interest
    
    
    Yield
    
    
    
    
    
    
    Interest
    
    
    YieldAverage
    
    
    Earned/
    
    
    and
    
    
    Average
    
    
    Earned/
    
    
    and
    
    
    Average
    
    
    Earned/
    
    
    andBalance
    
    
    Paid
    
    
    Rates
    
    
    Balance
    
    
    Paid
    
    
    Rates
    
    
    Balance
    
    
    Paid
    
    
    Rates(Dollars in Thousands)Interest-Earning
Assets:Loans receivable(1)
    
    $
    94,098
    
    
    
    5,435
    
    
    
    5.78
    %
    
    $
    95,816
    
    
    
    5,510
    
    
    
    5.75
    %
    
    $
    93,096
    
    
    
    5,503
    
    
    
    5.91
    %Mortgage-backed
securities
    
    
    1,788
    
    
    
    82
    
    
    
    4.59
    %
    
    
    2,267
    
    
    
    88
    
    
    
    3.88
    
    
    
    4,274
    
    
    
    205
    
    
    
    4.80Investment and other
securities
    
    
    17,597
    
    
    
    741
    
    
    
    4.21
    %
    
    
    1,280
    
    
    
    76
    
    
    
    5.93
    
    
    
    2,521
    
    
    
    118
    
    
    
    4.69Interest-bearing
deposits
    
    
    12,801
    
    
    
    521
    
    
    
    4.07
    %
    
    
    37,845
    
    
    
    770
    
    
    
    2.03
    
    
    
    47,229
    
    
    
    448
    
    
    
    0.95FHLB stock
    
    
    1,143
    
    
    
    42
    
    
    
    3.68
    
    
    
    1,096
    
    
    
    62
    
    
    
    5.64
    
    
    
    1,032
    
    
    
    66
    
    
    
    6.38Total interest-
earning assets
    
    
    127,427
    
    
    
    6,821
    
    
    
    5.35
    
    
    
    138,304
    
    
    
    6,506
    
    
    
    4.71
    
    
    
    148,152
    
    
    
    6,340
    
    
    
    4.28Non-interest earning
assets
    
    
    5,817
    
    
    
    
    
    
    
    
    
    
    
    6,509
    
    
    
    
    
    
    
    
    
    
    
    8,170Total assets
    
    $
    133,244
    
    
    
    
    
    
    
    
    
    
    $
    144,813
    
    
    
    
    
    
    
    
    
    
    $
    156,322Interest-Bearing
Liabilities:Certificates of
deposit
    
    $
    38,726
    
    
    
    1,105
    
    
    
    2.85
    %
    
    $
    43,437
    
    
    
    792
    
    
    
    1.82
    %
    
    $
    53,542
    
    
    
    1,013
    
    
    
    1.89
    %Passbook accounts
    
    
    50,121
    
    
    
    379
    
    
    
    0.76
    
    
    
    55,367
    
    
    
    418
    
    
    
    0.75
    
    
    
    57,163
    
    
    
    509
    
    
    
    0.89Money market and
NOW accounts
    
    
    17,631
    
    
    
    167
    
    
    
    0.95
    
    
    
    19,495
    
    
    
    161
    
    
    
    0.82
    
    
    
    20,911
    
    
    
    184
    
    
    
    0.88Total interest-
bearing
liabilities
    
    
    106,478
    
    
    
    1,651
    
    
    
    1.55
    
    
    
    118,299
    
    
    
    1,371
    
    
    
    1.16
    
    
    
    131,616
    
    
    
    1,706
    
    
    
    1.30Non-interest bearing
Deposits
    
    
    12,185
    
    
    
    
    
    
    
    
    
    
    
    12,721
    
    
    
    
    
    
    
    
    
    
    
    11,793Other liabilities
    
    
    1,581
    
    
    
    
    
    
    
    
    
    
    
    1,631
    
    
    
    
    
    
    
    
    
    
    
    1,397Total liabilities
    
    
    120,244
    
    
    
    
    
    
    
    
    
    
    
    132,651
    
    
    
    
    
    
    
    
    
    
    
    144,806Stockholders equity
    
    
    13,000
    
    
    
    
    
    
    
    
    
    
    
    12,162
    
    
    
    
    
    
    
    
    
    
    
    11,516Liabilities and
stockholders
equity
    
    $
    133,244
    
    
    
    
    
    
    
    
    
    
    $
    144,813
    
    
    
    
    
    
    
    
    
    
    $
    156,322Net earning assets
    
    $
    20,949
    
    
    
    
    
    
    
    
    
    
    $
    20,005
    
    
    
    
    
    
    
    
    
    
    $
    16,536Net-interest income
    
    
    
    
    
    $
    5,170
    
    
    
    
    
    
    
    
    
    
    $
    5,135
    
    
    
    
    
    
    
    
    
    
    $
    4,634Net-interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.80
    %
    
    
    
    
    
    
    
    
    
    
    3.55
    %
    
    
    
    
    
    
    
    
    
    
    2.98
    %Net-interest margin
    
    
    
    
    
    
    
    
    
    
    4.06
    %
    
    
    
    
    
    
    
    
    
    
    3.71
    %
    
    
    
    
    
    
    
    
    
    
    3.13
    %Average interest-earning
assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    119.67
    %
    
    
    
    
    
    
    
    
    
    
    116.91
    %
    
    
    
    
    
    
    
    
    
    
    112.56
    %
 
 (1)
    
    Calculated net of deferred yield adjustments, loan discounts, loans in process and loss reserves. 49




---



##### 



Year Ended June 30,2006
vs. 2005
    
    

2005
vs. 2004Increase (decrease) due to
    
    
    Increase (decrease) due toRate/
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rate/Volume
    
    
    Rate
    
    
    Volume
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Volume
    
    
    Net(In Thousands)Interest-Earning
Assets:Loans Receivable
    
    $
    (99
    )
    
    $
    24
    
    
    $
    
    
    
    $
    (75
    )
    
    $
    161
    
    
    $
    (154
    )
    
    $
    
    
    
    $
    7Mortgage-backed
securities
    
    
    (19
    )
    
    
    16
    
    
    
    (3
    )
    
    
    (6
    )
    
    
    (96
    )
    
    
    (39
    )
    
    
    18
    
    
    
    (117
    )Investment and other
securities
    
    
    969
    
    
    
    (22
    )
    
    
    (282
    )
    
    
    665
    
    
    
    (58
    )
    
    
    32
    
    
    
    (16
    )
    
    
    (42
    )Interest-bearing
deposits
    
    
    (509
    )
    
    
    770
    
    
    
    (510
    )
    
    
    (249
    )
    
    
    (89
    )
    
    
    512
    
    
    
    (101
    )
    
    
    322FHLB stock
    
    
    3
    
    
    
    (22
    )
    
    
    (1
    )
    
    
    (20
    )
    
    
    4
    
    
    
    (8
    )
    
