SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 _____________

                                   FORM 10-KSB
(Mark One)

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

For the fiscal year ended September 30, 2000

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

For the transition period from                to
                               --------------    ---------

                           Commission File No. 0-25704

                          FIRST FEDERAL BANCORPORATION
                 -----------------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

               MINNESOTA                                         41-1796238
       -------------------------------                      --------------------
       (STATE OR OTHER JURISDICTION OF                      (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

      214 5TH STREET, BEMIDJI, MINNESOTA                            56601
      ----------------------------------------                   ----------
      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                   (ZIP CODE)

       Registrant's telephone number, including area code: (218) 751-5120

           Securities registered pursuant to Section 12(b) of the Act:
                                 Not Applicable

           Securities registered pursuant to Section 12(g) of the Act:

                     Common stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

Check  whether the  issuer(1)  has filed all  reports  required by Section 13 or
15(d) of the  Securities  Exchange Act of 1934 during the past 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for past 90 days. Yes X  No
                                                                      ---   ---

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ X]

State issuer's revenues for its most recent fiscal year:  $10.36 million.

As of December 6, 2000,  the  aggregate  market  value of the 553,504  shares of
Common Stock of the registrant  issued and outstanding held by non-affiliates on
such date was approximately  $4,151,280 based on the closing sale price of $7.50
per share of the registrant's  Common Stock on December 6, 2000 as listed on the
National  Association of Securities Dealers Automated Quotation SmallCap Market.
For purposes of this calculation,  it is assumed that the 726,648 shares held by
directors,  officers,  the Employee  Stock  Ownership Plan  (unallocated  shares
only),  the Stock  Ownership Plan and Management  Recognition  Plan Trusts,  and
beneficial owners of more than 10% of the registrant's outstanding voting stock,
are shares held by affiliates.

Number of shares of Common Stock outstanding as of December 6, 2000: 1,280,152

                       DOCUMENTS INCORPORATED BY REFERENCE

             The following lists the documents incorporated by reference and the
Part of the Form 10-KSB into which the document is incorporated:

     1.   Portions  of the Annual  Report to  Stockholders  for the fiscal  year
          ended September 30, 2000. (Parts I and II)
     2.   Portions of Proxy  Statement for 2001 Annual Meeting of  Stockholders.
          (Part III)


<PAGE>


                                     PART I

ITEM 1.  BUSINESS
-----------------

GENERAL

         First  Federal   Bancorporation.   First  Federal  Bancorporation  (the
"Company")  was  incorporated  under  the  laws of the  State  of  Minnesota  in
September  1994 at the  direction  of the Board of  Directors  of First  Federal
Banking  and  Savings,  FSB  ("First  Federal" or the "Bank") for the purpose of
serving as a savings and loan holding  company of the Bank upon the  acquisition
of all of the  capital  stock  issued by the Bank upon its  conversion  from the
mutual to the stock form of ownership  (the  "Conversion").  The  Conversion was
completed on April 3, 1995. The Company's  principal business is the business of
the Bank.  The  Company has no  significant  assets  other than the  outstanding
capital stock of the Bank,  $366,000 of cash and cash  equivalents,  $998,000 in
securities  available for sale,  and $181,000 in other assets.  At September 30,
2000, the Company had total consolidated assets of $140.22 million,  deposits of
$88.90 million and stockholders' equity of $12.81 million. Because substantially
all of the Company's operations consist of the operations of the Bank, this Form
10-KSB largely is a discussion of the Bank's operations.

         The Company's executive offices are located at 214 5th Street, Bemidji,
Minnesota 56601, and its main telephone number is (218) 751-5120.

         First Federal Bank.  First Federal was originally  chartered in 1910 as
Beltrami  County Savings and Building  Association,  a  state-chartered  savings
institution,  and commenced operations in that same year. First Federal has been
a member of the Federal Home Loan Bank  ("FHLB") of Des Moines  since 1933,  and
its deposits have been  federally  insured since 1938. In August 1997,  the Bank
changed its name from "First  Federal  Banking and Savings,  FSB" to its current
name;  "First  Federal  Bank." First Federal  currently  operates as a federally
chartered savings bank through its main office located in Bemidji, Minnesota and
four branch offices, which are located in Bemidji,  Bagley, Baudette and Walker,
Minnesota.  The Bank has entered into an agreement with Wal-Mart  Stores,  Inc.,
subject to regulatory approval, for an in-store banking facility. A full service
in-store  banking  facility will be located in the new Wal-Mart  Supercenter  in
Bemidji. The Bank is tentatively scheduled to begin operations in late 2001 when
the Wal-Mart  Supercenter opens for business.  The Bank's market area is located
approximately 200 miles north of Minneapolis,  Minnesota. At September 30, 2000,
First Federal had total assets of $139.03  million,  deposits of $89.11 million,
mortgage-backed and related securities and investment securities totaling $57.95
million and stockholders' equity of $11.30 million.

         First  Federal is  primarily  engaged  in the  business  of  attracting
deposits  from  the  general  public  and  originating  loans  secured  by first
mortgages on owner  occupied one- to four-family  residences in First  Federal's
market area. First Federal also originates consumer loans,  including automobile
and home improvement loans, as well as other consumer loans, loans on commercial
real estate and multi-family real estate, and commercial  business loans. Due to
limited loan demand in its market area,  First Federal has invested excess funds
in mortgage-backed  and related  securities and in other investment  securities,
and during  fiscal 2000  continued to be active in  originating  and  purchasing
participation interests in commercial real estate loans. First Federal has also,
in recent years, increased its consumer lending activities in its local markets.

         The Bank is subject to examination and comprehensive  regulation by the
Office of Thrift  Supervision  ("OTS"),  and the  Bank's  savings  deposits  are
insured  up to  applicable  limits by the  Savings  Association  Insurance  Fund
("SAIF"),  which is administered by the Federal  Deposit  Insurance  Corporation
("FDIC").  The Bank is a member of, and owns  capital  stock in the Federal Home
Loan Bank ("FHLB") of Des Moines,  which is one of 12 regional banks in the FHLB
System.  The Bank is further subject to regulations of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board")  governing  reserves to
be maintained and certain other matters.

         The Bank's  executive  offices are located at 214 5th Street,  Bemidji,
Minnesota 56601, and its main telephone number is (218) 751-5120.



                                       2
<PAGE>


MARKET AREA

         First  Federal  serves the  Bemidji,  Minnesota  marketplace,  which is
located in northwestern Minnesota  approximately 200 miles north of Minneapolis,
Minnesota.  The  primary  market  area of  First  Federal  consists  of the five
counties  of  Beltrami,  Cass,  Hubbard,  Clearwater  and  Lake of the  Woods in
Minnesota. These counties are served by the Bank's main office and branch office
located in Bemidji and three  branch  offices  located in Bagley,  Baudette  and
Walker,  Minnesota.  These communities are the county seats and largest towns in
each of the counties where the branches are located. No branch office is located
in Hubbard County,  but the northern border of Hubbard County is only four miles
from the Bank's  main  office.  Bemidji is the largest  community  in the market
area,  while the balance of the Bank's market area  consists  primarily of rural
areas and small  towns.  The primary  market  area also  includes  three  Indian
reservations,  a portion of which  land is owned by the  federal  government  in
trust for the Native Americans. This portion of the area is not open to mortgage
lending, therefore, an enforceable lien is not possible. The Bank does receive a
limited  number of consumer loan  applications  from the area. In addition,  the
Bank's  primary  market area also includes large tracts of land covered by water
and national and state forests and, thus, not available for home building.

         In the Bank's most critical market,  Beltrami County,  median household
income of $28,200 was 75.2% of the median for the state of  Minnesota  and 82.7%
of the United  States at large.  National,  state and local  medians show modest
household  income  growth,  the result of projected  low inflation and continued
modest economic growth.

         The Bank's limited  lending  opportunities  are primarily a function of
Bemidji's  economy,  which exhibits moderate growth. For the period from 1990 to
1999, the population of the Bank's market area increased  14.04%, as compared to
an  increase of 9.14% for the State of  Minnesota,  and an increase of 9.61% for
the  United  States  as a  whole.  Lacking  growth  in  local  residential  loan
originations,  First  Federal has been forced to turn  toward  out-of-area  real
estate  lending,  multi-family  and  commercial  real  estate  lending,  and  to
investment in  mortgage-backed  and other securities.  Such  "out-of-area"  real
estate  lending  constituted  12.91%  of the  Bank's  gross  loan  portfolio  at
September  30,  2000 while  loans on  multi-family  and  commercial  real estate
constituted 19.79% of the Bank's gross loan portfolio at that date.

LENDING ACTIVITIES

         General.  First Federal's  principal  lending activity  consists of the
origination  of loans  secured  by first  mortgages  on owner  occupied  one- to
four-family  residences  in  the  Bank's  market  area,  which  consists  of the
Minnesota Counties of Beltrami, Cass, Hubbard, Clearwater and Lake of the Woods.
First Federal serves these counties  through its main office and a branch office
located in Bemidji and three  branch  offices  located in Bagley,  Baudette  and
Walker, Minnesota. The largest concentration of First Federal's loans are within
a ten mile  radius of the main  office in  Bemidji.  To a lesser  extent,  First
Federal  also  originates  loans  secured  by  multi-family  properties  such as
apartment   houses  and  commercial   properties   such  as  motels  and  retail
developments.  In recent years,  First Federal has become active in  originating
consumer loans,  including automobile loans and home equity and home improvement
loans. First Federal also makes a limited amount of commercial business loans.

         First Federal  attempts to manage interest rate risk by emphasizing the
origination of one-year  adjustable-rate mortgage loans and short-term (15 years
or less)  fixed-rate  mortgage loans.  Fixed-rate  mortgage loans continue to be
offered by the Bank, but substantially all such loans in excess of 15 year terms
are sold in the secondary  market.  To date,  such loan sale activities have not
been a significant contributor to the Bank's profitability. First Federal offers
a full range of mortgage products,  including  conventional  adjustable-rate and
fixed-rate mortgage loans,  short-term mortgages,  and FHA and VA insured loans.
First Federal has also  participated  in the Minnesota  Housing  Finance  Agency
("MHFA")  housing  program,  and  has  originated  and  purchased  participation
interests in multi-family and commercial mortgage loans.



                                       3
<PAGE>

         Loan  Portfolio  Composition.  The following  table sets forth selected
data relating to the  composition  of First  Federal's loan portfolio by type of
loan at the dates  indicated.  At  September  30,  2000,  First  Federal  had no
concentrations  of loans  exceeding  10% of total loans other than as  disclosed
below.
<TABLE>
<CAPTION>
                                                             At September 30,
                                               -----------------------------------------
                                                     2000                     1999
                                               -----------------       -----------------
                                               Amount        %         Amount        %
                                               ------      -----       ------      -----
                                                         (Dollars in thousands)

Type of Loan:
------------
<S>                                           <C>           <C>       <C>          <C>
Real estate loans --
  Construction loans......................... $    620      0.87%     $  1,130     1.94%
  One- to four-family residential............   29,660     41.37        26,432    45.28
  Multi-family residential...................    5,311      7.41         3,232     5.54
  Commercial.................................    8,877     12.38         9,117    15.62
Consumer loans --
  Automobiles................................   16,737     23.34         7,757    13.29
  Mobile home loans..........................      382      0.53           367     0.63
  Savings account loans......................      428      0.60           467     0.80
  Home improvement loans.....................    2,432      3.39         1,978     3.39
  Home equity lines of credit................      297      0.41           277     0.47
  Other consumer loans.......................    6,343      8.85         6,678    11.44
Commercial business loans....................      610      0.85           936     1.60
                                              --------    ------      --------   ------
                                              $ 71,697    100.00%     $ 58,371   100.00%
                                              ========    ======      ========   ======

Less:
  Loans in process...........................      489                     631
  Deferred fees and discounts (premiums).....      (65)                    (72)
  Allowance for loan losses..................      519                     555
                                              --------                --------
    Total.................................... $ 70,754                $ 57,257
                                              ========                ========
</TABLE>

         Loan Maturity.  The following  table sets forth certain  information at
September 30, 2000,  regarding the dollar amount of loans maturing in the Bank's
portfolio based on their contractual  terms to maturity.  Loans having no stated
schedule of repayments  and no stated  maturity,  and overdrafts are reported as
due in one year or less. Scheduled  contractual principal repayments of loans do
not  necessarily  reflect the actual life of such  assets.  The average  life of
long-term  loans is  substantially  less than their  contractual  terms,  due to
prepayments.  The average life of mortgage  loans tends to increase when current
mortgage  loan  market  rates are  substantially  higher  than rates on existing
mortgage loans and tends to decrease when current mortgage loan market rates are
substantially lower than rates on existing mortgage loans.
<TABLE>
<CAPTION>

                                     Due in the              Due after                  Due
                                     year ending         1 through 5 years         after 5 years
                                       9/30/01             after 9/30/00           after 9/30/00          Total
                                       -------             -------------           -------------          -----
                                                          (In thousands)

<S>                                  <C>                  <C>                       <C>                <C>
Real estate loans.................   $    2,008           $     9,462               $  32,998          $   44,468
Commercial........................          233                   259                     118                 610
Consumer..........................        1,606                19,319                   5,694              26,619
                                     ----------           -----------               ---------          ----------
     Total........................   $    3,847           $    29,040               $  38,810          $   71,697
                                     ==========           ===========               =========          ==========
</TABLE>

                                       4
<PAGE>

         Loan  Repricing.  The following table sets forth at September 30, 2000,
the dollar amount of all loans due one year after  September 30, 2000 which have
predetermined interest rates and have floating or adjustable interest rates.
<TABLE>
<CAPTION>
                                                                       Predetermined             Floating or
                                                                             Rate            Adjustable Rates
                                                                       ----------------      ----------------
                                                                                  (In thousands)

                  <S>                                                  <C>                       <C>
                  Real estate mortgage...............................  $    14,136               $    28,324
                  Commercial.........................................           91                       286
                  Consumer...........................................       16,079                     8,934
                                                                       -----------               -----------
                                                                       $    30,306               $    37,544
                                                                       ===========               ===========
</TABLE>

         Loan Originations,  Purchases and Sales. The following table sets forth
certain information with respect to First Federal's loan originations during the
periods indicated.
<TABLE>
<CAPTION>
                                                                   Year Ended September 30,
                                                                ----------------------------
                                                                  2000                1999
                                                                --------            --------
                                                                       (In thousands)
<S>                                                           <C>                   <C>
Loans originated:
  Real estate loans:
    Construction loans......................................  $      1,552          $     823
    One- to four-family residential.........................         3,659              5,925
    Multi-family residential................................            --                665
    Commercial..............................................           147                 --
  Consumer loans............................................        20,638             12,269
  Commercial business.......................................           348                142
                                                              ------------          ---------
                                                              $     26,344          $  19,824
                                                              ============          =========

Loans purchased:
  Real estate loans:
    One-to-four-family residential..........................  $      2,902          $     609
    Multi-family residential................................         2,220              2,189
    Commercial..............................................         1,043                764
  Commercial business.......................................            79                387
                                                              ------------          ---------
     Total loans purchased..................................  $      6,244          $   3,958
                                                              ============          =========

Loans sold:
  Whole loans...............................................  $        164          $     707
  Participation loans.......................................            --                 --
                                                              ------------          ---------
     Total loans sold.......................................  $        164          $     707
                                                              ============          =========
</TABLE>

         First Federal's  primary  lending  activity has been the origination of
residential  and  commercial  mortgages  as well as  consumer  loans  (including
automobile  and  home  equity  loans)  for its  loan  portfolio.  The  Bank  has
aggressively  pursued  mortgages in its market area in recent years but has been
constrained  in building  its  portfolio  by a  combination  of lack of economic
growth in the Bemidji area and prepayments,  which generally equaled or exceeded
loan originations.  First Federal sells substantially all long-term,  fixed-rate
mortgage loans it originates in the secondary  market.  For the five years ended
September 30, 2000, 54 fixed-rate mortgage loans, secured by single-family homes
totaling $3.48 million were sold in the secondary market,  with servicing rights
released.

