FIRST INDEPENDENCE CORP /DE/, 424B3, 1998-11-23

FIRST INDEPENDENCE CORP /DE/
424B3, 1998-11-23
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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PROSPECTUS

FIRST INDEPENDENCE CORPORATION

^ 165,518 Shares of Common Stock
(Anticipated Maximum)

First Independence Corporation (the "Company") is offering its common
stock to the depositors of The Neodesha Savings and Loan Association, FSA
("Neodesha") (through subscription rights) and the public pursuant to a plan by
which Neodesha is combining with First Federal Savings and Loan Association of
Independence ("First Federal" or the "Association") through the conversion of
Neodesha from the mutual to the stock form of organization and the simultaneous
merger of Neodesha with and into the Association (the "Merger Conversion"). The
Merger Conversion must be approved by the Office of Thrift Supervision and by a
majority of the votes eligible to be cast by members of Neodesha. No common
stock will be sold if Neodesha does not receive these approvals, or if First
Independence Corporation does not receive orders for at least the minimum number
of shares. Pursuant to Neodesha's plan of merger conversion ("Plan of Merger
Conversion"), non-transferable rights to subscribe for the Company's common
stock ("Subscription Rights") have been given, in order of priority, to: (1)
Eligible Account Holders (deposit account holders of Neodesha as of December 31,
1996); (2) Tax-Qualified Employee Plans; (3) Supplemental Eligible Account
Holders (deposit account holders of Neodesha as of ^ September 30, 1998); (4)
members of Neodesha, other than Eligible Account Holders and Supplemental
Eligible Account Holders, as of ^ November 9, 1998, the voting record date for
the Special Meeting ("Other Members"); and (5) officers, directors and employees
of Neodesha (the "Subscription Offering"). Concurrently, and subject to the
prior rights of holders of Subscription Rights, the Company is offering its
common stock for sale in a community offering to members of the general public,
with a first preference to natural persons residing in Wilson County, Kansas
(the "Community Offering"). It is anticipated that shares not subscribed for in
the Subscription and Community Offering will be offered to certain members of
the general public on a best efforts basis through a selected dealers
arrangement (the "Syndicated Community Offering") (the Subscription Offering,
the Community Offering and the Syndicated Community Offering are referred to
collectively as the "Subscription and Community Offering"). All purchases will
be subject to the maximum and minimum purchase limitations and other terms and
conditions described in the Prospectus including Neodesha's and the Company's
right, in their sole discretion, to reject orders received in the Community and
the Syndicated Community Offering in whole or in part.

An independent appraiser has estimated the pro forma market value of
Neodesha, as a stock institution, to be between $1,020,000 and $1,380,000.
Subject to regulatory approval, First Independence Corporation may sell up to
$1,587,000 of its common stock. The actual purchase price per share cannot
currently be determined because it will be equal to 95% of the average closing
bid price of First Independence Corporation common stock (based on the average
of the closing bid quotations on the Nasdaq SmallCap Market) for the ten trading
days ending the day before the closing of ^ the Merger Conversion. For the ten
trading days ending on ^ November 10, 1998, the average of the closing bid
quotations for a share of Company common stock on the Nasdaq SmallCap Market was
^ $10.325. If that price was the average market price for the ten trading days
ending on the day before the closing of ^ the Merger Conversion, the actual
purchase price per share would be ^ $9.81. As a result, subscribers must order,
and submit payments or authorize withdrawals for a specific dollar amount of
First Independence Corporation common stock. No fractional shares of common
stock will be issued. Based on these estimates, First Independence is making the
following offering of shares of common stock:

o Price per share

Minimum/Maximum: ^ $8.34 to ^ $11.28

o Estimated Expenses: $450,000

o Net Proceeds to First Independence Corporation
Minimum/Maximum/Maximum, as adjusted: $570,000 to $930,000 to $1,137,000

o Net Proceeds per Share (based on midpoint price per share)

Minimum/Maximum/Maximum, as adjusted: ^ $5.48 to ^ $6.61 to ^ $7.03

</TABLE>

Please refer to Risk Factors beginning on page 9 of this Prospectus.

These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other governmental agency.

Neither the Securities and Exchange Commission, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, nor any state securities
regulator has approved or disapproved these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.

Trident Securities, Inc. will use its best efforts to assist First Independence
Corporation in selling at least the minimum number of shares but does not
guarantee that this number will be sold. All funds received from subscribers
will be held in an interest bearing savings account at the Association until the
completion or termination of the Merger Conversion. First Independence
Corporation's common stock is listed on the Nasdaq SmallCap Market under the
symbol "FFSL".

For information on how to subscribe, call the Stock Information Center at (316)
325-2268.

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

Trident Securities, Inc.

The date of this Prospectus is ^ November 9, 1998

<PAGE>

[MAP TO COME]

THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
SAVINGS DEPOSITS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE
FUND.

<PAGE>

PROSPECTUS SUMMARY

The following summary does not purport to be complete and is qualified
in its entirety by the detailed information and financial statements appearing
elsewhere herein.

First Independence Corporation

The Company, a Delaware corporation, was organized by the Association
for the purpose of becoming a thrift institution holding company for the
Association. The Company is authorized to engage in any activity permitted by
Delaware law.

The principal asset of the Company is the outstanding stock of the
Association, its wholly owned subsidiary. The Company presently has no separate
operations, and its business consists only of the business of the Association,
although it does hold some investment securities and the loan on the ESOP. All
references to the Company, unless otherwise indicated, refer to the Company and
the Association on a consolidated basis, as the context requires.

The Company's sources of funds are primarily dividends from the
Association, borrowings and the issuance of shares of capital stock. For a
description of certain restrictions on the Association's ability to pay
dividends to the Company, see "Common Stock Prices and Dividends."

The Company and the Association are subject to examination and
comprehensive regulation and oversight by the OTS and by the Federal Deposit
Insurance Corporation ("FDIC"). The Association is further subject to
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") governing reserves required to be maintained against
transaction accounts and non-personal time deposits. The Association is a member
of the Federal Home Loan Bank ("FHLB") of Topeka, which is one of the 12
regional banks constituting the FHLB System and its savings deposits are backed
by the full faith and credit of the United States Government and are insured by
the Savings Association Insurance Fund ("SAIF") to the maximum extent permitted
by law.

As of June 30, 1998, the Company had total assets of $123.4 million,
deposits of $81.3 million and stockholders' equity of $11.8 million. For the
nine months ended June 30, 1998, the Company recorded net earnings of $644,000.

The Company's executive offices are located at Myrtle & Sixth,
Independence, Kansas 67301 and its telephone number at that location is (316)
331-1660.

The Neodesha Savings and Loan Association, FSA

Neodesha began operation in 1887 as a state-chartered mutual savings
institution. In June, 1993, Neodesha converted to a federally chartered mutual
savings and loan association. Its savings accounts have been insured since 1939
and Neodesha has been a member of the FHLB System since 1939. Neodesha's
operations are conducted through its home office in Neodesha, Kansas.

As of June 30, 1998, Neodesha had total assets of $13.5 million,
deposits of $11.7 million and retained earnings of $1.1 million. For the nine
months ended June 30, 1998, Neodesha recorded net earnings of $49,000.

The business of Neodesha consists primarily of attracting deposits
from the general public and using those deposits to originate one- to
four-family residential mortgage and consumer loans, to purchase investment
securities and to make other investments.

<PAGE>

The Merger Conversion

The Subscription Offering and Direct Community Offering are being made
in connection with the conversion of Neodesha from a mutual to a stock savings
and loan association and the simultaneous merger of Neodesha with and into the
Association. Net conversion proceeds are expected to increase the net worth of
the Company, which may support future deposit growth and expanded operations and
permit expansion of the Company's lending and investment activities and other
financial services to the public. The Merger Conversion is subject to certain
conditions, including the prior approval of the Plan of Merger Conversion (the
"Plan") by certain of Neodesha's members at a Special Meeting to be held on ^
December 22, 1998. After the Merger Conversion, members of Neodesha will have no
voting rights in the Company unless they become Company stockholders. Depositors
as of December 31, 1996 ("Eligible Account Holders") and depositors as of ^
September 30, 1998 ("Supplemental Eligible Account Holders), however, will have
certain liquidation rights in Neodesha. See "The Merger Conversion - Effects on
Depositors and Borrowers of Neodesha - Liquidation Rights."

Subscription Offering and Direct Community Offering. The Company is
offering up to ^ 165,518 newly issued shares of Common Stock in the Subscription
Offering. Certain depositors of Neodesha, the ESOP of the Company, and
directors, officers, and employees of Neodesha will receive subscription rights
to purchase the Common Stock. No person may sell, assign or transfer their
subscription rights. Persons found to be selling or otherwise transferring their
rights to purchase Common Stock in the Subscription Offering, or purchasing
Common Stock on behalf of another person will be subject to forfeiture of such
rights and possible federal penalties and sanctions. See "The Merger Conversion
- - Restriction on Transfer of Subscription Rights and Shares."

The Plan of Merger Conversion places limitations on the amount of
Common Stock which may be purchased in the Merger Conversion by various
categories of persons, including an overall limitation of $100,000 of Company
Common Stock which may be purchased in the Merger Conversion by any one person
or group of persons acting in concert (other than the Tax-Qualified Employee
Plan). The minimum purchase limitation is $250 of Common Stock. In addition, no
fractional shares of Common Stock will be issued. See "The Merger Conversion -
Purchase Limitations." If the Merger Conversion is not approved by the members
of Neodesha at the Special Meeting, or if all of the shares offered in the
Merger Conversion are not sold, no shares will be issued, the Merger Conversion
will not take place, all subscription funds received will be returned promptly
with interest at the Association's passbook rate and all withdrawal
authorizations will be terminated.

Concurrently with the Subscription Offering, the Company is offering
all unsubscribed shares, if any, to members of the general public to whom this
Prospectus is delivered, with a preference to natural persons residing in Wilson
County, Kansas. The Direct Community Offering may be extended by the Company up
to 45 days beyond the date of the completion of the Subscription Offering or, in
the event that the Company resolicits stock purchase orders, for such longer
period as the OTS may approve.

Stock Pricing and Number of Shares of Common Stock to be Issued in the
Conversion. The actual per share purchase price for the Conversion Stock will be
equal to 95% of the average closing bid price of the Company's Common Stock
(which is the average of the closing bid quotations on the Nasdaq SmallCap
Market) for the ten trading days ending on the day before the closing of ^ the
Merger Conversion (the "Pricing Date"). The total number of shares of Conversion
Stock to be issued will be determined by dividing the Aggregate Purchase Price
by the per share purchase price. The total number of shares to be issued may be
significantly increased or decreased without a resolicitation of subscriptions,
unless such an increase or decrease results in an Aggregate Purchase Price which
is outside the Valuation Range (without giving effect to any shares which may be
issued pursuant to the Aggregate Purchase Price being within 15% above the high
end of the Valuation Range), a price per share below ^ $8.34 or above ^ $11.28,
or is otherwise determined by the Company and Neodesha to be material.

The Company has established a Stock Information Center, managed by
Trident Securities, to coordinate the Subscription and Community Offering,
including tabulating orders and answering questions about the Subscription and
Community Offering received by telephone and in person. All subscribers will be
instructed to mail a completed order form and certification along with payment
to the Stock Information Center or deliver payment directly to the Company's
main office. Payment for shares of Common Stock may be made by cash (if
delivered in person), check or money order

<PAGE>

or by authorization of withdrawal from deposit accounts maintained with
Neodesha. Such funds will not be available for withdrawal and will not be
released until the Merger Conversion is completed or terminated. The Company
will not accept wire transfers for the payment of stock for any reason. See "The
Merger Conversion - Method of Payment for Subscriptions."

The aggregate pro forma market value of Neodesha, as converted, was
estimated by Ferguson & Company ("Ferguson"), which is experienced in appraising
converting thrift institutions, to be the Valuation Range. The Board of
Directors of Neodesha has reviewed the Valuation Range as stated in the
appraisal and compared it with recent stock trading prices as well as recent pro
forma market value estimates for other financial institutions. The Board of
Directors has also reviewed the appraisal report, including the assumptions and
methodology utilized therein, and determined that it was not unreasonable. The
appraisal is not intended to be, and must not be interpreted as, a
recommendation of any kind as to the advisability of voting to approve the
Merger Conversion or of purchasing shares of Common Stock. Moreover, the
appraisal is necessarily based on many factors which change from time to time.
See "Pro Forma Data" and "The Merger Conversion - Stock Pricing and Number of
Shares to be Issued" for a description of the manner in which such valuation was
made and the limitations on its use.

Use of Proceeds

The net proceeds from the sale of Conversion Stock in the Merger
Conversion will increase the net worth of the Company, which may support future
deposit growth and expanded lending and investment activities. On an interim
basis the proceeds may be invested in short-term securities.

Interests of Certain Persons in the Merger Conversion

Certain members of Neodesha's management and Board of Directors have
interests in the Merger Conversion in addition to their interests as members of
Neodesha generally. These interests relate to (i) the formation and maintenance
of a Neodesha, Kansas Advisory Board which will initially consist of the
non-employee directors of Neodesha; (ii) the Company has agreed to grant to
President Miller, Vice President Holmquist and each non-employee director of
Neodesha options to purchase, upon consummation of the Merger Conversion, 3,000,
1,500, and 1,000 shares, respectively, of Common Stock (all with an exercise
price equal to the fair market value on the date of grant and subject to vesting
over five years); (iii) the Company has agreed to enter into a three-year
employment agreement with Franklin Miller, president of Neodesha, upon
consummation of the Merger Conversion, which provides for the payment of salary
equal to his current compensation, the payment of 299% of his "base amount"
(five-year average) compensation under certain circumstances in connection with
a change of control of the Company and the use of a company car; and (iv) the
eligibility of former employees of Neodesha who become employees of the Company
for certain employee benefits. See "The Merger Conversion - Interests of Certain
Persons in the Merger Conversion."

Dividends

The Company has paid a cash dividend on its Common Stock in each
quarter since the Association's conversion to stock form in October 1993. The
most recent quarterly dividend declared by the Company was for $.075 per share
and was paid on August 21, 1998. The Company anticipates that it will continue
to pay quarterly cash dividends on the Common Stock, although there can be no
assurance as to the amount or timing of future dividends. The payment of
dividends in the future is at the discretion of the Company's Board of Directors
and will depend on the Company's operating results and financial condition,
availability of funds, regulatory limitations, tax considerations and other
factors. See "Common Stock Prices and Dividends."

Market for Common Stock

The Company's Common Stock is quoted on the Nasdaq SmallCap Market
under the symbol "FFSL." See "Common Stock Prices and Dividends."

<PAGE>

Forward-Looking Statements

In connection with ^ the Merger Conversion, when used in this
Prospectus, in the Company's press releases or other public or shareholder
communications, and in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result", "are expected to",
"will continue", "is anticipated", "estimate", "project" or similar expressions
are intended to identify "forward-looking statements." Such statements are
subject to risks and uncertainties, including but not limited to changes in
economic conditions in the Company's and Neodesha's market area, changes in
policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the Company's and Neodesha's market area and competition, all or some
of which could cause actual results to differ materially from historical
earnings and those presently anticipated or projected. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made and are subject to the
above-stated qualifications in any event. The Company wishes to advise readers
that the factors listed above could affect the Company's financial performance
and could cause the Company's actual results for future periods to differ
materially from any opinions or statements expressed with respect to future
periods in any current statements.

The Company does not undertake -- and specifically declines any
obligation -- to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION OF
FIRST INDEPENDENCE CORPORATION

The summary information presented below under "Selected Financial
Condition Data" and "Selected Operations Data" for, and as of the end of, each
of the years ended September 30 is derived from the Company's audited financial
statements. The selected data presented below as of June 30, 1998, and for the
nine months ended June 30, 1998 and 1997 is derived from the Company's unaudited
financial statements. In the opinion of management of the Company, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of results of or as of the periods indicated have been included.
The results of operations and other data for the nine month periods are not
necessarily indicative of the results of operations for the fiscal year end. The
following information is only a summary and you should read it in conjunction
with our financial statements and notes beginning on page F-2.
<TABLE>
<CAPTION>

June 30, September 30,
--------------------------------------------------------------

1998 1997 1996 1995 1994 1993 (1)
--------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>

Selected Financial Condition Data:

Total assets....................................... $123,366 $112,523 $108,539 $101,904 $94,593 $96,166
Cash, cash equivalents and interest-bearing
deposits........................................ 1,008 3,151 1,763 2,115 1,415 20,146
Loans receivable, net.............................. 90,614 74,559 67,683 60,370 56,895 58,089
Mortgage-backed securities - at cost............... 19,518 23,528 28,039 28,594 29,617 13,963
Investment securities - at cost.................... 5,000 3,000 2,000 1,000 4,245 271
Securities available for sale...................... 3,357 4,783 5,894 7,358 12 ---
Real estate acquired through foreclosure, net...... 36 12 12 62 234 1,409
Deposits........................................... 81,327 76,229 69,356 67,927 64,384 84,941
Borrowings......................................... 28,400 23,700 24,300 18,800 15,400 3,000
Stockholders' equity............................... 11,815 11,529 13,003 13,600 13,351 6,103
</TABLE>

<TABLE>
<CAPTION>
Nine Months
Ended June 30, Year Ended September 30,
---------------------------------------------------------------------------

1998 1997 1997 1996 1995 1994 1993 (1)
---------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>

Selected Operations Data:

Total interest income...................... $6,725 $6,007 $8,069 $7,773 $7,186 $6,296 $6,570
Total interest expense..................... 4,107 3,752 5,059 4,669 3,852 2,857 3,490
------- -------- ------- -------- -------- -------- --------
Net interest income...................... 2,618 2,255 3,010 3,104 3,334 3,439 3,080
Provision for losses on loans.............. --- --- --- --- --- 45 332
------- -------- ------- -------- -------- -------- --------
Net interest income after provision for

loan losses............................. 2,618 2,255 3,010 3,104 3,334 3,394 2,748
Other income............................... 132 83 159 214 ^ 267 216 217
Gain on sale of investments................ --- --- --- 251 --- --- 326
General, administrative and other expense.. (1,634) (1,497) (1,989) (2,267) (1,820) (1,653) (1,506)
------- -------- ------- -------- -------- -------- --------

Earnings before income tax expense and
cumulative effect of change in
accounting principle.................. 1,116 841 1,180 1,302 1,781 1,957 1,785
Income tax expense......................... 472 332 468 487 694 750 465
------- -------- ------- -------- -------- -------- --------
Earnings before cumulative effect of
change in accounting principle........ 644 509 712 815 1,087 1,207 1,320
Cumulative effect of change in accounting
principle............................. --- --- --- --- --- 241 ---
------- -------- ------- -------- -------- -------- --------
Net earnings............................... $ 644 $ 509 $ 712 $ 815 $ 1,087 $ 1,448 $ 1,320
------- ======= ======= ======= ======= ======= =======
Basic earnings per share................... $ .70 $ .51 $ .73 $ .72 $ .87 $ .99 N/A
======= ======== ======= ======= ======== =======

</TABLE>

<PAGE>

At or For the
Nine Months At or For the
Ended June 30, Year Ended September 30,

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

1998 1997 1997 1996 1995 1994 1993 (1)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

Selected Financial Ratios and Other Data:

Performance Ratios:
Return on assets (ratio of net earnings to
average total assets)..................... 0.72% 0.62% 0.65% 0.78% 1.12% 1.61% 1.50%
Interest rate spread information:
Average during period................... 2.52 2.29 2.31 2.36 2.87 3.38 3.45
End of period........................... 2.31 2.23 2.19 2.17 2.36 3.34 2.94
Net interest margin (2)................. 3.00 2.81 2.81 3.02 3.52 3.91 3.64
Ratio of operating expense to average 3 1 88 1 61
total assets.............................. 1.8 .82 1.81 2.17 1. .82 1.
Return on equity (ratio of net earnings to
average equity)........................... 7.42 5.78 6.09 6.21 8.16 11.21 24.63

Quality Ratios:
Non-performing assets to total assets at 6 77 1 81
end of period (3)......................... .5 87 1.25 0.57 0. .27 2.
Allowance for loan losses to
non-performing assets at end of period (3) 95.15 69.38 47.64 112.36 87.45 55.31 24.72
Allowance for loan losses to
non-performing loans at end of period .... 100.34 73.84 48.05 114.62 94.91 68.62 51.66

Capital Ratios:
Equity to total assets, at end of period.. 9.58 10.43 10.25 11.98 13.35 14.11 6.35
Average equity to average assets.......... 9.72 10.73 10.62 12.57 13.78 14.38 6.08
Ratio of average interest-earning assets to
average interest-bearing liabilities...... 110.20 111.08 110.64 114.50 115.83 116.42 104.66
Dividend payout ratio (4)................. 32.69 36.46 34.93 27.37 16.47 7.73 N/A
Number of full service offices............ 2 2 2 1 1 1 1

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

<FN>

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

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

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

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

</FN>
</TABLE>

<PAGE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION OF
THE NEODESHA SAVINGS AND LOAN ASSOCIATION, ^ FSA

The summary information presented below under "Selected Financial
Condition Data" and "Selected Operations Data" for, and as of the end of, each
of the years ended September 30 is derived from Neodesha's audited financial
statements. The selected data presented below as of June 30, 1998, and for the
nine months ended June 30, 1998 and 1997 is derived from Neodesha's unaudited
financial statements. In the opinion of management of Neodesha, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of results of or as of the periods indicated have been included. The results of
operations and other data for the nine month periods are not necessarily
indicative of the results of operations for the fiscal year end. The following
information is only a summary and you should read it in conjunction with our
financial statements and notes beginning on page F-36.
<TABLE>
<CAPTION>

June 30, September 30,
-----------------------------------------

1998 1997 1996 1995 1994 1993
------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>

Selected Financial Condition Data:

Total assets................................... $13,523 $14,155 $14,411 $13,799 $14,477 $13,943
Cash, cash equivalents and interest-bearing
deposits................................... 583 635 772 559 796 1,319
Loans receivable, net.......................... 9,364 9,468 9,489 9,049 8,940 9,116
Mortgage-backed securities -- at cost: ........ 159 253 253 253 253 627
Investment securities -- at cost:
U.S. Treasury.............................. 799 897 1,097 1,098 1,099 806
Agency..................................... 1,316 1,617 1,516 1,516 1,817 1,105
Municipal................................... 604 603 602 602 602 ---
Deposits....................................... 11,730 12,854 12,698 11,673 12,742 12,904
Borrowings..................................... 600 100 500 950 650 ---
Retained earnings - substantially restricted... 1,141 1,092 1,015 1,012 941 854
</TABLE>

<TABLE>
<CAPTION>
Nine Months
Ended June 30, Year Ended September 30,
----------------------------------------------------------------

1998 1997 1997 1996 1995 1994 1993
----------------------------------------------------------------
(In Thousands)

Selected Operations Data:

Total interest income........................ $ 750 $ 782 $1,046 $1,045 $1,009 $1,013 $1,122
Total interest expense....................... 404 418 560 571 496 461 548
----- ------- ------- ------ ------ ------ ------
Net interest income....................... 346 364 486 474 513 552 573
Provision for losses on loans ............... 5 4 6 6 6 36 24
----- ------- ------- ------ ------ ------ ------
Net interest income after provision for
loan losses............................... 341 360 480 468 507 516 549
Other income................................. 94 101 135 140 124 104 112
General, administrative and
other expense............................. (371) (385) (510) (604) (538) (538) (520)
----- ------- ------- ------ ------ ------ ------
Earnings before income tax expense
and cumulative effect of change
in accounting principle................... 64 76 105 4 91 82 141
Income tax expense........................... 15 20 28 1 20 18 46
----- ------- ------- ------ ------ ------ ------
Earnings before cumulative effect of
change in accounting principle............ 49 56 77 3 71 64 95
Cumulative effect of change in
accounting principle...................... --- --- --- --- --- 23 ---
----- ------- ------- ------ ------ ------ ------
Net earnings................................. $ 49 $ 56 $ 77 $ 3 $ 71 $ 87 $ 95
===== ======= ======= ====== ====== ====== ======
</TABLE>

At or For the
Nine Months At or For the
Ended June 30, Year Ended September 30,

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

1998 1997 1997 1996 1995 1994 1993
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

Selected Financial Ratios and Other Data:

Performance Ratios:
Return on assets (ratio of net earnings to
average total assets).................... 0.47% 0.52% 0.54% 0.02% 0.51% 0.60% 0.66%
Interest rate spread information:
Average during period................... 3.42 3.49 3.48 3.39 3.86 4.16 4.27
End of period........................... 3.25 3.40 3.49 3.49 3.61 4.32 4.46
Net interest margin(1).................. 3.57 3.61 3.61 3.51 3.94 4.15 4.26
Ratio of operating expense to average 1 3. 8 3. 9
total assets............................. 3.6 60 3.58 4.22 3.8 73 3.5
Return on equity (ratio of net earnings to 7 7. 0 9. 4
average equity)........................... 5.7 11 7.25 .29 7.3 67 11.5

Quality Ratios:
Non-performing assets to total assets at 1.92 1.69 1.29 0.91 1.59 4.41 5.06
end of period(2)..........................
Allowance for loan losses to non- 92 37 64 23 82
performing assets at end of period(2).... 30. .78 48.90 77.10 48. .66 21.
Allowance for loan losses to non- 33 34. 53 30 14
performing loans at end of period........ 35. 67 56.69 77.10 57. .92 31.

Capital Ratios:
Equity to total assets, at end of period.. 8.44 7.35 7.71 7.04 7.34 6.50 6.12
Average equity to average assets.......... 8.20 7.37 7.45 7.26 7.00 6.25 5.69
Ratio of average interest-earning assets to
average interest-bearing liabilities..... 103.58 102.94 103.12 102.88 102.13 99.90 99.84

Other data:
Number of full service offices............ 1 1 1 1 1 1 1

^------------------------------
<FN>

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

(2) Includes non-accruing loans, accruing loans delinquent 90 days or more and assets acquired through foreclosure.
</FN>
</TABLE>

<PAGE>

RECENT FINANCIAL DATA OF
FIRST INDEPENDENCE CORPORATION

The summary information presented below as of and for the year ended
September 30, 1997 is derived from the audited financial statements of the
Company. The summary information presented below as of September 30, 1998 and
June 30, 1998, and for the three and twelve months ended September 30, 1998 and
three months ended September 30, 1997 is derived from the Company's unaudited
financial statements. In the opinion of management of the Company, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of results of or as of the periods indicated have been included.
The results of operations and other data for the three month periods are not
necessarily indicative of the results of operations for the fiscal year end. The
following information is only a summary and you should read it in conjunction
with our financial statements and notes beginning on page F-2.

September 30, June 30, September 30,
1998 1998 1997
(In Thousands)
<S> <C> <C> <C>

Selected Financial Condition Data:

Total assets.................................... $124,337 $123,366 $112,523
Cash, cash equivalents and interest-bearing
deposits..................................... 914 1,008 3,151
Loans receivable, net........................... 93,684 90,614 74,559
Mortgage-backed securities - at cost............ 17,274 19,518 23,528
Investment securities - at cost................. 5,000 5,000 3,000
Securities available for sale................... 3,418 3,357 4,783
Real estate acquired through foreclosure, net... 72 36 12
Deposits........................................ 80,573 81,327 76,229
Borrowings...................................... 30,100 28,400 23,700
Stockholders' equity............................ 12,099 11,815 11,529

</TABLE>

Three Months
Ended September 30, Year Ended September 30,
----------------------------------------------------

1998 1997 1998 1997
----------------------------------------------------

(In Thousands)
<S> <C> <C> <C> <C>

Selected Operations Data:

Total interest income..................... $2,350 $2,062 $9,075 $8,069
Total interest expense.................... 1,449 1,307 5,556 5,059
------- -------- -------- --------
Net interest income..................... 901 755 3,519 3,010
Provision for losses on loans............. --- --- --- ---
---------- --------- -------- ---------
Net interest income after provision for
loan losses............................ 901 755 3,519 3,010
Other income.............................. 60 76 192 159
^ General, administrative and other (527) (492) (2,161) (1,989)
--------- --------- -------- ---------
expense...................................
Earnings before income tax expense..... 434 339 1,550 1,180
Income tax expense........................ 177 136 649 468
-------- -------- -------- --------
Net earnings.............................. $ 257 $ 203 $ 901 $ 712
------- ======= ------- =======
Basic earnings per share.................. $ .28 $ .22 $ .98 $ .73
======== ======== ======== ========

</TABLE>

<PAGE>

At or For the Three At or For the Year
Months Ended September 30, Ended September 30,
----------------------------------------------

1998 1997 1998 1997
----------------------------------------------
<S> <C> <C> <C> <C>

Selected Financial Ratios and Other Data:

Performance Ratios:
Return on assets (ratio of net earnings to
average total assets)..................... 0.83% 0.72% .75% 0.65%
Interest rate spread information:
Average during period................... 2.53 2.29 2.52 2.31
End of period........................... 2.29 2.19 2.29 2.19
Net interest margin (1)................. 2.98 2.77 2.99 2.81
Ratio of operating expense to average 80 1.81
total assets.............................. 1.69 1.76 1.
Return on equity (ratio of net earnings to
average equity)........................... 8.61 7.01 7.72 6.09

Quality Ratios:
Non-performing assets to total assets at 07 1.25
end of period (2)......................... 1.07 1.25 1.
Allowance for loan losses to
non-performing assets at end of period (2) 49.48 47.64 49.48 47.64
Allowance for loan losses to
non-performing loans at end of period .... 52.30 48.05 52.30 48.05

Capital Ratios:
Equity to total assets, at end of period.. 9.73 10.25 9.73 10.25
Average equity to average assets.......... 9.62 10.31 9.70 10.62
Ratio of average interest-earning assets to
average interest-bearing liabilities...... 109.30 109.97 109.98 110.64
Dividend payout ratio (3)................. 28.85 31.25 31.25 34.93
Number of full service offices............ 2 2 2 2

<FN>

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

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

(3) Dividends paid per share divided by earnings per share.
</FN>
</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION OF RECENT RESULTS
OF FIRST INDEPENDENCE CORPORATION

Financial Condition. At September 30, 1998, First Independence's total
assets amounted to $124.3 million as compared to $123.4 million at June 30,
1998. The $900,000 or .79% increase in total assets was primarily due to a $3.1
million or 3.39% increase in net loans receivable (primarily due to the increase
in the origination of construction loans), partially offset by a $2.2 million or
11.50% decrease in mortgage-backed securities. The increase in assets, along
with a reduction of $700,000 in savings deposits, was funded by an increase of
$1.7 million in advances from the Federal Home Loan Bank of Topeka.

