UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

[X]       ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2000

                                       OR

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

          For the transition period from ______________ to ______________

                         Commission File Number 0-22184

                         FIRST INDEPENDENCE CORPORATION
--------------------------------------------------------------------------------
           (Name of small business issuer as specified in its charter)

Delaware                                                    36-3899950
--------------------------------------------------------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                        Identification No.)

Myrtle and Sixth Streets, Independence, Kansas                   67301
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code:  (316) 331-1660
                                                      -------------

           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 $.01 per share
                     --------------------------------------
                                (Title of Class)

          Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the issuer was required to file such  reports),  and (2) has
been subject to such requirements for the past 90 days. YES X . NO ___.

          Check if there is no disclosure  of  delinquent  filers in response to
Item  405 of  Regulation  S-B  contained  herein,  and  no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

          State  the  issuer's   revenues  for  its  most  recent  fiscal  year:
$11,637,136.

          The aggregate market value of the voting stock held by  non-affiliates
of the  registrant,  computed by  reference  to the average of the bid and asked
prices of such stock on the NASDAQ Stock Market as of December 4, 2000, was $8.3
million. (The exclusion from such amount of the market value of the shares owned
by any  person  shall not be deemed an  admission  by the  registrant  that such
person is an affiliate of the registrant.)

   As of December 4, 2000, there were issued and outstanding 1,024,666 shares
                        of the Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part II of Form 10-KSB - Annual Report to Stockholders for the
                     fiscal year ended September 30, 2000.

               Part III of Form 10-KSB - Proxy Statement for 2001
                        Annual Meeting of Stockholders.

           Transitional Small Business Disclosure Format: YES __ NO X .


<PAGE>


FORWARD-LOOKING STATEMENTS

       First   Independence   Corporation   ("First   Independence"),   and  its
wholly-owned   subsidiary,   First  Federal  Savings  and  Loan  Association  of
Independence  ("First  Federal"),  may from  time to time make  written  or oral
"forward-looking statements," including statements contained in its filings with
the  Securities  and  Exchange  Commission  (the "SEC").  These  forward-looking
statements may be included in this Annual Report on Form 10-KSB and the exhibits
attached to it, in First  Independence's  reports to  shareholders  and in other
communications, which are made in good faith by us pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.

       These  forward-looking  statements  include statements about our beliefs,
plans, objectives, goals, expectations, anticipations, estimates and intentions,
that are  subject to  significant  risks and  uncertainties,  and are subject to
change based on various factors, some of which are beyond our control. The words
"may,"  "could,"  "should,"  "would,"   "believe,"   "anticipate,"   "estimate,"
"expect,"  "intend,"  "plan" and similar  expressions  are  intended to identify
forward-looking statements. The following factors, among others, could cause our
financial   performance  to  differ  materially  from  the  plans,   objectives,
expectations,   estimates  and  intentions   expressed  in  the  forward-looking
statements:

       o    the  strength  of the  United  States  economy  in  general  and the
            strength of the local economies in which we conduct operations;
       o    the effects of, and changes in, trade,  monetary and fiscal policies
            and laws,  including  interest rate policies of the Federal  Reserve
            Board;
       o    inflation, interest rate, market and monetary fluctuations;
       o    the timely  development  of and  acceptance  of our new products and
            services  and the  perceived  overall  value of these  products  and
            services  by users,  including  the  features,  pricing  and quality
            compared to competitors' products and services;
       o    the willingness of users to substitute our products and services for
            products and services of our  competitors;
       o    our  success in gaining  regulatory  approval  of our  products  and
            services,  when  required;
       o    the impact of changes in financial  services'  laws and  regulations
            (including   laws   concerning   taxes,   banking,   securities  and
            insurance);
       o    the impact of technological changes;
       o    acquisitions;
       o    changes in consumer spending and saving habits; and
       o    our success at managing the risks involved in the foregoing.

       The list of important  factors stated above is not  exclusive.  We do not
undertake to update any forward-looking statement, whether written or oral, that
may be made from time to time by or on  behalf  of First  Independence  or First
Federal.

                                       2
<PAGE>


                                     PART I

Item 1.    Description of Business
           -----------------------
General

       First  Independence  is a  Delaware  corporation  which was formed at the
direction of First  Federal in June 1993 for the purpose of becoming the savings
and loan holding company of First Federal.  First  Independence  owns all of the
outstanding  stock of First Federal issued on October 5, 1993 in connection with
the completion of First  Federal's  conversion from the mutual to the stock form
of organization.  First Independence  issued 727,375 shares of common stock at a
price of $10.00 per share in the  conversion.  On January 6, 1999,  The Neodesha
Savings and Loan  Association,  FSA  ("Neodesha  Savings")  combined  with First
Federal  through the  conversion of Neodesha  Savings from a mutual  savings and
loan  association to a stock savings and loan  association and the  simultaneous
merger  of  Neodesha  Savings  into  First  Federal.  See Note N of the Notes to
Consolidated  Financial  Statements in our Annual Report to Stockholders for the
year ended  September  30,  2000  attached  hereto as  Exhibit  13 (the  "Annual
Report").  All  references to First  Independence  at or before  October 5, 1993
refer to First  Federal.  References in this Form 10-KSB to "we," "us" and "our"
refer to First Independence and/or First Federal as the context requires.  First
Independence's  common  stock is quoted on the Nasdaq Small Cap Market under the
symbol "FFSL."

       At  September  30,  2000,  we had total  assets of  $149.1  million,  and
stockholders' equity of $13.8 million.

         First  Federal  is  a  federally   chartered  stock  savings  and  loan
association headquartered in Independence,  Kansas. First Federal was originally
organized in 1905 as a  state-chartered  savings and loan  association and later
converted to a federally chartered institution.

         First   Federal   has  been,   and   intends  to   continue  to  be,  a
community-oriented   financial  institution  offering  a  variety  of  financial
services to meet the needs of the  communities  it serves.  We attract  deposits
from the general  public and use  such  deposits,  together with  borrowings and
other funds, to originate one- to four-family  residential  mortgage loans. To a
much lesser extent,  we also  originate  loans secured by  non-residential  real
estate and consumer loans and a limited amount of loans secured by  multi-family
real estate. Subject to market conditions and loan demand in our market area, we
expect to  continue to  originate  the same types of loans we  currently  offer,
which include the origination of a limited number of commercial and multi-family
real estate  loans  secured by property  located in our market  area.  We do not
intend to originate or purchase  interests in  commercial or  multi-family  real
estate loans secured by properties located outside of our market area.

       We also  invest in  mortgage-backed  securities  which are  insured by or
guaranteed by federal  agencies and other  investment  securities.  See "Lending
Activities  -  Originations,  Purchases  and Sales of Loans and  Mortgage-Backed
Securities."

       Like all federally  chartered  savings  associations,  our operations are
regulated by the Office of Thrift  Supervision  (the "OTS").  First Federal is a
member of the Federal Home Loan Bank System ("FHLB System") and a stockholder in
the Federal Home Loan Bank ("FHLB") of Topeka. First Federal is also a member of
the Savings  Association  Insurance  Fund ("SAIF") and our deposit  accounts are
insured up to applicable  limits by the Federal  Deposit  Insurance  Corporation
("FDIC").

       Our revenue is derived  principally  from interest on mortgage  loans and
mortgage-backed  securities,  interest on  investment  securities,  dividends on
Federal Home Loan Bank stock and loan origination  income.

       Our  executive  offices  are  located  at  Myrtle  and Sixth  Streets  in
Independence, Kansas 67301 and our telephone number is (316) 331-1660.

                                       3
<PAGE>
Market Area

       Through our offices in Independence, Coffeyville and Neodesha, Kansas, we
currently  serve  primarily  Montgomery  and Wilson  Counties,  Kansas and, to a
lesser extent,  the eastern part of Chautauqua  County in Kansas.  We compete in
loan  originations  and in attracting  deposits with  approximately 25 financial
institutions  serving  our primary  market  area.  We estimate  our share of the
savings market in Montgomery County and Wilson to be approximately 14%.

       During  the  year  ended  September  30,  1998,  the  Association   began
originating  construction  loans at its new loan production  office in Lawrence,
Kansas. Lawrence, located in northeastern Kansas, is approximately 25 miles from
Kansas City.  Lawrence if the County Seat of Douglas  County and the location of
Kansas University.

       Independence,  Kansas,  located in southeastern  Kansas, is approximately
110 miles from Wichita,  Kansas.  Independence  is the County Seat of Montgomery
County and the location of Independence Community College.

       Montgomery County has a population of approximately 37,000.  Although the
economy of southeast  Kansas is closely  tied to the gas,  oil and  agricultural
industries, Montgomery County has attracted a variety of other industries. Major
employers in  Montgomery  County  include  Automotive  Controls  Corp.,  Inc., a
manufacturer  of electronic and electrical  parts,  City Publishing  Company,  a
publisher  of  cross-reference  directories,  Hackney & Sons  (Midwest)  Inc., a
manufacturer of beverage delivery truck bodies, Heartland Cement, a manufacturer
of cement and Cessna Aircraft, a manufacturer of single engine airplanes.

Lending Activities

       General.  Historically,  we have  originated  fixed-rate  mortgage loans.
Since 1982,  however,  we have  emphasized,  subject to market  conditions,  the
origination and holding of adjustable-rate mortgage loans and loans with shorter
terms to maturity than traditional  30-year,  fixed-rate loans. Our strategy has
been to increase the  percentage of assets in our  portfolio  with more frequent
repricing or shorter  maturities.  In response to customer demand,  however,  we
continue to originate for our loan portfolio fixed-rate mortgages with terms not
greater than 30 years.

       Our primary focus in lending  activities is on the  origination  of loans
secured by first mortgages on  owner-occupied,  one- to four-family  residences.
Recently,  a  significant  portion  of our  lending  has  been  in the  form  of
construction  loans. To a much lesser extent, we also originate loans secured by
non-residential  real  estate  and  consumer  loans  and  a  limited  amount  of
multi-family  real estate  loans.  See "-  Originations,  Purchases and Sales of
Loans and  Mortgage-Backed  Securities."  At September  30,  2000,  our net loan
portfolio totaled $125.1 million.

       All loans must be reviewed by a committee  comprised of the President and
three other  officers of First  Federal.  The committee has authority to approve
loans  secured  by  real  estate  to any one  borrower  of up to  $500,000.  The
executive  committee has authority to approve loans up to $750,000 which provide
for a  personal  guarantee  from the  borrower.  Loans in excess  of this  limit
require  approval of the First Federal Board of  Directors.  All loan  approvals
made by the loan committee are ratified by the First Federal Board of Directors.

       The  aggregate  amount of loans that First  Federal is  permitted to make
under  applicable  federal  regulations to any one borrower,  including  related
entities,  is generally  equal to the greater of 15% of  unimpaired  capital and
surplus or $500,000.  At  September  30,  2000,  the maximum  amount which First
Federal could have lent to any one borrower and the borrower's  related entities
was approximately $1.9 million.  See "Regulation - Federal Regulation of Savings
Associations."

