Midland Capital (MCPH) 10QSB 2007 Q3 Quarterly report (small business)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number 1-14343

MIDLAND CAPITAL HOLDINGS CORPORATION

(Name of Small Business Issuer in its Charter)

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

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

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

Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Transitional Small Business Disclosure Format. Yeso Noþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

Indicate the number of shares of each of the Issuer’s classes of common stock as of the latest practicable date:

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

As of May 14, 2007, the Issuer had
372,600 shares of Common Stock issued and outstanding.

MIDLAND CAPITAL HOLDINGS CORPORATION

			PAGE
Part I. FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Statements of Financial Condition -
		March 31, 2007 (unaudited) and June 30, 2006		1
		Consolidated Statements of Earnings -
		Three months ended March 31, 2007 and 2006 and
		Nine months ended March 31, 2007 and 2006 (unaudited)		2
		Consolidated Statements of Changes in Stockholders' Equity -
		Nine months ended March 31, 2007 (unaudited)		3
		Consolidated Statements of Cash Flows -
		Nine months ended March 31, 2007 and 2006 (unaudited)		4
		Notes to Consolidated Financial Statements		5-7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		8-16
	Item 3.	Controls and Procedures		16
Part II. OTHER INFORMATION				17
	Item 1.	Legal Proceedings		17
	Item 2.	Changes in Securities		17
	Item 3.	Defaults Upon Senior Securities		17
	Item 4.	Submission of Matters to a Vote of Security Holders		17
	Item 5.	Other Information		17
	Item 6.	Exhibits		17
	Index to Exhibits			18
Exhibit 11
Exhibit 31.1
Exhibit 32.1

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Part I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Consolidated Statements of Financial Condition

	March 31,		June 30,
	2007		2006
	(Unaudited)
Assets
Cash and amounts due from depository institutions	$	2,554,822		2,204,602
Interest-bearing deposits		10,407,530		9,055,302
Total cash and cash equivalents		12,962,352		11,259,904
Investment securities available for sale, at fair value		20,922,775		21,021,975
Mortgage-backed securities, held to maturity (fair value:
March 31, 2007 - $1,531,164; June 30, 2006 - $1,688,292)		1,517,660		1,684,228
Loans receivable (net of allowance for loan losses:
March 31, 2007 - $421,920; June 30, 2006 - $415,666)		85,369,049		91,701,483
Loans receivable held for sale		—		843,090
Stock in Federal Home Loan Bank of Chicago		1,148,087		1,148,087
Other Investments, available for sale		97,456		1,104
Accrued interest receivable		365,120		370,190
Office properties and equipment, net		2,096,872		2,240,702
Prepaid expenses and other assets		595,407		546,586
Total assets	$	125,074,778		130,817,349
Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	110,279,517		115,971,229
Advance payments by borrowers for taxes and insurance		699,646		1,127,293
Other liabilities		422,154		422,743
Total liabilities		111,401,317		117,521,265
Stockholders’ equity:
Preferred stock, $.01 par value: authorized 50,000 shares; none outstanding		—		—
Common stock, $.01 par value: authorized 600,000 shares; issued and outstanding 372,600 shares at March 31, 2007 and June 30, 2006		3,726		3,726
Additional paid-in capital		3,395,580		3,395,580
Retained earnings — substantially restricted		10,052,994		9,764,211
Accumulated other comprehensive income, net of income taxes		221,161		132,567
Total stockholders’ equity		13,673,461		13,296,084
Total liabilities and stockholders’ equity	$	125,074,778		130,817,349

See accompanying notes to consolidated financial statements.

-1-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Earnings (Unaudited)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2007		2006		2007		2006
Interest income:
Interest on loans	$	1,267,497		1,370,266		3,916,335		4,079,774
Interest on mortgage-backed securities		22,415		20,547		66,874		60,958
Interest on investment securities		268,142		192,526		801,994		518,793
Interest on interest-bearing deposits		117,366		122,097		312,796		389,475
Dividends on FHLB stock		9,609		8,642		27,892		33,248
Total interest income		1,685,029		1,714,078		5,125,891		5,082,248
Interest expense:
Interest on deposits		526,848		425,659		1,534,700		1,192,765
Total interest expense		526,848		425,659		1,534,700		1,192,765
Net interest income		1,158,181		1,288,419		3,591,191		3,889,483
Provision for loan losses		—		—		—		—
Net interest income after provision for loan losses		1,158,181		1,288,419		3,591,191		3,889,483
Non-interest income:
Loan fees and service charges		55,935		46,019		143,076		201,918
Commission income		25,466		19,192		47,816		40,661
Gain on sale of loans		31,714		13,381		82,777		32,426
Gain on sale of other assets		—		—		—		16,286
Deposit related fees		75,678		109,491		254,114		338,529
Other income		14,214		11,200		64,673		36,802
Total non-interest income		203,007		199,283		592,456		666,622
Non-interest expense:
Staffing costs		643,598		653,719		1,927,580		1,958,929
Advertising		14,290		15,512		49,881		48,517
Occupancy and equipment expenses		177,858		177,276		513,397		492,785
Data processing		52,038		52,721		141,470		150,854
Federal deposit insurance premiums		3,407		4,029		10,725		12,460
Other		221,245		246,081		696,960		755,347
Total non-interest expense		1,112,436		1,149,338		3,340,013		3,418,892
Income before income taxes		248,752		338,364		843,634		1,137,213
Income tax provision		84,424		115,044		286,579		386,652
Net income	$	164,328		223,320		557,055		750,561
Earnings per share (basic)	$	.44		.60		1.50		2.01
Earnings per share (diluted)	$	.44		.60		1.50		2.01
Dividends declared per common share	$	.24		.22		.72		.66

