<PAGE>





                                  Exhibit 13

                       Annual Report to Security Holders


<PAGE>

                               TABLE OF CONTENTS
                                                                           Page

President's Message to Stockholders                                          1


Selected Consolidated Financial Information                                  2


Management's Discussion and Analysis                                         4


Report of Independent Auditors                                              14


Consolidated Balance Sheets                                                 15


Consolidated Statements of Earnings                                         16


Consolidated Statements of Stockholders' Equity                             17


Consolidated Statements of Cash Flows                                       18


Notes to Consolidated Financial Statements                                  19


Stockholder Information                                                     32


Officers and Directors                            Inside Back Cover




                                 ANNUAL MEETING
The Annual Meeting of Stockholders will be held at the office of the Company
located at Myrtle and Sixth Streets, Independence, Kansas at 2:00 p.m.
Independence, Kansas time, on January 28, 1998.
<PAGE>



[GRAPHIC OMITTED]

To Our Stockholders, Depositors and Friends:

     The Board of Directors, Officers, and Staff of First Independence
Corporation and its wholly-owned subsidiary, First Federal Savings and Loan
Association, are pleased to provide you with the 1997 Annual Report.

     Several significant developments distinguish the 1997 fiscal year of First
Independence Corporation. In January of 1997, the Board of Directors approved a
100% of stock dividend to our stockholders as of January 24, 1997. This action
created more liquidity in our stock which will make it more affordable to a
greater number of people. Also in January, our new branch in Coffeyville
opened, and its success has far exceeded our expectations. We closed over $4.4
million in loans through the Coffeyville Branch and brought in an excess of
$6.0 million in deposits. In August of 1997 we started issuing a debit card to
complement our checking accounts; for the first two months we had a 10.6%
market penetration to our account base.

     In fiscal year 1998 we will see a new loan office open in Lawrence. Our
strategy will be to originate prime plus construction loans funded by prime
minus FHLB advances. Our new personnel have been working in the Lawrence area
for over three years and have been very successful. We are excited about this
venture and foresee that it will have a positive impact on our bottom line.

     We believe that our efforts to expand into new markets and to augment our
services will be positive for future growth. We will continue to service the
needs of our customers and to explore new products and services to better meet
their complete financial needs.

     As we focus on building upon the successes of this past year, I would
especially like to recognize all the hard work, dedication and personal
commitment put forth by our directors, officers and staff, each of whom can
take personal pride in the achievements of the past year. As we look forward to
another challenging year with your confidence and support, we pledge our
continued promise to build upon the achievements of this past year with strong
management, competitive products and quality customer service.



                                            Sincerely,


                                              [GRAPHIC OMITTED]

                                            /s/ Larry G. Spencer
                                            President & CEO













 [GRAPHIC OMITTED]

                                       1
<PAGE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                           September 30,
                                                  ----------------------------------------------------------------
                                                    1997          1996          1995          1994       1993 (1)
                                                  -----------   -----------   -----------   ----------   ---------
                                                                           (In Thousands)
<S>                                               <C>           <C>           <C>           <C>          <C>
Selected Financial Condition Data:
Total assets                                       $ 112,523     $ 108,539     $ 101,904     $ 94,593     $ 96,166
Cash, cash equivalents and interest-bearing
 deposits                                              3,151         1,763         2,115        1,415       20,146
Loans receivable, net                                 74,559        67,683        60,370       56,895       58,089
Mortgage-backed securities - at cost                  23,528        28,039        28,594       29,617       13,963
Investment securities - at cost                        3,000         2,000         1,000        4,245          271
Securities available for sale                          4,783         5,894         7,358           12           --
Real estate acquired through foreclosure, net             12            12            62          234        1,409
Deposits                                              76,229        69,356        67,927       64,384       84,941
Borrowings                                            23,700        24,300        18,800       15,400        3,000
Stockholders' equity                                  11,529        13,003        13,600       13,351        6,103
</TABLE>


<TABLE>
<CAPTION>
                                                                          Year Ended September 30,
                                                     -------------------------------------------------------------------
                                                      1997          1996           1995          1994        1993 (1)
                                                     -----------   -----------   -----------   -----------   -----------
                                                                               (In Thousands)
<S>                                                  <C>           <C>           <C>           <C>           <C>
Selected Operations Data:
Total interest income                                 $  8,069      $  7,773      $  7,186      $  6,296      $  6,570
Total interest expense                                   5,059         4,669         3,852         2,857         3,490
                                                      --------      --------      --------      --------      --------
 Net interest income                                     3,010         3,104         3,334         3,439         3,080
Provision for losses on loans                               --            --            --            45           332
                                                      --------      --------      --------      --------      --------
Net interest income after provision for losses on
 loans                                                   3,010         3,104         3,334         3,394         2,748
Other income                                               281           331           267           216           217
Gain on sale of investments                                 --           251            --            --           326
General, administrative and other expense               (2,111)       (2,384)       (1,820)       (1,653)       (1,506)
                                                      --------      --------      --------      --------      --------
 Earnings before income tax expense and
  cumulative effect of change in accounting
  principle                                              1,180         1,302         1,781         1,957         1,785
Income tax expense                                         468           487           694           750           465
                                                      --------      --------      --------      --------      --------
 Earnings before cumulative effect of change
  in accounting principle                                  712           815         1,087         1,207         1,320
Cumulative effect of change in
 accounting principle                                       --            --            --           241            --
                                                      --------      --------      --------      --------      --------
Net earnings                                          $    712      $    815      $  1,087      $  1,448      $  1,320
                                                      ========      ========      ========      ========      ========
Earnings per share                                    $    .68      $    .69      $    .84      $    .97         N/A
                                                      ========      ========      ========      ========
</TABLE>

(1) Does not reflect proceeds from the Association's conversion to stock form
    and stock issuance by First Independence Corporation which was completed
    on October 5, 1993.


                                       2
<PAGE>

FINANCIAL RATIOS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                September 30,
                                                        -------------------------------------------------------------
                                                         1997         1996         1995         1994        1993 (1)
                                                        ----------   ----------   ----------   ----------   ---------
<S>                                                     <C>          <C>          <C>          <C>          <C>
Selected Financial Ratios and Other Data:
Performance Ratios:
 Return on assets (ratio of net earnings to average
  total assets)                                           0.65%        0.78%        1.12%        1.61%         1.50%
 Interest rate spread information:
  Average during period                                   2.31         2.36         2.87         3.38          3.45
  End of period                                           2.19         2.17         2.36         3.34          2.94
 Net interest margin (2)                                  2.81         3.02         3.52         3.91          3.64
 Ratio of operating expense to average total assets       1.92         2.28         1.88         1.82          1.61
 Return on equity (ratio of net earnings to average
  equity)                                                 6.09         6.21         8.16        11.21         24.63
Quality Ratios:
 Non-performing assets to total assets, at end of
  period (3)                                              1.25         0.57         0.78         1.27          2.81
 Allowance for loan losses to non-performing
  assets, at end of period (3)                           47.64       112.36        87.45        55.31         24.72
Capital Ratios:
 Equity to total assets, at end of period                10.25        11.98        13.35        14.11          6.35
 Average equity to average assets                        10.62        12.57        13.78        14.38          6.08
 Ratio of average interest-earning assets to average
  interest-bearing liabilities                          110.64       114.50       115.83       116.42        104.66
 Dividend payout ratio (4)                               34.93        27.37        16.47         7.73          N/A
 Number of full service offices                              2            1            1            1             1
</TABLE>

(1) Does not reflect proceeds from the Association's conversion to stock form
    and stock issuance by First Independence Corporation which was completed
    on October 5, 1993.

(2) Net interest income divided by average interest-earning assets.

(3) Includes non-accruing loans, accruing loans delinquent 90 days or more and
    assets acquired through foreclosure.

(4) Dividends paid per share divided by earnings per share. The ratio for 1994
    does not give pro forma effect for annualizing dividends paid.


                                       3
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------

General
     Effective October 5, 1993, First Federal Savings and Loan Association of
Independence, Kansas ("First Federal" or the "Association") converted from a
federally chartered mutual savings association to a federally chartered stock
savings association and concurrently became a subsidiary of a holding company,
First Independence Corporation (the "Company"). The Company owns all of the
outstanding stock of First Federal and the Company's earnings are primarily
dependent on the operations of First Federal. Currently, the Company has no
other business activity other than acting as the holding company for First
Federal. As a result, the following discussion relates primarily to the
activities of First Federal. This discussion should be read in conjunction with
the consolidated Financial Statements and accompanying Notes included elsewhere
in this report.

     The Company's business consists of attracting deposits from the general
public and using such deposits primarily to make residential mortgage and other
loans. The Company's revenues are derived principally from interest charges on
mortgage loans and mortgage-backed securities and, to a lesser extent, from
interest earned on investment securities and interest-bearing deposits. In
addition, the Company receives fees from loan originations, late payments and
for various services related to transaction and other deposit accounts, and
dividends on its Federal Home Loan Bank ("FHLB") stock.

     The operations of the Company, and savings institutions and their holding
companies in general, are significantly affected by general economic conditions
and the related monetary and fiscal policies of regulatory agencies. Deposit
flows and cost of funds are influenced by interest rates on competing
investments and general market rates of interest. Lending activities are
affected by the demand for financing of real estate and other types of assets,
which in turn is affected by the interest rates at which such financing may be
offered and other factors including the availability of funds.

     Historically, the Company's principal business was the origination for its
portfolio of long-term, fixed rate mortgage loans, using funds provided by
passbook and short-term certificate of deposit accounts. During the early
1980's, the Board commenced the development and implementation of a strategy
designed to reduce vulnerability to interest rate fluctuations by increasing
the Company's adjustable rate assets. As a result of the implementation of this
strategy, management believes that the Company has reduced its vulnerability to
changes in interest rates.


Forward-Looking Statements

     Certain statements in this report that relate to First Independence
Corporation's plans, objectives or future performance may be deemed to be
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are based on Management's
current expectations. Actual strategies and results in future periods may
differ materially from those currently expected because of various risks and
uncertainties. Additional discussion of factors affecting First Independence's
business and prospects is contained in the Company's periodic filings with the
Securities and Exchange Commission.
<PAGE>

Asset/Liability Management

     The matching of assets and liabilities may be analyzed by examining the
extent to which they are "interest rate sensitive" and by monitoring an
institution's interest rate sensitivity "gap." An asset or liability is said to
be interest rate sensitive within a specific time period if it will mature or
reprice within that time period. The interest rate sensitivity gap is defined
as the difference between the amount of interest-earning assets anticipated,
based upon certain assumptions, to mature or reprice within a specific time
period and the amount of interest-bearing liabilities anticipated, based upon
certain assumptions, to mature or reprice within that same time period. A gap
is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect operations while a
positive gap would tend to benefit operations.

     A primary objective of asset/liability management is to manage interest
rate risk. First Federal monitors its asset/liability mix on an ongoing basis
and, from time to time, may institute certain changes in its product mix and
asset and liability maturities.

     Since the early 1980's, the Company has stressed the origination of
adjustable rate residential mortgage loans ("ARMs"), subject to market
conditions. In recent periods, the Company has also purchased adjustable-rate
mortgage-backed securities. At September 30, 1997, approximately $29.5 million,
or 38.7% of the Company's total loans secured by real estate, were ARMs. On the
same date, the Company also had $13.6 million in adjustable-rate
mortgage-backed securities.

     The Company's ARMs and adjustable-rate mortgage-backed securities adjust
to various indices. The Company monitors the mix of indices on its adjustable
rate assets and seeks, consistent with market conditions, to achieve a close
match in the repricing characteristics of its assets and liabilities.

