UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
( ) 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 36-4238089
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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. Yes (X)
No ( )
Transitional Small Business Disclosure Format. Yes ( ) No (X)
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 November 14, 2000, the Issuer had
363,975 shares of Common Stock issued and outstanding.
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
Part I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Financial Condition -
September 30, 2000 (unaudited) and June 30, 2000................ 1
Consolidated Statements of Earnings - Three Months
Ended September 30, 2000 and 1999 (unaudited)................... 2
Consolidated Statements of Changes in Stockholders' Equity -
Three Months Ended September 30, 2000 (unaudited)............... 3
Consolidated Statements of Cash Flows - Three Months
Ended September 30, 2000 and 1999 (unaudited)................... 4
Notes to Consolidated Financial Statements...................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 6-10
Part II. OTHER INFORMATION............................................... 11
Index to Exhibits.................................................... 12
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
Part I FINANCIAL INFORMATION
Consolidated Statements of Financial Condition
<TABLE>
Assets September 30, June 30,
2000 2000
------------ -----------
(Unaudited)
<S> <C> <C>
Cash and amounts due from
depository institutions $ 3,568,740 3,036,708
Interest-bearing deposits 32,943,615 29,629,809
------------ ----------
Total cash and cash equivalents 36,512,355 32,666,517
Investment securities, held to maturity (fair value:
September 30, 2000 - $19,991,313;
June 30, 2000 - $19,896,031) 20,005,296 19,990,723
Investment securities available for sale, at fair value 5,078,903 5,042,710
Mortgage-backed securities, held to maturity (fair value:
September 30, 2000 - $19,930,632;
June 30, 2000 - $21,508,988) 20,063,520 21,854,112
Loans receivable (net of allowance for loan losses:
September 30, 2000 - $382,520;
June 30, 2000 - $368,885) 54,416,733 53,030,170
Stock in Federal Home Loan Bank of Chicago 728,500 728,500
Office properties and equipment, net 2,522,836 2,580,061
Accrued interest receivable 753,210 650,954
Prepaid expenses and other assets 638,426 681,743
------------ -----------
Total assets $140,719,779 137,225,490
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits $130,649,815 126,870,476
Advance payments by borrowers for taxes and insurance 295,050 693,302
Other liabilities 408,060 404,995
------------ -----------
Total liabilities 131,352,925 127,968,773
=========== ===========
Stockholders' equity:
Preferred stock, $.01 par value:
authorized 1,000,000 shares; none outstanding - -
Common stock, $.01 par value: authorized 5,000,000
shares; issued and outstanding 363,975 shares
at September 30, 2000 and June 30, 2000 3,640 3,640
Additional paid-in capital 3,274,654 3,274,654
Retained earnings - substantially restricted 6,026,632 5,948,332
Accumulated other comprehensive income, net of income taxes 66,433 42,704
Common stock awarded by Bank Incentive Plan (4,505) (12,613)
------------ -----------
Total stockholders' equity 9,366,854 9,256,717
------------ -----------
Total liabilities and stockholders' equity $140,719,779 137,225,490
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Earnings
<TABLE>
Three Months Ended
September 30,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Interest income:
Interest on loans $1,014,379 896,398
Interest on mortgage-backed securities 347,899 285,810
Interest on investment securities 370,004 345,559
Interest on interest-bearing deposits 509,780 467,322
Dividends on FHLB stock 13,963 10,420
--------- ---------
Total interest income 2,256,025 2,005,509
--------- ---------
Interest expense:
Interest on deposits 1,304,380 1,185,824
--------- ---------
Total interest expense 1,304,380 1,185,824
--------- ---------
Net interest income 951,645 819,685
--------- ---------
Non-interest income:
Loan fees and service charges 39,022 49,352
Commission income 24,613 19,921
Profit on sale of loans 673 13,354
Profit on sale of real estate owned 766 808
Deposit related fees 123,718 127,705
Other income 18,579 19,810
--------- ---------
Total non-interest income 207,371 230,950
--------- ---------
Non-interest expense:
Staffing costs 512,826 494,065
Advertising 27,444 34,640
Occupancy and equipment expenses 182,259 183,233
Data processing 43,950 40,134
Federal deposit insurance premiums 6,722 16,265
Other 226,213 209,694
--------- ---------
Total non-interest expense 999,414 978,031
--------- ---------
Income before income taxes 159,602 72,604
Income tax provision 54,004 24,411
-------- ---------
Net income $ 105,598 48,193
========== ========
Earnings per share (basic) $ 0.29 0.13
========= =======
