UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
            For Annual and Transition Reports Pursuant to Sections 13
                 or 15(d) of the Securities Exchange Act of 1934
(MARK ONE)
[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2003
                          ------------------

                                     - OR -

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

For the transition period  __________________ to ____________________

Commission Number: 0-24648

                               FSF FINANCIAL CORP.
             (Exact name of Registrant as specified in its Charter)

Minnesota                                                    41-1783064
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

201 Main Street South
Hutchinson, Minnesota                                             55350-2573
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code: (320) 234-4500

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
        Common Stock, par value $0.10 per share
        ---------------------------------------
                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and (2) has  been  subject  to such  filling
requirements for the past 90 days.
YES     X           NO
       ---              ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined by Exchange Act Rule 12b-2) YES      NO  X
                                       ---      ---

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based on the average bid and asked price of the Registrant's Common
Stock as  quoted  on the  National  Association  of  Securities  Dealers,  Inc.,
Automated  Quotations  National  Market on November 28,  2003,  was $ 49,580,506
(1,639,025 shares at $ 30.25 per share).                            ------------
                       -----

As of November 28, 2003 there were issued and  outstanding  2,344,737  shares of
the Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     September 30, 2003. (Parts I, II and IV)
2.   Portions of the Proxy  Statement for the Annual Meeting of  Stockholders to
     be held January 20, 2004. (Part III)

<PAGE>

                                     PART I

FSF Financial Corp. (the  "Corporation") may, from time to time, make written or
oral  "forward-looking  statements",   including  statements  contained  in  the
Corporation's  filings with the  Securities and Exchange  Commission  (including
this  annual  report on Form  10-K and the  exhibits  thereto),  in  reports  to
stockholders and in other  communications by the Corporation,  which are made in
good faith by the  Corporation  pursuant to the "safe harbor"  provisions of the
Private Securities Litigation Reform Act of 1995.

These  forward-looking  statements  involve  risks  and  uncertainties,  such as
statements of the Corporation's plans, objectives,  expectations,  estimates and
intentions that are subject to change based on various important  factors,  some
of which are beyond the  Corporation's  control.  The following  factors,  among
others, could cause the Corporation's financial performance to differ materially
from the plans, objectives,  expectations, estimates and intentions expressed in
such forward-looking  statements:  the strength of the United States economy and
the  strength  of  the  local  economies  in  which  the  Corporation   conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the board of  governors of the
federal  reserve  system,   inflation,   interest  rates,  market  and  monetary
fluctuations.  Other factors include the timely development of and acceptance of
new products and services of the Corporation and the perceived  overall value of
these  products  and  services by users,  including  the  features,  pricing and
quality compared to competitors' products and services; the willingness of users
to substitute  competitors' products and services for the Corporation's products
and services.  More factors  include the success of the  Corporation  in gaining
regulatory approval of its products and services,  when required;  the impact of
changes in financial  services' laws and regulations,  including laws concerning
taxes, banking, securities and insurance;  technological changes;  acquisitions;
changes  in  consumer  spending  and  saving  habits  and  the  success  of  the
Corporation at managing the risks resulting from these factors.

The  Corporation  cautions that the factors listed above are not exclusive.  The
Corporation  does not take it upon  themselves  to  update  any  forward-looking
statement,  whether  written  or oral,  that may be made by or on  behalf of the
Corporation.


ITEM 1.     BUSINESS

GENERAL

FSF Financial Corp. is a Minnesota  corporation organized in May, 1994 and as of
October 6, 1994,  became the  holding  company  for First  Federal  fsb  ("First
Federal" or the "Bank").  Since  becoming an operating  subsidiary  of the Bank,
Homeowners  Mortgage  Corporation  ("HMC"), a mortgage banking  subsidiary,  has
become an integral part of the residential  construction  lending function.  The
terms "First Federal",  "Bank" and "HMC" are synonymous when used in conjunction
with residential lending and residential  construction  lending. See "Subsidiary
Activity".

First  Federal's  business  consists  primarily of attracting  deposits from the
general  public and using such  deposits,  together  with  borrowings  and other
funds, to make a variety of loans. At September 30, 2003, First Federal operated
13 retail  bank  offices  in  Minnesota.  On  November  9, 2001,  First  Federal
completed its acquisition of the ING Bank branch facility in the St. Cloud area.
See "Item 2- Properties".

First  Federal is regulated by the Office of Thrift  Supervision  ("OTS") and by
the Federal Deposit Insurance  Corporation  ("FDIC") which,  through the Savings
Association  Insurance  Fund ("SAIF"),  insures up to certain legal limits,  the
deposit accounts of institutions such as First Federal.  First Federal is also a
member of the Federal Home Loan Bank ("FHLB") of Des Moines, which is one of the
twelve  regional banks for federally  insured savings  institutions  and certain
other residential lending entities comprising the Federal Home Loan Bank System.

                                       1
<PAGE>

COMPETITION

The  Corporation is one of many financial  institutions  serving its market area
that consists of the ten Minnesota counties of Benton,  Carver,  Dakota, McLeod,
Meeker, Sherburne,  Sibley, Stearns,  Washington and Wright. The competition for
deposit  products  comes  from  other  insured  financial  institutions  such as
commercial banks, thrift  institutions,  credit unions and multi-state  regional
banks in the  Corporation's  market area.  Deposit  competition  also includes a
number of insurance  products sold by local agents and investment  products such
as mutual funds and other  securities sold by local and regional  brokers.  Loan
competition varies depending upon market conditions and comes from other insured
financial  institutions such as commercial banks,  thrift  institutions,  credit
unions, multi-state regional banks and mortgage bankers.

                                       2
<PAGE>

LENDING ACTIVITIES

The following  table sets forth the composition of the loan portfolio in dollars
and in percentages of total loans at the dates indicated:
<TABLE>
<CAPTION>
                                                                         At September 30,
                                     --------------------------------------------------------------------------------------------
                                             2003               2002            2001                2000              1999
                                     --------------------------------------------------------------------------------------------

                                        Amount     %      Amount      %     Amount      %      Amount      %      Amount      %
                                     --------------------------------------------------------------------------------------------
                                                                         (Dollars in Thousands)
<S>                                 <C>         <C>    <C>        <C>    <C>         <C>   <C>          <C>   <C>          <C>
Residential real estate:
   One-to-four family  (1)            $ 41,415    8.5    $ 71,625   13.9   $ 81,790    19.1  $ 101,034    26.3  $ 120,884    38.8
   Residential construction            263,227   53.9     239,155   46.3    142,035    33.2     82,408    21.5     42,937    13.8
   Multi-family                          7,703    1.6      10,095    2.0      5,922     1.4      4,737     1.2      5,635     1.8
                                     --------------------------------------------------------------------------------------------
                                       312,345   63.9     320,875   62.1    229,747    53.7    188,179    49.0    169,456    54.4

Agricultural loans                      57,259   11.7      56,129   10.9     49,935    11.7     43,829    11.4     33,384    10.7
Land and commercial real estate         40,831    8.4      55,270   10.7     55,220    12.9     50,970    13.3     36,429    11.7
Commercial business                     22,961    4.7      26,556    5.1     23,908     5.6     29,831     7.8     29,767     9.6
                                     --------------------------------------------------------------------------------------------
                                       121,051   24.8     137,955   26.7    129,063    30.1    124,630    32.4     99,580    32.0
Consumer:
   Home equity and second mortgage      22,482    4.6      27,543    5.3     29,991     7.0     28,106     7.3     24,312     7.8
   Automobile loans                     11,550    2.4       9,172    1.8     13,023     3.0     13,255     3.5      7,428     2.4
   Other                                21,272    4.4      20,757    4.0     26,292     6.1     29,943     7.8     10,898     3.5
                                     --------------------------------------------------------------------------------------------
Total consumer loans                    55,304   11.3      57,472   11.1     69,306    16.2     71,304    18.6     42,638    13.7
                                     --------------------------------------------------------------------------------------------
          Total loans                  488,700  100.0     516,302  100.0    428,116   100.0    384,113   100.0    311,674   100.0
                                                =====              =====              =====              =====              =====
Less:
   Loans in process                   (110,657)          (101,854)          (73,235)           (36,864)           (26,156)
   Net deferred fees                      (512)              (835)             (774)              (711)              (507)
   Allowance for loan losses            (1,701)            (1,681)           (1,541)            (1,534)            (1,387)
                                     ---------          ---------         ---------          ---------          ---------
          Net loans                  $ 375,830          $ 411,932         $ 352,566          $ 345,004          $ 283,624
                                     =========          =========         =========          =========          =========

1.   Includes loans held for sale in the amount of $17.1 million, $29.2 million,
     $12.1  million,  $3.2 million and $5.3  million as of  September  30, 2003,
     2002, 2001, 2000 and 1999, respectively.

</TABLE>


                                       3
<PAGE>

The following table sets forth the loan  originations,  loan sales and principal
payments for the periods indicated:

<TABLE>
<CAPTION>
                                                          Years Ended September 30,
                                       -------------------------------------------------------------
                                          2003         2002         2001         2000         1999
                                       ---------    ---------    ---------    ---------    ---------
                                                              (In Thousands)
<S>                                   <C>          <C>          <C>          <C>          <C>
Total gross loans receivable at
    end of period                      $ 488,700    $ 516,302    $ 428,116    $ 384,113    $ 311,674
Loans originated:
  Residential real estate:
     One-to-four family                  235,236      142,661       99,017       56,400      130,461
     Residential construction            219,750      233,716      150,254       94,929       55,700
                                       ---------    ---------    ---------    ---------    ---------
       Total residential real estate     454,986      376,377      249,271      151,329      186,161
  Land                                     7,300        8,370       14,258        7,189        5,900
  Commercial business                     23,258       18,449       12,912       16,149       13,033
  Agricultural                            54,793       55,328       42,040       38,204       28,081
  Consumer                                31,977       22,486       29,471       49,804       27,503
                                       ---------    ---------    ---------    ---------    ---------
          Total loans originated         572,314      481,010      347,952      262,675      260,678
Purchase of loans                          4,000       19,298       27,337       32,417       40,883
Acquired in ING branch acquisition             -       28,806            -            -            -
Sale of loan participation                     -            -       (1,600)        (851)      (3,000)
Sale of loans                           (355,097)    (208,371)    (129,245)     (54,364)    (128,925)
Principal repayments                    (252,778)    (270,001)    (235,841)    (166,921)    (169,131)
Other (net)                                3,959       37,444       35,400         (517)       9,560
                                       ---------    ---------    ---------    ---------    ---------
Net loan activity                      $ (27,602)   $  88,186    $  44,003    $  72,439    $  10,065
                                       =========    =========    =========    =========    =========
</TABLE>
Maturity of Loans
The following table sets forth the maturity of the Bank's loans at September 30,
2003. The table does not include prepayments or scheduled  principal  repayments
and  adjustable  rate mortgage  loans are shown as maturing based on contractual
maturities.
<TABLE>
<CAPTION>
                                  One to Four         Land,                           Commercial
                                     Family        Multi-Family                        Business,
                                  Real Estate     and Commercial                    Agriculture and
                                   Mortgages       Real Estate      Construction       Consumer          Total
                                  -----------------------------------------------------------------------------
<S>                             <C>              <C>               <C>             <C>             <C>
Amounts Due:                                                       (In Thousands)
Within 3 months                   $   1,125        $     3,117       $  95,246       $    10,035     $  109,523
3 months to 1 year                    2,359             11,552         167,981            19,491        201,383
                                  -----------------------------------------------------------------------------
Total due before one year             3,484             14,669         263,227            29,526        310,906
                                  -----------------------------------------------------------------------------