    
    
    
    
    
    (4
    )Total interest-
earning assets
    
    $
    345
    
    
    $
    766
    
    
    $
    (796
    )
    
    $
    315
    
    
    $
    (78
    )
    
    $
    343
    
    
    $
    (99
    )
    
    $
    166Interest-Bearing
Liabilities:Certificates of
deposit
    
    $
    (86
    )
    
    $
    448
    
    
    $
    (49
    )
    
    $
    313
    
    
    $
    (191
    )
    
    $
    (37
    )
    
    $
    7
    
    
    $
    (221
    )Passbook accounts
    
    
    (40
    )
    
    
    1
    
    
    
    
    
    
    
    (39
    )
    
    
    (16
    )
    
    
    (77
    )
    
    
    2
    
    
    
    (91
    )Money market and
NOW accounts
    
    
    (15
    )
    
    
    23
    
    
    
    (2
    )
    
    
    6
    
    
    
    (12
    )
    
    
    (11
    )
    
    
    
    
    
    
    (23
    )Total interest-bearing liabilities
    
    $
    (141
    )
    
    $
    472
    
    
    $
    (51
    )
    
    $
    280
    
    
    $
    (219
    )
    
    $
    (125
    )
    
    $
    9
    
    
    $
    (335
    )Net change in net
interest income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    501
 50




---



##### 



COMPARISON OF OPERATING RESULTS
FOR THE FISCAL YEARS ENDED
JUNE 30, 2006 AND JUNE 30, 2005
   INTEREST INCOME
      51




---



##### 



INTEREST EXPENSE
  PROVISIONS FOR LOSSES ON LOANS
   NON-INTEREST INCOME
  NON-INTEREST EXPENSE
  52




---



##### 



INCOME TAXES
  COMPARISON OF OPERATING RESULTS
FOR THE FISCAL YEARS ENDED
JUNE 30, 2005 AND JUNE 30, 2004
   INTEREST INCOME
     53




---



##### 



INTEREST EXPENSE
  PROVISIONS FOR LOSSES ON LOANS
   NON-INTEREST INCOME
  54




---



##### 



NON-INTEREST EXPENSE
  INCOME TAXES
  55




---



##### 



LIQUIDITY AND CAPITAL RESOURCES
     For the YearEnded June 30,2006
    
    
    2005(Dollars in Thousands)Net income
    
    $
    1,011
    
    
    $
    1,203Adjustments to reconcile net income
to net cash provided (for) by
operating activities
    
    
    (1,092
    )
    
    
    129Net cash provided (for) by
operating activities
    
    
    (81
    )
    
    
    1,332Net cash provided (for) by
investing activities
    
    
    (16,243
    )
    
    
    673Net cash provided for
financing activities
    
    
    (9,126
    )
    
    
    (15,792
    )Net change in cash and
cash equivalents
    
    
    (25,450
    )
    
    
    (13,787
    )Cash and cash equivalents at
beginning of year
    
    
    36,710
    
    
    
    50,497Cash and cash equivalents at
end of year
    
    $
    11,260
    
    
    $
    36,710
   56




---



##### 



IMPACT OF NEW ACCOUNTING STANDARDS
  Stock Based Compensation.
   Separately Recognized Servicing Assets and Servicing Liabilities.
 57




---



##### 



IMPACT OF INFLATION AND CHANGING PRICES
  COMMON STOCK
   Quarter ended
    
    High
    
    Low
    
    Cash dividends declaredSeptember 30, 2004
    
    $
    41.55
    
    
    $
    37.35
    
    
    $
    0.20December 31, 2004
    
    
    44.00
    
    
    
    44.00
    
    
    
    0.20March 31, 2005
    
    
    43.00
    
    
    
    41.10
    
    
    
    0.20June 30, 2005
    
    
    44.00
    
    
    
    40.00
    
    
    
    0.20September 30, 2005
    
    $
    44.00
    
    
    $
    38.60
    
    
    $
    0.22December 31, 2005
    
    
    45.00
    
    
    
    41.30
    
    
    
    0.22March 31, 2006
    
    
    44.00
    
    
    
    41.50
    
    
    
    0.22June 30, 2006
    
    
    42.25
    
    
    
    40.60
    
    
    
    0.22
  58




---



##### 



Cobitz, Vandenberg & Fennessy  CERTIFIED PUBLIC ACCOUNTANTS
9944 S. Roberts Road  Suite 202
Palos Hills, Illinois 60453
 (708) 430-4106  Fax (708) 430-4499
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




---



##### 



AND SUBSIDIARIES
  June 30,2006
    
    
    2005AssetsCash and amounts due from depository institutions
    
    $
    2,204,602
    
    
    
    2,640,369Interest-bearing deposits
    
    
    9,055,302
    
    
    
    34,069,224Total cash and cash equivalents
    
    
    11,259,904
    
    
    
    36,709,593Investment securities available for sale, at fair value (note 2)
    
    
    21,021,975
    
    
    
    1,310,937Stock in Federal Home Loan Bank of Chicago, at cost
    
    
    1,148,087
    
    
    
    1,123,500Mortgage-backed securities, held to
maturity (fair value: 2006 - $1,688,292; 2005 - $1,938,460) (note 3)
    
    
    1,684,228
    
    
    
    1,920,221Loans receivable (net of allowance
for loan losses: 2006 - $415,666; 2005 - $456,550) (note 4)
    
    
    91,701,483
    
    
    
    94,578,810Loans receivable held for sale (note 5)
    
    
    843,090
    
    
    
    250,500Accrued interest receivable (note 6)
    
    
    370,190
    
    
    
    367,351Office properties and equipment  net (note 7)
    
    
    2,240,702
    
    
    
    2,240,391Prepaid expenses and other assets (note 8)
    
    
    547,690
    
    
    
    477,467Total assets
    
    
    130,817,349
    
    
    
    138,978,770Liabilities and Stockholders EquityLiabilitiesDeposits (note 9)
    
    
    115,971,229
    
    
    
    124,836,132Advance payments by borrowers for taxes and insurance
    
    
    1,127,293
    
    
    
    1,060,670Other liabilities (note 10)
    
    
    422,743
    
    
    
    385,286Total liabilities
    
    
    117,521,265
    
    
    
    126,282,088Stockholders EquityPreferred stock, $.01 par value: authorized
50,000 shares; none outstanding
    
    
    
    
    
    
    Common stock, $.01 par value: authorized 600,000 shares;
issued and outstanding 372,600 shares at June 30, 2006 and 2005
    
    
    3,726
    
    
    
    3,726Additional paid-in capital
    
    
    3,395,580
    
    
    
    3,395,580Retained earnings  substantially restricted
    
    
    9,764,211
    
    
    
    9,080,803Accumulated other comprehensive income, net of tax
    
    
    132,567
    
    
    
    216,573Total stockholders equity (notes 14 and 15)
    
    
    13,296,084
    
    
    