     To increase the interest rate sensitivity of its assets, the Company has
also maintained a relatively high level of short and intermediate-term
investment securities and other assets. At September 30, 1997, the Company had
$4.1 million of investment securities and interest-bearing deposits maturing or
repricing within three years. Finally, the Company has undertaken various
marketing programs from time to

                                       4
<PAGE>

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

time over the last decade in order to extend the term of its deposit
liabilities. In 1993, the Company introduced a new certificate of deposit
program in an attempt to reduce deposit outflows and attract longer term
deposits which were being lost as a result of the general decline in market
rates of interest. This program offers two certificate products which have 4-
and 5-year terms. At September 30, 1997, the Company had approximately $8.1
million in these two certificates.
     In the future, in managing its interest rate sensitivity, the Company
intends to continue to stress the origination of ARMs, subject to market
conditions, the purchase of adjustable-rate mortgage-backed securities and the
maintenance of a relatively high level of short-term securities and other
assets.
     Office of Thrift Supervision ("OTS") regulations provide a Net Portfolio
Value ("NPV") approach to the quantification of interest rate risk. In essence,
this approach calculates the difference between the present value of expected
cash flows from assets and the present value of expected cash flows from
liabilities, as well as cash flows from off-balance-sheet contracts arising
from an assumed 200 basis point increase or decrease in interest rates
(whichever results in the greater pro forma decrease in NPV). Under OTS
regulations, an institution's "normal" level of interest rate risk in the event
of this assumed change in interest rates is a decrease in the institution's NPV
in an amount not to exceed 2% of the present value of its assets. Thrift
institutions with greater than "normal" interest rate exposure must take a
deduction from their total capital available to determine if they meet their
risk-based capital requirement. The amount of that deduction is one-half of the
difference between (a) the institution's actual calculated exposure to the 200
basis point interest rate change and (b) its "normal" level of exposure, which
is 2% of the present value of its assets. Savings associations, such as First
Federal, with less than $300 million in assets and a risk-based capital ratio
in excess of 12% are exempt from this requirement unless the OTS determines
otherwise. The OTS has postponed the implementation of the capital deduction
component of this regulation until it completes its analysis of the methods of
interest rate risk measurements proposed by the other banking regulators.
     Presented below, as of September 30, 1997, is an analysis of the
Association's interest rate risk as measured by changes in NPV for
instantaneous and sustained parallel shifts in the yield curve, in 100 basis
point increments, up and down 200 basis points and compared to Board policy
limits. The table was prepared and furnished to the Association by the Office
of Thrift Supervision. Assumptions used in calculating the amounts in this
table were determined by the OTS (dollars in thousands):

  Change in                                 Net Portfolio Value
                                           At September 30, 1997
 interest rate     Board Limit     -------------------------------------
(Basis Points)      % Change       $ Amount     $ Change       % Change
----------------   -------------   ----------   ------------   ---------
          +200          -40%         $ 8,212     $ (3,415)        -29%
          +100          -25           10,090       (1,537)        -13
             0           --           11,627           --          --
          -100          -25           12,526          899          +8
          -200          -40           12,820        1,193         +10

     As indicated in the table above, management has structured its assets and
liabilities to minimize its exposure to interest rate risk. In the event of a
200 basis point change in interest rates, the Association would experience a
10% increase in NPV in a declining rate environment and a 29% decrease in a
rising rate environment. During periods of rising interest rates, the value of
monetary assets and liabilities generally decline. Conversely, during periods
of falling interest rates, the value of monetary assets and liabilities
generally increase. However, the amount of change in value of specific assets
and liabilities due to changes in interest rates is not the same in a rising
interest rate environment as in a falling interest rate environment (i.e., as
indicated above, the amount of value increase under a specific rate decline may
not equal the amount of value decrease under an identical upward rate
movement).
<PAGE>

     Certain shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while interest rates on other types may lag behind
changes in market rates. Additionally, certain assets, such as ARMs, have
features which restrict changes in interest rates on a short-term basis and
over the life of the asset. Further, in the event of a change in interest
rates, prepayment and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. Finally, the ability
of many borrowers to service their debt may decrease in the event of an
interest rate increase. As a result, the actual effect of changing interest
rates may differ from that presented in the foregoing table.

Asset Quality
     Total non-performing assets increased to $1,403,000 at September 30, 1997
as compared to $614,000 at September 30, 1996. The increase in non-performing
assets was due primarily to two loans totaling $483,000 secured by single
family residences located in Texas and one loan totaling $207,000 secured by
fifteen single family residences located in the Company's primary market area.
The ratio of non-performing assets to total assets at September 30, 1997 was
1.25% compared to .57% at September 30, 1996. Included in non-performing assets
at September 30, 1997 were thirty mortgage loans and four consumer loans
totaling $1,359,000 and $32,000, respectively. Foreclosed real estate totaled
$12,000 at September 30, 1997.
     Management has taken into account its non-performing assets and the
composition of the loan portfolio in establishing its allowance for loan
losses, which totaled $668,000 at September 30, 1997.
 

                                       5
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------

Results of Operations

     Average Balances, Interest Rates and Yields. The following table presents
for the periods indicated the total dollar amount of interest income from
average interest-earning assets and related yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates. No tax equivalent adjustments were made. All average balances are
monthly average balances. Non-accruing loans have been included in the table as
loans carrying a zero yield.

<TABLE>
<CAPTION>
                                                            Year Ended September 30,
                                  ----------------------------------------------------------------------------
                                                  1997                                   1996
                                  -------------------------------------  -------------------------------------
                                    Average      Interest                  Average      Interest
                                  Outstanding     Earned/      Yield/    Outstanding     Earned/      Yield/
                                    Balance        Paid         Rate       Balance        Paid         Rate
                                  -------------  ------------  --------  -------------  ------------  --------
                                                             (Dollars in Thousands)
<S>                               <C>            <C>           <C>       <C>            <C>           <C>
Interest-earning assets:
 Loans receivable (1)               $ 71,188     $   5,684      7.98%      $ 63,152     $   5,190      8.22%
 Mortgage-backed securities           26,137         1,727      6.61         29,510         1,930      6.54
 Investment securities                 7,598           513      6.75          7,233           479      6.62
 FHLB stock                            1,314            89      6.79          1,103            70      6.38
 Federal funds sold                      567            34      6.02          1,434            79      5.53
 Other                                   318            22      6.83            445            25      5.64
                                    --------     ---------                 --------     ---------
  Total interest-earning
    assets                           107,122         8,069      7.53        102,877         7,773      7.56
                                    --------     ---------                 --------     ---------
Interest-bearing liabilities:
 Demand and NOW deposits              22,019           914      4.15         18,765           762      4.06
 Savings deposits and
  certificates                        51,219         2,745      5.36         51,950         2,820      5.43
 FHLB advances                        23,583         1,400      5.93         19,133         1,087      5.68
                                    --------     ---------                 --------     ---------
  Total interest-bearing
    liabilities                       96,821         5,059      5.22         89,848         4,669      5.20
                                    --------     ---------                 --------     ---------
Net interest income                              $   3,010                              $   3,104
                                                 =========                              =========
Net interest rate spread                                        2.31%                                  2.36%
                                                                ====                                   ====
Net earning assets                  $ 10,301                               $ 13,029
                                    ========                               ========
Net yield on average interest-
 earning assets                                                 2.81%                                  3.02%
                                                                ====                                   ====
Average interest-earning assets
 to average interest-bearing
 liabilities                                        110.64%                                114.50%
                                                 =========                              =========
<PAGE>

<CAPTION>
                                                  1995
                                  ------------------------------------
                                    Average      Interest
                                  Outstanding     Earned/      Yield/
                                    Balance        Paid         Rate
                                  -------------  ------------  -------
<S>                               <C>            <C>           <C>
Interest-earning assets:
 Loans receivable (1)                $58,628     $   4,804      8.19%
 Mortgage-backed securities           29,191         1,939      6.64
 Investment securities                 4,977           321      6.45
 FHLB stock                            1,028            61      5.93
 Federal funds sold                      650            44      6.77
 Other                                   275            17      6.18
                                     -------     ---------
  Total interest-earning
    assets                            94,749         7,186      7.58
                                     -------     ---------
Interest-bearing liabilities:
 Demand and NOW deposits              13,508           408      3.02
 Savings deposits and
  certificates                        51,019         2,441      4.78
 FHLB advances                        17,275         1,003      5.81
                                     -------     ---------
  Total interest-bearing
    liabilities                       81,802         3,852      4.71
                                     -------     ---------
Net interest income                              $   3,334
                                                 =========
Net interest rate spread                                        2.87%
                                                                ====
Net earning assets                   $12,947
                                     =======
Net yield on average interest-
 earning assets                                                 3.52%
                                                                ====
Average interest-earning assets
 to average interest-bearing
 liabilities                                        115.83%
                                                 =========
</TABLE>

----------
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.

                                       6
<PAGE>

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

Rate/Volume Analysis of Net Interest Income

     The following schedule presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to (i) changes in volume (i.e., changes in volume multiplied by old rate) and
(ii) changes in rate (i.e., changes in rate multiplied by old volume). For
purposes of this table, changes attributable to both rate and volume, which
cannot be segregated, have been allocated proportionately to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>
                                                                   Year Ended September 30,
                                         -----------------------------------------------------------------------------
                                                      1997 vs. 1996                           1996 vs. 1995
                                         ---------------------------------------   -----------------------------------
                                                        Increase                                Increase
                                                       (Decrease)                              (Decrease)
                                                         Due to                                  Due to
                                         ---------------------------------------   -----------------------------------
                                                                      Total                                  Total
                                                                     Increase                               Increase
                                         Volume         Rate        (Decrease)     Volume      Rate        (Decrease)
                                         -----------   ----------   ------------   --------   ----------   -----------
                                                                    (Dollars in Thousands)
<S>                                      <C>           <C>          <C>            <C>        <C>          <C>
Interest-earning assets:
 Loans receivable                          $ 645        $ (151)       $ 494          $372       $ 14         $ 386
 Mortgage-backed securities                 (223)           20         (203)           21        (30)             (9)
 Investment securities                        24            10           34           149          9           158
 FHLB stock                                   14             5           19             4          5             9
 Federal funds sold                          (52)            7          (45)           44           (9)         35
 Other                                          (8)          5             (3)         10           (2)          8
                                           --------     ------        --------       ----       -------      -------
  Total interest-earning assets              400          (104)         296           600        (13)          587
                                           -------      ------        -------        ----       ------       -------
Interest-bearing liabilities:
 Demand and NOW deposits                     135            17          152           188        166           354
 Savings deposits and certificates           (39)          (36)         (75)           45        334           379
 FHLB advances                               262            51          313           106        (22)           84
                                           -------      ------        -------        ----       ------       -------
  Total interest-bearing liabilities       $ 358        $   32          390          $339       $478           817
                                           =======      ======        -------        ====       ======       -------
Net interest income                                                   $ (94)                                 $(230)
                                                                      =======                                =======
</TABLE>

     The following table sets forth the weighted average yields on the
Company's interest-earning assets, the weighted average interest rates on
interest-bearing liabilities and the interest rate spread between the weighted
average yields and rates for the Company at the dates indicated. Non-accruing
loans have been included in the table as carrying a zero yield.
<TABLE>
<CAPTION>
                                                                     At September 30,
                                                                --------------------------
                                                                 1997      1996      1995
                                                                -------   -------   ------
<S>                                                             <C>       <C>       <C>
       Weighted average yield on:
        Loans receivable                                        7.74%     7.78%     8.13%
        Mortgage-backed securities                               6.66      6.53      6.97
        Investment securities                                    6.97      6.68      7.61
        Federal funds sold                                       5.28      5.48      5.57
        Other interest-earning assets                            5.22      4.93      5.35
        Combined weighted average yield on interest-earning      7.40      7.34      7.59
         assets
       Weighted average rate paid on:
        Savings deposits and certificates                        5.38      5.38      5.38
        Demand and NOW deposits                                  4.06      4.03      3.78
        FHLB advances                                            6.11      5.65      5.94
        Combined weighted average rate paid on interest-         5.21      5.17      5.23
         bearing liabilities
       Spread                                                    2.19      2.17      2.36
</TABLE>

                                       7
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------

                              FINANCIAL CONDITION

     The Company's total assets increased $4.0 million, or 3.7%, from $108.5
million at September 30, 1996 to $112.5 million at September 30, 1997. This
increase was primarily due to increases in net loans receivable of $6.9
million, cash and cash equivalents of $1.4 million, prem-ises and equipment of
$400,000, investment securities of $100,000 and Federal Home Loan Bank stock of
$100,000. These increases in assets, along with reductions in advances from the
Federal Home Loan Bank of Topeka of $600,000, checks issued in excess of cash
items of $500,000 and other accrued expenses and liabilities of $400,000 were
funded by increases in deposits of $6.8 million and decreases in
mortgage-backed securities of $4.7 million.

     Total loans receivable increased $6.9 million from $67.7 million at
September 30, 1996, to $74.6 million at September 30, 1997. Increased economic
activity in the Company's lending area resulted in loan originations exceeding
loan repayments. The loan portfolio is comprised primarily of first mortgage
loans secured by one- to four-family residential real estate located in the
Company's market area. The increase in one- to four-family mortgage loans
consisted primarily of 15- and 30-year fixed-rate loans and, to a lesser
extent, one-year adjustable rate mortgages and mortgage loans with a fixed rate
for the first three years of the loan term that automatically convert to one-
year adjustable rate loans during the fourth year.

     The allowance for loan losses totaled $668,000 at September 30, 1997 which
represented a $22,000 decrease from the allowance for loan losses at September
30, 1996. The ratio of the allowance for loan losses as a percent of total
loans decreased from 1.02% at September 30, 1996 to .90% at September 30, 1997,
primarily due to the increase in total loans receivable at September 30, 1997.
The allowance for loan losses as a percent of non-performing loans decreased
from 114.62% at September 30, 1996 to 48.05% at September 30, 1997, due to the
increase in non-performing loans at September 30, 1997. At September 30, 1997,
the Company's non-performing loans were comprised primarily of one- to
four-family residential loans.

     The allowance for loan losses is determined based upon an evaluation of
pertinent factors underlying the types and qualities of the Company's loans.
Management considers such factors as the repayment status of a loan, the
estimated net realizable value of the underlying collateral, the borrower's
ability to repay the loan, current and anticipated economic conditions which
might affect the borrower's ability to repay the loan and the Company's past
statistical history concerning charge-offs.

     Total deposits increased $6.8 million from $69.4 million at September 30,
1996, to $76.2 million at September 30, 1997. Deposits increased in fiscal 1997
primarily as a result of the "Bulldog" certificate account developed in January
1995 and the "Platinum" money fund account introduced in May 1995. The
"Bulldog" account offers interest rates from 25 to 50 basis points above the
local market for a term of eighteen months. The "Platinum" money fund account
offers tiered rates on a limited transaction account with the highest rate paid
on balances of $50,000 and above. Management feels the "Bulldog" certificate
and "Platinum" money fund provide an alternative to deposit customers looking
to higher risk investments with higher yields than certificates of deposit and
money market accounts.