See accompanying notes to consolidated financial statements.

-2-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

								Accumulated
			Additional					Other
	Common		Paid-In		Retained			Comprehensive
	Stock		Capital		Earnings			Income		Total
Balance at June 30, 2006	$	3,726		3,395,580		9,764,211			132,567		13,296,084
Comprehensive Income:
Net income						557,055					557,055
Other comprehensive income, net of tax:
Unrealized holding gain during the period									88,594		88,594
Total comprehensive income						557,055			88,594		645,649
Dividends declared on common stock ($0.72 per share)						(268,272	)				(268,272	)
Balance at March 31, 2007	$	3,726		3,395,580		10,052,994			221,161		13,673,461

See accompanying notes to consolidated financial statements.

-3-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	March 31,
	2007			2006
Cash flows from operating activities:
Net income	$	557,055			750,561
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		168,809			158,305
Net accretion on securities		(745,744	)		(462,543	)
Federal Home Loan Bank stock dividend		—			(24,587	)
Proceeds from sale of loans held for sale		6,583,274			2,534,462
Origination of loans held for sale		(5,673,600	)		(2,769,703	)
Gain on sale of loans		(82,777	)		(32,426	)
Gain on sale of other assets		—			(16,286	)
Decrease (increase) in accrued interest receivable		5,070			(3,281	)
Increase in accrued interest payable		912			300
Increase in deferred income on loans		27,868			3,470
Increase in other assets		(78,268	)		(187,995	)
(Decrease) increase in other liabilities		(1,501	)		59,500
Net cash provided by operating activities		761,098			9,777
Cash flows from investing activities:
Proceeds from repayments of mortgage backed securities, held to maturity		166,568			196,952
Proceeds from maturities of investment securities, available for sale		35,000,000			20,000,000
Purchase of investment securities, available for sale		(34,117,174	)		(34,294,245	)
Loan disbursements		(7,242,854	)		(14,608,912	)
Loan repayments		13,547,420			15,941,011
Proceeds from sale of other assets		—			16,286
Property and equipment expenditures		(24,979	)		(148,504	)
Net cash provided by (for) investing activities		7,328,981			(12,897,412	)
Cash flows from financing activities:
Deposit account receipts		233,524,306			268,426,852
Deposit account withdrawals		(240,633,213	)		(276,764,413	)
Interest credited to deposit accounts		1,417,195			1,125,820
Payment of dividends		(268,272	)		(245,916	)
Decrease in advance payments by borrowers for taxes and insurance		(427,647	)		(272,145	)
Net cash provided for financing activities		(6,387,631	)		(7,729,802	)
Net change in cash and cash equivalents		1,702,448			(20,617,437	)
Cash and cash equivalents at beginning of period		11,259,904			36,709,593
Cash and cash equivalents at end of period	$	12,962,352			16,092,156
Cash paid during the period for:
Interest	$	1,533,788			1,192,465
Income taxes		262,456			327,049

See accompanying notes to consolidated financial statements.

-4-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note A — Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form 10-QSB and therefore, do not include information or footnotes necessary for fair presentation of financial condition, results of operations and changes in financial position in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, all adjustments (which are normal and recurring in nature) necessary for a fair presentation have been included. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three months and nine months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the entire year.

Note B — Principles of Consolidation
The accompanying unaudited consolidated financial statements include the accounts of Midland Capital Holdings Corporation (the “Company”) and its wholly-owned subsidiary, Midland Federal Savings and Loan Association (the “Association”) and the Association’s wholly-owned subsidiaries, Midland Federal Service Corporation, Midland Insurance Services, Inc. and Bridgeview Development Company, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

Note C — Earnings Per Share
Earnings per share for the three month and nine month periods ended March 31, 2007 and 2006 were determined by dividing net income for the period by the weighted average number of shares of common stock outstanding (see Exhibit 11 attached). Stock options are regarded as common stock equivalents and are therefore considered in diluted earnings per share calculations. Common stock equivalents are computed using the treasury stock method.