Total stockholders' equity increased $284,000 or 2.40% from $11.8
million at June 30, 1998 to $12.1 million at September 30, 1998. The increase
was primarily due to the Company's net earnings from operations of $257,000,
unrealized gains on securities available for sale of $32,000, fair value
adjustment of $24,000 on ESOP shares committed for release, the repayment of
employee stock ownership debt of $18,000, the amortization of unearned stock
compensation of $11,000, and common stock options exercised of $10,000. These
increases were partially offset by the payment during the period of dividends
totaling $69,000.

General. Net earnings amounted to $257,000 and $901,000 for the three
and twelve months ended September 30, 1998, as compared to $203,000 and $712,000
for the same periods in the previous fiscal year. The increase in net earnings
for the three months ended September 30, 1998 was primarily the result of an
increase of $146,000 in net interest income, partially offset by increases in
income tax expense of $41,000 and non-interest expense of $35,000 and a decrease
in non-interest income of $16,000.

The increase in net earnings for the fiscal year ended September 30,
1998 was primarily due to increases in net interest income of $509,000 and
non-interest income of $33,000. These increases were partially offset by
increases in income tax expense of $181,000 and non-interest expense of
$172,000.

Net Interest Income. Net interest income increased by $146,000 and
$509,000 to $901,000 and $3.5 million for the three and twelve months ended
September 30, 1998, respectively, as compared to the three and twelve months
ended September 30, 1997. The Company's average spread increased to 2.53% and
2.52% for the three and twelve months ended September 30, 1998, respectively,
from 2.29% and 2.31% for the three and twelve months ended September 30, 1997,
respectively. The Company's net interest margin increased to 2.98% and 2.99% for
the three and twelve months ended September 30, 1998, respectively, from 2.77%
and 2.81% for the three and twelve months ended September 30, 1997,
respectively.

Interest Income. Total interest income increased by $288,000 and $1.0
million to $2.4 million and $9.1 million for the three and twelve months ended
September 30, 1998, respectively, as compared to the same periods in the
previous fiscal year. These increases were caused primarily by an increase in
the average outstanding amount of interest-earning assets and, to a lesser
extent, an increase in the average yield on interest-earning assets. The
increases in average interest-earning assets and average yield were due
primarily to Construction loan originations at the Company's new loan production
office in Lawrence, Kansas. These construction loans generally have terms of
nine months or less and interest rates tied to the prime rate plus a margin,
which is a shorter term to maturity and higher rate when compared to permanent
one- to four-family loans. As a result of this increase in construction loan
originations, we have been able to reduce the interest rate risk of the Company
and improve its earnings.

Interest Expense. Interest expense increased by $142,000 and $497,000
to $1.4 million and $5.6 million for the three and twelve months ended September
30, 1998, respectively, as compared to the same periods in the previous fiscal
year. These increases were primarily due to an increase in the average
outstanding amount of interest-bearing liabilities due primarily to new accounts
opened at the Coffeyville, Kansas branch office, seasonal deposits from public
units and advances obtained from the Federal Home Loan Bank of Topeka. This
growth in liabilities is being fueled by loan origination opportunities. The
increase in the average outstanding amount of interest-bearing liabilities was
partially offset by a decrease in the average interest rates paid on
interest-bearing liabilities, caused by a reduction in market interest rates.

<PAGE>

Provision for Loan Losses. Based upon management's analysis of
established reserves and its ongoing review of the composition of the loan
portfolio, including non-performing assets and other loans of concern, there was
no provision for losses on loans for the three and twelve months ended September
30, 1998 and September 30, 1997. The Company will continue to monitor its
allowance for loan losses and make future additions to the allowance through the
provision for loan losses as economic and regulatory conditions dictate.
However, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods. In addition, the Company's determination as to the amount of the
allowance for loan losses is subject to review by the regulatory agencies which
can order the establishment of additional general or specific allowances.

Non-Interest Income. Non-interest income decreased $16,000 to $60,000
for the three months ended September 30, 1998 and increased $33,000 to $192,000
for the twelve months ended September 30, 1998, as compared to the same periods
in the previous fiscal year. The decrease in non-interest income for the three
months ended September 30, 1998 was due primarily to a $31,000 decrease in
income from real estate operations. A deferred gain of $29,000 was recognized
during the 1997 three month period, while the remaining $8,000 of the deferred
gain was recognized during the 1998 three month period. The deferred gain
originated from real estate owned that was sold during fiscal 1995. Recurring
non-interest income generally consists of servicing fees as well as deposit and
other types of fees.

Non-interest Expense. Total non-interest expense increased by $35,000
and $172,000 to $527,000 and $2.2 million for the three and twelve months ended
September 30, 1998, respectively, as compared to the same periods in the
previous fiscal year. These increases were primarily due to the opening of a new
loan production office in Lawrence, Kansas, resulting in additional staff,
occupancy and equipment, stationery, printing and office supplies expense. Data
processing expenses also increased due to increased account volumes at the
Coffeyville branch and processing price increases. To a lesser extent, the
increases during the year were the result of normal, annual cost of living
increases in salaries and bonuses, and increased compensation expense associated
with the Company's ESOP plan due to the Company's higher stock price during a
portion of the year.

Income Tax Expense. Income tax expense increased $41,000 and $181,000
to $177,000 and $649,000 for the three and twelve months ended September 30,
1998, respectively, as compared to the same periods in the previous fiscal year.
These increases were primarily due to an increase in pre-tax earnings during the
1998 periods as compared to the 1997 periods.

Regulatory Capital Compliance. The following table sets forth the
Association's compliance with its regulatory capital requirements at September
30, 1998.

Association capital level
OTS requirement at September 30, 1998
-------------------------------------------------------
% of Amount % of Amount Amount of
Assets Assets Excess
-------------------------------------------------------
(Dollars in Thousands)
Capital standard

Tangible capital 1.50% $1,846 8.54% ^ $10,505 $8,659
Core capital (1) 3.00 3,691 8.54 10,505 6,814
Risk-based capital 8.00 5,012 17.82 11,161 6,149

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

<PAGE>

RECENT FINANCIAL DATA OF THE
THE NEODESHA SAVINGS AND LOAN ASSOCIATION, FSA

The summary information presented below as of and for the year ended
September 30, 1997 is derived from the audited financial statements of Neodesha.
The summary information presented below as of September 30, 1998 and June 30,
1998, and for the three and twelve months ended September 30, 1998 and three
months ended September 30, 1997 is derived from Neodesha's unaudited financial
statements. In the opinion of management of Neodesha, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of results of or as of the periods indicated have been included. The results of
operations and other data for the three month periods are not necessarily
indicative of the results of operations for the fiscal year end. The following
information is only a summary and you should read it in conjunction with our
financial statements and notes beginning on page F-36.

September 30, June 30, September 30,
1998 1998 1997
(In Thousands)
Selected Financial Condition Data:

Total assets................................. $13,036 $13,523 $14,155
Cash, cash equivalents and interest-bearing
deposits................................. 390 583 635
Loans receivable, net........................ 9,263 9,364 9,468
Mortgage-backed securities -- at cost: ...... 70 159 253
Investment securities -- at cost:
U.S. Treasury............................ 699 799 897
Agency................................... 1,316 1,316 1,617
Municipal................................. 604 604 603
Deposits..................................... 11,185 11,730 12,854
Borrowings................................... 600 600 100
Retained earnings - substantially restricted. 1,157 1,141 1,092

Three Months Year Ended
Ended September 30, September 30,
1998 1997 1998 1997
------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>

Selected Operations Data:

Total interest income.................... $ 249 $ 264 $ 999 $ 1,046
Total interest expense................... 130 143 534 560
------- ------- -------- --------
Net interest income................... 119 121 465 486
Provision for losses on loans ........... 7 2 11 6
--------- ------- -------- --------
Net interest income after provision for
loan losses........................... 112 119 454 480
Other income............................. 30 34 124 135
General, administrative and
other expense......................... (121) (124) (491) (510)
------- ------- -------- --------
Earnings before income tax expense.... 21 29 87 105
Income tax expense....................... 5 8 22 28
-------- ------- -------- --------
Net earnings............................. $ 16 $ 21 $ 65 $ 77
======= ======= ======== ========
</TABLE>

<PAGE>

At or For the
Three Months At or For the
Ended September 30, ^Year Ended September 30,
----------------------------------------------
1998 1997 1998 1997
----------------------------------------------

Selected Financial Ratios and Other Data:
<S> <C> <C> <C> <C>

Performance Ratios:
Return on assets (ratio of net earnings to
average total assets).................... 0.50% 0.59% 0.48% 0.54%
Interest rate spread information:
Average during period................... 3.65 3.46 3.48 3.48
End of period........................... 3.37 3.49 3.37 3.49
Net interest margin(1).................. 3.81 3.60 3.63 3.61
Ratio of operating expense to average 4 3.5 2 3.58
total assets............................. 3.6 0 3.6
Return on equity (ratio of net earnings to 8 7.6 8 7.25
average equity)........................... 5.7 7 5.7

Quality Ratios:
Non-performing assets to total assets at 1.37 1.29 1.37 1.29
end of period(2)..........................
Allowance for loan losses to non- 07 48. 07 48.90
performing assets at end of period(2).... 46. 90 46.
Allowance for loan losses to non- 90 56.6 90 56.69
performing loans at end of period........ 52. 9 52.

Capital Ratios:
Equity to total assets, at end of period.. 8.88 7.71 8.88 7.71
Average equity to average assets.......... 8.70 7.67 8.32 7.45
Ratio of average interest-earning assets to
average interest-bearing liabilities..... 104.01 103.35 103.68 103.12

Other data:
Number of full service offices............ 1 1 1 1

^---------------------------
<FN>

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

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

</FN>
</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION OF RECENT RESULTS
OF THE NEODESHA SAVINGS AND LOAN ASSOCIATION, ^ FSA

Financial Condition. At September 30, 1998, Neodesha's total assets
amounted to $13.0 million as compared to $13.5 million at June 30, 1998. The
$500,000 or 3.60% decrease in total assets was primarily due to decreases in
cash and cash equivalents of $193,000, net loans receivable of $101,000,
investment securities of $100,000 and mortgage-backed securities of $89,000.
These decreases in assets were used to fund a reduction in savings deposits of
$545,000. Retained earnings increased $16,000 or 1.40% as a result of net
earnings earned during the three months ended September 30, 1998.

General. Net earnings amounted to $16,000 and $65,000 for the three
and twelve months ended September 30, 1998, as compared to $21,000 and $77,000
for the same periods in the previous fiscal year. The decrease in net earnings
for the three months ended September 30, 1998 was primarily the result of an
increase in the provision for losses on loans of $5,000 and reductions in
noninterest income of $4,000 and net interest income of $2,000. These changes
were partially offset by decreases in non-interest expense of $3,000 and income
tax expense of $3,000.

The decrease in net earnings for the fiscal year ended September 30,
1998 was primarily due to decreases in net interest income of $21,000 and
non-interest income of $11,000 and an increase in provision for losses on loans
of $5,000. These decreases were partially offset by decreases in non-interest
expense of $19,000 and income tax expense of $6,000.

Net Interest Income. Net interest income decreased by $2,000 and
$21,000 to $119,000 and $465,000 for the three and twelve months ended September
30, 1998, respectively, as compared to the three and twelve months ended
September 30, 1997. This decrease was due primarily to a reduction in the
average balance of interest-earning assets during the three and twelve months
ended September 30, 1998.

Interest Income. Total interest income decreased by $15,000 and
$47,000 to $249,000 and $999,000 for the three and twelve months ended September
30, 1998, respectively, as compared to the same periods in the previous fiscal
year. These decreases were due primarily to a $996,000 and $654,000 reduction in
the average balance of interest-earning assets and, to a lesser extent, a 3 and
1 basis point decrease in the weighted average yield on interest-earning assets
for the three and twelve months ended September 30, 1998. The decrease in
average interest-earning assets was due primarily to a decrease in investment
securities due to maturities and, to a lesser extent, a decrease in net loans
receivable due to repayments (primarily due to refinancings), exceeding new
originations.

Interest Expense. Interest expense decreased by $13,000 and $26,000 to
$130,000 and $534,000 for the three and twelve months ended September 30, 1998,
respectively, as compared to the same periods in the previous fiscal year. The
decrease for the three months ended September 30, 1998 was primarily due to a
$1.0 million decrease in the average balance of interest-bearing liabilities
and, to a lesser extent, a 5 basis point decrease in the weighted average rate
paid on such liabilities. The decrease for the twelve months ended September 30,
1998 was primarily due to a $696,000 decrease in the average balance of
interest-bearing liabilities, partially offset by a 3 basis point increase in
the weighted average rate paid on interest-bearing liabilities. The decrease in
interest-bearing liabilities was due primarily to an outflow of deposits as a
result of competition from local financial institutions which are aggressively
seeking deposits by offering relatively high interest rates.

Provision for Loan Losses. The provision for loan losses increased
$5,000 for both the three and twelve months ended September 30, 1998 to $7,000
and $11,000, respectively, as compared to the same periods in the previous
fiscal year. Management determined that additional provisions were necessary
based upon their quarterly analysis of the established allowance and review of
the composition of the loan portfolio.

Non-interest Income. Non-interest income decreased $4,000 and $11,000
to $30,000 and $124,000 for the three and twelve months ended September 30,
1998, as compared to the same periods in the previous fiscal year.

<PAGE>

Non-interest Expense. Total non-interest expense decreased by $3,000
and $19,000 to $121,000 and $491,000 for the three and twelve months ended
September 30, 1998, respectively, as compared to the same periods in the
previous fiscal year. These decreases were due primarily to a reduction in
compensation and other operating expense.

Income Tax Expense. Income tax expense decreased $3,000 and $6,000 to
$5,000 and $22,000 for the three and twelve months ended September 30, 1998,
respectively, as compared to the same periods in the previous fiscal year. These
decreases were primarily due to a decrease in pre-tax earnings during the 1998
periods as compared to the 1997 periods.

Regulatory Capital Compliance. The following table sets forth
Neodesha's compliance with its regulatory capital requirements at September 30,
1998.

Neodesha capital level
OTS requirement at September 30, 1998
-----------------------------------------------------
% of Amount % of Amount Amount of
Assets Assets Excess
-----------------------------------------------------
(Dollars in Thousands)
Capital standard
Tangible capital 1.50% $196 8.86% $1,159 $963
Core capital (1) 3.00 392 8.86 1,159 767
Risk-based capital 8.00 574 17.25 1,238 664
- -------------
(1)Based on current core capital requirement of 3%.

<PAGE>

RISK FACTORS

The following factors, in addition to those discussed elsewhere in
this Prospectus, should be considered by investors before deciding whether to
purchase the Common Stock offered in the Offering.

Interest Rate Risk Exposure

The Company's profitability is dependent to a large extent upon its
net interest income, which is the difference between its interest income on
interest-earning assets, such as loans and investments, and its interest expense
on interest-bearing liabilities, such as deposits and borrowings. When interest
rates rise, the Company's net interest income tends to be adversely impacted
since its liabilities tend to reprice more quickly than its assets. Conversely,
in a declining rate environment the Company's net interest income is generally
positively impacted since its assets tend to reprice more slowly than its
liabilities. Changes in the level of interest rates also affect the amount of
loans originated by the Company and, thus, the amount of loan and commitment
fees, as well as the market value of the Company's interest-earning assets.
Moreover, increases in interest rates also can result in disintermediation,
which is the flow of funds away from savings institutions into direct
investments, such as corporate securities and other investment vehicles, which
generally pay higher rates of return than savings institutions. Finally, a
flattening of the "yield curve" (i.e., a decline in the difference between long
and short-term interest rates), could adversely impact net interest income to
the extent that the Company's assets have a longer average term than its
liabilities.

In managing its asset/liability mix, the Company has, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, placed more emphasis on managing net interest margin than
on better matching the interest rate sensitivity of its assets and liabilities
in an effort to enhance net interest income. In particular, because of customer
demand, a large majority of the Company's residential loans carry fixed interest
rates. As a result, the Company will continue to be significantly vulnerable to
changes in interest rates and to decreases in the difference between long- and
short-term interest rates.

The Company is also subject to reinvestment risk relating to interest
rate movements. Changes in interest rates can affect the average life of loans
and mortgage related securities. Decreases in interest rates can result in
increased prepayments of loans and mortgage related securities, as borrowers
refinance to reduce borrowing costs. Under these circumstances, the Company is
subject to reinvestment risk to the extent that it is not able to reinvest such
prepayments at rates that are comparable to the rates on the maturing loans or
securities.

Despite the Company's efforts to limit its sensitivity to interest rate
changes, at June 30, 1998, the Association's net portfolio value would have
declined by 32% in the event of an instantaneous 200 basis point increase in
general interest rates. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company - Asset/Liability
Management."

Diversified Lending Risks

The Company's current operating strategy includes an increased
emphasis on originating real estate construction loans. This lending category is
generally considered to involve a higher degree of risk than that for
traditional single-family residential lending, because, among other factors,
such loans involve larger loan balances to a single borrower or groups of
related borrowers. In addition some loans may default despite the Company's
policies and procedures for loan underwriting. At June 30, 1998, the Company had
a balance of $16.4 million in residential construction loans (16.7% of the total
loan portfolio). Risk of loss on a construction loan depends largely upon the
concurrence of the initial estimate of the property's value at completion of
construction and the estimated cost (including interest) of construction, as
well as the availability of permanent take-out financing. During the
construction phase, a number of factors could result in delays and cost
overruns. If the estimate of value proves to be inaccurate, the Company may be
confronted, at or prior to the maturity of the loan, with a project which, when
completed, has a value which is insufficient to ensure full repayment. See
"Business of the Company -- Lending Activities - Construction Lending."

<PAGE>

Competition

Both the Association and Neodesha experience significant competition
in their local market areas in both originating real estate and other loans and
attracting deposits. This competition arises from other savings institutions as
well as credit unions, mortgage banks, commercial banks, mutual funds and
national and local securities firms. Due to their size, many competitors can
achieve certain economies of scale and as a result offer a broader range of
products and services than the Association and Neodesha. The Association and
Neodesha attempt to mitigate the effect of such factors by emphasizing customer
service and community outreach. Such competition may limit the Company's growth
in the future.

Geographic Concentration of Business Activities

The Association's and Neodesha's lending and deposit gathering
activities are focused primarily on the local communities of Independence and
Neodesha, Kansas, respectively (although the Association has recently expanded
its lending activities through its new loan production office in Lawrence,
Kansas). In the event that such communities experienced an economic slow down or
a decline in real estate values, the results of operations of the Company could
be materially adversely affected. See "Business of the Company -- Market Area."

Market For Common Stock

Although the Company's Common Stock has been quoted on the Nasdaq
"Small Cap" Market under the symbol "FFSL" for several years, there can be no
assurance that an active or liquid trading market will continue. A public market
having the desirable characteristics of depth, liquidity and orderliness depends
upon the presence in the marketplace of both willing buyers and sellers of the
Common Stock at any given time, which is not within the control of the Company
or any market maker. Accordingly, there can be no assurance that purchasers will
be able to sell their shares at or above the Purchase Price. See "Market for
Common Stock."

Takeover Defensive Provisions

Certain provisions included in the Company's certificate of
incorporation and bylaws are designed to encourage potential acquirors to
negotiate directly with the Board of Directors of the Company. By discouraging
non-negotiated takeover attempts, these provisions may have the effect of
delaying or preventing attempts to change the control of the Company, including
attempts which might result in the payment to stockholders of a premium over the
market price for the Company's shares. These provisions include a classified
board of directors, lack of cumulative voting and authority for stockholders to
call a special meeting, authority for the Company to issue preferred stock and
additional common stock, certain restrictions on acquisitions of or offers to
acquire 10% or more of the outstanding voting stock of the Company,
supermajority vote requirements for amendments to certain provisions of the
certificate of incorporation and to the bylaws, and the requirement that certain
business combinations be approved by either at least 80% of the Company's
outstanding voting stock or by a two-thirds vote of the Board of Directors or
satisfy certain minimum price requirements. In addition, a federal regulation
prohibits transfers of, or agreements to transfer, the legal or beneficial
ownership of subscription rights or the stock issued upon their exercise prior
to completion of a conversion. This regulation also prohibits direct or indirect
acquisitions of (or offers to acquire) the beneficial ownership of more than 10%
of the stock of a converted savings institution without prior OTS approval. The
Change in Savings and Loan Control Act and the Savings and Loan Holding Company
Act, as amended (as well as regulations promulgated pursuant to both of these
Acts) also require OTS approval prior to the acquisition of "control" (as
defined in the regulations) of an insured institution, including a holding
company thereof. See "Restrictions on Acquisitions of Stock and Related Takeover
Defensive Provisions."

Regulatory Oversight

The Association and Neodesha are subject to extensive regulation,
supervision and examination by the OTS as their chartering authority and primary
federal regulator, and by the FDIC, which insures their deposits up to
applicable limits. The Association and Neodesha are members of the FHLB of
Topeka and are subject to certain limited regulation by the Federal Reserve
Board. As the savings and loan holding company of the Association, the Company
is subject to

<PAGE>

regulation and oversight by the OTS. See "Regulation." Such regulation and
supervision governs the activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors.
Regulatory authorities have been granted extensive discretion in connection with
their supervisory and enforcement activities which are intended to strengthen
the financial condition of the banking industry, including the imposition of
restrictions on the operation of an institution, the classification of assets by
the institution, the adequacy of an institution's capital and allowance for loan
losses and the assessment of fees to protect the insurance funds. See
"Regulation - Federal Regulation of Savings Associations" and "- Regulatory
Capital Requirements." Any change in such regulation and oversight, whether by
the OTS, the Federal Reserve Board, the FDIC or Congress, could have a material
impact on the Company, the Association and their respective operations.

Risk of Delay in Completion of the Offering

The Subscription and Community Offering will expire at ^ Noon,
Independence, Kansas time, on ^ December 22, 1998 unless extended by Neodesha
and the Company. If the offering is extended beyond ^ February 5, 1999, all
subscribers will have the right to modify or rescind their subscriptions and to
have their subscription funds returned with interest. There can be no assurance
that the Subscription and Community Offering will not be extended as set forth
above.

A material delay in the completion of the sale of all unsubscribed shares
in the Subscription and Community Offering or otherwise may result in a
significant increase in the costs in completing the Merger Conversion.
Significant changes in the Company's or Neodesha's operations and financial
condition, the aggregate market value of the shares to be issued in the Merger
Conversion and general market conditions may occur during such material delay.
See "The Merger Conversion - Risk of Delay in Completion of the Offering."

Capability of the Company's Data Information System to Accommodate the Year 2000

Like many financial institutions, the Association and Neodesha rely
upon computers for the daily conduct of their business and for information
systems processing. There is concern among industry experts that on January 1,
2000 computers will be unable to "read" the new year and there may be widespread
computer malfunctions. The Company and Neodesha generally rely on software and
hardware developed by independent third parties to provide the information
systems they use and management has been advised by the Company's and Neodesha's
information systems providers that the issue is being addressed. The Company and
Neodesha are also in the process of reviewing internally developed programs to
assure year 2000 compliance. Based on information currently available,
management of the Company and Neodesha do not believe that significant
additional costs will be incurred in connection with the year 2000 issue.

FIRST INDEPENDENCE CORPORATION

The principal asset of the Company is the outstanding stock of the
Association, its wholly-owned subsidiary. The Company presently has no separate
operations, and its business consists only of the business of the Association.
All references to the Company, unless otherwise indicated, refer to the Company
and the Association on a consolidated basis, as the context requires.

The Company and the Association are subject to examination and
comprehensive regulation and oversight by the OTS and by the FDIC. The
Association is further subject to regulations of Federal Reserve Board governing
reserves required to be maintained against transaction accounts and non-personal
time deposits. The Association is a member

<PAGE>

of the FHLB of Topeka, which is one of the 12 regional banks constituting the
FHLB System and its savings deposits are backed by the full faith and credit of
the United States Government and are insured by the SAIF to the maximum extent
permitted by law.

The Company's executive offices are located at Myrtle & Sixth,
Independence, Kansas 67301 and its telephone number at that location is (316)
331-1660.

THE NEODESHA SAVINGS AND LOAN ASSOCIATION, FSA

Neodesha began operations in 1887 as a state-chartered mutual savings
institution. In June, 1993, Neodesha converted to a federally chartered mutual
savings and loan association. Its savings accounts have been insured since 1939
and Neodesha has been a member of the FHLB System since 1939. Neodesha's
operations are conducted through its home office in Neodesha, Kansas.

As of June 30, 1998, Neodesha had total assets of $13.5 million,
deposits of $11.7 million and retained earnings of $1.1 million.

Neodesha's deposits are backed by the full faith and credit of the
United States Government and are insured to the maximum extent permitted by law
by the SAIF. Neodesha is subject to examination and comprehensive regulation by
the OTS and the FDIC. Neodesha is also a member of the FHLB of Topeka.

The home office of Neodesha is located at 801 Main Street, Neodesha,
Kansas 66757. Its telephone number at that address is (316) 325-3033.

PRO FORMA DATA

Selected Pro Forma Combined Financial Information

The following selected pro forma combined financial information has
been prepared based on the purchase method of accounting. This method of
accounting for business combinations requires that all assets and liabilities of
Neodesha be adjusted to their fair market value as of the date of acquisition.

The actual net proceeds from the sale of the Conversion Stock cannot
be determined until the Merger Conversion is completed. However, net proceeds
are currently estimated to be between $570,000 and $930,000. Such estimate and
the pro forma information which follows are computed based on an Aggregate
Purchase Price at the minimum, midpoint, maximum and 15% above the maximum of
the Valuation Range on the assumptions that (i) the number of shares of
Conversion Stock at the indicated points within the Valuation Range were sold at
the indicated prices per share (which ranges between 15% above and 15% below the
average of the closing bid quotations of the Company's Common Stock on the
Nasdaq SmallCap Market on ^ November 10, 1998) at the beginning of the
appropriate periods and resulted in net proceeds as indicated; (ii) the net
proceeds were invested at the beginning of the appropriate periods to yield an
annualized return of 4.11%, the one-year treasury bill rate on October 8, 1998
less applicable federal and state taxes at 38.0% of such return resulting in a
pro forma after tax return of 2.55%; and (iii) other expenses of the Merger
Conversion (including a fee of $85,000 to Trident for its services in connection
with the Merger Conversion) will aggregate $450,000. The use of the current
one-year treasury bill rate is viewed to be more relevant in the current
interest rate environment than the use of an arithmetic average of the weighted
average yield earned by the Company on its interest-earning assets and the
weighted average rate paid on its deposits during such period. The net earnings
for the periods have been adjusted for the pro forma effect of the resulting
assumed increase in Neodesha's and the Company's interest income. No effect has
been given to (i) the withdrawals from savings and deposit accounts for the

<PAGE>

purpose of subscribing for shares of the Conversion Stock to be offered in the
Subscription and Community Offering or (ii) the liquidation account to be
established for the benefit of depositors of Neodesha. See "The Merger
Conversion - Effects on Depositors and Borrowers of Neodesha." The pro forma
information may be materially affected by the actual Aggregate Purchase Price
and the number of shares of Conversion Stock issued in the Merger Conversion.

This information should be read in conjunction with the other pro
forma financial information, the accompanying pro forma notes and the
consolidated financial statements for the respective institutions and the
related notes thereto included elsewhere in this Prospectus. The per share
prices shown are for illustrative purposes only, and reflect the minimum,
midpoint and maximum of the per share price range within which shares may be
issued in the Merger Conversion without a resolicitation of subscriptions. The
pro forma net earnings derived from the assumptions set forth above should not
be considered indicative of the actual results of operations of Neodesha or of
the Company for any period, and the assumptions regarding investment yield
should not be considered indicative of the actual yields expected during this
and any future period. The book value data should not be regarded as indicative
of the fair market value of the Conversion Stock, nor does it represent amounts
that would be available in the event of liquidation.

Pro Forma Information - Aggregate Purchase Price
------------------------------------------------------
15% Above
Minimum of Midpoint of Maximum of Maximum of
Valuation Valuation Valuation Valuation
Range Range Range Range
(Dollars in Thousands)
<S> <C> <C> <C> <C>

Number of shares of the Company
Common Stock to be issued at the
following prices:

^ $8.34 per share ^ 122,340 143,929 165,518 190,346
$9.81 per share ^ 103,989 122,340 140,691 161,794
$11.28 per share ^ 90,425 106,382 122,340 140,691

Gross proceeds $1,020 $1,200 $1,380 $1,587
Less offering expenses 450 450 450 450
-------- -------- -------- --------
Estimated net proceeds $ 570 $ 750 $ 930 $1,137
======= ======= ======= ======

</TABLE>

<PAGE>

At or For the Nine Months Ended At or For the Year Ended
June 30, 1998 September 30, 1997
---------------------------------------------------------------------------------------
15% 15%
Above Above
Minimum Midpoint Maximum Maximum Minimum Midpoint Maximum Maximum
of of of of of of of of
Valuation Valuation Valuation Valuation Valuation Valuation Valuation Valuation
Range Range Range Range Range Range Range Range
------- ------- ------- ------- ------- ------- ------- ------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Net earnings:
Historical-- Company....... $ 644 $ 644 $ 644 $ 644 $ 712 $ 712 $ 712 $ 712
Historical-- Neodesha...... 48 48 48 48 77 77 77 77
------ ------ ------ ------ ------ ------ -----
Historical -- Combined..... 692 692 692 692 789 789 789 789
Pro forma earnings from
proceeds................. 11 14 18 22 15 19 24 29
ESOP....................... (10) (12) (14) (16) (14) (16) (19) (22)
Purchase accounting
effect on earnings....... 82 82 82 82 109 109 109 109
------ ------ ------ ----- ------ ----- ----- -----
Pro forma combined net
earnings............ $ 775 $ 776 $ 778 $ 780 $ 899 $ 901 $ 903 $905
====== ====== ====== ===== ====== ====== ===== ====

Per Share:
Historical-- Company.. $ 0.70 $ 0.70 $0.70 $0.70 $ 0.73 $0.73 $ 0.73 $0.73
Pro forma combined basic
net earnings per share at
the following assumed
prices:

^ $8.34 per share... $ 0.75 $^ 0.74 $0.72 $0.71 $ 0.82 $0.81 $^0.80 $0.78
^ $9.81 per share.. $ 0.76 $ 0.75 $0.74 $0.73 $^ 0.84 $0.82 $ 0.81 $0.80
^ $11.28 per share. $ 0.77 $ 0.76 $0.75 $0.74 $^ 0.85 $0.84 $ 0.83 $0.82

Total stockholders' equity
(net worth):
Historical-- Company....... $11,815 $11,815 $11,815 $11,815 $11,529 $11,529 $11,529 $11,529
Historical-- Neodesha...... 1,141 1,141 1,141 1,141 1,092 1,092 1,092 1,092
------- ------- -------- ------- ------- ------- ------ -------
Historical-- Combined...... 12,956 12,956 12,956 12,956 12,621 12,621 12,621 12,621
Estimated net offering
proceeds.............. 570 750 930 1,137 570 750 930 1,137
Common stock acquired
by ESOP............... (102) (120) (138) (159) (102) (120) (138) (159)
Purchase accounting
effect on equity...... (1,141)(1) (1,141)(1) (1,141)(1) (1,141)(1) (1,092)(2) (1,092)(2) (1,092)(2) (1,092)(2)
------- ------ ------ ------- ------- ------- ------ -------
Pro forma combined
stockholders' equity.. $12,283 $12,445 $12,607 $12,793 $11,997 $12,159 $12,321 $12,507
======= ======= ======= ======= ======= ======= ======= =======

Per share:
Historical-- Company.. $12.34 $12.34 $12.34 $12.34 $11.78 $11.78 $11.78 $11.78
Pro forma combined net
stockholders' equity per
share at the following
assumed prices:

^ $8.34 per share... ^ $11.38 $11.30 $11.23 $11.15 $10.90 $10.83 $10.77 $10.70
$9.81 per share.... ^ $11.57 $11.53 $11.48 $11.43 $11.08 $11.05 $11.01 $10.97
$11.28 per share... ^ $11.72 $11.70 $11.68 $11.65 $11.23 $11.21 $11.19 $11.18

<FN>
- ---------------
(1) Comprised of write-off of Neodesha property and equipment of $386, net of
deferred tax of $147, with remaining Neodesha equity recorded as negative
goodwill of $902.