After 1 year:
   1 to 3 years                       4,936             16,283               -            29,452         50,671
   3 to 5 years                       4,319             13,771               -            44,700         62,790
   5 to 10 years                      4,664              1,120               -            25,313         31,097
   10 to 20 years                     2,415              2,691               -             6,533         11,639
   Over 20 years                     21,597                  -               -                 -         21,597
                                  -----------------------------------------------------------------------------
Total due after one year             37,931             33,865               -           105,998        177,794
                                  -----------------------------------------------------------------------------
Total amount due                  $  41,415        $    48,534      $  263,227       $   135,524     $  488,700
                                  =============================================================================
</TABLE>

                                       4
<PAGE>

The following  table sets forth at September 30, 2003,  the dollar amount of all
loans due after September 30, 2004, based upon fixed rates of interest,  balloon
rates and adjustable rates.
<TABLE>
<CAPTION>
                                                     Fixed-        Balloon        Adjustable
                                                     Rates          Rates           Rates         Total
                                                   ---------       --------       ----------     --------
                                                                     (In Thousands)
<S>                                               <C>            <C>            <C>            <C>
One-to-four family real estate                      $ 31,824       $  2,603       $  3,504       $ 37,931
Land, multi-family and commercial real estate         11,544         10,413         11,908         33,865
Commercial business, agricultural and consumer        83,516              -         22,482        105,998
                                                    --------       --------       --------       --------
     Total                                          $126,884       $ 13,016       $ 37,894       $177,794
                                                    ========       ========       ========       ========
</TABLE>

One- to-Four Family Mortgage Loans
The  largest  portions  of  mortgage  loans are made for the purpose of enabling
borrowers to purchase one- to-four family  residences  secured by first liens on
the properties.  The Bank originates balloon,  adjustable rate ("ARM") and fixed
rate mortgage loans secured by one-to-four family residences with terms of up to
30 years. FHA and VA loans are also offered and then sold,  servicing  released,
in the  secondary  market.  Borrower  demand  for ARM loans  versus  fixed  rate
mortgage  loans  depends on  various  factors,  including  but not  limited  to,
interest rates offered,  the  expectations of changes in the short and long term
levels of interest  rates and loan fees charged.  The relative  amounts of fixed
rate,  balloon  and ARM  loans  that can be  originated  at any time is  largely
determined by the demand for each in a competitive environment.  The majority of
fixed rate loans are sold in the secondary market,  some with servicing released
and some with servicing retained.

The Bank  originates  three,  five and seven year balloon  mortgage  loans,  the
majority of which are in the three-year  category.  These  mortgages  contain no
contractual  assurances that the loan will be renewed. At maturity,  the loan is
generally  rewritten and re-recorded.  If the borrower's loan payment history is
satisfactory, a new appraisal is not required.  Management believes that balloon
loans have a pricing  characteristic  that helps offset the  detrimental  effect
that rising rates could have on net interest income because the balloon loans do
not contain  interest  rate  adjustment  caps.  At September  30, 2003,  balloon
mortgages were $6.8 million or 1.8% of the Bank's loan portfolio.

The Bank offers ARM loans that adjust  every year,  with the initial  adjustment
coming one, three,  five, seven or ten years after  origination.  The loans have
terms from 10 to 30 years and the  interest  rates on these loans are  generally
based on Treasury bill indices. The annual interest rate cap (the maximum amount
which the  interest  rate may  increase  in a year) on the  Bank's  ARM loans is
generally  2.0% and the lifetime cap is generally  6.0% over the initial rate of
the loan. The Bank considers  market factors and competitive  rates on loans, as
well as its own cost of funds when determining the rates on the loans it offers.
The Bank does not originate loans with negative amortization.

Residential Construction Lending
The Bank originates residential construction loans to qualified  owner-occupants
for the construction of one- to-four family  residential  properties in multiple
states and generally  have terms from six to twelve months.  Construction  loans
are also made to builders on a pre-sold, speculative and model home basis. Loans
for  speculative  housing  construction  are made to area  builders only after a
thorough background check, which includes an analysis of the builder's financial
statements,  credit  reports  and  reference  checks  with  sub-contractors  and
suppliers, has been made. The Bank limits the number of speculative and/or model
home  loans  made to  builders  based on a  review  of the  builder's  financial
statements. Loan proceeds are disbursed through title companies in increments as
construction  progresses and only after a physical inspection of the project has
been made. Accrued interest on loan disbursements is paid monthly.

Loans  involving  construction  financing  present a greater  level of risk than
loans  for  the  purchase  of  existing  homes  because   collateral  value  and
construction costs can only be estimated at the time the loan is approved.

                                       5
<PAGE>
The Bank has expanded their residential construction lending in recent years and
currently  does  business  in 44  states.  The  following  table  indicates  the
percentage of construction loans outstanding by state.

                                                        % OF TOTAL
                    STATE                              OUTSTANDING
        ----------------------------------------------------------------

        Minnesota                                           40.1%
        Wisconsin                                           10.4%
        Michigan                                             6.1%
        Colorado                                             5.9%
        40 Other States                                5% or less

The  majority of these  loans are  referred to the Bank by a network of national
home builders and are made on a  construction-permanent  basis. The loan is made
to the owner-occupant  based on sworn  construction  statements and prior to any
disbursements  being made, the property is inspected and various title insurance
companies obtain lien waivers. These loans generally have yields that are higher
than market interest rates. When construction is complete, a final inspection is
performed and a modification agreement is executed. The loan is then sold in the
secondary market, servicing released.

Land Acquisition and Development Loans,  Commercial Real Estate and Multi-Family
Lending
The Bank originates land loans on residential  properties  located in the Bank's
primary market area. Land lending  generally  involves  additional  risks to the
lender as compared with residential mortgage lending.  This risk is attributable
to the fact that  loan  funds  are  advanced  upon the  security  of land  under
development  and predicated on the future value of the property upon  completion
of  development.  Loans on  undeveloped  land may run the risk of adverse zoning
changes and environmental or other  restrictions on future use. Because of these
factors,  the analysis of land loans  requires an expertise that is different in
significant respects from that which is required for residential lending.

Commercial  real estate loans are permanent  loans secured by improved  property
such as office buildings,  retail or wholesale facilities,  industrial buildings
or  other  non-residential  buildings.  Commercial  real  estate  loans  may  be
originated in amounts up to 80% of the mortgaged  property's  appraised value as
determined by a certified or licensed independent appraiser.

Multi-family  residential  real  estate  loans are  permanent  loans  secured by
apartment buildings. Of primary concern in multi-family  residential real estate
lending is the borrower's creditworthiness,  feasibility and cash flow potential
of the project.  Loans  secured by income  properties  generally  are larger and
involve greater risks than residential mortgage loans because payments are often
dependent on the  successful  operation or  management of the  properties.  As a
result,  repayment of such loans may be subject to, more than  residential  real
estate loans,  adverse  conditions in the real estate market or the economy.  In
order to monitor cash flows on income  properties,  the Bank requires  borrowers
and loan  guarantors,  if any, to provide annual  financial  statements and rent
rolls on multi-family  loans. At September 30, 2003, the outstanding balance for
the five largest land  acquisition and  development,  commercial real estate and
multi-family  loans  ranged from $2.5  million to $4.0  million  with an average
committed  outstanding  balance  of $3.1  million.  All five of these  loans are
current and have performed in accordance with their terms.

Commercial Business Lending
The Bank makes commercial  business loans for a variety of purposes,  including;
working capital, accounts receivable, inventory, equipment and acquisitions. The
Bank has no energy or foreign loans.

Residential  mortgage  loans are generally  made on the basis of the  borrower's
ability  to make  repayments  from his or her  employment  income and also other
income sources.  These  residential  mortgage loans are secured by real property
with a value that is easily ascertained. Commercial business loans are generally
made on the basis of the borrower's ability to make repayment from the cash flow
of the  borrower's  business.  As a result,  the  availability  of funds for the
repayment of commercial  business  loans may be  substantially  dependent on the
success of the business itself, which is likely to be dependent upon the general
economic environment.  Business assets, such as accounts receivable,  equipment,
inventory  and real  estate may secure the  Bank's  commercial  business  loans.
However,  the collateral  securing these loans may depreciate  over time, may be
difficult  to  appraise  or may  fluctuate  in value based on the success of the
business.

                                       6
<PAGE>
The Bank  recognizes  the increased risk  associated  with  commercial  business
lending.  The Bank's  commercial  business lending policy  emphasizes (1) credit
file documentation,  (2) analysis of the borrower's  character,  (3) analysis of
the  borrower's  capacity  to repay the loan,  (4)  adequacy  of the  borrower's
capital and collateral and (5) evaluation of the industry  conditions  affecting
the borrower.  Analysis of the borrower's past, present and future cash flows is
also an  important  aspect of the  Bank's  credit  analysis.  The Bank  plans to
continue  to  expand  its  commercial   business  lending,   subject  to  market
conditions.

The Bank  generally  obtains  annual  financial  statements  from  borrowers for
commercial  business loans. These statements are analyzed to monitor the quality
of the loan. As of September  30, 2003,  the  outstanding  balances for the five
largest commercial business loans ranged from $1.1 million to $7.5 million, with
an average  committed  balance  outstanding of $3.7 million.  All five loans are
current and have performed in accordance with their terms.