         Due to limited demand for one- to four-family  residential  real estate
loans  in its  market  area,  First  Federal  has also  purchased  participation
interests  in  multi-family  and  commercial  mortgage  loans in  recent  years.
Specifically,  during the last five years, First Federal purchased participation
interests in 62 commercial real estate and multi-family  residential real estate
loans  originated by other lenders  totaling $16.63  million,  16 of these loans


                                       5
<PAGE>
totaling $2.94 million were  participation  interests in commercial  real estate
loans on properties  outside the Bank's primary  market area,  with a total loan
balance  at  September  30,  2000  of  $2.66  million.  Of the 35  participation
interests in commercial  real estate  loans,  two loans  totaling  $950,000 were
purchased  during  the year  ended  September  30,  2000.  See  "Commercial  and
Multi-Family  Real  Estate  Lending."  First  Federal  has not sold any whole or
participation  interests in commercial real estate or multi-family  loans within
the past five years.

         One- to Four-Family Residential Lending. The Bank historically has been
and  continues  to be an  originator  of  owner  occupied,  one- to  four-family
residential  properties  located in its market  area.  At  September  30,  2000,
approximately $29.66 million or 41.37% of the Bank's loan portfolio consisted of
loans secured by one- to four-family residential properties.

         First Federal began originating  adjustable-rate  residential  mortgage
loans in 1980. Since that time,  substantially all one- to four-family  mortgage
loans  originated  by the Bank for retention in the Bank's  portfolio  have been
adjustable-rate  loans which provide for annual interest rate  adjustments,  and
have  terms to  maturity  of from 15 to 30  years.  While  the Bank  does  offer
"teaser" or reduced interest rates for the initial one-year  adjustment  period,
all  borrowers  are  qualified at the  fully-indexed  interest  rate.  After the
initial  one-year  period,  the rate  adjustments on the Bank's  adjustable-rate
loans are indexed to the rate paid on one-year U.S. Treasury Bills. The interest
rates on these  mortgages  include  limitations on adjustments of two percentage
points per adjustment period, and a lifetime cap of six percentage points.

         At  September  30,  2000,  the Bank's loan  portfolio  included  $14.78
million in adjustable-rate  one- to four-family  residential  mortgage loans, or
20.61% of the Bank's loan portfolio.

         The retention of  adjustable-rate  loans in First  Federal's  portfolio
mitigates  First  Federal's  exposure to  increases  in market  interest  rates.
However,   there  are  unquantifiable  credit  risks  resulting  from  potential
increases  in  costs  to   borrowers  in  the  event  of  upward   repricing  of
adjustable-rate  loans.  It is possible that during  periods of rising  interest
rates,  the  risk of  default  on  adjustable-rate  loans  may  increase  due to
increases in interest  costs to  borrowers.  Further,  although  adjustable-rate
loans allow First Federal to increase the  sensitivity  of its  interest-earning
assets to changes in interest rates, the extent of this interest  sensitivity is
limited by the repricing  frequency and the periodic and lifetime  interest rate
adjustment  limitations.  Accordingly,  there can be no assurance that yields on
First  Federal's  adjustable-rate  loans will  fully  adjust to  compensate  for
increases  in First  Federal's  cost of funds.  Finally,  adjustable-rate  loans
increase  First  Federal's  exposure  to  decreases  in market  interest  rates,
although decreases in First Federal's cost of funds tend to offset this effect.

         In general,  First Federal originates  residential  mortgage loans with
loan-to-value  ratios of up to 95%, with private mortgage insurance required for
loans with  loan-to-value  ratios greater than 80%. The Bank also originates FHA
and VA loans and  participates  in the MHFA  housing  programs.  The majority of
these loans are long-term,  fixed-rate loans, which are primarily originated for
sale in the secondary market or sold to the MHFA.

         Construction and Land Lending.  First Federal offers construction loans
to qualified  borrowers for  construction  of one- to four-family  residences in
First Federal's  market area.  Typically,  First Federal limits its construction
lending  to  single-settlement,   construction-permanent  loans  to  individuals
building  their primary  residences  and second homes or vacation  homes.  These
loans  generally  have  adjustable   interest  rates  and  are  underwritten  in
accordance  with the same  standards  as First  Federal's  mortgages on existing
properties, except the loans generally provide for disbursement in stages during
a construction  period of up to twelve months,  during which period the borrower
is required to make monthly payments of accrued interest on the outstanding loan
balance. Construction loans generally have a maximum loan-to-value ratio of 80%.
Borrowers  must  satisfy  all credit  requirements  which  would  apply to First
Federal's permanent mortgage loan financing for the subject property.

         Construction  lending is  considered to involve a higher degree of risk
of loss than long-term financing on improved, occupied real estate. Risk of loss
on a  construction  loan is  dependent  largely upon the accuracy of the initial
estimate of the property's  value at completion of  development or  construction
and the estimated cost (including  interest)  thereof.  During the  construction
phase,  a number of factors  could  result in delays and cost  overruns.  If the
estimate of  construction  costs proves to be  inaccurate,  First Federal may be
required  to advance  funds  beyond the amount  originally  committed  to permit
completion  of the project.  If the  estimate of value proves


                                       6
<PAGE>
to be inaccurate,  First Federal may be confronted,  at or prior to the maturity
of the loan,  with a project having a value which is insufficient to assure full
repayment.  The ability of a developer  to sell  developed  lots or a builder to
sell  completed  dwelling  units will  depend on,  among other  things,  demand,
pricing,  availability of comparable  properties and economic conditions.  First
Federal has sought to minimize  this risk by  limiting  construction  lending to
qualified borrowers in First Federal's market area and by limiting the aggregate
amounts of outstanding construction loans.

         Commercial and Multi-Family Real Estate Lending.  The Bank is active in
the origination and purchase of commercial and  multi-family  real estate loans,
in part due to limited  residential  lending  opportunities in the Bank's market
area. The Bank's primary emphasis in its commercial and multi-family real estate
lending has been loans on motel  properties  which  totaled  $2.40  million,  or
3.34%,  of gross loans at  September  30, 2000,  and loans on apartment  houses,
which constituted $5.31 million, or 7.41%, of gross loans at September 30, 2000.
Commercial real estate loans (including  motel loans) totaled $8.88 million,  or
12.38%,  of gross  loans at  September  30,  2000,  a decrease of 2.63% from the
balance  of  $9.12  million  at  September  30,  1999.   Mortgages   secured  by
multi-family  real estate  (including  apartment  houses) had a balance of $5.31
million at  September  30, 2000,  compared to $3.23  million at the same date in
1999.

         As discussed above, in recent years, the Bank has become more active in
the origination and purchase of multi-family and commercial real estate lending.
During the year ended  September  30,  2000,  the Bank  originated  $147,000  in
commercial  real estate loans,  and purchased  participation  interests in three
loans  secured by  commercial  real estate  projects or  properties,  in amounts
ranging from $93,000 to $500,000 and  totaling  $1.04  million.  These loans are
secured by two motels and one medical  facility.  These  projects are located in
Colorado,  North Dakota and Arizona. The lead lenders on each of these loans are
institutions with whom the Bank is familiar,  and has done business in the past.
While the Bank believes that in purchasing these participation interests, it has
taken the appropriate  steps  consistent with lending policies and procedures it
uses in originating loans,  there are significant  additional risks attendant to
loan purchases, and to this type of lending.

         At September 30, 2000, the Bank's  portfolio  includes both  originated
mortgages and purchased  loan  participations  on  commercial  and  multi-family
properties  generally located in the State of Minnesota.  On both participations
and on loan  originations,  the Bank lends  based on a  project's  cash flow and
ability to meet debt service requirements. Each property is appraised by a Board
of Directors-approved appraiser. Credit verification on the borrower is obtained
and  personal  guarantees  are  generally  required  of  all  borrowers.  Annual
financial statements or tax returns are required on the securing property.

         As of  September  30,  2000,  the Bank's  largest loan was for $899,000
secured by multi-family real estate located in Minnesota.

         Included in the Bank's $8.88 million in commercial real estate loans at
September  30,  2000  were  eleven  loans on  motel  properties,  with  balances
outstanding  totaling  $2.40  million at  September  30,  2000.  The higher loan
amounts  and  dependence  on  income  and  cash  flow of the  property  to cover
operating expenses and debt service means these loans involve significantly more
credit risk than loans on one- to four-family properties. While the Bank has not
in recent years experienced losses from its loans secured by motel properties or
other commercial real estate, such losses are possible,  and if incurred,  could
have a significant effect on the Bank's net income and capital position.  All of
the  Bank's  loans  secured  by  multi-family  and  commercial  real  estate are
performing within their terms except one in the amount of $290,000.

         Commercial and  multi-family  real estate lending  entails  significant
additional  risks compared with one- to  four-family  residential  lending.  For
example,  commercial and multi-family  real estate loans typically involve large
loan balances to single  borrowers or groups of related  borrowers,  the payment
experience on such loans  typically is dependent on the successful  operation of
the real estate project, and these risks can be significantly impacted by supply
and  demand  conditions  in the market for  multi-family  residential  units and
commercial office,  retail and warehouse space, and for motel loans, tourism and
general  economic  conditions.  While the Bank has not  experienced  significant
losses from its  multi-family  residential  and  commercial  real estate lending
activities  in recent  years,  the higher  loan  balances on each of these loans
means that if the Bank experiences problems with any one of these loans, its net
income and financial condition could be severely impacted.


                                       7
<PAGE>
         The  aggregate  amount  of  loans  which  federally  chartered  savings
institutions may make on the security of liens on commercial real estate may not
exceed 400% of the institution's capital; however, the limits on commercial real
estate  lending do not require  divestiture  of any loan or investment  that was
lawful when made.  See "-- Loan Solicitation and Processing."

         Consumer  Lending.  First Federal  offers  consumer  loans as part of a
broad  commitment to be a full-service  consumer-oriented  banking  institution.
Such lending  activities have increased in recent years as the Bank has used its
excess funds to increase its consumer loan origination activities.  The consumer
loans originated by the Bank include automobile loans, savings account loans and
mobile home loans, as well as home equity loans and home improvement  loans, and
unsecured  consumer  loans.  At September  30, 2000,  the Bank's  consumer  loan
balance totaled $26.62 million,  or 37.12%, of its total loan portfolio.  Of the
consumer  loan balance at September  30, 2000,  $16.74  million were  automobile
loans,  $297,000  were home  equity  lines of credit,  $2.43  million  were home
improvement  loans,  $382,000  were mobile home loans and $428,000  were savings
account loans. The Bank has more aggressively pursued consumer loans outside its
customer base but within the markets it serves.

         In  addition,  included  in  the  Bank's  consumer  loan  portfolio  at
September 30, 2000 were $6.34 million in other consumer  loans,  which included:
$5.21  million in home equity loans;  $432,000 in loans secured by  recreational
vehicles  such as RVs,  boats,  motorcycles  or  snowmobiles;  $161,000 in other
secured loans; $171,000 in unsecured overdraft protection; $349,000 in unsecured
loans; and $13,000 in mobile homes.

         The Bank's automobile loans are generally underwritten in amounts up to
90% of the  purchase  price or the  N.A.D.A.  book value.  The terms of the loan
generally  do not  exceed  60 months  for new  vehicles  or 48  months  for used
vehicles.  The Bank requires that the vehicles be insured and the Bank be listed
as loss payee on the insurance policy.

         The Bank's  home  equity  lines of credit are made on the  security  of
residential  real  estate,  do not  exceed  80% of the  estimated  value  of the
property,  less the outstanding principal of the first mortgage,  and have terms
of up to fifteen years.  The Bank makes loans secured by savings accounts for up
to 90% of the depositor's savings account balance. The interest rate is normally
three  percentage  points  above the rate paid on the savings  account,  and the
account must be pledged as collateral to secure the loan.

         Consumer  loans  generally  entail  greater  risk  than do  residential
mortgage  loans,  particularly in the case of consumer loans which are unsecured
or secured by rapidly depreciable  assets,  such as automobiles.  Consumer loans
are generally  priced  relative to the Bank's  assessment of the risk associated
with the loan.  Virtually all consumer loans in the Bank's  portfolio are either
adjustable-rate or of short or intermediate term. Adjustable-rate consumer loans
are priced off the prime rate and increments are added based on risk  assessment
as determined by the Bank's senior lending and executive officers.

         Commercial  Business  Lending.  The Bank maintains in portfolio a small
amount of  commercial  business  loans as an  additional  service to its already
existing banking  relationships.  At September 30, 2000, these loans amounted to
$610,000,  or 0.85%, of gross loans. These loans are for a variety of commercial
purposes and are secured by  inventories,  receivables and other business assets
from  companies  in  the  Bemidji  area,  including  retail  establishments  and
restaurants.  The  Bank  underwrites  commercial  business  loans  based  on the
financial  condition of the business and the  creditworthiness  of the borrower.
The Bank seeks personal guarantees  whenever possible and, as appropriate,  will
cross-collateralize business loans with other assets tied to the business.

         Commercial business loans generally involve more credit risk than first
mortgage loans.  Repossessed  collateral for a defaulted loan may not provide an
adequate source of repayment of the outstanding credit obligation as a result of
damage, loss or depreciation.  In such circumstances,  the remaining  deficiency
often does not  warrant  further  substantial  collection  efforts  against  the
obligor.  In addition,  collections  are dependent on the  obligor's  continuing
financial  stability,  and thus are more likely to be adversely  affected by job
loss,  divorce,  illness or personal  bankruptcy.  Further,  the  application of
various  federal and state laws,  including  federal  and state  bankruptcy  and
insolvency  laws, may limit the amount which can be recovered.  These financings
may also give rise to claims and defenses by an obligor  against First  Federal,
and an obligor may be able to assert  against First Federal  claims and defenses
which it has against the seller of the underlying  collateral.  First  Federal's
risks  associated  with  commercial  loans have been minimized by the immaterial
amount of such loans made by First Federal.


                                       8
<PAGE>
         Loan Solicitation and Processing. First Federal's loan originations are
derived from a number of sources,  including promotional  activity,  real estate
brokers, walk-in customers and current customers of the Bank. Construction loans
are often originated through existing customers.

         The Bank's Loan Committee is responsible for review and approval of all
loans  originated  or purchased by the Bank.  Loans in excess of $250,000 may be
approved by the Bank's  President,  but usually  receive the  pre-approval  of a
committee  consisting  of four  members of the Board of  Directors or the entire
Board of Directors.  The list of outside  appraisers is approved annually by the
Board of Directors.  All  appraisers  are fee  appraisers and not members of the
Bank's staff.

         Under  the  Bank's  loan  policy,   the  loan  officer   processing  an
application is responsible for ensuring that all documentation is obtained prior
to submission of the  application to the Loan Committee.  In addition,  the loan
officer verifies that the application  meets the underwriting  guidelines of the
Bank. All of the Bank's lending is subject to its written underwriting standards
and to loan origination  procedures.  Decisions on loan applications are made on
the  basis  of  detailed   applications  and  property   valuations.   The  loan
applications are designed primarily to determine the borrower's ability to repay
the loan. More significant  items on the application are verified through use of
credit reports, financial statements, tax returns and written confirmations.

         Each individual loan officer is subject to a maximum lending  authority
established  by the  Board of  Directors.  Loans in  excess  of an  individual's
lending authority are submitted to an officer with sufficient lending authority,
or the Loan Committee for approval.  After a loan is closed, it is assigned to a
reviewing officer who reviews the file to assure its accuracy and completeness.