Note D — Industry Segments
The Company operates principally in the thrift industry through its subsidiary savings and loan. As such, substantially all of the Company’s revenues, net income, identifiable assets and capital expenditures are related to thrift operations.

Note E — Effect of New Accounting Pronouncements
In December 2004, the FASB issued Statement No. 123R “Shared-Based Payment” (“SFAS No. 123R”). SFAS No. 123R is a revision of SFAS No. 123, “Accounting for Stock Based Compensation”, supersedes APB 25 and amends FASB Statement No. 95, “Statement of Cash Flows.” SFAS No. 123R establishes standards for the accounting for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of the equity instruments. SFAS No. 123R eliminates the ability to account for stock-based compensation using APB 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. The effective date of SFAS No. 123R is the beginning of the Company’s next fiscal year that begins after December 15, 2005.

-5-

Note E — Effect of New Accounting Pronouncements (continued)
SFAS No. 123R permits companies to adopt the recognition requirements using either a “modified prospective” method or a “modified retrospective” method. Under the “modified prospective” method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all shared-based payments granted after that date, and based on the requirements of SFAS No. 123R for all unvested awards granted prior to the effective date of SFAS No. 123R. Under the “modified retrospective” method, the requirements are the same as under the “modified prospective” method, but also permits entities to restate financial statements of previous periods based on pro forma disclosures made in accordance with SFAS No. 123.

The Company adopted SFAS No. 123R effective July 1, 2006. The adoption of SFAS No. 123R did not have any impact on the Company’s financial position or results of operations as there are currently no outstanding options. Future levels of compensation cost recognized related to shared-based compensation awards may be impacted by new awards and/or modification, repurchases, and cancellations of existing awards after the adoption of this standard.

In March 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 156, “Accounting for Servicing of Financial Assets” (“SFAS No. 156”), which requires all separately recognized servicing assets and liabilities to be initially measured at fair value, if practical. An entity can elect either to (1) subsequently measure servicing rights at fair value and report changes in fair value in earnings, or (2) continue the current practice of amortizing servicing rights in proportion to and over the expected period of servicing income or loss. The statement also permits entities, at the date of adoption, a one-time option to reclassify certain available-for-sale (“AFS”) securities to trading securities, without calling into question the classification of other AFS securities under Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, provided that the AFS securities are identified as offsetting the entity’s exposure to changes in fair value of servicing assets or liabilities that the entity has elected to subsequently measure at fair value. This statement is effective for fiscal years beginning after September 15, 2006. The Company is currently evaluating the impact of the statement on its financial position and results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for uncertainty in Income Taxes, an interpretation of SFAS 109 (“FIN 48”) which establishes a recognition threshold and measurement for income tax positions recognized in an enterprise’s financial statements in accordance with SFAS 109, Account for Income Taxes. FIN 48 also prescribes a two-step evaluation process for tax positions. The first step is recognition and the second is measurement. For recognition, an enterprise judgmentally determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of related appeals or litigation processes, based on the technical merits of the position. If the tax position meets the more-likely-than-not recognition threshold, it is measured and recognized in the financial statements as the largest amount of tax benefit that is greater than 50% likely of being realized. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements.

Tax positions that meet the more-likely-than-not recognition threshold at the effective date of FIN 48 may be recognized or, continue to be recognized, upon adoption of this interpretation. The cumulative effect of applying the provisions of FIN 48 shall be reported as an adjustment to the opening balance of retained earnings for that fiscal year. FIN 48 is effective for fiscal years beginning after December 15, 2006. Accordingly, the Company plans to adopt FIN 48 on July 1, 2007. The adoption of FIN 48 is not expected to have a material impact on the Company’s financial condition or results of operations.

-6-

Note E — Effect of New Accounting Pronouncements (continued)
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Earlier application is encouraged provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statement for an interim period within that fiscal year. The Company does not expect the adoption of SFAS 157 to have a material impact on its financial condition or results of operations.

In September 2006, the U.S. Securities Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 is effective for fiscal years ending after November 15, 2006. The application of SAB 108 did not have an impact on the Company’s financial condition or results of operations.

In October 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) (“SFAS 158”), which does not change the amount of net periodic benefit cost included in net income or address the various measurement issues associated with postretirement benefit plan accounting. SFAS 158 requires an entity to recognize in its statement of financial position an asset for a defined benefit postretirement plan’s overfunded status or a liability for a plan’s underfunded status, measure a defined benefit postretirement plan’s assets and obligations that determine its funded status as of the end of the employer’s fiscal year, and recognize changes in the funded status of a defined benefit postretirement plan in comprehensive income in the year in which the changes occur. SFAS 158 is effective for fiscal years ending after December 15, 2006. The Company does not expect the adoption of SFAS 158 to have a significant impact on its financial condition and results of operations since the Company participates in a multi-employer defined benefit pension plan.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”) which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities. Subsequent changes in fair value of these financial assets and liabilities would be recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted. Management is currently evaluating the impact and timing of the adoption of SFAS 159 on the Company’s financial condition and results of operations.

