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, 2001

                                       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 $379,000 in net income for the fiscal year ended June
30, 2001.

         As of June 30, 2001, 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, 2001.

         PART III of Form 10_KSB _ Proxy Statement for the 2001 Annual Meeting
of Stockholders.
<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, Homer Glen, Lockport, Orland Park and
Lemont which it serves through its main office in Bridgeview and three branch
offices in southwest Chicago. Its deposits are insured up to applicable limits
by the Federal Deposit Insurance Corporation ("FDIC"). At June 30, 2001, Midland
Federal had $142.5 million of assets, deposits of $131.5 million and
stockholders equity of $9.7 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


                                       2
<PAGE>

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
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 loans
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, in the case of
residential loans, the guidelines issued by the Federal Home Loan Mortgage
Corporation ("FHLMC").

         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.


                                       3
<PAGE>

         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 amounts up to $200,000 or the President
in amounts up to $275,000 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 $275,000 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, 2001, the Association had two borrowers with an outstanding
loan balances in excess of $500,000. One loan totaled $1.0 million, and was
secured by a 43 unit multi-family residential property in the Association's
market area. The other loan totaled $607,000 and was secured by a single family
residence. Both loans are current and performing in accordance with their terms
at June 30, 2001. 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>
<CAPTION>

                                                                                June 30,
                                          ---------------------------------------------------------------------------------------
                                                    2001                          2000                             1999
                                          -------------------------       ----------------------         ------------------------
                                           Amount           Percent       Amount         Percent         Amount           Percent
                                           ------           -------       ------         -------         ------           -------
                                                          (Dollars in Thousands)
<S>                                       <C>                <C>         <C>               <C>           <C>                 <C>
Real Estate Loans
 One- to four-family                      $ 64,372           93.18%      $ 49,545          91.84%        $ 46,032            92.28%
 Multi-family                                1,507            2.18          1,640           3.04            1,713             3.43
 Non-residential                               491            0.71            440           0.82              223             0.45
 Construction                                  828            1.20            486           0.90               --               --
                                          --------           -----       --------          -----         --------            -----
    Total mortgage loans                    67,198           97.27         52,111          96.60           47,968            96.16
                                          --------           -----       --------          -----         --------            -----

Other Loans
 Consumer Loans:
  Deposit accounts                             344            0.51            277           0.51              274             0.55
  Student                                      876            1.26          1,016           1.88            1,167             2.34
  Automobile                                   469            0.68            323           0.60              274             0.55
  Credit card                                  124            0.18             97           0.18               85             0.17
  Other                                         64            0.09             81           0.15               58             0.11
                                          --------           -----       --------          -----         --------            -----
     Total consumer loans                    1,877            2.72          1,794           3.32            1,858             3.72
                                          --------           -----       --------          -----         --------            -----

  Commercial business loans                      6            0.01             41           0.08               58             0.12
                                          --------           -----       --------          -----         --------            -----
     Total loans receivable                 69,081          100.00%        53,946         100.00%          49,884           100.00%
                                          --------           -----       --------          -----         --------            -----

Less
 Loans in process                              668                            414                               4
 Deferred yield adjustments                   (240)                          (128)                            (95)
 Allowance for uncollected interest            260                            261                             260
 Allowance for loan losses                     359                            369                             366
                                          --------                       --------                       ---------
    Loans receivable, net                 $ 68,034                       $ 53,030                        $ 49,349
                                          ========                       ========                        ========

Mortgage-backed securities:
  FHLMC                                   $ 14,146           81.45%      $ 17,341          79.00%        $ 10,245            64.53%
  FNMA                                       3,075           17.70          4,375          19.93            5,318            33.49
  GNMA                                         135            0.78            219           1.00              295             1.86
  Collateralized mortgage obligations           12            0.07             15           0.07               19             0.12
                                          --------           -----       --------          -----         --------            -----
    Total mortgage-backed securities        17,368          100.00%        21,950         100.00%          15,877           100.00%
                                                            ======                        ======                            ======
  Net premiums (discounts)                     (58)                           (96)                              5
                                          --------                       --------                       ---------
  Net mortgage-backed securities          $ 17,310                       $ 21,854                       $  15,882
                                          ========                       ========                       =========