         The Bank generally  relies on attorneys'  opinions of title in its loan
processing. Title insurance is required on all mortgage loans closed for sale in
the secondary  market.  The Bank also requires title insurance for loans secured
by properties  exhibiting  unique title conditions which may involve  additional
risk. The Bank requires fire and extended coverage casualty insurance in amounts
at least equal to the principal  amount of the loan or the value of improvements
on the property,  depending on the type of loan.  The Bank also  requires  flood
insurance  to protect the property  securing  its interest  when the property is
located on a flood plain,  although  generally the Bank's primary market area is
not within a designated flood plain.

         The Bank makes up to a 90-day loan  commitment  for each loan approved.
If the borrower desires a longer commitment,  the commitment may be extended for
good cause and upon written approval. No fees are charged in connection with the
issuance of a commitment letter.

         Under  applicable  law,  with  certain  limited  exceptions,  loans and
extensions of credit by a savings  institution  to a person  outstanding  at one
time shall not exceed 15% of the institution's  unimpaired  capital and surplus.
Loans and  extensions of credit fully secured by readily  marketable  collateral
may comprise an additional 10% of unimpaired capital and surplus. Applicable law
additionally  authorizes savings institutions to make loans to one borrower, for
any purpose,  in an amount not to exceed  $500,000 or in an amount not to exceed
the lesser of  $30,000,000  or 30% of unimpaired  capital and surplus to develop
residential  housing,  provided  (1) the  purchase  price of each  single-family
dwelling  in  the  development  does  not  exceed  $500,000,   (2)  the  savings
institution is and continues to be in compliance  with its capital  requirements
as  prescribed  by  OTS  regulations,  (3)  the  loans  comply  with  applicable
loan-to-value  requirements,  (4) the aggregate  amount of loans made under this
authority  does not exceed 150% of unimpaired  capital and surplus,  and (5) the
Director of OTS, by order,  permits the savings  institution  to avail itself of
this higher  limit.  Under these  limits,  the Bank's loans to one borrower were
limited to $2.30 million at September  30, 2000.  At that date,  the Bank had no
lending  relationships in excess of the OTS's  loans-to-one-borrower  limit. The
Bank's five  largest  loans ranged from  $598,000 to $899,000 at  September  30,
2000. All of these loans were current as of September 30, 2000.

         Interest  Rates and Loan Fees.  Interest rates charged by First Federal
on mortgage loans are primarily  determined by competitive loan rates offered in
its  market  area and First  Federal's  yield  objectives.  Mortgage  loan rates
reflect factors such as prevailing  market  interest rate levels,  the supply of
money  available to the savings  industry  and the demand for such loans.  These
factors are in turn affected by general  economic  conditions,  the monetary and
fiscal policies of the federal government,  including the Federal Reserve Board,
the general supply of money in the economy, tax policies and governmental budget
matters.


                                       9
<PAGE>
         First Federal receives fees in connection with loan modifications, late
payments and for  miscellaneous  services  related to its loans.  Such loan fees
have not been significant in recent years.

         Asset Classification,  Allowances for Losses and Non-Performing Assets.
Federal regulations require savings institutions to classify their assets on the
basis of quality on a regular basis. An asset is classified as substandard if it
is determined to be  inadequately  protected by the current net worth and paying
capacity  of the  obligor  or of the  collateral  pledged,  if any.  An asset is
classified as doubtful if full collection is highly  questionable or improbable.
An asset is  classified  as loss if it is  considered  uncollectible,  even if a
partial  recovery could be expected in the future.  The regulations also provide
for a special  mention  designation,  described as assets which do not currently
expose  a  savings  institution  to a  sufficient  degree  of  risk  to  warrant
classification,  but do possess  credit  deficiencies  or  potential  weaknesses
deserving  management's  close  attention.  Assets  classified as substandard or
doubtful require a savings  institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings institution
must either establish a specific allowance for loss in the amount of the portion
of the asset classified loss, or charge off such amount.  Federal  examiners may
disagree with a savings institution's classifications.  If a savings institution
does not agree with an examiner's classification of an asset, it may appeal this
determination to the OTS Regional Director.  First Federal regularly reviews its
assets   to   determine   whether   any   assets   require   classification   or
reclassification.   The   Board  of   Directors   reviews   and   approves   all
classifications.  At September 30, 2000, First Federal had no assets  classified
as loss,  $2,000  of  assets  classified  as  doubtful  and  $694,000  of assets
classified as substandard.  At September 30, 2000,  there were $33,000 in assets
designated as special mention.

         Management  will  continue to actively  monitor First  Federal's  asset
quality  and will  establish  loan loss  reserves  and will charge off loans and
properties  acquired in settlement of loans against the allowances for losses on
such loans and such properties when  appropriate and will provide  specific loss
allowances  when  necessary.  Although  management  believes  it uses  the  best
information  available to make determinations with respect to the allowances for
losses,  future  adjustments  may be  necessary  if economic  conditions  differ
substantially from the economic conditions in the assumptions used in making the
initial determinations.

         The Bank's allowance for loan losses is established through a provision
for loan losses charged to earnings based on management's evaluation of the risk
inherent in it's entire loan  portfolio  and changes in the nature and volume of
its loan  activity.  Such  evaluation,  which  includes a review of all loans of
which full  collectibility  may not be reasonably  assured,  considers  specific
occurrences,  general and local economic conditions, loan portfolio composition,
historical and local  experience  and other factors that warrant  recognition in
providing for an adequate  allowance for loan losses. In determining the general
reserves under these policies, historical charge-offs and recoveries, changes in
the mix and levels of the various types of loans,  net  realizable  values,  the
current loan  portfolio and current  economic  conditions  are  considered.  The
Bank's Asset Classification  Policy establishes rates for establishing a general
valuation  allowance on risk assets.  Each risk asset  receives a percentage  of
asset  rate,  which is then the  multiplier  used in  determining  the  required
reserve for that  specific  asset in the  composition  of the general  valuation
reserve. These reserve rates vary from 0.05% to 5.00% in establishing the amount
of reserve  necessary for  unclassified  assets.  Special  mention assets have a
reserve  rate of 2.00%.  Substandard  assets have a 15.0%  reserve  rate,  while
doubtful assets  currently have a 50.00% reserve rate. The Bank may also require
additional or specific reserves for certain classified assets.

         The  above  reserve  rates  establish  a  minimum   general   valuation
allowance.  As of September 30, 2000,  the Bank  maintained a general  valuation
allowance  that the reserve  rates  dictated.  Reserves  determined by using the
reserve  rating  system  were  $475,583.  The  general  valuation  allowance  on
September 30, 2000, was in the amount of $475,583. The decrease in the provision
for losses on loans relates primarily to a decrease in non-performing assets. At
September  30, 2000 the Bank had a $43,500  specific  reserve  established  on a
commercial real estate loan.

         Real estate  acquired as a result of foreclosure or by  deed-in-lieu of
foreclosure is classified as real estate  in-judgment  for the six months or one
year redemption  period,  and thereafter,  as real estate owned until sold. When
property is  acquired  through the  foreclosure  process,  it is recorded at the
lower of cost or estimated fair value,  less the estimated cost of  disposition.
After acquisition,  all costs incurred in maintaining the property are expensed.
Costs relating to improvement of the property,  however,  are capitalized to the
extent of fair value, less estimated costs of disposition.


                                       10
<PAGE>
         The following table sets forth an analysis of First Federal's allowance
for loan losses for the periods indicated.
<TABLE>
<CAPTION>
                                                                   Year Ended September 30,
                                                              ---------------------------------
                                                                2000                  1999
                                                              --------              --------
                                                                    (Dollars in thousands)

<S>                                                           <C>                   <C>
Balance at beginning of period..............................  $        555          $     498
                                                              ------------          ---------

Loans charged-off:
  Real estate-- mortgages:
    Residential.............................................           (43)                (9)
    Commercial..............................................            --                 --
  Real estate-- construction................................            --                 --
  Commercial business.......................................            --                 --
  Consumer..................................................           (63)               (42)
                                                              ------------          ---------
Total charge-offs...........................................          (106)               (51)
                                                              ------------          ---------

Recoveries:
  Real estate-- mortgages:
    Residential.............................................            11                 --
    Commercial..............................................            --                 --

  Real estate-- construction................................            --                 --

  Commercial business.......................................            --                 --

  Consumer..................................................            14                 10
                                                              ------------          ---------
Total recoveries............................................            25                 10
                                                              ------------          ---------
Net loans charged-off.......................................           (81)               (41)
                                                              ------------          ---------
Provision for loan losses...................................            45                 98
                                                              ------------          ---------
Balance at end of period....................................  $        519          $     555
                                                              ============          =========

Ratio of net charge-offs to average
  loans outstanding during the period.......................          0.13%              0.07%
                                                              ============          =========

</TABLE>


                                       11
<PAGE>
         The  following  table  allocates  the allowance for loan losses by loan
category  at the  dates  indicated.  The  allocation  of the  allowance  to each
category is not  necessarily  indicative  of future losses and does not restrict
the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
                                                               September 30,
                                          ------------------------------------------------
                                                 2000                         1999
                                          ----------------------     ---------------------
                                                      Percent of                Percent of
                                                       Loans in                  Loans in
                                                    Category to                Category to
                                          Amount    Total Loans     Amount     Total Loans
                                          ------    -----------     ------     -----------
                                                        (Dollars in thousands)
<S>                                       <C>           <C>         <C>           <C>
Real estate - mortgage:
  Residential...........................  $    133      48.78%      $    91       50.82%
  Commercial............................        78      12.38           191       15.62
Real estate - construction..............         3       0.87            20        1.94
Commercial business.....................         6       0.85             8        1.60
Consumer................................       299      37.12           245       30.02
                                          --------     ------       -------      ------
    Total allowance for loan losses.....  $    519     100.00%      $   555      100.00%
                                          ========     ======       =======      ======
</TABLE>

         While  management  believes First Federal has  established its existing
loss allowances in accordance  with generally  accepted  accounting  principles,
there can be no assurance that regulators,  in reviewing First Federal's assets,
will not make First  Federal  increase its loss  allowance,  thereby  negatively
affecting  First  Federal's   reported   financial   condition  and  results  of
operations.

         The  following  table  sets  forth  information  with  respect to First
Federal's non-performing assets at the dates indicated.
<TABLE>
<CAPTION>
                                                                                September 30,
                                                                       -------------------------------
                                                                         2000                   1999
                                                                       --------               --------
                                                                             (Dollars in thousands)

<S>                                                                    <C>                    <C>
Loans accounted for on a non-accrual basis: (1)
  Real estate:
     Residential.....................................................  $      17              $    71
     Commercial......................................................        290                  290
  Commercial business................................................         --                   --
  Consumer...........................................................         --                   --
                                                                       ---------              -------
       Total.........................................................  $     307              $   361
                                                                       =========              =======

Accruing loans which are contractually past due 90 days or more:
  Real Estate:
     Residential.....................................................  $      --              $    --
     Commercial......................................................         --                   --
  Commercial business................................................         23                   --
  Consumer...........................................................         73                   79
                                                                       ---------              -------
       Total.........................................................  $      96              $    79
                                                                       =========              =======
       Total of non-accrual and 90 days past due loans...............  $     403              $   440
                                                                       =========              =======

Percentage of total loans............................................       0.56%                0.75%
                                                                       =========              =======
Other non-performing assets (2)......................................  $     208              $   188
                                                                       =========              =======
<FN>
___________
(1)     Non-accrual status denotes loans on which, in the opinion of management,
        the collection of additional interest is unlikely.  Payments received on
        a  non-accrual  loan are  either  applied to the  outstanding  principal
        balance or recorded as interest  income,  depending on assessment of the
        collectibility of the loan.  Generally,  loans contractually past due 90
        days or more are  placed on  non-accrual  except for loans  insured  for
        credit loss.
(2)     Other  non-performing  assets  represents  property  acquired  by  First
        Federal  through  foreclosure  or  repossession  or  accounted  for as a
        foreclosure  in-substance.  These properties are carried at the lower of
        fair market value, less estimated costs of disposition, or the principal
        balance of the related loan, whichever is lower.
</FN>
</TABLE>


                                       12
<PAGE>

         At September 30, 2000, First Federal's  non-performing  assets included
four residential  mortgage loans, with balances outstanding ranging from $17,000
to $79,000,  one  commercial  real estate loan,  with a balance  outstanding  of
$290,000,  and consumer loans (secured  primarily by automobiles)  with balances
outstanding ranging from $250 to $23,000.

         The one  commercial  real estate loan  accounted  for on a  non-accrual
basis is a gaming establishment located in Colorado.  The outstanding balance of
the Bank's  participation  interest  is  $290,000.  The Bank has  established  a
specific reserve against this loan in the amount of $43,500, resulting in a book
value of $246,500.

         At September  30, 2000,  the Bank had no loans which were not currently
classified  as  non-accrual,  90 days past due or  restructured  but where known
information  about possible  credit problems of borrowers  causes  management to
have serious  concerns as to the ability of the borrowers to comply with present
loan repayment terms.

INVESTMENT ACTIVITIES

         General.  First Federal is permitted  under federal law to make certain
investments,  including  investments  in  securities  issued by various  federal
agencies  and  state  and  municipal  governments,  deposits  at the FHLB of Des
Moines,  certificates  of deposits in federally  insured  institutions,  certain
bankers'  acceptances and federal funds. First Federal may also invest,  subject
to certain  limitations,  in  commercial  paper  having one of the four  highest
investment ratings of a nationally  recognized credit rating agency, and certain
other types of corporate debt securities and mutual funds.  Federal  regulations
require  First Federal to maintain an investment in FHLB of Des Moines stock and
a minimum  amount of liquid  assets which may be invested in cash and  specified
securities.  The Bank is also  permitted to invest in related  securities.  From
time to time,  the OTS adjusts the  percentage  of liquid  assets which  savings
associations  are  required  to  maintain.  For  additional   information,   see
"Regulation -- Regulation of the Bank -- Liquidity Requirements."

         First  Federal  makes  investments  in order to  diversify  its assets,
manage cash flow, obtain yields and maintain the minimum levels of liquid assets
required by regulatory authorities.  Under the Bank's current investment policy,
the amount invested with any one issuer may not exceed the lesser of $500,000 or
the net worth of the  issuing  corporation,  except for U.S.  Treasury  and U.S.
Government Agency Securities and mutual fund investments. The Board of Directors
reviews all securities purchased on a monthly basis.

         The investment  activities of the Bank consist primarily of investments
in  mortgage-backed  and related  securities  and other  investment  securities,
consisting  primarily of  securities  issued or  guaranteed by the United States
Government or agencies thereof.  Typical investments include federally sponsored
agency  mortgage  pass-throughs,  and  federally  sponsored  agency and  related
securities.  Investment and aggregate investment  limitations and credit quality
parameters of each class of investment are  prescribed in the Bank's  investment
policy.  The Bank performs analyses on related  securities prior to purchase and
on an ongoing  basis to determine  the impact on earnings and market value under
various interest rate and prepayment  conditions.  First Federal also invests in
mortgage-related  products,  which include  collateralized  mortgage obligations
("CMOs") and real estate mortgage investment conduits  ("REMICs").  The CMOs and
REMICs  purchased  by  the  Bank  comply  fully  with  regulatory   requirements
concerning  this type of investment.  Both the REMICs and CMOs owned by the Bank
are of short- or intermediate-term  targeted amortization class securities rated
AA or better.