                                       4
<PAGE>


       Loan  Portfolio  Composition.  The following  information  sets forth the
composition of our loan  portfolio in dollar amounts and in percentages  (before
deductions (or additions) for loans in process,  deferred fees and discounts and
allowances for losses) as of the dates indicated.
<TABLE>

                                                                         September 30,
                                       ------------------------------------------------------------------------------------
                                               2000                           1999                          1998
                                       -------------------------- ------------------------------ --------------------------
                                       Amount          Percent        Amount         Percent        Amount         Percent
                                       ------          -------        ------         -------        ------         -------
                                                                        (Dollars in Thousands)
<S>                                     <C>            <C>              <C>            <C>           <C>            <C>
Real Estate Loans
-----------------
 One- to four-family                   $ 90,928         66.90%        $ 84,053         67.55%       $ 71,855        71.06%
 Multi-family                               339          0.25              914          0.74           1,001         0.99
 Non-residential                         11,080          8.15            9,075          7.29           9,065         8.97
 Construction                            28,152         20.72           25,052         20.13          16,050        15.87
                                       --------        ------         --------        ------        --------       ------
    Total real estate loans            $130,499         96.02          119,094         95.71          97,971        96.89
                                       --------        ------         --------        ------        --------       ------

Consumer Loans
--------------
 Deposit account                            980          0.72              373          0.30             397         0.39
 Automobile                               2,578          1.90            2,867          2.31             961         0.95
 Home equity                                927          0.68              911          0.73             837         0.83
 Home improvement                           123          0.09              217          0.17             234         0.23
 Other                                      806          0.59              968          0.78             714         0.71
                                       --------        ------         --------        ------        --------       ------

    Total consumer loans                  5,414          3.98            5,336          4.29           3,143         3.11
                                       --------        ------         --------        ------        --------       ------

     Total Loans                        135,913        100.00%         124,430        100.00%        101,114       100.00%
                                       --------        ======         --------        ======        --------       ======

Less
----
 Loans in process                         9,665                         10,429                         6,437
 Deferred fees and discounts                371                            355                           337
 Allowance for losses                       758                            753                           656
                                       --------                       --------                      --------
 Total loans receivable, net           $125,119                       $112,893                      $ 93,684
                                       ========                       ========                      ========
</TABLE>


                                       5
<PAGE>


       The following table shows the composition of our loan portfolio by fixed-
and adjustable-rate categories at the dates indicated.
<TABLE>

                                                                                 September 30,
                                             ------------------------------------------------------------------------------------
                                                      2000                           1999                          1998
                                             -------------------------- ------------------------------ --------------------------
                                             Amount          Percent        Amount         Percent        Amount         Percent
                                             ------          -------        ------         -------        ------         -------
                                                                             (Dollars in Thousands)
<S>                                          <C>               <C>           <C>             <C>          <C>             <C>
Fixed-Rate Loans
---------------
 Real estate:
  One- to four-family                       $ 67,253           49.48%        $ 63,010         50.64%      $ 50,637        50.08%
  Multi-family                                   ---             ---              566          0.45            639         0.63
  Non-residential                              8,019            5.90            6,576          5.29          6,361         6.29
  Construction                                28,152           20.72           25,052         20.13         16,050        15.87
                                            --------          ------         --------        ------       --------       ------
   Total fixed-rate real estate loans        103,424           76.10           95,204         76.51         73,687        72.87
 Consumer                                      4,487            3.30            4,425          3.56          2,306         2.28
                                            --------          ------         --------        ------       --------       ------
   Total fixed-rate loans                    107,911           79.40           99,629         80.07         75,993        75.15
                                            --------          ------         --------        ------       --------       ------

Adjustable-Rate Loans
---------------------
 Real estate:
  One- to four-family                         23,675           17.42           21,043         16.91         21,218        20.98
  Multi-family                                   339            0.25              348          0.28            362         0.36
  Non-residential                              3,061            2.25            2,499          2.01          2,704         2.68
                                            --------          ------         --------        ------       --------       ------
   Total adjustable-rate real estate loans    27,075           19.92           23,890         19.20         24,284        24.02
 Consumer                                        927            0.68              911          0.73            837         0.83
                                            --------          ------         --------        ------       --------       ------
   Total adjustable-rate loans                28,002           20.60           24,801         19.93         25,121        24.85
                                            --------          ------         --------        ------       --------       ------
   Total Loans                               135,913          100.00%         124,430        100.00%       101,114       100.00%
                                            --------          ======         --------        ======       --------       ======
Less
----
 Loans in process                              9,665                           10,429                        6,437
 Deferred fees and discounts                     371                              355                          337
 Allowance for losses                            758                              753                          656
                                            --------                         --------                     --------
 Total loans receivable, net                $125,119                         $112,893                     $ 93,684
                                            ========                         ========                     ========
</TABLE>


                                       6


<PAGE>


       The following schedule shows the scheduled contractual  maturities of our
loan  portfolio  at September  30,  2000.  Mortgages  which have  adjustable  or
renegotiable interest rates are shown as repaying in the period during which the
contract  is due.  The  schedule  does  not  reflect  the  effects  of  possible
prepayments or enforcement of due-on-sale clauses.
<TABLE>
                                                 Real Estate
                           ----------------------------------------------------------------
                                   One- to        Multi-family, and
                                 Four-Family       Non-Residential       Construction               Consumer           Total
                           --------------------- ------------------- --------------------- ---------------------- ------------------
                                       Weighted            Weighted              Weighted          Weighted                Weighted
                                        Average             Average              Average            Average                 Average
                              Amount     Rate     Amount     Rate     Amount      Rate    Amount     Rate        Amount      Rate
                           ---------- ---------- -------- ---------- ---------- --------- --------- ------------ ---------- --------
    Due During Periods
   Ending September 30,
-----------------------

<S>                         <C>          <C>       <C>       <C>      <C>         <C>      <C>       <C>       <C>          <C>
2001                      $   297        8.53%     $ 1,452   10.02%   $23,878     9.82%   $2,205     8.67%    $ 27,832      9.73%
2002                          122        8.03            8    7.50      2,679     9.20       720     9.84        3,529      9.29
2003                          436        7.98           50    8.75        ---      ---       975    10.42        1,461      9.63
2004 and 2005                 974        8.18          302    8.92        ---      ---     1,173     9.67        2,449      8.98
2006 to 2010                9,220        7.77        1,560    8.53         12     8.00       341    10.16       11,133      7.95
2011 to 2025               38,131        7.67        7,966    8.23      1,583     8.01       ---      ---       47,680      7.77
2026 and following         41,748        7.36           81    7.50        ---      ---       ---      ---       41,829      7.36
                          -------                  -------            -------             ------              --------
       Total              $90,928                  $11,419            $28,152             $5,414              $135,913
                          =======                  =======            =======             ======              ========
</TABLE>


       The total  amount  of loans due after  September  30,  2001,  which  have
predetermined  interest rates is $81.0 million,  while the total amount of loans
due after such date which have  floating or adjustable  interest  rates is $27.1
million.


                                       7


<PAGE>


       One-  to  Four-Family  Residential  Mortgage  Lending.  Residential  loan
originations  are  generated  by our  marketing  efforts,  through  our  present
customers  and walk-in  customers,  and referrals  from real estate  brokers and
builders.  We have focused our lending  efforts  primarily on the origination of
loans secured by first mortgages on owner-occupied,  single-family residences in
our market area.  At  September  30, 2000,  our one-to  four-family  residential
mortgage loans, totaled $90.9 million, or 66.9% of our loan portfolio.

       We  currently  make  adjustable-rate,  one-  to  four-family  residential
mortgage loans in amounts up to 95% of the appraised value, or selling price, of
the security property,  whichever is less. For loans with a loan-to-value  ratio
of 90% or greater,  we require  private  mortgage  insurance equal to 20% of the
loan value in order to reduce our exposure level.  For loans with  loan-to-value
ratios of  greater  than 80% but less than 90%,  we  typically  require  private
mortgage  insurance to reduce our exposure.  The  determination as to whether to
obtain such  insurance is made on a  case-by-case  basis,  based on a variety of
factors  including the borrower's  payment  history,  the  borrower's  length of
employment,  the quality of the  property,  the term of the loan and the debt to
income ratio of the borrower.  At September 30, 2000, we had 800 loans  totaling
$49.2 million with a loan-to-value  ratio of greater than 80%, but less than 90%
and 469  loans  totaling  $24.0  million  with a  loan-to-value  ratio of 90% or
greater.

       We currently  offer mortgage loans with a fixed rate for either the first
five  years or three  years of the loan term  that  automatically  convert  to a
one-year adjustable-rate mortgage loan during the year following the fixed term.
Rates are  determined in accordance  with market and  competitive  factors for a
term of up to 30 years.  The interest rate charged on  adjustable-rate  mortgage
loans  currently  originated by us is based upon the one year Constant  Maturity
Treasury Index. The adjustable-rate loans currently originated by us provide for
a 2% annual cap and floor, and a 6% lifetime cap on the interest rate adjustment
over the rate in effect on the date of origination.  The actual interest rate on
these  adjustable-rate  loans may not be  reduced  below 6% over the life of the
loan. The annual and lifetime caps on interest rate increases  reduce the extent
to which  these  loans can help  protect us  against  interest  rate  risk.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -  Asset/Liability  Management and Market Risk" in the Annual Report.
Approximately  40.1% of the loans  secured by one- to  four-family  real  estate
originated by us during fiscal 2000 were  originated  with  adjustable  rates of
interest. See "- Originations,  Purchases and Sales of Loans and Mortgage-Backed
Securities."

       Adjustable-rate  loans  decrease  the risks  associated  with  changes in
interest  rates but involve  other risks,  primarily  because as interest  rates
rise, the payment by the borrower rises to the extent  permitted by the terms of
the loan,  thereby  increasing the potential for default.  At the same time, the
marketability  of the  underlying  property may be adversely  affected by higher
interest  rates.  We  believe  that these  risks,  which have not had a material
adverse  effect  on our  operations  to date,  are more than  outweighed  by the
benefits received by offering adjustable-rate mortgage loans.

       We also originate  fixed-rate mortgage loans.  Fixed-rate loans currently
originated by us have terms of up to 30 years.  Interest  rates charged on these
fixed-rate loans are competitively priced according to local market conditions.

       In underwriting residential real estate loans, we evaluate the borrower's
ability to make monthly  payments,  employment  history,  credit history and the
value of the  property  securing the loan.  Potential  borrowers  are  typically
qualified for both  adjustable-  and fixed-rate  loans based upon the initial or
stated rate of the loan.  Adjustable  rate loans increase the risk of default to
the extent the interest  rate adjusts  upward and the borrower is unable to make
the payments at the increased rate. Although borrowers on adjustable-rate  loans
are qualified  based upon the initial rate of the loan, if a borrower's  debt to
income  ratios are  marginal,  we will take into  consideration  the  borrower's
ability to make future  payments in the event the interest rate adjusts  upward.
Since the size of our average new loan originated is approximately  $50,000,  we
believe increases in interest rates do not generally increase payment amounts to
levels that would  significantly  impair the borrower's  ability to make monthly
payments.
                                      8

<PAGE>

       An  appraisal   of  the  security   property  is  obtained  on  all  loan
applications from Board-approved  independent fee appraisers. In connection with
the origination of residential real estate loans, we generally  require that the
borrower obtain an opinion from an attorney  regarding the title to the property
or title insurance and fire and casualty insurance,  as well as flood insurance,
where applicable, to protect our interest.

       Approximately   $2.0  million,   or  2.2%  of  our  one-  to  four-family
residential  mortgage  loan  portfolio,  was  purchased  by us.  These loans are
primarily  secured by property  located in Texas and have been in our  portfolio
for  several  years.  We  have  purchased  only a  limited  amount  of  one-  to
four-family  residential  mortgage loans since 1989. However, in connection with
the opening of a loan production office in Lawrence,  Kansas during fiscal 1998,
we purchased  approximately  $5.0 million  construction real estate loans. These
loans are secured by one- to  four-family  real estate  located in the  Lawrence
market area.  The level of  delinquencies  in our  portfolio of purchased  loans
secured by one- to four-family  residential  real estate is consistent with that
of the loans originated and retained by us.

       Our residential  mortgage loans customarily  include  due-on-sale clauses
giving us the right to  declare  the loan  immediately  due and  payable  in the
event,  among other  things,  the borrower  sells or  otherwise  disposes of the
property  subject to the mortgage and the loan is not repaid.  We have  enforced
due-on-sale  clauses in our mortgage contracts for the purpose of increasing our
loan portfolio yield.  The yield increase is obtained through the  authorization
of  assumptions of existing loans at higher rates of interest and the imposition
of  assumption  fees.  One- to  four-family  real  estate  loans may be  assumed
provided  home buyers  meet our  underwriting  standards  and the loan terms are
modified,  to the extent  necessary,  to conform with present yield and maturity
requirements.

       Construction  Lending.  We also make  construction  loans to builders and
individuals  for the  construction  of  residences.  There were $28.2 million of
construction loans outstanding at September 30, 2000.

       The majority of the  construction  loans were originated at the Lawrence,
Kansas loan  production  office.  This office is staffed with an originator  and
three  processors,  each of whom  has  substantial  experience  in  construction
lending.  Construction  loans  are made to both  builders  and  individuals  and
generally have terms of nine months or less and interest rates tied to the prime
rate plus a margin. Once the loan rate is determined,  however, it remains fixed
for  the  term  of  the  loan.  The  borrower  pays  interest  only  during  the
construction period.  Residential  construction loans are generally underwritten
pursuant  to the same  guidelines  used for  originating  permanent  residential
loans, and are approved at our  headquarters in Independence.  The amount loaned
to any one builder is subject to  pre-approved  guidance  lines with the maximum
amount not to exceed our loans-to-one-borrower limit.

       Construction  loans are generally  considered to involve a greater degree
of risk than permanent one-to four- family  residential  mortgage loans. Risk of
loss on a construction  loan depends largely upon the concurrence of the initial
estimate of the property's value at completion of construction and the estimated
cost  (including  interest)  of  construction,  as well as the  availability  of
permanent take-out financing. During the construction phase, a number of factors
could result in delays and cost overruns.  If the estimate of value proves to be
inaccurate,  we may be confronted, at or prior to the maturity of the loan, with
a project which,  when  completed,  has a value which is  insufficient to ensure
full  repayment.   Because  of  these   uncertainties   inherent  in  estimating
development  and  construction  costs,  it is  relatively  difficult to evaluate
accurately  the total loan funds  required  to  complete  a project.  Also,  the
funding  of loan fees and  interest  during  the  construction  phase  makes the
monitoring of the progress of the project particularly  important,  as customary
early warning signals of project difficulties may not be present.