</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>
<CAPTION>


                                                                              June 30,
                                         -----------------------------------------------------------------------------------
                                                   2001                         2000                         1999
                                         ----------------------         -----------------------      -----------------------
                                           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                    $ 59,160         85.64%      $ 44,131          81.80%      $ 42,988           86.18%
  Multi-family                                490          0.71            586           1.09            626            1.25
  Non-residential                             237          0.34            280           0.52             49            0.10
                                         --------         -----       --------          -----       --------           -----
      Total real estate loans              59,887         86.69         44,997          83.41         43,663           87.53
  Consumer                                    972          1.41            465           0.86            393            0.79
                                         --------         -----       --------          -----       --------           -----
     Total fixed-rate loans                60,859         88.10         45,462          84.27         44,056           88.32
                                         --------         -----       --------          -----       --------           -----

Adjustable-Rate Loans
Real estate:
  One- to four-family                       5,212          7.54          5,414          10.04          3,044            6.10
  Multi-family                              1,017          1.47          1,054           1.95          1,087            3.00
  Non-residential                             254          0.37            160           0.30            174            0.35
  Construction                                828          1.20            486           0.90             --           --
                                         --------         -----       --------          -----       --------           -----
     Total real estate loans                7,311         10.58          7,114          13.19          4,305            8.63
                                         --------         -----       --------          -----       --------           -----
  Consumer                                    905          1.31          1,329           2.46          1,465            2.93
  Commercial business
                                                6          0.01             41           0.08             58            0.12
                                         --------         -----       --------          -----       --------           -----
     Total adjustable-rate loans            8,222         11.90          8,484          15.73          5,828           11.68
                                         --------         -----       --------          -----       --------           -----
     Total loans, net                      69,081        100.00%        53,946         100.00%        49,884          100.00%
                                                         ======                        ======                         ======
Less:

  Loans in process                            668                          414                             4
  Deferred yield adjustments                 (240)                        (128)                          (95)
  Allowance for uncollected interest          260                          261                           260
  Allowance for loan losses                   359                          369                           366
                                         --------                     --------                    ----------
     Loans receivable, net               $ 68,034                     $ 53,030                    $   49,349
                                         ========                     ========                    ==========

</TABLE>


                                       6
<PAGE>
         The following schedule illustrates the interest rate sensitivity of the
Association's loan portfolio at June 30, 2001. 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.
<TABLE>
<CAPTION>


                                                                            Real Estate
                                      ------------------------------------------------------------------------------
                                                                         Multi-Family            Construction or
                                          One- to Four-Family            and Commercial           Development
                                      ------------------------     -------------------------   ---------------------
                                                      Weighted                     Weighted                Weighted
                                                      Average                      Average                 Average
                                        Amount          Rate        Amount           Rate      Amount        Rate
                                        ------          ----        ------           ----      ------        ----
                                                                      (Dollars in Thousands)
<S>                                   <C>                <C>        <C>            <C>          <C>           <C>
Due During Years
Ending June 30,

2002(1)...........................    $     940          7.02%      $   505        9.81%        $  828        8.41%
2003..............................          308          7.72           ---          ---           ---         ---
2004..............................          708          7.97           ---          ---           ---         ---
2005 to 2006......................          669          7.46         1,493         7.24           ---         ---
2007 to 2010......................        3,580          7.59           ---          ---           ---         ---
2011 to 2025......................       23,588          7.06           ---          ---           ---         ---
2026 and following................       34,579          7.34           ---          ---           ---         ---
                                        -------                      ------                     ------

                                        $64,372                      $1,998                     $  828
                                        =======                      ======                     ======

<CAPTION>
                                                                            Commercial
                                                Consumer                      Business                 Total
                                        ----------------------       -----------------------    -------------------
                                                      Weighted                      Weighted               Weighted
                                                      Average                       Average                Average
                                         Amount         Rate           Amount         Rate       Amount      Rate
                                         ------         ----           ------         ----       ------      ----
<S>                                   <C>                <C>        <C>            <C>          <C>           <C>
Due During Years
Ending June 30,

2002(1)...........................    $    513           9.91%      $    6         0.00%        $  2,792      8.45%
2003..............................         123           7.43          ---                           431      7.64
2004..............................         306           7.31          ---                         1,014      7.77
2005 to 2006......................         490           8.64          ---                         2,652      7.55
2007 to 2010......................         389           9.08          ---                        23,644      7.74
2011 to 2025......................          56           8.32          ---                        34,579      7.06
2026 and following................         ---            ---                                     34,579      7.34
                                      --------                       -----                       -------      ----

                                      $  1,877                      $    6                       $69,081      7.33%
                                      ========                       =====                       =======      ====

</TABLE>

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


         The total amount of loans due after June 30, 2002 which have
predetermined interest rates is approximately $60.02 million while the total
amount of loans due after such date which have floating or adjustable interest
rates is approximately $6.27 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. The Association has recently increased its one to four
family residential lending due to increased demand. At June 30, 2001, $64.4
million or 93.2%, 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.