    12,696,682Commitments and contingencies (notes 16 and 17)Total liabilities and stockholders equity
    
    $
    130,817,349
    
    
    
    138,978,770




---



##### 



AND SUBSIDIARIES
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Interest income:Interest on loans
    
    $
    5,434,886
    
    
    
    5,510,360
    
    
    
    5,502,835Interest on mortgage-backed securities
    
    
    81,798
    
    
    
    87,888
    
    
    
    205,278Interest on investment securities
    
    
    741,166
    
    
    
    75,958
    
    
    
    118,257Interest on interest-bearing deposits
    
    
    520,883
    
    
    
    769,701
    
    
    
    447,894Dividends on FHLB stock
    
    
    42,024
    
    
    
    61,815
    
    
    
    65,824Total interest income
    
    
    6,820,757
    
    
    
    6,505,722
    
    
    
    6,340,088Interest expense:Interest on deposits (note 9)
    
    
    1,650,610
    
    
    
    1,370,963
    
    
    
    1,705,562Total interest expense
    
    
    1,650,610
    
    
    
    1,370,963
    
    
    
    1,705,562Net interest income
    
    
    5,170,147
    
    
    
    5,134,759
    
    
    
    4,634,526Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    60,000Net interest income after provision for loan losses
    
    
    5,170,147
    
    
    
    5,134,759
    
    
    
    4,574,526Non-interest income:Loan fees and service charges
    
    
    249,914
    
    
    
    238,848
    
    
    
    398,685Deposit related fees
    
    
    446,271
    
    
    
    432,390
    
    
    
    472,890Commission income
    
    
    51,176
    
    
    
    56,561
    
    
    
    70,282Gain on sale of loans (notes 4 and 5)
    
    
    64,501
    
    
    
    25,627
    
    
    
    101,769Gain on satisfaction of foreclosure judgments (note 4)
    
    
    
    
    
    
    
    
    
    
    433,285Gain on sale of other assets (note 8)
    
    
    34,778
    
    
    
    328,880
    
    
    
    Other income
    
    
    52,669
    
    
    
    61,790
    
    
    
    86,160Total non-interest income
    
    
    899,309
    
    
    
    1,144,096
    
    
    
    1,563,071Non-interest expense:Staffing costs (notes 11 and 12)
    
    
    2,613,424
    
    
    
    2,578,126
    
    
    
    2,634,908Advertising
    
    
    65,356
    
    
    
    66,261
    
    
    
    69,620Occupancy and equipment expenses (note 7)
    
    
    654,176
    
    
    
    635,299
    
    
    
    729,604Data processing
    
    
    197,843
    
    
    
    203,759
    
    
    
    212,688Federal deposit insurance premiums
    
    
    16,305
    
    
    
    19,815
    
    
    
    22,450Legal, audit and examination services
    
    
    147,216
    
    
    
    136,152
    
    
    
    160,976Other
    
    
    848,118
    
    
    
    812,780
    
    
    
    744,159Total non-interest expense
    
    
    4,542,438
    
    
    
    4,452,192
    
    
    
    4,574,405Income before income taxes
    
    
    1,527,018
    
    
    
    1,826,663
    
    
    
    1,563,192Provision for income taxes (note 13)
    
    
    515,722
    
    
    
    624,114
    
    
    
    520,524Net income
    
    $
    1,011,296
    
    
    
    1,202,549
    
    
    
    1,042,668Earnings per share  basic
    
    $
    2.71
    
    
    
    3.23
    
    
    
    2.80Earnings per share  diluted
    
    $
    2.71
    
    
    
    3.23
    
    
    
    2.80




---



##### 



AND SUBSIDIARIES
  AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon
    
    
    Paid-In
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    TotalBalance at June 30, 2003
    
    $
    3,726
    
    
    
    3,395,580
    
    
    
    7,387,034
    
    
    
    269,807
    
    
    
    11,056,147Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    1,042,668
    
    
    
    
    
    
    
    1,042,668Other comprehensive income,
net of tax:Unrealized holding loss
during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,133
    )
    
    
    (103,133
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    1,042,668
    
    
    
    (103,133
    )
    
    
    939,535Dividends declared on
common stock ($.68 per share)
    
    
    
    
    
    
    
    
    
    
    (253,368
    )
    
    
    
    
    
    
    (253,368
    )Balance at June 30, 2004
    
    
    3,726
    
    
    
    3,395,580
    
    
    
    8,176,334
    
    
    
    166,674
    
    
    
    11,742,314Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    1,202,549
    
    
    
    
    
    
    
    1,202,549Other comprehensive income,
net of tax:Unrealized holding gain
during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,899
    
    
    
    49,899Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    1,202,549
    
    
    
    49,899
    
    
    
    1,252,448Dividends declared on
common stock ($.80 per share)
    
    
    
    
    
    
    
    
    
    
    (298,080
    )
    
    
    
    
    
    
    (298,080
    )Balance at June 30, 2005
    
    
    3,726
    
    
    
    3,395,580
    
    
    
    9,080,803
    
    
    
    216,573
    
    
    
    12,696,682Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    1,011,296
    
    
    
    
    
    
    
    1,011,296Other comprehensive income,
net of tax:Unrealized holding loss
during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,006
    )
    
    
    (84,006
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    1,011,296
    
    
    
    (84,006
    )
    
    
    927,290Dividends declared on
common stock ($.88 per share)
    
    
    
    
    
    
    
    
    
    
    (327,888
    )
    
    
    
    
    
    
    (327,888
    )Balance at June 30, 2006
    
    $
    3,726
    
    
    
    3,395,580
    
    
    
    9,764,211
    
    
    
    132,567
    
    
    
    13,296,084




---



##### 



AND SUBSIDIARIES
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    1,011,296
    
    
    
    1,202,549
    
    
    
    1,042,668Adjustments to reconcile net income
to net cash from operating activities:Depreciation
    
    
    213,911
    
    
    
    213,761
    
    
    
    270,315Amortization of premiums and discounts on securities
    
    
    (665,817
    )
    
    
    (2,227
    )
    
    
    (13,564
    )Federal Home Loan Bank stock dividend
    
    
    (24,587
    )
    
    
    (61,700
    )
    
    
    (65,600
    )Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    60,000Proceeds from sale of loans held for sale
    
    
    5,144,722
    
    
    
    1,823,050
    
    
    
    1,054,750Origination of loans held for sale
    
    
    (5,695,343
    )
    
    
    (1,492,050
    )
    
    
    (1,268,950
    )Gain on sale of loans
    
    
    (64,501
    )
    
    
    (25,627
    )
    
    
    (101,769
    )Gain on sale of other assets
    
    
    (34,778
    )
    
    
    (328,880
    )
    
    
    (Increase) decrease in accrued interest receivable
    
    
    (2,839
    )
    
    
    (7,649
    )
    
    
    89,060Increase (decrease) in accrued interest payable
    
    
    115
    
    
    