         In accordance with Statement of Financial Accounting Standards ("SFAS")
No.  115,  the  Bank   categorizes  the  securities  it  purchases  as  "Trading
Securities,"  "Available for Sale Securities" and "Held to Maturity Securities."
Securities  that are  categorized as "Held to Maturity" are securities  that the
Bank  has  the  ability  and  intent  to  hold to  maturity.  Upon  acquisition,
securities are classified as to the Bank's intent. Securities "Held to Maturity"
are held for investment  purposes and are carried at amortized cost.  Securities
categorized as "Available for Sale" are securities that the Bank may not hold to
maturity and thus are carried at aggregate  market value with  unrealized  gains
and losses, net of taxes, recognized in stockholders' equity.

         As of September 30, 2000, in accordance  with SFAS No. 115, the Company
classified $13.63 million of its investment securities and $11.58 million of its
mortgage-backed   and  related   securities  as  "Available   for  Sale".   Such
classification  gives the  Company  the  ability  to sell these  securities.  At
September  30,  2000  the  Company   classified

                                       13
<PAGE>
$33.58 million of investment  securities and $159,000 of its mortgage-backed and
related   securities  as  "held  to  maturity."  The  Company  has  no  "Trading
Securities."

         Investment  Securities.  The  following  table sets forth the  carrying
value  of  the   Company's   investment   securities   portfolio,   other   than
mortgage-backed securities, at the dates indicated.
<TABLE>
<CAPTION>
                                                                                  At September 30,
                                                                       -------------------------------
                                                                         2000                   1999
                                                                       --------               --------
                                                                                (In thousands)
<S>                                                                    <C>                    <C>
Investment securities:
  U.S. government and agency securities..............................  $  42,216              $43,036
  Corporate bonds and notes..........................................      3,801                5,142
  Municipal obligations..............................................        248                  505
  Mutual funds and equity stock......................................        944                  962
                                                                       ---------              -------
     Total investment securities.....................................  $  47,209              $49,645
                                                                       =========              =======
</TABLE>

                                       14
<PAGE>

       The  following  table  sets forth  information  regarding  the  scheduled
maturities,  market  value and  weighted  average  yields  for  First  Federal's
investments, other than mortgage-backed securities, at September 30, 2000.
<TABLE>
<CAPTION>

                                     One Year or Less    One to Five Years    Five to Ten Years       More than Ten Years
                                    -------------------  ------------------  ------------------    ----------------------
                                    Carrying   Average   Carrying  Average    Carrying  Average     Carrying     Average
                                     Value     Yield     Value      Yield      Value     Yield       Value        Yield
                                    -------   -------    -------   --------  --------   --------   ----------    --------
<S>                                  <C>                  <C>        <C>      <C>         <C>       <C>            <C>
Investment securities:
   U.S. government and
       agency  securities (1)....... $   --      -- %     $ 2,365    7.00%    $39,851     6.42%     $  --          -- %
   Corporate bonds and notes........  1,216     6.71        2,293    7.00         252     6.29         40         7.31
   Municipal obligations(2).........     --      --            --      --          --       --        248         9.57
                                     ------     ----      -------    ----     -------     ----      -----         ----
      Total......................... $1,216     6.71%     $ 4,658    7.00%    $40,103     6.42%     $ 288         9.26%
                                     ======     ====      =======    ====     =======     ====      =====         ====
Securities with no stated
  maturity..........................

Total investment
  securities........................

<CAPTION>

                                     Total Investment Portfolio
                                    -----------------------------
                                    Carrying   Market    Average
                                     Value     Value      Yield
                                    -------   -------    -------
<S>                                  <C>      <C>         <C>
Investment securities:
   U.S. government and
       agency  securities (1)....... $42,216  $40,339     6.45%
   Corporate bonds and notes........   3,801    3,801     6.87
   Municipal obligations(2).........     248      248     9.57
                                     -------  -------     ----
      Total......................... $46,265  $44,388     6.50%
                                     =======  =======     ====
Securities with no stated
  maturity.......................... $   944  $   944     6.28
                                     -------  -------
Total investment
  securities........................ $47,209  $45,332     6.50
                                     =======  =======
<FN>
---------------
(1)  All U.S. government and agency securities have call features which give the
     option to prepay the debt in one year or less.
(2)  Yield on tax exempt  investments  are not  presented at the tax  equivalent
     yield.
</FN>
</TABLE>

                                       15
<PAGE>

      Mortgage-Backed   Securities.   Mortgage-backed   securities  represent  a
participation interest in a pool of single-family or multi-family mortgages, the
principal  and  interest   payments  on  which  are  passed  from  the  mortgage
originators  through  intermediaries  that pool and repackage the  participation
interest  in the  form  of  securities  to  investors  such  as the  Bank.  Such
intermediaries may include quasi-governmental agencies such as Federal Home Loan
Mortgage Corporation  ("FHLMC"),  Federal National Mortgage Association ("FNMA")
and  Government  National  Mortgage  Association  ("GNMA")  which  guarantee the
payment of  principal  and  interest to  investors.  Mortgage-backed  securities
generally  increase the quality of the Bank's assets by virtue of the guarantees
that back them, are more liquid than  individual  mortgage loans and may be used
to collateralize borrowings or other obligations of the Bank.

      Mortgage-backed  securities  typically  are issued with  stated  principal
amounts and the securities are backed by pools of mortgages that have loans with
interest  rates  that  are  within  a range  and have  similar  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate  mortgages or
adjustable rate mortgage ("ARM") loans. Mortgage-backed securities generally are
referred to as mortgage participation certificates or pass-through certificates.
As a result,  the interest rate risk  characteristics  of the underlying pool of
mortgages, i.e., fixed-rate or adjustable-rate,  as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed  pass-through
security is equal to the life of the underlying mortgages.

      The actual maturity of a  mortgage-backed  security  varies,  depending on
when the mortgagors prepay or repay the underlying mortgages. Prepayments of the
underlying  mortgages may shorten the life of the investment,  thereby adversely
affecting   its  yield  to  maturity  and  the  related   market  value  of  the
mortgage-backed  security.  The yield is based upon the interest  income and the
amortization  of the  premium  or  accretion  of  the  discount  related  to the
mortgage-backed security.  Premiums and discounts on mortgage-backed  securities
are  amortized or accreted  over the estimated  term of the  securities  using a
level  yield  method.   The  prepayment   assumptions   used  to  determine  the
amortization  period for premiums and  discounts  can  significantly  affect the
yield  of the  mortgage-backed  security  and  these  assumptions  are  reviewed
periodically to reflect the actual prepayment.  The actual prepayment experience
of the underlying  mortgages,  the geographical  location of the underlying real
estate  collateralizing  the  mortgages  and general  levels of market  interest
rates. The difference between the interest rates on the underlying mortgages and
the prevailing  mortgage interest rates is an important  determinant in the rate
of prepayments.  During periods of falling mortgage interest rates,  prepayments
generally increase. If the coupon rate of the underlying mortgage  significantly
exceeds  the  prevailing  market  interest  rates  offered for  mortgage  loans,
refinancing generally increases and accelerates the prepayment of the underlying
mortgages.   Prepayment   experience   is  more   difficult   to  estimate   for
adjustable-rate mortgage-backed securities.

      The Bank's  mortgage-backed  securities  portfolio  consists  primarily of
seasoned fixed-rate and adjustable-rate mortgage-backed securities. At September
30, 2000, the Bank had $8.04 million in mortgage-backed securities (representing
99.75% of the Bank's  gross  mortgage-backed  securities  portfolio  or 5.73% of
total assets)  insured or  guaranteed  by FNMA,  FHLMC or GNMA. At September 30,
2000, $21,000 (representing 0.25% of the Bank's gross mortgage-backed securities
portfolio,  or 0.01% of total assets)  consisted of privately issued  securities
which  are  not  guaranteed  by  FHLMC,   FNMA,  GNMA  or  any  governmental  or
quasi-governmental agency.

      The Bank's  mortgage-backed  securities  portfolio contains fixed-rate and
floating rate securities. Certain of the Bank's mortgage-backed securities yield
above-market  rates of interest  and are subject to  prepayment.  In a declining
interest  rate  environment,   the  Bank  may  experience  prepayments  of  both
fixed-rate and  adjustable-rate  mortgage-backed  and related  securities.  In a
rising interest rate  environment,  the prepayments may cease,  market yields of
these  securities  may be less  attractive,  and the market  value of the Bank's
mortgage-backed securities may decline.

      Mortgage-Related  Securities.  CMOs and REMICs are  typically  issued by a
special purpose entity, which may be organized in a variety of legal forms, such
as a trust,  a corporation  or a  partnership.  The entity  aggregates  pools of
mortgage loans or pass-through  securities,  which are used to collateralize the
related securities. Once combined, the cash flows can be divided into "tranches"
or "classes" of individual securities, thereby creating more predictable average
lives for each security than the  underlying  pass-through  pools.  Accordingly,
under this security  structure all principal  paydowns from the various mortgage
pools are allocated to a related securities' class or classes structured to have
priority  until it has been paid off.  These  securities  generally  have  fixed
interest  rates,  and as a result,


                                       16
<PAGE>
changes in interest rates  generally  would affect the market value and possibly
the prepayment rates of such securities.

     Some related  securities  instruments are like traditional debt instruments
due to their stated principal  amounts and  traditionally  defined interest rate
terms.  Purchasers of certain other related securities  instruments are entitled
to the excess,  if any, of the issuer's cash inflows.  These related  securities
instruments  may include  instruments  designated  as residual  interest and are
riskier  in that they  could  result in the loss of a  portion  of the  original
investment. Cash flows from residual interests are very sensitive to prepayments
and, thus, contain a high degree of interest rate risk.

     At  September  30, 2000,  the Bank had $3.68  million in CMOs and REMICs or
2.62% of total assets.  The Bank's CMOs and REMICs had a weighted  average yield
of 6.44% at September 30, 2000.  The Bank's  current  policy is to purchase CMOs
and REMICs rated AA or better at the time of purchase by  nationally  recognized
rating services or issued by U.S. government agencies. As of September 30, 2000,
$21,000 of the securities in the Bank's  mortgage-backed  and related securities
portfolio were privately issued securities, $21,000 were rated as AAA.

     The  following   table  sets  forth  the  carrying   value  of  the  Bank's
mortgage-backed and related securities at the dates indicated.

<TABLE>
<CAPTION>
                                                                                At September 30,
                                                                       -------------------------------
                                                                         2000                   1999
                                                                       --------               --------
                                                                               (In thousands)

<S>                                                                    <C>                    <C>
GNMA.................................................................  $     749              $   860
FNMA.................................................................      3,719                4,450
FHLMC................................................................      3,569                4,422
FHA..................................................................         21                   69
Collateralized mortgage obligations..................................      3,678                5,634
                                                                       ---------              -------
     Total...........................................................  $  11,736              $15,435
                                                                       =========              =======
</TABLE>


                                       17
<PAGE>

       The following table sets forth the scheduled maturities, carrying values,
market  values and  average  yields for the Bank's  mortgage-backed  and related
securities at September 30, 2000.
<TABLE>
<CAPTION>

                                One Year or Less   One to Five Years    Five to Ten Years       More than Ten Years
                              -------------------  ------------------  ------------------    ----------------------
                              Carrying   Average   Carrying  Average    Carrying  Average     Carrying     Average
                               Value     Yield     Value      Yield      Value     Yield       Value        Yield
                              -------   -------    -------   --------  --------   --------   ----------    --------
<S>                                  <C>           <C>        <C>      <C>         <C>       <C>            <C>
GNMA........................  $     --     --  %    $   --      --%     $  182      7.58%     $   567        6.63%
FNMA........................       225   5.65          156    6.51       1,358      6.63        1,980        6.54
FHLMC.......................        95   6.06          240    6.74       1,566      6.70        1,668        6.55
FHA.........................        --     --           21   10.41          --        --           --          --
Collateralized mortgage
    obligations.............        --     --           --      --       1,340      6.32        2,338        6.51
                              --------   ----       ------   -----      ------      ----      -------        ----
      Total.................  $    320   5.77%      $  417    6.84%     $4,446      6.51%     $ 6,553        6.54%
                              ========   ====       ======   =====      ======      ====      =======        ====


<CAPTION>

                               Total Investment Portfolio
                               -----------------------------
                               Carrying   Market    Average
                                 Value    Value      Yield
                               -------   -------    -------
<S>                           <C>        <C>         <C>
GNMA........................  $    749   $   749     6.86%
FNMA........................     3,719     3,719     6.52
FHLMC.......................     3,569     3,570     6.61
FHA.........................        21        21    10.41
Collateralized mortgage
    obligations.............     3,678     3,675     6.44
                              --------   -------    -----
      Total.................  $ 11,736   $11,734     6.55%
                              ========   =======    =====
</TABLE>

                                       18
<PAGE>

DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS

         General.  Deposits are the primary source of First  Federal's funds for
lending and other investment  activities and general  operational  purposes.  In
addition to deposits,  First Federal derives funds from loan and mortgage-backed
and related securities principal repayments, maturities of investment securities
and interest  payments.  Loan repayments and interest  payments are a relatively
stable  source of funds,  while deposit  inflows and outflows are  significantly
influenced  by prevailing  market  interest  rates and money market  conditions.
Borrowings may be used to supplement  First  Federal's  available  funds.  First
Federal has access to borrow from the FHLB of Des Moines and the Federal Reserve
Bank.

         Deposits.  First Federal attracts deposits  principally from within its
market  area by  offering a variety of deposit  instruments,  including  savings
accounts, money market accounts, retirement savings accounts and certificates of
deposit  which  range  in term  from  three to 60  months.  Deposit  terms  vary
principally on the basis of the minimum balance required, the length of time the
funds must remain on deposit and the interest rate.  Maturities,  terms, service
fees and withdrawal  penalties for its deposit  accounts are  established by the
Bank on a periodic  basis.  The Bank  reviews  its deposit mix and pricing on an
ongoing basis. In determining the  characteristics of its deposit accounts,  the
Bank considers the rates offered by competing  institutions,  funds  acquisition
and liquidity requirements, growth goals, and federal regulations. The Bank does
not accept brokered deposits.

         The  Bank  competes  for  deposits,   including  individual  retirement
accounts  ("IRA") and Keogh Plan funds,  with other  institutions  in its market
area by  offering  deposit  instruments  that are  competitively  priced  and by
providing   customer   service  through   convenient  and  attractive   offices,
knowledgeable  and  efficient  staff and hours of service  that meet  customers'
needs. The Bank generally does not use premiums to attract savings deposits.



                                       19
<PAGE>

         The following table sets forth the average  balances and interest rates
based on daily  balances for  interest-bearing  demand and savings  deposits and
time deposits as of the dates indicated.
<TABLE>
<CAPTION>
                                                                        September 30,
                         ---------------------------------------------------------------------------------------------------------
                                                2000                                                1999
                         ----------------------------------------------------  ---------------------------------------------------
                         Interest-Bearing  Interest-Bearing  Interest-Bearing Interest-Bearing  Interest-Bearing  Interest-Bearing
                          Demand Deposits  Savings Deposits    Time Deposits   Demand Deposits   Savings Deposits    Time Deposits
                         ----------------  ----------------  ---------------- ----------------  ----------------- ----------------
                                                                   (Dollars in thousands)

<S>                         <C>               <C>              <C>               <C>                <C>               <C>
Average Balance...........  $ 22,579          $  8,238         $  53,745         $ 23,397           $ 7,877           $ 55,757
Average Rate..............      2.92%             1.89%             5.51%            2.18%             1.67%              5.53%
</TABLE>


                                       20
<PAGE>
         The following table indicates the amount of the certificates of deposit
of  $100,000  or more in First  Federal  by time  remaining  until  maturity  at
September 30, 2000.