                                       9

<PAGE>
       Non-Residential/Multi-Family Real Estate Lending. In order to enhance the
yield on and  decrease  the average  term to  maturity  of our  assets,  we have
originated and purchased  permanent loans and  participation  interests in loans
originated by other lenders secured by  non-residential  and  multi-family  real
estate.   We  also  have  a  limited  amount  of  loans  secured  by  land.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -  Asset/Liability  Management and Market Risk" in the Annual Report.
At September  30, 2000, we had $11.4  million in  non-residential/  multi-family
real estate loans, representing 8.4% of our loan portfolio.

       Approximately      4.5%     of     the     property      securing     our
non-residential/multi-family  (including  land) real  estate loan  portfolio  is
located outside our primary market area.  Many of the properties  securing these
purchased loans or participations  are located in Texas and neighboring  states.
Some of these areas have  experienced  adverse economic  conditions  including a
general softening in real estate markets and the local economy, which may result
in  increased  loan  delinquencies  and  loan  losses.   However,  most  of  our
non-residential/multi-family  real estate loan portfolio is seasoned and, during
the past five years, we have had no significant  purchases or  participations in
such loans.

       The  table  below  sets  forth,  by  type  of  security   property,   our
non-residential/multi-family real estate loans at September 30, 2000.
<TABLE>
                                                                Number       Outstanding            Amount
                                                                  of          Principal         Non-Performing
                                                                Loans          Balance           or of Concern
                                                             -----------    ------------       ----------------
                                                                        (Dollars in Thousands)
<S>                                                              <C>           <C>                   <C>

Multi-family                                                      2           $  339                 $---
Small business facilities and office buildings                   47            3,580                   69
Health care facility                                             14            2,352                  ---
Churches                                                          2               40                  ---
Warehouse/mini-storage                                            3              258                  ---
Hotel/motel                                                       4            1,515                  ---
Land                                                             60            3,336                   35
                                                                ---          -------                 ----

    Total multi-family residential and non-residential real
        estate loans                                            132          $11,420                 $104
                                                                ===          =======                 ====
</TABLE>

       Permanent  non-residential  and multi-family real estate loans originated
by us  generally  have  terms  ranging  from 5 to 20 years  and up to a  30-year
amortization  schedule.  Rates on permanent loans either (i) adjust (subject, in
some cases, to specified  interest rate caps) at one year intervals to specified
spreads over an index, (ii) float (subject, in some cases, to specified interest
rate caps) with  changes in a specified  prime rate or (iii) carry fixed  rates.
Under our current  loan policy,  multi-family/non-residential  real estate loans
(other  than  loans to  facilitate)  are  written in amounts of up to 80% of the
appraised value of the properties.

       Appraisals on properties  securing  non-residential and multi-family real
estate  property  loans   originated  by  First  Federal  are  performed  by  an
independent  appraiser  designated  by us at the  time  the  loan is  made.  All
appraisals on multi-family and non-residential real estate loans are reviewed by
us. In addition,  our underwriting  procedures generally require verification of
the  borrower's  credit  history,  income  and  financial  statements,   banking
relationships,  references  and income  projections  for the property.  Personal
guarantees   are   generally   obtained   for   all   or  a   portion   of   our
multi-family/non-residential  real  estate  loans.  While we continue to monitor
multi-family/non-residential   real  estate  loans  on  a  regular  basis  after
origination,  updated  appraisals are not normally obtained after closing unless
we believe that there are  questions  regarding  the progress of the loan or the
value of the collateral.

       At September 30, 2000, we had no non-residential/multi-family real estate
loans to one  borrower,  or group of borrowers,  which had an existing  carrying
value in excess of $500,000,  except for the loans to three unrelated  borrowers
or  groups  of  borrowers  described  below.  The  first  loan is  secured  by a
residential  care  facility  located  in Caney,  Kansas  and had an  outstanding
balance at September 30, 2000 of $775,000. The other loans in excess of $500,000

                                       10
<PAGE>
at September 30, 2000, included a loan with an outstanding balance of $1,132,000
secured by a nursing home located in  Independence,  Kansas;  and a loan with an
outstanding  balance of  $990,000  secured by a hotel  located in  Independence,
Kansas. All of these loans were current at September 30, 2000. See "Regulation -
Federal Regulation of Savings Associations."

       Non-residential/multi-family   real   estate   lending   affords  us  the
opportunity to receive  interest at rates higher than that  generally  available
from one- to four-family  residential  lending.  Nevertheless,  loans secured by
such  properties are generally  larger and involve a greater degree of risk than
one- to  four-family  residential  mortgage  loans.  Because  payments  on loans
secured  by  non-residential/multi-family   real  estate  properties  are  often
dependent on the successful operation or management of the properties, repayment
of such loans may be subject to adverse  conditions in the real estate market or
the  economy.  If the cash flow from the  project is reduced  (for  example,  if
leases are not obtained or renewed),  the  borrower's  ability to repay the loan
may be  impaired.  We  have  attempted  to  minimize  these  risks  through  our
underwriting  standards  and by lending  primarily on existing  income-producing
properties.

       We also  generally  maintain  an  escrow  account  for most of our  loans
secured by real estate,  in order to ensure that the borrower  provides funds to
cover  property  taxes in advance of the required  payment.  These  accounts are
analyzed annually to confirm that adequate funds are available.  For loans which
do not  include  an escrow  requirement,  an annual  review of tax  payments  is
performed by us in order to confirm payment. In order to monitor the adequacy of
cash  flows on  income-producing  properties,  the  borrower  or lead  lender is
notified annually,  requesting financial  information including rental rates and
income, maintenance costs and an update of real estate property tax payments.

       Consumer Lending. Consumer loans generally have shorter terms to maturity
(thus reducing our exposure to changes in interest rates) and carry higher rates
of interest than do one- to four-family residential mortgage loans. In addition,
we believe  that the  offering of  consumer  loan  products  helps to expand and
create stronger ties to our existing  customer base, by increasing the number of
customer relationships and providing cross-marketing opportunities. At September
30, 2000, our consumer loan  portfolio  totaled $5.4 million and was 4.0% of our
loan  portfolio.  Under  applicable  federal law, First Federal is authorized to
invest up to 35% of our assets in consumer loans.

       First Federal offers a variety of secured consumer loans,  including home
equity loans,  home improvement  loans, auto loans, and loans secured by savings
deposits  and other  consumer  collateral.  We also  offers a limited  amount of
unsecured loans. We currently  originate all of our consumer loans in our market
area. Our home equity and home improvement loans comprised  approximately  19.4%
of our total consumer loan  portfolio.  These loans are generally  originated in
amounts,  together with the amount of the existing first mortgage, of up to 100%
of the appraised  value of the property  securing the loan. The term to maturity
on such loans may be up to seven years. Other consumer loan terms vary according
to the type of  collateral,  length of  contract  and credit  worthiness  of the
borrower. Our consumer loans generally have a fixed rate of interest, except for
the home equity  lines of credit  which  adjust  based upon changes in the prime
rate.

       We do not originate any consumer loans on an indirect basis (i.e.,  where
loan  contracts are  purchased  from  retailers of goods or services  which have
extended credit to their customers).

       The  underwriting  standards  employed by us for consumer loans include a
determination  of  the  applicant's  payment  history  on  other  debts  and  an
assessment  of the  ability to meet  existing  obligations  and  payments on the
proposed  loan.  Although   creditworthiness  of  the  applicant  is  a  primary
consideration,  the underwriting process also includes a comparison of the value
of the security, if any, in relation to the proposed loan amount.

                                       11

<PAGE>
       Consumer  loans may  entail  greater  risk than do  residential  mortgage
loans,  particularly in the case of consumer loans which are unsecured,  such as
checking  account   overdraft   privilege  loans,  or  are  secured  by  rapidly
depreciable  assets,  such  as  automobiles.  In  such  cases,  any  repossessed
collateral for a defaulted  consumer loan may not provide an adequate  source of
repayment of the outstanding loan balance as a result of the greater  likelihood
of damage,  loss or  depreciation.  In addition,  consumer loan  collections are
dependent on the borrower's  continuing financial  stability,  and thus are more
likely to be  affected  by  adverse  personal  circumstances.  Furthermore,  the
application  of  various  federal  and  state  laws,  including  bankruptcy  and
insolvency  laws,  may limit the amount  which can be  recovered  on such loans.
Although the level of delinquencies in our consumer loan portfolio has generally
been low (at September 30, 2000,  $80,000, or approximately 1.5% of the consumer
loan portfolio, was 60 days or more delinquent),  there can be no assurance that
delinquencies will not increase in the future.

       Originations,   Purchases   and  Sales  of  Loans   and   Mortgage-Backed
Securities.  We  originate  real estate loans  through  marketing  efforts,  our
customer base,  walk-in  customers,  and referrals from real estate brokers.  We
originate both  adjustable-rate  and fixed-rate  loans. Our ability to originate
loans is dependent upon the relative  demand for  fixed-rate or  adjustable-rate
mortgage  loans  in the  origination  market,  which  is  affected  by the  term
structure  (short-term  compared to long-term) of interest  rates as well as the
current and expected future level of interest rates.

       Historically,  we have  also  purchased  loans  and loan  participations,
predominantly   for   non-residential   real  estate  and  one-  to  four-family
residential  loans.  Such purchases have enabled First Federal to take advantage
of favorable lending  opportunities in other markets, to diversify our portfolio
and to limit  origination  expenses while  generally  providing us with a higher
yield than was available on mortgage-backed securities.

       We have underwritten our loan purchases using the same criteria we use in
originating  loans.  Servicing of purchased loans is generally  performed by the
seller.  At September 30, 2000,  approximately  $4.1 million of First  Federal's
loan portfolio was serviced by others. During the year ended September 30, 2000,
we purchased loans totaling  $1,242,000 secured by non-residential  real estate.
Both of these loans are secured by property  located  within our market area and
were acquired  with interest  rates which  exceeded the then  available  rate on
mortgage-backed securities.

       During recent years, most of our loan purchase opportunities have been at
yields  that  were  not  sufficiently  higher  than  the  yields  of  comparable
mortgage-backed  securities  that  were  guaranteed  by a  Federal  agency as to
principal and interest (or derived from certificates that were so guaranteed) to
offset   such   credit   protection.   Accordingly,   we  have   increased   our
mortgage-backed securities portfolio rather than loan purchases. See "Investment
Activities - Mortgage-Backed Securities."

       We had $1.3  million in loans  serviced  for others as of  September  30,
2000.

                                       12

<PAGE>
       The following  table shows our loan  originations,  purchases,  sales and
repayment activities for the periods indicated.
<TABLE>

                                                                                 Year Ended September 30,
                                                                            ----------------------------------
                                                                            2000           1999           1998
                                                                            ----           ----           ----
                                                                                  (Dollars in Thousands)
<S>                                                                        <C>             <C>            <C>
Originations by type
--------------------
 Adjustable-rate:
  Real estate - one- to four-family                                        $ 8,055        $ 8,099        $ 5,984
                - non-residential                                               25            649            250
  Consumer  - home equity                                                      192             84            117
                                                                           -------        -------        -------
         Total adjustable-rate                                               8,272          8,832          6,351
                                                                           -------        -------        -------
 Fixed-rate:
  Real estate - one- to four-family                                         12,056         12,820         14,968
                - non-residential                                              876          1,235          3,028
  Construction                                                              37,245         33,319         23,621
  Consumer - non-residential                                                 3,960          3,380          2,294
                                                                           -------        -------        -------
         Total fixed-rate                                                   54,137         50,754         43,911
                                                                           -------        -------        -------
         Total loans originated                                             62,409         59,586         50,262
                                                                           -------        -------        -------

Purchases
---------
  Real estate - non-residential                                              1,242            ---            ---
  Construction                                                                 ---            ---          4,984
                                                                           -------        -------        -------
         Total purchased                                                     1,242            ---          4,984
                                                                           -------        -------        -------

Sales and Repayments
--------------------
  Mortgage-backed securities                                                 2,118          6,248          6,164
  Principal repayments(1)                                                   52,167         45,303         30,231
                                                                          --------        -------        -------
        Total reductions                                                    54,285         51,551         36,395
Loans transferred from Neodesha                                                ---          9,032            ---
  Increase (decrease), in other items, net(2)                                  695         (4,220)        (5,979)
                                                                          --------        -------        -------
         Net increase                                                     $ 10,061        $12,872        $12,847
                                                                          ========        =======        =======
</TABLE>

(1)    Includes transfers to real estate acquired through foreclosure.
(2)    Consists of loans in process, net deferred origination costs, unamortized
       discounts and allowance for loan losses.