(2) Comprised of write-off of Neodesha property and equipment of $384, net of
deferred tax of $146, with remaining Neodesha equity recorded as negative
goodwill of $854.
</FN>
</TABLE>

<PAGE>

PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)

The following unaudited pro forma combined condensed balance sheets as
of June 30, 1998 and the unaudited combined condensed statements of earnings for
the nine months ended June 30, 1998 and for the year ended September 30, 1997
combine the historical financial statements of the Company and Neodesha. The pro
forma combined condensed statements are presented under the purchase method of
accounting for business combinations. The purchase method of accounting requires
that all assets and liabilities be adjusted to their estimated fair market value
as of the date of acquisition.

The pro forma statements are provided for informational purposes only.
The pro forma combined condensed statements of earnings are not necessarily
indicative of actual results that would have been achieved had the acquisition
been consummated at the beginning of the periods presented, and is not
indicative of future results. The pro forma financial statements should be read
in conjunction with the audited financial statements and the notes thereto of
Neodesha and the Company, and their unaudited interim financial statements
included elsewhere herein.

<PAGE>

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

BALANCE SHEET
June 30, 1998

Pro Forma Purchase
Conversion Accounting Pro Forma
Company Neodesha Adjustments Adjustments Combined
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>

ASSETS
Cash, cash equivalents and interest-bearing
deposits....................... $ 1,007 $ 583 $ 630(a) $ --- $ 2,220
Investment securities held to maturity 5,000 2,719 --- --- 7,719
Investment securities available for sale 3,357 --- --- --- 3,357
Mortgage-backed securities held to
maturity....................... 19,518 159 --- --- 19,677
Loans receivable.................... 90,614 9,364 --- --- 99,978
Premises and equipment.............. 1,283 386 --- (386)(b) 1,283
Federal Home Loan Bank stock........ 1,449 142 --- --- 1,591
Real estate acquired through foreclosure 36 32 --- --- 68
Negative goodwill.................... --- --- --- (902)(d) (902)
Other assets........................ 1,102 138 --- --- 1,240
-------- -------- --------- --------- ---------

Total assets.............. $ 123,366 $ 13,523 $ 630 $ (1,288) $ 136,231
========= ======== ========= ========= =========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits............................ $ 81,327 $ 11,730 $ --- $ --- $ 93,057
Advances from Federal Home Loan Bank 28,400 600 --- --- 29,000
Other liabilities................... 1,824 52 --- (147)(c) 1,729
--------- -------- -------- --------- ---------

Total liabilities......... 111,551 12,382 --- (147) 123,786
(b)
Stockholders' equity................ 11,815 1,141 630(a) (1,141)(c)(d) 12,445
--------- --------- -------- ---------- ----------

$ 123,366 $ 13,523 $ 630 $ (1,288) $ 136,231
========= ======== ========= ========= =========
</TABLE>

See Notes to Pro Forma Unaudited Combined Condensed Financial Statements.

<PAGE>

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
STATEMENT OF EARNINGS
Nine months ended June 30, 1998

Pro Forma Purchase
Conversion Accounting Pro Forma
Company Neodesha Adjustments Adjustments Combined
(Dollars in thousands, except per share data)

Total interest income............... $ 6,725 $ 750 $ 23(e) $ --- $ 7,498
Total interest expense..... 4,107 404 --- --- 4,511
-------- ---------- ---------- ----------- ---------

Net interest income............ 2,618 346 23(e) --- 2,987

Provision for losses on loans....... --- 5 --- --- 5
----------- ----------- ---------- ----------- ---------

Net interest income after provision for

losses on loans................ 2,618 341 23(e) --- 2,982
Other income........................ ^ 132 94 --- 68(f) ^ 294
Other expenses...................... ^(1,634) (371) (20)(g) 23(h) ^(2,002)
---------- --------- ---------- ---------- ----------

Earnings before income taxes........ 1,116 64 ^ 3 91 1,274
Income tax expense.................. (472) (16) (1)(i) (9)(j) (498)
---------- ---------- ---------- ---------- --------

Net earnings........................ $ 644 $ 48 $ 2 $ 82 $ 776
============ ============ ============ ============= ===========

Earnings per share

Basic.......................... $ .70 $ .75
Diluted........................ .65 ^.71

Average common shares

Basic........................... 923,320 ^ 1,034,081
Diluted................ 987,338 ^ 1,098,099

</TABLE>

See Notes to Pro Forma Unaudited Combined Condensed Financial Statements.

<PAGE>

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
STATEMENT OF EARNINGS
Year ended September 30, 1997

Pro Forma Purchase
Conversion Accounting Pro Forma
Company Neodesha Adjustments Adjustments Combined
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>

Total interest income............... $ 8,069 $ 1,046 $ 31(e) $ --- $ 9,146
Total interest expense..... 5,059 560 --- --- 5,619
--------- --------- --------- --------- ---------

Net interest income............ 3,010 486 31(e) --- 3,527

Provision for losses on loans....... --- 6 --- --- 6
--------- ---------- --------- --------- ---------

Net interest income after provision for

losses on loans................ 3,010 480 31(e) --- 3,521
Other income........................ ^ 159 135 --- 90(f) ^ 384
Other expense....................... ^(1,989) (510) 26)(g) 31(h) ^(2,494)
--------- ---------- --------- ---------- ---------

Earnings before income taxes........ 1,180 105 5 121 1,411
Income tax expense.................. (468) (28) (2)(i) (12)(j) (510)
--------- ---------- --------- ----------- ---------

Net earnings........................ $ 712 $ 77 $ 3 $ 109 $ 901
========= ========= ========= ========= =========

Earnings per share
Basic............................ $ .73 $ .82
Diluted.......................... .68 .77

Average common shares

Basic............................ 980,858 ^ 1,091,838
Diluted.......................... 1,051,516 ^ 1,162,496

</TABLE>

See Notes to Pro Forma Unaudited Combined Condensed Financial Statements.

<PAGE>

NOTES TO PRO FORMA UNAUDITED COMBINED CONDENSED FINANCIAL STATEMENTS

General

The pro forma unaudited combined condensed balance sheet as of June
30, 1998 gives effect to the Merger Conversion between the Holding Company and
Neodesha as if the business combination had occurred as of that date. The pro
forma combined condensed balance sheet reflects the business combination using
the purchase method of accounting. The pro forma unaudited combined condensed
statements of earnings for the year ended September 30, 1997 and the nine-month
period ended June 30, 1998 reflect the historical results of operations of the
respective institutions for the periods presented. Pro forma adjustments have
been made to reflect the Merger Conversion and purchase accounting adjustments
as if the Merger Conversion had occurred at the beginning of the earliest period
presented.

Pro Forma Adjustments

(a) Net proceeds of offering ($750,000 at midpoint of the Valuation Range),
after deducting amount of stock purchased by ESOP ($120,000).
(b) Write-off of property and equipment.
(c) Adjustment to deferred tax due to write-off of property and equipment.
(d) Negative goodwill.
(e) Earnings on net proceeds.
(f) Amortization of negative goodwill on a ten-year straight-line basis. The
amortization period approximates the average life of the acquired long-term
interest-bearing assets.
(g) ESOP expense.
(h) Remove depreciation expense (due to write-off of property and equipment).
(i) Tax effect of (e) and (g).
(j) Tax effect of (h).

No additional fair value accounting adjustments are necessary as the
fair value of Neodesha assets and liabilities approximate their carrying value.

<PAGE>

CAPITALIZATION

The following table sets forth the capitalization, including deposit
accounts, of the Company and Neodesha as of June 30, 1998, and the pro forma
capitalization on a combined basis giving effect to the merger and the proposed
sale of the Conversion Stock in the Merger Conversion, which is to be accounted
for under the purchase method of accounting for business combinations. Any
changes in the number of shares of Common Stock to be issued and the actual per
share purchase price from those assumed for purposes of this table may
materially affect such pro forma capitalization.
<TABLE>
<CAPTION>

Pro Forma Combined Capitalization Based Upon
15% Above
Minimum of Midpoint of Maximum of Maximum of
June 30, 1998 Valuation Range Valuation Range Valuation Range Valuation Range
Company Neodesha
(In thousands)
<S> <C> <C> <C> <C> <C> <C>

Savings deposits $81,327 $11,730 $93,057 $93,057 $93,057 $93,057
======= ======= ======= ======= ======= =======

Borrowings:
FHLB advances $28,400 $ 600 $29,000 $29,000 $29,000 $29,000
======= ========= ======= ======= ======= =======

Stockholders' equity
Preferred stock $ --- $ --- $ --- $ --- $ --- $ ---
Common stock 15 --- 16 16 16 17
Additional paid-in capital 7,218 --- 7,787 7,967 8,146 8,353
Retained earnings 9,889 1,141 9,889 9,889 9,889 9,889
Unrealized gain on securities
available for sale, net 20 --- 20 20 20 20
Treasury stock at cost

^(541,073 shares) (5,152) --- (5,152) (5,152) (5,152) (5,152)
Required ESOP contribution (164) --- (266) (284) (301) (323)
Unearned stock compensation (11) --- (11) (11) (11) (11)
------- -------- ------- ------ ------- ------

Total stockholders' equity $11,815 $ 1,141 $12,283 $12,445 $12,607 $12,793
======= ======== ======= ======= ======= =======
<FN>

- --------------------------
(1) See "The Merger Conversion-- Effects on Depositors and Borrowers of
Neodesha" for information concerning the liquidation account to be
established as a result of the Merger Conversion as well as the liquidation
account established pursuant to the Association's 1993 conversion from
mutual to stock form. See also "Common Stock Prices and Dividends,"
"Regulation" and Note L of the Notes to the Company's Consolidated
Financial Statements regarding restrictions on future dividend payments.
</FN>
</TABLE>

USE OF PROCEEDS

The net Merger Conversion proceeds from the sale of the Common Stock
will increase the net worth of the Company and may support future deposit growth
and expanded lending and investment activities. The Company may retain up to 50%
of such proceeds, and the balance will become part of the Association's general
funds. On an interim basis, the proceeds may be invested in short term
securities. The Company has considered and may continue to consider certain
acquisition possibilities, but has no agreement or understanding at the present
time with respect to any acquisition other than Neodesha. There can be no
assurance that the Company will effect any acquisition. The Company reserves the
right to use the proceeds in any manner authorized by law.

The final appraisal of Neodesha may reflect a significantly different
Valuation Range and the Aggregate Purchase Price may be different than any of
the numbers set forth herein. The Aggregate Purchase Price for the Conversion
Stock will not be determined until after the termination of the Subscription and
Direct Community Offerings. Accordingly, the net proceeds to the Company may
vary from the estimate set forth herein. See "Pro Forma Data." The net proceeds
to the Company will also vary if the Aggregate Purchase Price is adjusted to
reflect a change in the estimated pro forma market value of Neodesha, and will
reflect the actual expenses incurred in the Merger Conversion.

<PAGE>

COMMON STOCK PRICES AND DIVIDENDS

The Company's Common Stock has been traded on the Nasdaq SmallCap
Market under the symbol "FFSL" since the consummation of the Association's
conversion to stock form in October 1993. Presented below are the high and low
bid prices for the Common Stock as reported on the Nasdaq SmallCap Market, as
well as the amount of dividends paid on the Common Stock, for each quarter since
the Association's October 7, 1993 conversion to stock form. Amounts have been
adjusted to reflect a two-for-one stock split (in the form of a 100% stock
dividend paid January 24, 1997) in fiscal 1997.

Price Range Dividends
-------------------------------------------------

Quarter Ended High Low Declared

December 31, 1993 $ 6.375 $ 5.750 $ -----

March 31, 1994 6.250 5.813 .0250
June 30, 1994 6.125 5.500 .0250
September 30, 1994 6.875 6.125 .0250
December 31, 1994 6.750 6.125 .0250

March 31, 1995 7.625 6.375 .0375
June 30, 1995 7.875 7.500 .0375
September 30, 1995 9.250 7.750 .0375
December 31, 1995 9.375 9.250 .0375

March 31, 1996 9.375 9.250 .0500
June 30, 1996 9.250 8.875 .0500
September 30, 1996 9.375 8.875 .0500
December 31, 1996 10.250 9.375 .0500

March 31, 1997 11.750 10.250 .0625
June 30, 1997 11.750 10.750 .0625
September 30, 1997 14.000 11.375 .0625
December 31, 1997 14.625 13.625 .0625

March 31, 1998 15.000 13.500 .0750
June 30, 1998 14.625 12.750 .0750
September 30, 1998 13.250 10.000 .0750

December 31, 1998 (through 10.250
November 10, 1998) 9.500 .0750

For the ten trading days ending on ^ November 10, 1998, the average of
the closing bid quotations of the Common Stock as reported on the Nasdaq
SmallCap Market was ^ $10.325. On February 25, 1998, the last trading day before
announcement of the Merger Conversion, ^ the closing bid ^ quotation of the
Common Stock was ^ $14.50. As of ^ September 30, 1998, the Company had ^ 959,319
outstanding shares of Common Stock, held by approximately 207 stockholders of
record. This number of stockholders does not reflect the number of persons or
entities who may hold their stock in nominee or "street" name through brokerage
firms or others.

The Company anticipates that it will continue to pay quarterly cash
dividends on the Common Stock, although there can be no assurance as to the
amount or timing of future dividends. The payment of dividends in the future is
at the discretion of the Company's Board of Directors and will depend on the
Company's operating results and financial condition, availability of funds,
regulatory limitations, tax considerations and other factors. The Company has no
current intention to consider making a one time only special dividend or
distribution (including a tax-free return of capital) and will take no steps
toward making such a distribution for at least one year following the completion
of the Merger Conversion.

The Company is a legal entity separate and distinct from the
Association. The principal source of the Company's funds on an unconsolidated
basis is expected to be dividends from the Association. There are various
statutory and regulatory limitations on the extent to which the Association can
pay dividends to the Company. See Note L of the Notes to the Company's
Consolidated Financial Statements. In addition to dividends from the
Association, the Company may obtain funds through borrowings and through the
sale of additional equity securities. See "Regulation."

<PAGE>

THE MERGER CONVERSION

The OTS has approved the Plan of Merger Conversion, subject to the
approval of the Plan by the members of Neodesha and to the satisfaction of
certain other conditions imposed by the OTS. Such approval, however, does not
constitute a recommendation or endorsement of the Plan by the OTS.

General

On February 18, 1998 the Boards of Directors of the Company, the
Association and Neodesha, respectively, unanimously adopted the Plan subject to
approval by the OTS and the members of Neodesha. Pursuant to the Plan, Neodesha
will combine with the Association through the conversion of Neodesha from a
mutual savings and loan association to a stock savings and loan association and
the simultaneous merger of Neodesha with and into the Association. The OTS has
approved the Plan, subject to its approval by the affirmative vote of the
members of Neodesha holding not less than a majority of the total number of
votes eligible to be cast at a special meeting (the "Special Meeting") called
for that purpose to be held on ^ December 22, 1998.

Subscription Rights are being offered in a Subscription Offering to
deposit account holders as of December 31, 1996, Tax-Qualified Employee Plans,
deposit account holders as of ^ September 30, 1998, voting members of Neodesha
as of ^ November 9, 1998, and officers, directors and employees of Neodesha.
Additionally, certain members of the general public are being afforded the
opportunity to subscribe for Company Common Stock in the Direct Community
Offering. See " - Subscription Offering" and " - Direct Community Offering."
Subscriptions for shares will be subject to the maximum and minimum purchase
limitations set forth in the Plan of Conversion.

Business Purposes

Under federal regulations the merger of a mutual institution, such as
Neodesha, with and into a stock institution, such as the Association, requires
the issuance of equity securities of the surviving institution, in this case the
Company. The Board of Directors of Neodesha has approved the Merger Conversion
in the belief that the Merger Conversion is in the best interests of Neodesha,
the depositors and borrowers of Neodesha, and the communities served by
Neodesha. The Merger Conversion will enhance Neodesha's competitive position and
further the interests of the depositors and borrowers of Neodesha and the
communities served by Neodesha by promoting a program of sound growth,
increasing funds and capital available for lending, and providing additional
resources for expansion of services, as well as by providing an enhanced
opportunity for attracting and retaining qualified personnel.

In considering its alternatives, the Board of Directors of Neodesha
determined that conversion to stock form on a stand-alone basis would be
impractical. The Board of Directors of Neodesha believed that it would do
nothing to help Neodesha from the standpoint of its limited operational
resources. With eight full-time employees, Neodesha runs a lean operation
currently. To add the additional pressures and responsibilities attendant with
being a public company would be extremely burdensome (and to hire additional
employees would significantly reduce profitability, assuming quality people
could be found at a reasonable price). Due to the size of the offering, the
Board of Directors of Neodesha further believed that converting on a stand-alone
basis would result in a publicly held company with limited, if any, liquidity in
the market for its stock. Moreover, the Board of Directors of Neodesha believed
that converting on a stand-alone basis would cause Neodesha to be
over-capitalized, without the resources necessary to expand the range of its
financial products and utilize its additional capital. In addition, it was
believed that an unsuccessful conversion attempt would result in a significant
and perhaps crippling charge to earnings. As such, the Board of Directors of
Neodesha believed that a stand-alone conversion would not address all of
Neodesha's concerns, and would actually create some new concerns.

The combination of being highly capitalized without the ability to
utilize this capital, an inability to significantly increase earnings and an
illiquid market for the stock would put added pressure on the Board and
management. Based on the foregoing, the Board of Directors of Neodesha
determined that conversion on a stand-alone basis was not a viable alternative.

<PAGE>

Certain members of Neodesha's management and Board of Directors have
interests in the Merger Conversion in addition to their interests as members of
Neodesha generally. These interests include (i) the formation and maintenance of
a Neodesha, Kansas Advisory Board (which will initially include all non-employee
directors of Neodesha); (ii) the agreement by the Company to grant to President
Miller, Vice President Holmquist and each non-employee director of Neodesha
options to purchase, upon consummation of the Merger Conversion, 3,000, 1,500,
and 1,000 shares, respectively, of Common Stock (all with an exercise price
equal to the fair market value on the date of grant and subject to vesting over
five years); (iii) the agreement by the Company to enter into a three year
employment agreement with Franklin Miller, president of Neodesha, upon
consummation of the Merger Conversion, which provides for the payment of salary
equal to his current compensation, the payment of 299% of his "base amount"
(five-year average) compensation under certain circumstances in connection with
a change of control of the Company and the use of a company car; and (iv) the
eligibility of former employees of Neodesha who become employees of the Company
for certain employee benefits.

Effects on Depositors and Borrowers of Neodesha

Voting Rights. Deposit account holders of Neodesha will have no voting
rights in the resulting institution ("Resulting Institution") or the Company and
will therefore not be able to elect directors of either entity or to control
their affairs. Voting rights as to the Company will be held exclusively by its
stockholders. Each purchaser of Company Common Stock shall be entitled to vote
on any matters to be considered by the Company stockholders. A stockholder will
be entitled to one vote for each share of Common Stock owned. See "Description
of Capital Stock." The Company intends to supply each stockholder with quarterly
and annual reports and proxy statements.

Deposit Accounts and Loans. Upon consummation of the Merger
Conversion, each deposit account holder in Neodesha will have a deposit account
in the Resulting Institution equivalent in withdrawable amount to the withdrawal
value and upon substantially the same terms and conditions (other than voting
and liquidation rights) as existed prior to such consummation. The existence of
Neodesha as a financial institution will be terminated by the Merger Conversion
and the Resulting Institution will assume all of the rights, franchises,
interests, obligations and liabilities of Neodesha. The Resulting Institution
will continue to be a member of the FHLB System. Furthermore, the Merger
Conversion will not affect the loan accounts, the balances of these accounts, or
the obligations of the borrowers under their individual contractual arrangements
with Neodesha.

Liquidation Rights. The Association and Neodesha have no plans
whatsoever to liquidate in the foreseeable future, whether or not the Merger
Conversion is completed. However, if there should ever be a complete
liquidation, either before or after Merger Conversion, deposit account holders
of both institutions would receive the protection of insurance by the SAIF up to
applicable limits. Subject thereto, liquidation rights before and after the
Merger Conversion would be as follows:

Liquidation Rights in Present Mutual Association. In addition to the
protection of SAIF insurance up to applicable limits, in the event of a complete
liquidation each holder of a deposit account in Neodesha in its present mutual
form would receive his or her pro rata share of any assets of Neodesha remaining
after payment of claims of all creditors (including the claims of all depositors
in the amount of the withdrawal value of their accounts). Such holder's pro rata
share of such remaining assets, if any, would be in the same proportion of such
assets as the balance in his or her deposit account was to the aggregate balance
in all deposit accounts in Neodesha at the time of liquidation.

Liquidation Rights in Proposed Resulting Institution. After the Merger
Conversion, each deposit account holder, in the event of a complete liquidation,
would have a claim of the same general priority as the claims of all other
general creditors of the Resulting Institution in addition to the protection of
SAIF insurance up to applicable limits. Therefore, except as described below,
the deposit account holder's claim would be solely in the amount of the balance
in his or her deposit account plus accrued interest. The holder would have no
interest in the value of the Resulting Institution above that amount.

The Plan of Merger Conversion provides that there shall be
established, upon the completion of the Merger Conversion, a special
"liquidation account" for the benefit of Eligible Account Holders of Neodesha
(i.e., depositors at December 31, 1996) and Supplemental Eligible Account
Holders (i.e., depositors at ^ September 30, 1998), who

<PAGE>

continue to maintain their deposit accounts, in an amount equal to the
regulatory capital of Neodesha as of the date of its latest statement of
financial condition contained in the final prospectus relating to the sales of
shares of Company Common Stock in the Merger Conversion. Each Eligible Account
Holder and Supplemental Eligible Account Holder would have an initial interest
in such liquidation account for each deposit account held in Neodesha on their
respective qualifying dates. A deposit account holder's interest as to each
deposit account would be in the same proportion of the total liquidation account
as the balance in his or her account on December 31, 1996 and ^ September 30,
1998 was to the aggregate balance in all deposit accounts of Eligible Account
Holders and Supplemental Eligible Account Holders, respectively, on such date.
However, if the amount in the deposit account of an Eligible Account Holder or
Supplemental Eligible Account Holder on any annual closing date of the Resulting
Institution is less than the lowest amount in such account on December 31, 1996
or ^ September 30, 1998, as applicable, and on any subsequent closing date, then
the deposit account holder's interest in this special liquidation account would
be reduced by an amount proportionate to any such reduction, and the deposit
account holder's interest would cease to exist if such deposit account were
closed.

In addition, the interest in the special liquidation account would
never be increased despite any increase in the balance of the deposit account
holder's related account after Merger Conversion, and would only decrease. Any
assets remaining after the above liquidation rights of Eligible Account Holders
and Supplemental Eligible Account Holders and other creditors were satisfied
would be distributed to the Company as the sole stockholder of the Resulting
Institution.

No merger, consolidation, bulk purchase of assets with assumptions of
deposit accounts and other liabilities, or similar transactions, with a
SAIF-insured institution in which Neodesha is not the surviving institution,
shall be considered to be a complete liquidation for purposes of distribution of
the liquidation account and, in any such transaction, the liquidation account
would be assumed to the full extent authorized by regulations of the OTS as then
in effect. The OTS has stated that the consummation of a transaction of the type
described in the preceding sentence in which the surviving entity is not a
SAIF-insured institution would be reviewed on a case-by-case basis to determine
whether the transaction should constitute a "complete liquidation" requiring
distribution of any then remaining balance in the liquidation account. While the
Company believes that such a transaction should not constitute a complete
liquidation, there can be no assurance that the OTS will not adopt a contrary
position.

Common Stock. For information as to the characteristics of the Common
Stock to be issued under the Plan of Merger Conversion, see "Dividends" and
"Description of Capital Stock." Common Stock issued under the Plan of Merger
Conversion cannot, and will not, be insured by the SAIF.

Tax Consequences of Merger Conversion

The Company has received an opinion from its legal counsel Silver,
Freedman & Taff, L.L.P. to the effect that, based in part on certain
representations made by the Company and Neodesha, for federal income tax
purposes: (i) the Merger Conversion will be a non-taxable reorganization under
Section 368(a)(1)(A) and ^(F) of the Internal Revenue Code of 1986 ("Code");
(ii) no gain or loss will be recognized by Neodesha or the Association as a
result of the Merger Conversion; (iii) the basis of Neodesha's assets in the
hands of the Association will be the same as the basis of those assets in the
hands of Neodesha immediately prior to the transaction; (iv) the holding period
of the Neodesha assets in the hands of the Association will include the period
during which such assets were held by Neodesha; (v) the Association will succeed
to and take into account the earnings and profits, or deficit in earnings and
profits, of Neodesha as of the date of the Merger Conversion; (vi) the
Association will succeed to and take into account immediately after the Merger
Conversion the dollar amounts of Neodesha's bad debt reserve accounts of which
Neodesha has taken a bad debt deduction for taxable years ending on or before
the date of the Merger Conversion and the bad debt reserves will not be required
to be restored to gross earnings of either Neodesha or the Association for the
taxable year of Merger Conversion; (vii) no gain or loss will be recognized by
the Association upon receipt of money for Conversion Stock of the Company;
(viii) gain, if any, will be recognized by savings depositors of Neodesha upon
the issuance to them of withdrawable savings deposits in the Association in the
same dollar amount as their savings deposits in Neodesha, interests in the
liquidation account of the Association, and non-transferable Subscription Rights
to purchase Conversion Stock, in exchange for their Neodesha savings deposits,
to the extent of the fair market value of the Subscription Rights; (ix) no
earnings, gain, or loss will be recognized by savings depositors, employees or
officers of Neodesha as a result

<PAGE>

of the exercise of non-transferable Subscription Rights; (x) the basis of the
savings deposits in the Association received by the savings depositors of
Neodesha will, in each instance, be the same as the basis of their savings
deposits in Neodesha which are surrendered in exchange therefor, decreased by
the fair market value of the subscription rights received and increased by the
amount of gain recognized on the exchange; (xi) the basis of the
non-transferable subscription rights will be their fair market value; (xii) the
basis of the Company Common Stock to its shareholders will be the purchase price
thereof plus, in the case of Conversion Stock acquired by depositors of
Neodesha, the basis, if any, in the subscription rights; and (xiii) a
shareholder's holding period for Conversion Stock acquired through the exercise
of the non-transferable subscription rights shall begin on the date on which the
subscription rights are exercised.

A number of the opinions described above are premised upon a letter of
Ferguson which, based on certain assumptions, states that the subscription
rights to be received by Eligible Account Holders, Supplemental Eligible Account
Holders and other eligible subscribers do not have any economic value at the
time of distribution or at the time the subscription rights are exercised,
whether or not a public offering takes place.

The Company has also received an opinion of Grant Thornton, LLP that
the Merger Conversion will not be a taxable transaction for Kansas income tax
purposes.

The opinions of Silver, Freedman & Taff, L.L.P., Grant Thornton and
Ferguson have no binding effect on the IRS or the Kansas tax authorities, and
there is no assurance that the conclusions in any of those opinions would be
sustained by a court if contested by such authorities.

Subscription Offering

In accordance with federal regulations, nontransferable Subscription
Rights have been granted under the Plan of Merger Conversion to the following
persons in the following order of priority: (1) Eligible Account Holders
(deposit account holders of Neodesha as of December 31, 1996); (2) Tax-Qualified
Employee Plans (defined benefit and contribution plans of the Company, the
Association or Neodesha, qualified under Section 401 of the Internal Revenue
Code); (3) Supplemental Eligible Account Holders (deposit account holders of
Neodesha as of ^ September 30, 1998); (4) members of Neodesha, other than
Eligible Account Holders and Supplemental Eligible Account Holders, at the close
of business on ^ November 9, 1998, the voting record date for the Special
Meeting ("Other Members"); and (5) officers, directors and employees of
Neodesha. All subscriptions received will be subject to the availability of
Company Common Stock after satisfaction of all subscriptions of all persons
having prior rights in the Subscription Offering, and to the maximum and minimum
purchase limitations set forth in the Plan of Merger Conversion (and described
below). The beneficiaries of IRA and Keogh accounts are deemed to have the same
subscription rights as other depositors. However, the IRA and Keogh accounts
maintained in Neodesha do not permit investment in the Common Stock.

Preference categories are more fully described below.

Category No. 1 is reserved for Neodesha's Eligible Account
Holders. Subscription Rights to purchase shares under this category
will be allocated among Eligible Account Holders to permit each such
depositor to purchase shares in this Category in an amount equal to
the greater of $100,000 of Common Stock, one-tenth of one percent
(.10%) of the total shares offered in the Merger Conversion, or 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be issued by
a fraction of which the numerator is the amount of the qualifying
deposits of the Eligible Account Holder and the denominator is the
total amount of the qualifying deposits of the Eligible Account
Holders in Neodesha, in each case on the Eligibility Record Date. To
the extent shares are oversubscribed in this category, shares shall be
allocated first to permit each subscribing Eligible Account Holder to
purchase, to the extent possible, 100 shares and thereafter among each
subscribing Eligible Account Holder pro rata in the same proportion
that his Qualifying Deposit bears to the total Qualifying Deposits of
all subscribing Eligible Account Holders whose subscriptions remain
unsatisfied.