    409
    
    
    
    (6,653
    )Increase (decrease) in deferred income on loans
    
    
    3,933
    
    
    
    (2,529
    )
    
    
    (244,135
    )(Increase) decrease in other assets
    
    
    (4,415
    )
    
    
    54,908
    
    
    
    62,579Increase (decrease) in other liabilities
    
    
    37,342
    
    
    
    (42,207
    )
    
    
    1,883Net cash provided (for) by operating activities
    
    
    (80,961
    )
    
    
    1,331,808
    
    
    
    880,584Cash flows from investing activities:Proceeds from repayments of mortgage-backed
securities, held to maturity
    
    
    235,993
    
    
    
    1,022,565
    
    
    
    3,342,775Proceeds from maturities of investment securities,
available for sale
    
    
    20,000,000
    
    
    
    
    
    
    
    5,000,000Purchase of investment securities, available for sale
    
    
    (39,172,503
    )
    
    
    
    
    
    
    Loan disbursements
    
    
    (17,124,431
    )
    
    
    (20,872,954
    )
    
    
    (41,776,527
    )Loan repayments
    
    
    19,997,825
    
    
    
    20,258,033
    
    
    
    40,615,105Proceeds from sale of non-performing loan
    
    
    
    
    
    
    
    
    
    
    403,366Proceeds from sale of other assets
    
    
    34,778
    
    
    
    343,880
    
    
    
    Property and equipment expenditures
    
    
    (214,222
    )
    
    
    (78,127
    )
    
    
    (38,951
    )Net cash provided (for) by investing activities
    
    
    (16,242,560
    )
    
    
    673,397
    
    
    
    7,545,768Cash flows from financing activities:Net decrease in deposits
    
    
    (8,864,903
    )
    
    
    (15,600,572
    )
    
    
    (7,052,900
    )Payment of dividends
    
    
    (327,888
    )
    
    
    (298,080
    )
    
    
    (253,368
    )Increase (decrease) in advance payments
by borrowers for taxes and insurance
    
    
    66,623
    
    
    
    106,411
    
    
    
    (44,520
    )Net cash provided for financing activities
    
    
    (9,126,168
    )
    
    
    (15,792,241
    )
    
    
    (7,350,788
    )Net change in cash and cash equivalents
    
    
    (25,449,689
    )
    
    
    (13,787,036
    )
    
    
    1,075,564Cash and cash equivalents at beginning of year
    
    
    36,709,593
    
    
    
    50,496,629
    
    
    
    49,421,065Cash and cash equivalents at end of year
    
    $
    11,259,904
    
    
    
    36,709,593
    
    
    
    50,496,629Cash paid during the year for:Interest
    
    $
    1,650,495
    
    
    
    1,370,554
    
    
    
    1,712,215Income taxes
    
    
    496,593
    
    
    
    630,297
    
    
    
    528,318




---



##### 



AND SUBSIDIARIES
  1)
    
    Summary of Significant Accounting PoliciesMidland 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.Principles of ConsolidationThe accompanying 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 Federal Service Corporation, Midland
Insurance Services, Inc. and Bridgeview Development Company. Significant intercompany
transactions and balances have been eliminated in consolidation.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and 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.Statement of Cash FlowsFor 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.Industry SegmentsThe 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 SaleInvestment 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.




---



##### 



1)
    
    Summary of Significant Accounting Policies (continued)Mortgage-Backed Securities, Held to MaturityThese 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 FeesLoans 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, 2006
and 2005, nor during the years ended June 30, 2006 and 2005, 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 SaleThat 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 RightsThe 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 5 for a discussion of the current year
impact on financial position and results of operations.




---



##### 



1)
    
    Summary of Significant Accounting Policies (continued)Allowance for Loan LossesThe 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
judgment, 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 judgments about information available to them at the time of their
examination.Office Properties and EquipmentLand is carried at cost. Depreciation of office properties and equipment is accumulated on
the straight line basis over estimated lives of the various assets. Useful lives are 25 to 40
years for office properties, 5 to 15 years for leasehold improvements and 3 to 10 years for
furniture, fixtures and equipment.Income TaxesThe 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.Earnings Per ShareEarnings per share is determined by dividing net income for the period by the weighted
average number of shares outstanding. Stock options are regarded as future common stock and
are considered in the earnings per share calculations, and are the only adjustments made to
average shares outstanding in computing diluted earnings per share.Weighted average shares used in calculating earnings per share are summarized below.
 Years Ended June 30,2006
    
    
    2005
    
    
    2004Weighted average number of common shares
outstanding used in basic EPS calculation
    
    
    372,600
    
    
    
    372,600
    
    
    
    372,600Add common stock equivalents for shares
issuable under Stock Option Plans
    
    
    
    
    
    
    
    
    
    
    Weighted average number of shares
outstanding adjusted for common
stock equivalents
    
    
    372,600
    
    
    
    372,600
    
    
    
    372,600Net income
    
    $
    1,011,296
    
    
    
    1,202,549
    
    
    
    1,042,668Basic earnings per share
    
    $
    2.71
    
    
    
    3.23
    
    
    
    2.80Diluted earnings per share
    
    $
    2.71
    
    
    
    3.23
    
    
    
    2.80




---



##### 



Investment Securities, Available for Sale
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueJune 30, 2006United States Treasury bills
    
    $
    19,837,361
    
    
    
    1,622
    
    
    
    133
    
    
    
    19,838,850United States Treasury bond
    
    
    983,756
    
    
    
    199,369
    
    
    
    
    
    
    
    1,183,125$
    20,821,117
    
    
    
    200,991
    
    
    
    133
    
    
    
    21,021,975Weighted average interest rate/yield
    
    
    4.87
    %June 30, 2005United States Treasury bond
    
    $
    982,797
    
    
    
    328,140
    
    
    
    
    
    
    
    1,310,937Weighted average interest rate
    
    
    7.60
    %
   June 30, 2006
    
    
    June 30, 2005Amortized
    
    
    Fair
    
    
    Amortized
    
    
FairTerm to Maturity
    
    Cost
    
    
Value

    
    Cost
    
    

ValueDue in one year or less
    
    $
    19,837,361
    
    
    
    19,838,850
    
    
    
    
    
    
    
    Due after
ten years through fifteen years
    
    
    983,756
    
    
    
    1,183,125
    
    
    
    982,797
    
    
    
    1,310,937$
    20,821,117
    
    
    
    21,021,975
    
    
    
    982,797
    
    
    
    1,310,937




---



##### 



3)
    
    Mortgage-Backed Securities, Held to MaturityMortgage-backed securities, held to maturity, are summarized as follows:
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueJune 30, 2006Participation certificates:FHLMC - Adjustable rate
    
    $
    1,064,803
    
    
    
    4,523
    
    
    
    1,379
    
    
    
    1,067,947FNMA- Adjustable rate
    
    
    611,303
    
    
    
