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, 1999

                                       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 Identification No.)
 incorporation or organization)

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: $10,490,232.

     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  6,  1999,  was $9.0
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 6, 1999, there were issued and outstanding  1,063,730 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, 1999.

     Part  III of Form  10-KSB - Proxy  Statement  for 2000  Annual  Meeting  of
Stockholders.

     Transitional Small Business Disclosure Format: YES   . NO  X .
                                                       ---     ---


<PAGE>


FORWARD-LOOKING STATEMENTS

     First  Independence  Corporation,  and its wholly-owned  subsidiary,  First
Federal Savings and Loan Association of Independence, may from time to time make
written or oral "forward-looking  statements," including statements contained in
its filings with the Securities and Exchange Commission.  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  Corporation is a Delaware  corporation which was formed
at the direction of First Federal  Savings and Loan  Association of Independence
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.  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,  1999,  we had  total  assets  of  $138.1  million,  and
stockholders' equity of $13.1 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
uses 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 it  currently  offers,  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  invests  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.  First Federal is a member of the
Federal Home Loan Bank System and a stockholder in the Federal Home Loan Bank of
Topeka. First Federal is also a member of the Savings Association Insurance Fund
and our deposit accounts are insured up to applicable limits by the 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.

     On January 6, 1999, The Neodesha Savings and Loan Association, FSA 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.


                                        3

<PAGE>



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

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%.

     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 originates 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, 1999, our net loan portfolio
totaled $112.9 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, 1999,  the maximum  amount which First Federal could
have  lent  to  any  one  borrower  and  the  borrower's  related  entities  was
approximately  $1.8 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>
<CAPTION>
                                                                          September 30,
                                     --------------------------------------------------------------------------------------
                                              1999                           1998                           1997
                                     --------------------------------------------------------------------------------------
                                        Amount      Percent         Amount         Percent         Amount         Percent
                                     --------------------------------------------------------------------------------------
                                                                   (Dollars in Thousands)

<S>                                   <C>            <C>         <C>               <C>           <C>               <C>
Real Estate Loans

 One- to four-family................. $ 84,053        67.55%      $ 71,855           71.06%       $64,152           84.30%
 Multi-family........................      914         0.74          1,001            0.99          1,164            1.53
 Non-residential.....................    9,075         7.29          9,065            8.97          7,479            9.83
 Construction........................   25,052        20.13         16,050           15.87            764            1.00
                                      --------       ------       --------         -------        -------          ------
    Total real estate loans..........  119,094        95.71         97,971           96.89         73,559           96.66
                                      --------       ------       --------         -------        -------          ------

Consumer Loans

 Deposit account.....................      373         0.30            397            0.39            350            0.46
 Automobile..........................    2,867         2.31            961            0.95            705            0.93
 Home equity.........................      911         0.73            837            0.83            550            0.72
 Home improvement....................      217         0.17            234            0.23            274            0.36
 Other...............................      968         0.78            714            0.71            661            0.87
                                      --------       ------       --------         -------        -------          ------

    Total consumer loans.............    5,336         4.29          3,143            3.11          2,540            3.34
                                      --------       ------       --------         -------        -------          ------

     Total Loans.....................  124,430       100.00%       101,114          100.00%        76,099          100.00%
                                                     ======                        =======                         ======

Less

 Loans in process....................   10,429                       6,437                            572
 Deferred fees and discounts.........      355                         337                            300
 Allowance for losses................      753                         656                            668
                                      --------                    --------                        -------
 Total loans receivable, net......... $112,893                    $ 93,684                        $74,559
                                      ========                    ========                        =======


</TABLE>


                                        5

<PAGE>



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

<TABLE>
<CAPTION>

                                                                                     September 30,
                                                  ----------------------------------------------------------------------------
                                                            1999                         1998                     1997
                                                  ----------------------------------------------------------------------------
                                                    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.........................      $ 63,010       50.64%      $ 50,637         50.08%    $37,581      49.38%
  Multi-family................................           566        0.45            639          0.63         683       0.90
  Non-residential.............................         6,576        5.29          6,361          6.29       5,055       6.64
  Construction................................        25,052       20.13         16,050         15.87         764       1.00
                                                    --------       -----      ---------      --------     -------     ------
    Total fixed-rate real estate loans........        95,204       76.51         73,687         72.87      44,083      57.92
 Consumer.....................................         4,425        3.56          2,306          2.28       1,990       2.62
                                                    --------      ------      ---------      --------     -------     ------
    Total fixed-rate loans....................        99,629       80.07         75,993         75.15      46,073      60.54
                                                    --------      ------      ---------      --------      ------     ------

Adjustable-Rate Loans
 Real estate:
  One- to four-family.........................        21,043       16.91         21,218         20.98      26,571      34.92
  Multi-family................................           348        0.28            362          0.36         481       0.63
  Non-residential.............................         2,499        2.01          2,704          2.68       2,424       3.19
  Construction................................           ---         ---            ---           ---         ---        ---
                                                    --------      ------      ---------      --------    --------     ------
     Total adjustable-rate real estate loans..        23,890       19.20         24,284         24.02      29,476      38.74
 Consumer.....................................           911        0.73            837          0.83         550       0.72
                                                    --------      ------      ---------      --------    --------     ------
     Total adjustable-rate loans..............        24,801       19.93         25,121         24.85      30,026      39.46
                                                    --------      ------      ---------      --------    --------     ------

     Total Loans..............................       124,430      100.00%       101,114        100.00%     76,099     100.00%
                                                                  ======                     ========                 ======

Less
 Loans in process.............................        10,429                      6,437                       572
 Deferred fees and discounts..................           355                        337                       300
 Allowance for losses.........................           753                        656                       668
                                                    --------                  ---------                  --------

 Total loans receivable, net..................      $112,893                  $  93,684                   $74,559
                                                    ========                  =========                   =======
</TABLE>


                                        6

<PAGE>


     The following  schedule shows the scheduled  contractual  maturities of our
loan  portfolio  at September  30,  1999.  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>
<CAPTION>