Category No. 2 provides for the issuance of Subscription Rights
to Tax-Qualified Employee Plans to purchase up to 10% of the total
amount of shares of Common Stock issued in the Subscription Offering
on a second priority basis. However, such plans shall not, in the
aggregate,

<PAGE>

purchase more than 10% of the Conversion Stock issued. The Company's
ESOP intends to purchase a total of 10% of the Company's Common Stock
sold in the Merger Conversion under this category. Subscription Rights
received pursuant to this category shall be subordinated to all rights
received by Eligible Account Holders to purchase shares pursuant to
Category No. 1; provided, however, that notwithstanding any provision
of the Plan of Merger Conversion to the contrary, the Tax-Qualified
Employee Plans shall have first priority Subscription Rights to the
extent that the total number of shares of Common Stock sold in the
Merger Conversion exceeds the maximum of the Valuation Range.

Category No. 3 is reserved for Neodesha's Supplemental Eligible
Account Holders. Subscription Rights to purchase shares under this
category will be allocated among Supplemental Eligible Account Holders
to permit each such depositor to purchase shares in this Category in
an amount equal to the greater of $100,000 of Common Stock, one-tenth
of one percent (.10%) of the total shares of Common Stock offered in
the Merger Conversion, or 15 times the product (rounded down to the
next whole number) obtained by multiplying the total number of shares
of Common Stock to be issued by a fraction of which the numerator is
the amount of the qualifying deposit of the Supplemental Eligible
Account Holder and the denominator is the total amount of the
qualifying deposits of the Supplemental Eligible Account Holders in
Neodesha in each case on ^ September 30, 1998 (the "Supplemental
Eligibility Record Date"), subject to the overall purchase limitation
after satisfying the subscriptions of Eligible Account Holders and Tax
Qualified Employee Plans. Any non-transferable Subscription Rights
received by an Eligible Account Holder shall reduce, to the extent
thereof, the subscription rights to be distributed to such person as a
Supplemental Eligible Account Holder. In the event of an
oversubscription for shares, the shares available shall be allocated
first to permit each subscribing Supplemental Eligible Account Holder,
to the extent possible, to purchase a number of shares sufficient to
make his total allocation (including the number of shares, if any,
allocated in accordance with Category No. 1) equal to 100 shares, and
thereafter among each subscribing Supplemental Eligible Account Holder
pro rata in the same proportion that his Qualifying Deposit bears to
the total Qualifying Deposits of all subscribing Supplemental Eligible
Account Holders whose subscriptions remain unsatisfied.

Category No. 4 provides, to the extent that shares are then
available after satisfying the subscriptions of Eligible Account
Holders, Tax-Qualified Employee Plans and Supplemental Eligible
Account Holders, for the issuance of Subscription Rights to Other
Members to purchase in this Category up to the greater of $100,000 of
Common Stock, or one-tenth of one percent (.10%) of the Common Stock
offered in the Merger Conversion. In the event of an oversubscription,
the shares available shall be allocated among the subscribing Other
Members pro rata in the same proportion that his number of votes on
the Voting Record Date bears to the total number of votes on the
Voting Record Date of all subscribing Other Members on such date. Such
number of votes shall be determined based on Neodesha's mutual charter
and bylaws in effect on the date of approval by members of this Plan
of Merger Conversion.

Category No. 5 provides for the issuance of Subscription Rights
to officers, directors and employees of Neodesha, to purchase in this
Category up to $100,000 of the Common Stock to the extent that shares
are available after satisfying the subscriptions of eligible
subscribers in preference Categories 1, 2, 3 and 4. The total number
of shares which may be purchased under this Category may not exceed
25% of the number of shares of Conversion Stock. In the event of an
oversubscription, the available shares will be allocated pro rata
among all subscribers in this category based on the number of shares
ordered by each subscriber.

Direct Community Offering

Any shares not subscribed for in the Subscription Offering will be
available for purchase in a Direct Community Offering to the general public,
with a preference to natural persons residing in Wilson County, Kansas. The
Direct Community Offering is being made concurrently with the Subscription
Offering, and may continue after the end

<PAGE>

of the Subscription Offering for a period of up to 45 days or for such longer
period as the OTS may approve. Purchase orders received during the Direct
Community Offering shall be filled on a when received basis up to a maximum of
$100,000 per purchaser. The Conversion Stock will be offered and sold in a
manner to achieve the widest practicable distribution of the Conversion Stock.
In the event of an extension for longer than such 45-day period, purchasers will
be notified and may increase, decrease or cancel their purchase orders under
conditions prescribed by the Director in approving the extension. Purchase
orders may not otherwise be decreased or changed by the purchaser without the
approval of the Company. The Company has the right, in its sole discretion, to
reject orders, in whole or in part, in the Direct Community Offering.

Syndicated Community Offering

The Plan of Merger Conversion provides that, if necessary, all shares
of Common Stock not purchased in the Subscription and Community Offering, if
any, may be offered for sale to the general public in a Syndicated Community
Offering through Selected Dealers managed by Trident Securities acting as agent
of the company in the sale of the Common Stock. The Company has the right to
reject orders, in whole or in part, in its sole discretion in the Syndicated
Community Offering. Neither Trident Securities nor any registered broker-dealer
shall have any obligation to take or purchase any shares of Common Stock in the
Syndicated Community Offering; however, Trident Securities has agreed to use its
best efforts in the sale of shares in the Syndicated Community Offering. Common
Stock sold in the Syndicated Community Offering will be sold at a purchase price
per share which is the same price as all other shares being offered in the
Merger Conversion. No person will be permitted to subscribe in the Syndicated
Community Offering for shares of Common Stock with an aggregate purchase price
of more than $100,000.

It is estimated that the Selected Dealers will receive a negotiated
commission based on the amount of Common Stock sold by the Selected Dealer,
payable by the Company. During the Syndicated Community Offering, Selected
Dealers may only solicit indications of interest from their customers to place
orders with the Company as of a certain date (the "Order Date") for the purchase
of shares of Common Stock. When and if Trident Securities and the Company
believe that enough indications and orders have been received in the Offering to
consummate the conversion, Trident Securities will request, as of the Order
Date, Selected Dealers to submit orders to purchase shares for which they have
received indications of interest from their customers. Selected Dealers will
send confirmations of the orders to such customers on the next business day
after the Order Date. Selected Dealers will debit the accounts of their
customers on a date which will be three business days from the Order Date
("Debit Date"). Customers who authorize Selected Dealers to debit their
brokerage accounts are required to have the funds for payment in their account
on but not before the Debit Date. On the next business day following the Debit
Date, Select Dealers will remit funds to the account that the Company
established for each Selected Dealer. After payment has been received by the
Company from Selected Dealers, funds will earn interest at the Bank's passbook
savings rate until the consummation of the Conversion. In the event the
Conversion is not consummated as described above, funds will be returned
promptly with interest to the Selected Dealers, who, in turn, will promptly
credit their customers' brokerage account.

The Syndicated Community Offering may close at any time after the
Expiration Date at the discretion of the Bank and the Company, but in no case
later than ^ February 5, 1999, unless further extended with the consent of the
OTS. The Offering may not be extended beyond ^ December 22, 2000.

Purchase Limitations

The following purchase limitations apply to all purchases of the
Conversion Stock.

(1) No less than $250 worth of the Conversion Stock may be purchased
by any person purchasing Conversion Stock offered in the Merger Conversion.

(2) No person, by himself or herself or with an Associate or with a
group of persons acting in concert (other than a Tax-Qualified Employee Plan),
including individuals on joint accounts or having the same address on Neodesha's
records, may subscribe for or purchase more than $100,000 of the Conversion
Stock offered in the Merger Conversion.

<PAGE>

(3) Directors and Officers of Neodesha and their associates may not
purchase an aggregate of more than 35% of the Conversion Stock.

Depending upon market and financial conditions, the Boards of
Directors of the Company and Neodesha, with the approval of the OTS, may
increase the purchase limitations set forth in categories (1) and (2) above.
Under such circumstances, either written or oral notification of the increase
will be provided, to the extent possible, to those persons who subscribed for
the maximum purchase limitation. Subscribers would then have the opportunity to
subscribe for additional shares of Conversion Stock up to the new maximum
purchase limitation.

Each person purchasing Conversion Stock will be deemed to confirm that
such purchase does not conflict with the above purchase limitations. Directors
of the Company or Neodesha will not be deemed to be Associates or a group acting
in concert in purchasing Conversion Stock solely as a result of their being
directors of the Company or Neodesha.

Independent Valuation

Federal regulations require that the aggregate purchase price of
shares of stock of a thrift institution sold in connection with the conversion
of the thrift institution, must be based on an appraised aggregate pro forma
market value of the converting institution as determined on the basis of an
independent valuation. The Company has retained the appraisal firm of Ferguson
to make such a valuation of the aggregate pro forma market value of Neodesha to
the Company and, accordingly, the Conversion Stock to be offered and sold. For
its appraisal services, Ferguson will receive a fee of approximately $25,000
plus reimbursement of ordinary and customary out-of-pocket expenses required in
connection with the appraisal and any updates.

The appraisal was prepared in reliance upon the information contained
in this prospectus including Neodesha's and the Company's consolidated financial
statements. The appraiser also considered the following factors among others:
the present and projected operating results and financial condition of Neodesha
and the Company, the economic and demographic conditions in Kansas, the quality
and depth of Neodesha's and the Company's management and personnel, certain
historical, financial and other information relating to Neodesha and the
Company, a comparative evaluation of the operating and financial statistics of
Neodesha and the Company with those of other comparable financial institutions,
the aggregate size of the offering of the Conversion Stock, the impact of the
Merger Conversion on Neodesha's and the Company's net worth and earnings
potential, the trading market for comparable financial institutions' stocks, and
general conditions in the markets for such common stocks. However, Ferguson does
not guarantee the accuracy or completeness of such information. No detailed
individual analysis of the separate components of Neodesha's assets and
liabilities was performed, nor was the accuracy of the information provided by
Neodesha and the Company verified in connection with this evaluation. The Boards
of Directors reviewed the appraisal, including the methodology and the
appropriateness of the assumptions utilized by Ferguson and determined that in
their opinions the appraisal was not unreasonable. The Valuation Range may be
amended with the approval of the OTS in connection with changes in the financial
condition or operating results of Neodesha or market conditions generally. As
described below, an amendment to the Valuation Range above $1,587,000 would not
be made without a resolicitation of subscriptions and/or proxies except in
limited circumstances.

On the basis of the foregoing, the appraiser has advised the Company
and Neodesha that in its opinion at ^ October 8, 1998, the date as of which such
valuation was made, the aggregate estimated pro forma market value of Neodesha
upon Merger Conversion would have been within the range of $1,020,000 to
$1,380,000 or 15% above and below the $1,200,000 midpoint of the range in
accordance with federal regulations.

Depending upon market and financial conditions subsequent to the date
of this prospectus and the length of time needed for the sale of the Conversion
Stock, the independent valuation may be updated as required by federal
regulations. Subscribers and other purchasers will be notified of any material
change in the valuation that would cause the Aggregate Purchase Price to be
outside of the valuation range.

Immediately prior to completion of the Merger Conversion, the
appraiser will provide Neodesha and the Company with an updated valuation
reflecting current financial and market conditions. The Aggregate Purchase Price
at which the Conversion Stock is to be sold must be consistent with this updated
final valuation. If the Aggregate

<PAGE>

Purchase Price is not within the final valuation range approved by the OTS,
completion of the Merger Conversion will be delayed until the updated final
valuation has received approval from the Director.

THE INDEPENDENT VALUATION IS NOT INTENDED AND MUST NOT BE CONSTRUED AS
A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING THE CONVERSION
STOCK. MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND
PROJECTIONS OF A NUMBER OF MATTERS (INCLUDING CERTAIN ASSUMPTIONS AS TO THE
AMOUNT OF NET PROCEEDS AND THE EARNINGS THEREON), ALL OF WHICH ARE SUBJECT TO
CHANGE FROM TIME TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING
SHARES IN THE MERGER CONVERSION WILL THEREAFTER BE ABLE TO SELL THE SHARES AT
PRICES RELATED TO THE FOREGOING VALUATION OF THE PRO FORMA MARKET VALUE.

Purchase Price and Number of Shares

The Aggregate Purchase Price for all shares of Conversion Stock to be
issued will be consistent with an independent valuation of the pro forma market
value of Neodesha, as converted.

Based on the Valuation Range as of October 8, 1998, the aggregate pro
forma market value of Neodesha upon Merger Conversion would be within the
Valuation Range of $1,020,000 to $1,380,000 with a midpoint of $1,200,000. The
Aggregate Purchase Price at which the Conversion Stock is sold will be
consistent with the Valuation Range, unless market and financial conditions at
the time of the final updated valuation cause a change in this Valuation Range.
In such event, a revised Valuation Range would be subject to further OTS
approval. If the estimated pro forma market value of Neodesha as so determined
is not within the Valuation Range, a resolicitation of subscriptions may be
made, the Plan of Merger Conversion may be terminated or such other action as
the OTS may permit may be taken; provided that if the pro forma market value of
Neodesha upon Merger Conversion has increased to an amount which does not exceed
$1,587,000 (15% above the high end of the Valuation Range), the Company and
Neodesha do not intend to resolicit subscriptions unless it is determined after
consultation with the OTS that a resolicitation is required.

All shares to be issued in the Merger Conversion will be sold at the
same actual purchase price per share, which shall be equal to 95% of the average
of the market price of the Company's Common Stock (which is the average of the
closing bid quotations on the Nasdaq SmallCap Market) for the ten trading days
ending on the Pricing Date. Assuming a price per share of ^ $9.81, which is 95%
of the average of the closing bid quotations for the Company's Common Stock ^
for the ten trading days ending on November 10, 1998, a minimum of ^ 103,989
shares and a maximum of ^ 140,691 shares (or ^ 161,794 shares if the Valuation
Range is increased by 15%) of Conversion Stock will be issued.

Depending upon market and financial conditions, the number of shares
of Conversion Stock issued may be more or less than the range in number of
shares shown above. The total number of shares to be issued in the Merger
Conversion will be determined by dividing the actual purchase price into the
appropriate aggregate price for the shares within the current Valuation Range as
determined by Ferguson. However, no fractional shares of Common Stock will be
issued. The total number of shares of the Conversion Stock to be issued and sold
to each purchaser will be determined promptly after the Pricing Date by dividing
the Aggregate Purchase Price by the actual purchase price per share, with a
refund for the differences between (i) such amount paid and (ii) the portion of
such amount representing the actual purchase price multiplied by the highest
possible number of whole shares.

Marketing Arrangements

The Company has retained Trident, a broker-dealer registered with the
Securities and Exchange Commission (the "SEC") and a member of the National
Association of Securities Dealers, Inc. (the "NASD"), to consult with and advise
the Company and Neodesha and to assist in the distribution of shares in the
offering on a best-efforts basis. Among the services Trident will perform are
(i) training and educating Company and Neodesha employees, who will be
performing certain ministerial functions in the offering, regarding the
mechanics and regulatory requirements of the stock sale process, (ii) keeping
records of orders for shares of Common Stock, (iii) targeting sales efforts
including preparation of marketing materials, (iv) assisting in the collection
of proxies from members of Neodesha for use at the Special Meeting, and (v)
providing its registered stock representatives to staff the Stock Center and
meeting with and

<PAGE>

assisting potential subscribers. For its services, Trident will receive a
success fee of $85,000. If the offering is terminated before completion, Trident
will be entitled to retain any fee or expense payments already accrued or
received.

To the extent registered broker-dealers are utilized ("Selected
Dealers"), the Company will pay a fee (to be negotiated, but not to exceed 5.5%
of the aggregate Purchase Price of shares of Common Stock sold in the Direct
Community Offering, including the Syndicated Community Offering) to such
dealers, including any sponsoring dealer fees. Fees paid to Trident and to any
other broker-dealer may be deemed to be underwriting fees, and Trident and such
other broker-dealers may be deemed to be underwriters. The Company has agreed to
reimburse Trident for its reasonable out-of-pocket expenses (not to exceed
$12,500), and its legal fees and expenses (not to exceed $35,000) and to
indemnify Trident against certain claims or liabilities, including certain
liabilities under the Securities Act.

Directors and executive officers of the Company and Neodesha may, to a
limited extent, participate in the solicitation of offers to purchase Common
Stock. Sales will be made from a Stock Center located away from the publicly
accessible areas (including teller windows) of Neodesha's offices. Other
employees of Neodesha may participate in the offering in administrative
capacities, providing clerical work in effecting a sales transaction or
answering questions of a potential purchaser provided that the content of the
employee's responses is limited to information contained in this Prospectus or
other offering document. Other questions of prospective purchasers will be
directed to executive officers or registered representatives of Trident. Such
other employees have been instructed not to solicit offers to purchase Common
Stock or provide advice regarding the purchase of Common Stock. To the extent
permitted under applicable law, directors and executive officers of the Company
and Neodesha may participate in the solicitation of offers to purchase Common
Stock. The Company will rely on Rule 3a4-1 under the Exchange Act and sales of
Common Stock will be conducted within the requirements of Rule 3a4-1, so as to
permit officers, directors and employees to participate in the sale of Common
Stock. No officer, director or employee of the Company or Neodesha will be
compensated in connection with his or her participation by the payment of
commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.

A Stock Center will be established at Neodesha's office, in an area
separated from Neodesha's banking operations. No sales activities will be
conducted in the public areas of Neodesha's offices, but persons will be able to
obtain a Prospectus and sales information at such places, and employees will
inform prospective purchasers to direct their questions to the Stock Center and
will provide such persons with the telephone number of the Stock Center.
Completed stock orders will be accepted at such places, and will be promptly
forwarded to the Stock Center for processing.

Neodesha and the Company will make reasonable efforts to comply with
the securities laws of all states in the United States in which persons entitled
to subscribe for shares, pursuant to the Plan of Merger Conversion, reside.
However, no shares will be offered or sold under the Plan of Merger Conversion
to any such person who (1) resides in a foreign country or (2) resides in a
state of the United States in which a small number of persons otherwise eligible
to subscribe for shares under the Plan of Merger Conversion reside or as to
which Neodesha and the Company determine that compliance with the securities law
of such state would be impracticable for reasons of cost or otherwise,
including, but not limited to, a requirement that Neodesha or the Company or any
of their officers, directors or employees register, under the securities laws of
such state, as a broker, dealer, salesmen or agent. No payments will be made in
lieu of the granting of Subscription Rights to any such person.

Method of Payment for Subscriptions

For Subscription Rights to be exercised, a completed Order Form and
form of certification with the required payment must be received by the Company
or Neodesha by ^ Noon, Independence, Kansas time, on ^ December 22, 1998, unless
the period of the Subscription Offering and Direct Community Offering is
extended. Any Order Forms not received during the Subscription Offering and
Direct Community Offering period, or any executed defectively, or any received
without full payment, will not be accepted and the Subscription Rights will
expire. The Company may seek correction of defectively executed forms, or may
waive an immaterial irregularity but does not represent that it will do so.
After receipt by the Company or Neodesha, subscriptions may not be modified,
withdrawn or canceled without the consent of the Company, except in the event of
an extension of the 45-day period after the termination of the

<PAGE>

Subscription Offering for completion of the sale of all unsubscribed shares. In
such event, subscribers will be entitled to increase, decrease or cancel their
subscriptions under conditions set by the Director.

Full payment for subscriptions may be made (i) in cash if delivered in
person at the Stock Information Center, (ii) by check, bank draft, or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with Neodesha. Appropriate means by which such withdrawals may be authorized are
provided on the Order Form. However, neither the Company nor Neodesha may
knowingly lend money to any person for the purpose of purchasing shares in the
Merger Conversion. Payments from private third parties or payments through
electronic transfer of funds will not be accepted. No wire transfers will be
accepted. Interest will be paid on payments made by cash, check, bank draft or
money order at the Association's passbook rate from the date payment is received
until the completion or termination of the Merger Conversion. If payment is made
by authorization of withdrawal from deposit accounts, the funds authorized to be
withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the Merger Conversion
(unless the certificate matures after the date of receipt of the Order Form but
prior to closing, in which case funds will earn interest at the passbook rate
from the date of maturity until consummation of the Merger Conversion ), but a
hold will be placed on such funds, thereby making them unavailable to the
depositor until completion or termination of the Merger Conversion. At the
completion of the Merger Conversion, the funds received in the Subscription and
Community Offering will be used to subscribe for the shares of Common Stock
ordered. The shares of Common Stock issued in the Merger Conversion cannot and
will not be insured by the FDIC or any other government agency. In the event
that the Merger Conversion is not consummated for any reason, all funds
submitted will be promptly refunded with interest as described above.

Interest penalties for early withdrawal applicable to certificate
accounts will not apply to withdrawals authorized for the purchase of Conversion
Stock. However, if the remaining balances in certificate accounts are less than
the minimum qualifying balance, the certificates evidencing such accounts will
be canceled upon consummation of the offering, and the remaining balances will
thereafter earn interest at the passbook rate. Interest will be paid on all
amounts authorized for withdrawal from savings accounts until the date of the
completion or termination of the Subscription Offering and Direct Community
Offering.

A depositor interested in using his or her Neodesha IRA funds to
purchase Common Stock must do so through a self-directed IRA. Since neither
Neodesha nor the Company offers such accounts, a depositor will be allowed to
make a trustee-to-trustee transfer of the IRA funds to a trustee offering a
self-directed IRA program with the agreement that such funds will be used to
purchase the Company's Common Stock in the offering. There will be no early
withdrawal or IRS interest penalties for such transfers. The new trustee would
hold the Common Stock in a self-directed account in the same manner as Neodesha
now holds the depositor's IRA funds. An annual administrative fee may be payable
to the new trustee. Depositors interested in using funds in a Neodesha IRA to
purchase Common Stock should contact the Stock Center at Neodesha as soon as
possible so that the necessary forms may be forwarded for execution and returned
prior to the day before the Expiration Date.

The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes, but rather, may pay for such shares of Common Stock
subscribed for upon consummation of the Merger Conversion, provided that there
is in force from the time of its subscription until such time, a loan commitment
to lend to the ESOP, at such time, the aggregate purchase price of the shares
for which it subscribed.

Cash, checks, bank drafts and money orders received in anticipation of
stock purchases by subscribers will be placed in a savings account established
specifically for this purpose. Interest will be paid on subscriptions made by
check or in cash at the Association's passbook rate from the date payment is
received until consummation or termination of the Merger Conversion.

All refunds and any interest due will be paid after completion of the
Merger Conversion. Certificates representing shares of Common Stock purchased
will be mailed to purchasers at the last address of such persons appearing on
the records of Neodesha, or to such other address as may be specified in
properly completed Order Forms, as soon as practicable following consummation of
the sale of all shares of Conversion Stock. Any certificates returned as
undeliverable will be disposed of in accordance with applicable law.

<PAGE>

To ensure that each purchaser receives a prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 under the Exchange
Act, no prospectus will be mailed any later than five days prior to such date or
hand delivered any later than two days prior to such date. Execution of the
Order Form will confirm receipt or delivery in accordance with Rule 15c2-8.
Order Forms will only be distributed with a prospectus. The Company will accept
for processing only orders submitted on original Order Forms. Photocopies or
facsimile copies of Order Forms will not be accepted. Payment by cash, check,
money order, bank draft or debit authorization to an existing account at
Neodesha must accompany the Order Form. No wire transfers will be accepted.

In order to ensure that Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are properly identified as to their
stock purchase priorities, depositors as of the Eligibility Record Date
(December 31, 1996), Supplemental Eligibility Record Date (September 30, 1998)
and/or the Voting Record Date ^(November 9, 1998) must list all accounts on the
Order Form giving all names on each account and the account number as of the
applicable record date.

In the event that the Merger Conversion is not consummated for any
reason, all funds submitted in the Subscription Offering and Direct Community
Offering will be promptly refunded after termination of the offering.
Subscription Rights are non-transferable and non-negotiable, and may only be
exercised by the holder on his or her own behalf.

Risk of Delayed Offering

In the event that all shares of the Conversion Stock are not sold in
the Subscription Offering and concurrent Direct Community Offering, the Company
may extend the Direct Community Offering for a period of 45 days from the
Subscription Expiration Date. Further extensions are subject to OTS approval.
Some converting financial institutions and their holding companies have had to
obtain extensions from the OTS for the consummation of their offerings. An
extension may be necessitated by volatility of the market for the stock of
thrift institutions or by periods of widespread operating losses in the
industry. If the offering is extended beyond ^ February 5, 1999, all subscribers
will have the right to modify or rescind their subscriptions and to have their
subscription funds returned with interest. There can be no assurance that the
offering will not be extended as set forth above.

A material delay in the completion of the sale of all unsubscribed
shares of Conversion Stock may result in a significant increase in the costs in
completing the Merger Conversion. Significant changes in Neodesha's operations
and financial condition, the aggregate market value of the shares to be issued
in the Merger Conversion and general market conditions may occur during such
material delay. In the event the Merger Conversion is not consummated within 24
months after the date of the Special Meeting of Members, Neodesha would charge
accrued Merger Conversion costs to then current period operations.

Approval, Interpretation, Amendment and Termination

All interpretations of the Plan of Merger Conversion, as well as the
completeness and validity of order forms and stock order and account withdrawal
authorizations, will be made by Neodesha and the Company and will be final,
subject to the authority of the OTS and the requirements of applicable law. The
Plan of Merger Conversion provides that, if deemed necessary or desirable by the
Boards of Directors of Neodesha and the Company, the Plan of Merger Conversion
may be substantively amended by the Boards of Directors of Neodesha and the
Company, as a result of comments from regulatory authorities or otherwise, at
any time with the concurrence of the OTS and the SEC. In the event the Plan of
Merger Conversion is substantially amended, other than a change in the maximum
purchase limits set forth herein, the Company intends to notify subscribers of
the change and to refund subscription funds with interest unless subscribers
affirmatively elect to increase, decrease or maintain their subscriptions. The
Plan of Merger Conversion will terminate if the sale of all shares is not
completed within 24 months after the date of the Special Meeting of Members. The
Plan of Merger Conversion may be terminated by the Boards of Directors of the
Company and Neodesha with the concurrence of the OTS, at any time. A specific
resolution approved by a two-thirds vote of the Boards of Directors of the
Company and Neodesha would be required to terminate the Plan of Merger
Conversion prior to the end of such 24-month period.

<PAGE>

Restrictions on Transferability

Prior to the completion of the Merger Conversion, the OTS conversion
regulations prohibit any person with subscription rights, including Eligible
Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account
Holders, Other Members and employees, officers and directors, from transferring
or entering into any agreement or understanding to transfer the legal or
beneficial ownership of the subscription rights issued under the Plan or the
shares of Common Stock to be issued upon their exercise. Such rights may be
executed only by the person to whom they are granted and only for his account.
Each person exercising such subscription rights will be required to certify that
he is purchasing shares solely for his own account and that he has no agreement
or understanding regarding the sale or transfer of such shares. The OTS
regulations also prohibit any person from offering or making an announcement of
an offer or intent to make an offer to purchase such subscription rights or
shares of Common Stock prior to the completion of the Merger Conversion.

Neodesha and the Company may pursue any and all legal and equitable
remedies in the event they become aware of the transfer of subscription rights
and will not honor orders known by them to involve the transfer of such rights.

Except as to directors, executive officers of Neodesha and the Company
and their associates, the shares of Common Stock sold pursuant to the Merger
Conversion will be freely transferable. Shares purchased by directors, executive
officers or their associates in the Merger Conversion shall be subject to the
restrictions that said shares shall not be sold during the period of one year
following the date of purchase, except in the event of the death of the
stockholder, in which event such restriction shall be released. Accordingly,
stock certificates issued by the Company to directors, executive officers and
associates shall bear a legend giving appropriate notice of such restriction
and, in addition, Neodesha and the Company will give appropriate instructions to
the transfer agent for the Company's Common Stock with respect to the applicable
restriction upon transfer of any restricted shares. Any shares issued at a later
date as a stock dividend, stock split or otherwise, to holders of restricted
stock, shall be subject to the same restrictions that may apply to such
restricted stock. Company Common Stock (like the stock of most companies) is
subject to the requirements of the Securities Act. Accordingly, Company Common
Stock may be offered and sold only in compliance with registration requirements
or pursuant to an applicable exemption from registration.

Company Common Stock received in the Merger Conversion by persons who
are not "affiliates" of the Company may be resold without registration. Shares
received by affiliates of the Company (primarily the directors, officers and
principal stockholders of the Company) will be subject to the resale
restrictions of Rule 144 under the Securities Act, which are discussed below.

Rule 144 generally requires that there be publicly available certain
information concerning the Company, and that sales thereunder be made in routine
brokerage transactions or through a market maker. If the conditions of Rule 144
are satisfied, each affiliate (or group of persons acting in concert with one or
more affiliates) is entitled to sell in the public market, without registration,
in any three-month period, a number of shares which does not exceed the greater
of (i) 1% of the number of outstanding shares of Company Common Stock, or (ii)
if the stock is admitted to trading on a national securities exchange or
reported through the automated quotation system of a registered securities
association, the average weekly reported volume of trading during the four weeks
preceding the sale.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE COMPANY

General

Effective October 5, 1993, First Federal converted from a federally
chartered mutual savings association to a federally chartered stock savings
association and concurrently became a subsidiary of the Company. The Company
owns all of the outstanding stock of First Federal and the Company's earnings
are primarily dependent on the operations of First Federal. Currently, the
Company has no other business activity other than acting as the holding company
for First Federal. As a result, the following discussion relates primarily to
the activities of First Federal.

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

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

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

Comparison of Financial Condition at June 30, 1998
and September 30, 1997 for the Company

The Company's total assets increased $10.9 million, or 9.64%, from
$112.5 million at September 30, 1997 to $123.4 million at June 30, 1998. This
increase was primarily a result of increases of $16.0 million in net loans
receivable and $1.1 million in investment securities. These increases in assets
were funded by increases in savings deposits of $5.1 million, advances from the
Federal Home Loan Bank of Topeka of $4.7 million, checks issued in excess of
cash items of $930,000, and decreases in mortgage-backed securities of $4.5
million and cash and cash equivalents of $2.2 million.

Loans receivable increased $16.0 million from $74.6 million at
September 30, 1997, to $90.6 million at June 30, 1998. The increase was
primarily due to construction loan originations at the Company's new loan
production office in Lawrence, Kansas. These construction loans generally have
terms of nine months or less and interest rates tied to the prime rate plus a
margin. The increase in construction loans also contributed to an increase in
loans in process due to the disbursement of funds over the construction period.
See "Business of the Company - Lending Activities Construction Lending." To a
lesser extent, the increase was due to originations in the Company's market area
consisting primarily of 15- and 30-year fixed-rate loans, mortgage loans with a
fixed rate for the first three years of the loan term that automatically convert
to one-year adjustable rate loans during the fourth year of the loan term, and,
to a lesser extent, one-year adjustable rate mortgages.