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

-7-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS
When used in this Form 10-QSB and in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases or other public or shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “would be”, “will allow”, “intends to”, “will likely result”, “are expected to”, “will continue”, “is anticipated”, “estimate”, “project” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, including but not limited to changes in economic conditions and real estate values in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates including the relationship between long and short term interest rates, demand for loans in the Company’s market area and competition, all or some of which could cause actual results to differ materially from historical earnings and those presently anticipated or projected.

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

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

GENERAL
Midland Capital Holdings Corporation (the “Company”) is a Delaware corporation that was organized for the purpose of becoming the thrift holding company for Midland Federal Savings and Loan Association (the “Association” or “Midland Federal”). At March 31, 2007, there were 372,600 shares of the Company’s common stock outstanding.

The principal asset of the Company is the outstanding stock of the Association. The Company presently has no separate operations and its business consists only of the business of the Association and its subsidiaries. Midland Federal has been principally engaged in the business of attracting deposits from the general public and using such deposits to originate one to four family residential mortgage loans, and to a lesser extent, consumer, multi-family and other loans in its primary market area. The Association also has made substantial investments in investment securities, mortgage-backed securities and liquid assets. Midland Federal also operates a wholly-owned subsidiary, Midland Federal Service Corporation that owns and operates Midland Insurance Services, Inc., a full service retail insurance agency.

The Association’s primary market area consists of Southwest Chicago, and the southwest suburban communities of Bridgeview, Oak Lawn, Palos Hills, Hickory Hills, Justice, Burbank, Chicago Ridge, Homer Glen, Lockport, Orland Park and Lemont. The Company serves these communities through its main office in Bridgeview, two branch banking offices in southwest Chicago and a third branch banking office in Homer Glen, Illinois. The Association’s deposits are insured up to applicable limits by the Federal Deposit Insurance Corporation (“FDIC”). At March 31, 2007, Midland Federal’s capital ratios exceeded all of its regulatory capital requirements with both tangible and core capital ratios of 8.91% and a risk-based capital ratio of 21.25%.

-8-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

FINANCIAL CONDITION
At March 31, 2007, total assets of the Company decreased by $5.7 million to $125.1 million from $130.8 million at June 30, 2006. The decrease was the result of repayments of net loans receivable, the proceeds of which were used to fund a $5.7 million decline in deposit balances to $110.3 million at March 31, 2007.

Loans receivable decreased $6.3 million to $85.4 million at March 31, 2007 due to a decline in portfolio loan originations. The Company originated $7.2 million of portfolio loans during the nine months ended March 31, 2007 compared to portfolio loan originations of $14.6 million during the 2006 period. The decline in portfolio loan origination volume in the current nine month period was due in part to an emphasis on originations of loans held for sale which increased to $5.7 million during the nine months ended March 31, 2007 compared to $2.8 million during the prior year period. We increased our originations of loans held for sale as we determined to limit fixed rate portfolio loan originations in view of the possibility of an increase in long term interest rates. Proceeds from the sale of loans held for sale also increased to $6.6 million during the nine months ended March 31, 2007 compared to $2.5 million during the 2006 period. Portfolio loan repayments declined to $13.5 million during the nine months ended March 31, 2007 compared with $15.9 million during the 2006 period. There were no new purchases of mortgage-backed securities during the nine months ended March 31, 2007 and as a result, the balance of mortgage-backed securities decreased by $167,000 to $1.5 million due to repayments.

The balance of investment securities available for sale remained stable at $20.9 million at March 31, 2007. The investment securities portfolio at March 31, 2007 was largely comprised of six month United States Treasury Securities in order to take advantage of higher short term interest rates. Gross unrealized gains in the available for sale investment securities portfolio were $239,000 at March 31, 2007 compared to gross unrealized gains of $201,000 at June 30, 2006, primarily reflecting the positive impact of lower long term interest rates on one long term investment security in the available for sale portfolio. The weighted average remaining term to maturity of the Company’s total investment securities portfolio at March 31, 2007 was 10 months.

The balance of other investments available for sale totaled $97,000 at March 31, 2007 compared to $1,000 at June 30, 2006. The increase was due to the conversion of a non-marketable equity security to common stock in two publicly traded equity securities and the resulting unrealized gains recorded on these marketable equity securities.

The balance of interest bearing deposits increased by $1.3 million to $10.4 million at March 31, 2007 from $9.1 million at June 30, 2006. The Company continued to maintain a higher balance of interest bearing deposits in light of the higher short term interest rate environment.