Agricultural Lending
The Bank originates loans to finance the purchase of farmland,  livestock,  farm
machinery and equipment,  seed,  fertilizer and for other farm related products.
Agricultural  operating  loans are  originated  at either an adjustable or fixed
rate of  interest  for up to one year or, in the case of  livestock,  upon sale.
Such loans provide for payments of principal and interest at least annually or a
lump sum payment upon maturity if the original term is less than one year. Loans
secured by agricultural  machinery are generally  originated as fixed rate loans
with terms of up to five years.

Agricultural  real estate loans are frequently  originated with adjustable rates
of interest.  Generally, such loans provide for a fixed rate of interest for the
first  three  years  adjusting  annually  thereafter.  In  addition,  such loans
generally  provide  for a ten year  term  based on a  twenty  year  amortization
schedule.  Adjustable rate  agricultural real estate loans are generally limited
to 80% of the value of the property securing the loan.

Agricultural lending affords the Bank the opportunity to earn yields higher than
on one-to-four  family  residential  lending.  Consequently,  agricultural loans
typically  have  larger  balances  and  involve  a  greater  degree of risk than
one-to-four  family residential  mortgage loans. In addition,  payments on loans
are  dependent on the  successful  operation or  management of the farm property
securing the loan or for which an operating loan is utilized. The success of the
loan may also be  affected  by any number of factors  outside the control of the
farm borrower.

Weather  presents one of the greatest  risks as hail,  drought,  floods or other
conditions  can severely  limit crop yields and thus impair loan  repayments and
the  value  of the  underlying  collateral.  This  risk can be  diminished  with
multi-peril crop insurance,  which guarantees set yields to provide certainty of
repayment. Unless circumstances merit otherwise, the Bank generally requires its
borrowers to procure  multi-peril  crop or hail insurance.  In addition,  recent
changes in government  support programs  generally  require that farmers procure
multi-peril  crop  insurance in order to be eligible for  participation  in such
programs.

Grain and  livestock  prices also present a risk as prices may decline  prior to
sale resulting in a failure to cover production costs. The farmer,  with the use
of futures contracts or options to provide a "floor" below which prices will not
fall,  may reduce these risks.  The Bank does not monitor nor require the use of
futures contracts or options.

Another risk is the  uncertainty of government  programs and other  regulations.
Some farmers rely on the income from  government  programs to make loan payments
and if these  programs are  discontinued  or  significantly  changed,  cash flow
problems or defaults could result.

Finally,  many farms are dependent on a limited number of key individuals  whose
injury or death may result in an inability to successfully  operate the farm. At
September 30, 2003,  the  outstanding  balance on First  Federal's  five largest
agricultural borrowers ranged from $1.1 million to $2.8 million, with an average
committed  outstanding  balance of $1.9 million.  All five of these loans are in
the Bank's market area, are current and have performed in accordance  with their
terms.

                                       7
<PAGE>

Consumer and Other Loans
The Bank  originates  consumer  loans for a variety of purposes,  including home
equity,  home  improvement,  automobile and other.  Federal  regulations  permit
federally  chartered thrift  institutions to make secured and unsecured consumer
loans in an amount up to 35% of an  institution's  assets.  The Bank  originates
consumer  loans in order to provide a wide range of  financial  services  to its
customers and because the shorter terms and generally higher interest rates help
maintain a profitable  spread  between the Bank's average loan yield and cost of
funds.

In connection with consumer loan applications,  the Bank verifies the borrower's
income and reviews credit bureau reports.  In addition,  the relationship of the
loan to the value of the collateral is considered. Consumer loans entail greater
risk  than  one-to-four  family  residential  mortgage  loans,  in part  because
consumer loans are secured by rapidly  depreciable assets such as automobiles or
are unsecured.  Repossessed collateral securing a defaulted loan may not provide
an adequate source of repayment on the outstanding loan balance since there is a
greater likelihood of damage, loss or depreciation of the underlying collateral.
Further,  consumer  loan  repayment is dependent  on the  borrower's  continuing
financial  stability and therefore  more likely to be adversely  affected by job
loss,  divorce,  illness or personal  bankruptcy.  Finally,  the  application of
various federal and state laws,  including  bankruptcy and insolvency  laws, may
limit the amount which can be recovered on such loans in the event of a default.

Loan Approval Authority and Underwriting
The primary source of mortgage loan  applications  is referrals from existing or
past  customers.  Applications  are also  solicited  from real  estate  brokers,
contractors,  call-ins  and  walk-ins  to the  offices.  In  addition,  the Bank
solicits construction loan applications from national homebuilders.

Upon  receipt of any loan  application  from a  prospective  borrower,  a credit
report is ordered and verifications of specific information relating to the loan
applicant's  employment,  income and credit standing are requested. An appraisal
or valuation  determination,  subject to  regulatory  requirements,  of the real
estate  intended to secure the proposed loan is undertaken.  In connection  with
the loan approval  process,  underwriters  analyze the loan applications and the
property involved. All residential, home equity, multi-family,  construction and
commercial real estate loans are underwritten  subject to the loan  underwriting
policies  as  approved  by the  Board of  Directors.  In  general,  the Board of
Directors must approve any loan in excess of $1.0 million.

Loan applicants are promptly  notified of the decision by a letter setting forth
the  terms  and  conditions  of the  decision.  If  approved,  these  terms  and
conditions  include the amount of the loan,  interest  rate basis,  amortization
term,  a brief  description  of real  estate to be  mortgaged  and the notice of
requirement of insurance  coverage to be maintained.  Title insurance or a title
opinion  is  required  on first  mortgage  loans,  as well as fire and  casualty
insurance on all properties securing loans.  Insurance must be maintained during
the entire term of the loan. Flood insurance is also required, if appropriate.

Loans to One Borrower
Under federal law,  federally  chartered savings banks have,  subject to certain
exemptions,  aggregate  lending  limits  to  one  borrower  equal  to 15% of the
institution's  unimpaired  capital and surplus.  As of September  30, 2003,  the
outstanding  balance  on First  Federal's  five  largest  lending  relationships
included a $4.0 million commercial line of credit, a $7.5 million line of credit
to an unaffiliated mortgage banking company, in which the Bank has been approved
by it's  regulators to exceed its loans to one borrower  limits as it is secured
by first  mortgages.  Also a $4.8 million in land  development  loans to a local
developer,  a $4.0  million  line of credit  secured  by real  estate and a land
development loan to a local developer with a gross commitment of $6.9 million in
which there is an agreement  with the  borrower  that the Bank will not disburse
funds over its lending limit. This is approximately  5.6% of the total loans. At
September  30,  2003,  all of these loans were within the loans to one  borrower
limitations,  performing in  accordance  with their terms and at market rates of
interest.

Loan Servicing
The Bank  services  almost all of the loans  that it  retains in the  portfolio.
However,  HMC does not engage in any loan  servicing.  Loan  servicing  includes
collecting and remitting  loan payments,  accounting for principal and interest,
making advances to cover delinquent  payments,  making  inspections of mortgaged
premises  (as   required),   contacting   delinquent   mortgagors,   supervising
foreclosures and property  dispositions in the event of unremedied  defaults and
generally  administering  the loans.  Funds that have been escrowed by borrowers
for the payment of mortgage  related  expenses,  such as property taxes,

                                       8
<PAGE>

hazard insurance and mortgage insurance premiums, are maintained in non-interest
bearing  accounts at the Bank.  At  September  30,  2003,  the Bank had $101,000
deposited in escrow accounts for loans serviced for others.

The following  table  presents  information  regarding the loans serviced by the
Bank for others at the dates indicated:


                                                    September 30,
                                          -----------------------------------
                                             2003       2002          2001
                                          -----------------------------------
                                                    (In Thousands)

Mortgage loan portfolios serviced for:
          FHLMC                           $  15,811   $  36,024     $  42,736
          Other Investors                    14,307      10,069        10,232
                                          -----------------------------------
                                          $  30,118   $  46,093     $  52,968
                                          ===================================

The Bank receives fees for servicing  mortgage  loans sold to others,  generally
about 0.25% per annum on the declining  balance of mortgage loans, to compensate
the Bank for the cost of performing the servicing  functions.  Another source of
loan  servicing  revenues  is late fees on loans the Bank  holds.  For the years
ended  September 30, 2003,  2002 and 2001,  the Bank earned gross loan servicing
and late fees of $182,000, $303,000 and $276,000, respectively. The Bank retains
a portion of funds  received from  borrowers on the loans it services for others
as payment of the servicing fees.

NON-PERFORMING AND PROBLEM ASSETS

Loan Collections and Delinquent Loans
The Bank's  collection  procedures  provide  that when a loan is 30 days or more
delinquent,  the  borrower  is  contacted  by mail or  telephone  and payment is
requested.  If the  delinquency  continues,  subsequent  efforts will be made to
contact  the  borrower.  In certain  instances,  the Bank may modify the loan or
grant a limited moratorium on loan payments to enable the borrower to reorganize
his financial affairs. Once a loan delinquency exceeds 60 days, it is classified
as special  mention and the Bank attempts to work with the borrower to establish
a  repayment  schedule  to cure the  delinquency.  If the  borrower is unable to
remedy the  delinquency,  the Bank will institute  foreclosure  proceedings.  If
foreclosure  action  is taken  and the loan is not  reinstated,  paid in full or
refinanced, the property is sold at a judicial sale at which the Bank may be the
buyer if there are no offers to satisfy the debt.  Any property  acquired as the
result  of  foreclosure  or by  deed in lieu of  foreclosure  is  classified  as
foreclosed real estate until such time as it is sold or otherwise disposed of by
the Bank.  At September 30, 2003,  the Bank had $1.2 million of foreclosed  real
estate,  consisting of eight single family residential  construction loans. When
foreclosed  real estate is  acquired,  it is recorded at the lower of the unpaid
principal  balance of the  related  loan or its fair market  value less  related
disposition  costs.  Any write down of the property is charged to the  allowance
for loan losses.

Non-performing Assets
Loans are reviewed on a regular basis and are placed on non-accrual status when,
in the opinion of management, the collection of additional interest is doubtful.
Residential  mortgage  loans are  generally  placed on  non-accrual  status when
either  principal  or interest is 90 days or more past due.  Consumer  loans are
generally charged off when the loan becomes over 90 days delinquent.  Commercial
business and real estate loans are generally  placed on non-accrual  status when
the loan is 90 days or more past due.  Interest accrued and unpaid at the time a
loan is placed  on  non-accrual  status  is  charged  against  interest  income.
Subsequent  payments are either applied to the outstanding  principal balance or
recorded  as  interest  income,  depending  on the  assessment  of the  ultimate
collectibility of the loan.