The allowance for loan losses totaled $656,000, or .72% of total loans
at June 30, 1998, which represented a $12,000 decrease from $668,000, or .90% of
total loans, at September 30, 1997. The ratio of the allowance for loan losses
as a percent of non-performing loans increased from 48.05% at September 30, 1997
to 100.34% at June 30, 1998.

<PAGE>

At June 30, 1998, the Company's non-performing loans were comprised primarily of
one- to four-family residential loans. See "Non-performing Assets."

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

Total deposits increased $5.1 million from $76.2 million at September
30, 1997, to $81.3 million at June 30, 1998. Deposits increased primarily as a
result of public units depositing short-term funds into the "Platinum" money
fund account and new accounts opened at the Coffeyville, Kansas branch office.
The "Platinum" money fund account offers tiered rates on a limited transaction
account with the highest rate paid on balances of $50,000 and above. Management
feels the "Platinum" money fund provides a lower risk, insured alternative for
deposit customers considering higher risk investments in order to get higher
yields than money market accounts.

Total borrowed funds increased $4.7 million from $23.7 million at
September 30, 1997 to $28.4 million at June 30, 1998. The increase was from
advances obtained from the Federal Home Loan Bank of Topeka. The FHLB advances
allowed the Association to invest the funds borrowed in loans receivable at a
positive spread.

Total stockholders' equity increased $286,000 from $11,529,000 at
September 30, 1997 to $11.8 million at June 30, 1998. The increase was primarily
due to the Company's net earnings from operations of $644,000, fair value
adjustment of $101,000 on ESOP shares committed for release, the repayment of
employee stock ownership debt of $55,000, the amortization of unearned stock
compensation of $33,000, common stock options exercised of $21,000, and
unrealized gains on securities available for sale of $5,000. These increases
were partially offset by the Company's use of $377,000 to repurchase 25,298
shares of common stock and dividends of $196,000 paid to stockholders.

Comparison of Financial Condition at September 30, 1997
and September 30, 1996 for the Company

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

Total loans receivable increased $6.9 million from $67.7 million at
September 30, 1996, to $74.6 million at September 30, 1997. Increased economic
activity in the Company's lending area resulted in loan originations exceeding
loan repayments. The loan portfolio is comprised primarily of first mortgage
loans secured by one- to four-family residential real estate located in the
Company's market area. The increase in one- to four-family mortgage loans
consisted primarily of 15- and 30-year fixed-rate loans and, to a lesser extent,
one-year adjustable rate mortgages and mortgage loans with a fixed rate for the
first three years of the loan term that automatically convert to one- year
adjustable rate loans during the fourth year. Auto loans also increased due to
originations to existing customers in the Company's local markets. The offering
of consumer loan products helps to expand and create stronger ties to the
Company's existing customer base by increasing the number of customer
relationships and providing cross-marketing opportunities.

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

<PAGE>

at September 30, 1997. At September 30, 1997, the Company's non-performing loans
were comprised primarily of one-to four-family residential loans.

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

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

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

Non-performing Assets of the Company

The ratio of non-performing assets to total assets is one indicator of
the Company's exposure to credit risk. Non-performing assets of the Company
consist of non-accruing loans, accruing loans delinquent 90 days or more,
troubled debt restructurings, and foreclosed assets which have been acquired as
a result of foreclosure or deed-in-lieu of foreclosure. At June 30, 1998,
non-performing assets were approximately $689,000, which represents a decrease
of $714,000, or 50.9%, as compared to September 30, 1997. This decrease was due
primarily to one loan totaling $344,000 secured by a single family residence in
Texas, which had been classified as non-accruing at September 30, 1997, but was
less than 90 days delinquent at June 30, 1998. In February 1991, the borrowers
experienced financial difficulties and filed for protection under the bankruptcy
statutes. Pursuant to the plan of reorganization approved by the Bankruptcy
Court, the borrowers are required to make additional payments each month to make
up the delinquent payments and interest. Although there are still certain
payments which are delinquent, at June 30, 1998, the borrowers were complying
with the terms of the repayment plan. The decrease was also due to one loan
totaling $139,000 secured by a single family residence in Texas, which had been
classified as accruing delinquent 90 days or more at September 30, 1997, but was
less than 90 days delinquent at June 30, 1998.

Included in non-accruing loans at June 30, 1998, were eleven loans
totaling $521,000 secured by one- to four-family real estate and five consumer
loans totaling $22,000. All non-accruing loans at June 30, 1998, were located in
the Company's primary market area. At June 30, 1998, accruing loans delinquent
90 days or more included two loans totaling $65,000 secured by one- to
four-family real estate and one loan totaling $21,000 secured by non-residential
real

<PAGE>

estate. At June 30, 1998, all of the Company's accruing loans delinquent 90 days
or more were secured by real estate located in the Company's primary market
area.

A summary of non-performing assets by category is set forth in the
following table:

June 30, September 30,
1998 1997
---------------------------
(Dollars in Thousands)
Non-Accruing Loans........................... $ 543 $1,049
Accruing Loans Delinquent 90 Days or More.... 86 292
Trouble Debt Restructurings.................. 24 50
Foreclosed Assets............................ 36 12
-------- ------
Total Non-Performing Assets.................. $ 689 $1,403
======= ======

Total Non-Performing Assets .56% 1.25%
as a Percentage of Total Assets ======= ====

Foreclosed Assets. At June 30, 1998, the Company's real estate
acquired through foreclosure included one single family residence located in the
Company's primary market area with a carrying value of $36,000.

Results of Operations of the Company

Comparison of Three and Nine Months Ended June 30, 1998
and June 30, 1997 for the Company

General. Net earnings for the nine months ended June 30, 1998 were
$644,000 as compared to $509,000 for the nine months ended June 30, 1997,
resulting in an increase of $135,000 or 26.4%. The increase in net earnings was
primarily due to increases in net interest income of $363,000 and non-interest
income of $48,000. These increases were partially offset by increases in income
tax expense of $140,000 and non-interest expense of $137,000.

Net earnings for the three months ended June 30, 1998 were $286,000 as
compared to $177,000 for the three months ended June 30, 1997, resulting in an
increase of $91,000 or 51.9%. The increase in net earnings was primarily due to
increases in net interest income of $148,000 and non-interest income of $23,000,
partially offset by increases in income tax expense of $57,000 and non-interest
expense of $22,000.

Net Interest Income. Net interest income increased $363,000, or
16.12%, for the nine months ended June 30, 1998 as compared to the nine months
ended June 30, 1997. This increase was due primarily to an increase in interest
income of $718,000, or 11.95%; offset partially by an increase in interest
expense of $355,000, or 9.45%. Interest income increased primarily due to a $9.5
million increase in the average balance of interest-earning assets, and a 21
basis point increase in the average yield on interest-earning assets. The
average yield on interest-earning assets increased primarily due to construction
loan originations at the Lawrence loan production office. These construction
loans generally have terms of nine months or less and carry higher rates of
interest than loans originated for the purchase of single-family residences.
Interest expense increased primarily due to a $9.4 million increase in the
average balance of interest-bearing liabilities, offset partially by a 2 basis
point decrease in the average rate paid on interest-bearing liabilities. The
average rate paid on interest-bearing liabilities decreased primarily due to a
$4.8 million increase in the average balance of low cost demand and NOW deposits
and, to a lesser extent, a decrease in market interest rates.

Net interest income increased $148,000, or 19.17%, for the three
months ended June 30, 1998, as compared to the three months ended June 30, 1997.
This increase was due primarily to an increase in interest income of $311,000,
or 15.27%, offset partially by an increase in interest expense of $163,000 or
12.89%. The increase was due to the same reasons as stated above for the nine
months ended June 30, 1998, as compared to the nine months ended June 30, 1997.
The ratio of average interest-earning assets to average interest-bearing
liabilities decreased from 110.5% for the three months ended June 30, 1997 to
110.0% for the three months ended June 30, 1998.

Interest Income. Interest income for the nine months ended June 30,
1998, increased to $6,725,000 from $6,007,000 for the nine months ended June 30,
1997. This increase was caused primarily by a $9.5 million increase in the
average outstanding amount of interest-earning assets during the nine months
ended June 30, 1998, as compared to the nine months ended June 30, 1997; due to
the increase in the average balance of loans receivable financed by the
increased average balance of savings deposits. The average balance of savings
deposits during the nine months ended

<PAGE>

June 30, 1998 was $7.5 million higher than during the nine months ended June 30,
1997. To a lesser extent, the increase in interest income was due to an increase
in the average yield on interest-earning assets. The average yield on
interest-earning assets increased 21 basis points to 7.71% for the nine months
ended June 30, 1998, from 7.50% for the nine months ended June 30, 1997. This
increase was caused primarily by increases in yield on the Association's Federal
Home Loan Bank stock from 6.62% to 7.64%, loan portfolio from 8.02% to 8.19%,
and mortgage-backed securities portfolio from 6.51% to 6.57% for the nine months
ended June 30, 1998, as compared to the nine months ended June 30, 1997. These
increases were partially offset by a decrease in the investment securities
portfolio yield from 6.62% to 6.33% for the nine months ended June 30, 1998, as
compared to the nine months ended June 30, 1997. The decrease in yield on
investment securities was primarily due to the reinvestment of proceeds from
called securities into lower yielding investments. The increase in yield on the
loan portfolio was primarily due to construction loan originations at the
Company's new loan production office in Lawrence, Kansas. These construction
loans generally have terms of nine months or less and interest rates tied to the
prime rate plus a margin.

Interest income for the quarter ended June 30, 1998, increased to
$2,348,000 from $2,037,000 for the quarter ended June 30, 1997. This increase
was caused primarily by a $13.2 million increase in the average outstanding
amount of interest-earning assets during the three months ended June 30, 1998,
as compared to the three months ended June 30, 1997 due to the increase in the
average balance of loans receivable financed by advances obtained from the
Federal Home Loan Bank of Topeka and increased savings deposits. To a lesser
extent, the increase was due to an increase in the average yield on
interest-earning assets. The average yield on interest-earning assets increased
20 basis points to 7.78% at June 30, 1998, from 7.58% at June 30, 1997. This
increase was caused primarily by increases in yield on the Association's Federal
Home Loan Bank stock from 6.89% to 7.43%, loan portfolio from 8.05% to 8.18%,
and mortgage-backed securities portfolio from 6.56% to 6.57% for the three
months ended June 30, 1998, as compared to the three months ended June 30, 1997.
The increase in yield on the loan portfolio was due to the same reason as stated
above. These increases were partially offset by a decrease in the investment
portfolio yield from 6.50% to 6.31% for the three months ended June 30, 1998, as
compared to the three months ended June 30, 1997.

Interest Expense. Interest expense for the nine months ended June 30,
1998, increased by $355,000 to $4,107,000 as compared to $3,752,000 for the nine
months ended June 30, 1997. This increase in interest expense was due primarily
to a $9.4 million increase in the average outstanding amount of interest-bearing
liabilities during the nine months ended June 30, 1998 as compared to the nine
months ended June 30, 1997. This increase was partially offset by a 2 basis
point decrease in average interest rates paid on interest-bearing liabilities,
caused by decreases in market interest rates. The increase in interest-bearing
liabilities was primarily due to a $7.5 million increase in the average
outstanding balance of deposits due primarily to new accounts opened at the
Coffeyville, Kansas branch office and seasonal deposits from public units.

Interest expense for the quarter ended June 30, 1998, increased by
$163,000 to $1,427,000 as compared to $1,264,000 for the quarter ended June 30,
1997. This increase in interest expense was due primarily to a $12.4 million
increase in the average outstanding amount of interest-bearing liabilities
during the three months ended June 30, 1998, as compared to the three months
ended June 30, 1997. The average interest rates paid on interest-bearing
liabilities remained the same for the two periods. The increase in
interest-bearing liabilities was due primarily to the same reasons as stated
above.

Provision for Loan Losses. Based upon management's analysis of
established reserves and its ongoing review of the composition of the loan
portfolio, including non-performing assets and other loans of concern, there was
no provision for losses on loans for the three and nine months ended June 30,
1998 and June 30, 1997. The Company will continue to monitor its allowance for
loan losses and make future additions to the allowance through the provision for
loan losses as economic and regulatory conditions dictate. However, there can be
no assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods. In
addition, the Company's determinations as to the amount of the allowance for
loan losses is subject to review by the regulatory agencies which can order the
establishment of additional general or specific allowances.

Non-interest Income. Non-interest income increased $48,000 to $131,000
during the nine months ended June 30, 1998 as compared to $83,000 for the nine
months ended June 30, 1997. The increase was primarily due to increased checking
and deposit account fees as a result of new accounts in the Coffeyville branch.
To a lesser extent, the increase was due to increased fees associated with
mortgage loans.

<PAGE>

Non-interest income increased $23,000 to $46,000 during the three
months ended June 30, 1998 as compared to $23,000 for the three months ended
June 30, 1997. Recurring non-interest income generally consists of servicing
fees as well as deposit and other types of fees.

Non-interest Expense. Total non-interest expense increased to
$1,634,000 for the nine months ended June 30, 1998 from $1,497,000 for the nine
months ended June 30, 1997, an increase of $137,000, or 9.18%. The increase was
primarily due to increases in compensation and employee benefits of $110,000,
occupancy and equipment of $52,000, and data processing fees of $26,000. These
increases were primarily due to the opening of a new loan production office in
Lawrence, Kansas, resulting in additional staff, occupancy and equipment,
stationery, printing and office supplies expense. Data processing also increased
due to increased account volumes at the Coffeyville branch and processing price
increases. To a lesser extent, the increase in compensation expense was the
result of normal, annual cost of living increases in salaries and bonuses, and
increased compensation expense associated with the Company's ESOP plan due to
the increase in the Company's stock price. These increases were partially offset
by decreases in other expenses of $32,000 and federal deposit insurance premiums
of $18,000.

Total non-interest expense increased by $22,000 for the three months
ended June 30, 1998, as compared to the three months ended June 30, 1997. The
increase was due primarily to increases in compensation and employee benefits of
$33,000, data processing fees of $11,000, and occupancy and equipment of $8,000.
These increases were partially offset by a decrease in other expense of $30,000.
The increase in noninterest expense for the three months ended June 30, 1998 was
due to the same reasons as stated above.

Income Tax Expense. Income tax expense was $472,000 for the nine
months ended June 30, 1998 compared to $332,000 for the nine months ended June
30, 1997, an increase of $140,000. This increase was primarily due to an
increase in pre-tax earnings during the 1998 period as compared to the 1997
period. The Company's effective tax rates were 42.3% and 39.5% for the nine
months ended June 30, 1998 and June 30, 1997, respectively. Rates exceed
expected rates due primarily to compensation expense associated with the ESOP,
of which a portion is not deductible for income tax purposes.

Income tax expense was $184,000 for the quarter ended June 30, 1998
compared to $127,000 for the quarter ended June 30, 1997, an increase of
$57,000. This increase was primarily due to an increase in pre-tax earnings
during the 1998 period as compared to the 1997 period. The Company's effective
tax rates were 40.6% and 41.7% for the three months ended June 30, 1998 and June
30, 1997, respectively. Rates exceed expected rates due primarily to
compensation expense associated with the ESOP, of which a portion is not
deductible for income tax purposes.

Comparison of Fiscal Years Ended September 30, 1997 and
September 30, 1996 for the Company

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

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

Interest Income. Interest income for the fiscal year ended September
30, 1997, increased to $8.1 million from $7.8 million for the fiscal year ended
September 30, 1996. This increase resulted primarily from a $4.2 million
increase in the average outstanding balance of interest-earning assets (due to
the increase in the average balance of loans receivable and investment
securities financed with borrowings from the Federal Home Loan Bank of Topeka
and

<PAGE>

increased savings deposits) during the fiscal year ended September 30, 1997, as
compared to the fiscal year ended September 30, 1996. These increases were
partially offset by a decrease in the average yield on interest-earning assets.
The average yield on interest-earning assets decreased 3 basis points to 7.53%
during fiscal 1997, from 7.56% during fiscal 1996. This decrease was caused
primarily by a decrease in yield on the Company's loans receivable from 8.22% to
7.98% due to new loans being originated at interest rates lower than those
currently in the loan portfolio. This decrease was partially offset by an
increase in yield on mortgage-backed securities from 6.54% to 6.61% and
investment securities from 6.62% to 6.75%.

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

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

Non-interest Income. Non-interest income decreased $306,000 to
$159,000 during the fiscal year ended September 30, 1997 as compared to $465,000
for the fiscal year ended September 30, 1996. The decrease was primarily due to
a non-recurring $251,000 gain on the sale of FHLMC stock which was recognized in
the fiscal year ended September 30, 1996, with no gains on the sale of
securities recognized in the fiscal year ended September 30, 1997. To a lesser
extent, the decrease was due to a decrease of $60,000 in earnings from real
estate operations for the fiscal year ended September 30, 1997 as compared to
the fiscal year ended September 30, 1996. Recurring non-interest income
generally consists of servicing fees as well as deposit and other types of fees.
Non-interest income levels are anticipated to remain stable in the future due to
the small number of checking accounts held by the Company.

Non-interest Expense. Total non-interest expense decreased to
$1,989,000 for the fiscal year ended September 30, 1997 from $2,267,000 for the
fiscal year ended September 30, 1996, a decrease of $278,000, or 12.3%. The
decrease was primarily due to a one-time pre-tax charge of $431,000 during the
fiscal year ended September 30, 1996, with no similar charge during the fiscal
year ended September 30, 1997. The charge was related to a special assessment of
65.7 basis points on deposits of SAIF-insured institutions as of March 31, 1995,
in order to recapitalize the Savings Association Insurance Fund. To a lesser
extent, the decrease was due to a reduction in the Company's ongoing deposit
insurance premium of $94,000, as a result of the recapitalization of the Savings
Association Insurance Fund. These decreases were partially offset by increases
in compensation and employee benefits of $142,000, other expenses of $58,000,
occupancy and equipment of $37,000, and data processing fees of $12,000. The
increase in compensation expense was primarily due to annual increases in
salaries and bonuses and expense associated with the Company's ESOP due to the
increase in the Company's stock price. In addition, the opening of a new branch
office in Coffeyville, Kansas resulted in additional staff, advertising,
stationery, printing and office supplies expense.

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

<PAGE>

Average Balances, Interest Rates and Yields of the Company

The following table presents for the periods indicated the total
dollar amount of interest income from average interest-earning assets and
related yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent adjustments
were made. All average balances are monthly average balances. The use of monthly
averages rather than daily averages does not have a significant effect upon the
Company's results. Non-accruing loans have been included in the table as loans
carrying a zero yield.

Nine Months Ended June 30, Year Ended September 30,

1998 1997 1997

Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield
Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Interest-earning assets:
Loans receivable(1)......... $ 83,816 $5,151 8.19% $70,225 $4,225 8.02% $71,188 $ 5,684 7.98%
Mortgage-backed securities.. 21,440 1,057 6.57 26,732 1,305 6.51 26,137 1,727 6.61
Investment securities....... 6,976 331 6.33 7,481 372 6.62 7,598 513 6.75
FHLB stock.................. 1,405 82 7.64 1,301 66 6.62 1,314 89 6.79
Federal funds sold.......... 2,106 85 5.36 669 27 5.26 567 34 6.02
Other earning assets........ 454 19 5.20 251 11 5.10 318 22 6.83
----------- --------- ------ ------ ------ ---- ------- ------- ----
Total earning assets....... 116,197 6,725 7.71 106,659 6,006 7.50 107,122 8,069 7.53
------- ------- -------
Non-interest earning assets 2,807 2,698 2,928
----------- ----------- ----------- ---
Total assets................ $119,004 $109,357 $110,050
======== ======== ========

Interest-bearing liabilities:
Savings deposits and 7$ 51,111 5$ 51,219 6
certificates.............. $ 53,908 2,171 5.3 2,049 5.3 2,745 5.3
Demand and NOW.............. 25,942 814 4.18 21,191 662 4.17 22,019 914 4.15
FHLB advances............... 25,589 1,122 5.84 23,722 1,041 5.85 23,583 1,400 5.93
---------- -------- --------- -------- --------- --------
Total interest-bearing 105,439 4,107 5.19 96,024 3,752 5.21 96,821 5,059 5.22
liabilities -------- ------ ------

Non-interest-bearing liabilities 1,994 1,599 1,538
-------- ---------- ----------- ---
Total liabilities......... 107,433 97,623 98,359

Equity....................... 11,571 11,734 11,691
---------- ---------- ---------- ---
Total liabilities and equity $119,004 $109,357 $110,050
======== ======== ========

Net interest/spread.......... $ 2,618 2.52 % $ 2,254 2.29 % $3,010 2.31%
======= ====== ======= ====== ====== =====
Margin....................... 3.00% 2.81% 2.81%
===== ===== =====
Assets to liabilities........ 110.20% 111.08% 110.64%
======= ======= =======
<FN>

- ---------------------
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
</FN>
</TABLE>

<PAGE>

1996 1995

Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield
Balance Paid Rate Balance Paid Rate

Interest-earning assets:
Loans receivable(1)......... $63,152 $ 5,190 8.22% $ 58,628 $ 4,804 8.19%
Mortgage-backed securities.. 29,510 1,930 6.54 29,191 1,939 6.64
Investment securities....... 7,233 479 6.62 4,977 321 6.45
FHLB stock.................. 1,103 70 6.38 1,028 61 5.93
Federal funds sold.......... 1,434 79 5.53 650 44 6.77
Other earning assets........ 445 25 5.64 275 17 6.18
----------------- -------------------
Total earning assets....... 102,877 7,773 7.56 94,749 7,186 7.58
------- -------
Non-interest earning assets 1,606 1,883
-------- ----------
Total assets................ $104,483 $ 96,632
======== ========

Interest-bearing liabilities:
Savings deposits and $ 51,950 8
certificates.............. 2,820 5.43 $ 51,019 2,441 4.7
Demand and NOW.............. 18,765 762 4.06 13,508 408 3.02
FHLB advances............... 19,133 1,087 5.68 17,275 1,003 5.81
-------- -------- ---------- --------
Total interest-bearing 89,848 4,669 5.20 81,802 3,852 4.71
liabilities -------- --------

Non-interest-bearing 1,497 1,512
liabilities -------- ----------

Total liabilities......... 91,345 83,314

Equity....................... 13,138 13,318
-------- ---------
Total liabilities and $104,483 $ 96,632
equity ======== ========

Net interest/spread.......... $3,104 2.36% $3,334 2.87%
====== ====== ====== ======
Margin....................... 3.02% 3.52%
====== ======
Assets to liabilities........ 114.50% 115.83%
======= =======

</TABLE>

<PAGE>

Rate/Volume Analysis of Net Interest Income of the Company

The following schedule presents the dollar amount of changes in
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. For each category of interest-earning
assets and interest-bearing liabilities, information is provided on changes
attributable to (i) changes in volume (i.e., changes in volume multiplied by old
rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume).
For purposes of this table, changes attributable to both rate and volume, which
cannot be segregated, have been allocated proportionately to the change due to
volume and the change due to rate.

Nine Months Ended
June 30, Year Ended September 30, Year Ended September 30,
1998 vs. 1997 1997 vs. 1996 1996 vs. 1995

Increase Increase Increase
(Decrease) (Decrease) (Decrease)
Due to Total Due to Total Due to Total
Increase Increase Increase
Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
--------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Interest-earning assets:
Loans receivable.............. $835 $ 91 $926 $645 $(151) $ 494 $372 $ 14 $ 386
Mortgage-backed securities.... (260) 12 (248) (223) 20 (203) 21 (30) (9)
Securities.................... (25) (16) (41) 24 10 34 149 9 158
FHLB stock.................... 5 11 16 14 5 19 4 5 9
Federal funds sold............ 57 1 58 (52) 7 (45) 44 (9) 35
Other earning assets.......... 8 --- 8 (8) 5 (3) 10 (2) 8
------- ------- ------ ------- --------- ------- ------ -------- -------
Total interest-earning assets $620 $ 99 719 $400 $(104) 296 $600 $(13) 587
==== ====== ---- ==== ====== ------ ==== ===== -----

Interest-bearing liabilities:
Passbook savings and certificates $114 $ 8 122 $ (39) $ (36) (75) $ 45 $ 334 379
NOW and Demand................ 150 2 152 135 17 152 188 166 354
FHLB Advances................. 83 (2) 81 262 51 313 106 (22) 84
----- -------- ----- ----- -------- ------ ----- ------ ------

Total interest-bearing liabilities $347 $ 8 355 $ 358 $ 32 390 $ 339 $ 478 817
==== ====== ---- ===== ======= ------ ===== ===== ------

Net interest income............ $ 364 $(94) $(230)
===== ===== ======
</TABLE>

The following table sets forth the weighted average yields on the
Company's interest-earning assets, the weighted average interest rates on
interest-bearing liabilities and the interest rate spread between the weighted
average yields and rates for the Company at the dates indicated. Non-accruing
loans have been included in the table as carrying a zero yield.

At
June 30, September 30,
1998 1997 1996 1995
---------------------------------------------------

Weighted average yield on:
Loans receivable.......................................... 7.82% 7.74% 7.78% 8.13%
Mortgage-backed securities................................ 6.48 6.66 6.53 6.97
Securities................................................ 6.39 6.97 6.68 7.61
Federal funds sold........................................ 5.35 5.28 5.48 5.57
Other interest-earning assets............................. 5.14 5.22 4.93 5.35
Combined weighted average yield on interest-earning
assets................................................. 7.49 7.40 7.34 7.59

Weighted average rate paid on:
Passbook Savings and certificates......................... 5.44 5.38 5.38 5.38
NOW....................................................... 4.04 4.06 4.03 3.78
FHLB advances............................................. 5.77 6.11 5.65 5.94
Combined weighted average rate paid on interest-
bearing liabilities.................................... 5.18 5.21 5.17 5.23

Spread..................................................... 2.31 2.19 2.17 2.36

</TABLE>

<PAGE>

Asset/Liability Management of the Company and Market Risk

Qualitative Aspects of Market Risk. The Company derives its income
primarily from the excess of interest collected over interest paid. The rates of
interest the Company earns on assets and pays on liabilities generally are
established contractually for a period of time. Market interest rates change
over time. Accordingly, the Company's results of operations, like those of many
financial institutions, are impacted by changes in interest rates and the
Company's ability to adapt to changes in interest rates is known as interest
rate risk and is the Company's most significant market risk.

Quantitative Aspects of Market Risk. In an attempt to manage our
exposure to changes in interest rates and comply with applicable regulations,
the Company monitors its interest rate risk. In monitoring interest rate risk,
the Company continually analyzes and manages assets and liabilities based on
their payment streams and interest rates, the timing of their maturities, and
their sensitivity to actual or potential changes in market interest rates.

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

Since the early 1980's, the Company has stressed the origination of
adjustable rate residential mortgage loans ("ARMs"), subject to market
conditions. In recent periods, the Company has also purchased adjustable-rate
mortgage-backed securities. At June 30, 1998, approximately $29.3 million, or
29.8% of the Company's total loans secured by real estate, were ARMs. On the
same date, the Company also had $11.8 million in adjustable-rate mortgage-backed
securities.

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

To increase the interest rate sensitivity of its assets, the Company
has also maintained a relatively high level of short and intermediate-term
investment securities and other assets. At June 30, 1998, the Company had $2.7
million of investment securities and interest-bearing deposits maturing or
repricing within three years. Finally, the Company has undertaken various
marketing programs from time to time over the last decade in order to extend the
term of its deposit liabilities. In 1993, the Company introduced a new
certificate of deposit program in an attempt to reduce deposit outflows and
attract longer term deposits which were being lost as a result of the general
decline in market rates of interest. This program offers two certificate
products which have 4- and 5-year terms. At June 30, 1998, the Company had
approximately $7.6 million in these two certificates.

In the future, in managing its interest rate sensitivity, the Company
intends to continue to stress the origination of ARMs, subject to market
conditions, the purchase of adjustable-rate mortgage-backed securities and the
maintenance of a relatively high level of short-term securities and other
assets.

Office of Thrift Supervision ("OTS") regulations provide a Net
Portfolio Value ("NPV") approach to the quantification of interest rate risk. In
essence, this approach calculates the difference between the present value of
expected cash flows from assets and the present value of expected cash flows
from liabilities, as well as cash flows from off-balance-sheet contracts arising
from an assumed 200 basis point increase or decrease in interest rates
(whichever results in the greater pro forma decrease in NPV). Under OTS
regulations, an institution's "normal" level of interest rate risk in the event
of this assumed change in interest rates is a decrease in the institution's NPV
in an amount not to exceed

<PAGE>

2% of the present value of its assets. Thrift institutions with
greater than "normal" interest rate exposure must take a deduction from their
total capital available to determine if they meet their risk-based capital
requirement. The amount of that deduction is one-half of the difference between
(a) the institution's actual calculated exposure to the 200 basis point interest
rate change and (b) its "normal" level of exposure, which is 2% of the present
value of its assets. Savings associations, such as First Federal, with less than
$300 million in assets and a risk-based capital ratio in excess of 12% are
exempt from this requirement unless the OTS determines otherwise. The OTS has
postponed the implementation of the capital deduction component of this
regulation until it completes its analysis of the methods of interest rate risk
measurements proposed by the other banking regulators.

Presented below, as of June 30, 1998, is an analysis of the
Association's interest rate risk as measured by changes in NPV for instantaneous
and sustained parallel shifts in the yield curve, in 100 basis point increments,
up and down 200 basis points and compared to Board policy limits. The table was
prepared and furnished to the Association by the Office of Thrift Supervision.
Assumptions used in calculating the amounts in this table were determined by the
OTS (dollars in thousands):

Change in
Interest Rate Board Limit Net Portfolio Value
(Basis Points) % Change At June 30, 1998
---------------- ---------- -----------------
$ Amount $ Change % Change
---------- ---------- ---------

+200 -40% $ 9,037 $ (4,259) (32)%
+100 -25 11,391 (1,905) (14)
0 -- 13,296 --- ---
-100 -25 14,433 1,137 9
-200 -40 15,283 1,987 15

As indicated in the table above, management has structured its assets
and liabilities to minimize its exposure to interest rate risk. In the event of
a 200 basis point change in interest rates, the Association would experience a
15% increase in NPV in a declining rate environment and a 32% decrease in a
rising rate environment. During periods of rising interest rates, the value of
monetary assets and liabilities generally decline. Conversely, during periods of
falling interest rates, the value of monetary assets and liabilities generally
increase. However, the amount of change in value of specific assets and
liabilities due to changes in interest rates is not the same in a rising
interest rate environment as in a falling interest rate environment (i.e., as
indicated above, the amount of value increase under a specific rate decline may
not equal the amount of value decrease under an identical upward rate movement).