         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.

         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, 2001, the total balance of one- to
four-family ARMs was $5.2 million, or 7.5% of the Association's gross loan
portfolio.

         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.

         Also classified as one- to four-family residential loans are home
equity lines of credit which were funded in the amount of $756,000 at June 30,
2001, and home equity loans, which were $1.5 million at June 30, 2001. Unfunded
commitments on home equity lines of credit totaled $1.1 million at June 30,
2001. 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
of 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 Board of Directors has authorized originations of mortgage


                                       8
<PAGE>

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 $1.5
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.

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

Consumer Lending
----------------

         Management believes that consumer loans help 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.


                                       9
<PAGE>
         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, 2001, student loans amounted to $876,000 or 1.3% 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, 2001, the Association had $469,000, or 0.68%
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, 2001, the Association had $124,000 or 0.18%
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 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.



                                       10
<PAGE>

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, 2001, $491,000, or 0.71%
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 $17.3 million at June 30, 2001. 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, 2001. 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>
<CAPTION>


                                                                 Due in                   Balance Outstanding
                                                     ------------------------------     ---------------------
                                                     1 to 5     6  to 20    Over 20
                                                     Years      Years       Years       Fixed      Adjustable
                                                     -----      -----       -----       -----      ----------
                                                                         (In Thousands)
<S>                                                  <C>        <C>         <C>         <C>         <C>
Federal Home Loan Mortgage Corporation.............. $ 9,104    $ 2,441     $ 2,543     $ 9,104     $ 4,984
Federal National Mortgage Association...............     ---      2,539         536         701       2,374
Government National Mortgage Association............     ---        135         ---         135         ---
Collateralized Mortgage Obligations.................      ---        12         ---          12         ---
                                                     --------   --------    --------    --------    -------
     Total.......................................... $ 9,104    $ 5,127     $ 3,079     $ 9,952     $ 7,358
                                                     =======    =======     =======     =======     =======

</TABLE>

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.



                                       11
<PAGE>



         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. During the years ended June 30, 2001, 2000 and 1999, the
Association sold loans to the Illinois Housing Development Authority and other
lenders, under various programs.



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

<TABLE>
<CAPTION>


                                                   Year Ended June 30,
                                           ------------------------------------
                                             2001         2000          1999
                                           --------      --------      --------
                                                  (Dollars in Thousands)
<S>                                        <C>           <C>           <C>
Originations by type:
 Adjustable-Rate:
   Real estate - one- to four-family       $    612      $  2,864      $    784
   Construction                                 342           486            --
   Non-real estate - consumer                   580           502           630
                                           --------      --------      --------
          Total adjustable rate               1,534         3,852         1,414
                                           --------      --------      --------
 Fixed-Rate:
   Real estate - One- to four-family         24,179        10,357        22,503
   Non-residential                              240           243            --
   Non-real estate - consumer                 1,374         1,044           929
                                           --------      --------      --------
          Total fixed-rate                   25,793        11,644        23,432
                                           --------      --------      --------
          Total loans originated             27,327        15,496        24,846
                                           --------      --------      --------

Purchases:
 Fixed-Rate:
  Real estate - one-to-four-family              984            --            --
                                           --------      --------      --------
         Total loans purchased                  984            --            --
                                           --------      --------      --------
         Total additions                     28,311        15,496        24,846
                                           --------      --------      --------

Sales:
 Real estate loans sold                        (534)       (3,173)       (3,298)
 Principal repayments                       (12,190)       (8,261)      (11,549)
                                           --------      --------      --------

 Net increase                              $ 15,587      $  4,062      $  9,999
                                           ========      ========      ========

Mortgage-backed securities:
 Mortgage-backed securities purchased            --      $ 10,007      $  1,102
 Mortgage-backed securities sold                 --            --            --
 Amortization and repayments                 (4,544)       (4,035)       (6,065)
                                           --------      --------      --------

 Net increase (decrease)                   $ (4,544)     $  5,972      $ (4,963)
                                           ========      ========      ========

</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.