    902
    
    
    
    
    
    
    
    612,205FNMA- Fixed rate
    
    
    4,159
    
    
    
    18
    
    
    
    
    
    
    
    4,177GNMA- Fixed rate
    
    
    3,963
    
    
    
    
    
    
    
    
    
    
    
    3,963$
    1,684,228
    
    
    
    5,443
    
    
    
    1,379
    
    
    
    1,688,292Weighted average interest rate
    
    
    5.01
    %June 30, 2005Participation certificates:FHLMC - Adjustable rate
    
    $
    1,219,356
    
    
    
    10,762
    
    
    
    
    
    
    
    1,230,118FNMA- Adjustable rate
    
    
    666,572
    
    
    
    7,122
    
    
    
    
    
    
    
    673,694FNMA- Fixed rate
    
    
    13,477
    
    
    
    355
    
    
    
    
    
    
    
    13,832GNMA- Fixed rate
    
    
    20,816
    
    
    
    
    
    
    
    
    
    
    
    20,816$
    1,920,221
    
    
    
    18,239
    
    
    
    
    
    
    
    1,938,460Weighted average interest rate
    
    
    4.04
    %




---



##### 



4)
    
    Loans ReceivableLoans receivable are summarized as follows:
 June 30,2006
    
    
    2005Mortgage loans:One-to-four family
    
    $
    88,617,507
    
    
    
    91,558,168Multi-family
    
    
    1,641,650
    
    
    
    1,125,007Non-residential
    
    
    750,365
    
    
    
    804,748Total mortgage loans
    
    
    91,009,522
    
    
    
    93,487,923Other loans:Loans on deposit accounts
    
    
    187,778
    
    
    
    268,637Auto loans
    
    
    354,970
    
    
    
    448,442Education loans
    
    
    161,186
    
    
    
    247,060Credit card loans
    
    
    149,221
    
    
    
    189,060Other
    
    
    2,084
    
    
    
    11,883Total other loans
    
    
    855,239
    
    
    
    1,165,082Commercial business loans
    
    
    37,869
    
    
    
    17,053Total loans receivable
    
    
    91,902,630
    
    
    
    94,670,058Less:Loans in process
    
    
    172,300
    
    
    
    25,450Net deferred yield adjustments
    
    
    (406,581
    )
    
    
    (404,924
    )Allowance for uncollected interest
    
    
    19,762
    
    
    
    14,172Allowance for loan losses
    
    
    415,666
    
    
    
    456,550Loans receivable, net
    
    $
    91,701,483
    
    
    
    94,578,810Weighted average interest rate
    
    
    5.87
    %
    
    
    5.80
    %
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Balance, beginning of year
    
    $
    456,550
    
    
    
    459,472
    
    
    
    409,560Provision for loan losses
    
    
    
    
    
    
    
    
    
    
    60,000Recoveries previously charged-off
    
    
    1,881
    
    
    
    
    
    
    
    8,215Charge-offs
    
    
    (42,765
    )
    
    
    (2,922
    )
    
    
    (18,303
    )Balance, end of year
    
    $
    415,666
    
    
    
    456,550
    
    
    
    459,472




---



##### 



4)
    
    Loans Receivable (continued)The Association had held forbearance agreements since 1996 to resolve non-performance on
three loans that were cross-collateralized by a multi-family residential property located in
Chicago, Illinois. As a result of the agreements, excess cash flow from the Chicago
multi-family property was used to reduce the amounts due on the three loans. The Association
also held $433,285 in deficiency judgments stemming from various foreclosure actions on
residential properties located in Florida that were also cross-collateralized by the Chicago
multi-family property under the agreements. This amount was expensed and charged-off in a
prior period. During the year ended June 30, 2004, the Chicago multi-family property was sold
and the proceeds were sufficient to repay the existing mortgage on that property in full, the
remaining obligations due on the three loans and the deficiency judgments, all in
satisfaction of the forbearance agreements.Loans to directors and executive officers aggregated $637,127 at June 30, 2006 and $646,032
at June 30, 2005. Such loans are made on substantially the same terms as those for other loan
customers.5)
    
    Loans Receivable Held for SaleThe Company sells loans in the secondary market to the Illinois Housing Development Authority
(IHDA) and private investors under various programs. During the years ended June 30, 2006,
2005 and 2004, the Company sold first mortgage loans totaling $5,144,272, $1,823,050 and
$1,054,750 in the secondary market. The Company retains the servicing on loans sold to IHDA.
Proceeds from the sale of loans during the years ended June 30, 2006, 2005 and 2004 were
$5,144,722, $1,823,050 and $1,054,750 with gains of $41,969 realized on those sales during
the year ended June 30, 2006 and no gain or loss realized on those sales for the years ended
June 30, 2005 and 2004. In addition, the Company recorded a gain of $22,532, $25,627 and
$14,853 for the years ended June 30, 2006, 2005 and 2004 on loan sales from the establishment
of a mortgage servicing right asset. During the years ended June 30, 2006, 2005 and 2004, the
Company amortized $13,701, $24,255 and $56,402 of mortgage servicing rights against current
servicing fee income.As of June 30, 2006, $843,090 of newly originated fixed rate thirty year original term loans
qualifying for sale into the secondary market were classified in this portfolio. Loans held
for sale are valued at the lower of cost or fair value in accordance with accounting
principles generally accepted in the United States of America. There were no recognized, but
unrealized, losses at June 30, 2006 and 2005.At June 30, 2006, 2005 and 2004, loans serviced for others amounted to $6,741,245, $5,905,383
and $6,014,542, respectively.6)
    
    Accrued Interest ReceivableAccrued interest receivable is summarized as follows:
 June 30,2006
    
    
    2005Investment securities
    
    $
    9,871
    
    
    
    9,723Mortgage-backed securities
    
    
    11,541
    
    
    
    10,392Loans receivable
    
    
    348,778
    
    
    
    347,236$
    370,190
    
    
    
    367,351




---



##### 



7)
    
    Office Properties and EquipmentOffice properties and equipment are summarized as follows:
 June 30,2006
    
    
    2005Land
    
    $
    439,935
    
    
    
    439,935Buildings
    
    
    2,365,311
    
    
    
    2,365,311Easement for parking lot and driveway
    
    
    223,050
    
    
    
    223,050Leasehold improvements  Homer Glen
    
    
    596,698
    
    
    
    579,253Furniture, fixtures and equipment
    
    
    3,079,150
    
    
    
    2,882,3736,704,144
    
    
    
    6,489,922Less accumulated depreciation
    
    
    4,463,442
    
    
    
    4,249,531$
    2,240,702
    
    
    
    2,240,391
    Year ended June 30, 2007
    
    $
    43,536Year ended June 30, 2008
    
    
    45,704Year ended June 30, 2009
    
    
    46,440




---



##### 



8)
    
    Prepaid Expenses and Other AssetsPrepaid expenses and other assets consist of the following:
 June 30,2006
    