                                       9
<PAGE>

The  following  table  sets  forth   information  with  respect  to  the  Bank's
non-performing   assets.   During  the  periods  indicated,   the  Bank  had  no
restructured  loans  within the meaning of  Statement  of  Financial  Accounting
Standards (SFAS) No. 15.
<TABLE>
<CAPTION>
                                                                   At September 30,
                                               ------------------------------------------------------------
                                                 2003        2002         2001         2000         1999
                                               ------------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                                          <C>          <C>          <C>           <C>          <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
   Residential construction loans              $  3,819     $  3,133     $  1,043      $   323      $     -
   Permanent loans secured by one to
      four family units                             483          482           78           55          205
   Non-residential loans                            884           74            -            -            -
Non-mortgage loans:
   Commercial and agricultural                      411          647        1,195          452            -
   Consumer                                         442          537          637          159           22
                                               ------------------------------------------------------------
Total non-accrual loans                           6,039        4,873        2,953          989          227
Foreclosed real estate and real estate
   held for investment                            1,152          122          126          321          323
                                               ------------------------------------------------------------
Total non-performing assets                    $  7,191     $  4,995     $  3,079     $  1,310      $   550
                                               ============================================================
Total non-performing loans to net loans           1.61%        1.18%        0.84%        0.29%        0.08%
                                               ============================================================
Total non-performing loans to total assets        1.12%        0.92%        0.62%        0.21%        0.05%
                                               ============================================================
Total non-performing assets to total assets       1.33%        0.94%        0.65%        0.28%        0.13%
                                               ============================================================
</TABLE>

There were 28  residential  construction  loans  accounted  for on a non-accrual
basis.  The borrower in three of the loans lost their jobs prior to the start of
construction  and negotiations  continue with the title company  associated with
one loan  were the  title  company  failed  to  identify  a life  estate  in the
property. A flood determination company failed to identify a property that is in
a flood plain and they are attempting to rectify the error,  four properties are
listed for sale and the remainder  should be resolved in a satisfactory  manner.
The non-residential  loan is a participation with another financial  institution
on a multi-use  commercial/industrial  building.  The remaining commercial loans
should be resolved in a satisfactory  manner.  Loans that are in the liquidation
process are evaluated for  impairment  and the balances are written down to fair
value, if necessary, in accordance with SFAS 114.

Interest  income  that  would have been  recorded  on loans  accounted  for on a
non-accrual  basis  under the  original  terms of such  loans was  approximately
$394,000 for the year ended September 30, 2003.

Classified Assets
Management, in compliance with regulatory guidelines, has instituted an internal
loan  review  program,   whereby  loans  are  classified  as  special   mention,
substandard,  doubtful or loss. As part of the classification process, all loans
are  divided  into two  categories;  homogenous  and  non-homogenous  loans.  In
general,  homogenous loans are one-to-four family residential loans and consumer
loans.  All other loans are  considered to be  non-homogenous.  The Bank's Asset
Quality Committee reviews all non-homogenous loans that have exhibited weakness.
These loans are subjected to the impairment  testing  requirements  of SFAS 114,
"Accounting by Creditors for Impairment of a Loan".

Management  has  established a watch list for loans that do not warrant  adverse
classification  but  nonetheless  may possess  potential  weaknesses and require
close attention.  Assets classified as special mention are homogenous loans that
are not yet substandard.  Assets  classified as substandard are characterized by
the possibility  that the Bank may sustain some loss if the deficiencies are not
corrected.

                                       10
<PAGE>

Loans are evaluated for  impairment in accordance  with SFAS 114,  including all
loans that are in a troubled  debt  restructuring  involving a  modification  of
terms,  and are  measured  at the present  value of  expected  future cash flows
discounted at the loan's initial effective  interest rate. The fair value of the
collateral of an impaired loan or an observable market price, if one exists, may
be used as an alternative to discounting. If the measure of the impaired loan is
less than the recorded investment in the loan,  impairment is recognized through
a charge to earnings and a reduction to the loan  balance.  A loan is considered
impaired when, based on current  information and events, it is probable that the
Bank will be unable to collect  all  amounts due  according  to the  contractual
terms of the loan agreement.

Management's  evaluation of the classification of assets and the adequacy of the
reserve  for loan losses is  reviewed  by  regulatory  agencies as part of their
periodic  examinations.  At September  30, 2003,  the Bank had total  classified
assets of $14.5 million,  of which $9.3 million were considered  substandard and
no assets were  classified as doubtful or loss. For additional  discussion  see-
Non-Performing  and Problem Assets.  Special mention assets totaled $5.2 million
at September 30, 2003.

Allowance for Loan and Lease Losses and Foreclosed Real Estate
In making loans,  the Bank  recognizes  that losses will be experienced and that
the risk of loss will vary  with,  among  other  things,  the type of loan being
made, the  creditworthiness of the borrower over the term of the loan and in the
case of a secured loan, the quality of the  collateral for the loan.  Management
evaluates  the  established  reserves  against loan losses and other assets each
quarter based on estimated  losses on specific loans and on any real estate held
for sale or  investment  when a  finding  is made that a loss is  estimable  and
probable.  Such an  evaluation  includes  a review of all  loans for which  full
collectibility may not be reasonably assured and considers, among other matters,
the estimated market value of the underlying collateral,  prior loss experience,
economic conditions and overall portfolio quality.  While management  recognizes
and  charges  against  the  allowance  for loan  losses  for  accounts  that are
determined to be uncollectible,  experience indicates that at any given point in
time, possible losses may exist in the loan portfolio which are not specifically
identifiable.  Therefore,  based upon management's  best estimate,  each year an
amount may be charged to earnings to maintain the allowance for loan losses at a
level sufficient to recognize potential risk.

The Bank believes it has established  its existing  allowance for loan losses in
accordance  with  GAAP.  However,   there  can  be  no  assurance  that  banking
regulators,  in  reviewing  the Bank's loan  portfolio,  will not request  First
Federal to increase its allowance for loan losses or that a  deteriorating  real
estate  market or other  unforeseen  economic  changes  may cause an increase in
allowance  for loan  losses.  This may  negatively  affect the Bank's  financial
condition and earnings.

                                       11
<PAGE>
The following table sets forth  information with respect to the Bank's allowance
for loan losses at the dates  indicated:
<TABLE>
<CAPTION>
                                                                           At September 30,
                                                   -----------------------------------------------------------------
                                                       2003         2002         2001         2000         1999
                                                   -----------------------------------------------------------------
                                                                        (Dollars in Thousands)
<S>                                                   <C>          <C>          <C>          <C>          <C>
Average loans outstanding                              $403,388     $383,892     $344,470     $308,721     $274,676
                                                   =================================================================
Allowance balance (beginning of period)                $  1,681     $  1,541     $  1,534     $  1,387     $  1,035
                                                   -----------------------------------------------------------------
ING branch acquisition                                 $      -     $    274     $      -     $      -     $      -
                                                   -----------------------------------------------------------------
Provision (credit):
   Residential and construction                             983          283           85            -            -
   Land and Commercial real estate                            -            -           30           60           20
   Commercial/agricultural business                         167          220          772          156          418
   Consumer                                                  78          308          190            -           18
                                                   -----------------------------------------------------------------
       Total provision                                    1,228          811        1,077          216          456
Charge off:
   Residential and construction                             719          174
   Land and Commercial real estate                           73            -            -            -            -
   Commercial/agricultural business                         160          282          756            -            -
   Consumer                                                 341          532          371           98          142
                                                   -----------------------------------------------------------------
       Total charge offs                                  1,293          988        1,127           98          142
Recoveries:
   Commercial real estate                                     -            -           35            -            -
   Consumer                                                  85           43           22           29           38
                                                   -----------------------------------------------------------------
       Total recoveries                                      85           43           57           29           38
                                                   -----------------------------------------------------------------
Net charge offs                                           1,208          945        1,070           69          104
                                                   -----------------------------------------------------------------
Allowance balance (at end of period)                   $  1,701     $  1,681     $  1,541     $  1,534     $  1,387
                                                   =================================================================
Allowance as percent of net loans                         0.45%        0.41%        0.44%        0.44%        0.48%
Net loans charged off as a percent of
   average loans                                          0.30%        0.25%        0.31%        0.02%        0.04%
</TABLE>

To further  monitor and assess the risk  characteristics  of the loan portfolio,
loan delinquencies are reviewed to consider any developing loan problems.  Based
upon the procedures in place, the Bank's  experience  regarding  charge-offs and
recoveries and the current risk elements in the portfolio,  management  believes
the  allowance  for loan  losses at  September  30, 2003 is  adequate.  However,
assessment of the adequacy of the allowance for loan losses involves  subjective
judgments  regarding  future  events  and thus  there can be no  assurance  that
additional provisions for loan losses will not be required in future periods.

The following table sets forth the breakdown of the allowance for loan losses by
loan category:
<TABLE>
<CAPTION>
                                                                              September 30,
                                        -----------------------------------------------------------------------------------------
                                               2003              2002              2001              2000              1999
                                        -----------------------------------------------------------------------------------------
                                                  Percent           Percent           Percent           Percent           Percent
                                                  of Loans          of Loans          of Loans          of Loans          of Loans
                                                  in Each           in Each           in Each           in Each           in Each
                                                  Category          Category          Category          Category          Category
                                                  to Total          to Total          to Total          to Total          to Total
                                          Amount   Loans    Amount   Loans    Amount   Loans    Amount   Loans    Amount   Loans
                                        -----------------------------------------------------------------------------------------
                                                                         (Dollars in Thousands)
<S>                                    <C>       <C>     <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Real Estate:
     One-to-four family                  $    23     8.4%  $    37    13.9%  $    49    19.1%  $    59    26.3%  $    73    38.8%
     Residential construction                334    53.9%      206    46.3%      117    33.2%       59    21.5%       25    13.8%
     Multi-family                             62     1.6%       44     1.2%       48     1.4%       47     1.2%       56     1.8%
     Land and commercial real estate         320     8.4%      535    12.7%      390    12.9%      473    13.2%      486    11.7%
Agricultural loans                           424    11.7%      319    10.9%      318    11.7%      245    11.4%      200    10.7%
Commercial business                          214     4.7%      205     4.0%      239     5.6%      298     7.8%      297     9.6%
Consumer loans                               324    11.3%      335    11.0%      380    16.1%      353    18.6%      250    13.6%
                                         ----------------------------------------------------------------------------------------
                                         $ 1,701   100.0%  $ 1,681   100.0%  $ 1,541   100.0%  $ 1,534   100.0%  $ 1,387   100.0%
                                         ========================================================================================
</TABLE>
                                       12
<PAGE>

INVESTMENT AND MORTGAGE-BACKED SECURITIES ACTIVITIES

General
Federally  chartered thrift institutions have the authority to invest in various
types of liquid assets; including United States Treasury obligations, securities
of various Federal  agencies,  certain  certificates of deposit of insured banks
and savings institutions,  certain bankers'  acceptances,  repurchase agreements
and loans on Federal Funds. To supplement lending activities, subject to various
restrictions,  the Bank  invests a portion  of its assets in  commercial  paper,
corporate debt securities and asset backed securities.  A significant portion of
the Bank's income during recent years has been  attributable  to interest income
on  such  securities.   The  Corporation  does  not  have  the  same  investment
limitations as the Bank.