Asset Quality

         When a borrower fails to make a required  payment on a loan, we attempt
to cause the delinquency to be cured by contacting the borrower.  In the case of
loans secured by real estate,  a computer  generated late notice is sent 15 days
after the due date.  If the  delinquency  is not cured between the 30th and 60th
day, a personal  letter is sent to the  borrower and if the  delinquency  is not
cured by the 75th day,  contact with the  borrower is made by phone.  Additional
written  and  verbal  contacts  are made with the  borrower  to the  extent  the
borrower appears to be cooperative. If the delinquency is not cured or a payment
plan  arranged by the 90th day, we send a 30-day  default  letter and, once that
period  elapses,  usually  institute  appropriate  action  to  foreclose  on the
property.  Interest  income on loans at this point is reduced by the full amount
of accrued and uncollected  interest.  If foreclosed,  the property is sold at a
sheriff's sale and may be purchased by us. Delinquent consumer loans are handled
in a  similar  manner.  If  these  efforts  fail  to  bring  the  loan  current,
appropriate  action  may be  taken to  collect  any loan  payment  that  remains
delinquent.  Our procedures for repossession and sale of consumer collateral are
subject to various requirements under Kansas consumer protection laws.

                                       13

<PAGE>

       Real estate properties  acquired through, or in lieu of, loan foreclosure
are to be  sold  and  are  initially  recorded  at  fair  value  at the  date of
foreclosure establishing a new cost basis. Subsequent to foreclosure, valuations
are  periodically  performed by management and the real estate is carried at the
lower of  carrying  amount or fair  value  less cost to sell.  See Note A of the
Notes  to  Consolidated   Financial   Statements  in  the  Annual  Report.  Upon
acquisition,  revenues and expenses from operations and changes in the valuation
allowance are included Foreclosed Assets Expense. However, costs relating to the
development and improvement of the property are capitalized to the extent of net
realizable value.

       Delinquent Loans. The following table sets forth  information  concerning
delinquent loans at September 30, 2000, in dollar amounts and as a percentage of
our  loan  portfolio.  The  amounts  presented  represent  the  total  remaining
principal balances of the related loans,  rather than the actual payment amounts
which are overdue.
<TABLE>


                                                    Loans Delinquent for:
                             --------------------------------------------------------------------      Total Loans Delinquent
                                       60-90 Days                        Over 90 Days                      60 Days or More
                             ---------------------------------- ---------------------------------  ---------------------------------
                                                   Percent of                         Percent of                         Percent of
                                                      Total                              Total                              Total
                                                      Loan                               Loan                               Loan
                              Number     Amount     Portfolio    Number     Amount     Portfolio    Number     Amount     Portfolio
                             -------    -------    ----------   -------   ---------  ------------  --------   --------  ------------
                                                                    (Dollars in Thousands)
<S>                           <C>        <C>        <C>          <C>        <C>        <C>          <C>      <C>         <C>
Real Estate:
  One- to four-family          13        $301       0.22%        22        $ 755       0.56%        35      $1,056       0.78%
  Non-residential             ---         ---        ---          2           69       0.05          2          69       0.05
Construction                  ---         ---        ---          5          408       0.30          5         408       0.30
Consumer                        6          42       0.03          9           38       0.03         15          80       0.06
                              ---        ----       ----       ----       ------       ----       ----      ------       ----
  Total                        19        $343       0.25%        38       $1,270       0.94%        57      $1,613       1.19%
                              ===        ====       ====       ====       ======       ====       ====      ======       ====
</TABLE>


                                       14
<PAGE>





       Non-Performing  Assets.  The  table  below  sets  forth the  amounts  and
categories of our non-performing  assets. Loans are placed on non-accrual status
when the collection of principal and/or interest becomes  doubtful.  As a matter
of policy,  we do not generally  accrue  interest on loans past due more than 90
days. For all periods  presented,  troubled debt  restructurings  (which involve
forgiving a portion of interest or  principal  on any loans or making loans at a
rate  materially  less than that of market  rates) are included in the following
table.  Real estate  acquired  through  foreclosure  includes assets acquired in
settlement  of loans and  reflects  the lower of cost or fair value less selling
expense.
<TABLE>

                                                                   Year Ended September 30,
                                                       --------------------------------------------------
                                                          2000              1999              1998
                                                       ------------ ------------------- -----------------
                                                                   (Dollars in Thousands)
<S>                                                      <C>               <C>              <C>
Non-accruing loans:
  One- to four-family                                    $  587           $  849            $  217
  Non-residential real estate                                50              ---                21
  Construction                                              408              330                62
  Consumer                                                   56              132                35
                                                         ------           ------            ------
    Total non-accruing loans                              1,101            1,311               335
                                                         ------           ------            ------

Accruing loans delinquent 90 days or more:
  One- to four-family                                       169              875               690
  Non-residential real estate                                18              ---               ---
  Construction                                              ---              239               223
  Consumer                                                  ---                4                 5
                                                         ------           ------            ------
    Total accruing loans delinquent 90 days or more         187            1,118               918
                                                         ------           ------            ------

Troubled debt restructurings:
  Consumer                                                   23              ---               ---
                                                         ------           ------            ------
    Total non-performing loans                            1,311            2,429             1,253
                                                         ------           ------            ------

Real estate acquired through foreclosure:
  One- to four-family                                       423              110                72
                                                         ------           ------            ------

Total non-performing assets                              $1,734           $2,539            $1,325
                                                         ======           ======            ======
Total as a percentage of total assets                      1.16%            1.84%             1.07%
                                                           ====             ====              ====
</TABLE>


       For the year ended September 30, 2000,  gross interest income which would
have been recorded had the  non-accruing  loans been current in accordance  with
their original terms amounted to $46,000. The amount included in interest income
on such loans was $26,000 for the year ended September 30, 2000.

       Included in  non-accruing  loans at  September  30,  2000,  were 14 loans
totaling $587,000 secured by one- to four-family real estate,  four construction
loans  totaling  $373,000  secured  by  one- to  four-family  real  estate,  one
construction loan totaling $35,000 secured by  non-residential  real estate, one
loan totaling $50,000 secured by  non-residential  real estate,  and 19 consumer
loans  totaling  $56,000.  All  non-accruing  loans at September 30, 2000,  were
located in our primary  market area.  At  September  30,  2000,  accruing  loans
delinquent 90 days or more included  eight loans  totaling  $169,000  secured by
one- to  four-family  real  estate  and one loan  totaling  $18,000  secured  by
non-residential  real estate.  At September 30, 2000,  all of our accruing loans
delinquent  90 days or more  secured by real estate were  located in our primary
market area.

         Real Estate Acquired  Through  Foreclosure.  At September 30, 2000, our
real estate  acquired  through  foreclosure  consisted of eleven  single  family
residences  located in our market area. The properties  have a carrying value of
$423,000 and are currently held for sale.

                                       15

<PAGE>
         Classified Assets.  Federal  regulations provide for the classification
of loans and other assets, such as debt and equity securities  considered by the
OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered  "substandard"  if it is  inadequately  protected  by the current net
worth and paying capacity of the obligor or of the collateral  pledged,  if any.
"Substandard"  assets include those characterized by the "distinct  possibility"
that the insured  institution  will sustain "some loss" if the  deficiencies are
not  corrected.  Assets  classified  as  "doubtful"  have all of the  weaknesses
inherent in those classified  "substandard," with the added  characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently  existing facts,  conditions,  and values,  "highly  questionable  and
improbable."  Assets  classified as "loss" are those considered  "uncollectible"
and  of  such  little  value  that  their  continuance  as  assets  without  the
establishment  of a specific loss reserve is not warranted.  Assets which do not
currently  expose  the  insured   institution  to  sufficient  risk  to  warrant
classification in one of the  aforementioned  categories but possess  weaknesses
are placed on a "watch list" by management.

       When  an  insured   institution   classifies  problem  assets  as  either
substandard or doubtful, it may establish general allowances in an amount deemed
prudent by management to cover probable  losses.  General  allowances  represent
loss allowances which have been established to cover probable losses  associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets. When an insured  institution  classifies
problem  assets as  "loss,"  it is  required  either  to  establish  a  specific
allowance for losses equal to 100% of that portion of the asset so classified or
to  charge-off  such  amount.   An   institution's   determination   as  to  the
classification  of its  assets  and the amount of its  valuation  allowances  is
subject to review by the regulatory authorities, who may order the establishment
of additional general or specific loss allowances.

       In connection with the filing of our periodic reports with the OTS and in
accordance with our  classification  of assets policy,  we regularly  review the
problem  loans  in  our  portfolio  to  determine   whether  any  loans  require
classification  in accordance  with  applicable  regulations.  We had classified
assets, all of which  at  September  30,  2000   are  included  in the table of
non-performing assets on the previous page, as follows:
<TABLE>
                                                                                  September 30,
                                                                   ------------------------------------------
                                                                     2000              1999           1998
                                                                   ------------- ---------------- -----------
                                                                               (Dollars in Thousands)
<S>                                                                   <C>             <C>             <C>
Substandard                                                          $1,640           $2,274          $1,320
Doubtful                                                                 71              ---               5
Loss                                                                    ---               15             ---
Pass                                                                    ---              250             ---
                                                                     ------           ------          ------
Total classified assets                                              $1,711           $2,539          $1,325
                                                                     ======           ======          ======
</TABLE>

       Allowance for Loan Losses.  The allowance for loan losses is  established
through a provision  for loan losses  based on our  evaluation  of the  probable
losses in our loan  portfolio  and  changes in the nature and volume of our loan
activity.  Such evaluation,  which includes a review of all loans for which full
collectibility may not be reasonably assured, considers among other matters, the
estimated  fair  value  of  the  underlying  collateral,   economic  conditions,
historical  loan loss  experience and other factors that warrant  recognition in
providing for an adequate loan  allowance.  Although we believe it uses the best
information  available to make such  determinations,  future  adjustments to the
allowance may be necessary,  and net income could be  significantly  affected if
circumstances  differ  substantially  from the  assumptions  used in making  the
initial  determinations.  At September  30, 2000,  we had an allowance  for loan
losses of $758,000.

                                       16

<PAGE>
       The  following  table sets forth an  analysis of our  allowance  for loan
losses at the dates indicated.
<TABLE>

                                                                                  Year Ended September 30,
                                                                              --------------------------------
                                                                              2000          1999          1998
                                                                              ---------  ------------  -------
                                                                                   (Dollars in Thousands)
<S>                                                                           <C>           <C>          <C>
Balance at beginning of fiscal year.                                          $753          $656         $668

Provision                                                                       99            66          ---
Transfer from Neodesha Savings merger/conversion                              ----            84          ---
Charge-offs:
  One- to four-family                                                           78             7           12
  Consumer Loans                                                                16            46          ---
                                                                              ----          ----         ----

  Net charge-offs                                                               94            53           12
                                                                              ----          ----         ----
Balance at end of fiscal year.                                                $758          $753         $656
                                                                              ====          ====         ====

Ratio of net charge-offs during the fiscal year to total loans at end of
 fiscal year                                                                  0.08%         0.05%        0.01%
                                                                              ====         =====         ====


Allowance for loan losses to total loans at end of fiscal year                0.61%         0.67%        0.70%
                                                                              ====         =====         ====


Allowance for loan losses to non-performing loans at end of fiscal year      57.86%        30.99%       52.30%
                                                                             =====         =====        =====
</TABLE>


                                       17

<PAGE>


       The  distribution  of the  allowance  for  losses  on loans at the  dates
indicated is summarized as follows:
<TABLE>

                                                                         September 30,
                                              --------------------------------------------------------------------
                                                       2000                  1999                   1998
                                              ------------------------ --------------------- ---------------------
                                                           Percent               Percent                Percent
                                                          of Loans               of Loans               of Loans
                                                           in Each               in Each                in Each
                                                          Category               Category               Category
                                                          to Total               to Total               to Total
                                                  Amount    Loans      Amount     Loans      Amount      Loans
                                              ----------- ----------- --------- ----------- --------- ------------
                                                                     (Dollars in Thousands)
<S>                                               <C>      <C>          <C>        <C>       <C>         <C>
Real Estate
  One- to four-family                             $353     66.90%       $315      67.55%     $286       71.06%
  Multi-family                                     ---      0.25         ---       0.74       ---        0.99
  Non-residential                                  103      8.15          92       7.29       103        8.97
  Construction                                     275     20.72         305      20.13       214       15.87
Consumer                                            27      3.98          41       4.29        20        3.11
Unallocated                                        ---       ---         ---        ---        33
                                                  ----    ------        ----     ------      ----      ------
    Total                                         $758    100.00%       $753     100.00%     $656      100.00%
                                                  ====    ======        ====     ======      ====      ======
</TABLE>


Investment Activities

       General.  First Federal must maintain  minimum levels of investments that
qualify as liquid  assets  under OTS  regulations.  Liquidity  may  increase  or
decrease  depending upon the  availability  of funds and  comparative  yields on
investments in relation to the return on loans. Historically, we have maintained
liquid  assets  at levels  above the  minimum  requirements  imposed  by the OTS
regulations and at levels believed  adequate to meet the  requirements of normal
operations,   including  repayments  of  maturing  debt  and  potential  deposit
outflows.  Cash flow  projections  are regularly  reviewed and updated to assure
that adequate  liquidity is  maintained.  At September  30, 2000,  our liquidity
ratio (liquid assets as a percentage of net  withdrawable  savings  deposits and
current  borrowings)  was 7.89%.  See  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
in the Annual Report.