     Total borrowed funds decreased $600,000 from $24.3 million at September
30, 1996 to $23.7 million at September 30, 1997 although the average balance of
FHLB advances during fiscal 1997 was $4.5 million higher than in fiscal 1996.
The decrease was due to the principal repayment of advances obtained from the
Federal Home Loan Bank of Topeka. The increase in deposits provided the Company
with the opportunity to reduce the amount of its outstanding advances. Most of
the advances obtained from the Federal Home Loan Bank of Topeka were originally
used by the Company to invest in loans receivable at a positive spread over the
term of the advances.

     Total stockholders' equity decreased approximately $1.5 million from $13.0
million at September 30, 1996 to $11.5 million at September 30, 1997. The
decrease was primarily the result of the Company's use of $2.2 million to
repurchase 197,963 shares of common stock and dividends of $231,000 paid to
stockholders. These decreases were partially offset by the Company's net
earnings from operations of $712,000, a fair value adjustment of $90,000 on
ESOP shares committed for release, the repayment of employee stock ownership
plan ("ESOP") debt of $73,000, common stock options exercised of $47,000, the
amortization of unearned stock compensation of $44,000 and unrealized gains on
securities available for sale of $26,000, net of deferred taxes.

                                       8
<PAGE>

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

  Comparison of Fiscal Years Ended September 30, 1997 and September 30, 1996

     General. Net earnings for the fiscal year ended September 30, 1997 were
$712,000 as compared to $815,000 for the fiscal year ended September 30, 1996,
a decrease of $103,000, or 12.6%. The decrease in net earnings was primarily
due to a non-recurring $251,000 gain on the sale of FHLMC stock which was
recognized in the fiscal year ended September 30, 1996, with no similar
activity in the fiscalyear ended September 30, 1997. To a lesser extent, the
decrease in net earnings was due to decreases in net interest income of $94,00
and income from real estate operations of $60,000. These decreases to net
earnings were partially offset by decreases in non-interest expenses of
$273,000 and income tax expense of $19,000.

     Net Interest Income. Net interest income decreased $94,000, or 3.02%, for
the fiscal year ended September 30, 1997 as compared to the fiscal year ended
September 30, 1996. This decrease was due primarily to an increase in interest
expense of $390,000, or 8.34%, offset partially by an increase in interest
income of $296,000, or 3.81%. Interest expense increased primarily due to a
$7.0 million increase in the average balance of interest-bearing liabilities
and, to a lesser extent, a 2 basis point increase in the average rate paid on
interest-bearing liabilities. Interest income increased primarily due to a $4.2
million increase in the average balance of interest-earning assets, partially
offset by a 3 basis point decrease in yield on interest-earning assets.

     Interest Income. Interest income for the fiscal year ended September 30,
1997, increased to $8.1 million from $7.8 million for the fiscal year ended
September 30, 1996. This increase resulted primarily from a $4.2 million
increase in the average outstanding balance of interest-earning assets (due to
the increase in the average balance of loans receivable and investment
securities financed with borrowings from the Federal Home Loan Bank of Topeka
and increased savings deposits) during the fiscal year ended September 30,
1997, as compared to the fiscal year ended September 30, 1996. These increases
were partially offset by a decrease in the average yield on interest-earning
assets. The average yield on interest-earning assets decreased 3 basis points
to 7.53% during fiscal 1997, from 7.56% during fiscal 1996. This decrease was
caused primarily by a decrease in yield on the Company's loans receivable from
8.22% to 7.98% due to new loans being originated at interest rates lower than
those currently in the loan portfolio. This decrease was partially offset by an
increase in yield on mortgage-backed securities from 6.54% to 6.61% and
investment securities from 6.62% to 6.75%.

     Interest Expense. Interest expense for the fiscal year ended September 30,
1997, increased by $400,000 to $5.1 million as compared to $4.7 million for the
fiscal year ended September 30, 1996. This increase was primarily the result of
a $7.0 million increase in the average outstanding balance of interest-bearing
liabilities during the fiscal year ended September 30, 1997 as compared to the
fiscal year ended September 30, 1996. To a lesser extent, the increase in
interest expense was due to a 2 basis point increase in average interest rates
paid on interest-bearing liabilities. The increase in interest-bearing
liabilities was primarily due to a $4.5 million increase in the average
outstanding amount of advances obtained from the Federal Home Loan Bank of
Topeka and a $3.3 million increase in demand and Now deposits. The advances
were used by the Company to invest in loans receivable at a positive spread
over the term of the advances.
<PAGE>

     Provision for Loan Losses. There was no provision for losses on loans for
the fiscal years ended September 30, 1997 and September 30, 1996. Management
determined that additional provisions were not necessary based upon their
analysis of the established allowance and review of the composition of the loan
portfolio. The Company will continue to monitor its allowance for loan losses
and make future additions to the allowance through the provision for loan
losses as economic and regulatory conditions dictate. However, there can be no
assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods.
In addition, the Company's determinations as to the amount of the allowance for
loan losses are subject to review by the regulatory agencies which can order
the establishment of additional general or specific allowances.


     Non-interest Income. Non-interest income decreased $302,000 to $280,000
during the fiscal year ended September 30, 1997 as compared to $582,000 for the
fiscal year ended September 30, 1996. The decrease was primarily due to a
non-recurring $251,000 gain on the sale of FHLMC stock which was recognized in
the fiscal year ended September 30, 1996, with no gains on the sale of
securities recognized in the fiscal year ended September 30, 1997. To a lesser
extent, the decrease was due to a decrease of $60,000 in income from real
estate operations for the fiscal year ended September 30, 1997 as compared to
the fiscal year ended September 30, 1996. Recurring non-interest income
generally consists of servicing fees as well as deposit and other types of
fees. Non-interest income levels are anticipated to remain stable in the future
due to the small number of checking accounts held by the Company.


     Non-interest Expense. Total non-interest expense decreased to $2,111,000
for the fiscal year ended September 30, 1997 from $2,384,000 for the fiscal
year ended September 30, 1996, a decrease of $273,000, or 11.4%. The decrease
was primarily due to a one-time pre-tax charge of $432,000 during the fiscal
year ended September 30, 1996, with no similar charge during the fiscal year
ended September 30, 1997. The charge was related to a special assessment of
65.7 basis points on deposits of SAIF-insured institutions as of March 31,


                                       9
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------

1995, in order to recapitalize the Savings Association Insurance Fund. To a
lesser extent, the decrease was due to a reduction in the Company's ongoing
deposit insurance premium of $94,000, as a result of the recapitalization of
the Savings Association Insurance Fund. These decreases were partially offset
by increases in compensation and employee benefits of $146,000, other expenses
of $58,000, occupancy and equipment of $37,000, and data processing fees of
$12,000. The increase in compensation expense was primarily due to annual
increases in salaries and bonuses and expense associated with the Company's
ESOP due to the increase in the Company's stock price. In addition, the opening
of a new branch office in Coffeyville, Kansas resulted in additional staff,
advertising, stationery, printing and office supplies expense.

     Income Tax Expense. Income tax expense was $468,000 for the fiscal year
ended September 30, 1997 compared to $487,000 for the fiscal year ended
September 30, 1996, a decrease of $19,000. The decrease was primarily the
result of a decrease in pre-tax income. The Company's effective tax rates were
39.7% and 37.4% for the fiscal years ended September 30, 1997 and September 30,
1996, respectively.


  Comparison of Fiscal Years Ended September 30, 1996 and September 30, 1995

     General. Net earnings for the fiscal year ended September 30, 1996 were
$815,000 as compared to $1,087,000 for the fiscal year ended September 30,
1995, a decrease of $272,000, or 25.0%. The decrease in net earnings was
primarily due to a one-time pre-tax charge of $432,000, resulting in a net
after tax reduction to earnings of $256,000. This one-time charge was the
result of legislation enacted on September 30, 1996 which mandated a special
assessment of 65.7 basis points on deposits of SAIF-insured institutions as of
March 31, 1995, in order to recapitalize the Savings Association Insurance
Fund. To a lesser extent, the decrease in net earnings was due to a decrease in
net interest income of $229,000 and an increase in non-interest expenses,
exclusive of the SAIF special assessment, of $132,000. These decreases to net
earnings were partially offset by an increase in non-interest income of
$315,000 and a decrease in income tax expense of $207,000.

     Net Interest Income. Net interest income decreased $230,000, or 6.9%, for
the fiscal year ended September 30, 1996 as compared to the fiscal year ended
September 30, 1995. This decrease was due primarily to an increase in interest
expense of $817,000, or 21.2%, offset partially by an increase in interest
income of $587,000, or 8.2%. Interest expense increased primarily due to a 49
basis point increase in the average rate paid on interest-bearing liabilities
and, to a lesser extent, an $8.0 million increase in the average balance of
interest-bearing liabilities. Interest income increased primarily due to an
$8.1 million increase in the average balance of interest-earning assets,
partially offset by a 2 basis point decrease in yield on interest-earning
assets.

     Interest Income. Interest income for the fiscal year ended September 30,
1996, increased to $7.8 million from $7.2 million for the fiscal year ended
September 30, 1995. This increase resulted primarily from an $8.1 million
increase in the average outstanding balance of interest-earning assets (due to
the increase in the average balance of loans receivable and investment
securities financed with borrowings from the Federal Home Loan Bank of Topeka
and increased savings deposits) during the fiscal year ended September 30,
1996, as compared to the fiscal year ended September 30, 1995. These increases
were partially offset by a decrease in the average yield on interest-earning
assets. The average yield on interest-earning assets decreased 2 basis points
to 7.56% during fiscal 1996, from 7.58% during fiscal 1995. This decrease was
caused primarily by a decrease in yield on the Company's mortgage-backed
securities portfolio from 6.64% to 6.54%. A portion of the Company's adjustable
rate mortgage-backed securities adjusted downward due to decreases in market
rates and lower yielding current rate mortgage-backed securities were purchased
during the fiscal year.
<PAGE>

     Interest Expense. Interest expense for the fiscal year ended September 30,
1996, increased by $800,000 to $4.7 million as compared to $3.9 million for the
fiscal year ended September 30, 1995. This increase was primarily the result of
a 49 basis point increase in average interest rates paid on interest-bearing
liabilities, caused by higher rates paid on new deposit products developed in
fiscal 1995 and an increase in rates paid on maturing certificates, as rates
paid on certificates of deposit increased during the terms of the maturing
certificates. To a lesser extent, the increase in interest expense was due to
an $8.0 million increase in the average outstanding balance of interest-bearing
liabilities during the fiscal year ended September 30, 1996 as compared to the
fiscal year ended September 30, 1995. This increase in interest-bearing
liabilities was primarily the result of a $6.2 million increase in the average
outstanding balance of deposits due primarily to the "Platinum" money fund
account introduced in May 1995. The "Platinum" money fund account is a limited
transaction account which offers tiered rates with the highest rate paid on
balances of $50,000 and above. To a lesser extent, the increase was due to a
$1.9 million increase in the average outstanding amount of advances obtained
from the Federal Home Loan Bank of Topeka. The advances were used by the
Company to invest in loans receivable and mortgage-backed securities at a
positive spread over the term of the advances.

     Provision for Loan Losses. There was no provision for losses on loans for
the fiscal years ended September 30, 1996 and September 30, 1995. Management
determined that additional provisions were not necessary based upon their
analysis of the established allowance and review of the composition of the loan
portfolio. The Company will continue to monitor its allowance for loan losses
and make future additions to the allowance through the provision for loan
losses as economic and regulatory conditions dictate. However, there can be no
assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods.
In addition, the Company's determinations as to the amount of the allowance for
loan losses are subject to review by the regulatory agencies which can order
the establishment of additional general or specific allowances.

                                       10
<PAGE>

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

     Non-interest Income. Non-interest income increased $315,000 to $582,000
during the fiscal year ended September 30, 1996 as compared to $267,000 for the
fiscal year ended September 30, 1995. The increase was primarily due to a
non-recurring $251,000 gain on the sale of FHLMC stock which was recognized in
the fiscal year ended September 30, 1996, with no gains on the sale of
securities recognized in the fiscal year ended September 30, 1995. Recurring
non-interest income generally consists of servicing fees as well as deposit and
other types of fees. Non-interest income levels are anticipated to remain
stable in the future due to the small number of checking accounts held by the
Company.

     Non-interest Expense. Total non-interest expense increased to $2,384,000
for the fiscal year ended September 30, 1996 from $1,820,000 for the fiscal
year ended September 30, 1995, an increase of $564,000, or 31.0%. The increase
was primarily due to a one-time pre-tax charge of $432,000, related to a
special assessment of 65.7 basis points on deposits of SAIF-insured
institutions as of March 31, 1995, in order to recapitalize the Savings
Association Insurance Fund. As a result of the recapitalization of the Savings
Association Insurance Fund, the Company expects its deposit insurance premium
to be reduced from its current level in future periods. To a lesser extent, the
increase was due to increases in compensation and employee benefits of $65,000,
other expenses of $37,000, occupancy and equipment of $12,000, and data
processing fees of $10,000. The increase in compensation expense was primarily
due to annual increases in salaries and bonuses and expense associated with the
Company's ESOP due to the increase in the Company's stock price.