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


                                       12
<PAGE>

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. 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, 2001 and June 30, 2000. The
balances included in the table do not reflect specific reserves.


                                       13
<PAGE>
<TABLE>
<CAPTION>

                                                                          At June 30, 2001
                                                                        Loans Delinquent For:
                                  --------------------------------------------------------------------------------------------------
                                          30 - 59 days                       60 - 89 days                     90 days and over
                                  -----------------------------      -----------------------------   -------------------------------
                                  Number     Amount     Percent      Number      Amount    Percent   Number     Amount       Percent
                                                                          (Dollars in Thousands)
<S>                                <C>        <C>         <C>            <C>    <C>        <C>       <C>       <C>          <C>
Real estate:
  One- to four-family............  13         $1,065      1.65%          1      $  30      0.05%       5        $ 218        0.34%
  Multi-family...................  --             --        --          --         --        --        1           61        0.40
Non-residential..................  --             --        --          --         --        --       --           --
Consumer.........................  --             --        --          --         --        --       27           62        3.30
Commercial business..............  --             --        --          --         --        --        2            3       43.79

     Total.......................  13         $1,065      1.54%          1      $  30      0.04%      35        $ 344        0.50%
                                  ===         ======                   ===      =====                ===        =====       =====
<CAPTION>
                                               At June 30, 2001
                                             Loans Delinquent For:
                                        --------------------------------
                                                      Total
                                        --------------------------------
                                        Number       Amount      Percent
                                        ------       ------      -------
<S>                                  <C>       <C>           <C>
Real estate:
  One- to four-family............    19        $1,313        2.04 %
  Multi-family...................     1            61        0.40
Non-residential..................    --            --          --
Consumer.........................    27            62        3.30
Commercial business..............     2             3       43.79

     Total.......................    49        $1,439        2.08%
                                     ==        ======



<CAPTION>

                                                                          At June 30, 2000
                                                                        Loans Delinquent For:
                                  --------------------------------------------------------------------------------------------------
                                          30 - 59 days                       60 - 89 days                     90 days and over
                                  -----------------------------      -----------------------------   -------------------------------
                                  Number     Amount     Percent      Number      Amount    Percent   Number     Amount       Percent
                                                                          (Dollars in Thousands)
<S>                                <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%
  Multi-family..................    --          --          --          --       --         --           3      155         9.44
Non-residential.................    --          --          --           1       19       4.32          --       --           --
Consumer........................    --          --          --           1        6       0.33          13       54         3.01
Commercial business.............    --          --          --          --       --         --           7        4         9.76
                                   ---        ----                     ---     ----                    ---     ---
     Total......................    10        $593        1.10%          4     $147       0.27%         27     $445         0.83%
                                   ===        ====        ====         ===     ====       ====         ===     ====         ====
<CAPTION>

                                           At June 30, 2001
                                         Loans Delinquent For:
                                    --------------------------------
                                                  Total
                                    --------------------------------
                                    Number       Amount      Percent
                                    ------       ------      -------
<S>                                 <C>      <C>          <C>
Real estate:
  One- to four-family...........    16       $ 947        1.91%
  Multi-family..................     3         155        9.45
Non-residential.................     1          19        4.32
Consumer........................    14          60        3.34
Commercial business.............     7           4        9.76
                                   ---      ------
     Total......................    41      $1,185        2.20%
                                   ===      ======        ====

</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>
<CAPTION>


                                                           At June 30,
                                                  ------------------------------
                                                   2001        2000        1999
                                                   ----        ----        ----
                                                      (Dollars in Thousands)
<S>                                                <C>         <C>         <C>
Non-Accruing Loans:
  One- to four-family                              $218        $232        $162
  Multi-family                                       --          38          38
  Consumer                                            8          13          --
   Commercial business                                4           1          24
                                                   ----        ----        ----
     Total                                          230         284         224
                                                   ----        ----        ----

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

Total non-performing assets                        $230        $284        $500
                                                   ====        ====        ====

Total as a percentage of total assets              0.16%       0.21%       0.38%
                                                   ====        ====        ====

</TABLE>

         As of June 30, 2001, 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, 2001, gross interest income which
would have been recorded had the non-accruing loans been current in accordance
with their original terms amounted to $1,000, which interest income was not
accrued into interest income for the fiscal year ended June 30, 2001.