       Federally chartered savings  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  federal  funds.  Subject  to  various  restrictions,  federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally  chartered savings  institution is otherwise
authorized to make directly.

       Generally,  our  investment  policy  is to  invest  funds  among  various
categories  of  investments  and  maturities  based  upon  our   asset/liability
management policies,  investment quality and marketability,  liquidity needs and
performance objectives.

       Investment  Securities.  At  September  30, 2000,  investment  securities
totaled $8.5 million,  or 5.7% of total  assets.  As of that date, we also had a
$2.0 million investment in FHLB stock, satisfying our requirement for membership
in the  FHLB  of  Topeka.  It is  our  general  policy  to  purchase  investment
securities which are U.S. Government securities or federal agency obligations or
other issues that are rated  investment  grade or have credit  enhancements.  At
September 30, 2000,  the average term to maturity or repricing of the investment
portfolio was 2.69 years.

                                       18
<PAGE>




       The  following  table  sets  forth  the  composition  of  our  securities
portfolio at the dates indicated.

<TABLE>

                                                                                          September 30,
                                                           -------------------------------------------------------------------------
                                                                   2000                       1999                     1998
                                                           --------------------- ------------------------- -------------------------
                                                             Book       % of          Book       % of          Book         % of
                                                             Value      Total         Value      Total         Value        Total
                                                           ---------- ---------- ------------ ------------ ------------ ------------
                                                                                   (Dollars in Thousands)
<S>                                                          <C>        <C>           <C>        <C>           <C>           <C>
Securities held to maturity:
  Federal agency obligations                                 $6,100     58.41%        $6,200     59.35%       $5,000        50.04%
  U.S. Government Securities                                    200      1.92            200      1.91           ---          ---
  Municipal Securities                                          196      1.88            605      5.79           ---          ---
                                                            -------    ------        -------    ------        ------       ------
   Total Securities held to maturity                          6,496     62.21          7,005     67.05         5,000        50.04
                                                            -------    ------        -------    ------       -------       ------

Securities available for sale:
  Federal agency obligations                                  1,992     19.07          2,000     19.15        3,065         30.68
  Other marketable equity securities(1)                         ---       ---            ---       ---          353          3.53
                                                            -------    ------        -------    ------       ------        ------
     Total securities available for sale                      1,992     19.07          2,000     19.15        3,418         34.21
                                                            -------    ------        -------    ------       ------        ------

  Federal Home Loan Bank stock                                1,955     18.72          1,442     13.80        1,574         15.75
                                                            -------    ------        -------    ------       ------        ------
     Total securities and Federal Home Loan Bank stock      $10,443    100.00%       $10,447    100.00%      $9,992        100.00%
                                                            =======    ======        =======    ======       ======        ======

  Average remaining life or term to repricing of
   securities  (excluding  Federal Home Loan Bank
   stock and other marketable equity securities)                   3.16 yrs.                3.96 yrs.                3.51 yrs.
Other Interest-Earning Assets:
  Short-term money market investments                        $1,471    100.00%       $   375    100.00%    $  439        100.00%
                                                             ======    ======        =======    ======     ======        ======

Average remaining life or term to repricing of
securities and other interest-earning assets (
excluding Federal Home Loan Bank stock and other
marketable equity securities)                                      2.69 yrs.                3.80 yrs.                3.33 yrs.
</TABLE>

------------------------------------
(1)    Represents  primarily  investments  in  mutual  funds  investing  in U.S.
       Government securities and federal agency obligations.

                                       19

<PAGE>


       The  composition  and maturities of the securities  portfolio,  excluding
FHLB of Topeka stock, are indicated in the following table.
<TABLE>

                                                          September 30, 2000
                                    -----------------------------------------------------------------------
                                      Less Than      1 to 5         5 to 10         Total Investment
                                       1 Year        Years           Years             Securities
                                    -------------- ------------- -------------- ---------------------------
                                      Amortized     Amortized      Amortized     Amortized
                                        Cost          Cost           Cost          Cost       Fair Value
                                    -------------- ------------- -------------- ----------- ----------------
                                                                 (Dollars in Thousands)
<S>                                    <C>            <C>           <C>           <C>          <C>

Held to Maturity:
  Municipal securities                  $---          $  ---         $196         $  196      $  194
  U.S. Government securities             200             ---          ---            200         200
  Federal agency obligations             100           6,000          ---          6,100       6,023
                                        ----           -----         ----         ------      ------
    Total investment securities         $300          $6,000         $196         $6,496      $6,417
                                        ====          ======         ====         ======      ======
     Weighted average yield             6.04%           6.78%        4.00%          6.66%
                                        ====           =====         ====           ====

Available for Sale:
 Federal agency obligations             $998          $1,002         $---          $2,000      $1,992
                                        ====          ======         ====          ======      ======
     Weighted average yield             5.29%           6.42%         ---%           5.85%
                                        ====            ====          ===            ====
</TABLE>

       Our  securities   portfolio  at  September  30,  2000,  did  not  contain
securities  of any issuer with an  aggregate  book value in excess of 10% of our
stockholders'   equity,   excluding  securities  issued  by  the  United  States
Government, or its agencies.

       Our  securities  portfolio  is  managed  in  accordance  with  a  written
investment policy adopted by the Board of Directors.  Investments may be made by
First Federal  officers within  specified limits and must be approved in advance
by the Board of Directors for transactions over certain limits. At September 30,
2000, we held no investments  for trading  purposes,  but did hold securities as
available  for sale with an amortized  cost and market value of $2.0 million and
$2.0 million, respectively.

       Mortgage-Backed  Securities.  We  have  a  portfolio  of  mortgage-backed
securities and have utilized such investments to complement our mortgage lending
activities.  At September 30, 2000, our mortgage-backed  securities totaled $8.7
million.  For  information  regarding  the  carrying  and  fair  values  of  our
mortgage-backed  securities  portfolio,  see Note C of the Notes to Consolidated
Financial Statements in the Annual Report.

       At  September  30,  2000,  $6.3  million,  or 71.7%,  of First  Federal's
mortgage-backed securities carried adjustable-rates of interest. Under the OTS's
risk-based capital  requirements,  Ginnie Mae mortgage-backed  securities have a
zero  percent  risk   weighting  and  Fannie  Mae,   Freddie  Mac  and  AA-rated
mortgage-backed  securities  have a 20% risk  weighting,  in contrast to the 50%
risk weighting carried by one- to four-family  performing  residential  mortgage
loans.

                                       20

<PAGE>
       The  following  table  sets  forth  the  contractual  maturities  of  the
mortgage-backed securities at September 30, 2000.

<TABLE>
                                                                           Due in
                                    ------------------------------------------------------------------------------------------------

                                     6 months     6 months      1 to       3 to 5       5 to 10    10 to 20     Over 20     Book
                                      or Less     to 1 Year    3 Years      Years        Years       Years       Years      Value
                                    ---------- ------------- ----------- ----------- ----------- ------------ ---------- -----------
                                                                      (Dollars in Thousands)
<S>                                    <C>         <C>        <C>          <C>         <C>          <C>       <C>           <C>
Held to Maturity
----------------
Adjustable-Rate Mortgage-Backed
Securities:
  Freddie Mac                         $ ---       $ ---       $ ---       $ ---         $  ---      $  262      $2,316      $2,578
  Fannie Mae                            ---         ---         ---         ---            ---       1,101       2,591       3,692
                                      -----       -----       -----       -----         ------      ------      ------      ------
     Total adjustable-rate              ---         ---         ---         ---            ---       1,363       4,907       6,270
                                      -----       -----       -----       -----         ------      ------      ------      ------

Fixed-Rate Mortgage-Backed
Securities:
Freddie Mac                             ---         ---         ---         206          1,141         290         ---       1,637
Fannie Mae                              ---         ---         ---         ---            661         150         ---         811
Ginnie Mae                              ---         ---         ---         ---            ---          28         ---          28
                                      -----       -----       -----       -----         ------     -------     -------      ------
  Total fixed-rate                      ---         ---         ---         206          1,802         468         ---       2,476
                                      -----       -----       -----       -----         ------     -------     -------      ------
Total mortgage-backed securities
held   to maturity                   $  ---       $ ---       $ ---       $ 206         $1,802     $ 1,831      $4,907      $8,746
                                      =====       =====       =====       =====         ======     =======      ======      ======
</TABLE>

Sources of Funds

       General.  Our primary  sources of funds are  deposits,  amortization  and
repayment of loan principal  (including  mortgage-backed  securities),  sales or
maturities of investment securities,  mortgage-backed  securities and short-term
investments, borrowings, and funds provided from operations.

       Borrowings  may be used on a short-term  basis to compensate for seasonal
reductions in deposits or deposit  inflows at less than  projected  levels,  and
have been used in the past on a longer-term basis to support lending activities.
We had $39.1 million in FHLB advances outstanding at September 30, 2000.

       Deposits.  We offer a variety of deposit  accounts having a wide range of
interest  rates and terms.  Our  deposits  consist  of  passbook  accounts,  NOW
accounts,  and money  market and  certificate  accounts.  We rely  primarily  on
advertising,  competitive  pricing  policies and customer service to attract and
retain these deposits.  We only solicit deposits from our market area and do not
use brokers to obtain deposits.

       The flow of  deposits is  influenced  significantly  by general  economic
conditions,   changes  in  money  market  and  prevailing   interest  rates  and
competition.  The  variety of deposit  accounts  we offer have  allowed us to be
competitive  in obtaining  funds and to respond with  flexibility  to changes in
consumer demand.  We have become more susceptible to short-term  fluctuations in
deposit flows as customers have become more interest rate  conscious.  We manage
the pricing of our deposits in keeping with our  asset/liability  management and
profitability objectives. Based on our experience, we believe that our passbook,
NOW and non-interest-bearing  checking accounts are relatively stable sources of
deposits.  However, our ability to attract and maintain certificates of deposit,
and the  rates  paid on  these  deposits,  has  been  and  will  continue  to be
significantly affected by market conditions.

                                       21

<PAGE>

       The following  table sets forth the dollar amount of savings  deposits in
the various types of deposit programs we offered for the dates indicated and the
rates offered. See Note H of the Notes to the Consolidated  Financial Statements
in the Annual Report for weighted average nominal rates.
<TABLE>

                                                                         September 30,
                                          ------------------------------------------------------------------------------
                                                    2000                     1999                     1998
                                          ------------------------------------------------------------------------------
                                                        Percent                Percent                 Percent
                                           Amount       of Total    Amount     of Total    Amount      of Total
                                          ---------- ------------ ---------- ----------- ----------- -------------------
                                                                    (Dollars in Thousands)
<S>                                        <C>           <C>        <C>          <C>        <C>           <C>
Transactions and Savings Deposits:
---------------------------------
 Passbook Demand (2.85%)                   $ 4,527        4.80%    $ 4,583        4.79%    $ 2,745        3.40%
 NOW Accounts (2.00-2.50%)                   7,182        7.62       6,503        6.81       3,939        4.88
 Money Market Accounts (2.50-5.25%)         24,729       26.24      26,541       27.78      21,952       27.22
                                           -------       -----     -------       ----- --  -------      ------

   Total Transactions and Savings Deposits  36,438       38.66      37,627       39.38      28,636       35.50
                                           -------       -----     -------       -----     -------      ------

Certificates:

 0.00  -  3.99%                                ---         ---         212        0.22           3         .01
 4.00  -  4.99%                              2,519        2.67      15,802       16.54       1,792        2.22
 5.00  -  5.99%                             44,596       47.32      36,768       38.49      45,364       56.24
 6.00  -  6.99%                             10,575       11.22       5,030        5.27       4,751        5.89
 7.00%  and over                               ---         ---          14        0.01          27         .03
                                           -------      ------     -------       -----     -------      ------
Total Certificates                          57,690       61.21      57,826       60.53      51,937       64.39
                                           -------      ------     -------       -----     -------      ------
Accrued Interest                               118        0.13          86        0.09          85         .11
                                           -------      ------     -------       -----     -------      ------
Total Deposits                             $94,246      100.00%    $95,539      100.00%    $80,658      100.00%
                                           =======      ======     =======      ======     =======      ======
</TABLE>

       The  following  table sets forth our  savings  flows  during the  periods
indicated.  Net increase  refers to the amount of deposits  during a period less
the amount of withdrawals during the period.