Earnings per share (diluted) $ 0.29 0.13
========= =======
Dividends declared per common share $ 0.075 0.075
========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
<TABLE>
Accumulated Common
Additional Other stock
Common Paid-In Retained Comprehensive awarded
Stock Capital Earnings Income by BIP Total
------ --------- --------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 2000 $3,640 3,274,654 5,948,332 42,704 (12,613) 9,256,717
------ --------- --------- -------- ----- ---------
Comprehensive Income:
Net Income 105,598 105,598
Other comprehensive income, net of tax:
Unrealized holding gain
during the period 23,729 23,729
------- ------ ------
Total comprehensive income 105,598 23,729 129,327
Amoritzation of award of
BIP stock 8,108 8,108
Dividends declared on
common stock ($0.075
per share) (27,298) (27,298)
----- --------- --------- ------- ------ ---------
Balance at
September 30, 2000 $3,640 3,274,654 6,026,632 66,433 (4,505) 9,366,854
====== ========== ========= ====== ====== =========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
Three Months Ended
September 30,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 105,598 48,193
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation 78,978 75,814
Amortization of premiums and discounts on securities (23,210) (3,799)
Amortization of cost of stock benefit plan 8,108 8,108
Profit on sale of real estate owned (766) (808)
Proceeds from sale of loans held for sale 50,000 1,195,200
Origination of loans held for sale (50,000) (1,128,750)
Profit on sale of loans (673) (13,354)
Increase in accrued interest receivable (102,256) (120,099)
Increase (decrease) in accrued interest payable 311 (832)
Decrease in deferred income on loans (14,466) (881)
Decrease in other assets 31,765 40,619
Increase (decrease) in other liabilities 2,754 (42,140)
------------ ----------
Net cash provided by operating activities 86,143 57,271
------------ ----------
Cash flows from investing activities:
Purchase of mortgage-backed securities, held to maturity - (10,007,275)
Proceeds from repayments of mortgage-backed securities,
held to maturity 1,801,240 1,344,215
Purchase of investment securities, held to maturity (2,502,250) (2,497,325)
Proceeds from maturities of investment securities,
held to maturity 2,500,000 2,500,000
Loan disbursements (3,316,366) (2,089,868)
Loan repayments 1,945,035 2,251,047
Proceeds from sale of real estate owned - 276,472
Property and equipment expenditures (21,753) (45,506)
------------ ----------
Net cash provided for investing activities 405,906 (8,268,240)
------------ ----------
Cash flows from financing activities:
Deposit account receipts 107,170,155 110,823,035
Deposit account withdrawals (104,632,704) (100,388,793)
Interest credited to deposit accounts 1,241,888 1,126,420
Payment of dividends (27,298) (27,298)
(Decrease) increase in advance payments by borrowers
for taxes and insurance (398,252) 324,887
------------ ----------
Net cash provided for financing activities 3,353,789 11,858,251
------------ ----------
Increase in cash and cash equivalents 3,845,838 3,647,282
Cash and cash equivalents at beginning of period 32,666,517 35,020,296
------------ ----------
Cash and cash equivalents at end of period $ 36,512,355 38,667,578
------------ ----------
Cash paid during the period for:
Interest $ 1,304,069 1,186,656
Income taxes 28,054 0
------------ ----------
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
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
generally accepted accounting principles. 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 generally accepted accounting principles 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 ended September 30, 2000 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 Service
Corporation, MS Insurance Agency, Inc. and Bridgeview Development Company. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Note C - Stock Conversion and Holding Company Reorganization
On June 30, 1993, the Association completed a conversion to the stock form of
organization with the sale of 345,000 shares of $.01 par value common stock at
$10.00 per share. On March 19, 1998, the Board of Directors of the Association
adopted a proposal to reorganize the Association into a holding company form of
organization in accordance with a Merger Agreement and Plan of Reorganization
(the "Reorganization"). The Reorganization was approved by the Association's
shareholders on July 15, 1998 and became effective on July 23, 1998. As a result
of the Reorganization, the Association became a wholly-owned subsidiary of
Midland Capital Holdings Corporation, a newly formed Delaware Corporation, and
each outstanding share of common stock of the Association became, by operation
of law, one share of common stock of Midland Capital Holdings Corporation.
Midland Capital Holdings Corporation operates as a unitary thrift holding
company.