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

Liquidity and Capital Resources of the Company

The ^ OTS requires minimum levels of liquid assets. At June 30, 1998,
OTS regulations required First Federal to maintain an average daily balance of
liquid assets (United States Treasury, federal agency, and other investments
having maturities of five years or less) equal to at least 4.0% of the sum of
its average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. Such requirements may be changed from time to time
by OTS to reflect changing economic conditions. Such investments are intended to
provide a source of relatively liquid funds upon which First Federal may rely if
necessary to fund deposit withdrawals and other short-term funding needs. First
Federal's regulatory liquidity at June 30, 1998 was 9.71%, as compared to 7.20%
at September 30, 1997. This

<PAGE>

increase was primarily due to an increase in short-term investments funded with
public unit deposits. First Federal normally attempts to maintain liquidity
between 7% and 9%.

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

The Company's primary investing activity is the origination of
mortgage loans and the purchase of mortgage-backed and other securities. At June
30, 1998, mortgage loans and mortgage-backed securities accounted for 89.3% of
the Company's total assets. The Company has been able to generate sufficient
cash through the retail deposit market, its traditional funding source, and
through short-term borrowings, to provide the cash utilized in investing
activities. A $9.0 million line of credit has also been established with the
FHLB of Topeka with an outstanding balance of $500,000 at June 30, 1998. The
line of credit is scheduled to mature on February 5, 1999, and will most likely
be renewed for another one year term at that time. The line of credit is subject
to various conditions, including the pledging of acceptable collateral. The
primary purpose of the line of credit is to serve as a back-up liquidity
facility for the Company, however, the Company may from time to time utilize the
line of credit to purchase investment securities and fund other commitments.

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

The Company anticipates that it will have sufficient funds available
to meet current loan commitments. At June 30, 1998, the Company had outstanding
commitments to extend credit which amounted to $1,440,000, including commitments
on construction loans. The Company is not aware of any trends, events or
uncertainties which will have or that are reasonably likely to have a material
effect on the Company's liquidity, capital resources or operations.

Certificates of deposit scheduled to mature in one year or less at
June 30, 1998 totaled approximately $33.9 million. Management believes that a
significant portion of such deposits will remain with the Company. There can be
no assurance, however, that the Company can retain all such deposits. At June
30, 1998, the Company had $28.4 million in advances from the FHLB of Topeka with
$8.9 million maturing in one year or less.

The Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA"), among other things, mandated the adoption of new minimum
capital requirements that are no less stringent than the minimum capital
requirements for national banks. These minimum capital standards generally
require the maintenance of regulatory capital sufficient to meet each of three
tests: the tangible capital requirement, the core capital requirement, and the
risk-based capital requirement. The tangible capital requirement provides for
minimum tangible capital (defined as retained earnings less all intangible
assets) equal to 1.5% of adjusted total assets. The core capital requirement
provides for minimum core capital (tangible capital plus supervisory goodwill)
equal to 3.0% of assets. The risk-based capital requirement provides for the
maintenance of core capital plus general loss allowances (less a specified
percentage of certain equity investments) equal to 8.0% of risk-weighted assets.
In computing risk-weighted assets, the Association multiplies the book value of
each asset on its balance sheet by a defined risk-weighting factor (e.g., one-
to four-family residential loans carry a risk-weighted factor of 50%).
Management has reviewed these capital standards and determined that the
Association is in compliance with each of the three requirements. As of June 30,
1998, the Association's tangible capital, core capital, and risk-based capital
of $10.2 million, $10.2 million, and $10.9 million exceeded the applicable
minimum requirements by $8.4 million, $6.6 million, and $6.0 million,
respectively.

<PAGE>

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

Year 2000 Compliance Issues

The Company has established a year 2000 Committee to assess the risk
of potential problems that might arise from the failures of computer programming
to recognize the year 2000 and to develop a plan to mitigate any such risk. The
committee has determined that the greatest potential impact upon the Company is
the risk related to vendors used by the Company, particularly First
Independence's data processing service bureau. Quarterly progress reports from
the service bureau indicate levels of manpower and expertise sufficient to amend
and test the adequacy of their computer programming and systems prior to the
arrival of the year 2000. All other vendors used by the Company have been
identified and requests for year 2000 certifications have been forwarded.

The year 2000 compliance program established by the committee includes
quarterly progress reports submitted to the Board of Directors and a target date
of December 31, 1998 for required internal testing. Contingency plans have also
been developed in the event the Company's service bureau or vendors are not year
2000 certified. The committee estimates that the impact upon the Company's
results of operations, liquidity and capital resources will be immaterial.

Effect of New Accounting Standards

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

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

In June, 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This Statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company currently has no plans to adopt
SFAS No. 133 early or to reclassify securities from Held to Maturity upon
adoption. Management believes adoption of SFAS No. 133 will not have a material
effect on the Company's financial position or results of operations, nor will
adoption require additional capital resources.

<PAGE>

BUSINESS OF THE COMPANY

General

The Company is a Delaware corporation which was formed at the
direction of First Federal Savings and Loan Association of Independence ("First
Federal" or the "Association") in June 1993 for the purpose of becoming the
savings and loan holding company of First Federal. The Company owns all of the
outstanding stock of First Federal issued on October 5, 1993 in connection with
the completion of First Federal's conversion from the mutual to the stock form
of organization (the "Conversion"). The Company issued 727,375 shares of common
stock at a price of $10.00 per share in the Conversion. On January 24, 1997, the
Common Stock was split two-for-one through the issuance of a 100% stock
dividend. At June 30, 1998, the Company had total assets of $123.4 million, and
stockholders' equity of $11.8 million.

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

Like all federally chartered savings associations, First Federal's
operations are regulated by the OTS. First Federal is a member of the FHLB
System and a stockholder in the FHLB of Topeka. The Association is also a member
of the SAIF and its deposit accounts are insured up to applicable limits by the
FDIC.

The business of the Association consists primarily of attracting
deposits from the general public and using these deposits to originate one- to
four-family and multi-family residential mortgage, non-residential mortgage and
consumer loans. The Association also invests in mortgage-backed securities which
are insured by or guaranteed by federal agencies and other investment
securities. See "-- Lending Activities -- Originations, Purchases and Sales of
Loans and Mortgage-Backed Securities."

The principle sources of funds for the Association's lending
activities include deposits, amortization and prepayment of loan principal
(including mortgage-backed securities), sales or maturities of investment
securities, mortgage-backed securities and short-term investments, borrowings
and funds provided from operations.

The Association's revenues are derived principally from interest on
mortgage loans and mortgage-backed securities, interest on investment
securities, dividends on FHLB stock and loan origination earnings.

Community Orientation

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

Market Area

Through its offices in Independence and Coffeyville, Kansas, First
Federal currently serves primarily Montgomery County, Kansas and, to a lesser
extent, Wilson County and the eastern part of Chautauqua County in Kansas. The
Association competes in loan originations and in attracting deposits with
approximately 10 financial institutions serving its primary market area. The
Association estimates its share of the savings market in Montgomery County to be
approximately 15%.

<PAGE>

First Federal established a loan production office in Lawrence, Kansas
effective October 15, 1997. The office primarily originates construction loans
in Lawrence and the surrounding area. Loan approvals are made at the
Association's main office with disbursements and collections handled at the loan
production office. The office is currently staffed with a loan originator and
two processors.

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

Montgomery County has a population of approximately 38,000. Although
the economy of southeast Kansas is closely tied to the gas, oil and agricultural
industries, Montgomery County has attracted a variety of other industries. Major
employers in Montgomery County include Automotive Controls Corp., Inc., a
manufacturer of electronic and electrical parts, City Publishing Company, a
publisher of cross-reference directories, Emerson Electric Co., a manufacturer
of small electric motors, Hackney & Sons (Midwest) Inc., a manufacturer of
beverage delivery truck bodies, Heartland Cement, a manufacturer of cement and
Cessna Aircraft, a manufacturer of single engine airplanes.

Lending Activities

General. Historically, the Association originated fixed-rate mortgage
loans. Since 1982, however, the Association has emphasized, subject to market
conditions, the origination and holding of adjustable-rate mortgage ("ARM")
loans and loans with shorter terms to maturity than traditional 30-year,
fixed-rate loans. Management's strategy has been to increase the percentage of
assets in its portfolio with more frequent repricing or shorter maturities. In
response to customer demand, however, the Association continues to originate for
its loan portfolio fixed-rate mortgages with terms not greater than 30 years.

The Association's primary focus in lending activities is on the
origination of loans secured by first mortgages on owner-occupied, one- to
four-family residences. Recently, a significant portion of the Association's
lending has been in the form of construction loans. To a much lesser extent, the
Association also originates loans secured by non-residential real estate and
consumer loans and a limited amount of multi-family real estate loans. See
"Originations, Purchases and Sales of Loans and Mortgage-Backed Securities." At
June 30, 1998, the Association's net loan portfolio totaled $90.6 million.

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

The aggregate amount of loans that the Association is permitted to
make under applicable federal regulations to any one borrower, including related
entities, is generally equal to the greater of 15% of unimpaired capital and
surplus or $500,000. At June 30, 1998, the maximum amount which the Association
could have lent to any one borrower and the borrower's related entities was
approximately $1.5 million. See " - Regulation - Federal Regulation of Savings
Associations."

<PAGE>

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

June 30, At September 30,
1998 1997 1996 1995
--------------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent Amount Percent
--------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Real Estate Loans

One- to four-family............ $70,075 71.36% $64,152 84.30% $57,353 82.29% $50,747 82.34%
Multi-family................... 1,116 1.14 1,164 1.53 1,371 1.97 1,420 2.30
Non-residential................ 7,674 7.81 7,479 9.83 7,224 10.36 7,454 12.10
Construction................... 16,391 16.69 764 1.00 1,834 2.63 526 0.85
-------- ------- ---------- ------- --------- ------- --------- -------
Total real estate loans..... 95,256 97.00 73,559 96.66 67,782 97.25 60,147 97.59
-------- ------- -------- ------- -------- ------- -------- -------

Consumer Loans:

Deposit account................ 414 0.42 350 0.46 364 0.52 314 0.50
Automobile..................... 880 0.90 705 0.93 402 0.58 269 0.44
Home equity.................... 723 0.74 550 0.72 781 1.12 641 1.04
Home improvement............... 271 0.28 274 0.36 183 0.26 102 0.17
Other.......................... 654 0.66 661 0.87 185 0.27 159 0.26
---------- -------- ---------- ------- ---------- ------- --------- -------

Total consumer loans........ 2,942 3.00 2,540 3.34 1,915 2.75 1,485 2.41
--------- -------- --------- ------- --------- ------- -------- -------

Total Loans................ 98,198 100.00% 76,099 100.00% 69,697 100.00% 61,632 100.00%
====== ====== ====== ======

Less:

Loans in process............... 6,603 572 1,050 372
Deferred fees and discounts.... 325 300 274 200
Allowance for losses........... 656 668 690 690
---------- ---------- ---------- ----------
Total loans receivable, net.... $90,614 $74,559 $67,683 $60,370
======= ======= ======= =======
</TABLE>

<PAGE>

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

June 30, At September 30,
1998 1997 1996 1995
--------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Fixed-Rate Loans
Real estate:
One- to four-family......................... $43,685 44.49 $37,581 49.38% $31,231 44.81% $23,163 37.59%
Multi-family................................ 651 0.66 683 0.90 871 1.25 821 1.33
Non-residential............................. 5,221 5.32 5,055 6.64 4,835 6.94 5,304 8.61
Construction................................ 16,391 16.69 764 1.00 --- --- 526 0.85
-------- ------- -------- -------- -------- ----- -------- ------
Total fixed-rate real estate loans........ 65,948 67.16 44,083 57.92 36,937 53.00 29,814 48.38
Consumer..................................... 2,219 2.26 1,990 2.62 1,437 2.06 1,123 1.82
--------- -------- --------- ------- -------- ------- -------- ------
Total fixed-rate loans.................... 68,167 69.42 46,073 60.54 38,374 55.06 30,937 50.20
-------- ------- -------- ------- -------- ======= -------- ------

Adjustable-Rate Loans
Real estate:
One- to four-family......................... 26,390 26.87 26,571 34.92 26,122 37.47 27,584 44.75
Multi-family................................ 465 0.47 481 0.63 500 0.72 599 0.97
Non-residential............................. 2,453 2.50 2,424 3.19 2,389 3.43 2,150 3.49
Construction................................ --- --- --- --- 1,834 2.63 --- ---
------------ ------ ---------- ----- -------- ------- -------- ----
Total adjustable-rate real estate loans.. 29,308 29.84 29,476 38.74 30,845 44.25 30,333 49.21
Consumer..................................... 723 0.74 550 0.72 478 0.69 362 0.59
---------- -------- ---------- ------- -------- ------- -------- ------
Total adjustable-rate loans.............. 30,031 30.58 30,026 39.46 31,323 44.94 30,695 49.80
-------- ------- -------- ------- -------- ------- -------- ------

Total Loans.............................. 98,198 100.00% 76,099 100.00% 69,697 100.00% 61,632 100.00%
====== ====== ====== ======

Less
Loans in process............................. 6,603 572 1,050 372
Deferred fees and discounts.................. 325 300 274 200
Allowance for losses......................... 656 668 690 690
---------- ---------- -------- ----------

Total loans receivable, net.................. $90,614 $74,559 $67,683 $60,370
======= ======= ======= =======
</TABLE>

<PAGE>

The following schedule shows the scheduled contractual maturities of
the Association's loan portfolio at June 30, 1998. Mortgages which have
adjustable or renegotiable interest rates are shown as repaying in the period
during which the contract is due. The schedule does not reflect the effects of
possible prepayments or enforcement of due-on-sale clauses.

Real Estate
-----------------------------------------------
One- to Multi-family, and
Four-Family Non-Residential Construction Consumer Total
-------------------------- ----------------------------------------------------------------------------
Due During Periods Weighted Weighted Weighted Weighted Weighted
Ending June 30, Amount Average Amount Average Amount Average Amount Average Amount Average
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

1999(1).................... $ 308 8.42% $ 114 8.84% $14,516 9.78% $1,047 9.15% $15,985 9.71%
2000....................... 119 8.29 245 8.74 1,045 9.38 359 9.09 1,768 9.16
2001....................... 362 7.71 607 8.88 --- --- 414 9.29 1,383 8.70
2002 and 2003.............. 1,487 7.84 202 8.70 --- --- 820 8.99 2,509 8.29
2004 to 2008............... 7,362 7.81 1,659 8.61 --- --- 302 8.79 9,323 7.98
2009 to 2023............... 37,036 7.63 5,821 8.40 543 8.62 --- --- 43,400 7.75
2024 and following......... 23,401 7.50 142 8.24 287 8.19 --- --- 23,830 7.51
------- ------ ------- ------- --------
Total $70,075 $8,790 $16,391 $2,942 $98,198
======= ====== ======= ====== =======
<FN>

(1) Includes demand loans, loans having no stated maturity and overdraft loans.
</FN>
</TABLE>

The total amount of loans due after June 30, 1999, which have a
predetermined interest rate is $52.3 million, while the total amount of loans
due after such date which have a floating or adjustable interest rate is $29.9
million.

<PAGE>

One- to Four-Family Residential Mortgage Lending. Residential loan
originations are generated by the Association's marketing efforts, its present
customers, walk-in customers and referrals from real estate brokers and
builders. The Association has focused its lending efforts primarily on the
origination of loans secured by first mortgages on owner-occupied, single-family
residences in its market area. At June 30, 1998, the Association's one- to
four-family residential mortgage loans, totaled $70.1 million, or 71.4% of the
Association's loan portfolio.

The Association currently makes adjustable-rate, one- to four-family
residential mortgage loans in amounts up to 95% of the appraised value, or
selling price, of the security property, whichever is less. For loans with a
loan-to-value ratio of 90% or greater, the Association requires private mortgage
insurance equal to 20% of the loan value in order to reduce the Association's
exposure level. For loans with loan-to-value ratios of greater than 80% but less
than 90%, the Association typically requires private mortgage insurance to
reduce the Association's exposure. The determination as to whether to obtain
such insurance is made on a case-by-case basis, based on a variety of factors
including the borrower's payment history, the borrower's length of employment,
the quality of the property, the term of the loan and the debt to income ratio
of the borrower. At June 30, 1998, the Association had 540 loans totaling $29.3
million with a loan-to-value ratio of greater than 80% but less than 90% and 342
loans totaling $16.9 million with a loan-to-value ratio of 90% or greater.

The Association currently offers one-year ARM loans at rates
determined in accordance with market and competitive factors for a term of up to
30 years. The interest rate charged on ARM loans currently originated by the
Association is based upon the one year Constant Maturity Treasury Index. The
adjustable-rate loans currently originated by the Association provide for a 1%
annual cap and floor, and a 5% lifetime cap on the interest rate adjustment over
the rate in effect on the date of origination. The actual interest rate on these
adjustable-rate loans may not be reduced below 5% over the life of the loan. The
annual and lifetime caps on interest rate increases reduce the extent to which
these loans can help protect the Association against interest rate risk. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company - Asset/Liability Management." Approximately 38.8% of
the loans secured by one- to four-family real estate originated by the
Association during fiscal 1997 were originated with adjustable rates of
interest. Approximately 29.8% of the loans secured by one- to four-family real
estate originated by the Association during the nine months ended June 30, 1998
were originated with adjustable rates of interest. See "- Originations,
Purchases and Sales of Loans and Mortgage-Backed Securities."

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

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

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

An appraisal of the security property is obtained on all loan
applications from Board-approved independent fee appraisers. In connection with
the origination of residential real estate loans, the Association generally
requires that

<PAGE>

the borrower obtain an opinion from an attorney regarding the title to the
property or title insurance and fire and casualty insurance, as well as flood
insurance, where applicable, to protect the Association's interest.

Approximately $2.1 million, or 3.0% of the Association's one- to
four-family residential mortgage loan portfolio, was purchased by the
Association. These loans are primarily secured by property located in Texas and
have been in the Association's portfolio for several years. The Association has
purchased only a limited amount of one- to four-family residential mortgage
loans since 1989. The level of delinquencies in the Association's portfolio of
purchased loans secured by one- to four-family residential real estate is
consistent with that of the loans originated and retained by the Association.

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

Non-Residential/Multi-Family Real Estate Lending. In order to enhance
the yield on and decrease the average term to maturity of its assets, the
Association has originated and purchased permanent loans and participation
interests in loans originated by other lenders secured by non-residential and
multi-family real estate. The Association also has a limited amount of loans
secured by land. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Company - Asset/Liability
Management." At June 30, 1998, the Association had $8.8 million in
non-residential/ multi-family real estate loans, representing 9.0% of the
Association's loan portfolio.

Approximately 12.0% of the property securing the Association's
non-residential/multi-family (including land) real estate loan portfolio is
located outside the Association's primary market area. Many of the properties
securing these purchased loans or participations are located in Texas and
neighboring states. Some of these areas have experienced adverse economic
conditions including a general softening in real estate markets and the local
economy, which may result in increased loan delinquencies and loan losses.
However, most of the Association's non-residential/multi-family real estate loan
portfolio is seasoned and, during the past five years, the Association has had
no significant purchases or participations in such loans.

The table below sets forth, by type of security property, the
Association's non-residential/ multi-family real estate loans at June 30, 1998.
<TABLE>
<CAPTION>

Number Outstanding Amount
of Principal Non-Performing
Loans Balance or of Concern
(Dollars in Thousands)

Multi-family................................................ 6 $1,115 $ ---
Small business facilities and office buildings.............. 39 2,857 21
Health care facility........................................ 12 2,139 ---
Churches.................................................... 4 197 ---
Warehouse/mini-storage...................................... 3 319 ---
Shopping centers............................................ --- --- ---
Hotel/motel................................................. 3 1,246 ---
Land........................................................ 24 917 ---
----- -------- -------

Total multi-family residential and non-residential real
91 $8,790 $ 21
estate loans........................................ ===== ====== =====

</TABLE>

<PAGE>

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

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

At June 30, 1998, the Association had no non-residential/multi-family
real estate loans to one borrower, or group of borrowers, which had an existing
carrying value in excess of $500,000, except for the loans to five unrelated
borrowers or groups of borrowers described below. The first loan is secured by a
hotel located in Columbia, Missouri and had an outstanding balance at June 30,
1998 of $687,000. This loan has been current since its inception in June 1991.
The other loans in excess of $500,000 at June 30, 1998, included a loan to one
borrower totaling $598,000 secured by an apartment building located in Rogers,
Arkansas; a loan with an outstanding balance of $518,000 secured by a motel in
Independence, Kansas; a loan with an outstanding balance of $537,000 secured by
a guest home located in Caney, Kansas; and a loan with an outstanding balance of
$848,000 secured by a residential care facility located in Caney, Kansas. All of
these loans were current at June 30, 1998. See " - Regulation - Federal
Regulation of Savings Associations."

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

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

Construction Lending. The Association also makes a number of
construction loans to builders and individuals for the construction of
residences. There were $16.4 million of construction loans outstanding at June
30, 1998.

Although the Association has offered construction loans for years, it
recently expanded its efforts for this type of lending with the opening of its
Lawrence, Kansas production office. The majority of the construction loans were
originated at the Lawrence, Kansas loan production office. This office is
staffed with an originator and two processors, each of whom has substantial
experience in construction lending. Construction loans are made to both builders
and individuals and generally have terms of six months or less and interest
rates tied to the prime rate plus a margin. The

<PAGE>

borrower pays interest only during the construction period. Residential
construction loans are generally underwritten pursuant to the same guidelines
used for originating permanent residential loans, and are approved at the
Association's headquarters in Independence.

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

Consumer Lending. Consumer loans generally have shorter terms to
maturity (thus reducing First Federal's exposure to changes in interest rates)
and carry higher rates of interest than do one- to four-family residential
mortgage loans. In addition, management believes that the offering of consumer
loan products helps to expand and create stronger ties to its existing customer
base, by increasing the number of customer relationships and providing
cross-marketing opportunities. At June 30, 1998, the Association's consumer loan
portfolio totaled $2.9 million, or 3.0% of its loan portfolio. Under applicable
federal law, the Association is authorized to invest up to 35% of its assets in
consumer loans. First Federal offers a variety of secured consumer loans,
including home equity loans, home improvement loans, auto loans, and loans
secured by savings deposits and other consumer collateral. The Association also
offers a limited amount of unsecured loans. The Association currently originates
all of its consumer loans in its market area. The Association's home equity and
home improvement loans comprised approximately 33.8% of the Association's total
consumer loan portfolio. These loans are generally originated in amounts,
together with the amount of the existing first mortgage, of up to 90% of the
appraised value of the property securing the loan. The term to maturity on such
loans may be up to seven years. Other consumer loan terms vary according to the
type of collateral, length of contract and creditworthiness of the borrower. The
Association's consumer loans generally have a fixed rate of interest, except for
the home equity lines of credit which adjust based upon changes in the prime
rate.

At June 30, 1998, the Association had $880,000 of automobile loans.
The Association's automobile loans are originated as installment loans with a
fixed interest rate and terms of up to 60 months. The Association originates
automobile loans directly from its existing customers, for both new and used
automobiles, and will lend up to 80% of the value of the automobile.

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

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

Consumer loans may entail greater risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured, such as
checking account overdraft privilege loans, or are secured by rapidly
depreciable assets, such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. In addition, consumer loan collections are
dependent on the borrower's continuing financial stability, and thus are more
likely to be affected by adverse personal circumstances. Furthermore, the
application of various federal and state laws, including bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans.
Although the level of delinquencies in the Association's consumer loan portfolio
has generally been low (at June

<PAGE>

30, 1998, $31,000, or approximately 1.1% of the consumer loan portfolio, was 60
days or more delinquent), there can be no assurance that delinquencies will not
increase in the future.

Originations, Purchases and Sales of Loans and Mortgage-Backed Securities

The Association originates real estate loans through marketing
efforts, the Association's customer base, walk-in customers, and referrals from
real estate brokers. The Association originates both adjustable-rate and
fixed-rate loans. Its ability to originate loans is dependent upon the relative
demand for fixed-rate or ARM loans in the origination market, which is affected
by the term structure (short-term compared to long-term) of interest rates as
well as the current and expected future level of interest rates.

Historically, the Association has also purchased loans and loan
participations, predominantly for non-residential real estate and one- to
four-family residential loans. Such purchases have enabled First Federal to
offset the relatively low level of loan demand in the Association's principal
market areas, to take advantage of favorable lending opportunities in other
markets, to diversify its portfolio and to limit origination expenses while
generally providing the Association with a higher yield than was available on
mortgage-backed securities.

The Association has underwritten its loan purchases using the same
criteria it uses in originating loans. Servicing of purchased loans is generally
performed by the seller. At June 30, 1998, approximately $3.9 million of First
Federal's loan portfolio was serviced by others. During the year ended September
30, 1997, the Association purchased loans totaling $546,000 secured by
non-residential real estate, and $5.0 million secured by construction real
estate during the nine months ended June 30, 1998.

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

The Association had $1.9 million in loans serviced for others as of
June 30, 1998.

<PAGE>

The following table shows the loan origination, purchase, sale and
repayment activities of the Association for the periods indicated.

Nine Months
Ended
June 30, Year Ended September 30,
1998 1997 1996 1995
-------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>

Originations by type
Adjustable-rate:
Real estate - one- to four-family.................. $ 4,365 $ 6,437 $ 4,465 $ 6,144
- multi-family....................... --- --- --- 173
- non-residential.................... --- 633 614 921
Consumer - home equity............................. 37 673 314 469
------- --------- --------- --------
Total adjustable-rate....................... 4,402 7,743 5,393 7,707
------- ------- -------- -------
Fixed-rate:
Real estate - one- to four-family.................. 10,290 10,167 14,879 5,886
- non-residential and land........... 1,813 1,492 320 219
- construction....................... 18,319 --- --- ---
Consumer - non-real estate......................... 1,738 1,965 1,429 1,234
------- ------- -------- -------
Total fixed-rate............................ 32,160 13,624 16,628 7,339
------- ------- ------- -------
Total loans originated...................... 36,562 21,367 22,021 15,046
------- ------- ------- -------

Purchases
Real estate - non-residential...................... --- 546 --- ---
- construction...................... 4,984 --- --- ---
Mortgage-backed securities (excluding
REMICs and CMOs)................................. --- --- 4,660 2,982
-------- ----------- ------- -------
Total purchased............................. 4,984 546 4,660 2,982
-------- -------- ------- -------

Sales and Repayments
Mortgage-backed securities......................... 3,938 4,412 5,237 3,041
Transfer of mortgage-backed securities to
mortgage-backed securities available for sale.... --- --- --- 968
Principal repayments(1)............................ 19,447 15,512 13,956 11,854
-------- ------- ------- --------
Total reductions............................. 23,385 19,924 19,193 15,863
Increase (decrease) in other items, net(2)........... (6,116) 375 (730) 287
-------- -------- --------- ---------
Net increase................................ $12,045 $ 2,364 $ 6,758 $ 2,452
======= ======= ======= =======

<FN>

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

<PAGE>

Asset Quality

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

Real estate acquired by First Federal as a result of foreclosure or by
deed in lieu of foreclosure is classified as real estate acquired through
foreclosure until it is sold. When property is acquired, it is recorded at the
lower of the loan's unpaid principal balance (cost) or fair value less estimated
selling expenses at the date of acquisition and any write-down resulting
therefrom is charged to the allowance for losses on loans. See Note A of the
Notes to Consolidated Financial Statements of the Company. Upon acquisition, all
costs incurred in maintaining the property are expensed. However, costs relating
to the development and improvement of the property are capitalized to the extent
of net realizable value. Delinquent Loans. The following table sets forth
information concerning delinquent loans at June 30, 1998, in dollar amounts and
as a percentage of the Association's loan portfolio. The amounts presented
represent the total remaining principal balances of the related loans, rather
than the actual payment amounts which are overdue.
<TABLE>
<CAPTION>

Loans Delinquent for: Total Loans Delinquent
60-90 Days Over 90 Days 60 Days or more
----------------------------------------------------------------------------------------
Percent of Percent of Percent of
Total Loan Total Loan Total Loan
Number Amount Portfolio Number Amount Portfolio Number Amount Portfolio
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Real Estate:
One- to four-family.. 4 $424 .43% 13 $586 .60% 17 $1,010 1.03%
Non-residential...... --- --- --- 1 21 .02 1 21 .02
Consumer. . . . . ..... 2 9 .01 5 22 .02 7 31 .03
---- ------ ----- ----- ------ ------ ---- --------- -----

Total............. 6 $433 .44% 19 $629 .64% 25 $1,062 1.08%
==== ==== ====== ==== ==== ====== === ====== =====
</TABLE>

The following table sets forth information concerning delinquent loans
at September 30, 1997 in dollar amounts and as a percentage of the Association's
loan portfolio. The amounts presented represent the total remaining principal
balances of the related loans, rather than the actual payment amounts which are
overdue.
<TABLE>
<CAPTION>

Real Estate:
One- to four-family.. 8 $235 0.31% 27 $1,211 1.59% 35 $1,446 1.90%
Non-residential...... 2 264 0.35 1 98 0.13 3 362 0.48
Consumer. . . . . ..... 3 11 0.01 4 32 0.04 7 43 0.05
--- ---- ---- -- -------- ---- -- -------- ----

Total............. 13 $510 0.67% 32 $1,341 1.76% 45 $1,851 2.43%
==== ==== ==== == ====== ==== == ====== ====

</TABLE>

<PAGE>

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

June 30, September 30,
1998 1997 1996 1995
------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>

Non-accruing loans:
One- to four-family......................... $ 521 $ 919 $ 148 $ 444
Non-residential real estate................. --- 98 99 100
Construction................................ --- --- 94 ---
Consumer.................................... 22 32 26 11
--------- --------- -------- --------
Total non-accruing loans................. 543 1,049 367 555

Accruing loans delinquent 90 days or more:
One- to four-family........................ 65 292 183 116
Non-residential............................ 21 --- -- ---
-------- ---------- --------- ---------
86 292 183 116

Troubled debt restructurings:
One- to four-family......................... 24 50 52 56
--------- --------- --------- --------

Total non-performing loans.................... 653 1,391 602 727
-------- ------- -------- -------

Real estate acquired through foreclosure:
One- to four-family......................... 36 12 12 ---
Non-residential real estate................. --- --- --- 62
---------- ---------- ---------- --------
Total real estate acquired
through foreclosure............ 36 12 12 62
--------- --------- --------- --------

Total non-performing assets................... $ 689 $1,403 $ 614 $ 789
======= ====== ======= ======
Total as a percentage of total assets......... .56% 1.25% 0.57% 0.77%
========= ======== ======== ========
</TABLE>

For the nine months ended June 30, 1998, gross interest income which
would have been recorded had the non-accruing loans been current in accordance
with their original terms amounted to $18,982. The amount included in interest
income on such loans was $17,876 for the nine months ended June 30, 1998.