                                                              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
                           ---------------------------------------------------------------------------------------------------------
                                                                        (Dollars in Thousands)

    Due During Periods
   Ending September 30,
-----------------------

<S>                         <C>         <C>         <C>      <C>     <C>        <C>     <C>         <C>        <C>          <C>
2000.......................  $    542     8.39%     $  814    9.09%  $22,318     9.37%   $1,653      8.81%      $ 25,327     9.30%
2001.......................       143     7.66          56    8.28     1,955     9.07       761      9.86          2,915     9.19
2002.......................       256     7.57          12    7.49       ---      ---     1,228      9.60          1,496     9.24
2003 and 2004..............     1,182     8.22         165    8.17       ---      ---     1,307      9.08          2,654     8.64
2005 to 2009 ..............     9,014     7.48       1,195    8.38       ---      ---       387      8.46         10,598     7.62
2010 to 2024...............    37,566     7.44       7,561    7.98       640     7.42       ---       ---         45,766     7.53
2025 and following.........    35,350     7.21         186    7.47       139     7.50       ---       ---         35,674     7.21
                              -------               ------           -------             ------                 --------
       Total                  $84,053               $9,989           $25,052             $5,336                 $124,430
                              =======               ======           =======             ======                 ========

----------------

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


</TABLE>

     The total  amount  of loans  due  after  September  30,  2000,  which  have
predetermined  interest rates is $75.3 million,  while the total amount of loans
due after such date which have  floating or adjustable  interest  rates is $23.8
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, 1999,  our one-to  four-family  residential
mortgage loans, totaled $84.1 million, or 67.6% 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, 1999, we had 721 loans totaling $40.3 million
with a  loan-to-value  ratio of greater than 80% but less than 90% and 428 loans
totaling $21.5 million with a loan-to-value ratio of 90% or greater.

     We  currently  offer  one-year  adjustable-rate  mortgage  loans  at  rates
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 1% annual cap
and floor,  and a 5% 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 5% 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" in our Annual Report to Stockholders attached hereto
as Exhibit 13 (the "Annual Report"). Approximately 38.7% of the loans secured by
one- to  four-family  real  estate  originated  by us  during  fiscal  1999 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

                                       8

<PAGE>



$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.

     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 $2.5 million, or 2.9% 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 $25.1 million of
construction loans outstanding at September 30, 1999.

     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

                                       9

<PAGE>



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.

     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" in the Annual Report. At September 30,
1999,  we had $10.0 million in  non-residential/multi-family  real estate loans,
representing 8.0% of our loan portfolio.

     Approximately   9.2%  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, 1999.

<TABLE>
<CAPTION>

                                                                Number        Outstanding            Amount
                                                                  of           Principal         Non-Performing
                                                                 Loans          Balance           or of Concern
                                                             -----------      -----------        --------------
<S>                                                              <C>           <C>                   <C>

Multi-family................................................        3            $   914               $---
Small business facilities and office buildings..............       46              3,692                ---
Health care facility........................................       13              2,210                ---
Churches....................................................        3                109                ---
Warehouse/mini-storage......................................        3                285                ---
Hotel/motel.................................................        3                555                ---
Land........................................................       45              2,224                ---
                                                                  ---             ------               ----

    Total multi-family residential and non-residential real
        estate loans........................................      116             $9,989               $---
                                                                  ===             ======               ====

</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

                                       10

<PAGE>



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, 1999, 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, 1999 of $809,000. The other loans in excess of $500,000
at September 30, 1999,  included a loan with an outstanding  balance of $566,000
secured by an apartment building located in Rogers, Arkansas; and a loan with an
outstanding  balance  of  $511,000  secured  by a guest  home  located in Caney,
Kansas.  All of these loans were current at September 30, 1999. 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, 1999, our consumer loan  portfolio  totaled $5.3 million and was 4.3% 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  21.1%
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.


                                       11

<PAGE>



     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.

     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,  1999,  $184,000,  or  approximately  3.4% 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 offset the
relatively  low level of loan  demand in our  principal  market  areas,  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 it uses in
originating  loans.  Servicing of purchased loans is generally  performed by the
seller.  At September 30, 1999,  approximately  $4.0 million of First  Federal's
loan portfolio was serviced by others. During the year ended September 30, 1999,
no loans were purchased.

     During recent years, most of our loan purchase  opportunities  have been at
yields  that we  believed  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 $1.6 million in loans serviced for others as of September 30, 1999.


                                       12

<PAGE>



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

<TABLE>
<CAPTION>

                                                             Year Ended September 30,
                                                   -----------------------------------------
                                                        1999           1998           1997
                                                   -----------------------------------------
                                                                   (In Thousands)
<S>                                                  <C>            <C>             <C>
Originations by type
 Adjustable-rate:
  Real estate - one- to four-family................   $ 8,099        $ 5,984        $ 6,437
              - non-residential....................       649            250            633
  Consumer - home equity...........................        84            117            673
                                                      -------        -------        -------
         Total adjustable-rate.....................     8,832          6,351          7,743
                                                      -------        -------        -------
 Fixed-rate:
  Real estate - one- to four-family................    12,820         14,968         10,167
                  - non-residential................     1,235          3,028          1,492
  Construction.....................................    33,319         23,621            ---
  Consumer - non-residential.......................     3,380          2,294          1,965
                                                      -------        -------        -------
         Total fixed-rate..........................    50,754         43,911         13,624
                                                      -------        -------        -------
         Total loans originated....................    59,586         50,262         21,367
                                                      -------        -------        -------

Purchases
  Real estate - non-residential....................       ---            ---            546
  Construction.....................................       ---          4,984            ---
                                                      -------        -------        -------
         Total purchased...........................       ---          4,984            546
                                                      -------        -------        -------