Mortgage-Backed and Related Securities
First Federal invests in residential  mortgage-backed  securities  guaranteed by
participation  certificate issues by the Federal Home Loan Mortgage  Corporation
("FHLMC"), the Federal National Mortgage Association ("FNMA") and the Government
National Mortgage Association ("GNMA"). The mortgage-backed securities portfolio
as of  September  30, 2003  consisted of $20.4  million in Real Estate  Mortgage
Investment  Conduits  ("REMICs"),  $5.9 million in a FNMA  certificate  and $3.7
million in FHLMC certificates.

Mortgage-backed  securities  represent  a  participation  interest  in a pool of
single family or multi-family mortgages. The principal and interest payments are
passed  from  the  mortgage   originator   through   intermediaries   (generally
quasi-governmental  agencies) that pool and repackage the participation interest
in the form of securities to investors such as the Bank. Such quasi-governmental
agencies,  which  guarantee  the payment of principal and interest to investors,
primarily include FHLMC, FNMA and GNMA.

Mortgage-backed  securities  typically are issued with stated principal  amounts
and pools of  mortgages  that have loans with  interest  rates that are within a
range and have varying maturities. The underlying pool of mortgages is primarily
composed of either fixed rate or adjustable rate mortgage loans. Mortgage-backed
securities are generally referred to as mortgage  participation  certificates or
pass-through   certificates   and  as  a   result,   the   interest   rate  risk
characteristics of the underlying pool of mortgages,  as well as prepayment risk
are  passed  on  to  the  certificate  holder.  The  life  of a  mortgage-backed
pass-through  security  is  equal  to  the  life  of the  underlying  mortgages.
Mortgage-backed  securities issued by FHLMC, FNMA and GNMA make up a majority of
the pass-through market.

Mortgage-backed  securities  provide  for  monthly  payments  of  principal  and
interest and generally have contractual  maturities  ranging from five to thirty
years. In periods of declining  interest rates,  mortgage  payments are received
faster than the contractual requirement, causing the estimated lives of mortgage
related securities to be significantly shorter than expected.

REMICs are typically issued by a special purpose entity ("issuer"), which may be
organized  in a variety of legal  forms,  such as a trust,  a  corporation  or a
partnership.  The entity aggregates pools of pass-through securities,  which are
used to collateralize the mortgage-related  securities.  Once combined, the cash
flows can be divided into tranches or classes of individual securities,  thereby
creating more predictable average duration for each security than the underlying
pass-through pools. Accordingly, under this security structure all principal pay
downs from the various  mortgage pools are allocated to a mortgage related class
or classes  structured to have priority until it has been paid off. Thus,  these
securities are intended to address the  reinvestment  concerns  associated  with
mortgage-backed  securities  pass-through,  namely that (i) they tend to pay off
when interest rates fall thereby taking their  relatively  high coupon with them
and (ii) their expected average life may vary significantly  among the different
tranches.

Some REMIC  instruments are more like traditional debt instruments  because they
have stated  principal  amounts and  traditionally  defined interest rate terms.
Purchasers of certain other REMIC  securities  are entitled to any excess of the
issuer's cash inflows,  including reinvestment earnings,  over the cash outflows
for debt service and administrative expenses. These mortgage related instruments
may include instruments designated as residual interests and are riskier in that
they could  result in the loss of a portion  of the  original  investment.  Cash
flows from  residual  interests  are very  sensitive  to  prepayments  and thus,
contain a high degree of interest  rate risk.  Residual  interest  represents an
ownership  interest in the underlying  collateral,  subject to the first lien of
the REMICs investors.

                                       13
<PAGE>

The REMICs  held by the Bank at  September  30, 2003  consist of  floating  rate
tranches.  The interest rate of all the Bank's floating rate securities  adjusts
monthly and provides the institution  with net interest margin  protection in an
increasing  market rate  environment.  The securities are backed by mortgages on
one-to-four family residential real estate and have contractual maturities up to
30 years.  None of the securities are deemed to be "high risk"  according to OTS
guidelines.  The  securities  are  primarily  companion  tranches  to "PACs" and
"TACs". PACs and TACs (Planned and Targeted  Amortization  Classes) are designed
to provide a specific principal and interest cash flow.  Principal payments that
are received in excess of the amount  needed for the PACs and TACs are allocated
to the  companion  tranches.  When the PACs and  TACs are  repaid  in full,  all
principal  is then used to pay the  companion  tranches.  Although the timing of
principal  payments may be impacted by the amount of prepayments (the higher the
level of  prepayments,  the sooner the principal  will be received),  all of the
principal and interest payments are guaranteed.

Investment Securities
The Bank is required under federal  regulation to maintain a sufficient level of
liquid  assets that may be  invested  in  specified  short-term  securities  and
certain other investments.  However, the OTS does not prescribe by regulation to
a minimum  amount  or  percentage  of liquid  assets.  Liquidity  levels  may be
increased or decreased, depending upon the yields on investment alternatives and
upon management's  judgement as to the attractiveness of the yields available in
relationship to other  opportunities.  Also expectations of future yield levels,
as well as management's  projections as to the short-term  demand for funds, are
used in the Bank's  loan  originating  and other  activities.  These  securities
consist  mainly  of  U.S.  Government  Securities  and  U.S.  Government  Agency
obligations. The Bank also invests in debt and equity securities.

The Board of Directors is responsible for establishing the investment  policy of
the Bank. It is designed to provide and maintain liquidity, generate a favorable
return on investments  without incurring undue interest rate and credit risk and
to compliment the Bank's lending  activity.  The policy  currently  provides for
investments available for sale.

The amount of short-term  securities reflects  management's  strategy to provide
interest rate  adjustments  for securities that are shorter than their maturity.
It is the  intention  of  management  to maintain a repricing  structure  in the
Bank's investment  portfolio that better matches the interest rate sensitivities
of its assets and  liabilities.  However,  during  periods of rapidly  declining
interest rates,  such  investments also decline at a faster rate than the yields
on  fixed  rate  investments.   Investment  decisions  are  made  within  policy
guidelines established by the Board of Directors.  Unless loan demand increases,
the Bank intends to maintain its investments at current levels.

Investment Activities
Current regulatory and accounting  guidelines  regarding  investment  securities
(including  mortgage-backed  securities)  require the  Corporation to categorize
securities as held to maturity,  available for sale or trading.  As of September
30, 2003, the Corporation had securities classified as available for sale in the
amount of $54.1 million.  There were no securities classified as trading or held
to  maturity.  Securities  classified  as  available  for sale are  reported for
financial purposes at the fair market value with net changes in the market value
from period to period included as a separate component of stockholders'  equity,
net of income  taxes.  At  September  30,  2003,  the  Corporation's  securities
available for sale had an amortized  cost of $53.5 million and a market value of
$54.1 million.  Changes in the market value of securities  available for sale do
not affect the Corporation's income. In addition, changes in the market value of
securities  available  for sale do not  affect  the  Bank's  regulatory  capital
requirements or its loan to one borrower limit.

                                       14
<PAGE>
Investment and Mortgage-Backed Securities Portfolio
The following table sets forth the carrying value of First Federal's  investment
securities portfolio, short-term investments, FHLB stock and mortgage-backed and
related securities at the dates indicated:
<TABLE>
<CAPTION>
                                                                        September 30,
                                                               ------------------------------
                                                                 2003       2002       2001
                                                               --------   --------   --------
                                                                      (In Thousands)
<S>                                                          <C>        <C>        <C>
Investment securities:
   Debt securities held to maturity                            $      -   $ 12,447   $ 12,420
   Debt securities available for sale                            12,178          -      3,055
   FHLB Stock                                                     4,797      5,925      5,925
   Equity securities available for sale                          12,009     12,046     12,021
                                                               --------   --------   --------
Total investment securities                                      28,984     30,418     33,421
Interest bearing deposits                                        77,045     11,018      9,767
Mortgage-backed and related securities:
   Mortgage-backed and related securities held to maturity            -     20,679     25,731
   Mortgage-backed and related securities available for sale     29,923     29,196     27,481
                                                               --------   --------   --------
Total mortgage-backed and related securities
                                                                 29,923     49,875     53,212
                                                               --------   --------   --------
Total investments                                              $135,952   $ 91,311   $ 96,400
                                                               ========   ========   ========
</TABLE>

                                       15
<PAGE>
The  following  table sets forth  certain  information  regarding  the  carrying
values,  weighted  average  yields  and  maturities  of  the  Bank's  investment
portfolio at September 30, 2003:
<TABLE>
<CAPTION>
                     Adjustable      One Year or Less One to Five Years   Five to Ten       More than Ten       Total Investment
                                                                             Years             Years               Securities
                  ----------------- ----------------- ---------------- ----------------  ----------------- -------------------------
                   Carrying Average Carrying  Average Carrying Average Carrying Average  Carrying  Average Carrying Average  Market
                    Value    Yield   Value     Yield   Value    Yield    Value   Yield    Value     Yield   Value    Yield   Value
                    -----    -----   -----     -----   -----    -----    -----   -----    -----     -----   -----    -----   -----
                                                         (Dollars in Thousands)
<S>             <C>          <C>    <C>        <C>    <C>       <C>    <C>        <C>    <C>        <C>    <C>       <C>   <C>
U. S.
  Government
  and Federal
Agency
  obligations
  available for
  sale            $       -       -% $ 2,011    4.00%  $ 8,707   5.32%  $     -    0.00%  $ 1,460    7.02%  $ 12,178  5.28% $ 12,178
Equity
  securities
  available
  for sale           12,009    1.77        -       -                -         -       -         -       -   $ 12,009  1.77    12,009
FHLB Stock              N/A     N/A      N/A     N/A       N/A    N/A       N/A     N/A       N/A     N/A   $  4,797  3.00     4,797
Mortgage-backed
  and related
  securities
  available
  for sale           20,411    3.31        -       -     1,057   3.47     1,986    5.50     6,469    5.18   $ 29,923  4.00    29,923
Interest-bearing
  deposits           77,045    0.70        -       -         -      -         -                 -       -   $ 77,045  0.70    77,045
                  ---------          -------           -------          -------           --------         ---------        --------
       Total      $ 109,465    1.30% $ 2,011    4.00%  $ 9,764   5.12%  $ 1,986    5.50%  $ 7,929    5.51%  $135,952  2.01% $135,952
                  =========          =======           =======          =======           ========         =========        ========
</TABLE>