Note D - Earnings Per Share
Earnings per share for the three month periods ended September 30, 2000 and 1999
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 E - 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 F - Effect of New Accounting Pronouncements
There are no new accounting pronouncements not yet implemented by the Company
that would have a material impact on its financial position or results of
operations.
-5-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Midland Capital Holdings Corporation (the "Company") is a Delaware corporation
that was organized in 1998 by Midland Federal Savings and Loan Association (the
"Association" or "Midland Federal") for the purpose of becoming 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 by reorganizing the Association into a
holding company form of organization. Each outstanding share of common stock of
the Association became one share of common stock 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 and its subsidiaries. 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 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 mortgage-backed securities, investment securities and
liquid assets. Midland Federal also operates a wholly-owned subsidiary, Midland
Service Corporation that owns and operates MS Insurance Agency, 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, 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 Township, Illinois. The Association's deposits are insured up to
applicable limits by the Federal Deposit Insurance Corporation ("FDIC"). At
September 30, 2000, Midland Federal's capital ratios exceeded all of its
regulatory capital requirements with both tangible and core capital ratios of
6.32% and a risk-based capital ratio of 19.14%.
Forward Looking Statements
When used in this Form 10-QSB and in future filings by the Company with the
Securities and Exchange Commission (the "SEC"), in the Company's press releases
or other public or shareholder communications, and in oral statements made with
the approval of an authorized executive officer, the words or phrases "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to risks and
uncertainties, including but not limited to changes in economic conditions in
the 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.
-6-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
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.
FINANCIAL CONDITION
During the quarter ended September 30, 2000, total assets of the Company
increased by $3.5 million to $140.7 million from $137.2 million at June 30,
2000. Net loans receivable increased $1.4 million to $54.4 million at September
30, 2000 as loan disbursements of $3.3 million offset loan repayments of $1.9
million. The balance of cash and cash equivalents increased by $3.8 million to
$36.5 million at September 30, 2000. The Company maintains a substantial balance
of cash equivalents in an attempt to control interest rate risk and to fund
future loan demand. The $1.4 million increase in net loans receivable and the
$3.8 million increase in cash and cash equivalents were funded by a $1.8 million
decrease in the balance of mortgage-backed securities to $20.1 million as well
as a $3.8 million increase in deposits to $130.6 million at September 30, 2000.
The $1.8 million decrease in the balance of mortgage-backed securities was the
result of repayments of mortgage-backed securities during the quarter ended
September 30, 2000. The balance of investment securities remained relatively
unchanged at $25.1 million during the quarter ended September 30, 2000. The
weighted average remaining maturity of the Company's investment securities
portfolio at September 30, 2000 was 1.8 years.
As discussed above, deposits for the quarter ended September 30, 2000 increased
$3.8 million as deposit activity of $107.2 million and interest credited to
deposits in the amount of $1.2 million exceeded withdrawal activity of $104.6
million. The net increase in savings deposits is attributed to a $5.2 million
increase in certificate of deposit accounts, a $430,000 increase in demand
deposit accounts and a $326,000 increase in NOW accounts, offset by a $1.5
million decrease in passbook deposit accounts and a $679,000 decrease in money
market accounts. The net increase in savings deposits is primarily attributed to
aggressive pricing and promotion of certificate of deposit accounts at the
Company's new branch office location in Homer Township, Illinois.
Stockholders' equity for the quarter ended September 30, 2000 increased by
$110,000 to $9.4 million primarily as a result of earnings in the amount of
$106,000 and a $24,000 market adjustment from securities available for sale, net
of income taxes, offset by dividends paid on common stock in the amount of
$27,000.
RESULTS OF OPERATIONS
The Company had net income of $106,000 for the quarter ended September 30, 2000
compared to net income of $48,000 for the quarter ended September 30, 1999. The
increase in net income in the current quarter is the result of a $132,000
increase in net interest income offset by a $24,000 decrease in non-interest
income, a $21,000 increase in non-interest expense and a $30,000 increase in
income taxes. For a discussion on the decrease in non-interest income and
increase in non-interest expense, respectively, see "Non-Interest Income" and
"Non-Interest Expense." The increase in net interest income was primarily the
result of increases in both net interest margin and interest rate spread. For
the quarter ended September 30, 2000 interest rate spread and net interest
margin increased to 2.78% and 2.88%, respectively, from 2.43% and 2.50% in the
prior year quarter. The Company attributed the increase in both interest rate
spread and net interest margin to an increase in the average yield on interest
earning assets to 6.83% for the current quarter from 6.11% in the prior year
quarter as the Company's interest earning assets re-priced at higher market
interest rates.