Included in non-accruing loans at June 30, 1998, were eleven loans
totaling $521,000 secured by one- to four-family real estate and five consumer
loans totaling $22,000. All non-accruing loans at June 30, 1998 were located in
the Company's primary market area. At June 30, 1998, accruing loans delinquent
90 days or more included two loans totaling $65,000 secured by one- to
four-family real estate and one loan totaling $21,000 secured by non-residential
real estate. At June 30, 1998, all of the Association's accruing loans
delinquent 90 days or more were secured by real estate located in the
Association's primary market area.

Management has considered loans of concern in establishing the
Association's allowance for loan losses.

Real Estate Acquired Through Foreclosure. At June 30, 1998, the
Association's real estate acquired through foreclosure consisted of one single
family residence located in the Association's market area with a carrying value
of $36,000, which is currently offered for sale.

<PAGE>

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

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

In connection with the filing of its periodic reports with the OTS and
in accordance with its classification of assets policy, the Association
regularly reviews the problem loans in its portfolio to determine whether any
loans require classification in accordance with applicable regulations.
Classified assets of the Association all of which, at June 30, 1998, are
included in the table of non-performing assets above or are described under the
caption "- Other Loans of Concern" above, were as follows:

June 30, September 30,
1998 1997 1996 1995
--------------------------------------------------

(In Thousands)

Substandard................ $ 645 $1,261 $676 $1,003
Doubtful................... 20 92 95 89
Loss....................... --- --- --- ---
-------- --------- ------ --------

Total classified assets.... $ 665 $1,353 $771 $1,092
======= ====== ==== ======

Allowance for Loan Losses. The allowance for loan losses is
established through a provision for loan losses based on management's evaluation
of the risk inherent in its loan portfolio and changes in the nature and volume
of its loan activity. Such evaluation, which includes a review of all loans for
which full collectibility may not be reasonably assured, considers among other
matters, the estimated fair value of the underlying collateral, economic
conditions, historical loan loss experience and other factors that warrant
recognition in providing for an adequate loan allowance. Although management
believes it uses the best information available to make such determinations,
future adjustments to the allowance may be necessary, and net earnings could be
significantly affected if circumstances differ substantially from the
assumptions used in making the initial determinations. At June 30, 1998, the
Association had an allowance for loan losses of $656,000.

<PAGE>

The following table sets forth an analysis of the Association's
allowance for loan losses at the dates indicated.
<TABLE>
<CAPTION>

Nine Months
Ended
June 30, Year Ended September 30,
1998 1997 1996 1995
(Dollars In Thousands)
<S> <C> <C> <C> <C>

Balance at beginning of period.......................... $ 668 $ 690 $ 690 $ 667

Charge-offs:
One- to four-family................................... 12 22 --- 15

Recoveries:
Non-residential real estate........................... --- --- --- 38
------- ------ ------- ------

Net charge-offs (recoveries).......................... 12 22 --- (23)
------ ------ ------- ------
Balance at end of period................................ $656 $ 668 $ 690 $ 690
==== ===== ===== =====

Ratio of net charge-offs (recoveries) during the
period to total loans at end of period................ 0.01% 0.03% ---% (0.04)%
==== ==== ====== ======

Allowance for loan losses to total loans at end of
period................................................ 0.72% 0.90% 1.02% 1.14%
==== ==== ====== =====

Allowance for loan losses to non-performing loans at
end of period......................................... 100.34% 48.05% 114.62% 94.91%
====== ===== ====== ======
</TABLE>

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

September 30,
June 30, ---------------------------------------------------------------
1998 1997 1996 1995
----------------------------------------------------------------------------------------
Percent Percent Percent Percent
of-Loans of-Loans of-Loans of-Loans
in Each in Each in Each in Each
Category Category Category Category
to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans
------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Real Estate:
One- to four-family.. $350 71.36% $ 391 84.30% $ 357 82.29% $ 343 82.34%
Multi-family......... --- 1.14 --- 1.53 --- 1.97 17 2.30
Non-residential...... 92 7.81 92 9.83 87 10.36 87 12.10
Construction........... 181 16.69 --- 1.00 11 2.63 --- .85
Consumer............... 33 3.00 35 3.34 30 2.75 7 2.41
Unallocated............ --- --- 150 --- 205 --- 236 ---
----- ------ ---- ------ ----- ------ ------ ------
Total.............. $ 656 100.00% $ 668 100.00% $ 690 100.00% $ 690 100.00%
===== ====== ===== ====== ===== ====== ===== ======
</TABLE>

Investment Activities

General. First Federal must maintain minimum levels of investments
that qualify as liquid assets under OTS regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Historically, the Association
has maintained liquid assets at levels above the minimum requirements imposed by
the OTS regulations and at levels believed adequate to meet the requirements

<PAGE>

of normal operations, including repayments of maturing debt and potential
deposit outflows. Cash flow projections are regularly reviewed and updated to
assure that adequate liquidity is maintained. At June 30, 1998, the
Association's liquidity ratio (liquid assets as a percentage of net withdrawable
savings deposits and current borrowings) was 9.71%. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations of the Company
- -Liquidity and Capital Resources" and " - Regulation - Liquidity."

Federally chartered savings institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered savings institution is otherwise
authorized to make directly.

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

Investment Securities. At June 30, 1998, investment securities totaled
$8.4 million, or 6.8% of total assets. As of such date, the Association also had
a $1.4 million investment in FHLB stock, satisfying its requirement for
membership in the FHLB of Topeka. It is the Company's general policy to purchase
investment securities which are U.S. Government securities or federal agency
obligations or other issues that are rated investment grade or have credit
enhancements. At June 30, 1998, the average term to maturity or repricing of the
investment portfolio was 3.6 years.

<PAGE>

The following table sets forth the composition of the Company's
securities portfolio at the dates indicated.
<TABLE>
<CAPTION>

September 30,
June 30, --------------------------------------------------------------
1998 1997 1996 1995
-------------------------------------------------------------------------------------
Book % of Book % of Book % of Book % of
Value Total Value Total Value Total Value Total
-------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>

Securities held to maturity:
Federal agency obligations................ $ 5,000 50.99% $3,000 34.56% $2,000 23.60% $1,000 11.68%
--------- ------ ------ ------- ------ ------- ------ -------

Securities available for sale:

U.S. Government securities................ ^--- --- 999 11.51 1,993 23.52 1,997 23.32
Federal agency obligations................ 3,014 30.74 2,985 34.39 2,934 34.62 3,981 46.48
FHLMC preferred stock..................... --- --- --- --- --- --- 253 2.95
Other marketable equity securities(1)..... 343 3.49 327 3.77 308 3.63 294 3.43
-------- ------- -------- ------- -------- -------- -------- --------

Total securities available for sale.... 3,357 34.23 4,311 49.67 5,235 61.77 6,525 76.18
------- ------ ------- ------ ------- ------- ------- -------

FHLB stock................................ 1,449 14.78 1,369 15.77 1,240 14.63 1,040 12.14
------- ------ ------- ------- ------- ------- ------- -------
Total securities and FHLB stock........ $9,806 100.00% $8,680 100.00% $8,475 100.00% $8,565 100.00%
====== ====== ====== ====== ====== ====== ====== ======

Average remaining life or term to
repricing of securities (excluding FHLMC
preferred stock, FHLB stock and other
marketable equity securities)............. 3.77 yrs. 4.61 yrs. 5.04 yrs. 4.49 yrs.
Other Interest-Earning Assets:
Short-term money market investments....... $ 332 100.00% $2,190 100.00% $1,010 100.00% $ 1,745 100.00%
======= ====== ====== ====== ====== ====== ======= ======

Average remaining life or term to
repricing of securities and other
interest-earning assets (excluding FHLB
stock, FHLMC preferred stock and other
marketable equity securities)............. 3.62 yrs. 3.51 yrs. 4.40 yrs. 3.59 yrs.
<FN>

(1) Represents primarily investments in mutual funds investing in U.S.
Government securities and federal agency obligations.
</FN>
</TABLE>

<PAGE>

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

June 30, 1998
-------------------------------------------
Less Than 1 to 5 Total Investment
1 Year Years Securities
---------------------------------------------------------
Amortized Amortized Amortized
Cost Cost Cost Fair Value
---------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>

Held to Maturity:
Federal agency obligations.............. $ 5,000 $ 5,000 $ 4,980
--------- --------- ---------
Weighted average yield............... 6.30% 6.30%
=========== ===========
Available for Sale:
Federal agency obligations.............. $ 990 $1,992 $2,982 $3,014
Other marketable equity securities(1)... 342 --- 342 343
-------- -------- -------- --------
Total investment securities.......... $1,332 $1,992 $3,324 $3,357
====== ====== ====== ======
Weighted average yield............... 5.53% 5.86% 5.73%
==== ==== ====
<FN>

(1) Represents primarily investments in mutual funds investing in U.S.
Government securities and federal agency obligations.
</FN>
</TABLE>

The Company's securities portfolio at June 30, 1998, did not contain
securities of any issuer with an aggregate book value in excess of 10% of the
Company's stockholders' equity, excluding securities issued by the United States
Government, or its agencies.

The Association's securities portfolio is managed in accordance with a
written investment policy adopted by the Board of Directors. Investments may be
made by the Association's officers within specified limits and must be approved
in advance by the Board of Directors for transactions over certain limits.
Effective October 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). SFAS No. 115 requires that securities and
mortgage-backed securities be classified as held to maturity, available for sale
or trading purposes. Under SFAS No. 115, securities that the Company has the
positive intent and ability to hold until maturity are classified as held to
maturity and are reported at amortized cost. Securities classified as available
for sale are those the Company may sell in response to liquidity needs, for
asset/liability management purposes and other reasons and are reported at fair
value. Unrealized gains and losses on securities available for sale net of
related taxes are reported as a separate component of equity. Trading securities
are those which are purchased for sale in the near future and are reported at
fair value. Unrealized gains and losses on trading securities are included in
earnings. Transfers between categories are accounted for as sales and
repurchases at fair value. For any sales or transfers of securities classified
as held to maturity, the cost basis, the realized gain or loss, and the
circumstances leading to the decision to sell are required to be disclosed. At
the time of purchase of new securities, management of the Company makes a
determination as to the appropriate classification of securities as available
for sale or held to maturity. At June 30, 1998, the Company held no investments
for trading purposes, but did hold securities available for sale with an
amortized cost and market value of $3.3 million and $3.4 million, respectively.

Mortgage-Backed Securities. The Association has a portfolio of
mortgage-backed securities and has utilized such investments to complement its
mortgage lending activities. At June 30, 1998, the Association's mortgage-backed
securities totaled $19.5 million. For information regarding the carrying and
fair values of First Federal's mortgage-backed securities portfolio, see Note C
of the Notes to Consolidated Financial Statements of the Company.

At June 30, 1998, $11.8 million, or 60.3%, of the Association's
mortgage-backed securities carried adjustable-rates of interest. Under the OTS's
risk-based capital requirements, Government National Mortgage Association
("GNMA") mortgage-backed securities have a zero percent risk weighting and
Federal National Mortgage

<PAGE>

Association ("FNMA"), FHLMC and AA-rated mortgage-backed securities have a 20%
risk weighting, in contrast to the 50% risk weighting carried by one- to
four-family performing residential mortgage loans.

The following table sets forth the contractual maturities of the
mortgage-backed securities at June 30, 1998. The Association had no
mortgage-based securities available for sale at that date.

Due in
-------------------------------------------------------------------------
6 months 6 months 1 to 3 to 5 5 to 10 10 to 20 Over 20 June 30, 1998
or Less to 1 Year 3 Years Years Years Years Years Book Value
------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Held to Maturity
Adjustable-Rate Mortgage-Backed
Securities:
Federal Home Loan Mortgage
Corporation................... $ -- $ -- $ -- $ -- $ -- $ 166 $ 5,703 $ 5,869
Federal National Mortgage
Association................... -- -- -- -- -- 1,102 4,805 5,907
----- ------ ------ ------ ------ ------ -------- -------
Total adjustable-rate......... -- -- -- -- -- 1,268 10,508 11,776
----- ------ ------ ------ ------ ------ ------- -------

Fixed-Rate Mortgage-Backed
Securities:
Federal Home Loan Mortgage
Corporation..................... -- -- -- -- 2,570 2,140 -- 4,710
Federal National Mortgage
Association..................... -- -- -- -- 1,995 997 -- 2,992
Government National Mortgage
Association..................... -- -- -- -- -- -- 40 40
----- ------ ------ ------ ------ ------- ------- -------
Total fixed-rate................. -- -- -- -- 4,565 3,137 40 7,742
----- ------ ------ ------ ----- ----- ------- -------
Total mortgage-backed
securities held to maturity.... $ -- $ -- $ -- $ -- $4,565 $4,405 $10,548 $19,518
====== ======= ======= ======= ====== ====== ======= =======
</TABLE>

Sources of Funds

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

Borrowings may be used on a short-term basis to compensate for
seasonal reductions in deposits or deposit inflows at less than projected
levels, and have been used in the past on a longer-term basis to support lending
activities. The Association had $28.4 million in FHLB advances outstanding at
June 30, 1998.

Deposits. First Federal offers a variety of deposit accounts having a
wide range of interest rates and terms. The Association's deposits consist of
passbook accounts, NOW accounts, and money market and certificate accounts. The
Association relies primarily on advertising, competitive pricing policies and
customer service to attract and retain these deposits. First Federal solicits
deposits from its market area only and does not use brokers to obtain deposits.

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

<PAGE>

Effective April 1, 1993, the Association introduced a new certificate
of deposit program in an attempt to reduce deposit outflows and attract longer
term deposits which were lost as a result of the general decline in market rates
of interest. This program offers two new certificate products which have four-
and five-year terms. The following table sets forth information regarding the
dollar amount and percent of certificates of deposit of this program.

At June 30, 1998 % of Total Certificates
----------------------- --------------------------
(Dollars in Thousands)

Four-Year Certificate........ $1,387 2.64%
Five-Year Certificate........ 6,198 11.79

The following table sets forth the dollar amount of savings deposits
in the various types of deposit programs offered by the Association for the
dates indicated and the rates offered. See Note H of the Notes to Financial
Statements of the Company for weighted average nominal rates.

September 30,
June 30, ----------------------------------------------------------
1998 1997 1996 1995
--------------------------------------------------------------------------------
Percent Percent Percent Percent
of of of of
Amount Total Amount Total Amount Total Amount Total
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Transactions and Savings Deposits:

Passbook Demand (2.85%).................. $ 2,866 3.52% $2,703 3.54% $ 2,649 3.82% $ 2,752 4.05%
NOW Accounts (2.00-2.50%)................ 4,199 5.16 3,763 4.93 3,232 4.66 2,899 4.26
Money Market Accounts (2.50-5.75%)....... 21,684 26.63 20,702 27.13 15,553 22.40 11,694 17.20
------- ------ ------ ----- ------- ----- ------ ------

Total Transactions and Savings Deposits 28,749 35.31 27,168 35.60 21,434 30.88 17,345 25.51
------- ------ ------ ----- ------- ----- ------- ------

Certificates:

0.00 - 3.99%........................... --- --- 5 0.01 9 0.01 804 1.18
4.00 - 4.99%........................... 1,726 2.12 2,189 2.87 4,216 6.07 10,498 15.44
5.00 - 5.99%........................... 46,127 56.65 39,911 52.30 30,296 43.64 16,882 24.83
6.00 - 6.99%........................... 4,698 5.77 6,930 9.08 13,367 19.25 22,351 32.87
7.00% and over.......................... 27 0.03 26 0.03 34 0.05 47 0.07
------- ------ -------- ---- ------- ----- ------- ------

Total Certificates........................ 52,578 64.57 49,061 64.29 47,922 69.02 50,582 74.39
------- ------ ------ ----- ------- ----- ------ ------
Accrued Interest.......................... 101 0.12 82 0.11 70 0.10 70 0.10
------- ---------------- ------ ------- -------- ------- ------
Total Deposits............................ $81,428 100.00% $76,311 100.00% $69,426 100.00% $67,997 100.00%
======= ====== ======= ====== ======= ====== ======= ======
</TABLE>

<PAGE>

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

Nine Months
Ended Year Ended September 30,
June 30, ----------------------------------
1998 1997 1996 1995
--------------------------------------------------

(Dollars In Thousands)

Opening balance........ $76,229 $ 69,356 $67,927 $ 64,384
Deposits............... 75,699 86,304 65,771 61,024
Withdrawals............ (72,940) (82,247) (67,067) (59,578)
Interest credited...... 2,339 2,816 2,725 2,097
--------- -------- ------- --------
Ending balance......... $81,327 $ 76,229 $69,356 $ 67,927
======= ======== ======= ========

Net increase........... $ 5,098 $ 6,873 $ 1,429 $ 3,543
======= ========= ======= ========

Percent increase...... 6.69% 9.91% 2.10% 5.50%
========= ===== ===== ======

The following table shows rate and maturity information for the
Association's certificates of deposit as of June 30, 1998.
<TABLE>
<CAPTION>

4.00- 5.00- 6.00- 7.00- Percent
4.99% 5.99% 6.99% 7.99% Total of Total
------------------------ ------------------------------------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>

Certificate accounts maturing
in quarter ending:

September 30, 1998........... $ 772 $ 9,148 $ 105 $ --- $ 10,025 19.07%
December 31, 1998............ 806 6,009 180 --- 6,995 13.30
March 31, 1999............... 148 8,481 36 --- 8,665 16.48
June 30, 1999................ --- 8,132 66 --- 8,198 15.59
September 30, 1999........... --- 7,649 674 --- 8,323 15.83
December 31, 1999............ --- 2,439 431 --- 2,870 5.46
March 31, 2000............... --- 1,153 733 26 1,912 3.64
June 30, 2000................ --- 761 153 --- 914 1.74
September 30, 2000........... --- 669 196 --- 865 1.64
December 31, 2000............ --- 848 577 --- 1,425 2.71
March 31, 2001............... --- 234 --- --- 234 .45
June 30, 2001................ --- 112 75 --- 187 .35
September 30, 2001........... --- 7 418 --- 425 .81
Thereafter................... --- 485 1,055 --- 1,540 2.93
---------- ---------- ------- ------ --------- ------

Total..................... $1,726 $46,127 $4,699 $ 26 $52,578 100.00%
====== ======= ====== ==== ======= ======

Percent of total.......... 3.28% 87.73% 8.94% .05%
======= ========= ======= ====
</TABLE>

<PAGE>

The following table indicates the amount of the Association's
certificates of deposit and other deposits by time remaining until maturity as
of June 30, 1998.

Maturity
-------------------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
-------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>

Certificates of deposit less than $100,000.. $ 7,969 $ 6,054 $ 15,947 $ 17,370 $ 47,340
Certificates of deposit of $100,000 or more. 404 244 916 1,142 2,706
Public funds(1)............................. 1,652 697 --- 183 2,532
---------- --------- ---------- ---------- ----------
Total certificates of deposit............... $ 10,025 $ 6,995 $ 16,863 $ 18,695 $ 52,578
======== ========= ========== ========== ==========

<FN>

(1) Deposits from governmental and other public entities.
</FN>
</TABLE>

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

First Federal may obtain advances from the FHLB of Topeka upon the
security of certain of its mortgage loans and mortgage-backed securities. Such
advances may be made pursuant to several different credit programs, each of
which has its own interest rate and range of maturities. At June 30, 1998, the
Association had $28.4 million in FHLB advances outstanding.

The following table sets forth the maximum month-end balance and
average balance of the Association's FHLB advances and other borrowings at the
dates and for the periods indicated.

At and for the
Nine Months
Ended
June 30, At and for the Year Ended September 30,
-------------------------------------------

1998 1997 1996 1995
--------------------------------------------------------

(In Thousands)
Maximum Balance:

FHLB advances...... $28,400 ^ $25,400 $24,400 $19,900

Average Balance:
FHLB advances...... $25,589 $23,583 $19,133 $17,275

The following table sets forth certain information as to the
Association's FHLB advances at the dates indicated.
<TABLE>
<CAPTION>

At September 30,
June 30, --------------------------------------
1998 1997 1996 1995
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>

FHLB advances.................................. $28,400 $ 23,700 $24,300 $18,800

Weighted average interest rate of FHLB
advances.................................... 5.712% ^ 6.072% ^ 5.672% 5.933%

</TABLE>

<PAGE>

Competition

First Federal faces strong competition, both in originating real
estate and other loans and in attracting deposits. Competition in originating
real estate loans comes primarily from commercial banks, credit unions, mortgage
bankers and brokers.

The Association attracts all of its deposits, primarily from
Montgomery County where the Association's offices are located; therefore,
competition for those deposits is principally from the 10 commercial banks and
credit unions located in the same communities. The Association competes for
these deposits by offering a variety of deposit accounts at competitive rates
and convenient business hours. The Association estimates its share of the
savings market in its primary market area to be approximately 15%.

Employees

At June 30, 1998, the Association had a total of 27 full-time
employees and one part-time employee. The Association's employees are not
represented by any collective bargaining group. Management considers its
employee relations to be good.

Property

The Company owns its offices located at Myrtle and Sixth in
Independence, Kansas and McArthur and Eleventh in Coffeyville, Kansas. The total
net book value of the Company's premises and equipment at June 30, 1998, was
$1,283,344.

The Company maintains depositor and borrower customer files on an
on-line basis with the FiServ Data Processing System, Milwaukee, Wisconsin. The
net book value of the data processing and computer equipment utilized by the
Company at June 30, 1998, was approximately $101,000.

Legal Proceedings

First Federal is involved as plaintiff or defendant in various legal
actions arising in the normal course of their business. While the ultimate
outcome of these proceedings cannot be predicted with certainty, it is the
opinion of management, after consultation with counsel representing First
Federal in the proceedings, that the resolution of these proceedings should not
have a material effect on the Company's results of operations. The Company was
not involved in any legal proceedings at June 30, 1998.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF NEODESHA

General

Neodesha is a community oriented financial institution engaged
primarily in attracting deposits from the general public and using such deposits
to originate one- to four-family residential mortgage and, to a lesser extent,
non-residential and consumer loans primarily in its market area. Neodesha's
revenues are derived principally from interest earned on loans and, to a lesser
extent, from interest earned on investments securities. The operations of
Neodesha are influenced significantly by general economic conditions and by
policies of financial institution regulatory agencies, including the OTS and the
FDIC. Neodesha's cost of funds is influenced by interest rates on competing
investments and general market interest rates. Lending activities are affected
by the demand for financing of real estate and other types of loans, which in
turn is affected by the interest rates at which such financings may be offered.

Neodesha's net interest income is dependent primarily upon the
difference or spread between the average yield earned on loans receivable and
investments and the average rate paid on deposits, as well as the relative
amounts of such assets and liabilities. Neodesha, like other thrift
institutions, is subject to interest rate risk to the degree that its
interest-bearing liabilities mature or reprice at different times, or on a
different basis, than its interest-earning assets.

Financial Condition of Neodesha

Comparison of June 30, 1998 and September 30, 1997

Assets. The Association's total assets decreased $632,000, or 4.47%,
from $14,155,000 at September 30, 1997 to $13,523,000 at June 30, 1998. This
decrease was primarily due to decreases in investment securities of $398,000,
net loans receivable of $104,000, mortgage-backed securities of $94,000, and
cash and cash equivalents of $52,000. These decreases in assets were partially
offset by increases in other assets of $10,000, real estate owned of $8,000, and
Federal Home Loan Bank stock of $8,000.

Liabilities. The Association's total liabilities decreased $681,000,
or 5.21%, from $13,063,000 at September 30, 1997 to $12,382,000 at June 30,
1998. This decrease was primarily a result of a decrease in savings deposits of
$1,124,000, partially offset by an increase in advances from the Federal Home
Loan Bank of Topeka of $500,000. The outflow of deposits was a result of
competition from local financial institutions which are aggressively seeking
deposits by offering relatively high interest rates and competition from other
investment products that offer the potential of a higher rate of return, but
also represent higher risk investments.

Comparison of September 30, 1997 and September 30, 1996

Assets. As of September 30, 1997, Neodesha's assets totaled
$14,155,000 as compared to $14,411,000 as of September 30, 1996. The three
largest factors in this $256,000 decrease were a decrease of cash and cash
equivalents of $137,000, a decrease in securities holdings of $98,000 and a
decrease in loans of $21,000.

Liabilities. The liabilities as of September 30, 1997 totaled
$13,063,000 as compared to $13,396,000 as of September 30,1996. Deposits
increased by $156,000 during the year, but this increase was more than offset by
a decrease in FHLB advances of $400,000.

Results of Operations of Neodesha

Neodesha's results of operations depend primarily upon the level of
net interest income, which is the difference between the interest income earned
on its interest-earning assets such as loans and securities, and the costs of
Neodesha's interest-bearing liabilities, primarily deposits and borrowings.
Results of operations are also dependent upon the level of Neodesha's
noninterest income, including fee income and service charges, and affected by
the level of its noninterest

<PAGE>

expenses, including its general and administrative expenses. Net interest income
depends upon the volume of interest-earning assets and interest-bearing
liabilities and the interest rate earned or paid on them, respectively.

Comparison of the Nine Months Ended June 30, 1998 and June 30, 1997

General. The net earnings for the nine months ended June 30, 1998 were
$49,000 as compared to net earnings of $56,000 for the nine months ended June
30, 1997. This decrease was due primarily to a decrease in net interest income.

Net Interest Income. Net interest income for the nine months ended
June 30, 1998 was $346,000 as compared to $364,000 for the nine months ended
June 30, 1997. This decrease was due primarily to a reduction in the average
balance of interest-earning assets in the fiscal 1998 period.

Interest Income. Total interest income for the nine months ended June
30, 1998 was $750,000, as compared to $782,000 for the nine months ended June
30, 1997. This decrease was due to a $540,000 decrease in the average balance of
interest-earning assets during the 1998 period, and, to a lesser extent, a one
basis point decrease in the weighted average yield on interest-earning assets.

Interest Expense. Total interest expense for the nine months ended
June 30, 1998 was $404,000 as compared to $418,000 for the nine months ended
June 30, 1997. This decrease was primarily due to a $602,000 decrease in the
average balance of interest-bearing liabilities, partially offset by a six basis
point increase in the weighted average rate paid on such liabilities.

Provision of Loan Losses. The loan loss provision was $4,500 for both
nine month periods ended June 30, 1998 and June 30, 1997. Management determined
that additional provisions were necessary based upon their quarterly analysis of
the established allowance and review of the composition of the loan portfolio.
The Association's determination regarding the allowance for loan losses is
subject to review by the regulatory agencies which can order the establishment
of additional general or specific allowances.

Non-Interest Income. The non-interest income for the nine months ended
June 30, 1998 was $94,000 as compared to the non-interest income for the nine
months ended June 30, 1997 of $101,000.

Non-Interest Expense. For the nine months ended June 30, 1998, the
non-interest expense was $371,000 as compared to $385,000 for the nine months
ended June 30, 1997. This decrease was due to a decrease in FDIC insurance
premiums.

Income Tax Expense. The income tax expense for the nine months ended
June 30, 1998 was $15,000 as compared to $20,000 for the nine months ended June
30, 1997.

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

General. Net earnings for the year ended September 30, 1997 were
$77,000 as compared to net earnings for the year ended September 30, 1996 of
$3,000. This increase was primarily due to a non-recurring expense of $79,000
related to the SAIF assessment at September 30, 1996.

Net Interest Income. Net interest income for fiscal 1997 was $486,000
as compared to $474,000 for fiscal 1996. The increase was primarily due to a
decrease in interest expense on deposits and FHLB advances.

Interest Income. Interest income remained stable during the periods
with interest income of $1,046,000 in both fiscal 1997 and fiscal 1996.

Interest Expense. Interest expense during fiscal 1997 was $560,000
compared to $571,000 for fiscal 1996. The decrease was primarily due to a
reduction in average deposits and FHLB advances during fiscal 1997, partially
offset by a 7 basis point increase in average rates paid on interest-bearing
liabilities for the comparative periods.

<PAGE>

Provision for Loan Losses. The provision for loan losses during each
of fiscal 1997 and fiscal 1996 was $6,000. The Association will continue to
monitor its allowance for loan losses quarterly, and make future additions to
the allowance through the provision for loan losses as economic and regulatory
conditions dictate.

Non-Interest Income. Non-interest income during fiscal 1997 was
$135,000 as compared to $140,000 for fiscal 1996. This decrease was partially
due to the sale of Financial Information Trust (FIT), which was a co-op data
processor of which Neodesha was a member. All members shared in the sale of FIT
to FISERV and Neodesha's share of the proceeds was approximately $10,000, which
was received during fiscal 1996.

Non-Interest Expense. Non-interest expense during fiscal 1997 was
$510,000 as compared to non-interest expense during fiscal 1996 of $605,000. The
two major components of this decrease were the non-recurring SAIF assessment of
$79,000 in fiscal 1996 and the annual FDIC deposit insurance premium decrease of
$16,000 from 1996 to 1997.

Income Tax Expense. Income tax expense during fiscal 1997 was $28,000
as compared to $1,000 for fiscal 1996. This increase was due to an increase in
earnings during 1997, as Neodesha paid the SAIF assessment of $79,000 in 1996.

Analysis of Net Interest Income of Neodesha

Net interest income represents the difference between interest earned
on interest-earning assets and interest paid on interest-bearing liabilities.
Net interest income depends on the volumes of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them.