                                                    Certificates
     Maturity Period                                 of Deposits
     ---------------                                 -----------
                                                   (In thousands)

      Three months or less.......................  $      2,259
      Over three through six months..............           475
      Over six through 12 months.................         2,266
      Over 12 months.............................         3,361
                                                   ------------
            Total................................  $      8,361
                                                   ============


         Borrowings.  Savings deposits historically have been the primary source
of  funds  for  First  Federal's  lending,   investment  and  general  operating
activities. First Federal is authorized,  however, to use advances from the FHLB
of Des Moines to  supplement  its supply of lendable  funds and to meet  deposit
withdrawal  requirements.  The FHLB of Des Moines functions as a central reserve
bank  providing  credit  for  savings  institutions  and  certain  other  member
financial  institutions.  As a  member  of the FHLB  System,  First  Federal  is
required to own stock in the FHLB of Des Moines and is  authorized  to apply for
advances.  Advances are made  pursuant to several  different  programs,  each of
which  has its own  interest  rate  and  range of  maturities.  The Bank is also
eligible to borrow from the Federal  Reserve Bank.  At September  30, 2000,  the
Bank had $31.36 million in advances outstanding with the FHLB.

         From  time to time  the  Bank  utilizes  repurchase  agreements  issued
primarily to local government  units.  The form of repurchase  agreement used by
the Bank involves the sale of securities  owned by the Bank with a commitment to
repurchase  the same or  substantially  the same  securities at a  predetermined
price at a future date,  typically one to 180 days thereafter.  At September 30,
2000, the Bank had $5.56 million in repurchase agreements outstanding.

         The following table presents a summary of the Bank's borrowings,  which
were greater than 30% of stockholders' equity as of September 30, 2000 and 1999.
<TABLE>
<CAPTION>
                                                                          September 30,
                                                                 ----------------------------
                                                                   2000                1999
                                                                 --------            --------
                                                                     (Dollars in thousands)
<S>                                                              <C>                <C>
Federal Home Loan Bank advances
  outstanding at period end...................................   $  31,363          $  24,957
Weighted average rate at period end...........................        6.66               5.06%
Daily average outstanding for the period......................   $  26,466          $  22,554
  Weighted average rate for the period........................        6.10               5.16%
Highest outstanding at any month end..........................   $  31,365          $  24,957
Repurchase agreements
  outstanding at period end...................................   $   5,562          $   4,701
  Weighted average rate at period end.........................        6.34               5.06%
Daily average outstanding for the period......................   $   7,415          $   4,779
  Weighted average rate for the period........................        5.76               5.14%
Highest outstanding at any month end..........................   $  12,246          $   6,800
</TABLE>


         For more  information on borrowings,  see "Note 12 - Borrowings" of the
Notes to Consolidated  Financial  Statements  included under Item 7, and part of
Exhibit 13 to this Form 10-KSB.


                                       21
<PAGE>


SUBSIDIARY ACTIVITIES

         As a federally  chartered savings bank, the Bank is permitted to invest
an  amount  equal  to 2% of its  assets  in  subsidiaries,  with  an  additional
investment of 1% of assets where such  investment  serves  primarily  community,
inner-city and community  development  purposes.  Under such limitations,  as of
September 30, 2000, the Bank was authorized to invest up to approximately  $4.17
million in the stock of or loans to  subsidiaries,  including the  additional 1%
investment for community inner-city and community development purposes.

         The  Bank  has one  wholly  owned  subsidiary:  First  Federal  Service
Corporation  ("First  Federal  Service").  First  Federal  Service,  a Minnesota
corporation,  sells credit, life and disability insurance and retail non-deposit
investment products. At September 30, 2000, the Bank's total investment in First
Federal Service was $143,000.

         SAIF-insured  savings  institutions must give the FDIC and OTS 30 days'
prior notice before  establishing or acquiring a new  subsidiary,  or commencing
any new  activity  through an  existing  subsidiary.  Both the FDIC and OTS have
authority to order  termination  of subsidiary  activities  determined to pose a
risk to the  safety  or  soundness  of the  institution.  In  addition,  capital
requirements  require savings  institutions to deduct from capital the amount of
their  investments  in and  extensions  of credit  to  subsidiaries  engaged  in
activities not permissible to national banks in determining  regulatory  capital
compliance.  The  activities of First Federal  Service are not  permissible  for
national  banks.   See  "--  Regulation  of  the  Bank  --  Regulatory   Capital
Requirements."

COMPETITION

         First Federal faces strong  competition  for deposits and loans.  First
Federal's  principal  competitors  for deposits are other banking  institutions,
such as commercial banks, credit unions and other savings institutions,  as well
as mutual funds and other investments.  First Federal  principally  competes for
deposits by offering a variety of deposit  accounts,  convenient  business hours
and branch locations,  customer service and a well trained staff, in addition to
a  substantial  ATM  network.  First  Federal  competes  for  loans  with  other
depository  institutions,  as well as specialty mortgage lenders and brokers and
consumer finance companies.  First Federal principally competes for loans on the
basis of  interest  rates  and the loan fees it  charges,  the types of loans it
originates and the  convenience  and quick service it provides to borrowers.  In
addition,  First Federal believes it has developed strong relationships with the
businesses,  realtors,  builders and general  public in its market  area.  First
Federal is the fourth largest financial institution in its market area, based on
deposit  and asset  information  at  September  30,  2000.  Of the three  larger
institutions,  two are located in Bemidji,  within two blocks of the Bank's main
office.

EMPLOYEES

         As of September 30, 2000, the Company and the Bank had 36 full-time and
11 part-time employees,  none of whom was represented by a collective bargaining
agreement.

REGULATION

         General.  As a federally chartered savings bank, the Bank is subject to
extensive  regulation by the OTS and FDIC and to OTS regulations  governing such
matters  as  capital  standards,  mergers,   establishment  of  branch  offices,
subsidiary  investments  and activities and general  investment  authority.  The
lending  activities  and other  investments of the Bank must comply with various
federal  regulatory  requirements.  The OTS  periodically  examines the Bank for
compliance with various regulatory requirements. The FDIC also has the authority
to conduct special  examinations of the Bank because its deposits are insured by
the SAIF.  The Bank must file reports with OTS  describing  its  activities  and
financial  condition  and  is  also  subject  to  certain  reserve  requirements
promulgated by the Federal  Reserve Board.  This  supervision  and regulation is
intended primarily for the protection of depositors. Certain of these regulatory
requirements are referred to below or appear elsewhere herein.

         Financial  Modernization  Legislation.  On November 12, 1999, President
Clinton  signed  legislation  which  could  have a  far-reaching  impact  on the
financial services  industry.  The  Gramm-Leach-Bliley  ("G-L-B") Act authorizes
affiliations between banking, securities and insurance firms and authorizes bank
holding  companies  and national  banks to engage in a variety of new  financial
activities.  Among the new  activities  that will be  permitted  to


                                       22
<PAGE>
bank holding  companies  are  securities  and  insurance  brokerage,  securities
underwriting,  insurance  underwriting and merchant banking. The Federal Reserve
Board,  in  consultation  with  the  Secretary  of  the  Treasury,  may  approve
additional  financial  activities.  The G-L-B  Act,  however,  prohibits  future
acquisitions of existing  unitary savings and loan holding  companies,  like the
Company,  by firms which are  engaged in  commercial  activities  and limits the
permissible  activities  of unitary  savings and loan holding  companies  formed
after May 4, 2000.

         The G-L-B Act imposes new requirements on financial  institutions  with
respect to customer  privacy.  The G-L-B Act generally  prohibits  disclosure of
customer  information  to  non-affiliated  third parties unless the customer has
been given the  opportunity  to object and has not objected to such  disclosure.
Financial  institutions  are further required to disclose their privacy policies
to customers  annually.  Financial  institutions,  however,  will be required to
comply  with state law if it is more  protective  of customer  privacy  than the
G-L-B Act.  The G-L-B Act directs the federal  banking  agencies,  the  National
Credit Union Administration,  the Secretary of the Treasury,  the Securities and
Exchange  Commission and the Federal Trade Commission,  after  consultation with
the National Association of Insurance Commissioners,  to promulgate implementing
regulations  within six  months of  enactment.  The  privacy  provisions  became
effective in November 2000, with full compliance required by July 1, 2001.

         The G-L-B Act contains  significant  revisions to the FHLB System.  The
G-L-B Act imposes new capital  requirements  on the FHLBs and authorizes them to
issue  two  classes  of stock  with  differing  dividend  rates  and  redemption
requirements.  The G-L-B Act  deletes  the  current  requirement  that the FHLBs
annually   contribute  $300  million  to  pay  interest  on  certain  government
obligations in favor of a 20% of net earnings formula. The G-L-B Act expands the
permissible  uses of FHLB advances by community  financial  institutions  (under
$500  million in assets) to include  funding  loans to small  businesses,  small
farms and small  agri-businesses.  The  G-L-B Act makes  membership  in the FHLB
voluntary for federal savings associations.

         The G-L-B  Act  contains  a variety  of other  provisions  including  a
prohibition  against ATM surcharges  unless the customer has first been provided
notice of the  imposition  and  amount of the fee.  The  G-L-B Act  reduces  the
frequency of Community  Reinvestment Act  examinations for smaller  institutions
and imposes certain reporting requirements on depository  institutions that make
payments  to   non-governmental   entities  in  connection  with  the  Community
Reinvestment  Act.  The  G-L-B  Act  eliminates  the SAIF  special  reserve  and
authorizes a federal  savings  association  that converts to a national or state
bank charter to continue to use the term "federal" in its name and to retain any
interstate branches.

         The  Company  is unable to  predict  the impact of the G-L-B Act on its
operations at this time.

REGULATION OF THE BANK

         Federal Home Loan Bank System. The Bank is a member of the FHLB System,
which consists of 12 district FHLBs subject to supervision and regulation by the
Federal  Housing  Finance Board  ("FHFB").  The FHLBs  provide a central  credit
facility  primarily  for  member  institutions.  As a member  of the FHLB of Des
Moines,  the Bank is required to acquire and hold shares of capital stock in the
FHLB of Des  Moines in an amount at least  equal to 1% of the  aggregate  unpaid
principal of its home  mortgage  loans,  home  purchase  contracts,  and similar
obligations at the end of each year, or 1/20 of its advances  (borrowings)  from
the FHLB of Des Moines,  whichever is greater.  The Bank was in compliance  with
this requirement with an investment in FHLB of Des Moines stock at September 30,
2000 of $1.57 million.

         The FHLB of Des  Moines  serves as a reserve  or  central  bank for its
member  institutions  within its assigned district.  It is funded primarily from
proceeds  derived from the sale of consolidated  obligations of the FHLB System.
It makes  advances  to  members  in  accordance  with  policies  and  procedures
established  by the FHFB and the Board of  Directors  of the FHLB of Des Moines.
Long-term  advances  may only be made for the  purpose  of  providing  funds for
residential  housing finance. At September 30, 2000, the Bank had $31.36 million
in advances  outstanding  from the FHLB of Des Moines.  See "-- Deposit Activity
and Other Sources of Funds -- Borrowings."

         Liquidity Requirements.  The Bank is required to maintain average daily
balances of liquid assets (cash,  certain time  deposits,  bankers'  acceptance,
highly rated corporate debt and commercial  paper,  securities of certain mutual
funds  and  specified  United  States   government,   state  or  federal  agency
obligations)  equal to the  average  daily  balance of not less than a specified
percentage  (currently  4%)  of  its  net  withdrawable  savings  deposits  plus
short-


                                       23
<PAGE>

term borrowings. Monetary penalties may be imposed for failure to meet liquidity
requirements.  The average  daily  liquidity  ratio of the Bank for the month of
September 2000 was 15.36% with respect to liquid assets.

         Qualified Thrift Lender Test. A savings  institution that does not meet
the Qualified  Thrift Lender  ("QTL") test must either convert to a bank charter
or comply with the following restrictions on its operations: (i) the institution
may not  engage in any new  activity  or make any new  investment,  directly  or
indirectly,  unless  such  activity  or  investment  is  permissible  for both a
national  bank and a  savings  institution;  (ii) the  branching  powers  of the
institution  shall  be  restricted  to  those  of a  national  bank;  (iii)  the
institution shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the institution  shall be subject to the rules regarding
payment of dividends by a national bank. In addition,  any company that controls
a  savings  institution  that  fails to  qualify  as a QTL will be  required  to
register  as, and to be deemed,  a bank  holding  company  subject to all of the
provisions  of the Bank  Holding  Company  Act of 1956  (the  "BHCA")  and other
statutes  applicable  to bank holding  companies.  Upon the  expiration of three
years  from the date the  institution  ceases  to be a QTL,  it must  cease  any
activity and not retain any investment not  permissible for both a national bank
and a savings  institution and immediately  repay any outstanding  FHLB advances
(subject to safety and soundness considerations).

         To qualify as a QTL, a savings  institution  must  either  qualify as a
"domestic  building and loan  association"  under the  Internal  Revenue Code or
maintain at least 65% of its "portfolio assets" in Qualified Thrift Investments.
Portfolio assets are defined as total assets less intangibles,  property used by
a savings institution in its business and liquidity investments in an amount not
exceeding  20% of assets.  All of the  following  may be included  as  Qualified
Thrift  Investments:  investments in residential  mortgages,  home equity loans,
loans made for educational purposes, small business loans, credit card loans and
shares of stock issued by an FHLB.  Subject to a 20% of portfolio  assets limit,
savings  institutions  are also able to treat the following as Qualified  Thrift
Investments:  (i) 50% of the dollar amount of residential mortgage loans subject
to sale under certain conditions, (ii) investments, both debt and equity, in the
capital  stock or  obligations  of and any  other  security  issued by a service
corporation or operating  subsidiary,  provided that such subsidiary  derives at
least 80% of its annual  gross  revenues  from  activities  directly  related to
purchasing,   refinancing,   constructing,   improving  or  repairing   domestic
residential housing or manufactured housing,  (iii) 200% of their investments in
loan to finance  "starter  homes"  and loans for  construction,  development  or
improvement of housing and community  service  facilities or for financing small
businesses in "credit-needy"  areas, (iv) loans for the purchase,  construction,
development  or  improvement  of  community  service  facilities,  (v) loans for
personal,  family,  household or educational purposes,  and (vi) shares of stock
issued by FNMA or FHLMC.

         A savings  institution  must  maintain its status as a QTL on a monthly
basis in nine out of  every 12  months.  A  savings  institution  that  fails to
maintain Qualified Thrift Lender status will be permitted to requalify once, and
if it fails the QTL test a second time,  it will become  immediately  subject to
all penalties as if all time limits on such penalties had expired.  At September
30, 2000, the Bank qualified as a QTL.

         Uniform Lending  Standards.  Under OTS regulations,  savings banks must
adopt and  maintain  written  policies  that  establish  appropriate  limits and
standards  for  extensions  of credit that are secured by liens or  interests in
real estate or are made for the purpose of financing  permanent  improvements to
real estate.  These  policies  must  establish  loan  portfolio  diversification
standards, prudent underwriting standards,  including loan-to-value limits, that
are clear and  measurable,  loan  administration  procedures and  documentation,
approval and  reporting  requirements.  The real estate  lending  policies  must
reflect  consideration  of the  Interagency  Guidelines  for Real Estate Lending
Policies (the  "Interagency  Guidelines")  that have been adopted by the federal
bank regulators.