     Income Tax Expense. Income tax expense was $487,000 for the fiscal year
ended September 30, 1996 compared to $694,000 for the fiscal year ended
September 30, 1995, a decrease of $207,000. The decrease was primarily the
result of a decrease in pre-tax income. The Company's effective tax rates were
37.4% and 39.0% for the fiscal years ended September 30, 1996 and September 30,
1995, respectively. The decrease in the effective tax rates during fiscal 1996
was due primarily to a state tax credit received by the Company due to a
charitable contribution to a non-profit organization.



Liquidity and Capital Resources

     The OTS requires minimum levels of liquid assets. During fiscal 1997, OTS
regulations required First Federal to maintain an average daily balance of
liquid assets (United States Treasury, federal agency, and other investments
having maturities of five years or less) equal to at least 5.0% of the sum of
its average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. Such requirements may be changed from time to time
by OTS to reflect changing economic conditions. Such investments are intended
to provide a source of relatively liquid funds upon which First Federal may
rely if necessary to fund deposit withdrawals and other short-term funding
needs. First Federal's regulatory liquidity at September 30, 1997 was 7.20%.
First Federal normally attempts to maintain liquidity between 7% and 9%. In
addition to the regulatory liquidity requirement, the Association is required
to maintain short-term liquid assets, as defined, equal to 1.0% of the average
sum of net withdrawable deposits and other liabilities, as defined. First
Federal's short-term liquidity ratio at September 30, 1997 was 3.23%.

     The Company's primary sources of funds consist of deposits and loan and
mortgage-backed securities repayments. Other potential sources of funds
available include borrowings from the Federal Home Loan Bank ("FHLB") of
Topeka. The Company uses its liquid resources principally to meet on-going
commitments, to fund maturing certificates of deposit and deposit withdrawals,
to invest, to fund existing and future loan commitments, to maintain liquidity,
and to meet operating expenses. Management believes that loan repayments and
other sources of funds will be adequate to meet the Company's foreseeable
liquidity needs.

<PAGE>

     The Company's primary investing activity is the origination of mortgage
loans and the purchase of mortgage-backed and other securities. At September
30, 1997, mortgage loans and mortgage-backed securities accounted for 87.6% of
the Company's total assets. The Company has been able to generate sufficient
cash through the retail deposit market, its traditional funding source, and
through short-term borrowings, to provide the cash utilized in investing
activities. A $9.0 million line of credit has also been established with the
FHLB of Topeka with an outstanding balance of $4.0 million at September 30,
1997. The line of credit is scheduled to mature on February 6, 1998, and will
most likely be renewed for another one year term at that time. The line of
credit is subject to various conditions, including the pledging of acceptable
collateral. The primary purpose of the line of credit is to serve as a back-up
liquidity facility for the Company, however, the Company may from time to time
utilize the line of credit to purchase investment securities and fund other
commitments.

     Liquidity management is both a daily and long-term responsibility of
management. The Company adjusts its investments in liquid assets based upon
management's assessment of (i) expected loan demand, (ii) expected deposit
flows, (iii) yields available on interest-bearing deposits, and (iv) the
objectives of its asset/liability management program. Excess liquidity is
invested generally in interest-bearing overnight deposits and other short-term
government and agency obligations. If the Company requires additional funds,
beyond its internal ability to generate, it has additional borrowing capacity
with the FHLB of Topeka.

     The Company anticipates that it will have sufficient funds available to
meet current loan commitments. At September 30, 1997, the Company had
outstanding commitments to extend credit which amounted to $379,000. The
Company is not aware of any trends, events or uncertainties which will have or
that are reasonably likely to have a material effect on the Company's
liquidity, capital resources or operations.


                                       11
<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations
--------------------------------------------------------------------------------

     Certificates of deposit scheduled to mature in one year or less at
September 30, 1997 totaled approximately $28.0 million. Management believes
that a significant portion of such deposits will remain with the Company. There
can be no assurance, however, that the Company can retain all such deposits. At
September 30, 1997, the Company had $23.7 million in advances from the FHLB of
Topeka with $12.8 million maturing in one year or less.

     The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), among other things, mandated the adoption of new minimum capital
requirements that are no less stringent than the minimum capital requirements
for national banks. These minimum capital standards generally require the
maintenance of regulatory capital sufficient to meet each of three tests: the
tangible capital requirement, the core capital requirement, and the risk-based
capital requirement. The tangible capital requirement provides for minimum
tangible capital (defined as retained earnings less all intangible assets)
equal to 1.5% of adjusted total assets. The core capital requirement provides
for minimum core capital (tangible capital plus supervisory goodwill) equal to
3.0% of assets. The risk-based capital requirement provides for the maintenance
of core capital plus general loss allowances (less a specified percentage of
certain equity investments) equal to 8.0% of risk-weighted assets. In computing
risk-weighted assets, the Association multiplies the book value of each asset
on its balance sheet by a defined risk-weighting factor (e.g., one- to
four-family residential loans carry a risk-weighted factor of 50%). Management
has reviewed these capital standards and determined that the Association is in
compliance with each of the three requirements. As of September 30, 1997, the
Association's tangible capital, core capital, and risk-based capital of $9.3
million, $9.3 million, and $10.0 million exceeded the applicable minimum
requirements by $7.7 million, $6.0 million, and $5.9 million, respectively.

     The following table sets forth the Association's compliance with such
requirements at September 30, 1997.



<TABLE>
<CAPTION>
                                                  Association capital level
                         OTS requirement            at September 30, 1997
                       --------------------   ----------------------------------
                        % of                   % of                    Amount
                       Assets      Amount     Assets       Amount     of Excess
Capital standard       --------   ---------   ----------   --------   ----------
                                        (Dollars in Thousands)
<S>                    <C>        <C>         <C>          <C>        <C>
Tangible capital        1.50%      $ 1,666     8.42%        $9,349      $ 7,683
Core capital (1)        3.00         3,333     8.42          9,349        6,016
Risk-based capital      8.00         4,093    19.53          9,989        5,896
</TABLE>

----------
(1) Based on current core capital requirement of 3%.

     See Note L of Notes to Consolidated Financial Statements for additional
information.


     Management has reviewed the restriction in FIRREA relating to loans to one
borrower, qualification as a qualified thrift lender, and other restrictions on
lending and investment, and has determined that, based on the Association's
capital position and lending and investment policies, these restrictions have
not had a material impact on the Association's operations.

<PAGE>

Impact of Inflation and Changing Prices

     The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and results of operations in
terms of historical dollars without considering changes in the relative
purchasing power of money over time because of inflation.


     Unlike most industrial companies, virtually all of the assets and
liabilities of First Federal are monetary in nature. As a result, interest
rates have a more significant impact on the Association's performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the prices of goods and
services. In the present interest rate environment, the liquidity, maturity
structure, and quality of First Federal's assets and liabilities are important
factors in the maintenance of acceptable performance levels.



Effect of New Accounting Standards

     SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," was issued in 1996. It revises the
accounting for transfers of financial assets, such as loans and securities, and
for distinguishing between sales and secured borrowings. It became effective
for some transactions occurring after December 31, 1996, and will be effective
for others in 1998. The adoption of SFAS No. 125 is not expected to have a
material impact on the results of operations or financial condition of the
Company.


     Also, in March 1997, the accounting requirements for calculating earnings
per share were revised by SFAS No. 128, "Earnings Per Share." Basic earnings
per share for the quarter ending December 31, 1997 and later will be calculated
solely on average common shares


                                       12
<PAGE>

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

outstanding. Diluted earnings per share will reflect the potential dilution of
stock options and other common stock equivalents. All prior calculations will
be restated to be comparable to the new methods. As the Company has dilution
from stock options, the new calculation methods will increase basic earnings
per share over what otherwise would have been reported as primary earnings per
share, while there will be little effect on fully diluted earnings per share.

     In June 1997, the Financial Accounting Standards Board "FASB" issued SFAS
No. 130, "Reporting Comprehensive Income." This statement establishes standards
for reporting and display of comprehensive income and its components (revenue,
expenses, gains and losses) in a full set of general-purpose financial
statements. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Income tax effects must also be shown. This
statement is effective for fiscal years beginning after December 15, 1997. The
adoption of SFAS No. 130 relates solely to disclosure provisions and therefore
will not have a material impact on the results of operations or financial
condition of the Company.

     In June 1997, The FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
This Statement is effective for financial statements for periods beginning
after December 15, 1997. The adoption of SFAS No. 131 relates solely to
disclosure provisions and therefore will not have a material impact on the
results of operations or financial condition of the Company.


                                       13
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------


[GRAPHIC OMITTED]

     Board of Directors
     First Independence Corporation and Subsidiary

     We have audited the accompanying consolidated balance sheets of First
     Independence Corporation and Subsidiary as of September 30, 1997 and 1996,
     and the related consolidated statements of earnings, stockholders' equity
     and cash flows for the years then ended. These consolidated financial
     statements are the responsibility of the Corporation's management. Our
     responsibility is to express an opinion on these consolidated financial
     statements based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
     in all material respects, the consolidated financial position of First
     Independence Corporation and Subsidiary as of September 30, 1997 and 1996,
     and the consolidated results of their operations and their consolidated
     cash flows for the years then ended in conformity with generally accepted
     accounting principles.


[GRAPHIC OMITTED]

     Wichita, Kansas
     October 24, 1997

                                       14
<PAGE>

First Independence Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------

September 30,


 ASSETS
<TABLE>
<CAPTION>
                                                                                                1997               1996
                                                                                            -----------------  -----------------
<S>                                                                                         <C>                <C>
Cash and due from banks                                                                      $     961,350      $     753,134
Federal funds sold                                                                               1,600,000            400,000
Other interest-bearing deposits                                                                    589,877            610,295
                                                                                             -------------      -------------
     Cash and cash equivalents                                                                   3,151,227          1,763,429
Investment securities held to maturity (estimated fair value of $2,996,300 in 1997 and
 $1,970,980 in 1996)                                                                             3,000,000          2,000,000
Investment securities available for sale                                                         4,311,406          5,235,073
Mortgage-backed securities held to maturity (estimated fair value of $23,748,569 in 1997
and
 $27,873,630 in 1996)                                                                           23,527,689         28,039,314
Mortgage-backed securities available for sale                                                      471,618            659,207
Loans receivable, net                                                                           74,558,783         67,682,920
Premises and equipment, net                                                                      1,297,500            910,813
Federal Home Loan Bank stock, at cost                                                            1,368,900          1,239,500
Accrued interest receivable                                                                        712,298            667,920
Real estate acquired through foreclosure                                                            12,131             11,845
Deferred income taxes                                                                                   --            173,904
Other                                                                                              111,107            155,304
                                                                                             $ 112,522,659      $ 108,539,229
                                                                                             =============      =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits                                                                                     $  76,229,176      $  69,356,422
Advances from borrowers for taxes and insurance                                                    693,069            678,072
Checks issued in excess of cash items                                                                   --            492,627
Deferred income taxes                                                                               34,048                 --
Advances from Federal Home Loan Bank                                                            23,700,000         24,300,000
Accrued expenses and other                                                                         337,085            709,599
                                                                                             -------------      -------------
     Total liabilities                                                                         100,993,378         95,536,720
Stockholders' equity
  Preferred stock, $.01 par value, 500,000 shares authorized; none issued                               --                 --
  Common stock, $.01 par value, 2,500,000 shares authorized; 1,498,392 shares issued in
    1997 and 749,196 shares issued in 1996                                                          14,984              7,492
  Additional paid-in capital                                                                     7,122,744          7,053,143
  Retained earnings - substantially restricted                                                   9,441,054          8,960,098
  Unrealized gain (loss) on securities available for sale, net of related taxes                     15,112            (11,293)
  Required contributions for shares acquired by Employee Stock Ownership Plan (ESOP)              (218,212)          (290,949)
  Unearned stock compensation - recognition and retention plan (RRP)                               (43,634)           (87,278)
  Treasury stock, 520,059 shares in 1997 and 331,550 shares in 1996 - at cost                   (4,802,767)        (2,628,704)
                                                                                             -------------      -------------
     Total stockholders' equity                                                                 11,529,281         13,002,509
                                                                                             -------------      -------------
                                                                                             $ 112,522,659      $ 108,539,229
                                                                                             =============      =============
</TABLE>

The accompanying notes are an integral part of these statements.

                                       15
<PAGE>

First Independence Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
--------------------------------------------------------------------------------

Year ended September 30,



                                                1997            1996
                                             -------------   ------------
Interest income
  Loans                                       $ 5,684,053     $ 5,189,361
  Mortgage-backed securities                    1,726,754       1,929,927
  Investment securities                           513,223         478,990
  Interest-bearing deposits and other             145,016         174,825
                                              -----------     -----------
     Total interest income                      8,069,046       7,773,103
Interest expense
  Deposits                                      3,659,320       3,581,799
  Borrowed funds                                1,399,263       1,087,249
                                              -----------     -----------
     Total interest expense                     5,058,583       4,669,048
                                              -----------     -----------
Net interest income                             3,010,463       3,104,055
Other income
  Gain on sale of investment securities                --         250,945
  Service charges                                 199,459         178,949
  Real estate operations                           34,179          94,199
  Other                                            46,795          58,292
                                              -----------     -----------
                                                  280,433         582,385
General, administrative and other expense
  Employee compensation and benefits            1,239,516       1,093,509
  Occupancy and equipment                         167,944         131,172
  Data processing fees                            150,896         138,659
  Federal deposit insurance premiums               65,626         591,677
  Other operating                                 487,516         429,304
                                              -----------     -----------
                                                2,111,498       2,384,321
                                              -----------     -----------
Earnings before income taxes                    1,179,398       1,302,119
Income tax expense                                467,718         486,826
                                              -----------     -----------
     NET EARNINGS                             $   711,680     $   815,293
                                              ===========     ===========
Earnings per share                            $       .68     $       .69

The accompanying notes are an integral part of these statements.