         Non-Accruing Loans. As of June 30, 2001, non-accruing one-to-four
family loans totaled $218,000 and consisted of five loans secured by properties
located in the Association's primary market area.

         As of June 30, 2001, there were no other loans not included in the
table or discussed above where known information about the possible credit
problems of borrowers caused management to have serious doubts as to the ability
of the borrower to comply with present loan repayment terms and which may result
in disclosure of such loans in the future.

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


                                       15
<PAGE>
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, 2001, the Association had
classified a total of $226,000 of its assets as substandard, none as doubtful,
$114,000 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 $24,000 in loan charge-offs during fiscal 2001.
During fiscal 2001, the Company increased its general allowance for loan losses
to $246,000 at fiscal year end from $185,000 at the prior fiscal year end. At
fiscal year end, the $246,000 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 $61,000
increase in the Company's general allowance for loan losses during fiscal 2001
was the result of $72,000 in recoveries from fully reserved loans which loss
reserves were transferred from specific allowance to general and $14,000 in
recoveries from loans previously charged off. These loan loss recoveries were
offset by $25,000 in loans that were specifically reserved out of the general
allowance for loan losses during the current fiscal year. Although management


                                       16
<PAGE>

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, 2001 the
Association had a total allowance for losses on loans of $359,000 or 0.52% 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>
<CAPTION>
                                                       Year Ended June 30,
                                                  ----------------------------
                                                  2001        2000        1999
                                                  -----       -----      -----
                                                      (Dollars in Thousands)
<S>                                               <C>         <C>        <C>
Balance at beginning of period                    $ 369       $ 366      $ 394
                                                  -----       -----      -----

Charge-offs:
 One- to four-family                                 --          --         --
 Consumer                                            11          --          7
 Commercial business                                 13          --         23
                                                  -----       -----      -----
      Total charge-offs                              24          --         30
                                                  -----       -----      -----

Recoveries:
 One- to four-family                                 14          --         --
 Consumer                                            --           3          2
                                                  -----       -----      -----
     Total recoveries                                14           3          2
                                                  -----       -----      -----

Net charge-offs                                     (10)          3        (28)
                                                  -----       -----      -----
Balance at end of period                          $ 359       $ 369      $ 366
                                                  =====       =====      =====

Ratio of net charge-offs during the period to
 average loans outstanding during the period       0.04%       ---%        .06%

Ratio of net charge-offs during the period to
 average non-performing assets                     4.79%       ---%       2.68%

Allowance for loan losses to
 non-performing loans(1)                          106.92%     65.24%     79.66%

Allowance for loan losses to total loans           0.52%       0.69%      0.74%
</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>
<CAPTION>

                                                     June 30,
                       ----------------------------------------------------------------------
                                  2001                    2000                   1999
                       ---------------------   ---------------------    ---------------------
                                    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     $ 96         93.18%      $102         91.84%      $ 70         92.28%
Multi-family              64          2.18        126          3.04        166          3.43
Non-residential            1          0.71          1          0.82         --          0.45
Construction              --          1.20         --          0.90         --            --
Consumer                  55          2.72         67          3.32         35          3.72
Commercial business        2          0.01          3          0.08         --          0.12
Unallocated              141            --         70            --         95            --
                        ----        ------       ----        ------       ----        ------
     Total              $359        100.00%      $369        100.00%      $366        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
in the Association's market area, the Association invests in various types of
liquid assets, short and medium term government securities as well as smaller
amounts of other assets. Cash flow projections are regularly reviewed and
updated to assure that adequate liquidity is provided.

         At June 30, 2001, the Association's interest-bearing deposits in other
financial institutions totaled $16.4 million, or 11.5% of its total assets, and
investment securities totaled $31.3 million, or 22.0% of its total assets. As of
such date, the Association also had a $783,000 investment in the common stock of
the FHLB of Chicago in order to satisfy the requirement for membership in this
institution. At June 30, 2001, 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>
<CAPTION>



                                                                    At June 30,
                                      -------------------------------------------------------------------
                                              2001                    2000                   1999
                                      ------------------      ------------------      -------------------
                                      Carrying     Fair       Carrying     Fair       Carrying     Fair
                                       Value       Value       Value       Value       Value       Value
                                      -------     -------     -------     -------     -------     -------
                                                                  (In Thousands)
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>
Investment Securities:
 U.S. government securities           $ 8,477     $ 8,741     $18,469     $18,508     $20,971     $21,063
 U.S. agency securities                22,614      22,907       6,500       6,431       4,000       3,969
 FHLB - Chicago stock                     783         783         728         728         636         636
                                      -------     -------     -------     -------     -------     -------
   Total investment securities        $31,874     $32,431     $25,697     $25,667     $25,607     $25,668
                                      =======     =======     =======     =======     =======     =======