                                       16
<PAGE>

DEPOSITS AND OTHER SOURCES OF FUNDS

General
Deposits are a major source of funds for the Bank's lending and other investment
purposes.  In  addition  to  deposits,  the Bank  derives  funds  from  loan and
mortgage-backed   securities   principal   payments,   interest  on   investment
securities,  proceeds  from  the  maturity  of  mortgage-backed  securities  and
investment  securities  and  borrowings.  Loan  and  mortgage-backed  securities
payments are a relatively  stable source of funds,  while general interest rates
and money market conditions significantly influence deposit inflows.  Borrowings
may  be  used  on a  short-term  basis  to  compensate  for  reductions  in  the
availability of funds from other sources. They may also be used on a longer-term
basis for general business purposes.

Deposits
First Federal offers a wide variety of deposit accounts,  constantly striving to
meet  consumer's  needs by offering new  products.  In addition to interest rate
risk management and  asset/liability  ratios,  this is taken into  consideration
prior to offering new products.  Deposit  account terms vary primarily as to the
required  minimum balance amount,  the amount of time that the funds must remain
on deposit and the applicable interest rate.

The Bank's current deposit products  include regular  savings,  demand deposits,
NOW, money market and certificate of deposit  accounts  ranging in terms from 91
days to 5 years including certificates of deposit with negotiable interest rates
and  balances  in  excess  of  $100,000  (jumbo   certificates)  and  Individual
Retirement  Accounts (IRAs).  All checking and savings accounts are eligible for
an  Express  Teller  ATM  card.  This  card can be used at any  Express  Teller,
Fastbank,  or Instant Cash ATM in Minnesota  and  surrounding  states.  With the
addition  of the  Plus  and  Cirrus  network  automated  banking  system,  First
Federal's  Express  Teller ATM card can be used at  thousands  of ATM  locations
throughout the United States and the world.

Deposits are obtained  primarily  from  residents in the  Minnesota  counties of
McLeod, Dakota, Meeker, Sibley, Carver, Wright, Benton,  Sherburne,  Stearns and
Washington.  First Federal  attracts deposit accounts by offering a wide variety
of products, competitive interest rates, convenient locations and service hours.
The Bank uses  traditional  methods of  advertising to attract new customers and
deposits, including radio and print media advertising.

The Bank pays interest on its deposits, which is competitive in the marketplace.
Interest  rates  on  deposits  are set  weekly,  based on a  number  of  factors
including;  the previous  week's  deposit  flow, a current  survey of a selected
group of  competitor's  rates for  similar  products,  external  data  which may
influence interest rates,  investment  opportunities,  loan demand and scheduled
maturities.

The following table  indicates the amount of the Bank's  certificates of deposit
of $100,000 or more by time remaining until maturity as of September 30, 2003:


            Maturity Period                  Certificates of Deposit
            ---------------                  -----------------------
                                                  (In Thousands)
            Within three months                       $ 26,017
            Three through six months                     3,917
            Six through twelve months                   26,200
            Over twelve months                          13,129
                                                      --------
                                                      $ 69,263
                                                      ========

Borrowings
Savings  deposits are the primary  source of funds for First  Federal's  lending
activities,  investment  activities and also for general business  purposes.  If
necessary,  the Bank may  rely  upon  advances  from the FHLB of Des  Moines  to
supplement  its  lendable  funds and to meet  deposit  withdrawal  requirements.
Advances from the FHLB of Des Moines are typically secured by FHLB stock held by
First Federal and a portion of First  Federal's  residential  mortgage loans and
other assets,  which primarily consist of securities which are obligations of or
guaranteed by the U.S. Government.

                                       17
<PAGE>

Advances have been  utilized when adequate  spreads can be obtained and the risk
(credit risk,  interest rate risk and market risk) in the  transaction  has been
maintained.  Advances  have been used to  purchase  mortgage-backed  and related
securities and to purchase  single family  residential  mortgages  originated by
other financial institutions within the State of Minnesota.

The  following  table  sets forth  certain  information  as to the  Bank's  FHLB
advances at the dates indicated:

                                          As of and for the Years Ended
                                                September 30,
                                   --------------------------------------------
                                         2003           2002            2001
                                   --------------------------------------------
                                               (Dollars in Thousands)

      Maximum balance                $  98,000      $  113,500      $  127,500
      Average balance                   93,699         100,871         117,957
      Balance at end of period          93,000          98,000         113,500
      Weighted average rate:
           at end of period              5.31%           5.56%           5.87%
           during the period             5.43%           5.72%           6.00%


It is First  Federal's  policy to fund loan demand and investment  opportunities
out of  current  loan  and  mortgage-backed  securities  repayments,  investment
maturities  and new  deposits.  However,  the Bank has utilized FHLB advances to
supplement  these  sources.  This policy may change in the future as  investment
opportunities are presented or loan demand increases.

SUBSIDIARY ACTIVITY

As of September 30, 2003, the Corporation  had two directly owned  subsidiaries:
the Bank and the Agency.

The Bank is permitted  to invest up to 2% of its assets in the capital  stock of
subsidiary corporations in the form of secured or unsecured loans. An additional
investment  of 1% of assets is  permitted  when such  investments  are  utilized
primarily for community development purposes. As of September 30, 2003, the Bank
was  authorized  to invest up to  approximately  $10.8  million  in the stock of
service  corporations  (based upon the 2%  limitation).  The Bank has two wholly
owned  subsidiaries,  Firstate  Services,  Inc. ("FSI") and Homeowners  Mortgage
Corporation  ("HMC").  On November  17, 1998,  the  Corporation  acquired,  in a
transaction  that was a combination  of stock and cash,  all of the  outstanding
shares of  Homeowners  Mortgage  Corporation  ("HMC").  As of June 1, 2000,  HMC
became an operating  subsidiary of the Bank. The transfer of HMC was recorded as
a  non-cash  capital  contribution  from the  Corporation  to the Bank.  FSI was
incorporated  in the State of  Minnesota  in August  1983 and is  engaged in the
sale, on an agency basis, of mutual funds,  annuities and life,  credit life and
disability insurance products. HMC was incorporated in the State of Minnesota in
1988 and originates  residential mortgage loans from two locations in Minnesota.
As of September 30, 2003,  the net book value of First  Federal's  investment in
stock, unsecured loans and conforming loans in FSI and HMC was $103,000 and $1.9
million, respectively.

Insurance  Planners (the "Agency") was incorporated in the State of Minnesota in
August 1983 and is engaged in the sale,  on an agency  basis,  of  property  and
casualty insurance products. As of September 30, 2003, the net book value of the
Corporation's  investment in stock,  unsecured loans and conforming loans in its
subsidiary was $830,000.

                                       18

<PAGE>

PERSONNEL

As of September 30, 2003,  the  Corporation  had 209 full time  employees and 49
part time  employees  representing a total of 235.7 full time  equivalents.  The
employees  are not  represented  by a collective  bargaining  agreement  and the
Corporation believes its relationship with their employees is satisfactory.

REGULATION

Set forth below is a brief description of certain laws related to the regulation
of the Corporation and the Bank. The description does not purport to be complete
and  is  qualified  in  its  entirety  by  reference  to  applicable   laws  and
regulations.

REGULATION OF THE CORPORATION

Recent Legislation to Curtail Corporate Accounting Irregularities
On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley Act of 2002
(the "Act"). The Securities and Exchange  Commission (the "SEC") has promulgated
certain regulations  pursuant to the Act and will continue to propose additional
implementing  or clarifying  regulations as necessary in furtherance of the Act.
The  passage  of the Act  and the  regulations  implemented  by the SEC  subject
publicly  traded   companies  to  additional  and  more   cumbersome   reporting
regulations   and  disclosure.   Compliance  with  the  Act  and   corresponding
regulations may increase the Company's expenses.

General
The  Corporation  is a unitary  savings  and loan  holding  company  subject  to
regulatory  oversight  by the OTS.  As such,  the  Corporation  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
Corporation  and  its   non-savings   association   subsidiaries,   should  such
subsidiaries  be formed,  which also  permits  the OTS to  restrict  or prohibit
activities  that are determined to be a serious risk to the  subsidiary  savings
association.  This  regulation  and  oversight  is  intended  primarily  for the
protection of the depositors of the Bank and not for the benefit of stockholders
of the Corporation.

As a unitary savings and loan holding company, the Corporation  generally is not
subject   to  any   restrictions   on  its   business   activities.   While  the
Gramm-Leach-Bliley  Act ("GLB Act"),  enacted in November  1999,  terminated the
"unitary  thrift  holding  company"  exemption from activity  restrictions  on a
prospective  basis,  the  Corporation  enjoys  grandfathered  status  under this
provision of the GLB Act because it acquired the Bank prior to May 4, 1999. As a
result,  the GLB Act did not  affect the  Corporation's  freedom  from  activity
restrictions  as a unitary  savings and loan holding  company.  However,  if the
Corporation were to acquire control of an additional  savings  association,  its
business  activities would be subject to restriction under the Home Owners' Loan
Act.  Furthermore,  if the Corporation were in the future to sell control of the
Bank to any other company,  such company would not succeed to the  Corporation's
grandfathered status under the GLB Act and would be subject to the same activity
restrictions.  The continuation of the Corporation's exemption from restrictions
on business  activities  as a unitary  savings and loan holding  company is also
subject to the  Corporation's  continued  compliance  with the Qualified  Thrift
Lender  ("QTL") test.  See  "-Regulation  of the Bank-  Qualified  Thrift Lender
Test."