                                       16
<PAGE>

First Independence Corporation and Subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------

Years ended September 30, 1996 and 1995



<TABLE>
<CAPTION>
                                                                                     Unrealized
                                                                                        gain
                                                                                      (loss) on
                                                                                     securities
                                                    Additional                        available
                                        Common       paid-in         Retained         for sale,
                                        stock        capital         earnings           net
                                       ----------  ---------------  ---------------  ------------
<S>                                    <C>         <C>              <C>              <C>
Balance at October 1, 1995              $  7,492    $ 6,998,314      $ 8,358,681     $ 176,580
Net earnings for the year                     --             --          815,293            --
Cash dividends of $.188 per share             --             --         (213,876)           --
Common stock options exercised                --         (5,250)              --            --
Depreciation of securities available
 for sale                                     --             --               --      (187,873)
ESOP loan repayments                          --             --               --            --
Fair value adjustment on ESOP
 shares committed for release                 --         60,079               --            --
Amortization of unearned stock
 compensation                                 --             --               --            --
Purchase of 125,846 shares of
 treasury stock                               --             --               --            --
                                        --------    -----------      -----------     ---------
Balance at September 30, 1996              7,492      7,053,143        8,960,098       (11,293)
Net earnings for the year                     --             --          711,680            --
Cash dividends of $.238 per share             --             --         (230,724)           --
Common stock options exercised                --        (12,499)              --            --
Appreciation of securities available
 for sale                                     --             --               --        26,405
ESOP loan repayments                          --             --               --            --
Fair value adjustment on ESOP
 shares committed for release                 --         89,592               --            --
Amortization of unearned stock
 compensation                                 --             --               --            --
Purchase of 197,963 shares of
 treasury stock                               --             --               --            --
Two-for-one stock split                    7,492         (7,492)              --            --
                                        --------    -----------      -----------     ---------
Balance at September 30, 1997           $ 14,984    $ 7,122,744      $ 9,441,054     $  15,112
                                        ========    ===========      ===========     =========

<PAGE>

<CAPTION>
                                        Required
                                         contri-
                                         butions          Unearned
                                        for shares         stock
                                        acquired          compen-         Treasury
                                         by ESOP        sation - RRP        stock             Total
                                       ---------------  --------------  -----------------  ----------------
<S>                                    <C>              <C>             <C>                <C>
Balance at October 1, 1995              $  (363,686)     $  (130,922)    $  (1,446,524)     $ 13,599,935
Net earnings for the year                        --               --                --           815,293
Cash dividends of $.188 per share                --               --                --          (213,876)
Common stock options exercised                   --               --            25,250            20,000
Depreciation of securities available
 for sale                                        --               --                --          (187,873)
ESOP loan repayments                         72,737               --                --            72,737
Fair value adjustment on ESOP
 shares committed for release                    --               --                --            60,079
Amortization of unearned stock
 compensation                                    --           43,644                --            43,644
Purchase of 125,846 shares of
 treasury stock                                  --               --        (1,207,430)       (1,207,430)
                                        -----------      -----------     -------------      ------------
Balance at September 30, 1996              (290,949)         (87,278)       (2,628,704)       13,002,509
Net earnings for the year                        --               --                --           711,680
Cash dividends of $.238 per share                --               --                --          (230,724)
Common stock options exercised                   --               --            59,769            47,270
Appreciation of securities available
 for sale                                        --               --                --            26,405
ESOP loan repayments                         72,737               --                --            72,737
Fair value adjustment on ESOP
 shares committed for release                    --               --                --            89,592
Amortization of unearned stock
 compensation                                    --           43,644                --            43,644
Purchase of 197,963 shares of
 treasury stock                                  --               --        (2,233,832)       (2,233,832)
Two-for-one stock split                          --               --                --                --
                                        -----------      -----------     -------------      ------------
Balance at September 30, 1997           $  (218,212)     $   (43,634)    $  (4,802,767)     $ 11,529,281
                                        ===========      ===========     =============      ============
</TABLE>

The accompanying notes are an integral part of these statements.

                                       17
<PAGE>

First Independence Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

Year ended September 30,



<TABLE>
<CAPTION>
                                                                                              1997              1996
                                                                                          ---------------   ---------------
<S>                                                                                       <C>               <C>
Cash flows from operating activities
  Net earnings                                                                            $    711,680      $    815,293
  Adjustments to reconcile net earnings to net cash provided by operating activities
     Depreciation                                                                               84,077            55,895
     Amortization of premiums and discounts on investments and mortgage-backed                  88,993           106,967
      securities
     Gain on sale of investment securities                                                          --          (250,945)
     Amortization of deferred loan origination fees                                            (60,988)          (64,119)
     Amortization of expense related to employee benefit plans                                 205,973           176,460
     Gain on sale of real estate acquired through foreclosure                                  (41,216)         (111,956)
     Deferred income taxes                                                                     191,768           (38,769)
     Other                                                                                         229             3,402
     Increase (decrease) in cash due to changes in
      Accrued interest receivable                                                              (44,378)          (49,482)
      Other assets                                                                              22,957            (4,829)
      Accrued expenses and other liabilities                                                  (369,995)          503,251
      Income taxes payable                                                                      50,864          (123,286)
                                                                                          ------------      ------------
        Net cash provided by operating activities                                              839,964         1,017,882
Cash flows from investing activities
  Proceeds from sale of available for sale securities                                               --           263,145
  Proceeds from maturities and repayment of securities
     Available for sale                                                                      2,188,741         3,167,307
     Held to maturity                                                                        6,412,465         5,236,916
  Purchase of securities
     Available for sale                                                                     (1,154,129)       (2,217,489)
     Held to maturity                                                                       (3,000,000)       (5,790,535)
  Net increase in loans                                                                     (6,830,223)       (7,215,690)
  Capital expenditures                                                                        (470,993)         (308,867)
  Proceeds from sale of real estate acquired through foreclosure                                24,136            37,669
  Other                                                                                             --             2,219
                                                                                          ------------      ------------
     Net cash used in investing activities                                                  (2,830,003)       (6,825,325)
Cash flows from financing activities
  Net increase in deposits                                                                   6,872,754         1,429,794
  Net increase (decrease) in advances from borrowers for taxes and insurance                    14,996          (564,868)
  Net increase (decrease) in checks issued in excess of cash items                            (492,627)          492,627
  Advances from Federal Home Loan Bank                                                      17,500,000        20,900,000
  Repayment of Federal Home Loan Bank advances                                             (18,100,000)      (15,400,000)
  Cash dividends paid                                                                         (230,724)         (213,876)
  Purchase of treasury stock                                                                (2,233,832)       (1,207,430)
  Stock options exercised                                                                       47,270            20,000
                                                                                          ------------      ------------
     Net cash provided by financing activities                                               3,377,837         5,456,247
                                                                                          ------------      ------------
Net increase (decrease) in cash and cash equivalents                                         1,387,798          (351,196)
Cash and cash equivalents at beginning of year                                               1,763,429         2,114,625
                                                                                          ------------      ------------
Cash and cash equivalents at end of year                                                  $  3,151,227      $  1,763,429
                                                                                          ============      ============
Supplemental disclosures of cash flow information
  Cash paid during the year for
     Income taxes                                                                         $    225,086      $    648,881
     Interest                                                                                4,935,024         4,669,113
  Noncash investing and financing activities
     Transfer from loans to real estate acquired through foreclosure                            88,772            11,845
     Issuance of loans receivable in connection with the sale of real estate acquired           51,600            45,000
      through foreclosure
</TABLE>

The accompanying notes are an integral part of these statements.

                                       18
<PAGE>

First Independence Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
September 30, 1997 and 1996

NOTE A -- SUMMARY OF ACCOUNTING POLICIES

     First Independence Corporation (the "Corporation") is a savings and loan
holding company whose activities are primarily limited to holding the stock of
First Federal Savings and Loan Association of Independence (the "Association").
Future references to the Corporation or the Association are utilized herein as
the context requires. The Association conducts a general banking business in
southeastern Kansas which consists of attracting deposits from the general
public and applying those funds to the origination of loans for residential,
consumer and nonresidential purposes and the purchase of investment and
mortgage-backed securities. The Association's profitability is significantly
dependent on net interest income, which is the difference between interest
income generated from interest-earning assets (i.e., loans and investments) and
the interest expense paid on interest-bearing liabilities (i.e., customer
deposits and borrowed funds). Net interest income is affected by the relative
amount of interest-earning assets and interest-bearing liabilities and the
interest received or paid on these balances. The level of interest rates paid
or received by the Association can be significantly influenced by a number of
environmental factors, such as governmental monetary policy, that are outside
of management's control.


     The consolidated financial information presented herein has been prepared
in accordance with generally accepted accounting principles (GAAP) and general
accounting practices within the financial services industry. In preparing
consolidated financial statements in accordance with GAAP, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from such estimates.


     The following is a summary of the Corporation's significant accounting
policies which have been consistently applied in the preparation of the
accompanying consolidated financial statements.


     1. Principles of consolidation


     The consolidated financial statements include the accounts of First
Independence Corporation and its wholly-owned subsidiary, First Federal Savings
and Loan Association of Independence. All significant intercompany balances and
transactions have been eliminated.


     2. Cash equivalents


     For purposes of reporting cash flows, cash and cash equivalents include
cash, due from banks, federal funds sold and other overnight deposits.
<PAGE>

     3. Investment securities and mortgage-backed securities


     Investment securities and mortgage-backed securities are classified in
three categories and accounted for as follows: (a) debt securities that the
Corporation has the positive intent and ability to hold to maturity are
classified as held to maturity securities and reported at amortized cost, (b)
debt and equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading securities and
reported at fair value, with unrealized gains and losses included in earnings
and (c) debt and equity securities not classified as either held to maturity
securities or trading securities are classified as available for sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of stockholders'
equity.


     Premiums and discounts on investment securities are amortized to
operations over the term of the security using the level yield method. Premiums
and discounts on mortgage-backed securities are amortized and accreted to
operations using the level yield method over the estimated life of the
underlying loans collateralizing the securities. Gains and losses on the sale
of securities designated as available for sale are recorded using the specific
identification method.


     4. Loans receivable


     Loans receivable that management has the intent and ability to hold for
the foreseeable future or until maturity or pay-off are reported at their
outstanding principal balance, adjusted for any charge-offs, the allowance for
loan losses, unearned discounts and net deferred loan origination fees.


     The allowance for loan losses is increased by charges to operations and
decreased by charge-offs (net of recoveries). Management's periodic evaluation
of the adequacy of the allowance is based on the Association's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, estimated value of any underlying
collateral and current economic conditions.


     Specific reserves are established for any impaired nonresidential loan for
which the recorded investment in the loan exceeds the measured value of the
loan. Loans subject to impairment valuation are defined as nonaccrual loans or
any other loan where it is probable that


                                       19
<PAGE>

First Independence Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
--------------------------------------------------------------------------------
September 30, 1997 and 1996

all amounts due according to the contractual terms will not be collected,
exclusive of smaller balance homogenous loans such as home equity, consumer and
1-4 family residential real estate loans. The values of loans subject to
impairment valuation are determined based on the present value of expected
future cash flows, the market price of the loans, or the fair values of the
underlying collateral if the loan is collateral dependent.

     Uncollectible interest on loans that are contractually past due is charged
off or an allowance is established based on management's periodic evaluation.
The allowance is established by a charge to interest income equal to all
interest previously accrued. Income is subsequently recognized only to the
extent cash payments are received until, in management's judgment, the
borrower's ability to make periodic interest and principal payments is back to
normal, in which case the loan is returned to accrual status. If the collection
of principal in whole or in part is in doubt, all payments received on
nonaccrual loans are credited to principal until such doubt is eliminated.

     5. Loan origination fees and related costs

     Loan origination fees received, net of certain direct origination costs
are deferred on a loan-by-loan basis and amortized to interest income using the
interest method, giving effect to actual loan prepayments. Loan origination
costs are considered to be direct costs attributable to originating a loan.

     6. Real estate acquired through foreclosure

     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. After 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. Revenue and expenses
from operations and changes in the valuation allowance are included in real
estate operations.

     7. Premises and equipment

     Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is included in occupancy and equipment expense and is provided by
the straight-line method over the following estimated useful lives:



                                              Years
                                              ------
         Building                             8-50
         Furniture, fixtures and equipment    5-20
         Automobiles                             5

     The costs of maintenance and repairs are charged to operations as
incurred. The costs of significant additions, renewals and betterments to
depreciable properties are capitalized and depreciated over the remaining or
extended estimated useful lives of the properties. Gains and losses on
disposition of property and equipment are included in operations.
<PAGE>

     8. Employee stock ownership plan

     The Corporation sponsors a leveraged employee stock ownership plan (ESOP).
The ESOP holds company stock which serves as collateral for the ESOP debt. As
shares are released from collateral, the Corporation reports compensation
expense equal to the current market price of the shares, and the shares become
outstanding for earnings-per-share ("EPS") computations. Dividends on released
and allocated ESOP shares are recorded as a reduction of retained earnings;
dividends on unallocated ESOP shares are recorded as compensation cost.