    
    2005Prepaid federal insurance premiums
    
    $
    3,704
    
    
    
    4,256Prepaid insurance
    
    
    82,942
    
    
    
    38,384Prepaid income taxes
    
    
    26,777
    
    
    
    6,870Other prepaid expenses
    
    
    119,391
    
    
    
    117,031Mortgage servicing rights
    
    
    66,445
    
    
    
    57,614Deferred federal income tax benefit  net (a)
    
    
    132,329
    
    
    
    128,089Accounts receivable and other assets (b)
    
    
    116,102
    
    
    
    125,223$
    547,690
    
    
    
    477,467
 (a)
    
    Significant components of the deferred tax assets and liabilities are as follows:
 June 30,2006
    
    
    2005Deferred tax assets:Tax basis of office building in excess of book basis
    
    $
    351,850
    
    
    
    372,178Accelerated book depreciation
    
    
    14,592
    
    
    
    12,564Book allowance for loan losses
    
    
    141,326
    
    
    
    155,227Total deferred tax assets
    
    
    507,768
    
    
    
    539,969Deferred tax liabilities:Loan fees deferred for financial
reporting purposes, net of costs
    
    
    150,601
    
    
    
    155,128FHLB stock dividends
    
    
    133,956
    
    
    
    125,596Mortgage servicing rights
    
    
    22,591
    
    
    
    19,589Unrealized gain on securities available for sale
    
    
    68,291
    
    
    
    111,567Total deferred tax liabilities
    
    
    375,439
    
    
    
    411,880Net deferred tax benefit
    
    $
    132,329
    
    
    
    128,089
 (b)
    
    In March 2005, the shareholders of Intrieve Incorporated, the Associations data
processing provider, approved the sale and merger of Intrieve into Harland Financial
Solutions, Inc., a wholly owned subsidiary of John H. Harland Company. This transaction
closed in April 2005. As a shareholder of Intrieve, the Association received $343,880 in
cash on its $15,000 investment, resulting in a gain of $328,880 for the year ended June
30, 2005. During the current year, the Association received additional funds of $34,778
from this investment which represents the net proceeds of amounts held back to cover
expenses of the transaction.




---



##### 



9)
    
    DepositsDeposit accounts are summarized as follows:
 June 30,2006
    
    
    2005Passbook accounts
    
    $
    48,439,352
    
    
    
    52,859,335NOW accounts
    
    
    10,854,884
    
    
    
    12,028,751Money market accounts
    
    
    5,105,750
    
    
    
    6,108,339Non-interest bearing demand deposit accounts
    
    
    11,783,529
    
    
    
    13,528,20076,183,515
    
    
    
    84,524,625Certificates of deposit by interest rate:1.01 - 2.00%
    
    
    817,642
    
    
    
    14,588,8392.01 - 3.00
    
    
    8,212,199
    
    
    
    23,221,1143.01 - 4.00
    
    
    21,533,166
    
    
    
    2,501,5544.01 - 5.00
    
    
    6,768,299
    
    
    
    5.01 - 6.00
    
    
    2,456,408
    
    
    
    39,787,714
    
    
    
    40,311,507$
    115,971,229
    
    
    
    124,836,132
    June 30,2006
    
    
    2005Within 12 months
    
    $
    33,301,073
    
    
    
    34,415,90012 months to 24 months
    
    
    5,682,252
    
    
    
    4,200,93524 months to 36 months
    
    
    804,389
    
    
    
    1,694,672Total
    
    $
    39,787,714
    
    
    
    40,311,507
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Passbook accounts
    
    $
    378,442
    
    
    
    418,495
    
    
    
    508,804Certificate accounts
    
    
    1,104,838
    
    
    
    791,675
    
    
    
    1,013,354NOW and money market accounts
    
    
    167,330
    
    
    
    160,793
    
    
    
    183,404Total
    
    $
    1,650,610
    
    
    
    1,370,963
    
    
    
    1,705,562




---



##### 



10)
    
    Other LiabilitiesOther liabilities consist of the following:
 June 30,2006
    
    
    2005Accrued interest on deposits
    
    $
    8,492
    
    
    
    8,377Accrued real estate taxes
    
    
    136,470
    
    
    
    137,511Other accrued expenses
    
    
    161,085
    
    
    
    144,535Outstanding bank drafts
    
    
    34,034
    
    
    
    35,174Other accounts payable
    
    
    82,662
    
    
    
    59,689$
    422,743
    
    
    
    385,286
 11)
    
    Retirement Plans and Other Employee BenefitsThe Association participates in the Financial Institutions Retirement Fund, a tax-qualified
pension trust, which covers all eligible employees. The Plan meets the criteria of a
multiemployer pension plan as defined in Financial Accounting Standards Board Statement No.
87, Employers Accounting for Pensions and as such, does not make separate actuarial
valuations with respect to each employer, nor does it segregate plan assets. The practice
with respect to multiemployer plans has been to accept employers contributions that are paid
as its expense for accounting purposes. Contributions of $314,701, $291,038 and $211,753 were
paid and expensed by the Association for the years ended June 30, 2006, 2005 and 2004,
respectively.In addition, the Association established a qualified defined contribution plan (401(k) Plan)
which covers all full-time employees having a minimum of twelve months of service and who are
at least twenty-one years of age. Eligible employees may contribute from 2% to 15% of their
monthly salaries. The Association will contribute an amount equal to 50%, 75% or 100% of the
monthly contribution up to 3% of salary, depending upon years of employment. Employer
contributions to the Plan amounted to $40,361, $43,205 and $43,077 for the years ended June
30, 2006, 2005 and 2004, respectively.




---



##### 



12)
    
    Stock Option PlanIn 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. 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.
There was no option activity in any of the years in the three year period ended June 30,
2006. There were no outstanding options at June 30, 2006, however, there were 6,900 options
available for future grants.The Company accounts for stock options using the intrinsic value method under the provisions
of Accounting Principles Board (APB) Opinion No. 25 and provides pro forma net income and
pro forma earnings per share disclosures for employee stock option grants as if the fair
value based method, defined in SFAS No. 123, Accounting for Stock Based Compensation, had
been applied. Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Companys net income and pro forma
amounts would be as indicated below:
 Years Ended June 30,2006
    
    
    2005
    
    
    2004Net income, as reported
    
    $
    1,011,296
    
    
    
    1,202,549
    
    
    
    1,042,668Deduct: Total stock based employee compensation
expense determined under the fair value based
method, net of related tax effects
    
    
    
    
    
    
    
    
    
    
    Pro forma net income
    
    $
    1,011,296
    
    
    
    1,202,549
    
    
    
    1,042,668Diluted earnings per share, as reported
    
    
    2.71
    
    
    
    3.23
    
    
    
    2.80Pro forma diluted earnings per share
    
    
    2.71
    
    
    
    3.23
    
    
    