         The Interagency  Guidelines,  among other things,  call upon depository
institutions to establish  internal  loan-to-value  limits for real estate loans
that are not in  excess  of the  following  supervisory  limits:  (i) for  loans
secured by raw land, the supervisory  loan-to-value limit is 65% of the value of
the collateral;  (ii) for land development loans (i.e., loans for the purpose of
improving  unimproved  property  prior  to  the  erection  of  structures),  the
supervisory  limit is 75%; (iii) for loans for the  construction  of commercial,
multifamily or other nonresidential property, the supervisory limit is 80%; (iv)
for  loans  for  the  construction  of  one-  to  four-family  properties,   the
supervisory  limit is 85%; and (v) for loans secured by other improved  property
(e.g.,  farmland,  completed  commercial  property  and  other  income-producing
property including non-owner-occupied,  one- to four-family property), the limit
is 85%.  Although no supervisory  loan-to-value  limit has been  established for
owner-occupied,  one- to  four-family  and home equity  loans,  the  Interagency
Guidelines  state that for any such loan with a loan-to-value  ratio that equals
or exceeds


                                       24
<PAGE>

90% at origination, an institution should require appropriate credit enhancement
in the form of either mortgage insurance or readily marketable collateral.

         The  Interagency  Guidelines  state  that  it  may  be  appropriate  in
individual  cases to originate or purchase  loans with  loan-to-value  ratios in
excess of the supervisory loan-to-value limits, based on the support provided by
other credit factors. The aggregate amount of loans in excess of the supervisory
loan-to-value limits,  however,  should not exceed 100% of total capital and the
total of such loans secured by commercial,  agricultural,  multifamily and other
non-one-to-four  family  residential  properties  should not exceed 30% of total
capital. The supervisory loan-to-value limits do not apply to certain categories
of loans  including  loans insured or guaranteed by the U.S.  government and its
agencies or by  financially  capable  state,  local or municipal  governments or
agencies, loans backed by the full faith and credit of a state government, loans
that are to be sold promptly after origination without recourse to a financially
responsible  party, loans that are renewed,  refinanced or restructured  without
the advancement of new funds, loans that are renewed, refinanced or restructured
in connection with a workout,  loans to facilitate sales of real estate acquired
by the  institution  in the  ordinary  course of  collecting  a debt  previously
contracted and loans where the real estate is not the primary collateral.

         Management believes that the Bank's current lending policies conform to
the  Interagency  Guidelines  and  does  not  anticipate  that  the  Interagency
Guidelines will have a material effect on its lending activities.

         Regulatory  Capital  Requirements.  Under the OTS's regulatory  capital
requirements,  savings  associations must maintain  "tangible"  capital equal to
1.5% of adjusted total assets, "core" capital equal to at least 4.0% or 3.0% (if
the  institution is rated  composite 1 CAMELS under the OTS  examination  rating
system) of adjusted  total assets and "total"  capital (a  combination of "core"
and "supplementary" capital) equal to 8.0% of risk-weighted assets. In addition,
the OTS has adopted  regulations  which impose certain  restrictions  on savings
associations that have a total risk-based  capital ratio that is less than 8.0%,
a ratio of Tier 1 capital to  risk-weighted  assets of less than 4.0% or a ratio
of Tier 1 capital  to  adjusted  total  assets of less than 4.0% (or 3.0% if the
institution  is  rated  composite  1 CAMELS  under  the OTS  examination  rating
system).  For  purposes  of  these  regulations,  Tier 1  capital  has the  same
definitions as core capital. See "--Prompt Corrective Regulatory Action."

         Core  capital  is  defined as common  stockholders'  equity  (including
retained earnings), noncumulative perpetual preferred stock and related surplus,
minority  interests in the equity accounts of fully  consolidated  subsidiaries,
certain   nonwithdrawable   accounts  and  pledged   deposits  and   "qualifying
supervisory  goodwill."  Core capital is generally  reduced by the amount of the
savings  association's  intangible  assets for which no market  exists.  Limited
exceptions  to the  deduction of  intangible  assets are provided for  purchased
mortgage servicing rights and qualifying supervisory goodwill.  Tangible capital
is given the same  definition  as core capital but does not include an exception
for  qualifying  supervisory  goodwill  and is  reduced by the amount of all the
savings  association's  intangible  assets  with  only a limited  exception  for
purchased mortgage servicing rights.  Both core and tangible capital are further
reduced  by  an  amount  equal  to  a  savings  institution's  debt  and  equity
investments in  subsidiaries  engaged in activities not  permissible to national
banks (other than  subsidiaries  engaged in  activities  undertaken as agent for
customers  or  in  mortgage   banking   activities  and  subsidiary   depository
institutions  or their  holding  companies).  Investments  in and  extensions of
credit to such subsidiaries are required to be fully netted against tangible and
core capital. At September 30, 2000, the Bank had no such investments.

         Adjusted  total  assets  are a savings  association's  total  assets as
determined under generally accepted accounting  principles  increased by certain
goodwill  amounts  and by a pro rated  portion of the  assets of  unconsolidated
includable  subsidiaries  in which  the  savings  association  holds a  minority
interest.  Adjusted  total  assets are reduced by the amount of assets that have
been deducted from capital, the portion of savings association's  investments in
unconsolidated  includable  subsidiaries,  and,  for purpose of the core capital
requirement,  qualifying supervisory goodwill. At September 30, 2000, the Bank's
adjusted  total  assets  for the  purposes  of the  core  and  tangible  capital
requirements were approximately $139.61 million.

         In determining  compliance with the risk-based capital  requirement,  a
savings  association  is allowed to include both core capital and  supplementary
capital  in its total  capital  provided  the  amount of  supplementary  capital
included does not exceed the savings  association's core capital.  Supplementary
capital is defined to include certain  preferred  stock issues,  nonwithdrawable
accounts  and  pledged  deposits  that do not qualify as core  capital,  certain
approved subordinated debt, certain other capital instruments,  a portion of the
savings  association's general loss


                                       25
<PAGE>
allowances and up to 45% of unrealized  gains on equity  securities.  Total core
and supplementary  capital are reduced by the amount of capital instruments held
by other depository institutions pursuant to reciprocal arrangements, all equity
investments and that portion of the institution's land loans and non-residential
construction  loans in excess of 80%  loan-to-value  ratio.  As of September 30,
2000, the Bank had no high ratio land or non-residential  construction loans and
no equity  investments for which OTS regulations  require a deduction from total
capital.

         The risk-based  capital  requirement is measured against  risk-weighted
assets  which  equal the sum of each asset and the  credit-equivalent  amount of
each  off-balance  sheet item after being multiplied by an assigned risk weight.
Under the OTS  risk-weighting  system,  one- to four-family  first mortgages not
more than 90 days past due with  loan-to-value  ratios  under 80% are assigned a
risk weight of 50%. Consumer and residential  construction  loans are assigned a
risk weight of 100%.  Mortgage-backed  securities issued, or fully guaranteed as
to principal and interest,  by the FNMA or FHLMC are assigned a 20% risk weight.
Cash and U.S.  Government  securities backed by the full faith and credit of the
U.S. Government are given a 0% risk weight. As of September 30, 2000, the Bank's
risk-weighted assets were approximately $72.64 million.

         The  table  below  provides  information  with  respect  to the  Bank's
compliance with its regulatory capital requirements at September 30, 2000.
<TABLE>
<CAPTION>
                                                                                          To Be Well Capitalized
                                                                  For Capital                 Under Prompt
                                             Actual            Adequacy Purposes        Corrective Acton Provisions
                                    ----------------------    ------------------        ---------------------------
                                    Amount                    Amount                    Amount
                                    (000's)        Ratio      (000's)      Ratio        (000's)           Ratio
<S>                                 <C>            <C>        <C>          <C>          <C>               <C>
As of September 30, 2000:
  Total capital (to risk-
      weighted assets)...........   $ 12,108       16.67%     $   5,811    8.00%        $   7,264         10.00%
  Tier 1 capital (to risk-
     weighted assets)............     11,632       16.01          2,906    4.00             4,359          6.00
  Tier 1 capital (to average
     assets).....................     11,632        8.67          5,367    4.00             6,709          5.00
As of September 30, 2000:
  Total capital (to risk-
      weighted assets)...........   $ 11,302       18.04%     $   5,011    8.00%        $   6,264         10.00%
  Tier 1 capital (to risk-
     weighted assets)............     10,790       17.23          2,506    4.00             3,758          6.00
  Tier 1 capital (to average
     assets).....................     10,790        8.49          5,084    4.00             6,356          5.00

</TABLE>


         The   risk-based   capital   standards  of  the  OTS  require   savings
institutions  with more than a "normal"  level of interest rate risk to maintain
additional total capital. A savings institution's interest rate risk is measured
in terms of the sensitivity of its "net portfolio  value" to changes in interest
rates.  Net  portfolio  value is defined,  generally,  as the  present  value of
expected cash inflows from existing assets and off-balance  sheet contracts less
the present value of expected cash outflows from existing liabilities. A savings
institution  will be considered  to have a "normal"  level of interest rate risk
exposure if the decline in its net portfolio  value after an immediate 200 basis
point increase or decrease in market  interest rates  (whichever  results in the
greater  decline) is less than 2.0% of the current  estimated  economic value of
its assets.

         The OTS  calculates  the  sensitivity  of a savings  institution's  net
portfolio  value based on data submitted by the institution in a schedule to its
quarterly  Thrift  Financial Report and using the interest rate risk measurement
model  adopted by the OTS. The amount of the interest  rate risk  component,  if
any, to be deducted from a savings  institution's  total capital is based on the
institution's  Thrift  Financial  Report  filed two  quarters  earlier.  Savings
institutions  with less than $300  million  in assets and a  risk-based  capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their  Thrift  Financial  Reports.  However,  the OTS  requires  any exempt
savings  institution  that it determines  may have a high level of interest rate
risk exposure to file such  schedule on a quarterly  basis and may be subject to
an additional capital  requirement based upon its level of interest rate risk as
compared to its peers.  The Bank has  determined  that,  on the basis of current
financial data, it will not be deemed to have more than normal level of interest
rate risk under the rule and  believes  that it will not be required to increase
its total capital as a result of the rule.

                                       26
<PAGE>

         In addition to requiring  generally  applicable  capital  standards for
savings  institutions,  the OTS is  authorized to establish the minimum level of
capital  for  a  savings  institution  at  such  amount  or  at  such  ratio  of
capital-to-assets  as the OTS determines to be necessary or appropriate for such
institution in light of the particular  circumstances of the  institution.  Such
circumstances  would  include a high degree of  exposure to interest  rate risk,
prepayment  risk,  credit risk,  concentration  of credit risk and certain risks
arising from  non-traditional  activities.  The OTS may treat the failure of any
savings  institution to maintain  capital at or above such level as an unsafe or
unsound  practice and may issue a directive  requiring  any savings  institution
which fails to maintain  capital at or above the minimum  level  required by the
OTS to submit and adhere to a plan for increasing capital.  Such an order may be
enforced in the same manner as an order issued by the FDIC.

         At September 30, 2000, the Bank exceeded all regulatory minimum capital
requirements.

         Prompt Corrective  Regulatory Action. Under FDICIA, the federal banking
regulators  are  required  to  take  prompt  corrective  action  if  an  insured
depository  institution  fails to satisfy certain minimum capital  requirements,
including a leverage  limit,  a risk-based  capital  requirement,  and any other
measure deemed  appropriate by the federal banking  regulators for measuring the
capital  adequacy  of  an  insured  depository  institution.  All  institutions,
regardless  of their  capital  levels,  are  restricted  from making any capital
distribution or paying any management fees if the institution  would  thereafter
fail to satisfy  the  minimum  levels for any of its  capital  requirements.  An
institution  that  fails to meet the  minimum  level  for any  relevant  capital
measure (an  "undercapitalized  institution")  may be: (i) subject to  increased
monitoring by the appropriate federal banking regulator; (ii) required to submit
an acceptable  capital  restoration  plan within 45 days; (iii) subject to asset
growth  limits;  and (iv)  required  to obtain  prior  regulatory  approval  for
acquisitions,  branching and new lines of  businesses.  The capital  restoration
plan must  include a guarantee  by the  institution's  holding  company that the
institution  will comply with the plan until it has been adequately  capitalized
on average for four consecutive quarters,  under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the  institution  into capital  compliance  as of the date it
failed  to  comply  with  its  capital   restoration   plan.  A   "significantly
undercapitalized"  institution, as well as any undercapitalized institution that
does not  submit an  acceptable  capital  restoration  plan,  may be  subject to
regulatory demands for recapitalization,  broader application of restrictions on
transactions  with  affiliates,  limitations on interest rates paid on deposits,
asset  growth  and other  activities,  possible  replacement  of  directors  and
officers,  and restrictions on capital distributions by any bank holding company
controlling the institution. Any company controlling the institution may also be
required  to divest the  institution  or the  institution  could be  required to
divest   subsidiaries.   The  senior  executive   officers  of  a  significantly
undercapitalized   institution   may  not  receive   bonuses  or   increases  in
compensation  without prior  approval and the  institution  is  prohibited  from
making  payments of principal  or interest on its  subordinated  debt.  In their
discretion,  the  federal  banking  regulators  may also  impose  the  foregoing
sanctions on an  undercapitalized  institution if the regulators  determine that
such actions are  necessary  to carry out the purposes of the prompt  corrective
provisions.  If an institution's ratio of tangible capital to total assets falls
below the  "critical  capital  level"  established  by the  appropriate  federal
banking  regulator,  the  institution  will be  subject  to  conservatorship  or
receivership within specified time periods.

         Under the  implementing  regulations,  the federal banking  regulators,
including the OTS,  generally  measure an institution's  capital adequacy on the
basis of its total  risk-based  capital ratio (the ratio of its total capital to
risk-weighted  assets),  Tier 1 risk-based  capital ratio (the ratio of its core
capital  to  risk-weighted  assets)  and  leverage  ratio (the ratio of its core
capital to adjusted total assets).  The following table shows the capital ratios
required for the various prompt corrective action categories.
<TABLE>
<CAPTION>
                                                     Adequately                                   Significantly
                           Well Capitalized          Capitalized         Undercapitalized        Undercapitalized
                           ----------------          -----------         ----------------        ----------------
<S>                        <C>                       <C>                 <C>                     <C>
Total risk-based
    capital ratio          10.0% or more             8.0% or more        Less than 8.0%          Less than 6.0%
Tier 1 risk-based
    capital ratio           6.0% or more             4.0% or more        Less than 4.0%          Less than 3.0%
Leverage ratio              5.0% or more             4.0% or more *      Less than 4.0% *        Less than 3.0%
<FN>
-----------
*  3.0% if institution has a composite 1 CAMELS rating.
</FN>
</TABLE>


                                       27
<PAGE>

         A "critically  undercapitalized"  savings  institution is defined as an
institution  that has a ratio of "tangible  equity" to total assets of less than
2.0%.  Tangible  equity is defined as core  capital  plus  cumulative  perpetual
preferred stock (and related surplus) less all intangibles other than qualifying
supervisory  goodwill and certain purchased  mortgage servicing rights. The FDIC
may reclassify a well capitalized savings institution as adequately  capitalized
and may require an adequately  capitalized  or  undercapitalized  institution to
comply with the supervisory actions applicable to institutions in the next lower
capital  category  (but  may not  reclassify  a  significantly  undercapitalized
institution as critically undercapitalized) if the FDIC determines, after notice
and an opportunity for a hearing,  that the savings  institution is in an unsafe
or unsound  condition or that the  institution  has received and not corrected a
less-than-satisfactory rating for any CAMELS rating category.

         Deposit Insurance. The Bank is required to pay assessments,  based on a
percentage of its insured deposits, to the FDIC for insurance of its deposits by
the FDIC through the SAIF. Under the Federal Deposit  Insurance Act, the FDIC is
required to set semi-annual assessments for SAIF-insured institutions at a level
necessary  to  maintain  the  designated  reserve  ratio of the SAIF at 1.25% of
estimated  insured  deposits,  or at a higher  percentage  of estimated  insured
deposits that the FDIC determines to be justified for that year by circumstances
indicating a significant risk of substantial future losses to the SAIF.