REGULATION OF THE BANK

General
Set forth  below is a brief  description  of  certain  laws  that  relate to the
regulation of the Bank. The  description  does not purport to be complete and is
qualified in its entirety be reference to applicable laws and regulations.  As a
federally chartered,  SAIF-insured  savings association,  the Bank is subject to
extensive regulation by the OTS and the FDIC;  consequently,  lending activities
and other  investment  activity must comply with various  federal  statutory and
regulatory   requirements.   The  Bank  is  also  subject  to  certain   reserve
requirements promulgated by the Federal Reserve Board.

The OTS, in conjunction with the FDIC,  regularly examines the Bank and prepares
reports  for  the  consideration  of  the  Bank's  Board  of  Directors  on  any
deficiencies that are found in the Bank's  operations.  The Bank's  relationship
with its  depositors  and  borrowers  is also  regulated,  to a great  extent by
federal and state law,  especially  in such matters as the  ownership of savings
accounts and the form and content of the Bank's mortgage documents.

                                       19

<PAGE>

The Bank must file reports with the OTS and the FDIC  concerning  its activities
and financial condition,  in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with or acquisitions of other
savings   institutions.   This   regulation   and   supervision   establishes  a
comprehensive  framework of activities in which an institution can engage and is
intended primarily for the protection of the SAIF and depositors. This structure
also gives the regulatory  authorities  extensive  discretion in connection with
their supervisory and enforcement activities and examination policies, including
policies with respect to the  classification  of assets and the establishment of
adequate loan loss reserves for regulatory purposes.

Insurance of Deposit Accounts
The  deposit  accounts  held by the Bank are insured by the SAIF to a maximum of
$100,000 or each insured member (as defined by law and regulation). Insurance of
deposits may be terminated by the FDIC upon a finding that the  institution  has
engaged in unsafe or unsound practices,  is in an unsafe or unsound condition to
continue operations or has violated any applicable law, regulation,  rule, order
or condition imposed by the FDIC or the institution's primary regulator.

The Bank is required to pay  insurance  premiums,  based on a percentage  of its
insured  deposits,  to the FDIC for  insurance of its deposits by the SAIF.  The
FDIC also  maintains  another  insurance  fund, the Bank Insurance Fund ("BIF"),
which primarily insures  commercial bank deposits.  The FDIC has set the deposit
insurance assessment rates for SAIF-member institutions for the first six months
of 2004 at 0% to 0.27% of insured  deposits  on an  annualized  basis,  with the
assessment rate for most savings institutions set at 0%.

In addition,  all FDIC insured  institutions  are required to pay assessments to
the FDIC at an annual rate of  approximately  0.003% of insured deposits to fund
interest  payments on bonds issued by the  Financing  Corporation  ("FICO"),  an
agency of the Federal Government  established to recapitalize the predecessor to
the SAIF. These assessments will continue until the FICO bonds mature in 2017.

Regulatory Capital Requirements
OTS capital  regulations  require  savings  institutions  to meet three  capital
standards:  (1) tangible capital equal to 1.5% of total adjusted  assets,  (2) a
leverage ratio (core  capital)  equal to at least 3.0% of total adjusted  assets
and (3) a risk-based  capital  requirement equal to 8.0% of total  risk-weighted
assets.

Dividend and Other Capital Distribution Limitations
The OTS imposes  various  restrictions or requirements on the ability of savings
institutions to make capital distributions, including cash dividends.

A  savings  association  that is a  subsidiary  of a  savings  and loan  holding
company,  such as the Bank, must file an application or a notice with the OTS at
least 30 days before making a capital distribution. Savings associations are not
required to file an application  for  permission to make a capital  distribution
and need only file a notice if the  following  conditions  are met: (1) they are
eligible for expedited  treatment under OTS  regulations,  (2) they would remain
adequately capitalized after the distribution,  (3) the annual amount of capital
distribution  does not exceed net income for that year to date added to retained
net income for the two preceding  years and (4) the capital  distribution  would
not violate any  agreements  between the OTS and the savings  association or any
OTS regulations. Any other situation would require an application to the OTS.

The  OTS may  disapprove  an  application  or  notice  if the  proposed  capital
distribution   would:  (1)  make  the  savings   association   undercapitalized,
significantly undercapitalized or critically undercapitalized,  (2) raise safety
or soundness concerns or (3) violate a statute, regulation or agreement with the
OTS (or with the FDIC), or a condition imposed in an OTS approved application or
notice.  Further,  a  federal  savings  association,  like  the  Bank,  can  not
distribute regulatory capital that is needed for its liquidation account.

Qualified Thrift Lender Test
Federal  savings  institutions  must  meet one of two  Qualified  Thrift  Lender
("QTL")  tests.  To qualify as a QTL, a savings  institution  must either (1) be
deemed a "domestic  building and loan  association"  under the Internal  Revenue
Code by  maintaining  at least 60% of its total  assets  in  specified  types of
assets,  including cash,  certain  government  securities,  loans secured by and
other  assets  related  to  residential  real  property,  educational  loans and
investments in premises of the institution or (2) satisfy the statutory QTL test
set  forth  in the Home  Owner's  Loan Act by  maintaining  at least  65% of its
"portfolio assets" in

                                       20
<PAGE>

certain "Qualified Thrift Investments" (defined to include residential mortgages
and related  equity  investments,  certain  mortgage-related  securities,  small
business loans, student loans and credit card loans and 50% of certain community
development loans). For purposes of the statutory QTL test, portfolio assets are
defined  as  total  assets  minus  intangible  assets,   property  used  by  the
institution  in conducting  its business and liquid assets equal to 20% of total
assets.  A savings  institution  must  maintain its status as a QTL on a monthly
basis in at least nine out of every twelve months. A failure to qualify as a QTL
results in a number of sanctions,  including the imposition of certain operating
restrictions and a restriction on obtaining  additional  advances from its FHLB.
At September 30, 2003, the Bank was in compliance with its QTL requirement.

Federal Home Loan Bank System
The Bank is a member of the FHLB of Des Moines,  which is one of twelve 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.

As a member,  the Bank is required to purchase and maintain stock in the FHLB of
Des Moines.  This amount must be equal to at least 2 basis  points of the Bank's
assets at December 31, 2002 and 4.45% of outstanding FHLB advances.

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.  The  balances  maintained  to  meet  the  reserve
requirements  imposed by the Federal  Reserve Board might be used to satisfy the
liquidity  requirements  that are imposed by the OTS. At September 30, 2003, the
Bank was in compliance with these Federal Reserve Board requirements.

                                       21

<PAGE>

ITEM 2.     PROPERTIES

The Bank  operates  from its  main  office  located  at 201 Main  Street  South,
Hutchinson,  Minnesota.  The Bank owns this 20,000  square foot office  facility
which it built in 1985/86. The total investment in property and equipment at 201
Main Street South had a net book value of $2.0 million at September 30, 2003.

Additional offices, either owned or leased by the Bank, are set forth below with
information  regarding  net book value of the  premises  and  equipment  at such
facilities at September 30, 2003.

                                         Year
                                      Acquired or     Net Book
                                      Date Lease      Value at         Square
Location                               Expires    September 30, 2003   Footage
--------------------------------   ---------------------------------------------
                                              (Dollars in thousands)
14994 Glazier Avenue
Apple Valley, MN  55124                  1989           $238            3,000

305 10th Avenue S
Buffalo, MN  55313                       1999            871            5,620

1002 Greeley Avenue
Glencoe, MN  55336                       2000            392            1,980

1320 South Frontage Road
Hastings, MN  55033                      1984            903           15,000

905 Highway 15 South,
Frontage Road
Hutchinson, MN  55350                    1980            180            1,400

6505 Cahill Avenue
Inver Grove Heights, MN  55075           1979            215            3,000

501 North Sibley Avenue
Litchfield, MN  55355                    1978            128            2,400

200 East Frontage Road,
Highway 5
Waconia, MN  55387                       1985            250            2,400

122 East Second Street
Winthrop, MN  55396                      2004 (1)         19              950

113 Waite Avenue South
Waite Park, MN  56387                    2004 (2)         38              700

135 3rd Avenue SW
Hutchinson, MN  55350                    2007 (3)          2            1,200

1001 Labore Industrial Court Suite E
Vadnais Heights, MN  55110               2006 (4)        209            7,748

1113 West Saint Germain Street
Saint Cloud, MN  56302                   2001 (5)        907            8,360

1.   Lease  expires in July 2004 with option to renew for  one-year  terms.  The
     Bank expects to renew the lease.
2.   Lease expires in September 2004.
3.   Lease expires in April 2007.
4.   Lease expires in January 2006.
5.   Property acquired on November 9, 2001.


                                       22
<PAGE>

The Bank leases  approximately  1,040  square feet of the  property in Hastings,
Minnesota  under an operating  lease set to expire  April 14, 2004,  with annual
rents totaling $8,356 in addition to their  proportionate share of the operating
expenses.

The  Agency  operates  from  its  main  office  at  135  3rd  Avenue  Southeast,
Hutchinson,  Minnesota  and also has an office  within  the Bank's  building  in
Buffalo, Minnesota. Those facilities are covered by a month to month lease under
the terms of an expense sharing agreement.

HMC  operates  from its main  office  located at 1001 Labore  Industrial  Court,
Vadnais Heights,  Minnesota and also has an office within the Bank's building in
Hastings,  Minnesota.  These  facilities  are  covered by a month to month lease
under the terms of an expense sharing agreement.

ITEM 3.     LEGAL PROCEEDINGS

The  Corporation  and  First  Federal,  from  time to time,  is a party to legal
proceedings  in the  ordinary  course  of  business  when it  enforces  security
interests in loans made by it. The Corporation and First Federal are not engaged
in any legal proceedings of a material nature at the present time.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                     PART II


ITEM 5.     MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
                  STOCKHOLDERS MATTERS

For additional  information  relating to the market for the Corporation's common
equity and related stockholder  matters, see "Corporate Profile and Stock Market
Information"  in the  Registrant's  2003 Annual Report to Stockholders on page 1
and is incorporated herein by reference.

ITEM 6.     SELECTED FINANCIAL DATA

The above captioned  information  appears under "Selected Financial Data" in the
Corporation's  2003 Annual Report to  Stockholders on page 2 and is incorporated
herein by reference.


ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

The above  captioned  information  appears under  "Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations" in the  Registrant's
2003 Annual  Report to  stockholders  on pages 4 through 14 and is  incorporated
herein by reference.


ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The above  information  appears under  "Management's  Discussion and Analysis of
Financial  Condition and Results of Operations" in the Registrant's  2003 Annual
Report to  Stockholders  on pages 4  through  14 and is  incorporated  herein by
reference.