Sales and Repayments
  Mortgage-backed securities.......................     6,248          6,164          4,412
  Principal repayments(1)..........................    45,303         30,231         15,512
                                                      -------        -------        -------
        Total reductions...........................    51,551         36,395         19,924
Loans transferred from Neodosha....................     9,032            ---            ---
  Increase (decrease) in other items, net(2).......    (4,220)        (5,979)           375
                                                      -------        -------        -------
         Net increase (decrease)...................   $12,847        $12,872        $ 2,364
                                                      =======        =======        =======

</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 in Real Estate Operations. 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, 1999, 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>
<CAPTION>

                                                    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       $923        0.74%         43      $1,724        1.39%         56     $2,647        2.13%
  Construction.............       1          1         ---           6         569        0.46           7        570        0.46
Consumer...................      17         67        0.06          25         117        0.09          42        184        0.15
                                 --       ----        ----          --      ------        ----        ----    -------        ----

     Total.................      31       $991        0.80%         74      $2,410        1.94%        105     $3,401        2.74%
                                 ==       ====        ====          ==      ======        ====         ===     ======        ====

</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>
<CAPTION>
                                                                   Year Ended September 30,
                                                       ------------------------------------------------
                                                          1999              1998              1997
                                                       ------------------------------------------------
                                                                   (Dollars in Thousands)
<S>                                                       <C>              <C>              <C>
Non-accruing loans:
  One- to four-family..................................    $  849           $   217          $    919
  Non-residential real estate..........................       ---                21                98
  Construction.........................................       330                62               ---
  Consumer.............................................       132                35                32
                                                           ------           -------           -------
     Total non-accruing loans..........................     1,311               335             1,049
                                                           ------           -------           -------
Accruing loans delinquent 90 days or more:
   One- to four-family.................................       875               690               292
   Construction........................................       239               223               ---
   Consumer............................................         4                 5               ---
                                                           ------           -------           -------
     Total accruing loans delinquent 90 days or more...     1,118               918               292
                                                           ------           -------           -------
Troubled debt restructurings:
   One- to four-family.................................       ---               ---                50
                                                           ------         ---------         ---------

     Total non-performing loans........................     2,429             1,253             1,391
                                                           ------           -------           -------

Real estate acquired through foreclosure:
  One- to four-family..................................       110                72                12
                                                           ------          --------          --------

Total non-performing assets............................    $2,539            $1,325            $1,403
                                                           ======            ======            ======
Total as a percentage of total assets..................     1.84%             1.07%             1.25%
                                                           =====              ====              ====
</TABLE>

     For the year ended  September 30, 1999,  gross interest  income which would
have been recorded had the  non-accruing  loans been current in accordance  with
their original terms amounted to $85,365. The amount included in interest income
on such loans was $52,611 for the year ended September 30, 1999.

     Included  in  non-accruing  loans  at  September  30,  1999,  were 21 loans
totaling $849,000 secured by one- to four-family real estate,  four construction
loans  totaling  $330,000  secured by one- to  four-family  real estate,  and 39
consumer loans totaling $132,000.  All non-accruing loans at September 30, 1999,
were located in our primary  market area. At September 30, 1999,  accruing loans
delinquent 90 days or more included 22 loans totaling  $875,000  secured by one-
to four-family real estate,  two construction loans totaling $239,000 secured by
one- to  four-family  real estate,  and one consumer  loan totaling  $4,000.  At
September 30, 1999, all of our accruing loans delinquent 90 days or more secured
by real estate were located in our primary  market area,  except for three loans
totaling $216,000 secured by a single family residences located in Texas.

     Real Estate Acquired Through  Foreclosure.  At September 30, 1999, our real
estate acquired through  foreclosure  consisted of five single family residences
located in our market area. The properties have a carrying value of $110,000 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
Office  of  Thrift  Supervision  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 Office of
Thrift  Supervision 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, 1999, are included in the table
of non-performing assets on the previous page, as follows:



                                                 September 30,
                                       -----------------------------
                                        1999        1998      1997
                                       -----------------------------
                                                (In Thousands)

Substandard....................         $2,274    $1,320     $1,261
Doubtful.......................            ---         5         92
Loss...........................             15       ---        ---
Pass...........................            250       ---        ---
                                       -------    ------     ------

Total classified assets........         $2,539    $1,325     $1,353
                                        ======    ======     ======


     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, 1999,  we had an allowance  for loan
losses of $753,000.


                                       16

<PAGE>



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

<TABLE>
<CAPTION>

                                                                  Year Ended September 30,
                                                         -----------------------------------------
                                                              1999          1998          1997
                                                         -----------------------------------------
                                                                   (Dollars in Thousands)
<S>                                                          <C>           <C>           <C>

Balance at beginning of period......................          $656          $668          $690

Provision...........................................            66           ---           ---
Transfer from Neodesha merger/conversion............            84           ---           ---
Charge-offs:
  One- to four-family...............................             7            12            22
  Consumer Loans....................................            46           ---           ---
                                                            ------      --------        ------

  Net charge-offs...................................            53            12            22
                                                            ------       -------        ------
Balance at end of period............................          $753         $ 656          $668
                                                              ====         =====          ====

Ratio of net charge-offs during the
 period to total loans at end of
 period.............................................          0.05%         0.01%         0.03%
                                                             =====        ======        ======

Allowance for loan losses to total loans
 at end of period...................................          0.67%         0.70%         0.90%
                                                             =====        ======        ======

Allowance for loan losses to non-performing
 loans at end of period.............................         30.99%        52.30%        48.05%
                                                             =====         =====         =====
</TABLE>


                                       17

<PAGE>



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


<TABLE>
<CAPTION>
                                                                         September 30,
                                              ------------------------------------------------------------------
                                                       1999                  1998                   1997
                                              ------------------------------------------------------------------
                                                           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........................       $315      67.55%     $ 286      71.06%   $ 391        84.30%
  Multi-family...............................        ---       0.74        ---       0.99      ---         1.53
  Non-residential............................         92       7.29        103       8.97       92         9.83
  Construction...............................        305      20.13        214      15.87      ---         1.00
Consumer.....................................         41       4.29         20       3.11       35         3.34
Unallocated..................................        ---        ---         33        ---      150          ---
                                                  ------     ------      -----     ------    -----       ------
    Total....................................       $753     100.00%     $ 656     100.00%   $ 668       100.00%
                                                    ====     ======      =====     ======    =====       ======
</TABLE>

Investment Activities

     General.  First Federal must maintain  minimum levels of  investments  that
qualify  as  liquid  assets  under  Office of  Thrift  Supervision  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  Office of Thrift  Supervision  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, 1999,  our liquidity  ratio (liquid assets as a
percentage of net  withdrawable  savings  deposits and current  borrowings)  was
9.66%.  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, 1999, investment securities totaled
$9.0  million,  or 6.5% of total  assets.  As of such  date,  we also had a $1.4
million  investment in Federal Home Loan Bank stock,  satisfying our requirement
for membership in the Federal Home Loan Bank 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, 1999, the average term to maturity or
repricing of the investment portfolio was 3.8 years.