         Under the FDIC's risk-based  deposit insurance  assessment  system, the
assessment rate for an insured depository  institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the  institution's  capital level and supervisory  evaluations.  Based on the
data reported to regulators  for the date closest to the last day of the seventh
month preceding the semi-annual assessment period,  institutions are assigned to
one of three  capital  groups -- well  capitalized,  adequately  capitalized  or
undercapitalized  -- using the same  percentage  criteria  as under  the  prompt
corrective action  regulations.  See " -- Prompt Corrective  Regulatory Action."
Within each capital group,  institutions  are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority,  and such other  information as the FDIC determines to be relevant to
the  institution's  financial  condition  and  the  risk  posed  to the  deposit
insurance fund.  Subgroup A consists of financially sound institutions with only
a few minor  weaknesses.  Subgroup B consists of institutions  that  demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the  institution  and  increased  risk of loss to the  deposit  insurance  fund.
Subgroup C consists of institutions that pose a substantial  probability of loss
to the deposit insurance fund unless effective corrective action is taken.

         Historically,  institutions  with  SAIF-assessable  deposits,  like the
Bank, were required to pay higher deposit  insurance  premiums than institutions
with  deposits  insured  by  the  Bank  Insurance  Fund  ("BIF").  In  order  to
recapitalize  the SAIF and address the premium  disparity,  in November 1996 the
FDIC imposed a one-time special assessment on institutions with  SAIF-assessable
deposits based on the amount  determined by the FDIC to be necessary to increase
the  reserve  levels  of the SAIF to the  designated  reserve  ratio of 1.25% of
insured  deposits.  Institutions  were assessed at the rate of 65.7 basis points
based on the amount of their SAIF-assessable deposits as of March 31, 1995.

         The special  assessment  recapitalized  the SAIF, and as a result,  the
FDIC  lowered  the SAIF  deposit  insurance  assessment  rates to zero for "well
capitalized"  institutions  with the  highest  supervisory  ratings and 0.27% of
insured deposits for institutions in the highest  risk-based  premium  category.
Until  December  31,  2000,  SAIF-insured  institutions  will be required to pay
assessments  to the FDIC at the rate of 6.5 basis  points to help fund  interest
payments on certain  bonds  issued by the  Financing  Corporation  ("FICO"),  an
agency of the federal  government  established to finance takeovers of insolvent
thrifts.  During this period, BIF members will be assessed for these obligations
at the rate of 1.3 basis  points.  After  December 31,  1999,  both BIF and SAIF
members  will be assessed at the same rate for FICO  payments,  or sooner if the
two funds are merged.

         Substantial  entrance and exit fees apply to  conversions  from SAIF to
BIF  insurance  and such  fees may make a SAIF to BIF  conversion  prohibitively
expensive.  In the past  the  substantial  disparity  existing  between  deposit
insurance premiums paid by BIF and SAIF members gave BIF-insured  institutions a
competitive  advantage  over  SAIF-insured   institutions  like  the  Bank.  The
reduction  of  SAIF  deposit  insurance  premiums  effectively  eliminated  this
disparity and could have the effect of  increasing  the net earnings of the Bank
and restoring the competitive  equality  between  BIF-insured  and  SAIF-insured
institutions.


                                       28
<PAGE>

         The FDIC has  adopted a  regulation  which  provides  that any  insured
depository  institution  with a ratio of Tier 1 capital to total  assets of less
than 2% will be deemed to be operating in an unsafe or unsound condition,  which
would constitute  grounds for the initiation of termination of deposit insurance
proceedings.  The FDIC,  however,  would not initiate  termination  of insurance
proceedings if the depository  institution has entered into and is in compliance
with a written agreement with its primary regulator,  and the FDIC is a party to
the  agreement,  to increase  its Tier 1 capital to such level as the FDIC deems
appropriate.  Tier 1  capital  is  defined  as the sum of  common  stockholders'
equity,  noncumulative perpetual preferred stock (including any related surplus)
and minority interests in consolidated subsidiaries, minus all intangible assets
other  than  mortgage  servicing  rights  and  qualifying  supervisory  goodwill
eligible  for  inclusion  in  core  capital  under  OTS  regulations  and  minus
identified losses and investments in certain  securities  subsidiaries.  Insured
depository institutions with Tier 1 capital equal to or greater than 2% of total
assets  may also be deemed to be  operating  in an unsafe or  unsound  condition
notwithstanding  such capital  level.  The regulation  further  provides that in
considering  applications that must be submitted to it by savings  institutions,
the FDIC will take into account whether the savings  institution is meeting with
the Tier 1 capital  requirement for state non-member banks of 4% of total assets
for all but the most highly rated state non-member banks.

         Federal Reserve System.  Pursuant to regulations of the Federal Reserve
Board, a savings institution must maintain average daily reserves equal to 3% on
net transaction accounts between $4.9 million and $46.5 million, plus 10% on the
remainder.  This  percentage  is subject to  adjustment  by the Federal  Reserve
Board. Because required reserves must be maintained in the form of vault cash or
in a non-interest  bearing  account at a Federal Reserve Bank, the effect of the
reserve   requirement   is  to   reduce   the   amount   of  the   institution's
interest-earning  assets.  As of September  30,  2000,  the Bank met its reserve
requirements.

         Dividend   Restrictions.   Under  the  OTS  prompt   corrective  action
regulations,  the Bank would be prohibited from making any capital distributions
if, after making the distribution, it would have: (i) a total risk-based capital
ratio of less than 8.0%;  (ii) a Tier 1  risk-based  capital  ratio of less than
4.0%; or (iii) a Tier 1 leverage ratio of less than 4.0%. See "Prompt Corrective
Regulatory  Action." The OTS, after  consultation  with the FDIC,  however,  may
permit an otherwise  prohibited  stock repurchase if made in connection with the
issuance of additional  shares in an equivalent  amount and the repurchase  will
reduce  the  institution's   financial  obligations  or  otherwise  improve  the
institution's  financial  condition.  Under  OTS  regulations,  the  Bank is not
permitted to pay dividends on its capital stock if its regulatory  capital would
thereby be reduced  below the amount then required for the  liquidation  account
established for the benefit of certain depositors of the Bank at the time of its
conversion to stock form.

         Savings  institutions  must submit  notice to the OTS prior to making a
capital  distribution  if (a)  they  would  not be  well-capitalized  after  the
distribution,  (b) the distribution would result in the retirement of any of the
institution's  common  or  preferred  stock or debt  counted  as its  regulatory
capital,  or (c) the institution is a subsidiary of a holding company. A savings
institution  must make  application to the OTS to pay a capital  distribution if
(x)  the  institution  would  not  be  adequately   capitalized   following  the
distribution,  (y) the institution's  total  distributions for the calendar year
exceeds the  institution's net income for the calendar year to date plus its net
income (less distributions) for the preceding two years, or (z) the distribution
would  otherwise  violate  applicable  law or regulation or an agreement with or
condition imposed by the OTS.

         In addition to the foregoing,  earnings of the Bank appropriated to bad
debt reserves and deducted for federal income tax purposes are not available for
payment of cash dividends or other  distributions to the Company without payment
of taxes at the then  current  tax rate by the Bank on the  amount  of  earnings
removed from the reserves for such  distributions.  See  "Taxation." The Company
intends to make full use of this  favorable tax  treatment  afforded to the Bank
and the Company and does not contemplate use of any post-Conversion  earnings of
the Bank in a manner which would limit either  institution's  bad debt deduction
or create federal tax liabilities.

         Transactions  with  Related  Parties.   Transactions   between  savings
institutions  and any  affiliate  are  governed by  Sections  23A and 23B of the
Federal  Reserve Act. An affiliate  of a savings  institution  is any company or
entity which  controls,  is  controlled  by or is under common  control with the
savings institution. In a holding company context, the parent holding company of
a  savings  institution  (such  as the  Company)  and any  companies  which  are
controlled  by  such  parent  holding  company  are  affiliates  of the  savings
institution.  Generally,  Sections 23A and 23B (i) limit the extent to which the
savings  institution or its  subsidiaries  may engage in "covered  transactions"
with any one affiliate to an amount equal to 10% of such  institution's  capital
stock and surplus,  and

                                       29
<PAGE>
contain an aggregate  limit on all such  transactions  with all affiliates to an
amount equal to 20% of such capital stock and surplus, and (ii) require that all
such transactions be on terms  substantially the same, or at least as favorable,
to the institution or subsidiary as those provided to a non-affiliate.  The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee  and  similar  other  types of  transactions.  In addition to the
restrictions  imposed by Sections 23A and 23B, OTS  regulations  provide that no
savings  institution  may  (i)  make a loan or  otherwise  extend  credit  to an
affiliate,  except for any affiliate which engages only in activities  which are
permissible  for bank  holding  companies,  or (ii)  purchase  or  invest in any
stocks, bonds, debentures, notes or similar obligations of any affiliate, except
for affiliates which are subsidiaries of the savings institution. Section 106 of
the BHCA which applies to the Bank,  prohibits the Bank from extending credit to
or offering any other services,  or fixing or varying the consideration for such
extension of credit or service,  on the condition that the customer  obtain some
additional  service from the  institution  or certain of its  affiliates  or not
obtain  services  of  a  competitor  of  the  institution,  subject  to  certain
exceptions.

         Loans to  Directors,  Executive  Officers and  Principal  Stockholders.
Savings  institutions are also subject to the restrictions  contained in Section
22(h)  and  Section  22(g) of the  Federal  Reserve  Act on  loans to  executive
officers, directors and principal stockholders.  Under Section 22(h), loans to a
director,  executive  officer and to a greater than 10% stockholder of a savings
institution  and certain  affiliated  entities of such persons,  may not exceed,
together  with  all  other  outstanding  loans  to such  person  and  affiliated
entities, the institution's  loans-to-one-borrower limit (generally equal to 15%
of the  institution's  unimpaired  capital and surplus and an additional  10% of
such  capital  and  surplus  for  loans  fully  secured  by  readily  marketable
collateral). Section 22(h) also prohibits loans, above amounts prescribed by the
appropriate federal banking agency, to directors, executive officers and greater
than 10% stockholders of a savings institution, and their respective affiliates,
unless such loan is approved in advance by a majority of the board of  directors
of the  institution  with any  "interested"  director not  participating  in the
voting. The Federal Reserve Board has prescribed the loan amount (which includes
all other  outstanding  loans to such  person) as to which  such prior  board of
director approval is required,  as being the greater of $25,000 or 5% of capital
and surplus (up to  $500,000).  Further,  Section  22(h)  requires that loans to
directors,  executive  officers  and  principal  stockholders  be made on  terms
substantially  the same as offered in comparable  transactions to other persons.
Section 22(h) also generally prohibits a depository  institution from paying the
overdrafts of any of its executive officers or directors.

         Section  22(g)  of the  Federal  Reserve  Act  requires  that  loans to
executive  officers  of  depository  institutions  not be  made  on  terms  more
favorable than those afforded to other borrowers, requires approval by the board
of directors of the  depository  institution  for such  extensions  of credit to
executive  officers of the institution,  and imposes reporting  requirements for
and  additional  restrictions  on the type,  amount and terms of credits to such
officers. In addition, Section 106 of the BHCA prohibits extensions of credit to
executive officers, directors, and greater than 10% stockholders of a depository
institution  by  any  other  institution  which  has  a  correspondent   banking
relationship  with the  institution,  unless  such  extension  of  credit  is on
substantially  the same  terms as those  prevailing  at the time for  comparable
transactions  with other  persons and does not involve more than the normal risk
of repayment or present other unfavorable features.

         Safety and Soundness Standards.  Under FDICIA, as amended by the Riegle
Community  Development and Regulatory  Improvement Act of 1994 (the "CDRI Act"),
each  federal  banking  agency is required  to  establish  safety and  soundness
standards for depository institutions under its authority. On July 10, 1995, the
federal banking  agencies,  including the OTS, released  Interagency  Guidelines
Establishing  Standards  for Safety and  Soundness  and  published  a final rule
establishing  deadlines  for  submission  and  review  of safety  and  soundness
compliance  plans.  The final rule and the guidelines went into effect on August
9, 1995.  The  guidelines  require  savings  institutions  to maintain  internal
controls and information systems and internal audit systems that are appropriate
for the size,  nature and scope of the  institution's  business.  The guidelines
also  establish   certain  basic  standards  for  loan   documentation,   credit
underwriting,  interest rate risk  exposure,  and asset growth.  The  guidelines
further provide that savings  institutions should maintain safeguards to prevent
the payment of compensation,  fees and benefits that are excessive or that could
lead to material  financial  loss, and should take into account  factors such as
comparable  compensation  practices  at  comparable  institutions.  If  the  OTS
determines  that a savings  institution is not in compliance with the safety and
soundness  guidelines,  it may require the  institution  to submit an acceptable
plan to achieve  compliance  with the  guidelines.  A savings  institution  must
submit an acceptable  compliance  plan to the OTS within 30 days of receipt of a
request for such a plan.  Failure to submit or implement a  compliance  plan may
subject the institution to regulatory  sanctions.  Management  believes that the
Bank already meets  substantially  all the standards  adopted in


                                       30
<PAGE>
the interagency  guidelines,  and therefore does not believe that implementation
of these regulatory standards will materially affect the Bank's operations.

         Under federal banking regulations, savings institutions must also adopt
and maintain  written policies that establish  appropriate  limits and standards
for  extensions  of credit that are secured by liens or interests in real estate
or are made for the purpose of financing permanent  improvements to real estate.
These policies must establish loan portfolio diversification standards,  prudent
underwriting  standards,  including  loan-to-value  limits,  that are  clear and
measurable,  loan  administration  procedures  and  documentation,  approval and
reporting requirements.  A savings institution's real estate lending policy must
reflect  consideration  of the  Interagency  Guidelines  for Real Estate Lending
Policies (the "Real Estate  Lending  Guidelines")  that have been adopted by the
federal  banking  regulators.  The Real Estate Lending  Guidelines,  among other
things,  call upon  savings  institutions  to establish  internal  loan-to-value
limits  for  real  estate  loans  that  are  not  in  excess  of  the  specified
loan-to-value limits for the various types of real estate loans. The Real Estate
Lending  Guidelines  state,  however,  that it may be  appropriate in individual
cases to originate or purchase loans with loan-to-value  ratios in excess of the
supervisory loan-to-value limits.

         Additionally,  under  FDICIA,  as amended by the CDRI Act,  the federal
banking  agencies  are  required to  establish  standards  relating to the asset
quality and earnings that the agencies determine to be appropriate.  On July 10,
1995,  the  federal  banking  agencies,   including  the  OTS,  issued  proposed
guidelines   relating  to  asset  quality  and  earnings.   Under  the  proposed
guidelines, a savings institution should maintain systems, commensurate with its
size and the nature and scope of its operations,  to identify problem assets and
prevent  deterioration  in  those  assets  as well as to  evaluate  and  monitor
earnings and ensure that earnings are  sufficient to maintain  adequate  capital
and reserves. Management believes that the asset quality and earnings standards,
in the form proposed by the banking  agencies,  would not have a material effect
on the Bank's operations.

REGULATION OF THE COMPANY

         General.  The Company is a unitary  savings and loan holding company as
defined  by the  Home  Owners'  Loan  Act  ("HOLA").  As such,  the  Company  is
registered  with  the  OTS  and  is  subject  to  OTS  regulation,  examination,
supervision  and reporting  requirements.  As a subsidiary of a savings and loan
holding  company,  the Bank is subject to certain  restrictions  in its dealings
with the Company and affiliates thereof. The Company is required to file certain
reports  with,  and  otherwise  comply  with the  rules and  regulations  of the
Securities and Exchange Commission ("SEC") under federal securities laws.