Non-performing assets consisted of $834,000 in non-accruing loans at March 31, 2007 compared to $327,000 at June 30, 2006. The allowance for loan losses increased $6,000, due to net recoveries, and amounted to $422,000, or 0.49% of total loans, at March 31, 2007 as compared to $416,000, or ..45% of total loans, at June 30, 2006. The Company made no loan loss provisions during the nine months ended March 31, 2007. Non-accruing loans at March 31, 2007 consisted of $808,000 in one-to-four family residential mortgage loans and $26,000 in non-mortgage loans. At March 31, 2007 the Company’s ratio of allowance for loan losses to non-performing loans was 50.61% compared to 127.27% at June 30, 2006. Management believes that the current allowance for loan losses at March 31, 2007 was adequate to cover probable accrued losses in the portfolio.

-9-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

FINANCIAL CONDITION (continued)
The following table sets forth the amounts and categories of non-performing assets in the Company’s portfolio. Loans are placed on non-accrual status when the collection of principal and/or interest becomes doubtful, generally when the loan is delinquent 90 days or more. Foreclosed assets, if any, include assets acquired in settlement of loans.

	March 31,			June 30,
	2007			2006
	(Dollars in Thousands)
Non-Accruing Loans:
One-to-four family	$	808		$	295
Multi-family		—			—
Consumer		26			32
Commercial business		—			—
Total non-performing loans	$	834		$	327
Foreclosed Assets:
One-to-four family		—			—
Total foreclosed assets		—			—
Total non-performing assets	$	834		$	327
Total as a percentage of total assets		0.67	%		0.25	%

As of March 31, 2007, there were no loans not included in the above table where known information about the possible credit problems of borrowers caused management to have serious doubts as to the ability of the borrower to comply with present loan repayment terms and which may result in disclosure of such loans in the future.

-10-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

FINANCIAL CONDITION (continued)
The following table sets forth an analysis of the Company’s allowance for loan losses.

	Nine Months Ended
	March 31,
	2007			2006
	(Dollars in Thousands)
Balance at beginning of period	$	416		$	457
Charge-offs:
One-to-four family loans		—			—
Multi-family loans		—			—
Consumer loans		—			17
Total charge-offs		—			17
Recoveries:
One-to-four family loans		—			—
Multi-family loans		—			—
Consumer loans		6			2
Total recoveries		6			2
Net recoveries (charge-offs)		6			(15	)
Additions charged to operations		—			—
Balance at end of period	$	422		$	442
Ratio of net charge-offs during the period to average loans outstanding during the period		—	%		.02	%
Ratio of net charge-offs during the period to average non-performing assets		—	%		5.32	%
Allowance for loan losses to non-performing loans		50.61	%		189.79	%
Allowance for loan losses to total loans		0.49	%		0.47	%

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

Deposits for the nine months ended March 31, 2007 decreased $5.7 million to $110.3 million as a result of withdrawals, net of deposits, in the amount of $7.1 million, offset by interest credited to deposits in the amount of $1.4 million. The net decrease in deposits is primarily attributed to increased competition for deposit accounts in a flat yield curve environment. The decrease in deposits is the result of a $3.5 million decrease in passbook deposit accounts due to consumer preference for certificates of deposit account in a higher interest rate environment, a $1.7 million decrease in demand deposit accounts, a $1.2 million decrease in money market accounts and a $670,000 decrease in NOW accounts offset by a $1.4 million increase in certificate of deposit accounts.

Stockholders’ equity increased $377,000, or 2.8%, to $13.7 million at March 31, 2007 from $13.3 million at June 30, 2006. The increase in stockholders’ equity was due to net income of $557,000 and an increase in accumulated other comprehensive income of $88,000 offset by the payment of cash dividends in the amount of $268,000.

-11-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 2007 was $164,000 compared to net income of $223,000 for the quarter ended March 31, 2006. Net income decreased in the current quarter, compared to the prior year quarter, as the result of a $130,000 decrease in net interest income offset by a $4,000 increase in non-interest income, a $37,000 decrease in non-interest expense and a $30,000 decrease in income taxes.

For the nine months ended March 31, 2007 the Company had net income of $557,000 compared to net income of $751,000 for the nine months ended March 31, 2006. Net income decreased in the nine months ended March 31, 2007, compared to the prior year period, as the result of a $299,000 decrease in net interest income and a $74,000 decrease in non-interest income, offset by a $79,000 decrease in non-interest expense and a $100,000 decrease in income taxes.

The Company’s interest rate spread decreased to 3.54% for the quarter ended March 31, 2007 from 3.81% for the prior year quarter. The decrease in interest rate spread reflects an increase in the Company’s average yield paid on interest costing deposits to 2.11% in the current quarter from 1.62% in the prior year quarter. The increase in the average yield paid on interest costing deposits more than offset an increase in the average yield earned on interest earning assets to 5.65% in the current quarter from 5.43% in the prior year quarter. The average balance of net earning assets (average interest earning assets minus average interest bearing liabilities) also decreased by $1.6 million to $19.3 million compared with the prior year quarter.