                                       18

<PAGE>



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

<TABLE>
<CAPTION>
                                                                                         September 30,
                                                           -------------------------------------------------------------------------
                                                                   1999                       1998                     1997
                                                           -------------------------------------------------------------------------
                                                             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...............................   $6,200      59.35%    $5,000       50.04%      $3,000         34.56%
  U.S. Government Securities...............................      200       1.91        ---         ---          ---           ---
  Municipal Securities.....................................      605       5.79        ---         ---          ---           ---
                                                              ------     ------     ------      -------      ------        ------
    Total Securities held to maturity                          7,005      67.05      5,000       50.04        3,000         34.56
                                                              ------     ------     ------      -------      ------        ------

Securities available for sale:
  U.S. Government securities...............................      ---        ---        ---         ---          999         11.51
  Federal agency obligations...............................    2,000      19.15      3,065       30.68        2,985         34.39
  Other marketable equity securities(1)....................      ---        ---        353        3.53          327          3.77
                                                              ------     ------     ------      -------      ------        ------
     Total securities available for sale...................    2,000      19.15      3,418       34.21        4,311         49.67
                                                              ------      -----     ------     -------       ------        ------

  Federal Home Loan Bank stock.............................    1,442      13.80      1,574       15.75        1,369         15.77
                                                             -------     ------     ------     -------       ------        ------
     Total securities and Federal Home Loan Bank stock.....  $10,447     100.00%    $9,992      100.00%      $8,680        100.00%
                                                             =======     ======     ======      ======       ======        ======

  Average remaining life or term to repricing of
   securities (excluding Federal Home Loan Bank
   stock and other marketable equity securities)...........  3.96 yrs.               3.51 yrs.               4.61 yrs.
Other Interest-Earning Assets:
  Short-term money market investments......................     $375     100.00%     $ 439      100.00%    $2,190          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)..............................  3.80 yrs.               3.33 yrs.                   3.51 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
Federal Home Loan Bank of Topeka stock, are indicated in the following table.

<TABLE>
<CAPTION>
                                                          September 30, 1999
                                 -----------------------------------------------------------------------
                                   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...........      $410    $     ---       $   195       $   605      $    602
  U.S. Government Securities.....       ---          200           ---           200           200
  Federal agency obligations.....       100        1,100         5,000         6,200         6,156
                                        ---      -------       -------       -------       -------
    Total Investment Securities        $510       $1,300        $5,195        $7,005        $6,958
     Weighted average yield......     4.25%        5.66%         6.91%         6.49%
                                      ====         ====          ====          ====

Available for Sale:
  Federal agency obligations.....      $---       $1,996         $ ---        $1,996        $2,000
                                       ----       ------         -----        ------        ------
     Total investment securities.      $---       $1,996         $ ---        $1,996        $2,000
                                       ====       ======         =====        ======        ======
     Weighted average yield......       ---%        5.86%          --- %        5.86%
                                       ====       ======         =====        ======

</TABLE>

     Our securities  portfolio at September 30, 1999, 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, 1999,
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, 1999, our mortgage-backed  securities totaled $10.9
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,  1999,  $7.1  million,  or  64.8%,  of  First  Federal's
mortgage-backed  securities  carried  adjustable-rates  of  interest.  Under the
Office of Thrift  Supervision'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, 1999.

<TABLE>
<CAPTION>

                                                                           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
                                    ------------------------------------------------------------------------------------------------
                                                                               (In Thousands)
<S>                                    <C>          <C>          <C>        <C>          <C>       <C>          <C>      <C>
Held to Maturity
Adjustable-Rate Mortgage-Backed
Securities:
  Freddie Mac......................      $---         $---        $---        $---         $---     $   341      $2,673   $  3,014
  Fannie Mae.......................       ---          ---         ---         ---          ---       1,344       2,710      4,054
                                        -----        -----       -----       -----        -----      ------      ------    -------
     Total adjustable-rate.........       ---          ---         ---         ---          ---       1,685       5,383      7,068
                                        -----        -----       -----       -----        -----      ------      ------    -------

Fixed-Rate Mortgage-Backed
Securities:
Freddie Mac........................       ---          ---         ---         ---        1,736         479         ---      2,215
Fannie Mae.........................       ---          ---         ---         ---        1,376         224         ---      1,600
Ginnie Mae.........................       ---          ---         ---         ---          ---         ---          29         29
                                        -----        -----       -----       -----     --------   ---------   ---------   --------
  Total fixed-rate.................       ---          ---         ---         ---        3,112         703          29      3,844
                                        -----        -----       -----       -----        -----     -------   ---------   --------
Total mortgage-backed securities held
    to maturity....................      $---         $---        $---        $---       $3,112      $2,388      $5,412    $10,912
                                         ====         ====        ====        ====       ======      ======      ======    =======

</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 $27.5 million in Federal Home Loan Bank advances outstanding at September
30, 1999.