     9. Income taxes

     First Independence Corporation and its subsidiary file a consolidated
federal income tax return. Deferred tax assets and liabilities are determined
based on the differences between the financial accounting and tax basis of
assets and liabilities. Deferred tax assets or liabilities at the end of each
period are determined using the currently enacted tax rate expected to apply to
taxable income in the periods in which the deferred tax asset or liability is
expected to be settled or realized.

     10. Earnings per share

     Primary earnings per share is based upon the weighted average shares
outstanding during the year including those stock options that are dilutive.
Weighted average common shares deemed outstanding totaled 1,041,034 and
1,189,586 for the years ended September 30, 1997 and 1996, respectively.

     Fully-diluted earnings per share assumes the exercise of all outstanding
stock options at the beginning of the respective fiscal period and subsequent
reinvestment of the cash proceeds in the Company's common shares at either the
closing price or weighted average market price of the common stock for the
fiscal year, whichever is greater. Fully diluted earnings per share for the
years ended September 30, 1997 and 1996 are based on 1,051,516 and 1,191,372
weighted-average shares outstanding, respectively. Computed primary and fully-
diluted earnings per share were the same in both 1997 and 1996.

     Common shares outstanding exclude unallocated and uncommitted shares held
by the ESOP trust.

                                       20
<PAGE>

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

     11. Common stock split

     On December 8, 1996, the Corporation's Board of Directors announced a
two-for-one stock split effected in the form of a stock dividend to
stockholders of record as of January 10, 1997. All references in the financial
statements to number of shares, per share amounts and market prices of the
Corporation's common stock have been retroactively restated to reflect the
increased number of common shares outstanding.

NOTE B -- INVESTMENT SECURITIES

     The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair value of investment securities are as follows:
<TABLE>
<CAPTION>
                                                               September 30, 1997
                                           ----------------------------------------------------------
                                                             Gross          Gross         Estimated
                                            Amortized      unrealized     unrealized        fair
                                              cost           gains          losses          value
      Held to maturity                     -------------   ------------   ------------   ------------
<S>                                        <C>             <C>            <C>            <C>
U.S. Government agency obligations          $ 3,000,000      $  2,860       $ 6,560       $ 2,996,300
                                            ===========      ========       =======       ===========
     Available for sale
Intermediate term liquidity portfolio       $   327,017      $    639       $    --       $   327,656
U.S. Government and agency obligations        3,961,757        29,213         7,220         3,983,750
                                            -----------      --------       -------       -----------
                                            $ 4,288,774      $ 29,852       $ 7,220       $ 4,311,406
                                            ===========      ========       =======       ===========
</TABLE>
<TABLE>
<CAPTION>
                                                               September 30, 1996
                                           ----------------------------------------------------------
                                                             Gross          Gross         Estimated
                                            Amortized      unrealized     unrealized        fair
                                              cost           gains          losses          value
      Held to maturity                     -------------   ------------   ------------   ------------
<S>                                        <C>             <C>            <C>            <C>
U.S. Government agency obligations          $ 2,000,000      $     --       $ 29,020      $ 1,970,980
                                            ===========      ======         ========      ===========
     Available for sale
Intermediate term liquidity portfolio       $   308,102      $     --       $    579      $   307,523
U.S. Government and agency obligations        4,934,938        29,016         36,404        4,927,550
                                            -----------      --------       --------      -----------
                                            $ 5,243,040      $ 29,016       $ 36,983      $ 5,235,073
                                            ===========      ========       ========      ===========
</TABLE>
     The amortized cost and estimated fair value of U.S. Government and agency
obligations at September 30, 1997, by term to maturity are as follows:

                                              Estimated
                              Amortized         fair
                                cost            value
      Held to maturity       -------------   ------------
Due in two to five years      $ 1,000,000     $ 1,001,250
Due five to ten years           2,000,000       1,995,050
                              -----------     -----------
                              $ 3,000,000     $ 2,996,300
                              ===========     ===========
     Available for sale
Due in one year or less       $   993,777     $   998,750
Due in one to two years           978,149         995,000
Due in two to five years        1,989,831       1,990,000
                              -----------     -----------
                              $ 3,961,757     $ 3,983,750
                              ===========     ===========

     During the year ended September 30, 1996 the Association sold FHLMC stock
designated as available for sale for total proceeds of $263,145 realizing a
gain of $250,945.

     The intermediate term liquidity portfolio does not have a contractual due
date.

     Investment securities with a fair value of $993,440 at September 30, 1997
were pledged to secure government deposits.

                                       21
<PAGE>

First Independence Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
--------------------------------------------------------------------------------
September 30, 1997 and 1996

NOTE C -- MORTGAGE-BACKED SECURITIES

     The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair value of mortgage-backed securities are summarized as follows:



<TABLE>
<CAPTION>
                                                               September 30, 1997
                                          ------------------------------------------------------------
                                                             Gross          Gross         Estimated
                                           Amortized       unrealized     unrealized         fair
                                              cost           gains          losses          value
      Held to maturity                    --------------   ------------   ------------   -------------
<S>                                       <C>              <C>            <C>            <C>
  GNMA certificates                        $     88,687      $   8,094      $      --     $     96,781
  FHLMC certificates                          8,304,231        145,519         10,514        8,439,236
  FNMA certificates                           6,535,590        154,284         29,048        6,660,826
  Collateralized mortgage obligations         8,599,181         64,924        112,379        8,551,726
                                           ------------     ----------     ----------     ------------
                                           $ 23,527,689      $ 372,821      $ 151,941     $ 23,748,569
                                           ============     ==========     ==========     ============
       Available for sale
  FHLMC certificates                       $    469,874      $   1,744      $      --     $    471,618
                                           ============     ==========     ==========     ============
</TABLE>


<TABLE>
<CAPTION>
                                                               September 30, 1996
                                          ------------------------------------------------------------
                                                             Gross          Gross         Estimated
                                           Amortized       unrealized     unrealized         fair
                                              cost           gains          losses          value
      Held to maturity                    --------------   ------------   ------------   -------------
<S>                                       <C>              <C>            <C>            <C>
  GNMA certificates                        $    122,921      $  10,687      $      --     $    133,608
  FHLMC certificates                         10,066,669         60,422         62,866       10,064,225
  FNMA certificates                           8,912,022        118,258         47,439        8,982,841
  Collateralized mortgage obligations         8,937,702             --        244,746        8,692,956
                                           ------------     ----------     ----------     ------------
                                           $ 28,039,314      $ 189,367      $ 355,051     $ 27,873,630
                                           ============     ==========     ==========     ============
       Available for sale
  FHLMC certificates                       $    669,454      $      --      $  10,247     $    659,207
                                           ============     ==========     ==========     ============
</TABLE>

     Mortgage-backed securities generally mature ratably over the 30-year term
of the underlying loans collateralizing the securities. Expected maturities on
mortgage-backed securities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

     Mortgage-backed securities with a fair value of $13,295,170 and
$11,005,909 at September 30, 1997 and 1996, respectively, are pledged to secure
government and other deposits.
 

                                       22
<PAGE>

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

NOTE D -- LOANS RECEIVABLE

     Loans receivable at September 30 are summarized as follows:



<TABLE>
<CAPTION>
                                                    1997               1996
                                                ----------------   ----------------
<S>                                             <C>                <C>
  First mortgage loans
   Secured by one-to-four family residences      $ 64,152,604       $ 57,352,844
   Secured by multi-family residences               1,164,442          1,370,715
   Nonresidential                                   7,478,908          7,223,602
   Construction                                       763,712          1,833,750
                                                 ------------       ------------
     Total first mortgage loans                    73,559,666         67,780,911
  Consumer and other loans
   Savings                                            349,531            364,011
   Automobile                                         704,519            402,592
   Home equity and second mortgages                   550,008            781,199
   Unsecured home improvement                         274,267            183,630
   Other                                              661,209            184,723
                                                 ------------       ------------
     Total consumer and other loans                 2,539,534          1,916,155
  Less
   Allowance for loan losses                         (668,185)          (690,009)
   Loans in process                                  (571,808)        (1,050,012)
   Unearned discounts                                  (2,726)            (2,929)
   Deferred loan origination fees                    (297,698)          (271,196)
                                                 ------------       ------------
                                                   (1,540,417)        (2,014,146)
     Net loans receivable                        $ 74,558,783       $ 67,682,920
                                                 ============       ============
</TABLE>

     Activity in the allowance for loan losses is summarized as follows for the
years ended September 30:




                                     1997            1996
                                   -------------   ----------
  Balance at beginning of year      $ 690,009       $ 690,009
  Loans charged off                   (21,824)             --
                                    ---------       ---------
  Balance at end of year            $ 668,185       $ 690,009
                                    =========       =========

     The Association's lending efforts have historically focused on one-to-four
family residential real estate loans, which comprise approximately 84% (1997)
and 82% (1996) of the total loan portfolio. Approximately 4% (1997) and 5%
(1996) of the Association's one-to-four family residential real estate loans
are secured by properties located outside of the primary lending area of
Montgomery and surrounding Kansas counties. Generally, such loans have been
underwritten on the basis of 80% to 90% loan-to-value ratio or mortgage
insurance was required. The Association, as with any lending institution, is
subject to the risk that real estate values could deteriorate in its primary
lending area thereby impairing collateral values. Management believes, however,
that real estate values in the Association's primary lending area are currently
stable or increasing.

     Approximately 11% (1997) and 12% (1996) of the loan portfolio is comprised
of nonresidential and multi-family real estate loans with approximately 13%
(1997) and 20% (1996) of this total collateralized by properties located
outside the Association's primary lending area.

     Loans serviced under a County Mortgage Revenue Bond totaled $1,471,229 and
$1,606,982 at September 30, 1997 and 1996, respectively.

                                       23
<PAGE>

First Independence Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
--------------------------------------------------------------------------------
September 30, 1997 and 1996

     In the normal course of business, the Association makes loans to
directors, executive officers and related entities. An analysis of aggregate
loan activity with this group is as follows:


  Loans outstanding at October 1, 1996         $ 563,082
  New loans                                       37,528
  Repayments                                     (72,726)
                                               ---------
  Loans outstanding at September 30, 1997      $ 527,884
                                               =========

     Loan impairment is measured by estimating the expected future cash flows
and discounting them at the respective effective interest rate or by valuing
the underlying collateral. The recorded investment in these loans and the
valuation allowance for losses related to loan impairment at September 30 are
as follows:



                                           1997          1996
                                         -----------   ----------
  Principal amount of impaired loans      $ 206,691     $ 210,309
  Less valuation allowance                   69,691        73,309
                                          ---------     ---------
                                          $ 137,000     $ 137,000
                                          =========     =========

     The Association has no impaired loans for which there is no related
allowance for losses. Interest income of $9,537 and $17,267 was recognized and
collected on impaired loans during the year ended September 30, 1997 and 1996,
respectively.

     Nonaccrual loans totaled $1,017,367 and $366,832 at September 30, 1997 and
1996, respectively. Interest income that would have been recorded under the
original terms of such loans approximated $40,000 and $20,000 for the years
ended September 30, 1997 and 1996, respectively. Interest income that was
recorded was insignificant for the years ended September 30, 1997 and 1996. The
Association is not committed to make additional loans to borrowers whose loans
have been modified.


NOTE E -- ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable at September 30 is summarized as follows:



                                   1997          1996
                                 -----------   ----------
  Loans receivable                $ 450,257     $ 404,266
  Mortgage-backed securities        171,729       205,389
  Investment securities              90,312        58,265
                                  ---------     ---------
                                  $ 712,298     $ 667,920
                                  =========     =========

NOTE F -- PREMISES AND EQUIPMENT

     Premises and equipment at September 30 are summarized as follows:



                                           1997           1996
                                        -------------   -----------
  Land                                   $    74,958    $  74,958
  Building                                 1,281,916      923,518
  Furniture, fixtures and equipment          383,148      307,821
  Automobiles                                 43,579       38,729
                                         -----------    ---------
                                           1,783,601    1,345,026
  Less accumulated depreciation              486,101      434,213
                                         -----------    ---------
                                         $ 1,297,500    $ 910,813
                                         ===========    =========


                                       24
<PAGE>

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

NOTE G -- REAL ESTATE OPERATIONS

     A summary of real estate operations is as follows for the years ended
September 30:



<TABLE>
<CAPTION>
                                                                      1997           1996
                                                                    ------------   -------------
<S>                                                                 <C>            <C>
  Gain on sale of real estate acquired through foreclosure, net      $ 41,216       $ 111,956
  Net operating expense                                                (7,037)        (17,757)
                                                                     --------       ---------
  Income from real estate operations                                 $ 34,179       $  94,199
                                                                     ========       =========
</TABLE>

     Real estate operations of the Association consist primarily of paying
property taxes and general maintenance expenses on the properties held.