    2.80




---



##### 



13)
    
    Income TaxesThe provision for income taxes is summarized below:
 Years Ended June 30,2006
    
    
    2005
    
    
    2004Current
    
    $
    476,686
    
    
    
    596,697
    
    
    
    529,072Deferred
    
    
    39,036
    
    
    
    27,417
    
    
    
    (8,548
    )$
    515,722
    
    
    
    624,114
    
    
    
    520,524
   Years Ended June 30,2006
    
    2005
    
    2004Statutory federal income tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Other
    
    
    (.2
    )
    
    
    .2
    
    
    
    (.7
    )Effective income tax rate
    
    
    33.8
    %
    
    
    34.2
    %
    
    
    33.3
    %
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Loan fees net of costs
    
    $
    (4,527
    )
    
    
    1,863
    
    
    
    3,216Depreciation
    
    
    18,300
    
    
    
    3,296
    
    
    
    (2,971
    )FHLB stock dividends
    
    
    8,360
    
    
    
    20,978
    
    
    
    22,304Book loan loss provision less than
(in excess of) tax deduction
    
    
    13,901
    
    
    
    813
    
    
    
    (16,970
    )Mortgage servicing rights
    
    
    3,002
    
    
    
    467
    
    
    
    (14,127
    )$
    39,036
    
    
    
    27,417
    
    
    
    (8,548
    )




---



##### 



14)
    
    Regulatory Capital RequirementsThe 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, 2006, 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, 2006 and 2005, 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:
 To Be Well-Capitalized UnderFor Capital
    
    Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioJune 30, 2006Tangible
    
    $
    11,157,648
    
    
    
    8.51
    %
    
    $
    1,968,000
    
    
    
    1.50
    %
    
    $
    N/A
    
    
    
    N/A
    %Core
    
    
    11,157,648
    
    
    
    8.51
    
    
    
    3,935,000
    
    
    
    3.00
    
    
    
    6,558,000
    
    
    
    5.00Risk-based
    
    
    11,573,314
    
    
    
    19.58
    
    
    
    4,729,000
    
    
    
    8.00
    
    
    
    5,911,000
    
    
    
    10.00June 30, 2005Tangible
    
    $
    10,904,534
    
    
    
    7.83
    %
    
    $
    2,088,000
    
    
    
    1.50
    %
    
    $
    N/A
    
    
    
    N/A
    %Core
    
    
    10,904,534
    
    
    
    7.83
    
    
    
    4,176,000
    
    
    
    3.00
    
    
    
    6,960,000
    
    
    
    5.00Risk-based
    
    
    11,361,084
    
    
    
    14.27
    
    
    
    6,371,000
    
    
    
    8.00
    
    
    
    7,963,000
    
    
    
    10.00




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##### 



14)
    
    Regulatory Capital Requirements (continued)
 Tangible
    
    
    Core
    
    
    Risk-basedCapital
    
    
    Capital
    
    
    CapitalJune 30, 2006Stockholders equity
    
    $
    11,296,859
    
    
    
    11,296,859
    
    
    
    11,296,859Unrealized gain on securities
available for sale, net of taxes
    
    
    (132,567
    )
    
    
    (132,567
    )
    
    
    (132,567
    )Retained mortgage servicing rights
    
    
    (6,644
    )
    
    
    (6,644
    )
    
    
    (6,644
    )General loss allowances
    
    
    
    
    
    
    
    
    
    
    415,666Regulatory capital computed
    
    $
    11,157,648
    
    
    
    11,157,648
    
    
    
    11,573,314A reconciliation of the Associations equity capital at June 30, 2006 is as follows:Stockholders equity
    
    
    
    
    
    
    
    
    
    $
    13,296,084Less Company stockholders equity not available
for regulatory capital
    
    
    
    
    
    
    
    
    
    
    (1,999,225
    )Stockholders equity of the Association
    
    
    
    
    
    
    
    
    
    $
    11,296,859
 Tangible
    
    
    Core
    
    
    Risk-basedCapital
    
    
    Capital
    
    
    CapitalJune 30, 2005Stockholders equity
    
    $
    11,126,868
    
    
    
    11,126,868
    
    
    
    11,126,868Unrealized gain on securities
available for sale, net of taxes
    
    
    (216,573
    )
    
    
    (216,573
    )
    
    
    (216,573
    )Retained mortgage servicing rights
    
    
    (5,761
    )
    
    
    (5,761
    )
    
    
    (5,761
    )General loss allowances
    
    
    
    
    
    
    
    
    
    
    456,550Regulatory capital computed
    
    $
    10,904,534
    
    
    
    10,904,534
    
    
    
    11,361,084A reconciliation of the Associations equity
capital at June 30, 2005 is as follows:Stockholders equity
    
    
    
    
    
    
    
    
    
    $
    12,696,682Less Company stockholders equity not
available for regulatory capital
    
    
    
    
    
    
    
    
    
    
    (1,569,814
    )Stockholders equity of the Association
    
    
    
    
    
    
    
    
    
    $
    11,126,868




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##### 



15)
    
    Stockholders EquityAs 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.16)
    
    Financial Instruments with Off-Balance Sheet RiskThe 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 $500,000 at June 30, 2006 represents an amount
which the Association plans to fund within the normal commitment period of 60 to 90 days. The
commitments are all adjustable rate. 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 $4,432,000
at June 30, 2006. In addition, the Association has approved, but unused, credit card lines of
credit amounting to approximately $617,000. The Association has also issued outstanding
letters of credit totaling $106,000.17)
    
    ContingenciesThe 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.18)
    
    Subsequent EventAt the July, 2006 Board of Directors meeting, the Company declared a quarterly dividend of
$.24 per share, totaling $89,424, payable August 17, 2006 to shareholders of record as of
August 7, 2006.




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##### 



19)
    
    Disclosures About the Fair Value of Financial InstrumentsThe following methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value:Cash and cash equivalents: For cash and interest-bearing deposits, the carrying
amount is a reasonable estimate of fair value.Investment securities: Fair values for securities are based on quoted market prices
as published in financial publications or on quotes from third-party brokers.Mortgage-backed securities: Fair values for mortgage-backed securities are based on
the lower of quotes received from various third-party brokers.Loans receivable: The fair value for fixed and adjustable rate mortgage loans are
estimated using discounted cash flow analyses, using interest rates currently being offered
for loans with similar terms and collateral to borrowers of similar credit quality.Accrued interest receivable and payable: The carrying value of accrued interest
receivable, net of the allowance for uncollected interest, and accrued interest payable
approximates fair value due to the relatively short period of time between accrual and
expected realization.Deposit liabilities: The fair value of demand deposits, savings accounts and money
market deposits is the amount payable on demand at the reporting date. The fair value of
fixed maturity certificates of deposit is estimated by discounting the future cash flows
using the rates currently offered for deposits of similar original maturities.The fair value of the Associations off-balance-sheet instruments is nominal.The estimated fair value of the Associations financial instruments as of June 30, 2006 and
2005 are as follows:
 June 30, 2006Carrying
    