     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>
<CAPTION>

                                                                         September 30,
                                          ------------------------------------------------------------------------------
                                                    1999                     1998                     1997
                                          ------------------------------------------------------------------------------
                                                          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%)..................   $ 4,583         4.79%    $ 2,745          3.40%    $2,703         3.54%
 NOW Accounts (2.00-2.50%)................     6,503         6.81       3,939          4.88      3,763         4.93
 Money Market Accounts (2.50-5.25%).......    26,541        27.78      21,952         27.22     20,702        27.13
                                              ------       ------     -------        ------     ------       ------

   Total Transactions and Savings Deposits    37,627        39.38      28,636         35.50     27,168        35.60
                                              ------       ------      ------         -----     ------       ------

Certificates:

 0.00  -  3.99%...........................       212         0.22           3           .01          5         0.01
 4.00  -  4.99%...........................    15,802        16.54       1,792          2.22      2,189         2.87
 5.00  -  5.99%...........................    36,768        38.49      45,364         56.24     39,911        52.30
 6.00  -  6.99%...........................     5,030         5.27       4,751          5.89      6,930         9.08
 7.00%  and over..........................        14         0.01          27           .03         26         0.03
                                             -------       ------     -------        ------   --------       ------

Total Certificates........................    57,826        60.53      51,937         64.39     49,061        64.29
                                             -------       ------      ------         -----     ------       ------
Accrued Interest..........................        86         0.09          85           .11         82         0.11
                                             -------       ------     -------       --------  --------       ------
Total Deposits............................   $95,539       100.00%    $80,658        100.00%   $76,311       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>
<CAPTION>
                                                                             Year Ended September 30,
                                                              -------------------------------------------------------

                                                                     1999              1998              1997
                                                              -------------------------------------------------------
                                                                              (Dollars in Thousands)

<S>                                                                <C>               <C>                <C>

Opening balance...............................................      $ 80,573          $ 76,229          $ 69,356
Neodesha Acquisition..........................................        12,671               ---               ---
Deposits......................................................       131,061           101,678            86,304
Withdrawals...................................................      (132,286)         (100,512)          (82,247)
Interest credited.............................................         3,434             3,178             2,816
                                                                   ---------          --------          --------
Ending balance................................................       $95,453          $ 80,573          $ 76,229
                                                                     =======          ========          ========

Net increase..................................................       $14,880        $    4,344         $   6,873
                                                                     =======        ==========         =========

Percent increase.............................................         18.47%             5.70%             9.91%
                                                                      =====              ====              ====

</TABLE>

                                       22

<PAGE>



     The  following   table  shows  rate  and  maturity   information   for  our
certificates of deposit as of September 30, 1999.

<TABLE>
<CAPTION>
                                        0.00-      4.00-     5.00-       6.00-    7.00% or                Percent
                                        3.99%      4.99%     5.99%       6.99%     greater      Total    of Total
                                ---------------------------------------------------------------------------------
<S>                                     <C>      <C>        <C>        <C>          <C>       <C>         <C>
Certificate accounts maturing
 in quarter ending:

December 31, 1999...............        $212     $2,546     $4,474     $   592       $---     $ 7,824      13.53%
March 31, 2000..................        ---       3,772      2,755       1,251         14       7,792      13.48
June 30, 2000...................        ---       2,957      4,145         123        ---       7,225      12.49
September 30, 2000..............        ---       3,984      2,104         301        ---       6,389      11.05
December 31, 2000...............        ---       1,528      1,159         580        ---       3,267       5.65
March 31, 2001..................        ---       1,016      5,414         ---        ---       6,430      11.12
June 30, 2001...................        ---         ---      1,531          76        ---       1,607       2.78
September 30, 2001..............        ---         ---      3,795         433        ---       4,228       7.31
December 31, 2001...............        ---         ---      4,470         686        ---       5,156       8.92
March 31, 2002..................        ---         ---      3,553         375        ---       3,928       6.79
June 30, 2002...................        ---         ---         71           2        ---          73       0.13
September 30, 2002..............        ---         ---        187         ---        ---         187       0.32
December 31, 2002...............        ---         ---         62           1        ---          63       0.11
Thereafter......................        ---         ---      3,047         610        ---       3,657       6.32
                                     ------ -----------   --------    --------      -----    --------    -------

  TOTAL.........................       $212     $15,803    $36,767      $5,030        $14     $57,826     100.00%
                                       ====     =======    =======      ======        ===     =======     ======

Percent of Total................       0.37%     27.33%     63.58%       8.70%      0.02%
                                       ====      =====      =====        ====       ====

</TABLE>

     The following table indicates the amount of our certificates of deposit and
other deposits by time remaining until maturity as of September 30, 1999.

<TABLE>
<CAPTION>
                                                                       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.....     $6,671        $6,625       $11,861      $27,137       $52,294
Certificates of deposit of $100,00 or more.....        412           867         1,161        1,459         3,899
Public funds(1)................................        741           300           592          ---         1,633
                                                  --------       -------     ---------  -----------      --------
Total certificates of deposit..................     $7,824        $7,792       $13,614      $28,596       $57,826
                                                    ======        ======       =======      =======       =======
</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 Federal Home Loan Bank of Topeka upon the
security  of our  capital  stock in the  Federal  Home Loan  Bank 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,  1999,  we had $27.5
million in Federal Home Loan Bank advances outstanding.



                                       23

<PAGE>



     The following  table sets forth the maximum  month-end  balance and average
balance of our Federal Home Loan Bank  advances and other  borrowings at and for
the dates indicated.

<TABLE>
<CAPTION>

                                                               At and for the Year Ended September 30,
                                                  ------------------------------------------------------------
                                                          1999                  1998                  1997
                                                  ------------------------------------------------------------
                                                                           (In Thousands)
<S>                                                      <C>                   <C>                   <C>
Maximum Balance:
 Federal Home Loan Bank advances.................         $33,400               $30,100               $25,000

Average Balance:
 Federal Home Loan Bank advances.................         $29,217               $26,492               $23,583


</TABLE>

     The following  table sets forth certain  information as to our Federal Home
Loan Bank advances at the dates indicated.