Interest-bearing deposits:

 FHLB daily investment                $ 2,424     $ 2,424     $17,625     $17,625     $19,723     $19,723
 Other daily investments               14,015      14,015      12,005      12,005      11,364      11,364
                                      -------     -------     -------     -------     -------     -------
  Total interest-bearing deposits     $16,439     $16,439     $29,630     $29,630     $31,087     $31,087
                                      =======     =======     =======     =======     =======     =======

</TABLE>

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

<TABLE>
<CAPTION>


                                                                          June 30, 2001
                                             -------------------------------------------------------------------

                                             1 Year       1 to 5      Over        Total Investment
                                             or Less       Years    10 Years         Securities
                                             -------       -----    --------         ----------
                                                                    (Dollars in Thousands)
                                                                                                        Weighted
                                                Book       Book        Book        Book       Fair       Average
                                               Value       Value      Value       Value       Value       Yield
                                               -----       -----      -----       -----       -----       -----
                                                                        (In Thousands)
<S>                                            <C>        <C>         <C>         <C>         <C>          <C>
U.S. government and agency securities         $ 7,498     $    --     $   979     $ 8,477     $ 8,741
U.S. Agency securities                          2,542      20,072          --      22,614      22,907


                                              $10,040     $20,072     $   979     $31,091     $31,648        5.85%
</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


                                       19
<PAGE>
accounts, fixed interest rate certificates of deposit with varying maturities,
and negotiated rate $100,000 jumbo certificates of deposit ("Jumbo CDS").

         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>
<CAPTION>

                                                 Year Ended June 30,
                                     -----------------------------------------
                                        2001            2000            1999
                                     ---------       ---------       ---------
                                                (Dollars in Thousands)
<S>                                  <C>             <C>             <C>
Opening balance                      $ 126,871       $ 120,225       $ 107,762
Deposits                               423,623         438,125         388,101
Withdrawals                           (424,012)       (436,191)       (379,590)
                                     ---------       ---------       ---------
Balance before interest credited       126,482         122,159         116,273
Interest credited                        5,022           4,712           3,952
                                     ---------       ---------       ---------

Ending balance                       $ 131,504       $ 126,871       $ 120,225
                                     =========       =========       =========

Net increase                         $   4,633       $   6,646       $  12,463
                                     =========       =========       =========

Percent increase                          3.65%           5.53%          11.57%
                                     =========       =========       =========

</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>
<CAPTION>

                                                                     June 30,
                                   --------------------------------------------------------------------------
                                            2001                     2000                       1999
                                   ----------------------     ---------------------     ---------------------
                                                 Percent                   Percent                   Percent
                                    Amount       of Total     Amount       of Total     Amount       of Total
                                    ------       --------     ------       --------     ------       --------
                                                               (Dollars in Thousands)
Interest Rate Range:
-------------------
<S>                               <C>              <C>        <C>            <C>        <C>               <C>
Passbook accounts                 $ 43,581         33.14%     $ 42,814       33.75%     $ 43,456          36.15%
NOW accounts                        11,107          8.45         9,829        7.75         8,755           7.28
Money market accounts                7,962          6.05         8,364        6.59         5,343           4.44
Non-interest bearing deposits       10,009          7.61         9,109        7.18         9,278           7.72
                                  --------        ------      --------      ------      --------         ------

  Total non-certificates            72,659         55.25        70,116       55.27        66,832          55.59
                                  ========        ======      ========      ======      ========         ======

Certificates:
-------------


Interest rate range:
--------------------
 3.01-4.00%                          8,316          6.32            --       --               --          --
 4.01-5.00%                         29,201         22.21        16,284       12.83        36,937          30.72
 5.01-6.00%                         16,649         12.66        36,309       28.62        16,456          13.69
 6.01-7.00%                          4,679          3.56         4,162        3.28            --          --

   Total certificates               58,845         44.75        56,755       44.73        53,393          44.41
                                  --------        ------      --------      ------      --------         ------