-7-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
Interest Income
Interest income increased $251,000, or 12.5%, for the quarter ended September
30, 2000 as compared to the same period last year. The increase in interest
income is primarily attributed to an increase in the average yield earned on
interest earning assets, as discussed above. The average balance of interest
earning assets also increased $866,000 to $132.2 million for the quarter ended
September 30, 2000 compared to $131.3 million for the quarter ended September
30, 1999.
Interest on loans receivable increased $118,000, or 13.2%, for the quarter ended
September 30, 2000 from the comparable quarter in 1999. The increase in interest
income was primarily attributed to a $4.5 million increase in the average
outstanding balance of net loans receivable to $53.9 million for the quarter
ended September 30, 2000 from $49.4 million for the quarter ended September 30,
1999. The average yield earned on loans receivable also increased to 7.52% for
the quarter ended September 30, 2000 from 7.26% for the quarter ended September
30, 1999.
Interest on mortgage-backed securities increased $62,000, or 21.7%, for the
quarter ended September 30, 2000 from the comparable quarter in 1999. The
increase in interest income is attributed to an increase in the average balance
of mortgage-backed securities as well as an increase in the average yield earned
on mortgage-backed securities in the quarter ended September 30, 2000 as
compared with the same period last year. For the quarter ended September 30,
2000, the average balance of mortgage-backed securities increased $2.7 million
to $20.7 million from $18.0 million in the prior year quarter. The average yield
earned on mortgage-backed securities also increased to 6.72% for the quarter
ended September 30, 2000 from 6.34% for the quarter ended September 30, 1999.
The increase in the average yield earned on mortgage-backed securities was
primarily the result of an increase in the yield earned on the Company's balance
of adjustable rate mortgage-backed securities which securities re-priced at
higher yields as market interest rates increased between the two quarterly
periods.
Interest earned on investment securities increased $24,000, or 7.1%, for the
quarter ended September 30, 2000 from the quarter ended September 30, 1999. The
increase in interest income is primarily attributed to an increase in the
average yield earned on investment securities to 5.87% for the quarter ended
September 30, 2000 from 5.52% for the prior year period. The average balance of
investment securities remained relatively stable at $25.2 million for the
quarter ended September 30, 2000.
Interest earned on interest bearing deposits increased $42,000, or 9.1%, for the
quarter ended September 30, 2000 from the same quarter in 1999. The increase in
interest income on interest bearing deposits is attributed to an increase in the
average yield earned on interest bearing deposits to 6.46% for the quarter ended
September 30, 2000 from 4.88% for the quarter ended September 30, 1999. The
increase in the average yield earned on interest bearing deposits offset a $6.7
million decrease in the average outstanding balance of interest bearing deposits
to $31.6 million for the quarter ended September 30, 2000 compared to $38.2
million for the quarter ended September 30, 1999. The decrease in the average
balance of interest earning deposits primarily funded the increase in the
average outstanding balances of both net loans receivable and mortgage-backed
securities, discussed above.
-8-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
Interest Expense
Interest expense increased $119,000, or 10.0%, for the quarter ended September
30, 2000 compared with the prior year quarter. The increase in interest expense
is attributable to an increase in the average cost paid on interest costing
deposits to 4.37% for the quarter ended September 30, 2000 from 3.96% for the
quarter ended September 30, 1999. The increase in the average cost paid on
interest costing deposits was partially offset by a $292,000 decrease in the
average outstanding balance of interest costing deposits to $119.3 million for
the quarter ended September 30, 2000 from $119.6 million for the prior year
quarter.
Provisions for Losses on Loans
The Company maintains an allowance for loan losses based upon management's
periodic evaluation of known and inherent risks in the loan portfolio, past loan
loss experience, adverse situations that may affect borrowers' ability to repay
loans, estimated value of the underlying collateral and current and expected
market conditions. The Company made no provisions for loan losses out of income
in either period based upon the absence of any specific asset quality problems,
the current level of general loan loss reserves and management's assessment of
the inherent risks in the loan portfolio. Non-performing loans, net of specific
reserves, decreased to $165,000 at September 30, 2000 from $284,000 at June 30,
2000. At September 30, 2000 non-performing loans, net of specific reserves,
consisted of $126,000 in three single family residential mortgage loans, $19,000
in one non-residential mortgage loan and $20,000 in non-mortgage loans. General
loan loss reserves totaled $194,000 or 117.69% of net non-performing loans at
September 30, 2000. At September 30, 2000, 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 to be adequate to provide for
potential losses, there can be no assurance that such losses will not exceed the
estimated amounts.