<TABLE>
<CAPTION>

                                                                                   September 30,
                                                                 ----------------------------------------------
                                                                       1999            1998             1997
                                                                 ----------------------------------------------
                                                                              (Dollars in Thousands)

<S>                                                                   <C>              <C>             <C>
Federal Home Loan Bank advances..................................      $27,500          $30,100         $23,700

Weighted average interest rate of Federal Home Loan Bank
 advances........................................................       5.474%           5.684%          5.930%

</TABLE>

Regulation

     General.   First  Federal  is  a  federally   chartered  savings  and  loan
association,  the deposits of which are federally insured and backed by the full
faith and credit of the United States Government.  Accordingly, First Federal is
subject  to broad  federal  regulation  and  oversight  extending  to all of our
operations.  First  Federal is a member of the Federal  Home Loan Bank of Topeka
and is subject to certain  limited  regulation  by the Board of Governors of the
Federal  Reserve  System.  As the  savings  and loan  holding  company  of First
Federal, First Independence also is subject to federal regulation and oversight.

     Federal   Regulation  of  Savings   Associations.   The  Office  of  Thrift
Supervision has extensive authority over the operations of savings associations.
As part of this  authority,  we are required to file  periodic  reports with the
Office of Thrift  Supervision  and are subject to periodic  examinations  by the
Office of Thrift  Supervision  and the FDIC.  The last regular  Office of Thrift
Supervision  and FDIC  examinations  of First Federal were  commenced as of July
1998 and October 1992,  respectively.  When these  examinations are conducted by
the Office of Thrift  Supervision  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 Office of
Thrift Supervision.  First Federal's Office of Thrift Supervision assessment for
the fiscal year ended September 30, 1999, was $37,801.

     The Office of Thrift Supervision 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.

     Our 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,

                                       24

<PAGE>



1999, our lending limit under this restriction was  approximately  $1.8 million.
At September  30, 1999,  we had no loans in excess of our  loans-to-one-borrower
limit.

     Insurance  of Accounts and  Regulation  by the FDIC.  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 Federal Home Loan Bank or the
Bank  Insurance  Fund.  The FDIC also has the authority to initiate  enforcement
actions  against  savings  associations,  after  giving  the  Office  of  Thrift
Supervision an  opportunity  to take such 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. 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  will be made by the FDIC  semi-annually.  At  September  30, 1999,
First Federal was classified as a well-capitalized institution.

     Effective January 1, 1997, the premium schedule for Bank Insurance Fund and
Savings  Association  Insurance  Fund insured  institutions  ranged from 0 to 27
basis points.  However,  Savings Association Insurance Fund insured institutions
and Bank  Insurance  Fund insured  institutions  are required to pay a Financing
Corporation  assessment in order to fund the interest on bonds issued to resolve
thrift failures in the 1980s.  This amount is currently equal to about six basis
points for each $100 in domestic deposits for Savings Association Insurance Fund
members while Bank Insurance Fund insured  institutions  pay an assessment equal
to about  1.50 basis  points for each $100 in  domestic  deposits.  The  savings
institutions  assessment  is expected to be reduced to about two basis points no
later than January 1, 2000, when Bank Insurance Fund insured  institutions fully
participate in the  assessment.  These  assessments,  which may be revised based
upon the level of Bank  Insurance  Fund and Savings  Association  Insurance Fund
deposits, will continue until the bonds mature in the year 2015.

     Regulatory Capital  Requirements.  Federally insured savings  associations,
such as First  Federal,  are required to maintain a minimum  level of regulatory
capital.  The Office of Thrift  Supervision 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.

     The  capital  regulations  require  tangible  capital  of at least  1.5% of
adjusted total assets (as defined by regulation).  At September 30, 1999,  First
Federal  had  tangible  capital of $12.1  million,  or 8.76% of  adjusted  total
assets,  which is approximately  $10.0 million above the minimum  requirement of
1.5% of adjusted  total assets in effect on that date.  At  September  30, 1999,
First Federal did not have any intangible assets.

     The capital  standards also require core capital equal to at least 3% to 4%
of adjusted total assets, depending on an institution's supervisory rating. Core
capital generally  consists of tangible  capital.  At September 30, 1999, we had
core capital equal to $12.1 million, or 8.76% of adjusted total assets, which is
$8.0 million above the minimum leverage ratio  requirement of 3% as in effect on
that date.

     The Office of Thrift Supervision  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

                                       25

<PAGE>



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.

     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 Office of Thrift Supervision 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.

     On September 30, 1999,  we had total  risk-based  capital of  approximately
$12.8  million,  including  $12.1  million  in  core  capital  and  $753,000  in
qualifying  supplementary capital, and risk-weighted assets of $66.9 million, or
total  capital of 19.2% of  risk-weighted  assets.  This amount was $7.5 million
above the 8% requirement in effect on that date.

     The  Office  of  Thrift   Supervision   is  authorized  to  impose  capital
requirements  in excess  of these  standards  on  individual  associations  on a
case-by-case basis. The Office of Thrift Supervision 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 Office of
Thrift  Supervision  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 such  association  must submit a
capital restoration plan and until such plan is approved by the Office of Thrift
Supervision 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 Office of Thrift  Supervision  is  authorized  to impose the
additional  restrictions  that are applicable to significantly  undercapitalized
associations.

     The Office of Thrift Supervision 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 Office of Thrift  Supervision  or the FDIC of any of
these  measures on First  Independence  or First  Federal may have a substantial
adverse effect on our operations and profitability.

     Limitations  on Dividends  and Other Capital  Distributions.  The Office of
Thrift  Supervision  imposes 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.  The Office of Thrift  Supervision
also prohibits a savings  association  from declaring or paying any dividends or
from  repurchasing  any of its  stock  if,  as a  result  of  such  action,  the
regulatory capital of the association would be reduced below the amount required
to be maintained for the liquidation  account established in connection with the
association's mutual to stock conversion.