   Total deposits                 $131,504        100.00%     $126,871      100.00%     $120,225         100.00%
                                  ========        ======      ========      ======      ========         ======

</TABLE>

         The following table shows rate and maturity information for the
Association's time deposits as of June 30, 2001.
<TABLE>
<CAPTION>

                                    3.01-      4.01-       5.01-        6.01-                   Percent
                                    4.00%      5.00%       6.00%        7.00%       Total       of Total
                                    -----      -----       -----        -----       -----       --------
                                                          (Dollars in Thousands)

Certificate Accounts Maturing
in Quarter Ending:
-----------------------------

<S>                                <C>         <C>         <C>           <C>        <C>            <C>
September 30, 2001                 $ 2,457     $ 7,909     $ 6,934       3,491      20,791         35.33%
December 31, 2001                    5,830       8,901       2,973       1,088      18,792         31.94
March 31, 2002                          10       7,209       4,804         100      12,123         20.60
June 30, 2002                           19       4,696         163          --       4,878          8.29
September 30, 2002                      --           5         463          --         468          0.79
December 31, 2002                       --          59         258          --         317          0.54
March 31, 2003                          --          21         583          --         604          1.03
June 30, 2003                           --          32         326          --         358          0.61
September 30, 2003                      --         184         145          --         329          0.56
December 31, 2003                       --         185          --         185                      0.31
                                   -------     -------     -------     -------     -------        ------

     Total                         $ 8,316     $29,201     $16,649     $ 4,679     $58,845        100.00%
                                   =======     =======     =======     =======     =======        ======

     Percent of total                14.13%      49.63%      28.29%       7.95%     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, 2001.

<TABLE>
<CAPTION>

                                                                            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......... $ 18,269     $15,360     $14,683    $1,997      $50,309

Certificate of deposit of $100,000 or more......... $  2,522       3,432       2,318       264        8,536
                                                    --------    --------     -------    -------     --------

   Total certificates of deposit................... $ 20,791     $18,792     $17,001    $2,261      $58,845
                                                    ========     =======     =======    ======      =======
</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 amount in operating subsidiaries engaged solely in
activities which a federal association may engage in directly.

                                       22
<PAGE>

         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, 2001, Midland Federal's equity investment in Midland
Service Corporation was approximately $177,000. During fiscal 2001, Midland
Service Corporation recorded a profit of $8,000.

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 profit of $4,000 for the 2001 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 January 2, 2001 using financial data as of September
30, 2000, 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, 2001 was $39,000.

         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 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.


                                       23
<PAGE>


         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, 2001, 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, 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 (Tier 1 Risk-Based Capital) 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
a Tier 1 Risk-Based Capital ratio of 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.

         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


                                       24
<PAGE>

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.

         At fiscal year end 2001, 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 about 2 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, 2001, the
Association had retained mortgage servicing assets and an unrealized gain, net
of tax, under SFAS No. 115 in the amount of $163,000.

         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.

         At June 30, 2001, the Association had tangible capital of $8.8 million,
or 6.15% of adjusted total assets, which is approximately $6.7 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.

         The capital standards also require core capital or Tier 1 Capital equal
to at least 3% of adjusted total assets (as defined by regulation). Core capital
generally consists of tangible capital plus certain intangible assets, including
supervisory goodwill and a limited amount of purchased credit card relationships
and purchased mortgage servicing rights. As a result of the prompt corrective
action provisions of FDICIA, discussed below, a savings association must
maintain a core capital ratio of at least 4% to be considered "adequately


                                       25
<PAGE>
capitalized" unless its supervisory condition is such to allow it to maintain a
3% ratio. At June 30, 2001, the Association had retained mortgage servicing
assets which were subject to these tests.

         At June 30, 2001, the Association had core capital equal to $8.8
million, or 6.15% of adjusted total assets, which is $4.5 million above the
minimum leverage ratio requirement of 3% in effect on that date. In addition, on
such date the Association had Tier 1 Risked Capital equal to $8.8 million or
a15.63% of Risk-Weighted Assets, which is $6.5 million above the requirement of
4% on effect on that date.

          The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. At
June 30, 2001, Midland Federal had no capital instruments that qualify as
supplementary capital and $246,000 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, 2001.

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

         OTS regulations also require that every savings association with more
than normal interest rate risk exposure to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to 50%
of its interest-rate risk exposure multiplied by the present value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings association, greater than 2% of the present value of its
assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule will not become effective until the OTS
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain as to when this evaluation may be
completed. Any savings association with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement unless the
OTS determines otherwise.