         Activities  Restrictions.   The  Board  of  Directors  of  the  Company
presently  intends to operate the Company as a unitary  savings and loan holding
company.  There are  generally no  restrictions  on the  activities of a unitary
savings and loan holding company. However, if the Director of the OTS determines
that there is reasonable cause to believe that the continuation by a savings and
loan holding company of an activity  constitutes a serious risk to the financial
safety,  soundness or  stability  of its  subsidiary  savings  institution,  the
Director of the OTS may impose such  restrictions as deemed necessary to address
such  risk  including  limiting:   (i)  payment  of  dividends  by  the  savings
institution;   (ii)  transactions   between  the  savings  institution  and  its
affiliates;  and (iii) any  activities  of the  savings  institution  that might
create a serious  risk  that the  liabilities  of the  holding  company  and its
affiliates may be imposed on the savings institution.  Notwithstanding the above
rules as to permissible  business activities of unitary savings and loan holding
companies, if the savings institution subsidiary of such a holding company fails
to meet the QTL test,  then such unitary  holding  company shall also  presently
become subject to the  activities  restrictions  applicable to multiple  holding
companies and,  unless the savings  institution  requalifies as a QTL within one
year thereafter, register as, and become subject to, the restrictions applicable
to a bank holding  company.  See "-- Regulation of the Bank -- Qualified  Thrift
Lender Test."

         If the Company were to acquire control of another savings  institution,
other than  through  merger or other  business  combination  with the Bank,  the
Company  would  thereupon  become a multiple  savings and loan holding  company.
Except where such acquisition is pursuant to the authority to approve  emergency
thrift  acquisitions and where each subsidiary savings institution meets the QTL
test, the activities of the Company and any of its subsidiaries  (other than the
Bank or other subsidiary  savings  institutions)  would thereafter be subject to
further  restrictions.  Among other things, no multiple savings and loan holding
company or subsidiary thereof which is not a savings  institution shall commence
or continue for a limited period of time after  becoming a multiple  savings and
loan holding company or subsidiary  thereof,  any business activity,  upon prior
notice  to,  and no  objection  by,  the


                                       31
<PAGE>
OTS,  other  than:  (i)  furnishing  or  performing  management  services  for a
subsidiary  savings  institution;  (ii) conducting an insurance agency or escrow
business;  (iii) holding,  managing,  or liquidating assets owned by or acquired
from a subsidiary savings institution;  (iv) holding or managing properties used
or occupied by a subsidiary  savings  institution;  (v) acting as trustee  under
deeds  of  trust;  (vi)  those  activities  previously  directly  authorized  by
regulation as of March 5, 1987 to be engaged in by multiple  holding  companies;
or (vii) unless the Director of the OTS by  regulation  prohibits or limits such
activities for savings and loan holding companies,  those activities  authorized
by the Federal  Reserve Board as permissible for bank holding  companies.  Those
activities described in (vii) above must also be approved by the Director of the
OTS prior to being engaged in by a multiple savings and loan holding company.

         Restrictions on Acquisitions.  The HOLA generally prohibits savings and
loan holding companies from acquiring, without prior approval of the Director of
OTS, (i) control of any other  savings  institution  or savings and loan holding
company or  substantially  all the assets  thereof,  or (ii) more than 5% of the
voting shares of a savings institution or holding company thereof which is not a
subsidiary.  Except  with the prior  approval  of the  Director  of the OTS,  no
director or officer of a savings and loan  holding  company or person  owning or
controlling  by proxy or otherwise more than 25% of such  company's  stock,  may
also acquire control of any savings institution, other than a subsidiary savings
institution, or of any other savings and loan holding company.

         The Director of the OTS may only approve acquisitions  resulting in the
formation of a multiple  savings and loan holding company which controls savings
institutions  in more than one  state  if:  (i) the  multiple  savings  and loan
holding company involved controls a savings institution which operated a home or
branch  office in the state of the  institution  to be  acquired  as of March 5,
1987;  (ii) the  acquiror  is  authorized  to  acquire  control  of the  savings
institution  pursuant to the  emergency  acquisition  provisions  of the Federal
Deposit  Insurance  Act;  or (iii)  the  statutes  of the  state  in  which  the
institution to be acquired is located  specifically  permit  institutions  to be
acquired by  state-chartered  institutions or savings and loan holding companies
located in the state  where the  acquiring  entity is  located  (or by a holding
company that controls such state-chartered savings institutions).

         OTS regulations  permit federal  savings  institutions to branch in any
state or states of the United States and its territories.  Except in supervisory
cases or when interstate  branching is otherwise permitted by state law or other
statutory  provision,  a  federal  savings  institution  may  not  establish  an
out-of-state  branch unless (i) the federal savings  institution  qualifies as a
QTL or as a "domestic building and loan institution" under ss.7701(a)(19) of the
Internal  Revenue Code and the total assets  attributable to all branches of the
savings  institution  in the state would qualify such branches  taken as a whole
for treatment as a QTL or for a domestic  building and loan association and (ii)
such  branch  would not  result in (a)  formation  of a  prohibited  multi-state
multiple  savings  and  loan  holding  company  or (b) a  violation  of  certain
statutory  restrictions  on branching  by savings  institution  subsidiaries  of
banking  holding  companies.  Federal  savings  institutions  generally  may not
establish new branches unless the savings  institution  meets or exceeds minimum
regulatory  capital  requirements.  The  OTS  will  also  consider  the  savings
institution's  record of compliance with the Community  Reinvestment Act of 1977
in connection with any branch application.

TAXATION

         General.  The Company and its subsidiaries  (including the Bank) file a
consolidated  federal  income tax return on a fiscal  year  basis.  Consolidated
returns have the effect of  eliminating  intercompany  distributions,  including
dividends,  from the computation of taxable income for the taxable year in which
the distributions occur.

         Federal Income Taxation.  Included in the Small Business Job Protection
Act of 1996 are provisions  which repeal the special bad debt reserve method for
savings and loan  associations  for taxable years  beginning  after December 31,
1995. The legislation requires  institutions to recapture the portion of the tax
bad debt  reserves  that exceeds the pre-1988 tax bad debt reserve over a period
of six to eight years. The recapture can be deferred for one to two years if the
institution meets a residential loan origination requirement.

         For taxable  years  beginning  after  December 31,  1995,  the bad debt
method  for  savings  and  loan  associations  is  conformed  to that of  banks.
Institutions  that  qualify as a "small  bank"  will be able to use the  reserve
method for bad debts.  Reasonable  additions  to the  reserve  for bad debts are
calculated  using the experience  method.


                                       32
<PAGE>
A small bank is an institution with assets less than $500 million.  Institutions
that do not  qualify  as a small  bank will not be  allowed  to use the  reserve
method for bad debts.

         Earnings  appropriated to an institution's bad debt reserve and claimed
as a tax deduction  are not  available for the payment of cash  dividends or for
distribution to  shareholders  (including  distributions  made on dissolution or
liquidation),  unless such amount is included in taxable income,  along with the
amount deemed necessary to pay the resulting federal income tax.

         The Bank's federal  corporate  income tax returns have not been audited
in the last five years.

         State  Income  Taxation.  The State of  Minnesota  imposes a  corporate
franchise  tax at the  rate of 9.8% on  income  which  is  considered  Minnesota
taxable income.  Taxable income for the State of Minnesota is substantially  the
same as federal taxable income.

         For additional  information regarding taxation, see Note 11 of Notes to
Consolidated Financial Statements.

ITEM 2.  PROPERTIES
-------------------

         The  following  table sets forth  information  regarding  the Company's
offices at September 30, 2000.
<TABLE>
<CAPTION>
                               Year          Owned or     Book Value at          Approximate         Deposits at
                               Opened         Leased   September 30, 2000      Square Footage    September 30, 2000
                               ------         ------   ------------------      --------------    ------------------
                                                                                                     (In thousands)
<S>                              <C>                      <C>                     <C>              <C>
MAIN OFFICE:
214 5th Street                   1910          Owned      $     1,320,000         10,990           $    53,781
Bemidji, Minnesota  56601

BRANCH OFFICES:
22 First Street, NE              1977          Owned              269,000          1,789                18,452
Bagley,  Minnesota  56621

109 Main Street West             1983          Owned              277,000          3,083                10,431
Baudette, Minnesota  56623

527 Minnesota Avenue             1987          Owned               94,000          1,700                 3,966
Walker, Minnesota  56484

550 Paul Bunyan Drive, N.W.      1995         Leased              207,000          2,158                 2,270
Bemidji, Minnesota  56601

</TABLE>

         The Bank has entered  into an agreement  with  Wal-Mart  Stores,  Inc.,
subject to regulatory approval, for an in-store banking facility. A full service
in-store  banking  facility will be located in the new Wal-Mart  Supercenter  in
Bemidji. The Bank is tentatively scheduled to begin operations in late 2001 when
the Wal-Mart Supercenter opens for business.

         The book value of the  Company's  investment  in premises and equipment
totaled $2.17 million at September 30, 2000. See Note 9 of Notes to Consolidated
Financial Statements.

ITEM 3. LEGAL PROCEEDINGS.
-------------------------

         At September  30, 2000,  there were no legal  proceedings  to which the
Company or First  Federal  was a party,  or to which any of their  property  was
subject,  which were  expected by management to result in a material loss to the
Company or the Bank.


                                       33
<PAGE>

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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year ended September 30, 2000.


                                     PART II

ITEM 5. MARKET FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDERS'
MATTERS
--------------------------------------------------------------------------------

         The  information  contained  under the sections  captioned  "Market and
Dividend  Information" in the Company's  Annual Report to  Stockholders  for the
Fiscal Year Ended  September 30, 2000 (the "Annual  Report") filed as Exhibit 13
hereto is incorporated herein by reference.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------

         The  information  contained  in  the  section  captioned  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

         The Consolidated Financial Statements,  Notes to Consolidated Financial
Statements and  Independent  Auditors'  Report in the Annual  Report,  which are
listed under Item 13 herein, are incorporated herein by reference.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

         None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
--------------------------------------------------------------------------------

         For  information  concerning  the  Board  of  Directors  and  executive
officers of the Company,  the information  contained under the section captioned
"Proposal  I --  Election  of  Directors"  in  the  Company's  definitive  proxy
statement  for the Company's  2001 Annual  Meeting of  Stockholders  (the "Proxy
Statement") is incorporated herein by reference.

         For information regarding delinquent filers, as required by Item 405 of
Regulation S-B,  reference is made to "Security  Ownership of Management" in the
Proxy Statement, which is incorporated herein by reference.

ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

         The information  contained under the sections captioned  "Proposal I --
Election of Directors -- Executive Compensation" "-- Director Compensation," "--
Employment  Agreements" and "-- Supplemental  Executive Retirement Agreement" in
the Proxy Statement is incorporated herein by reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference  to the section  captioned  "Voting  Securities  and
                  Principal Holders Thereof" in the Proxy Statement.


                                       34
<PAGE>

         (b)      Security Ownership of Management

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

         (c)      Changes in Control

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

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The information  required by this item is incorporated  herein by reference
to the section  captioned  "Proposal I -- Election of Directors --  Transactions
with Management" in the Proxy Statement.

                                     PART IV

ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K.
-----------------------------------------------

     (a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
         ----------------------------------------------

     (1) Financial Statements.  The following  consolidated financial statements
are incorporated by reference from Item 8 hereof (see Exhibit 13):

          Independent Auditors' Report

          Consolidated  Statements  of Financial  Condition - September 30, 2000
          and 1999

          Consolidated Statements of Income - Years ended September 30, 2000 and
          1999

          Consolidated   Statements  of  Stockholders'   Equity  -  Years  ended
          September 30, 2000 and 1999

          Consolidated Statements of Cash Flows - Years ended September 30, 2000
          and 1999

          Notes to Consolidated Financial Statements

     (2) Financial  Statement  Schedules.  All schedules for which  provision is
made in the  applicable  accounting  regulations  of the Securities and Exchange
Commission are omitted because of the absence of conditions under which they are
required or because the  required  information  is included in the  consolidated
financial statements and related notes thereto.

     (3)  Exhibits.  The  following is a list of exhibits  filed as part of this
Annual Report on Form 10-K and is also the Exhibit Index.

       No.        Description
       --         -----------

       3.1        Articles of Incorporation of First Federal Bancorporation    *
       3.2        Bylaws of First Federal Bancorporation                       *
       4          Form of Common Stock Certificate of First Federal
                  Bancorporation                                              **
       10.1       First Federal Bancorporation 1995 Stock Option and
                  Incentive Plan                                              **
       10.2       First Federal Bancorporation Management Recognition Plan     *
       10.3(a)    Employment Agreement between First Federal Bancorporation
                  and William R. Belford                                       *

                                       35
<PAGE>

       10.3(b)    Employment Agreement between First Federal Banking &
                  Savings, FSB and William R. Belford                          *
       10.4       First Federal Banking & Savings, FSB Retirement Plan
                  for Non-Employee Directors                                   *
       10.5       First Federal Banking & Savings, FSB Deferred Compensation
                  Plan, as Amended and Restated                                *
       10.6       First Federal Banking & Savings, FSB Supplemental
                  Retirement Plan                                              *
       10.7       First Federal Bancorporation 1998 Stock Option Plan        ***
       13         Annual Report to Stockholders
       21         Subsidiaries of the Registrant
       23         Consent of McGladrey & Pullen LLP
       27         Financial Data Schedule
____________
(*)  Incorporated  herein by reference from  Registration  Statement on Form S-1
     filed February 8, 1995 (File No. 33-86964).
(**) Incorporated  herein by reference from  Registration  Statement on Form 8-A
     filed March 15, 1995 (File No. 0-25704).
(***)Incorporated  herein by reference  from Annual  Report on Form 10-KSB filed
     December 23, 1999 (File No. 0-25704).

     (b) REPORTS ON FORM 8-K.  During the quarter ended  September 30, 2000, the
         -------------------
Registrant did not file any Current Reports on Form 8-K.

     (c)  EXHIBITS.  The  exhibits  required by Item 601 of  Regulation  S-B are
          --------
either  filed as part of this Annual  Report on Form 10-KSB or  incorporated  by
reference herein.

     (d) FINANCIAL  STATEMENTS AND SCHEDULES EXCLUDED FROM ANNUAL REPORT.  There
         --------------------------------------------------------------
are no other financial  statements and financial  statement schedules which were
excluded from the Annual Report to Stockholders  pursuant to Rule 14a-3(b) which
are required to be included herein.


                                       36
<PAGE>
                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


                                      FIRST FEDERAL BANCORPORATION




December 22, 2000                     By: /s/ William R. Belford
                                          --------------------------------
                                          William R. Belford
                                          President and Chief Executive Officer

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.


/s/ William R. Belford                                     December 22, 2000
-----------------------------------------------------
William R. Belford
President, Chief Executive Officer
  and Director
(Principal Executive Officer)

/s/ Dennis M. Vorgert                                      December 22, 2000
-----------------------------------------------------
Dennis M. Vorgert
Vice President and Treasurer
(Principal Financial and Accounting Officer)

/s/ Ralph T. Smith                                         December 22, 2000
-----------------------------------------------------
Ralph T. Smith
Chairman of the Board

/s/ Martin R. Sathre                                       December 22, 2000
-----------------------------------------------------
Martin R. Sathre
Vice Chairman of the Board

/s/ Walter R. Fankhanel                                    December 22, 2000
-----------------------------------------------------
Walter R. Fankhanel
Director

/s/ James R. Sharp                                         December 22, 2000
-----------------------------------------------------
James R. Sharp
Director

/s/ Dean J. Thompson                                       December 22, 2000
-----------------------------------------------------
Dean J. Thompson
Director