     First Federal may make a capital  distribution  without the approval of the
Office  of  Thrift   Supervision   provided  we  notify  the  Office  of  Thrift
Supervision,  30 days before we declare the capital distribution and we meet the
following  requirements:  (i) we have a regulatory  rating in one of the two top
examination categories,  (ii) we are not of supervisory concern, and will remain
adequately- or well-capitalized,  as defined in the Office of Thrift Supervision
prompt corrective action regulations,  following the proposed distribution,  and
(iii)  the  distribution  does  not  exceed  our net  income  for  the  calendar
year-to-date  plus retained net income for the previous two calendar years (less
any dividends previously paid). If we do not meet the above stated requirements,
we must  obtain the prior  approval of the Office of Thrift  Supervision  before
declaring any proposed distributions.


                                       26

<PAGE>



     Qualified Thrift Lender Test. All savings institutions are required to meet
a  qualified  thrift  lender  test  to  avoid  certain   restrictions  on  their
operations. This test requires a savings institution 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  institutions  may maintain 60% of its assets in those
assets  specified in Section  7701(a)(19)  of the Internal  Revenue Code.  Under
either test, these assets primarily consist of residential housing related loans
and  investments.  At  September  30, 1999,  First  Federal met the test and has
always met the test since its  effectiveness.  First Federal's  qualified thrift
lender percentage was 96.6% at September 30, 1999.

     Any savings institution that fails to meet the qualified thrift lender test
must convert to a national bank charter,  unless it  requalifies  as a qualified
thrift lender and remains a qualified thrift lender.  If an institution does not
requalify  and  converts to a national  bank  charter,  it must  remain  Savings
Association Insurance  Fund-insured until the FDIC permits it to transfer to the
Banking  Insurance Fund. If an institution have 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
institution is immediately  ineligible to receive any new Federal Home Loan Bank
borrowings  and is subject to national bank limits for payment of dividends.  If
the institution has not requalified or converted to a national bank within three
years after the failure,  it must sell all  investments  and stop all activities
not  permissible  for a national  bank. In addition,  it must repay promptly any
outstanding  Federal Home Loan Bank  borrowings,  which may result in prepayment
penalties.  If any  institution  that fails the qualified  thrift lender 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 "- Holding Company Regulation."

     Community  Reinvestment  Act. Under the Community  Reinvestment  Act, 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 Community
Reinvestment Act requires the Office of Thrift  Supervision,  in connection with
the examination of First Federal, to assess the institution's  record of meeting
the credit  needs of our  community  and to take this record into account in our
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 Office of Thrift Supervision.  First Federal
was  examined  for  Community  Reinvestment  Act  compliance  in March  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 Office of Thrift Supervision 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 Office of
Thrift  Supervision.  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.

     Holding  Company  Regulation.  First  Independence is a unitary savings and
loan holding  company  subject to  regulatory  oversight by the Office of Thrift
Supervision.  First  Independence  is required to register and file reports with
the Office of Thrift Supervision and is subject to regulation and examination by
the

                                       27

<PAGE>



Office of Thrift Supervision.  In addition, the Office of Thrift Supervision has
enforcement  authority over First  Independence and its non-savings  association
subsidiaries  which also permits the Office of Thrift Supervision to restrict or
prohibit  activities  that are determined to be a serious risk to the subsidiary
savings association.

     As a unitary savings and loan holding company, First Independence generally
is not subject to activity restrictions.  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 and any of our subsidiaries  (other than First Federal or any other
Savings Association  Insurance Fund insured savings association) would generally
become  subject to  additional  restrictions.  If we fail the  qualified  thrift
lender  test,  within one year First  Independence  must  register  as, and will
become  subject to, the  significant  activity  restrictions  applicable to bank
holding companies.

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

     First  Independence  stock held by persons  who are  affiliates  (generally
executive  officers,  directors and 10% shareholders) of First  Independence may
not be resold  without  registration  or 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, 1999, 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 Office of Thrift Supervision.
See "--Liquidity and Capital Resources" in the Annual Report.

     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 Federal Home
Loan Bank borrowings, before borrowing from the Federal Reserve Bank.

     Federal  Home Loan Bank  System.  First  Federal is a member of the Federal
Home Loan Bank of Topeka,  which is one of 12 regional  Federal  Home Loan Banks
that administer the home financing credit function of savings associations. Each
Federal  Home Loan Bank  serves as a reserve  or  central  bank for its  members
within its  assigned  region.  It makes  loans to members  (i.e.,  advances)  in
accordance with policies and  procedures,  established by the board of directors
of the Federal Home Loan Bank, which are subject to the oversight of the Federal
Housing Finance Board. All advances from the Federal Home Loan Bank are required
to be fully secured by  sufficient  collateral as determined by the Federal Home
Loan Bank. In addition, all long-term advances must be used for residential home
financing.

     As a member,  First  Federal is required to purchase and maintain a minimum
amount of stock in the Federal Home Loan Bank of Topeka.  At September 30, 1999,
First  Federal had $1.4  million in Federal  Home Loan Bank stock,  which was in
compliance  with this  requirement.  In past years,  First  Federal has received
substantial  dividends on our Federal Home Loan Bank stock.  For the fiscal year
ended September 30, 1999, dividends paid by the Federal Home Loan Bank of Topeka
to First Federal totaled $125,548, which constitutes a $15,957 increase over the
amount of  dividends  received in fiscal  1998.  Over the past five fiscal years
these dividends have averaged 6.77% and were 7.0% for fiscal 1999.


                                       28

<PAGE>



Federal and State Taxation

     Federal Taxation.  Savings institutions that met certain definitional tests
relating to the  composition  of assets and other  conditions  prescribed by the
Internal  Revenue  Code of 1986,  as amended,  had been  permitted  to establish
reserves  for bad  debts  and to  make  annual  additions  which  could,  within
specified  formula limits,  be taken as a deduction in computing  taxable income
for federal income tax purposes. The amount of the bad debt reserve deduction is
now computed under the experience method.