For the nine months ended March 31, 2007, interest rate spread decreased to 3.63% compared to 3.81% in the prior year nine month period. Interest rate spread decreased in the nine months ended March 31, 2007 compared with the prior year period also as a result of a 55 basis point increase in the average yield paid on interest costing deposits which more than offset a 37 basis point increase in the average yield earned on interest earning assets. For the nine months ended March 31, 2007, the average outstanding balance of interest earning assets decreased to $120.7 million from $128.1 million for the prior year period. The average balance of net earning assets in the nine months ended March 31, 2007 also decreased by $954,000 to $20.0 million compared with the prior year period.

Interest Income
Interest income decreased $29,000, or 1.7%, for the quarter ended March 31, 2007 as compared to the same period last year. The decrease in interest income is attributed to a $7.0 million decline in the average balance of interest earning assets to $119.3 million for the quarter ended March 31, 2007 compared to $126.3 million for the quarter ended March 31, 2006. The decrease in the average balance of interest earning assets offset an increase in the average yield earned on interest earning assets to 5.65% for the quarter ended March 31, 2007 from 5.43% in the prior year quarter.

For the nine months ended March 31, 2007, interest income increased $44,000, or 0.9%, from the 2006 period. The increase in interest income for the current nine month period was the result of an increase in the average yield earned on interest earning assets which offset a decrease in the average outstanding balance of interest earning assets. The average yield on interest earning assets increased to 5.66% compared to 5.29% for the year earlier period. The average outstanding balance of interest earning assets decreased by $7.4 million to $120.7 million for the nine months ended March 31, 2007 from $128.1 million for the prior year period.

-12-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Interest Income (continued)
Interest on loans receivable decreased $103,000, or 7.5%, for the quarter ended March 31, 2007 from the comparable quarter in 2006. The decrease in interest income was primarily attributed to an $8.1 million decrease in the average outstanding balance of net loans receivable to $86.1 million for the quarter ended March 31, 2007 from $94.2 million for the quarter ended March 31, 2006. The decrease in the average outstanding balance of loans receivable more than offset an increase in the average yield earned on loans receivable to 5.89% for the quarter ended March 31, 2007 as compared to 5.82% for the quarter ended March 31, 2006.

Interest on mortgage-backed securities increased $2,000, or 9.1%, for the quarter ended March 31, 2007 from the comparable quarter in 2006. The increase in interest income is attributed to an increase in the average yield earned on mortgage-backed securities to 5.84% for the quarter ended March 31, 2007 from 4.70% in the year earlier period. The increase in the average yield earned on mortgage-backed securities offset a $214,000 decrease in the average balance of mortgage-backed securities to $1.5 million from $1.7 million in the prior year quarter. The increase in the average yield earned on mortgage-backed securities was the result of the Company’s adjustable rate mortgage-backed securities re-pricing at higher yields as market interest rates increased between the two quarterly periods.

Interest on investment securities increased $76,000, or 39.3%, to $268,000 for the quarter ended March 31, 2007 from $193,000 for the prior year period due to an increase in the average yield earned on investment securities. For the quarter ended March 31, 2007 the average yield earned on investment securities increased to 5.13% from 4.23% in the prior year quarter due to an increase in yield on the portfolio of six month treasury bill securities.

Interest earned on interest bearing deposits decreased $5,000, or 3.9%, to $117,000 for the quarter ended March 31, 2007 from the prior year quarter. The decrease in interest income is attributed to a $1.6 million decrease in the average outstanding balance of interest bearing deposits to $9.4 million for the quarter ended March 31, 2007 from $11.0 million in the 2006 quarter. The decrease in the average outstanding balance of interest bearing deposits offset an increase in the average yield earned on interest bearing deposits to 4.97% for the quarter ended March 31, 2007 from 4.44% in the 2006 quarter.

For the nine months ended March 31, 2007, interest on loans receivable decreased $163,000, or 4.0%, compared with the prior year period. The decrease in interest income was primarily attributed to a $5.5 million decrease in the average outstanding balance of net loans receivable to $88.9 million for the nine months ended March 31, 2007 from $94.4 million for the nine months ended March 31, 2006. The decline in the average outstanding balance of net loans receivable offset an increase in the average yield earned on loans receivable to 5.87% for the nine months ended March 31, 2007 as compared to 5.76% for the prior year period.

For the nine months ended March 31, 2007 interest earned on mortgage backed securities increased $6,000 to $67,000. The increase in interest income is attributed to an increase in the average yield earned on mortgage-backed securities to 5.62% for the nine months ended March 31, 2007 from 4.47% for the comparable prior year period. The increase in the average yield earned on mortgage-backed securities offset a decrease in the average outstanding balance of mortgage-backed securities to $1.6 million for the nine months ended March 31, 2007 from $1.8 million for the nine months ended March 31, 2006.