NOTE H -- DEPOSITS

     Deposits at September 30 are summarized as follows:



<TABLE>
<CAPTION>
                                         Weighted
                                      average rate at
                                       September 30,                 1997                          1996
                                     -----------------   ----------------------------   ---------------------------
                                      1997     1 996        Amount        Percent          Amount        Percent
                                     -------   -------   --------------   -----------   --------------   ----------
<S>                                  <C>       <C>       <C>              <C>           <C>              <C>
  NOW accounts  ..................   2.05%     2.31%      $  2,058,500        2.70%      $  1,631,512        2.35%
  First Super NOW accounts  ......   2.30       2.56         1,704,678        2.24          1,600,400        2.31
  First Money Fund accounts ......   4.51       4.48        20,702,177       27.15         15,552,973       22.43
                                                                            ------       ------------      ------
     Total demand deposits  ......   4.16       4.15        24,465,355       32.09         18,784,885       27.09
  Passbook savings accounts ......   2.89       2.89         2,702,740        3.55          2,649,720        3.82
  Certificates of deposit
   3.00% to 3.99%  ...............   3.75       3.81             4,539         .01              8,565         .01
   4.00% to 4.99%  ...............   4.77       4.58         2,189,277        2.87          4,216,378        6.08
   5.00% to 5.99%  ...............   5.55       5.46        39,910,696       52.36         30,296,166       43.68
   6.00% to 6.99%  ...............   6.30       6.37         6,930,530        9.09         13,366,636       19.27
   7.00% to 7.99%  ...............   7.00       7.02            26,039         .03             25,241         .04
   8.00% to 8.99%  ...............     --       8.35                --          --              8,831         .01
                                                                            ------       ------------      ------
  Total savings certificates   ...   5.62       5.64        49,061,081       64.36         47,921,817       69.09
                                                                            ------       ------------      ------
  Total savings ..................   5.48       5.48        51,763,821       67.91         50,571,537       72.91
                                                                            ------       ------------      ------
  Total deposits   ...............   5.06       5.12      $ 76,229,176      100.00%      $ 69,356,422      100.00%
                                                                            ======       ============      ======
</TABLE>

      

                                       25
<PAGE>

First Independence Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
--------------------------------------------------------------------------------
September 30, 1997 and 1996

     The aggregate amount of certificates of deposit and savings with a minimum
denomination of $100,000 was $3,844,877 and $2,489,514 at September 30, 1997
and 1996, respectively.

     Scheduled maturities of certificates of deposit are as follows:

September 30, 1997



<TABLE>
<CAPTION>
                        Less than          One to         Three to
                         one year        three years      five years        Total
                       --------------   --------------   -------------   -------------
<S>                    <C>              <C>              <C>             <C>
   3.00% to 3.99%       $      4,539     $         --     $        --     $      4,539
   4.00% to 4.99%          1,734,025          455,252              --        2,189,277
   5.00% to 5.99%         23,918,436       15,493,876         498,384       39,910,696
   6.00% to 6.99%          2,351,745        2,411,600       2,167,185        6,930,530
   7.00% to 7.99%                 --           26,039              --           26,039
                        ------------     ------------     -----------     ------------
                        $ 28,008,745     $ 18,386,767     $ 2,665,569     $ 49,061,081
                        ============     ============     ===========     ============
</TABLE>

September 30, 1996



<TABLE>
<CAPTION>
                        Less than          One to         Three to
                         one year        three years      five years        Total
                       --------------   --------------   -------------   -------------
<S>                    <C>              <C>              <C>             <C>
   3.00% to 3.99%       $      8,565     $         --     $        --     $      8,565
   4.00% to 4.99%          3,420,783          795,595              --        4,216,378
   5.00% to 5.99%         19,637,400        9,795,294         863,472       30,296,166
   6.00% to 6.99%          7,903,547        3,068,176       2,394,913       13,366,636
   7.00% to 7.99%                 --               --          25,241           25,241
   8.00% to 8.99%              8,831               --              --            8,831
                        ------------     ------------     -----------     ------------
                        $ 30,979,126     $ 13,659,065     $ 3,283,626     $ 47,921,817
                        ============     ============     ===========     ============
</TABLE>

     Interest expense on deposits for the years ended September 30 is
summarized as follows:



                                 1997            1996
                              -------------   ------------
  Certificates of deposit      $ 2,745,188     $ 2,819,977
  NOW accounts                     878,302         730,627
  Demand deposits                   35,830          31,195
                               -----------     -----------
                               $ 3,659,320     $ 3,581,799
                               ===========     ===========

NOTE I -- ADVANCES FROM FEDERAL HOME LOAN BANK

     Advances from the Federal Home Loan Bank at September 30 consist of the
following:



<TABLE>
<CAPTION>
                                       1997                             1996
                          -------------------------------  ------------------------------
                               Rates          Amount            Rates          Amount
                          ---------------  --------------  ---------------  -------------
<S>                       <C>              <C>             <C>              <C>
  Variable rates  ......   5.67% - 6.00%    $  8,400,000    5.40% - 5.75%    $ 10,600,000
  Fixed rates  .........   4.92  - 7.06       15,300,000    4.92  - 7.06       13,700,000
                                              ----------                     ------------
                                            $ 23,700,000                     $ 24,300,000
                                            ============                     ============
</TABLE>


                                       26
<PAGE>

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

     The Company has a line of credit with the Federal Home Loan Bank totaling
$9,000,000 with an outstanding balance of $4,000,000 at September 30, 1997.

     Aggregate maturities for the years following September 30, 1997 are as
follows:


1998 ..................    $ 12,800,000
1999 ..................       2,900,000
2001 ..................       3,000,000
2002 ..................       5,000,000
                           ------------
                           $ 23,700,000
                           ============

     Assets of the Association are subject to a blanket pledge agreement to
collateralize the advances.


NOTE J -- EMPLOYEE BENEFITS

     The Corporation sponsors a leveraged employee stock ownership plan
("ESOP") that covers all full-time employees. All employees of the Corporation
are eligible to participate in the ESOP after they attain age 21 and complete
one year of service during which they work at least 1,000 hours. The
Corporation makes annual contributions to the ESOP equal to the ESOP's debt
service. All dividends received by the ESOP are credited to the employee's
stock ownership account. The unallocated ESOP shares are pledged as collateral
for its debt. As the debt is repaid, shares are released from collateral and
allocated to active employees, based on the proportion of debt service paid in
the year. Accordingly, unpaid ESOP debt is reflected as a deduction from
stockholders' equity. ESOP compensation expense was $174,215 and $145,360 for
the years ended September 30, 1997 and 1996, respectively.

     The ESOP shares as of September 30, 1997 were as follows:


<TABLE>
<S>                                                                  <C>
           Allocated shares                                              58,190
           Unreleased shares                                             43,642
                                                                         ------
            Total ESOP shares                                           101,832
                                                                        =======
           Fair value of unreleased shares at September 30, 1997      $ 610,988
                                                                      =========
</TABLE>

     Additionally, the Corporation has a Recognition and Retention Plan (RRP)
as a means of providing directors and certain key employees of the Association
with an ownership interest in a manner designed to compensate such directors
and key employees for services to the Corporation. During fiscal 1994 the RRP
purchased 43,642 shares of common stock. Such shares are earned and allocated
ratably to participants over five years. Expense under the RRP totaled $43,644
for each of the years ended September 30, 1997 and 1996.

     The Company has adopted a Stock Option and Incentive Plan (SOP) for
designated participants. The SOP provides for up to 145,474 shares of common
stock to be issued to participants. The option price of any options granted may
not be less than the market value of the common stock on the date of the grant
and unless otherwise specified, the options expire ten years from the date of
the grant. A summary of the Company's stock option plan as of September 30,
1997 and 1996 and changes during the years ended as of those dates is presented
below:



                                                    Weighted
                                                     average
                                                    exercise
                                         Shares      price
                                        ---------   ---------
  Outstanding at October 1, 1995         125,276    $ 5.14
   Exercised                               4,000      5.00
                                         -------
  Outstanding at September 30, 1996      121,276      5.14
   Exercised                               9,454      5.00
                                         -------
  Outstanding at September 30, 1997      111,822      5.15
                                         =======

      

                                       27
<PAGE>

First Independence Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
--------------------------------------------------------------------------------
September 30, 1997 and 1996

     All options outstanding at September 30, 1997 were exercisable and can be
summarized as follows:

                         Exercise         Remaining
        Shares            price              life
----------------------   ----------   ------------------
               98,186    $ 5.00       6 years
               11,636      6.19       6 years 4 months
                2,000      6.69       6 years 10 months
 --------------------
              111,822
 ====================
 

     The Association participates in a defined benefit multi-employer pension
plan. Substantially all employees are eligible and benefits are based on the
employee's salary and years of service. No contribution was made or required to
be made by the Association for the years ended September 30, 1997 and 1996 due
to the plan's overfunded status. Separate actuarial disclosure information is
not available due to the plan being a multi-employer pension plan.


NOTE K -- INCOME TAXES

     Income tax expense for the years ended September 30 consists of the
following:

                 1997          1996
               -----------   -------------
  Current       $ 275,950     $ 525,595
  Deferred        191,768       (38,769)
                ---------     ---------
                $ 467,718     $ 486,826
                =========     =========

     Reconciliation of income tax expense computed at the federal statutory
rate of 34% and income tax expense for the years ended September 30 is as
follows:
<TABLE>
<CAPTION>
                                                         1997            1996
                                                       -------------   -------------
<S>                                                    <C>             <C>
  Income tax expense at statutory rate                  $ 400,995       $ 442,720
  Kansas privilege tax, net of federal tax benefit         52,542          51,434
  State contribution credit                               (28,875)        (28,875)
  Other                                                    43,056          21,547
                                                        ---------       ---------
                                                        $ 467,718       $ 486,826
                                                        =========       =========
</TABLE>
<PAGE>


     The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at September 30 are as follows:

                                                 1997            1996
                                              --------------   ----------
  Deferred tax assets
   Allowance for loan losses                   $  241,667       $ 226,927
   SAIF recapitalization assessment                    --         171,156
   Accrued bonuses                                  8,327           7,138
   State contribution credit                       18,924          28,875
   Other                                            5,780           4,710
                                               ----------       ---------
      Total deferred tax assets                   274,698         438,806
                                               ----------       ---------
  Deferred tax liabilities
   Securities available for sale                   23,393          20,232
   Depreciation of property and equipment          34,622          29,191
   Federal Home Loan Bank stock dividends         250,731         215,479
                                               ----------       ---------
      Total deferred tax liabilities              308,746         264,902
                                               ----------       ---------
      Net deferred tax asset (liability)       $  (34,048)      $ 173,904
                                               ==========       =========

     The Association was allowed a special bad debt deduction based on a
percentage of earnings, generally limited to 8% of otherwise taxable income and
subject to certain limitations based on aggregate loans and savings account
balances at the end of the year. This percentage of earnings bad debt deduction
had accumulated to approximately $2.7 million as of September 30, 1997. If the
amounts that


                                       28
<PAGE>

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

qualify as deductions for federal income tax purposes are later used for
purposes other than for bad debt losses, including distributions in
liquidation, such distributions will be subject to federal income taxes at the
then current corporate income tax rate. The approximate amount of unrecognized
deferred tax liability relating to the cumulative bad debt deduction is
$850,000 at September 30, 1997. See Note M for additional information regarding
future percentage of earnings bad debt deductions.


NOTE L -- STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL

     The Association is subject to various regulatory capital requirements
administered by the Office of Thrift Supervision (OTS). Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Association's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Association must meet specific capital guidelines that involve quantitative
measures of the Association's assets liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Association's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.

     Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios (set forth in
the table below) of total risk-based and Tier 1 capital to risk-weighted assets
and of Tier 1 (core) capital and tangible capital to adjust total assets.
Management believes, as of September 30, 1997, that the Association meets all
capital adequacy requirements to which it is subject.

     As of September 30, 1997, the most recent notification from the OTS
categorized the Association as well capitalized under the regulatory framework
for prompt corrective action. There are no conditions or events since that
notification that management believes have changed the Association's category.
To be categorized as well capitalized the Association must maintain minimum
total risk-based, Tier 1 risk-based and Tier 1 (core) ratios as set forth in
the table below.



<TABLE>
<CAPTION>
                                                                                           To be well
                                                                                        capitalized under
                                                                 For capital            prompt corrective
                                         Actual               adequacy purposes         action provisions
                                 -----------------------   -----------------------   -----------------------
                                   Amount        Ratio       Amount        Ratio       Amount         Ratio
                                 -------------   -------   -------------   -------   -------------   -------
<S>                              <C>             <C>       <C>             <C>       <C>             <C>
  As of September 30, 1997
   Total risk-based capital       $ 9,989,000    19.5%      $ 4,093,000    -8.0%      $ 5,116,000    -10.0%
   Tier 1 risk-based capital        9,349,000    18.3         2,046,000     -4.0        3,069,000    - 6.0
   Tier 1 (core) capital            9,349,000     8.4         3,333,000     -3.0        5,555,000    - 5.0
   Tangible capital                 9,349,000     8.4         1,666,000     -1.5               --    --
</TABLE>

<PAGE>


<TABLE>
<CAPTION>
                                                                                            To be well
                                                                                         capitalized under
                                                                  For capital            prompt corrective
                                          Actual               adequacy purposes         action provisions
                                 ------------------------   -----------------------   -----------------------
                                    Amount        Ratio       Amount        Ratio       Amount         Ratio
                                 --------------   -------   -------------   -------   -------------   -------
<S>                              <C>              <C>       <C>             <C>       <C>             <C>
  As of September 30, 1996
   Total risk-based capital       $ 11,129,000    23.8%      $ 3,746,000    -8.0%      $ 4,682,000    -10.0%
   Tier 1 risk-based capital        10,542,000    22.5         1,873,000     -4.0        2,809,000    - 6.0
   Tier 1 (core) capital            10,542,000     9.9         3,204,000     -3.0        5,339,000    - 5.0
   Tangible capital                 10,542,000     9.9         1,602,000     -1.5               --    --
</TABLE>

     Regulations of the OTS impose limitations on the payment of dividends and
other capital distributions by savings associations. Under such regulations a
savings association that immediately prior to and on a pro forma basis, after
giving effect to a proposed capital distribution, has total capital (as defined
by OTS regulation) that is equal to or greater than the amount of its fully
phased-in capital requirement is generally permitted without OTS approval (but
subsequent to 30 days prior notice to the OTS of the planned dividend) to make
capital distributions during a calendar year in the amount of up to the greater
of (1) 100% of its net earnings to date during the year plus an amount equal to
one-half of the amount by which its total capital to assets ratio exceeded its
fully phased-in capital to assets ratio at the beginning of the year or (2) 75%
of its net income for the most recent four quarters. Pursuant to such OTS
dividend regulations, the Association had the ability to pay dividends of
approximately $3,200,000 to First Independence Corporation at September 30,
1997.