    FairAmount
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    11,259,904
    
    
    
    11,259,904Investment securities, available for sale
    
    
    21,021,975
    
    
    
    21,021,975Mortgage-backed securities, held to maturity
    
    
    1,684,228
    
    
    
    1,688,292Loans receivable, gross
    
    
    92,745,720
    
    
    
    89,835,000Accrued interest receivable
    
    
    370,190
    
    
    
    370,190Financial liabilities:Deposits
    
    
    115,971,229
    
    
    
    115,615,000Accrued interest payable
    
    
    8,492
    
    
    
    8,492
 June 30, 2005Carrying
    
    FairAmount
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    36,709,593
    
    
    
    36,709,593Investment securities, available for sale
    
    
    1,310,937
    
    
    
    1,310,937Mortgage-backed securities, held to maturity
    
    
    1,920,221
    
    
    
    1,938,460Loans receivable, gross
    
    
    94,920,558
    
    
    
    96,109,000Accrued interest receivable
    
    
    367,351
    
    
    
    367,351Financial liabilities:Deposits
    
    
    124,836,132
    
    
    
    124,601,000Accrued interest payable
    
    
    8,377
    
    
    
    8,377




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##### 



20)
    
    Condensed Parent Company Only Financial StatementsThe following condensed statements of financial condition, as of June 30, 2006 and 2005 and
condensed statements of income and cash flows for the years ended June 30 2006, 2005 and 2004
for Midland Capital Holdings Corporation should be read in conjunction with the consolidated
financial statements and the notes thereto.
  June 30,2006
    
    
    2005AssetsCash and cash equivalents
    
    $
    2,002,108
    
    
    
    1,568,662Loans receivable
    
    
    
    
    
    
    5,343Equity investment in the Association
    
    
    11,296,859
    
    
    
    11,126,868Prepaid expenses and other assets
    
    
    159
    
    
    
    613,299,126
    
    
    
    12,700,879Liabilities and Stockholders EquityLiabilities:Accrued taxes and other liabilities
    
    
    3,042
    
    
    
    4,197Stockholders Equity:Common stock
    
    
    3,726
    
    
    
    3,726Additional paid-in capital
    
    
    3,395,580
    
    
    
    3,395,580Retained earnings
    
    
    9,764,211
    
    
    
    9,080,803Accumulated other comprehensive income, net of tax
    
    
    132,567
    
    
    
    216,573Total stockholders equity
    
    
    13,296,084
    
    
    
    12,696,682$
    13,299,126
    
    
    
    12,700,879
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Interest income
    
    $
    14,585
    
    
    
    10,460
    
    
    
    11,281Non-interest income
    
    
    
    
    
    
    29
    
    
    
    Non-interest expense
    
    
    79,284
    
    
    
    70,345
    
    
    
    76,147Net loss before income tax benefit
and equity in earnings of subsidiaries
    
    
    (64,699
    )
    
    
    (59,856
    )
    
    
    (64,866
    )Benefit from income taxes
    
    
    21,998
    
    
    
    20,351
    
    
    
    22,054Net loss before equity in earnings of subsidiaries
    
    
    (42,701
    )
    
    
    (39,505
    )
    
    
    (42,812
    )Equity in earnings of subsidiaries
    
    
    1,053,997
    
    
    
    1,242,054
    
    
    
    1,085,480Net income
    
    $
    1,011,296
    
    
    
    1,202,549
    
    
    
    1,042,668




---



##### 



20)
    
    Condensed Parent Company Only Financial Statements (continued)
  Years Ended June 30,2006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    1,011,296
    
    
    
    1,202,549
    
    
    
    1,042,668Equity in earnings of the Association
    
    
    (1,053,997
    )
    
    
    (1,242,054
    )
    
    
    (1,085,480
    )(Increase) decrease in prepaid expenses
and other assets
    
    
    (153
    )
    
    
    1,553
    
    
    
    6,544(Decrease) increase in other liabilities
    
    
    (1,155
    )
    
    
    2,033
    
    
    
    (1,177
    )Net cash provided for operating activities
    
    
    (44,009
    )
    
    
    (35,919
    )
    
    
    (37,445
    )Cash flows from investing activities:Loan disbursements
    
    
    
    
    
    
    
    
    
    
    (15,000
    )Loan repayments
    
    
    5,343
    
    
    
    9,550
    
    
    
    107Net cash provided by (for) investing activities
    
    
    5,343
    
    
    
    9,550
    
    
    
    (14,893
    )Cash flows from financing activities:Dividends received from Association
    
    
    800,000
    
    
    
    750,000
    
    
    
    100,000Dividends paid on common stock
    
    
    (327,888
    )
    
    
    (298,080
    )
    
    
    (253,368
    )Net cash provided by (for) financing activities
    
    
    472,112
    
    
    
    451,920
    
    
    
    (153,368
    )Net change in cash and cash equivalents
    
    
    433,446
    
    
    
    425,551
    
    
    
    (205,706
    )Cash and cash equivalents at beginning of year
    
    
    1,568,662
    
    
    
    1,143,111
    
    
    
    1,348,817Cash and cash equivalents at end of year
    
    $
    2,002,108
    
    
    
    1,568,662
    
    
    
    1,143,111




---



##### 



Officers and DirectorsOfficers
    
    DirectorsPaul Zogas
    
    Paul ZogasPresident,
    
    President, Chief Executive Officer,Chief Executive Officer
    
    Chief Financial Officer andand Chief Financial Officer of
    
    Chairman of the Board forthe Company and the Association
    
    the Company and the AssociationCharles Zogas
    
    Charles ZogasExecutive Vice President,
    
    Executive Vice President,Chief Operating Officer,
    
    Chief Operating Officer,Secretary and Treasurer of
    
    Secretary and Treasurerthe Company and the AssociationRichard Taylor
    
    Richard TaylorVice President, Trust Officer
    
    Vice President, Trust Officerand Assistant Secretary of
    
    and Assistant Secretarythe Company and the AssociationJanice Cecott
    
    Algerd BrazisController of the Company
    
    Retired businessman andand the Association
    
    Director, Knights of LithuaniaMid-America DistrictDonna Chmiel
    
    Michael J. KukanzaInternal Auditor of the
    
    Self-employed private investorCompany and the AssociationLinda Kolecki
    
    Jonas VaznelisAssistant Vice President
    
    Retired businessman and Committeeof the Association
    
    member of the Board of Zoning Appealsfor Beverly Shores, Indiana.




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##### 



Corporate Information
 Investor Information
  Annual Report on Form 10-KSB
  Annual Meeting of Shareholders
  Stock Transfer Agent
  
 Corporate Counsel/Washington, D.C.
 
 Corporate Counsel/Chicago, Illinois
 
 Independent Auditors