-13-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Interest Income (continued)
For the nine months ended March 31, 2007 interest earned on investment securities increased $283,000, or 54.6%, to $802,000. The increase in interest income is attributed to increases in both the average outstanding balance of investment securities and the average yield earned on investment securities. For the nine months ended March 31, 2007 the average outstanding balance of investment securities increased $3.6 million to $20.8 million from $17.2 million in the 2006 quarter. The average yield earned on investment securities also increased to 5.13% for the nine months ended March 31, 2007 from 4.02% in the year earlier period.

For the nine months ended March 31, 2007 interest earned on interest bearing deposits decreased $77,000, or 19.7%, from the year earlier period. The decrease in interest income was due to a $5.3 million decrease in the average outstanding balance of interest bearing deposits to $8.2 million for the nine months ended March 31, 2007 from $13.5 million for the comparable prior year period. The decrease in the average outstanding balance of interest bearing deposits offset an increase in the average yield earned on interest bearing deposits to 5.12% for the nine months ended March 31, 2007 from 3.85% for the prior year period.

Interest Expense
Interest expense increased $101,000, or 23.8%, for the quarter ended March 31, 2007 compared with the prior year quarter. The increase in interest expense is attributable to an increase in the average yield paid on interest costing deposits to 2.11% for the quarter ended March 31, 2007 from 1.62% for the quarter ended March 31, 2006. The increase in the average yield paid on interest costing deposits was partially offset by a decrease in the average balance of interest costing deposits. The average balance of interest costing deposits decreased by $5.4 million to $100.0 million for the quarter ended March 31, 2007 from $105.4 million in the prior year quarter.

For the nine months ended March 31, 2007 interest expense increased $342,000, or 28.7%, to $1.5 million from $1.2 million for the prior year period. The increase in interest expense in the nine month period is also the result of an increase in the average yield paid on interest costing deposits offset by a decline in the average outstanding balance of interest costing deposits. For the nine months ended March 31, 2007 the average yield paid on interest costing deposits increased to 2.03% from 1.48% for the nine months ended March 31, 2006 and the average outstanding balance of interest costing deposits decreased by $6.5 million to $100.7 million from $107.2 million for the comparable prior year period.

Provisions for Losses on Loans
The Company maintains an allowance for loan losses based upon management’s periodic evaluation of probable accrued losses in the portfolio based on known and inherent risks in the loan portfolio, the Company’s past loan loss experience, adverse situations that may affect borrowers’ ability to repay loans, estimated value of the underlying collateral and current and expected market conditions. The allowance for loan loses totaled $422,000, or .49% of total loans, at March 31, 2007 compared to $416,000, or .45% of total loans, at June 30, 2006. The $6,000 increase in the Company’s allowance for loan losses during the current nine month period was the result of net recoveries. At March 31, 2007, after consideration of the high concentration of one-to-four family mortgage loans in the loan portfolio, peer data, current economic conditions, trends in the portfolio, the low level of loan charge offs and the locally stable housing market, the $422,000 allowance for loan losses was determined by the Company to be sufficient to cover probable accrued losses in the loan portfolio consistent with its policy for the establishment and maintenance of adequate levels of loan loss reserves. As a result, the Company made no loan loss provisions during the three and nine months ended March 31, 2007.

-14-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

Non-Interest Income
Non-interest income increased $4,000 to $203,000 in the quarter ended March 31, 2007 as compared to the prior year quarter. The primary factors for the increase in non-interest income were an $18,000 increase in gain on the sale of loans, a $10,000 increase in loan fees and service charges, a $6,000 increase in commission income and a $3,000 increase in land trust fees offset by a $34,000 decrease in deposit related fees. The increase in loan fees and service charges resulted primarily from an increase in brokered loan fees.

For the nine months ended March 31, 2007 non-interest income decreased $74,000 to $593,000 from $667,000 in the prior year period. The primary factors for the decrease in non-interest income were an $84,000 decrease in deposit related fees and a $59,000 decrease in loan fees and service charges offset by a $50,000 increase in profit on the sale of loans, a $24,000 recovery of data communication charges billed in error and a $7,000 increase in commission income. Non-interest income was increased in the prior year period as a result of a $16,000 gain from additional proceeds received in the prior year period on the sale of Midland Federal’s investment in Intrieve, Incorporated.

Non-Interest Expense
Non-interest expense decreased $37,000 to $1.1 million in the quarter ended March 31, 2007 as compared to the prior year quarter. The decrease in non-interest expense is primarily the result of a $10,000 decrease in staffing costs and a $10,000 decrease in computer software and support expense.