NOTE M -- RECENT LEGISLATIVE DEVELOPMENTS

     The deposit accounts of the Association and other savings associations are
insured by the FDIC in the Savings Association Insurance Fund ("SAIF"). The
reserves of the SAIF were below the level required by law, because a
significant portion of the assessments paid into


                                       29
<PAGE>

First Independence Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
--------------------------------------------------------------------------------
September 30, 1997 and 1996

the fund were used to pay the cost of prior thrift failures. The deposit
accounts of commercial banks are insured by the FDIC in the Bank Insurance Fund
('BIF"), except to the extent such banks have acquired SAIF deposits. The
reserves of the BIF met the level required by law in May 1995. As a result of
the respective reserve levels of the funds, deposit insurance assessments paid
by healthy savings associations exceeded those paid by healthy commercial banks
by approximately $.19 per $100 in deposits in 1995. In 1996 and 1997, no BIF
assessments were required for healthy commercial banks except for a $2,000
minimum fee.


     Legislation was enacted to recapitalize the SAIF that provides for a
special assessment totaling $.657 per $100 of SAIF deposits held at March 31,
1995, in order to increase SAIF reserves to the level required by law. The
Association had $65.7 million in deposits at March 31, 1995, resulting in an
assessment of approximately $431,000, or $260,000 after tax, which was charged
to operations in the fourth quarter of fiscal 1996.


     A component of the recapitalization plan provides for the merger of the
SAIF and BIF on January 1, 1999. However, the SAIF recapitalization legislation
currently provides for an elimination of the thrift charter or of the separate
federal regulation of thrifts prior to the merger of the deposit insurance
funds. As a result, the Association would be regulated as a bank under federal
laws which would subject it to the more restrictive activity limits imposed on
national banks. Under separate legislation related to the recapitalization
plan, the Association is required to recapture as taxable income approximately
$115,000 of its bad debt reserve, which represents the post-1987 additions to
the reserve and will be unable to utilize the percentage of earnings method to
compute its reserve in the future. The Association has provided deferred taxes
for this amount and will be permitted to amortize the recapture of its bad debt
reserve over six years.



NOTE N -- COMMITMENTS


     The Association is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers including commitments to extend credit. Such commitments involve, to
varying degrees, elements of credit and interest-rate risk in excess of the
amount recognized in the consolidated balance sheets. The contract or notional
amounts of the commitments reflect the extent of the Association's involvement
in such financial instruments.


     The Association's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to extend credit
is represented by the contractual notional amount of those instruments. The
Association uses the same credit policies in making commitments and conditional
obligations as those utilized for on-balance sheet instruments. The
Association's commitments to extend credit at September 30, 1997 include loans
in process as disclosed in Note D and first mortgage loans with fixed rates
ranging from 7.25% to 8.5% aggregating $329,110 and $50,000 of variable rate
loans at 6.5%. Collateral for loans in process and commitments are the same as
for other Association loans. The commitment period is generally for forty-five
days.
<PAGE>


NOTE O -- FAIR VALUE OF FINANCIAL INSTRUMENTS


     The following methods and assumptions were used to estimate the fair value
of each class of financial instruments at September 30, 1997.


     Cash and cash equivalents: The balance sheet carrying amounts for cash and
short-term instruments approximate the estimated fair values of such assets.


     Investment securities and mortgage-backed securities: Fair values for
investment securities and mortgage-backed securities are based on quoted market
prices, if available. If quoted market prices are not available, fair values
are based on quoted market prices of comparable instruments.


     Loans receivable: For variable rate loans that reprice frequently and
which entail no significant change in credit risk, fair values are based on the
carrying values. The estimated fair values of fixed rate loans are estimated
based on discounted cash flow analyses using prepayment assumptions and
interest rates currently offered for loans with similar terms to borrowers of
similar credit quality. Nonperforming loans have not been discounted. The
carrying amount of accrued interest receivable approximates its fair value.


     Commitments to extend credit: No premium or discount was ascribed to loan
commitments because when funded virtually all funding will be at current market
rates.


     Federal Home Loan Bank stock: The balance sheet carrying amount
approximates the stocks fair value.


     Deposit liabilities: The fair values estimated for demand deposits, NOW
accounts, savings and certain types of money market accounts are, by
definition, equal to the amount payable on demand at the reporting date (i.e.,
their carrying amounts). The carrying amounts of


                                       30
<PAGE>

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

variable rate, fixed-term money market accounts and certificates of deposit
approximate their fair values at the reporting date. Fair values of fixed rate
certificates of deposit are estimated using a discounted cash flow calculation
that applies interest rates currently being offered to a schedule of aggregated
expected monthly time deposit maturities. The carrying amount of accrued
interest payable approximates its fair value.

     Advances from Federal Home Loan Bank: For variable rate advances fair
values are considered equal to their carrying values. The estimated fair value
of fixed rate advances are estimated based on discounted cash flow analysis
using interest rates currently offered for advances with similar terms.

     The following table provides summary information on the fair value of
financial instruments. Such information does not purport to represent the
aggregate net fair value of the Company. Further, the fair value estimates are
based on various assumptions, methodologies and subjective considerations,
which vary widely among different financial institutions and which are subject
to change. The carrying amounts are the amounts at which the financial
instruments are reported in the consolidated financial statements.



<TABLE>
<CAPTION>
                                                                   1997
                                                    ----------------------------------
                                                      Carrying          Estimated
                                                      amount of        fair value
                                                     assets and       of assets and
                                                    (liabilities)     (liabilities)
                                                    ---------------   ----------------
<S>                                                 <C>               <C>
  Cash and cash equivalents                         $  3,151,227       $   3,151,227
  Investment securities available for sale             4,311,406           4,311,406
  Investment securities held to maturity               3,000,000           2,996,300
  Mortgage-backed securities available for sale          471,618             471,618
  Mortgage-backed securities held to maturity         23,527,689          23,748,569
  Loans                                               75,226,968          75,929,533
  Federal Home Loan Bank stock                         1,368,900           1,368,900
  Deposits                                           (76,229,176)        (75,926,401)
  Advances from Federal Home Loan Bank               (23,700,000)        (23,736,269)
</TABLE>


<TABLE>
<CAPTION>
                                                                   1996
                                                    ----------------------------------
                                                      Carrying          Estimated
                                                      amount of        fair value
                                                     assets and       of assets and
                                                    (liabilities)     (liabilities)
                                                    ---------------   ----------------
<S>                                                 <C>               <C>
  Cash and cash equivalents                         $  1,763,429       $   1,763,429
  Investment securities available for sale             5,235,073           5,235,073
  Investment securities held to maturity               2,000,000           1,970,980
  Mortgage-backed securities available for sale          659,207             659,207
  Mortgage-backed securities held to maturity         28,039,314          27,873,630
  Loans                                               68,372,929          67,768,345
  Federal Home Loan Bank stock                         1,239,500           1,239,500
  Deposits                                           (69,356,422)        (68,999,524)
  Advances from Federal Home Loan Bank               (24,300,000)        (24,204,628)
</TABLE>

                                       31
<PAGE>

                            STOCKHOLDER INFORMATION
--------------------------------------------------------------------------------

Stock Listing Information
First Federal Savings and Loan Association of Independence converted from a
mutual to a stock savings and loan association effective October 5, 1993, and
formed First Independence Corporation (the "Company") to act as its holding
company. The Company's Common Stock (the "Common Stock") is traded on the
National Association, of Securities Dealers Automated Quotation ("NASDAQ")
Small-Cap Market under the symbol "FFSL."


Stock Price Information and Dividends
As of December 5, 1997, there were approximately 207 shareholders of record of
the Company's Common Stock, not including those shares held in nominee or
street name through various brokerage firms or banks.


The following table sets forth the high and low bid prices of the Common Stock
and dividends declared for each fiscal quarter since it began trading on
October 7, 1993. The stock price information was provided by the NASD, Inc.
Amounts have been adjusted to reflect a two-for-one stock split in fiscal 1997.
 



                                               Dividends
   Quarter Ended        High        Low         Declared
--------------------   ---------   ---------   ----------
December 31, 1993      $6.375      $5.750      $--
March 31, 1994          6.250       5.813       .0250
June 30, 1994           6.125       5.500       .0250
September 30, 1994      6.875       6.125       .0250
December 31, 1994       6.750       6.125       .0250
March 31, 1995          7.625       6.375       .0375
June 30, 1995           7.875       7.500       .0375
September 30, 1995      9.250       7.750       .0375
December 31, 1995       9.375       9.250       .0375
March 31, 1996          9.375       9.250       .0500
June 30, 1996           9.250       8.875       .0500
September 30, 1996      9.375       8.875       .0500
December 31, 1996      10.250       9.375       .0500
March 31, 1997         11.750      10.250       .0625
June 30, 1997          11.750      10.750       .0625
September 30, 1997     14.000      11.375       .0625

The Company has paid a cash dividend on its Common Stock for each quarter since
the Association's conversion to stock form. Future dividends, if any, will be
dependent upon the results of operations and financial condition of the
Company, tax considerations, industry standards, economic conditions, general
business practices and other factors. The Company's ability to pay dividends is
dependent on the dividend payments it receives from the Association, which are
subject to regulations and the Association's continued compliance with all
regulatory capital requirements. See Note L of the Notes to Consolidated
Financial Statements for a discussion of regulations governing the
Association's ability to pay dividends.
<PAGE>


Annual Report on Form 10-KSB and Investor Information
A copy of the Company's annual report on Form 10-KSB, filed with the Securities
and Exchange Commission, is available without charge by writing:
   Gary L. Overfield
   Senior Vice President and Secretary
   First Independence Corporation
   Myrtle and Sixth
     Independence, Kansas 67301

Stock Transfer Agent
Inquiries regarding stock transfer, registration, lost certificates or changes
in name and address should be directed to the stock transfer agent and
registrar by writing:
   Registrar and Transfer Company
   10 Commerce Drive
   Cranford, New Jersey 07016

Investor Information
Stockholders, investors, and analysts interested in additional information may
contact:
   James B. Mitchell,
   Vice President and Chief Financial Officer

Corporate Office
First Independence Corporation
Myrtle and Sixth
Independence, Kansas 67301
(316) 331-1660

Special Counsel
Silver, Freedman & Taff, L.L.P.
7th Floor - East Tower
1100 New York Avenue, NW
Washington, DC 20005

Independent Auditor
Grant Thornton, LLP
100 N. Broadway, Suite 800
Wichita, Kansas 67202

First Federal Savings and Loan Association of Independence
Myrtle and Sixth
Independence, Kansas 67301
(316) 331-1660

                                       32
<PAGE>

                       DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
                         FIRST INDEPENDENCE CORPORATION
 

OFFICERS
Donald E. Aitken
Chairman of the Board


Larry G. Spencer
President and Chief Executive Officer


Gary L. Overfield
Senior Vice President and Secretary


James B. Mitchell
Vice President and Chief Financial Officer

BOARD OF DIRECTORS
Donald E. Aitken
Chairman of the Board
 First Independence Corporation and
 First Federal Savings and Loan Association of Independence
Retired - Manager
 City Publishing Co., Inc.


Larry G. Spencer
President and Chief Executive Officer
 First Independence Corporation
President and Chief Executive Officer
 First Federal Savings and Loan Association of Independence


William T. Newkirk II
Agent
 Newkirk, Dennis & Buckles Insurance Co.


John T. Updegraff
Retired - Former Vice President and Senior Counsel
 Arco Pipe Line Company


Harold L. Swearingen
Retired - Former Telecommunications Manager
 Arco Pipe Line Company


Joseph M. Smith
County Extension Agent - Agriculture and Coordinator
 Montgomery County Extension Council


Laverne W. Strecker
Retired - Former Manager of Accounting and Control
 Arco Pipe Line Company
<PAGE>

 
          FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF INDEPENDENCE
 

OFFICERS

Donald E. Aitken
Chairman of the Board

Larry G. Spencer
President and Chief Executive Officer

Gary L. Overfield
Senior Vice President and Secretary

James B. Mitchell
Vice President and Chief Financial Officer

Jim L. Clubine
Vice President and Asset Manager

Gregg S. Webster
Vice President

Lori L. Kelley
Assistant Vice President and Compliance Officer

Betty J. Redman
Treasurer

BOARD OF DIRECTORS
Donald E. Aitken
Larry G. Spencer
William T. Newkirk II
John T. Updegraff
Harold L. Swearingen
Lavern W. Strecker

Joseph M. Smith