                                       26
<PAGE>

         On June 30, 2001, the Association had total capital of $9.0 million
(including $8.8 million in core capital and $241,000 of qualifying general loss
reserves) and risk-weighted assets of $56.3 million or total capital of 16.04%
of risk-weighted assets. This amount was $4.5 million above the 8% requirement
in effect on that date.

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

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

         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



                                       27
<PAGE>

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.

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

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

         OTS accounting regulations, which may be made more stringent than GAAP
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.

         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, 2001 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 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.


                                       28
<PAGE>

         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.

         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 2001 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 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.

Holding Company Regulation

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

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


                                       29
<PAGE>

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

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

Federal Securities Law

         The stock of the Company is registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the SEC under the Exchange Act.

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

         Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. At June 30, 2001 the
Association was in compliance with these reserve requirements.

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

         Federal Home Loan Bank System. 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


                                       30
<PAGE>

financing. While a member of the FHLB of Chicago at June 30, 2001, 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, 2001 Midland Federal had $783,000 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 6.87% and were 7.47% for
calendar year 2000.

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

         For the year ended June 30, 2001, dividends paid by the FHLB of Chicago
to Midland Federal totaled $54,000, which was an $8,000 increase over the amount
of dividends received in fiscal year 2001. The $12,000 dividend received for the
quarter ended June 30, 2001 reflects an annualized rate of 6.50%, or 0.97% below
the rate for calender year 2000.

         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,
2001, the Association's excess for tax purposes totaled approximately $1.1
million.

                                       31
<PAGE>

         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, 1998, 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.

         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 July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" (SFAS No.141) and Statement of
Financial Accounting Standards N. 142, "Goodwill and Other Intangible Assets"
(SFAS No. 142). SFAS No. 141 requires that all business combinations initiated
after June 30, 2001 be accounted for under the purchase method and addresses the
initial recognition and measurement of goodwill and other intangible assets
acquired in a business combination. SFAS No. 142 addresses the initial
recognition and measurement of intangible assets acquired outside of a business
combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives will not be amortized, but will rather be tested at least
annually for impairment. SFAS No. 142 is effective January 1, 2002 for calender
year companies, however, any acquired goodwill or intangible assets recorded in
transactions closed subsequent to June 30, 2001 will be subject immediately to
the nonamortization and amortization provisions of SFAS No. 142. The Company
does not believe these statements will have a material impact on its financial
position or results of operations.

Employees
---------

         At June 30, 2001, the Association had a total of 42 full-time employees
and 42 part-time employees. None of the Association's employees are represented
by any collective bargaining group. Management considers its employee relations
to be good.


                                       32
<PAGE>

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 $929,000 at June 30, 2001. 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 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 $46,000 and $21,000
net book values at June 30, 2001, respectively.

         The Association owns a parcel of vacant land located in Homer Glen,
Illinois which has a net book value of $180,500 at June 30, 2001. The
Association has also entered into a lease for retail space and additional vacant
land adjacent to the same location in Homer Glen, Illinois. The Association
established a full service branch banking facility at this location which opened
for business during April 1999. The net book value of remodeling and leasehold
improvement costs at this 32,846 square foot location amount to approximately
$465,000 at June 30, 2001.

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, 2001 was $267,000.

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,
2001.

                                     PART II
                                     -------


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

         Pages 20 and 49 of the 2001 Annual Report to Stockholders is herein
incorporated by reference.



                                       33
<PAGE>

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

         Pages 6 through 18 of the 2001 Annual Report to Stockholders is herein
incorporated by reference.

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

         Pages 23 through 47 of the 2001 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.

                                    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.


                                       34
<PAGE>
                                     PART IV
                                     -------


Item 13.  Exhibits and Reports on Form 8-K

         (a) Exhibits:
         ------------
<TABLE>
<CAPTION>

                                                                                          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
                 Published report regarding matters submitted to vote of security
    22           holders................................................................      None
    23           Consent of Experts and Counsel.........................................      None
    24           Power of Attorney......................................................      Not required
    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, 2001.


                                       35
<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:                             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.

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

Date: September 28, 2001                                       Date: September 28, 2001

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

Date: September 28, 2001                                       Date: September 28, 2001


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

Date: September 28, 2001                                       Date: September 28, 2001


</TABLE>
                                       36