<TABLE>
                                                                             Year Ended September 30,
                                                                   --------------------------------------------------------

                                                                           2000              1999              1998
                                                                   ---------------- --------------------- ------------------
                                                                                     (Dollars in Thousands)
<S>                                                                   <C>               <C>                <C>
Opening balance                                                       $   95,453       $   80,573        $   76,229
Neodesha Savings acquisition                                                 ---           12,671               ---
Deposits                                                                 145,613          131,061           101,678
Withdrawals                                                             (150,535)        (132,286)         (100,512)
Interest credited                                                          3,597            3,434             3,178
                                                                      ----------       ----------        ----------
Ending balance                                                        $   94,128       $   95,453        $   80,573
                                                                      ==========       ==========        ==========

Net increase (decrease)                                               $  (1,325)       $   14,880        $    4,344
                                                                      ==========       ==========        ==========

Percent increase (decrease)                                               (1.39)%           18.47%             5.70%
                                                                          =====             =====              ====
</TABLE>


                                       22

<PAGE>


       The  following  table  shows  rate  and  maturity   information  for  our
certificates of deposit as of September 30, 2000.

<TABLE>
                                                 4.00-      5.00-      6.00-               Percent
                                                 4.99%      5.99%      6.99%      Total    of Total
                                                ------     ------     ------     ------   ----------
                                                                   (Dollars in Thousands)
<S>                                               <C>        <C>         <C>       <C>        <C>
Certificate accounts maturing in
  quarter ending:
December 31, 2000                              $1,644    $ 5,200     $ 1,429    $  8,273      14.34%
March 31, 2001                                    875     10,664         300      11,839      20.52
June 30, 2001                                     ---      7,168         476       7,644      13.25
September 30, 2001                                ---      5,595       1,248       6,843      11.86
December 31, 2001                                 ---      6,028       2,120       8,148      14.12
March 31, 2002                                    ---      4,214       3,299       7,513      13.02
June 30, 2002                                     ---        388           2         390       0.68
September 30, 2002                                ---        984         ---         984       1.71
December 31, 2002                                 ---        380           1         381       0.66
March 31, 2003                                    ---        510         ---         510       0.89
June 30, 2003                                     ---        250         ---         250       0.43
September 30, 2003                                ---        275         119         394       0.68
December 31, 2003                                 ---        493         419         912       1.58
Thereafter                                        ---      2,447       1,162       3,609       6.26
                                               ------    -------     -------    --------     ------
  TOTAL                                        $2,519    $44,596     $10,575    $ 57,690     100.00%
                                               ======    =======     =======    ========     ======


Percent of Total                                 4.37%     77.30%      18.33%
                                                 ====      =====       =====
</TABLE>

       The following table  indicates the amount of our  certificates of deposit
and other deposits by time remaining until maturity as of September 30, 2000.
<TABLE>
                                                                       Maturity
                                                     --------------------------------------------------
                                                                  Over         Over
                                                      3 Months    3 to 6      6 to 12        Over
                                                      or Less     Months      Months       12 Months        Total
                                                     ---------- ---------- ------------- -------------- --------------
                                                                           (In Thousands)
<S>                                                    <C>       <C>            <C>          <C>           <C>

Certificates of deposit less than $100,000             $5,757    $10,341       $14,086      $21,294       $51,478
Certificates of deposit of $100,000 or more             1,186        798           301        1,797         4,082
Public funds(1)                                         1,330        700           100          ---         2,130
                                                       ------    -------       -------      -------       -------
Total certificates of deposit                          $8,273    $11,839       $14,487      $23,091       $57,690
                                                       ======    =======       =======      =======       =======
</TABLE>

(1) Deposits from governmental and other public entities.


       Borrowings. Although deposits are our primary source of funds, our policy
has been to utilize  borrowings  when they are a less costly  source of funds or
can be invested at a positive rate of return.  In addition,  we have relied upon
borrowings for short-term liquidity needs.

       We may obtain  advances  from the FHLB of Topeka upon the security of our
capital  stock in the FHLB of  Topeka  and  certain  of our  mortgage  loans and
mortgage-backed  securities.  Such  advances  may be made  pursuant  to  several
different credit programs,  each of which has its own interest rate and range of
maturities.  At  September  30,  2000,  we had $39.1  million  in FHLB  advances
outstanding.

                                       23

<PAGE>


       The following table sets forth the maximum  month-end balance and average
balance  of our  FHLB  advances  and  other  borrowings  at and  for  the  dates
indicated.
<TABLE>

                               At and for the Year Ended September 30,
                        ------------------------------------------------------
                          2000                  1999                 1998
                        -------------- -------------------- ------------------
                                       (Dollars in Thousands)
<S>                        <C>                  <C>                  <C>
Maximum Balance:
 FHLB advances           $39,100               $33,400               $30,100

Average Balance:
 FHLB advances           $34,975               $29,217               $26,492
</TABLE>


       The  following  table  sets  forth  certain  information  as to our  FHLB
advances at the dates indicated.
<TABLE>
                                                                                   September 30,
                                                                     ---------------------------------------
                                                                       2000            1999          1998
                                                                     ----------- -------------- ------------
                                                                                 (Dollars in Thousands)
<S>                                                                     <C>            <C>            <C>
FHLB advances                                                         $39,100         $27,500       $30,100

Weighted average interest rate of FHLB advances                         6.123%          5.474%        5.684%
</TABLE>

Regulation

       General. First Federal is a federally chartered savings association,  the
deposits of which are federally  insured and backed by the full faith and credit
of the United States Government.  Accordingly, First Federal is subject to broad
federal regulation and oversight extending to all its operations.  First Federal
is a member of the FHLB of Topeka and is subject to certain  limited  regulation
by the Board of  Governors  of the  Federal  Reserve  System  ("Federal  Reserve
Board").  As the  savings  and loan  holding  company  of First  Federal,  First
Independence  is also  subject  to federal  regulation  and  oversight  which is
designed to protect subsidiary savings associations,  like First Federal.  First
Federal is a member of the SAIF,  which  together with the Bank  Insurance  Fund
(the "BIF") are the two deposit  insurance  funds  administered by the FDIC, and
the deposits of First Federal are insured by the FDIC. As a result, the FDIC has
certain regulatory and examination authority over First Federal.

       Certain of these  regulatory  requirements and restrictions are discussed
below or elsewhere in this document.

       Federal  Regulation  of  Savings  Associations.  The  OTS  has  extensive
authority  over  the  operations  of  savings  associations.  As  part  of  this
authority,  First Federal is required to file periodic  reports with the OTS and
is subject to periodic  examinations  by the OTS and the FDIC.  The last regular
OTS  examination  of First  Federal  was as of  December  31,  1999.  When these
examinations  are  conducted by the OTS and the FDIC,  the examiners may require
First Federal to provide for higher general or specific loan loss reserves.  All
savings  associations  are subject to a semi-annual  assessment,  based upon the
savings  association's  total assets,  to fund the  operations of the OTS. First
Federal's  OTS  assessment  for the fiscal  year ended  September  30,  2000 was
$38,000.

       The OTS  also  has  extensive  enforcement  authority  over  all  savings
institutions  and their  holding  companies,  including  First Federal and First
Independence.  This  enforcement  authority  includes,  among other things,  the
ability to assess civil money penalties,  to issue  cease-and-desist  or removal
orders and to initiate injunctive actions. In general, these enforcement actions
may be initiated for  violations of laws and  regulations  and unsafe or unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,  including  misleading or untimely  reports  filed with the OTS.  Except
under certain  circumstances,  public disclosure of final enforcement actions by
the OTS is required.

                                       24

<PAGE>

       In addition,  the  investment,  lending and branching  authority of First
Federal is prescribed by federal laws and it is prohibited  from engaging in any
activities not permitted by these laws. For instance, no savings institution may
invest in  non-investment  grade  corporate debt  securities.  In addition,  the
permissible level of investment by federal savings associations in loans secured
by  non-residential  real property may not exceed 400% of total capital,  except
with  approval  of the OTS.  Federal  savings  associations  are also  generally
authorized to branch  nationwide.  First Federal is in compliance with the noted
restrictions.

       First    Federal's    general     permissible     lending    limit    for
loans-to-one-borrower  is equal to the greater of $500,000 or 15% of  unimpaired
capital  and  surplus  (except  for  loans  fully  secured  by  certain  readily
marketable  collateral,  in  which  case  this  limit  is  increased  to  25% of
unimpaired capital and surplus).  At September 30, 2000, First Federal's lending
limit under this  restriction  was $1.9 million.  First Federal is in compliance
with the loans-to-one-borrower limitation.

       The OTS,  as well as the other  federal  banking  agencies,  has  adopted
guidelines  establishing  safety and  soundness  standards  on matters like loan
underwriting and  documentation,  asset quality,  earnings  standards,  internal
controls and audit  systems,  interest rate risk exposure and  compensation  and
other  employee  benefits.  Any  institution  which  fails to comply  with these
standards must submit a compliance plan.

       Insurance  of Accounts and  Regulation  by the FDIC.  First  Federal is a
member of the SAIF,  which is administered by the FDIC.  Deposits are insured up
to  applicable  limits by the FDIC and the insurance is backed by the full faith
and credit of the United States Government. As insurer, the FDIC imposes deposit
insurance  premiums and is authorized to conduct  examinations of and to require
reporting by FDIC-insured  institutions.  It also may prohibit any  FDIC-insured
institution  from engaging in any activity the FDIC  determines by regulation or
order  to pose a  serious  risk to the SAIF or the  BIF.  The FDIC  also has the
authority to initiate  enforcement actions against savings  associations,  after
giving the OTS an  opportunity  to take action,  and may  terminate  the deposit
insurance if it determines that the institution has engaged in unsafe or unsound
practices or is in an unsafe or unsound condition.

       The FDIC's deposit  insurance  premiums are assessed through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. The current assessment rates range from zero
to  0.27%  per $100 of  assessable  deposits.  Under  the  system,  institutions
classified  as well  capitalized  (i.e.,  a core capital ratio of at least 5%, a
ratio of Tier 1 or core  capital to  risk-weighted  assets  ("Tier 1  risk-based
capital")  of at least 6% and a  risk-based  capital  ratio of at least 10%) and
considered  healthy pay the lowest premium while institutions that are less than
adequately  capitalized  (i.e., core or Tier 1 risk-based capital ratios of less
than 4% or a  risk-based  capital  ratio  of less  than  8%) and  considered  of
substantial  supervisory concern pay the highest premium. Risk classification of
all insured  institutions  is made by the FDIC for each  semi-annual  assessment
period.

       Prior to the  enactment  of the  legislation  recapitalizing  the SAIF in
1996, a portion of the SAIF assessment imposed on savings  associations was used
to repay  obligations  issued by a federally  chartered  corporation  to provide
financing for resolving the thrift crisis in the 1980s. Although the legislation
also  required  assessments  to be  made on  BIF-assessable  deposits  for  this
purpose,  effective  January 1, 1997,  that assessment was limited to 20% of the
rate imposed on SAIF assessable  deposits until the earlier of December 31, 1999
or when no savings  association  continues to exist,  thereby imposing a greater
burden on SAIF member institutions such as First Federal.  Thereafter,  however,
assessments  on  BIF-member  institutions  are on the same basis as  SAIF-member
institutions. The rate established by the FDIC to implement this requirement for
all  FDIC-insured  institutions  is a 2.02 basis point  assessment  on both SAIF
deposits and BIF deposits.

                                       25
<PAGE>

       Regulatory Capital Requirements.  Federally insured savings associations,
such as First  Federal,  are required to maintain a minimum  level of regulatory
capital. The OTS has established capital standards, including a tangible capital
requirement,  a leverage  ratio (or core capital)  requirement  and a risk-based
capital  requirement  applicable  to such savings  associations.  These  capital
requirements   must  be  generally  as  stringent  as  the  comparable   capital
requirements  for national  banks.  The OTS is also authorized to impose capital
requirements  in excess  of these  standards  on  individual  associations  on a
case-by-case basis.

       The  capital  regulations  require  tangible  capital of at least 1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   stockholders'   equity  and  retained  income,   and  certain
noncumulative  perpetual  preferred stock and related income.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights,  must be deducted from tangible capital for calculating  compliance with
the  requirement.  At  September  30,  2000,  First  Federal  did not  have  any
intangible assets.