                                       23
<PAGE>

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated  Financial  Statements of the Corporation and its subsidiaries,
together with the report  thereon by Crowe Chizek and Company LLC appears in the
2003 Annual Report to Stockholders  on pages 15 through 42 and are  incorporated
herein by reference.

Quarterly  Results of Operations on page 42 of the Annual Report is incorporated
herein by reference.


ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
              AND FINANCIAL DISCLOSURES

On May 9, 2003, Larson, Allen,  Weishair & Co., LLP ("Larson Allen"),  Certified
Public  Accountants,  resigned as the  Company's  independent  auditors  and the
Company  appointed  Crowe  Chizek and Company  LLC  ("Crowe  Chizek") as its new
independent  auditors.  The decision to change  accountants  was approved by the
Company's   Board  of  Directors.   Larson  Allen's  reports  on  the  Company's
consolidated  financial  statements for the two fiscal years ended September 30,
2002 did not contain an adverse  opinion or  disclaimer  of opinion and were not
qualified or modified as to uncertainty,  audit scope or accounting  principles.
In connection  with audits of the two fiscal years ended  September 30, 2002 and
any  subsequent  interim  period  preceding  the  date  hereof,  there  were  no
disagreements  or reportable  events between the Company and Larson Allen on any
matters of accounting principles or practices, financial statement disclosure or
auditing  scope or  procedure,  which,  if not resolved to the  satisfaction  of
Larson Allen,  would have caused them to make a reference to the subject  matter
of the  disagreements  or reportable  events in connection  with their  reports.
During the two most recent fiscal years and the subsequent interim period to the
date  hereof,  the Company  did not  consult  with Crowe  Chizek  regarding  the
application of accounting principals to any transaction or as to any accounting,
auditing or financial reporting issues.

ITEM 9A.    CONTROLS AND PROCEDURES

The Company's  management  evaluated,  with the  participation  of the Company's
Chief Executive  Officer and Chief Financial  Officer,  the effectiveness of the
Company's  disclosure  controls  and  procedures,  as of the  end of the  period
covered by this report.  Based on that evaluation,  the Chief Executive  Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information  required to be disclosed by
the  Company  in the  reports  that it files or  submits  under  the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time periods  specified in the  Securities and Exchange  Commission's  rules and
forms.

There were no changes in the Company's internal control over financial reporting
that occurred  during the  Company's  last fiscal  quarter that have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.

                                    PART III

ITEM 10.   DIRECTORS AND OFFICERS OF THE REGISTRANT

The information contained under the sections captioned "Section 16(a) Beneficial
Ownership  Reporting  Compliance"  and "Proposal  I--Election  of Directors" and
"Biographical  Information" in the 2003 Proxy Statement (the "Proxy  Statement")
are incorporated herein by reference.

The Company has adopted a Code of Ethics that applies to its principal executive
officer, principal financial officer, principal accounting officer or controller
or persons performing similar functions.  A copy of the Company's Code of Ethics
will be  furnished,  without  charge,  to any person who  requests  such copy by
writing  to  the  Secretary,   FSF  Financial  Corp.,  201  Main  Street  South,
Hutchinson, Minnesota 55350.

ITEM 11.   EXECUTIVE COMPENSATION

The information  contained under the section  captioned  "Director and Executive
Compensation" in the Proxy Statement is incorporated herein by reference.

                                       24

<PAGE>

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
             RELATED SHAREHOLDER MATTERS

          (a)  Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal  Holders  Thereof--Security   Ownership  of  Certain
                  Beneficial Owners" of the Proxy Statement.

          (b)  Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference to the sections  captioned  "Voting  Securities  and
                  Principal  Holders  Thereof--Security   Ownership  of  Certain
                  Beneficial Owners" and "Proposal I - Election of Directors" of
                  the Proxy Statement.

          (c)  Management of the Company knows of no arrangements, including any
               pledge by any person of securities  of the Company,  in which the
               operation may, at a subsequent date result in a change in control
               of the Corporation.

          (d)  EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                   (a)                        (b)                          (c)
                                                                                                 Number of securities
                                           Number of securities        Weighted-average         remaining available for
                                            to be issued upon         exercise price of          future issuance under
                                               exercise of               outstanding           equity compensation plans
                                           outstanding options,       options, warrants          (excluding securities
                                           warrants and rights            and rights           reflected in column (a))
                                        ------------------------------------------------------------------------------------
<S>                                            <C>                        <C>                         <C>
Equity compensation plans
-------------------------
approved by shareholders:
-------------------------
   1994 Stock Option Plan                         55,848             $       9.68                        7,481
   1998 Stock Option Plan                        242,115                    16.93                        1,185

Restricted Stock Plan                              2,800                      N/A                       38,964
---------------------

Equity compensation plans
-------------------------
   not approved by shareholders (1)                    -               $        -                            -
  -----------------------------
                                        --------------------------------------------------------------------------
TOTAL                                            300,763                    15.43                       47,630
</TABLE>

(1)  Not applicable.




ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference to the
section captioned "Certain  Relationships and Related Transactions" in the Proxy
Statement.

                                       25

<PAGE>

                                     PART IV


ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

The information  called for by this item as incorporated  herein by reference to
the Section entitled Audit Fees and All Other Fees in the Proxy Statement.

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as a part of this report:

     (1)  The consolidated  statements of financial condition of the Corporation
          and  subsidiaries  as of  September  30, 2003 and 2002 and the related
          consolidated  statements of operations,  comprehensive income, changes
          in  stockholders'  equity  and cash flows for the three  fiscal  years
          ended  September  30, 2003,  together  with the related  notes and the
          independent   auditors'  report  of  Crowe  Chizek  and  Company  LLC,
          independent   certified  public   accountants,   are  incorporated  by
          reference  to  pages  15  through  42 of the  2003  Annual  Report  to
          Stockholders.

(2)  Financial  Schedules
          The Company is filing herewith the Report of its  Independent  Auditor
          on its  Consolidated  Financial  Statements for the fiscal years ended
          September  30, 2002 and 2001,  which has been excluded from its Annual
          Report to Stockholders for the fiscal year ended September 30, 2003 in
          accordance with Note 1 to Rule 14a-3(b)(1).

         (3)  Exhibits
                (a)  The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
                <S>         <C>
                      3.1      Articles of Incorporation of FSF Financial Corporation *
                      3.2      Bylaws of FSF Financial Corporation *
                      4.0      Stock Certificate of FSF Financial Corporation *
                     10.1      Form of Employment Agreement with Donald A. Glas, George B. Loban and
                                 Richard H. Burgart *
                     10.2      First Federal fsb Management Stock Plan **
                     10.3      FSF Financial Corporation 1996 Stock Option Plan **
                     10.4      FSF Financial Corporation 1998 Stock Compensation Plan ***
                     13.0      Portions of the 2002 Annual Report to Stockholders
                     21.0      Subsidiary Information (See "Item 1-Business")
                     23.1      Consent of Crowe Chizek and Company LLC
                     23.2      Consent of Larson, Allen, Weishair & Co., LLP
                     31.0      Rule 13a-14(a)/15d-14(a) Certifications
                     32.0      Section 1350 Certification

                (b) Reports on Form 8-k
                    The Registrant  filed a Report on Form 8-K pursuant to items
                    7 and 12 on  July  22,  2003,  to  report  earnings  for the
                    quarter ended June 30, 2003.
</TABLE>

--------------------------------------------------------------------------------
*    Incorporated  herein by reference  into this  document from the Exhibits to
     Form S-1, Registration Statement,  initially filed with the Commission,  on
     June 1, 1994, Registration No. 33-79570.
**   Incorporated  herein by reference into this document from the  Registrant's
     Proxy Statement for the Annual Meeting of Stockholders  held on January 17,
     1996 and filed with the Commission on December 13, 1995.
***  Incorporated  herein by reference into this document from the  Registrant's
     proxy statement for the Annual Meeting of Stockholders  held on January 20,
     1998 and filed with the Commission on December 10, 1997.

                                       26

<PAGE>
                                Larson Allen SM


                          CPAs, Consultants & Advisors
                              www.larsonallen.com



                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders
FSF Financial Corp. and Subsidiaries
Hutchinson, Minnesota

We have audited the accompanying  consolidated statements of financial condition
of FSF Financial Corp. and Subsidiaries ("the  Corporation") as of September 30,
2002 and the related consolidated  statements of income,  comprehensive  income,
changes in stockholders' equity, and cash flows for each of the two fiscal years
in the period ended  September  30, 2002.  These  financial  statements  are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of the Corporation as
of September 30, 2002 and the consolidated results of their operations and their
cash flows for each of the fiscal years in the two-year  period ended  September
30, 2002, in conformity with  accounting  principles  generally  accepted in the
United State of America.


/s/Larson, Allen, Weishair & Co., LLP

Larson, Allen, Weishair & Co., LLP
Austin, Minnesota
October 26, 2002

<PAGE>


SIGNATURES

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

                                         FSF FINANCIAL CORP.


Dated:  December 18, 2003                By:   /s/ Donald A. Glas
                                               ---------------------------------
                                               Donald A. Glas
                                               Co-Chair of the Board and Chief
                                               Executive Officer
                                               (Duly Authorized Representative)

Pursuant to the requirement of the Securities  Exchange Act of 1934, 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>

By:       /s/ Donald A. Glas                                       By:     /s/ Richard H. Burgart
          -------------------------------------------------                --------------------------------------------
          Donald A. Glas                                                   Richard H. Burgart
          Co-Chair of the Board and Chief Executive Officer                Chief Financial Officer and Treasurer
          (Principal Executive Officer)                                    (Principal Financial and Accounting Officer)
                                                                           Director

Date:     December 18, 2003                                        Date:   December 18, 2003



By:       /s/ George B. Loban                                      By:     /s/ Sever B. Knutson
          -------------------------------------------------                --------------------------------------------
          George B. Loban                                                  Sever B. Knutson
          Co-Chair of the Board and President                              Director

Date:     December 18, 2003                                        Date:   December 18, 2003



By:       /s/ Roger R. Stearns                                     By:     /s/ James J. Caturia
          -------------------------------------------------                --------------------------------------------
          Roger R. Stearns                                                 James J. Caturia
          Director                                                         Director

Date:     December 18, 2003                                        Date:   December 18, 2003



By:       /s/ Jerome R. Dempsey
          -------------------------------------------------
          Jerome R. Dempsey
          Director

Date:     December 18, 2003

</TABLE>