For the nine months ended March 31, 2007 non-interest expense decreased $79,000 to $3.3 million compared with the prior year period. The primary factors for the decrease in non-interest expense in the current nine month period were a $31,000 decrease in staffing expense, a $21,000 decrease in computer software and support expense and a $9,000 decrease in data processing fees, offset by a $21,000 increase in office occupancy expense. The decrease in staffing expense is primarily attributed to a $28,000 decrease in payroll expenses and a $15,000 decrease in loan origination commissions due to a decrease in lending volume, offset by an $18,000 increase in the cost of employee benefits.

Income Taxes
Income taxes decreased by $31,000 to $84,000 in the quarter ended March 31, 2007 from $115,000 for the same period last year. The decreased income tax provision was due to the decrease in operating income in the quarter ended March 31, 2007 as compared to the quarter ended March 31, 2006.

For the nine months ended March 31, 2007 income taxes decreased $100,000 to $287,000 compared to $387,000 in the prior year period. The decreased income tax provision was due to the decrease in operating income in the nine months ended March 31, 2007 as compared to the nine months ended March 31, 2006. The effective income tax rate in all periods presented was 34.0%.

-15-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

LIQUIDITY AND CAPITAL RESOURCES
The Company’s principal sources of funds are deposits, loan and mortgage backed securities repayments, proceeds from the maturities of investment securities and other funds provided by operations. The Company maintains investments in liquid assets based upon management’s assessment of (i) the Company’s need for funds, (ii) expected deposit flows, (iii) the yields available on short-term liquid assets and (iv) the objectives of the Company’s asset/liability management program. At March 31, 2007 the Company had commitments to originate $292,000 in loans for the portfolio and unused lines of credit in the amount of $4.1 million. At March 31, 2007 the Company had commitments to sell $170,000 in loans. Also on that date, the Company had $37.5 million of certificate of deposit accounts maturing within one year, which management generally expects to retain.

The Company uses its capital resources principally to meet its ongoing commitments to fund maturing certificate of deposits and deposit withdrawals, fund existing and continuing loan commitments, maintain its liquidity and meet operating expenses. The Company considers its liquidity and capital reserves sufficient to meet its outstanding short and long-term needs. The Company expects to be able to fund or refinance, on a timely basis, its material commitments and long-term liabilities.

At March 31, 2007, the Association had tangible and core capital of $11.1 million, or 8.91% of adjusted total assets, which was approximately $9.3 million and $7.4 million above the minimum requirements in effect on that date of 1.5% and 3.0%, respectively, of adjusted total assets.

At March 31, 2007, the Association had total capital of $11.6 million (including $11.1 million in core capital) and risk-weighted assets of $54.6 million, or total capital of 21.25% of risk-weighted assets. This amount was $7.2 million above the 8.0% requirement in effect on that date.

Item 3. CONTROLS AND PROCEDURES
The Company has adopted disclosure controls and procedures designed to facilitate the Company’s financial reporting. The disclosure controls currently consist of communications between the Chief Executive and Financial Officer and each department head to identify any new transactions, events, trends, risks or contingencies which may be material to the Company’s operations. In addition, the Chief Executive and Financial Officer and the Company’s independent auditors also meet on a quarterly basis and discuss the Company’s material accounting policies. Finally, the Chief Executive and Financial Officer and certain of the Company’s other Officers meet on a regular basis to review the Company’s financial statements and certain documents related to material transactions. The Company’s Chief Executive and Financial Officer has evaluated the effectiveness of these disclosure controls as of the end of the period covered by this report and found them to be adequate.

The Company maintains internal control over financial reporting. There have not been any significant changes in such internal control over financial reporting in the last quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

-16-

MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
From time to time, the Association is a party to legal proceedings wherein it enforces its security interest or is a defendant to certain lawsuits arising out of the ordinary course of its business. Neither the Company nor the Association believes that it is a party to any legal proceedings that will have a material adverse effect on its financial condition at this time.

Item 2. CHANGES IN SECURITIES
Not applicable.

Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.

Item 5. OTHER INFORMATION
Not applicable.

Item 6. EXHIBITS
See Exhibit Index.

-17-

INDEX TO EXHIBITS

Exhibit
Number	Description
11	Computation of Per Share Earnings
31.1	Rule 13a-14(a)/15d-14(a) Certification
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

-18-

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MIDLAND CAPITAL HOLDINGS CORPORATION Registrant
DATE: May 14, 2007	BY:	/s/ Paul Zogas
		Paul Zogas
		President, Chief Executive Officer and Chief Financial Officer
DATE: May 14, 2007	BY:	/s/ Charles Zogas
		Charles Zogas
		Executive Vice President and Chief Operating Officer

EXHIBIT INDEX

Exhibit
Number	Description
11	Computation of Per Share Earnings
31.1	Rule 13a-14(a)/15d-14(a) Certification
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002