       At  September  30,  2000,  First  Federal had  tangible  capital of $12.5
million, or 8.39% of adjusted total assets, which is approximately $10.3 million
above the minimum requirement of 1.5% of adjusted total assets in effect on that
date.

       The capital  standards  also require core capital equal to at least 3% of
adjusted total assets.  Core capital generally consists of tangible capital plus
certain intangible  assets,  including a limited amount of purchased credit card
receivables.  As a result of the prompt corrective  action provisions  discussed
below,  however, a savings  association must maintain a core capital ratio of at
least  4%  to  be  considered  adequately  capitalized  unless  its  supervisory
condition allows it to maintain a 3% ratio. At September 30, 2000, First Federal
had no intangible assets which were subject to these tests.

       At September  30,  2000,  First  Federal had core capital  equal to $12.5
million,  or 8.39% of adjusted  total  assets,  which is $8.0 million  above the
minimum leverage ratio requirement of 3% as in effect on that date.

       The OTS risk-based  requirement  requires  savings  associations  to have
total capital of at least 8% of risk-weighted  assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital and general  valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based  requirement  only to the extent of core capital.  The
OTS is  also  authorized  to  require  a  savings  association  to  maintain  an
additional  amount of total capital to account for  concentration of credit risk
and the risk of non-traditional activities. At September 30, 2000, First Federal
had  $758,000  of  general  loss   reserves,   which  was  less  than  1.25%  of
risk-weighted assets.

       Certain  exclusions  from  capital and assets are required to be made for
the purpose of calculating  total  capital.  Such  exclusions  consist of equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal  holdings of  qualifying  capital  instruments.  First Federal had no
exclusions from capital and assets at September 30, 2000.

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

                                       26

<PAGE>

       On September  30, 2000,  First Federal had total capital of $13.3 million
(including   $12.5   million  in  core  capital  and   $758,000  in   qualifying
supplementary  capital)  and  risk-weighted  assets of $73.1  million,  or total
capital of 18.17% of  risk-weighted  assets.  This amount was $7.4 million above
the 8% requirement in effect on that date.

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

       The OTS is also generally  authorized to reclassify an association into a
lower capital category and impose the  restrictions  applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.

       The  imposition by the OTS or the FDIC of any of these  measures on First
Federal  may  have  a  substantial   adverse   effect  on  its   operations  and
profitability.

       Limitations on Dividends and Other Capital Distributions. OTS regulations
impose  various  restrictions  on  savings  associations  with  respect to their
ability  to make  distributions  of  capital,  which  include  dividends,  stock
redemptions or repurchases,  cash-out mergers and other transactions  charged to
the  capital  account.  OTS  regulations  generally  permit  a  federal  savings
association  to pay  dividends in any calendar year equal to net income for that
year plus retained  earnings for the  preceding  two years.  First Federal is in
compliance with this requirement.

       Liquidity.  All  savings  associations,   including  First  Federal,  are
required  to  maintain  an average  daily  balance of liquid  assets  equal to a
certain  percentage of the sum of its average daily balance of net  withdrawable
deposit accounts and borrowings payable in one year or less. For a discussion of
what First Federal includes in liquid assets,  see "Management's  Discussion and
Analysis of  Financial  Condition  and  Results of  Operations  - Liquidity  and
Capital Resources" in the Annual Report. This liquid asset ratio requirement may
vary from time to time depending  upon economic  conditions and savings flows of
all savings associations. At the present time, the minimum liquid asset ratio is
4%.

       Qualified Thrift Lender Test. All savings  associations,  including First
Federal,  are required to meet a qualified  thrift lender  ("QTL") test to avoid
certain  restrictions  on  their  operations.   This  test  requires  a  savings
association  to have  at  least  65% of its  portfolio  assets  (as  defined  by
regulation) in qualified thrift investments on a monthly average for nine out of
every 12 months on a rolling basis. As an alternative,  the savings  association
may maintain 60% of its assets in those assets specified in Section  7701(a)(19)
of the Internal Revenue Code of 1986, as amended. Under either test, such assets
primarily  consist of  residential  housing  related loans and  investments.  At
September 30, 2000, First Federal met the test and has always met the test since
its effectiveness.

                                       27

<PAGE>
       Any savings association that fails to meet the QTL test must convert to a
national bank charter,  unless it requalifies as a QTL and thereafter  remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF. If the  association  has not yet requalified or converted to a national
bank, its new  investments  and activities are limited to those  permissible for
both a savings  association  and a national  bank, and it is limited to national
bank  branching  rights in its home  state.  In  addition,  the  association  is
immediately  ineligible  to receive  any new FHLB  borrowings  and is subject to
national  bank  limits for  payment of  dividends.  If the  association  has not
requalified  or  converted  to a national  bank  within  three  years  after the
failure,  it must  divest  of all  investments  and  cease  all  activities  not
permissible  for a  national  bank.  In  addition,  it must repay  promptly  any
outstanding FHLB borrowings,  which may result in prepayment  penalties.  If any
association  that fails the QTL test is  controlled by a holding  company,  then
within one year after the failure,  the holding  company must register as a bank
holding  company  and  become  subject  to  all  restrictions  on  bank  holding
companies. See "Regulation of First Independence."

       Community Reinvestment Act. Under the Community Reinvestment Act ("CRA"),
every FDIC insured  institution  has a  continuing  and  affirmative  obligation
consistent  with safe and sound banking  practices to help meet the credit needs
of its entire community,  including low and moderate income  neighborhoods.  The
CRA does not establish  specific lending  requirements or programs for financial
institutions nor does it limit an institution's  discretion to develop the types
of products  and  services  that it believes  are best suited to its  particular
community, consistent with the CRA. The CRA requires the OTS, in connection with
the examination of First Federal, to assess the institution's  record of meeting
the credit  needs of its  community  and to take such record into account in its
evaluation of certain  applications,  such as a merger or the establishment of a
branch, by First Federal. An unsatisfactory  rating may be used as the basis for
the denial of an application by the OTS.

       Due to the heightened  attention  being given to the CRA in recent years,
First  Federal may be required to devote  additional  funds for  investment  and
lending in its local community. First Federal was examined for CRA compliance in
1998 and received a rating of "satisfactory."

       Transactions with Affiliates.  Generally,  transactions between a savings
association or its  subsidiaries  and its affiliates are required to be on terms
as  favorable  to  the  association  as  transactions  with  non-affiliates.  In
addition,  certain of these  transactions,  such as loans to an  affiliate,  are
restricted to a percentage  of the  association's  capital.  Affiliates of First
Federal include First Independence and any company which is under common control
with First  Federal.  In  addition,  a savings  association  may not lend to any
affiliate  engaged in activities not  permissible  for a bank holding company or
acquire the securities of most  affiliates.  The OTS has the discretion to treat
subsidiaries of savings associations as affiliates on a case by case basis.

       Certain transactions with directors,  officers or controlling persons are
also  subject to  conflict of interest  regulations  enforced by the OTS.  These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must be made on terms  substantially the same as for loans to unaffiliated
individuals.

       Regulation of First Independence. First Independence is a unitary savings
and loan  holding  company  subject to  regulatory  oversight  by the OTS.  As a
result, First Independence 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  First   Independence   and  its  non-savings
association  subsidiaries  which also  permits  the OTS to  restrict or prohibit
activities  that are determined to be a serious risk to the  subsidiary  savings
association.

                                       28

<PAGE>
       As a unitary savings and loan holding company that was in existence prior
to May 4,  1999,  First  Independence  is  generally  not  subject  to  activity
restrictions  at the  holding  company  level.  If First  Independence  acquires
control of another savings association as a separate subsidiary, it would become
a  multiple  savings  and loan  holding  company,  and the  activities  of First
Independence would be limited to those that are only financial in nature.

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

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

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

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

       Federal Reserve System. The Federal Reserve Board requires all depository
institutions  to  maintain  noninterest  bearing  reserves at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking accounts).  At September 30, 2000, First Federal was in compliance with
these  reserve  requirements.  The  balances  maintained  to  meet  the  reserve
requirements  imposed  by the  Federal  Reserve  Board  may be used  to  satisfy
liquidity requirements that may be imposed by the OTS. See "- Liquidity."

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

       Federal Home Loan Bank System.  First  Federal is a member of the FHLB of
Topeka,  which is one of 12 regional  FHLBs that  administer  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,  which are
subject to the oversight of the Federal Housing Finance Board. All advances from
the FHLB are required to be fully secured by sufficient collateral as determined
by the FHLB. In addition,  all long-term  advances are required to provide funds
for residential home financing.


                                       29

<PAGE>
       As a member,  First Federal is required to purchase and maintain stock in
the FHLB of Topeka.  At September  30, 2000,  First  Federal had $2.0 million in
FHLB stock, which was in compliance with this requirement.  In past years, First
Federal has received substantial dividends on its FHLB stock. Over the past five
fiscal years these dividends have averaged 7.13% and were 7.71% for fiscal 2000.

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

       For the fiscal year ended September 30, 2000,  dividends paid by the FHLB
of  Topeka  to First  Federal  totaled  $134,342,  which  constitutes  an $8,794
increase over the amount of dividends received in fiscal year 1999.

Federal and State Taxation

       Federal  Taxation.  In addition to the regular income tax,  corporations,
including savings  associations  like First Federal,  generally are subject to a
minimum tax. An alternative  minimum tax is imposed at a minimum tax rate of 20%
on  alternative  minimum  taxable  income,  which is the sum of a  corporation's
regular taxable income (with certain adjustments) and tax preference items, less
any available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax and net operating losses can offset
no more than 90% of alternative minimum taxable income.

       A  portion  of First  Federal's  reserves  for  losses  on loans may not,
without adverse tax consequences,  be utilized for the payment of cash dividends
or other distributions to a shareholder (including  distributions on redemption,
dissolution or  liquidation) or for any other purpose (except to absorb bad debt
losses).  As of September  30,  2000,  the portion of First  Federal's  reserves
subject to this treatment for tax purposes totaled approximately $2.8 million.

       We file  consolidated  federal  income tax returns on a fiscal year basis
using the accrual method of accounting.  Savings  institutions that file federal
income tax returns as part of a  consolidated  group are required by  applicable
Treasury  regulations  to reduce their taxable  income for purposes of computing
the percentage bad debt deduction for losses  attributable  to activities of the
non-savings  association members of the consolidated group that are functionally
related to the activities of the savings association member.

       Our  federal  income tax  returns  for the last  three  years are open to
possible  audit by the IRS.  No  returns  are  being  audited  by the IRS at the
current time. In our opinion,  any  examination  of still open returns would not
result  in a  deficiency  which  could  have a  material  adverse  effect on our
financial condition.

                                       30

<PAGE>
       For additional  information regarding federal income taxation, see Note K
of the Notes to Consolidated Financial Statements in the Annual Report.

       Kansas  Taxation.  First  Independence  and First  Federal file  separate
Kansas income and Kansas privilege tax returns,  respectively,  on a fiscal year
basis using the accrual method of accounting.

       Kansas law  permits  savings  and loan  associations  to deduct  from net
income,  a reserve  established  for the sole  purpose of  meeting or  absorbing
losses, in the amount of five percent of such net income determined  without the
benefit of such deduction,  or, in the alternative,  a reasonable  addition to a
reserve  for  losses  based on past  experiences.  The Kansas  privilege  tax is
computed on the basis of 4.5% of taxable income, plus 2.25% of taxable income in
excess of $25,000 for tax years  commencing  prior to January 1, 1998. For years
commencing on or after January 1, 1998, the Kansas  privilege tax is computed on
the basis of 2.25% of taxable income, plus an additional 2.25% of taxable income
in excess of $25,000..

       We have not been audited by the Kansas Department of Revenue for the last
ten years and have Kansas  privilege  tax returns  which are open and subject to
audit for the years 1997 through 1999. In our opinion,  any  examination of such
open  returns  would not  result in a  deficiency  which  could  have a material
adverse effect on our financial condition.

       Delaware Taxation.  As a Delaware holding company,  First Independence is
exempted from Delaware  corporate  income tax, but is required to file an annual
report with and pay an annual fee to the State of Delaware.  First  Independence
is also  subject to an annual  franchise  tax imposed by the State of  Delaware.

Competition

       We face strong  competition,  both in  originating  real estate and other
loans and in attracting  deposits.  Competition in originating real estate loans
comes primarily from commercial banks and credit unions.

       We attract all of our  deposits,  primarily  from  Montgomery  and Wilson
County where our offices are located; therefore,  competition for those deposits
is  principally  from  commercial  banks and credit  unions  located in the same
communities.  We compete  for these  deposits  by  offering a variety of deposit
accounts at competitive  rates and convenient  business  hours.  We estimate our
share of the savings market in our primary market area to be approximately 14%.