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

     To the extent  earnings  appropriated  to a savings  institutions  bad debt
reserves for  "qualifying  real property  loans" and deducted for federal income
tax purposes  exceed the allowable  amount of such reserves  computed  under the
experience method and to the extent of the institution's  supplemental  reserves
for losses on loans, such excess may not, without adverse tax  consequences,  be
utilized  for  the  payment  of  cash  dividends  or  other  distributions  to a
shareholder (including distributions on redemption,  dissolution or liquidation)
or for any other purpose (except to absorb bad debt losses). As of September 30,
1999,  First  Federal's  excess  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.

     Kansas Taxation.  First Independence and First Federal file separate Kansas
income and Kansas privilege tax returns 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
2.5% of taxable income, plus 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 1996 through 1998. 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.  We are also subject
to an annual franchise tax imposed by the State of Delaware.


                                       29

<PAGE>



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

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%.

Executive Officers of First Independence

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

<TABLE>
<CAPTION>

           NAME                AGE(1)                                  POSITION(S) HELD
-----------------------------------------------------------------------------------------------
<S>                             <C>               <C>
Larry G. Spencer                 51                President and Chief Executive Officer
Gary L. Overfield                47                Senior Vice President and Secretary
James B. Mitchell                44                Vice President and Chief Financial Officer

</TABLE>
----------------
(1)  At September 30, 1999.

Executive Officers of First Federal

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

<TABLE>
<CAPTION>

           NAME                AGE(1)                                  POSITION(S) HELD
---------------------------------------------------------------------------------------------------------------
<S>                             <C>                <C>
Larry G. Spencer                 51                President and Chief Executive Officer and Director
Gary L. Overfield                47                Senior Vice President, and Secretary and Chief Loan Officer
Jim L. Clubine                   46                Vice President and Asset Manager
James B. Mitchell                44                Vice President and Chief Financial Officer

</TABLE>
----------------
(1)  At September 30, 1999.

     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.

                                       30

<PAGE>



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), Mercy Hospital Foundation Fund Raising Committee,  Eisenhower
Site Council team, Airport Advisory Board, Carnival Chairman for Neewolah, and a
member of the Rotary Club. He was a previous  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, 1999,  we had a total of 36  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, 1999, was $1,322,128.

     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, 1999,
was approximately $127,000.

Item 3. Legal Proceedings

     We are involved as plaintiff or defendant in various legal actions  arising
in  the  normal  course  of  business.  While  the  ultimate  outcome  of  these
proceedings  cannot  be  predicted  with  certainty,  it is our  opinion,  after
consultation  with  counsel  representing  us  in  the  proceedings,   that  the
resolution of these proceedings should not have a material effect on the results
of  operations.  We were not involved in any legal  proceedings at September 30,
1999.

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,
1999.


                                       31

<PAGE>



                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

     Pages 41 and 42 of the  attached  1999  Annual  Report to  Stockholders  is
herein incorporated by reference.

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

     Pages 4 through 14 of the attached  1999 Annual Report to  Stockholders  is
herein incorporated by reference.

Item 7. Financial Statements

     The following  information  appearing in our Annual Report to  Stockholders
for the year ended  September  30, 1999,  is  incorporated  by reference in this
Annual Report on Form 10-KSB as Exhibit 13.


<TABLE>
<CAPTION>
                                                                                                        Pages in
                                                                                                         Annual
                                       Annual Report Section                                             Report
-----------------------------------------------------------------------------------------------------------------

<S>                                                                                                     <C>
Report of Independent Certified Public Accountants.................................................      15
Consolidated Balance Sheets (September 30, 1999 and 1998)..........................................      16-17
Consolidated Statements of Earnings (For the Years Ended September 30, 1999
  and 1998)........................................................................................      18
Consolidated Statements of Comprehensive Income (For the Years Ended September
30, 1999 and 1998).................................................................................      19
Consolidated Statements of Stockholders' Equity (For the Years Ended September 30,
1999 and 1998).....................................................................................      20
Consolidated Statements of Cash Flows (For the Years Ended September 30, 1999
  and 1998)........................................................................................      21-22
Notes to Consolidated Financial Statements.........................................................      23-40

</TABLE>


     With the exception of the aforementioned information in Part II of the Form
10-KSB,  our Annual Report to Stockholders for the year ended September 30, 1999
is not deemed filed as part of this Annual Report on Form 10-KSB.

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.


                                       32

<PAGE>



                                    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 2000,  a copy of which  will be filed not later  than 120 days after the
close of fiscal year.

Executive Officers

     Information  regarding the business  experience  of 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 2000,  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 2000, 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 2000, a copy of which will be filed
not later than 120 days after the close of the fiscal year.



                                       33

<PAGE>



Item 13. Exhibits and Reports on Form 8-K

         (a)  Exhibits

<TABLE>
<CAPTION>
                                                                                                      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(a)                Articles of Incorporation                                                               *
3(b)                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 Security Holders                                                      13
16                  Letter on change in certifying accountants                                            None
18                  Letter on change in accounting principles                                             None
21                  Subsidiaries of the Registrant                                                         21
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 exhibits 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.

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

         (b)  Reports on Form 8-K

     During the quarter  ended  September  30, 1999, we did not file any Current
Reports on Form 8-K.

                                       34

<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, 1999   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, Officer and Director (Principal                      Financial Officer (Principal Financial and
Executive and  Operating Officer)                             Accounting Officer)

Date:  December 29, 1999                                      Date:  December 29, 1999



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

Date:  December 29, 1999                                      Date:  December 29, 1999



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

Date:  December 29, 1999                                      Date:  December 29, 1999



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

Date:  December 29, 1999                                      Date:  December 29, 1999
</TABLE>





                                       35

<PAGE>



                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>


Exhibit
Number
--------------------------------------------------------------------------------
<S>       <C>

11        Statement Regarding  Computation of Per Share Earnings (included under
          Note A of Notes to  Consolidated  Financial  Statements  in the Annual
          Report to Stockholders' attached hereto as Exhibit 13)

13        Annual Report to Security Holders

21        Subsidiaries of the Registrant

23        Consent of Accountants

27        Financial Data Schedule

</TABLE>


                                       36