Non-Interest Income
Non-interest income decreased $24,000 to $207,000 in the quarter ended September
30, 2000 from $231,000 in the quarter ended September 30, 1999. The primary
factors for the decrease in non-interest income in the current quarter were a
$13,000 decrease in profit on the sale of loans and a $10,000 decrease in loan
fees and service charges. The decrease in loan fees and service charges in the
current quarter is primarily attributed to a decline in loans sold from $1.2
million in the prior year quarter to $50,000 in the current period as the
Company increased its portfolio loan originations to $3.3 million in the current
period from $2.1 million in the prior year period.
Non-Interest Expense
Non-interest expense increased $21,000 to $999,000 in the quarter ended
September 30, 2000 compared to $978,000 in the 1999 quarter. The increase in
non-interest expense in the current quarter is primarily the result of a $19,000
increase in staffing costs. The increase in staffing costs was primarily
attributed to an increase in the cost of employee benefits as well as directors'
fees. Non-interest expense was also increased by a $12,000 increase in legal
expense, an $8,000 loss on forged checks and a $4,000 increase in data
processing costs offset by a $10,000 decrease in deposit insurance premiums, a
$7,000 decrease in advertising expense and the elimination of $5,000 in real
estate owned expenses.
-9-
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
AND SUBSIDIARIES
Income Taxes
Income taxes increased $30,000 to $54,000 in the quarter ended September 30,
2000 from $24,000 for the same period last year. The increased income tax
provision was due primarily to the increase in operating income in the quarter
ended September 30, 2000 as compared to the quarter ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are deposits, loan and mortgage backed
securities repayments, proceeds from the maturities of investment securities and
other funds provided by operations. In addition, the Association may borrow
funds from the Federal Home Loan Bank ("FHLB") of Chicago. The Company maintains
investments in liquid assets based upon management's assessment of (i) the
Company's need for funds, (ii) expected deposit flows, (iii) the yields
available on short-term liquid assets and (iv) the objectives of the Company's
asset/liability management program. The Office of Thrift Supervision ("OTS")
requires members of the FHLB system to maintain minimum levels of liquid assets.
OTS regulations currently require the Association to maintain an average daily
balance of liquid assets equal to at least 4% of the sum of its average daily
balance of net withdrawable deposit accounts and borrowings payable in one year
or less. At September 30, 2000, the Association's regulatory liquidity ratio was
57.2%. At such date, the Company had commitments to originate $1.5 million in
loans, $1.0 million in commitments to purchase loans, no commitments to sell
loans and no commitments to either purchase or sell securities.
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 September 30, 2000, the Association had tangible and core capital of $8.9
million, or 6.3% of adjusted total assets, which was approximately $6.8 million
and $4.7 million above the minimum requirements in effect on that date of 1.5%
and 3.0%, respectively, of adjusted total assets.
At September 30, 2000, the Association had total capital of $9.1 million
(including $8.9 million in core capital) and risk-weighted assets of $47.5
million, or total capital of 19.1% of risk-weighted assets. This amount was $5.3
million above the 8.0% requirement in effect on that date.
-10-
<PAGE>
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, if adversely
determined, would 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 AND REPORTS ON FORM 8-K
(a) Exhibits:
See Exhibit Index.
(b) No reports on Form 8-K were filed the quarter ended September 30, 2000.
-11-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
11 Computation of Per Share Earnings
27 Financial Data Table
-12-
<PAGE>
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: November 15, 2000 BY: /s/ Paul Zogas
-------------------------------------
Paul Zogas
President, Chief Executive Officer
and Chief Financial Officer
DATE: November 15, 2000 BY: /s/ Charles Zogas
-------------------------------------
Charles Zogas
Executive Vice President and
Chief Operating Officer
<PAGE>
MIDLAND CAPITAL HOLDINGS CORPORATION
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
Three Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Net Income $105,598 $48,193
======= ======
Weighted average common shares outstanding
for basic computation 363,975 363,975
======= ======
Basic earnings per share $ 0.29 $ 0.13
======= ======
Weighted average common shares outstanding
for basic computation 363,975 363,975
Common stock equivalents due to dilutive effect
of stock options 1,920 3,777
======= ======
Weighted average common shares and equivalents
Outstanding for diluted computation 365,895 367,752
======= ======
Diluted earnings per share $ 0.29 $ 0.13
======= ======
</TABLE>