                                       31

<PAGE>
Executive Officers of First Independence

       The following table sets forth certain  information  with respect to each
of the executive officers of First Independence.

<TABLE>
    NAME                  AGE(1)                      POSITION(S) HELD
 -----------------     -------------     ---------------------------------------
<S>                        <C>           <C>
 Larry G. Spencer          52            President, Chief Executive Officer and Director
 Gary L. Overfield         48            Senior Vice President and Secretary
 James B. Mitchell         45            Vice President and Chief Financial Officer
</TABLE>

---------------
(1)    At September 30, 2000.

Executive Officers of First Federal

       The following table sets forth certain  information  with respect to each
of the executive officers of First Federal.

<TABLE>
    NAME                  AGE(1)                      POSITION(S) HELD
 -----------------     -------------     ---------------------------------------
<S>                        <C>           <C>
 Larry G. Spencer          52            President, Chief Executive Officer and Director
 Gary L. Overfield         48            Senior Vice President, Secretary and Chief Loan Officer
 Jim L. Clubine            47            Vice President and Asset Manager
 James B. Mitchell         45            Vice President and Chief Financial Officer
</TABLE>

----------------
(1)    At September 30, 2000.

                                       32

<PAGE>


       Larry G. Spencer. Mr. Spencer is President and Chief Executive Officer of
First Federal. Mr. Spencer has been employed by First Federal since 1974 and has
held a variety of positions including Executive Vice President.  Mr. Spencer was
promoted  to his  present  position in 1990.  Mr.  Spencer  received a degree in
Business  Administration from Pittsburg  State University and served in the U.S.
Army for three  years.  He has served on the board of the  Chamber of  Commerce,
Main Street, the Independence Community College Endowment Association, Community
Chest and Junior Achievement. He is presently a member of the board of Heartland
Community  Bankers,  USD #446  Endowment  Association,  Kansas  Food  Bank,  and
Independence Industries. He is also a member of the Rotary Club.

       Gary L. Overfield. Mr. Overfield is Senior Vice President,  Secretary and
Chief Loan  Officer of First  Federal,  a position he has held since  1990.  Mr.
Overfield  has been  employed by First Federal since 1976 and has held a variety
of positions  including  Vice  President and Loan Officer from 1985 to 1990. Mr.
Overfield is a graduate of Pittsburg State University.  He is currently licensed
by the State of Kansas as a Life and Accident and Health Insurance agent. He was
a member of the Board of Directors  and previous  Secretary of the  Independence
Rotary Club, a youth coach for the Independence Recreation Commission,  previous
Treasurer for the local chapter of Duck's  Unlimited,  and previous Director and
Treasurer for the Independence Chamber of Commerce.

       Jim L. Clubine.  Mr. Clubine is Vice President and Asset Manager of First
Federal,  a position he has held since 1990. Prior to joining First Federal,  he
was employed as Branch  Manager by  MidAmerica  Federal of Parsons,  Kansas from
1979 to 1990.  Mr.  Clubine  is a member of  Independence  Chamber  of  Commerce
(Ambassador Club), Airport Advisory Board, Carnival Chairman for Neewolah, and a
member of the  Rotary  Club.  He was a  previous  member  of the Mercy  Hospital
Foundation Fund Raising Committee, Eisenhower Site Council team, Chairman of the
March of Dimes and former board member for Chamber of Commerce,  Community Chest
and Junior Achievement. Mr. Clubine is a graduate of Kansas State University.

       James B. Mitchell.  Mr.  Mitchell is Vice  President and Chief  Financial
Officer of First  Federal,  a position he has held since  March  1992.  Prior to
joining First Federal,  he was employed by Eureka Savings Bank, Eureka,  Kansas,
in the capacity of Strategic Asset Manager from 1988 to 1991 and Chief Financial
Officer from 1991 to 1992.  From 1976 to 1988, Mr.  Mitchell was Chief Financial
Officer for Peoples Savings and Loan, Parsons,  Kansas. He is presently a member
of the board of Junior  Achievement.  Mr. Mitchell has an accounting degree from
Pittsburg State University.

Employees

       At September 30, 2000, we had a total of 37 employees.  Our employees are
not  represented by any collective  bargaining  group.  We consider our employee
relations to be good.

Item 2.  Description of Property
         -----------------------
       First  Independence  owns its  offices  located  at  Myrtle  and Sixth in
Independence, Kansas, McArthur and Eleventh in Coffeyville, Kansas and Eight and
Main in  Neodesha,  Kansas.  The  total net book  value of First  Independence's
premises and equipment at September 30, 2000, was $1,449,000.

       First Federal  established a loan production  office in Lawrence,  Kansas
effective October 15, 1997. The office primarily  originates  construction loans
in Lawrence and the surrounding area. Loan approvals are made at the main office
with disbursements and collections handled at the loan production office.

       We maintain  depositor  and borrower  customer  files on an on-line basis
with the FiServ Data Processing System, Milwaukee, Wisconsin. The net book value
of the data  processing and computer  equipment  utilized by us at September 30,
2000, was approximately $114,000.

                                       33

<PAGE>

Item 3.  Legal Proceedings
         -----------------
       From time to time,  we are  involved as plaintiff or defendant in various
legal actions arising in the normal course of business.  We were not involved in
any legal proceedings of a material nature at September 30, 2000.


Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------
       No matter  was  submitted  to a vote of  security  holders,  through  the
solicitation  of proxies or otherwise,  during the quarter  ended  September 30,
2000.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters
         --------------------------------------------------------
       Page 40 of the Annual Report is incorporated herein by reference.


Item 6.  Management's Discussion and Analysis or Plan of Operation
         ---------------------------------------------------------
       Pages 4  through  13 of the  Annual  Report  are  incorporated  herein by
reference.



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

       The following  information appearing in the Annual Report is incorporated
herein by reference.
<TABLE>
                                                                                                   Pages in
                                                                                                     Annual
                                       Annual Report Section                                         Report
-------------------------------------------------------------------------------                ------------------
<S>                                                                                                   <C>
Report of Independent Certified Public Accountants                                                       15

Consolidated Balance Sheets (September 30, 2000 and 1999)                                             16-17

Consolidated Statements of Earnings (For the Years Ended September 30, 2000                              18
  and 1999)

Consolidated Statements of Comprehensive Income (For the Years Ended September 30, 2000 and 1999)        19

Consolidated Statements of Stockholders' Equity (For the Years Ended September 30,    2000 and           20
1999)

Consolidated Statements of Cash Flows (For the Years Ended September 30, 2000                         21-22
  and 1999)

Notes to Consolidated Financial Statements                                                            23-39
</TABLE>

       With the exception of the  aforementioned  information  in Part II of the
Form 10-KSB, the Annual Report is not deemed filed as part of this Annual Report
on Form 10-KSB.

                                       34

<PAGE>
Item 8.  Changes In and Disagreements With Accountants on Accounting and
         ---------------------------------------------------------------
         Financial Disclosure
         --------------------

       There has been no Current Report on Form 8-K filed within 24 months prior
to the  date of the most  recent  financial  statements  reporting  a change  of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         ------------------------------------------------------------
         Compliance with Section 16(a) of the Exchange Act
         -------------------------------------------------

Directors
---------

       Information  concerning our Directors is incorporated herein by reference
from the definitive proxy statement for the annual meeting of stockholders to be
held in 2001,  a copy of which  will be filed not later  than 120 days after the
close of the fiscal year.

Executive Officers
-------------------

       Information concerning our executive officers contained in Part I of this
Form 10-KSB is incorporated herein by reference.

Item 10. Executive Compensation
         ----------------------

       Information  concerning executive  compensation is incorporated herein by
reference  from  the  definitive  proxy  statement  for the  annual  meeting  of
stockholders  to be held in 2001,  a copy of which  will be filed not later than
120 days after the close of the fiscal year.

Item 11. Security Ownership of Certain Beneficial Owners and Management
         ---------------------------------------------------------------

       Information  concerning  security  ownership of certain beneficial owners
and management is  incorporated  herein by reference  from the definitive  proxy
statement for the annual meeting of  stockholders  to be held in 2001, a copy of
which will be filed not later than 120 days after the close of the fiscal year.

Item 12. Certain Relationships and Related Transactions
         ----------------------------------------------

       Information  concerning certain relationships and related transactions is
incorporated  herein by reference  from the definitive  proxy  statement for the
annual meeting of stockholders to be held in 2001, a copy of which will be filed
not later than 120 days after the close of the fiscal year.


                                       35

<PAGE>

Item 13. Exhibits and Reports on Form 8-K
         --------------------------------
         (a)  Exhibits
<TABLE>
                                                                                                   Reference to
  Regulation S-B                                                                                 Prior Filing or
     Exhibit                                                                                      Exhibit Number
     Number                                 Document                                             Attached Hereto
 ----------------   ---------------------------------------------------------------------------- ----------------
     <S>            <C>                                                                                <C>
        2           Plan of acquisition, reorganization, arrangement, liquidation, or succession        None
       3(i)         Articles of Incorporation                                                             *
      3(ii)         By-Laws                                                                               *
        4           Instruments defining the rights of security holders, including debentures             *
        9           Voting trust agreement                                                              None
       10           Executive compensation plans and arrangements
                     (a)  1994 Stock Option and Incentive Plan                                           **
                     (b)  Recognition and Retention Plan                                                  *
                     (c)  Employment Agreements                                                           *
       11           Statement re: computation of per share earnings                                      ***
       12           Statement re: computation of ratios                                             Not Required
       13           Annual report to stockholders                                                        13
       16           Letter on change in certifying accountant                                           None
       18           Letter on change in accounting principles                                           None
       21           Subsidiaries of the registrant                                                       21
       22           Published report regarding matters submitted to vote                                None
       23           Consents of experts and counsel                                                      23
       24           Power of attorney                                                               Not Required
       27           Financial data schedule                                                              27
       99           Additional exhibits                                                                 None
</TABLE>
--------------------
*      Filed as an  exhibit to the  Company's  Form S-1  registration  statement
       filed on June 22, 1994 (File No.  33-64812)  pursuant to Section 5 of the
       Securities Act of 1933. All of such previously filed documents are hereby
       incorporated   herein  by  reference  in  accordance  with  Item  601  of
       Regulation S-B.

**     Filed as an exhibit to the  Company's  Annual Report on Form 10-KSB filed
       on  December  29,  1994 (File No.  0-22184)  pursuant  to the  Securities
       Exchange Act of 1934 and incorporated herein by reference.

***    See Note A of Notes to  Consolidated  Financial  Statements in the Annual
       Report attached hereto as Exhibit 13.


         (b)  Reports on Form 8-K

         During the quarter ended September 30, 2000, we did not file any
         Current Reports on Form 8-K.

                                       36

<PAGE>





                                   SIGNATURES

     Pursuant to the  requirements  of Section 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.

                           FIRST INDEPENDENCE CORPORATION




Date:  December 29, 2000   By:    /s/Larry G. Spencer
-------------------------         ----------------------------------------------
                                  Larry G. Spencer, President, Chief Executive
                                  Officer and Director (Duly Authorized
                                  Representative)

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the following  persons in the  capacities and on
the dates indicated.

<TABLE>
<CAPTION>
<S>                                                           <C>

/s/ Larry G. Spencer                                          /s/ James B. Mitchell
--------------------------------------------                  -------------------------------------------
Larry G. Spencer, President, Chief Executive                  James B. Mitchell, Vice President and Chief
Officer and Director (Principal                               Financial Officer (Principal Financial and
Executive and  Operating Officer)                             Accounting Officer)

Date:  December 29, 2000                                      Date:  December 29, 2000



/s/ E. JoVonnah Boecker                                       /s/ William T. NewKirk II
--------------------------------------------                  -------------------------------------------
E. JoVonnah Boecker, Director                                 William T. NewKirk II, Director

Date:  December 29, 2000                                      Date:  December 29, 2000



/s/ Harold L. Swearingen                                      /s/ Joseph M. Smith
--------------------------------------------                  -------------------------------------------
Harold L. Swearingen, Director                                Joseph M. Smith, Director

Date:  December 29, 2000                                      Date:  December 29, 2000



/s/ Lavern W. Strecker                                        /s/ Robert A. Johnson
--------------------------------------------                  -------------------------------------------
Lavern W. Strecker, Director                                  Robert A. Johnson, Director

Date:  December 29, 2000                                      Date:  December 29, 2000
</TABLE>
<PAGE>










                                INDEX TO EXHIBITS





   Exhibit Number
   --------------

         13            Annual Report to Stockholders
         21            Subsidiaries of the Registrant
         23            Consent of Accountants
         27            Financial Data Schedule