<PAGE>

The following table presents, for the periods indicated, the total
dollar amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent adjustments
were made. All average balances are monthly average balances. The use of monthly
averages rather than daily averages does not have a significant effect on the
results of Neodesha. Non-accruing loans have been included in the table as loans
carrying a zero yield.
<TABLE>
<CAPTION>

Nine Months Ended June 30, Year Ended September 30,
----------------------------------------------------------- -----------------------------
1998 1997 1997
----------------------------- ----------------------------- -----------------------------

Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
----------- ------ --------- ----------- ------ --------- ----------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Interest-earning assets:
Loans receivable(1)............ $ 9,255 $606 8.73% $9,538 $632 8.83 $9,548 $843 8.82
Mortgage-backed securities..... 231 8 4.73 253 11 6.07 253 15 6.07
Investment securities.......... 2,940 123 5.60 3,204 130 5.39 3,199 174 5.45
FHLB stock..................... 138 8 7.64 129 6 6.63 130 9 6.79
Interest-bearing deposits...... 340 5 1.87 320 3 1.25 317 5 1.55
------- ---- ------ ---- ---- ---- ----- ----
Total earning assets.......... 12,904 750 7.75 13,444 782 7.76 13,447 1,046 7.78
---- ---- -----
Non-interest earning assets.... 808 805 806
------- ------ ------
Total assets................... $13,712 $14,249 $14,253
======= ======= =======

Interest-bearing liabilities:

Savings deposits............... $ 1,736 39 3.03 $1,816 41 3.01$ 1,847 56 3.03
Demand and NOW................. 2,230 44 2.61 2,448 43 2.35 2,437 58 2.38
MMDA........................... 1,842 53 3.84 1,743 50 3.86 1,737 68 3.91
Certificates of deposit........ 6,200 251 5.40 6,386 258 5.38 6,381 344 5.38
FHLB advances................. 450 17 5.08 667 26 5.14 633 35 5.48
------- ---- ------ ---- ------ -----

Total interest-bearing
liabilities.............. 12,458 404 4.33 13,060 418 4.27 13,035 561 4.30
---- ---- -----

Non-interest-bearing liabilities 130 139 156
------- ------ ------
Total liabilities............ 12,588 13,199 13,191

Equity.......................... 1,124 1,050 1,062
------- ------ ------
Total liabilities and equity. $13,712 $14,249 $14,253
======= ======= =======

Net interest/spread............. 2% 9%
= =
$346 3.4 $364 3.4 $485 3.48%
==== === ==== === ==== ====
Margin.......................... 7% 1%
= =
3.5 3.6 3.61%
=== === ====
Assets to liabilities........... 103.58% 102.94% 103.16%
====== ====== ======

- ---------------------
<FN>

(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------
1996 1995
---------------------------- -----------------------------

Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
----------- ----- ------- ------------ ----- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>

Interest-earning assets:
Loans receivable(1)............ $9,250 $830 8.98% $9,047 $ 803 8.87%
Mortgage-backed securities..... 253 15 6.07 253 15 6.08
Investment securities.......... 3,216 173 5.39 3,308 179 5.40
FHLB stock..................... 122 8 6.40 151 9 6.11
Interest-bearing deposits...... 640 19 2.94 250 3 1.16
----- ------ ---- ------ ------ ----
Total earning assets.......... 13,481 1,045 7.76 13,009 1,009 7.76
------ ------
Non-interest earning assets.... 842 872
------ ------
Total assets................... $14,323 $13,881
======= =======

Interest-bearing liabilities:

Savings deposits............... $ 1,722 53 ^3.02 $ 1,769 54 3.05
Demand and NOW................. 2,304 57 2.47 2,425 63 2.60
MMDA........................... 1,682 64 3.80 1,832 67 3.66
Certificates of deposit........ 6,651 358 5.38 6,062 275 4.54
FHLB advances................. 742 40 5.33 650 37 5.79
------ ------ ---- ------ ------ ----

Total interest-bearing liabil
13,101 572 4.37 12,738 496 3.90
------ ------
Non-interest-bearing liabilities
182 171
Total liabilities............ ------ ------
13,283 12,909
Equity.......................... 1,040 972
Total liabilities and equity. ------ ------
$14,323 $13,881
======= =======

Net interest/spread............. 3.% 6%
== =
$473 39^ $513 3.8
Margin.......................... ==== == ==== ===
3.% 4%
== =
51^ 3.9
Assets to liabilities........... == ===
^102.90% 102.13%
======== ======

</TABLE>

<PAGE>

The following table presents the weighted average yields earned on
loans, securities and other interest-earning assets, and the weighted average
rates paid on savings deposits and the resultant interest rate spreads at the
dates indicated. Non-accruing loans have been included in the table as carrying
a zero yield.

At September 30,
June 30, ---------------------
1998 1997 1996 1995
----- ---- ---- -----
<S> <C> <C> <C> <C>

Weighted average yield on:
Loans receivable.......................................... 8.58% 8.85% 8.87% 9.06%
Mortgage-backed securities................................ 4.66 6.08 6.08 6.09
Investment securities..................................... 5.52 5.49 5.44 5.38
Other interest-earning assets............................. 3.87 2.71 4.91 5.34
Combined weighted average yield on interest-earning
assets.............................................. 7.71 7.74 7.82 7.95

Weighted average rate paid on:
Passbook Savings ......................................... 3.01 3.01 3.01 3.01
NOW....................................................... 2.57 2.39 2.33 2.63
MMDA...................................................... 4.04 3.91 3.90 3.85
Certificate accounts...................................... 5.41 5.43 5.42 5.17
Borrowings................................................ 6.65 6.56 6.03 6.65
Combined weighted average rate paid on interest-
bearing liabilities................................ 4.46 4.25 4.33 4.34

Spread..................................................... 3.25% 3.49% 3.49% 3.61%

</TABLE>

<PAGE>

The following schedule presents the dollar amount of changes in
interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. It distinguishes between the changes
related to outstanding balances and that due to the changes in interest rates.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume). For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
allocated proportionately to the change due to volume and the change due to
rate.

Nine Months Ended
June 30, Year Ended September 30,
1998 vs. 1997 1997 vs. 1996
----------------------- ------------------------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Total Due to Total
----------------------- Increase ----------------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease)
-------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>

Interest-earning assets:
Loans receivable................... $ (19) $ (7) $ (26) $ 27 $ (14) $ 13
Mortgage-backed securities......... (1) (2) (3) 0 0 0
Investment securities.............. (12) 5 (7) (1) 2 1
FHLB stock......................... 1 1 2 1 0 1
Interest-bearing deposits.......... 0 2 2 (7) (7) (14)
--------- -------- -------- --------- ---------- ---------
Total interest-earning assets.... $ (31) $ (1) (32) $ 20 $ (19) 1
======== ========= -------- ======= ======== ---------

Interest-bearing liabilities:
Savings deposits................... $ (2) $ 0 (2) $ 4 $ (1) 3
Demand and NOW..................... (4) 5 1 3 (2) 1
MMDA............................... 3 0 3 2 2 4
Certificates of Deposit............ (8) 1 (7) (14) --- (14)
FHLB advances...................... (9) 0 (9) (6) 1 (5)
---------- -------- ---------- ---------- -------- ----------

Total interest-bearing liabilities $ (20) $ 6 (14) $ (11) $ 1 (11)
======== ======= ---------- ======== ======= --------

Net interest/spread................. $ (18) $ 12
========= =======
</TABLE>

<PAGE>

Asset/Liability Management of Neodesha and Market Risk

Qualitative Aspects of Market Risk. Neodesha derives its income
primarily from the excess of interest collected over interest paid. The rates of
interest Neodesha earns on assets and pays on liabilities generally are
established contractually for a period of time. Market interest rates change
over time. Accordingly, Neodesha's results of operations, like those of many
financial institutions, are impacted by changes in interest rates and its
ability to adapt to changes in interest rates is known as interest rate risk and
is Neodesha's most significant market risk.

Quantitative Aspects of Market Risk. In an attempt to manage
Neodesha's exposure to changes in interest rates and comply with applicable
regulations, Neodesha monitors its interest rate risk. In monitoring interest
rate risk, Neodesha continually analyzes and manages assets and liabilities
based on their payment streams and interest rates, the timing of their
maturities, and their sensitivity to actual or potential changes in market
interest rates.

The measurement and analysis of the exposure of Neodesha to changes in
the interest rate environment is referred to as asset/liability management. In
an attempt to manage its exposure to changes in interest rates, management
monitors Neodesha's interest rate risk. The Board of Directors meets at least
quarterly to review Neodesha's interest rate risk position and profitability.
The Board of Directors also reviews Neodesha's portfolio, formulates investment
strategies and oversees the timing and implementation of transactions to assure
attainment of Neodesha's objectives in the most effective manner.

In managing its asset/liability mix, Neodesha, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, often places more emphasis on managing net interest margin
than on better matching the interest rate sensitivity of its assets and
liabilities in an effort to enhance net interest income. Management believes
that the increased net interest income resulting from a mismatch in the maturity
of its asset and liability portfolios can, during periods of declining or stable
interest rates, provide high enough returns to justify the increased exposure to
sudden and unexpected increases in interest rates.

Neodesha stresses the origination of ARMs in an effort to manage its
exposure to changes in interest rates. At June 30, 1998, approximately $5.3
million, or 55.6% of Neodesha's total loan portfolio, was ARMs. In addition, the
primary objective of Neodesha's investment strategy is to provide liquidity
necessary to meet funding needs as well as to address daily, cyclical and
long-term changes in the asset/liability mix, while contributing to
profitability by providing a stable flow of dependable earnings. Investments
generally include interest-bearing deposits in other federally insured financial
institutions, FHLB stock and U.S. Government securities.

Generally, the investment policy of Neodesha is to invest funds among
various categories of investments and maturities based upon Neodesha's need for
liquidity, to achieve the proper balance between its desire to minimize risk and
maximize yield, to provide collateral for borrowings, and to fulfill Neodesha's
asset/liability management policies.

Neodesha's cost of funds responds to changes in interest rates due to
the relatively short-term nature of its deposit portfolio. Consequently, the
results of operations are heavily influenced by the levels of short-term
interest rates. Neodesha offers a range of maturities on its deposit products at
competitive rates and monitors the maturities on an ongoing basis.

One approach used by management to quantify interest rate risk is the
net portfolio value ("NPV") analysis. In essence, this approach calculates the
difference between the present value of liabilities, expected cash flows from
assets and cash flows from off balance sheet contracts. Under OTS regulations,
an institution's "normal" level of interest rate risk in the event of an
immediate and sustained 200 basis point change in interest rates is a decrease
in the institution's NPV in an amount not exceeding 2% of the present value of
its assets. Pursuant to this regulation, thrift institutions with greater than
"normal" interest rate exposure must take a deduction from their total capital
available to meet their risk-based capital requirement. The amount of that
deduction is one-half of the difference between (a) the institution's actual
calculated exposure to the 200 basis point interest rate increase or decrease
(whichever results in the greater pro forma decrease in NPV) and (b) its
"normal" level of exposure which is 2% of the present value of its assets.
Savings institutions, however, with less than $300 million in assets and a total
capital ratio in excess of 12%, will be exempt from this requirement unless the
OTS determines otherwise. The OTS has postponed the implementation of

<PAGE>

the rule until further notice. Based upon its asset size and capital level at
June 30, 1998, Neodesha would qualify for an exemption from this rule.

The following table sets forth, at June 30, 1998, an analysis of
Neodesha's interest rate risk as measured by the estimated changes in NPV
resulting from instantaneous and sustained parallel shifts in the yield curve
(+/-200 basis points, measured in 100 basis point increments).

Change in
Interest Rate Net Portfolio Value
(Basis Points) At June 30, 1998
---------------- -----------------
$ Amount $ Change % Change
---------- ---------- ---------
(Dollars in Thousands)

+200 $ 1,328 $ (44) (3)%
+100 1,365 (7) (1)
--- 1,372 --- ---
-100 1,407 34 3
-200 1,502 130 9

Certain assumptions utilized in assessing the interest rate risk of
thrift institutions were employed in preparing the preceding table. These
assumptions relate to interest rates, loan prepayment rates, deposit decay
rates, and the market values of certain assets under the various interest rate
scenarios. It was also assumed that delinquency rates will not change as a
result of changes in interest rates although there can be no assurance that this
will be the case. Even if interest rates change in the designated amounts, there
can be no assurance that Neodesha's assets and liabilities would perform as set
forth above. In addition, a change in U.S. Treasury rates in the designated
amounts accompanied by a change in the shape of the Treasury yield curve would
cause significantly different changes to the NPV than indicated above.

Liquidity and Capital Resources of Neodesha

Neodesha's primary sources of funds are deposits, proceeds from
principal and interest payments on loans and investment securities. While
maturities and scheduled amortization of loans and securities are predictable
sources of funds, deposit flows and mortgage prepayments are greatly influenced
by general interest rates, economic conditions and competition. Neodesha
generally manages the pricing of its deposits to be competitive and increase
core deposit relationships.

Federal regulations require Neodesha to maintain minimum levels of
liquid assets. The required percentage has varied from time to time based upon
economic conditions and savings flows and is currently 4% of net withdrawable
savings deposits and borrowings payable on demand or in one year or less during
the preceding calendar month. Liquid assets for purposes of this ratio include
cash, certain time deposits, U.S. Government, government agency and corporate
securities and other obligations generally having remaining maturities of less
than five years. Neodesha has historically maintained its liquidity ratio for
regulatory purposes at levels in excess of those required. At June 30, 1998,
Neodesha's liquidity ratio for regulatory purposes was 14.45%.

Neodesha's cash flows are comprised of three primary classifications:
cash flows from operating activities, investing activities and financing
activities. Cash flows provided by operating activities were $57,000 for the
nine months ended June 30, 1998, and $66,000 for the year ended September 30,
1997. Net cash from investing activities consisted primarily of disbursements
for loan originations and the purchase of investment securities, offset by
principal collections on loans and proceeds from maturation of securities. Net
cash from financing activities consisted primarily of activity in deposit
accounts and borrowings. The net change in deposits was a $1,124,000 decrease
for the nine months ended June 30, 1998 and a $156,000 increase for the year
ended September 30, 1997.

Neodesha's most liquid assets are cash and short-term investments. The
levels of these assets are dependent on Neodesha's operating, financing, lending
and investing activities during any given period. At June 30, 1998, cash

<PAGE>

and short-term investments totaled $583,000. Neodesha has other sources of
liquidity if a need for additional funds arises, including securities maturing
within one year and the repayment of loans. Neodesha may also utilize Federal
Home Loan Bank advances as a source of funds.

At June 30, 1998, Neodesha had outstanding commitments to originate
loans of $26,000, all of which had adjustable interest rates. These loans are to
be secured by properties located in its market area. Neodesha anticipates that
it will have sufficient funds available to meet its current loan commitments.

Liquidity management is both a daily and long-term responsibility of
management. Neodesha adjusts its investments in liquid assets based upon
management's assessment of (i) expected loan demand, (ii) expected deposit
flows, (iii) yields available on interest-earning deposits and investment
securities, and (iv) the objectives of its asset/liability management program.
Excess liquidity is invested generally in interest-earning overnight deposits
and short- and intermediate-term U.S. Government and agency obligations and
mortgage-backed securities of short duration. If Neodesha requires funds beyond
its ability to generate them internally, it has additional borrowing capacity
with the FHLB of Topeka.

Neodesha is subject to various regulatory capital requirements imposed
by the OTS. At June 30, 1998, Neodesha was in compliance with all applicable
capital requirements. See "Regulation - Regulatory Capital Requirements."

Neodesha's principal sources of funds are deposits, amortization and
prepayment of loan principal and mortgage-backed securities, maturities of
investment securities and operations. While scheduled loan repayments and
maturing investments are relatively predictable, deposit flows and early loan
repayments are more influenced by interest rates, floors and caps on loan rates,
general economic conditions and competition. Neodesha generally manages the
pricing of its deposits to be competitive and increase core deposit
relationships, but has from time to time decided not to pay deposit rates that
are as high as those of its competitors.

Year 2000 Compliance Issues

Neodesha has established a year 2000 Committee to assess the risk of
potential problems that might arise from the failures of computer programming to
recognize the year 2000 and to develop a plan to mitigate any such risk. The
committee has determined that the greatest potential impact upon Neodesha is the
risk related to vendors used by Neodesha, particularly Neodesha's data
processing service bureau. Quarterly progress reports from the service bureau
indicate levels of manpower and expertise sufficient to amend and test the
adequacy of their computer programming and systems prior to the arrival of the
year 2000. All other vendors used by Neodesha have been identified and requests
for year 2000 certifications have been forwarded.

The year 2000 compliance program established by the committee includes
quarterly progress reports submitted to the Board of Directors and a target date
of December 31, 1998 for required internal testing. Contingency plans have also
been developed in the event that Neodesha's service bureau or vendors are not
year 2000 certified. The committee estimates that the impact upon Neodesha's
results of operations, liquidity and capital resources will be immaterial.

Impact of New Accounting Standards

<PAGE>

In June, 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This Statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Neodesha currently has no plans to adopt
SFAS No. 133 early or to reclassify securities from Held to Maturity upon
adoption. Management believes adoption of SFAS No. 133 will not have a material
effect on Neodesha's financial position or results of operations, nor will
adoption require additional capital resources.

<PAGE>

BUSINESS OF NEODESHA

General

As a community-oriented financial institution, Neodesha seeks to serve
the financial needs of the Neodesha, Kansas community. Neodesha's business
involves attracting deposits from the general public and using such deposits,
together with other funds, to originate primarily one- to four-family
residential mortgage loans and, to a lesser extent, consumer and non-residential
real estate loans in its market area. Neodesha also invests in U.S. Treasury and
other securities.

Neodesha offers a variety of accounts having a range of interest rates
and terms. Neodesha's deposits include passbook savings, NOW, Super NOW and
money market accounts and certificates of deposit with terms of three months to
48 months. Neodesha solicits deposits only in its primary market area and does
not accept brokered deposits.

Market Area

Neodesha's office is located in Neodesha, Kansas in the southeast
corner of Kansas in Wilson County. Agriculture is the primary industry in
Neodesha. In addition, Neodesha is home to an industrial park with such varied
businesses as Cobalt Boats, M-E-C Company, Prestige Cabinets, Neodesha Plastics,
Airosol Company and Berwind Railway Service Co.

Wilson County has a population of approximately 10,500. Neodesha
estimates its share of the savings market in Wilson County to be less than 10%.

Lending Activities

General. The principal lending activity of Neodesha is originating for
its portfolio adjustable rate ("ARM") and, to a lesser extent, fixed rate
mortgage loans secured by one- to four-family residences located primarily in
their market area. To a lesser extent, Neodesha also originates consumer and
commercial real estate loans in its market area. At June 30, 1998, Neodesha's
loans receivable, net totaled $9.4 million. See "- Originations of Loans."

<PAGE>

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

At September 30,
June 30, ----------------------------------------------------------
1998 1997 1996 1995
------ ------ ------ -----
Amount Percent Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Real Estate Loans:
One- to four-family.............. $7,128 75.44% $7,237 75.70% $7,455 77.18% $7,282 79.43%
Multi-family..................... --- --- --- --- 5 .05 9 .10
Commercial....................... 48 .51 72 .75 105 1.09 196 2.13
Construction or development...... --- --- --- --- 70 .72 --- ---
------ ------ ------ ------ ------ ------ ------ ------
Total real estate loans........ 7,176 75.95 7,309 76.45 7,635 79.04 7,487 81.66
------ ------ ------ ------ ------ ------ ------ ------

Consumer loans:
Deposit account.................. 131 1.39 123 1.29 142 1.47 153 1.67
Automobile....................... 1,926 20.39 1,872 19.58 1,606 16.63 1,261 13.76
Unsecured........................ 107 1.13 118 1.23 109 1.13 79 .86
Other............................ 108 1.14 139 1.45 167 1.73 188 2.05
------ ------ ------ ------ ------ ------ ------ ------
Total consumer loans........... 2,272 24.05 2,252 23.55 2,024 20.96 1,681 18.34
------ ------ ------ ------ ------ ------ ------ ------
Total loans.................... 9,448 100.00% 9,561 100.00% 9,659 100.00% 9,168 100.00%
====== ====== ====== ======

Less:
Loans in process................. --- --- 57 1
Deferred fees and discounts...... 4 4 12 11
Allowance for losses............. 80 89 101 107
------ ------ ------ ------
Total loans receivable, net.... $9,364 $9,468 $9,489 $9,049
====== ====== ====== ======
</TABLE>

<PAGE>

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

At September 30,
June 30, ------------------------------------------------------------
1998 1997 1996 1995
------ ------ ------ -----
Amount Percent Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Fixed-Rate Loans:
Real estate:
One- to four-family............ $1,876 19.85% $2,162 22.61% $2,591 26.82% $2,947 32.14%
Multi-family................... --- --- --- --- 5 0.05 9 .10
Non-residential................ 48 .51 72 .76 105 1.09 196 2.14
------- ------ ------- ------ ------- ------ ------- ------
Total fixed -rate
real estate loans....... 1,924 20.36 2,234 23.37 2,701 27.96 3,152 34.38
Consumer....................... 2,272 24.05 2,252 23.55 2,024 20.95 1,681 18.34
------ ------ ------ ------ ------ ------ ------- ------
Total fixed-rate loans....... 4,196 44.41 4,486 46.92 4,725 48.91 4,833 52.72
------ ------ ------ ------ ------ ------ ------- ------

Adjustable-Rate Loans
Real estate:
One-to four-family............. 5,252 55.59 5,075 53.08 4,864 50.36 4,335 47.28
Construction................... --- --- --- --- 70 0.73 --- ---
--------- ------ ------ ------ ------ ------ ------ ------
Total adjustable-rate loans.. 5,252 55.59 5,075 53.08 4,934 51.09 4,335 47.28
------- ------ ------ ------ ------ ------ ------ ------

Total loans.................. 9,448 100.00% 9,561 100.00% 9,659 100.00% 9,168 100.00%
====== ====== ====== ======

Less:
Loans in process............... --- --- 57 1
Deferred fees and discounts.... 4 4 12 11
Allowance for losses........... 80 89 101 107
--------- --------- ------ ------
Total loans receivable, net.. $9,364 $9,468 $9,489 $9,049
====== ====== ====== ======
</TABLE>

<PAGE>

The following schedule shows the scheduled contractual maturities of
Neodesha's loan portfolio at June 30, 1998. Mortgages which have adjustable or
renegotiable interest rates are shown as repaying in the period during which the
contract is due. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.

Real Estate
Multi-family and
One- to four-family Non-Residential Consumer Total
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Rate Amount Rate Amount Rate Amount Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Due During
Periods Ending
June 30,
1999(1)............. $ 2 7.4$% 7 7.75 $ 550 10.54% $ 559 10.49%
2000................ 18 9.18 --- --- 258 11.30 276 11.16
2001................ 27 9.05 --- --- 603 10.36 630 10.30
2002 and 2003....... 129 8.13 25 7.75 811 9.32 965 9.12
2004 to 2008........ 665 8.87 16 7.75 33 9.50 714 8.87
2009 to 2023........ 5,066 8.34 --- --- 17 12.50 5,083 8.35
2024 and following.. 1,221 7.83 --- --- --- --- 1,221 7.83
------ ---- ---- -----
Total............ $7,128 $ 48 $2,272 $9.448
====== ==== ====== ======
<FN>

(1) Includes demand loans, loans having no stated maturity and overdraft loans.
</FN>
</TABLE>

The total amount of loans due after June 30, 1999 which have
predetermined interest rates is $3.6 million while the total amount of loans due
after such dates which have floating or adjustable interest rates is $5.2
million.

Under federal law, the aggregate amount of loans that Neodesha is
permitted to make to any one borrower or group of related borrowers is generally
limited to the greater of $500,000 or 15% of unimpaired capital and surplus (25%
if the security for such loan has a "readily ascertainable" value). At June 30,
1998, based on the above, Neodesha's regulatory loans-to-one borrower limit was
approximately $500,000. On the same date, Neodesha had no borrowers with
outstanding balances in excess of this amount. As of June 30, 1998, the largest
dollar amount outstanding or committed to be lent to one borrower, or group of
related borrowers, related to a one- to four-family loan totaling $108,000
located in Neodesha. Neodesha's second largest lending relationship was four
loans to one borrower secured by real estate located in Neodesha with an
aggregate carrying value of $100,000. At June 30, 1998, both loans were
performing in accordance with their terms. As of the same date, there were no
other loans or lending relationships with carrying values in excess of $100,000.

All of Neodesha'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 (consistent
with Neodesha's appraisal policy). The loan applications are designed primarily
to determine the borrower's ability to repay and the more significant items on
the application are verified through use of credit reports, financial
statements, tax returns or confirmations. All loans originated by Neodesha are
approved by the loan committee and ratified by the full Board of Directors.

Neodesha requires title insurance or other evidence of title on its
mortgage loans, as well as 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 Association
also requires flood insurance to protect the property securing its interest when
the property is located in a flood plain.

One- to Four-Family Residential Real Estate Lending. The cornerstone
of Neodesha's lending program is the origination of loans secured by mortgages
on owner-occupied one- to four-family residences. Approximately 80% of
Neodesha's one- to four-family residential mortgage originations are secured by
properties located in its market area. The remainder are purchased FHA and VA
loans located in the Wichita, Kansas, area. All mortgage loans currently
originated by Neodesha are retained and serviced by it.

<PAGE>

Historically, Neodesha offered fixed-rate mortgage loans with
maturities up to 30 years. However, in 1991, Neodesha stopped originating fixed
rate loans. As of June 30, 1998, Neodesha had $1.9 million of fixed rate
residential mortgage loans. See "- Originations of Loans."

Neodesha offers ARMs which carry interest rates which adjust annually
based on the Home Mortgage Rate published monthly by the FHLB. Such loans may
carry terms to maturity of up to 30 years. The ARM loans currently offered by
Neodesha provide for an annual interest rate change cap of up to 100 basis point
and a lifetime cap generally of 300 basis points over the initial rate.
Neodesha's ARMs do not permit negative amortization of principal, and do not
contain prepayment penalties. At June 30, 1998, one- to four-family ARMs totaled
$5.3 million or 55.59% of Neodesha's total loan portfolio.

Neodesha will generally lend up to 90% of the lesser of the sales
price or appraised value of the security property on owner occupied one- to
four-family loans. In underwriting one- to four-family residential real estate
loans, Neodesha currently evaluates both the borrower's ability to make
principal, interest and escrow payments, the value of the property that will
secure the loan and debt to income ratios.

Residential loans do not currently include prepayment penalties, are
non-assumable and do not produce negative amortization. Neodesha originates
mortgage loans for its portfolio only.

Neodesha's residential mortgage loans customarily include due-on-sale
clauses giving Neodesha the right to declare the loan immediately due and
payable in the event that, among other things, the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid.

Non-Residential Real Estate Lending. Occasionally, in order to
increase the yield of its loan portfolio and to complement residential lending
opportunities, Neodesha originates commercial real estate loans secured by
properties in its primary market area. At June 30, 1998, Neodesha had commercial
real estate loans totaling $48,000, or 0.51% of Neodesha's total loan portfolio.

Commercial real estate loans may present a higher level of risk than
loans secured by one- to four-family residences. This greater risk is due to
several factors, including the concentration of principal in a limited number of
loans and borrowers, the effects of general economic conditions on income
producing properties and the increased difficulty of evaluating and monitoring
these types of loans. While Neodesha has experienced losses on commercial real
estate loans in the past, as of June 30, 1998, there were no commercial real
estate loans delinquent 90 days or more.

Consumer Lending. Management believes that offering consumer loan
products helps to expand Neodesha's customer base and to create stronger ties to
its existing customer base. In addition, because consumer loans generally have
shorter terms to maturity and carry higher rates of interest than do residential
mortgage loans, they can be valuable asset/liability management tools. Neodesha
originates a variety of different types of consumer loans, but primarily
automobile and deposit account loans. At June 30, 1998 consumer loans totaled
$2.3 million or 24.05% of total loans.

Consumer loan terms vary according to the type and value of
collateral, length of contract and creditworthiness of the borrower. Neodesha
primarily originates loans secured by certificates of deposit and automobile
loans. Neodesha's automobile loans are originated as installment loans with a
fixed interest rate and terms of up to 60 months for new vehicles and up to 48
months for used vehicles. Neodesha originates its automobile loans directly from
its existing customers and will loan up to 100% of the value of the automobile.

The underwriting standards employed by Neodesha for consumer loans
include a determination of the applicant's payment history on other debts and
ability to meet existing obligations and payments on the proposed loan. Although
creditworthiness of the applicant is of primary consideration, the underwriting
process also includes a comparison of the value of the security, if any, in
relation to the proposed loan amount. Consumer loans may entail greater credit
risk than do residential mortgage loans, particularly in the case of consumer
loans which are unsecured or are secured by rapidly depreciable assets, such as
automobiles. In such cases, any repossessed collateral for a defaulted consumer
loan may not provide an adequate source of repayment of the outstanding loan
balance as a result of the greater likelihood of damage, loss or depreciation.
In addition, consumer loan collections are dependent on the

<PAGE>

borrower's continuing financial stability, and thus are more likely to be
affected by adverse personal circumstances. Furthermore, the application of
various federal and state laws, including bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans.

Originations of Loans

Real estate loans are originated by Neodesha's staff through referrals
from existing customers or real estate agents.

Neodesha's ability to originate loans is dependent upon customer
demand for loans in its market and to a limited extent, various marketing
efforts. Demand is affected by both the local economy and the interest rate
environment. See "- Market Area." Under current policy, all loans originated by
Neodesha are retained in Neodesha's portfolio. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Neodesha -
Asset/Liability Management."

The following table shows the loan origination, purchase, sale and
repayment activities of Neodesha for the periods indicated.
<TABLE>
<CAPTION>

Year Ended September 30,
June 30, ----------------------------------
1998 1997 1996 1995
-------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>

Originations by type:
Adjustable rate:
Real estate - one- to four-family......... $ 652 $ 1,159 $ 1,518 $ 1,106

Fixed rate:
Consumer - non-real estate................ 1,926 2,755 2,361 2,013
------- -------- -------- -------
Total loans originated.............. 2,578 3,914 3,879 3,119

Repayments
Principal repayments (1).................... 2,691 4,012 3,388 3,053
Increase (decrease) in other items, net (2) 9 77 (51) 43
-------- --------- -------- -------
Net increase (decrease)............ $ (104) $ (21) $ 440 $ 109
======== ========= ======== =======
<FN>

Delinquencies and Non-Performing Assets

Delinquency Procedures. When a borrower fails to make a required
payment on a loan, Neodesha attempts to cure the delinquency by contacting the
borrower. Generally, Neodesha personnel work with the delinquent borrower on a
case by case basis to solve the delinquency. Generally, a late notice is sent on
all delinquent loans followed by a phone call after the thirtieth day of
delinquency. Additional written and verbal contacts may be made with the
borrower between 30 and 60 days after the due date. If the loan is contractually
delinquent for 90 days, Neodesha may institute appropriate action to foreclose
on the property. After 120 days, foreclosure procedures are initiated. If
foreclosed, the property is sold at public sale and may be purchased by
Neodesha.

Real estate acquired by Neodesha as a result of foreclosure or by deed
in lieu of foreclosure is classified as real estate owned until it is sold. When
property is acquired by foreclosure or deed in lieu of foreclosure, it is
recorded at the lower of cost or fair value less estimated selling costs. After
acquisition, all costs incurred in maintaining the property are expensed. Costs
relating to the development and improvement of the property, however, are
capitalized.

<PAGE>

Delinquent Loans. The following table sets forth information
concerning delinquent loans at June 30, 1998, in dollar amounts and as a
percentage of Neodesha's loan portfolio. The amounts presented represent the
total remaining principal balances of the related loans, rather than the actual
payment amounts which are overdue.
<TABLE>
<CAPTION>

Loans Delinquent for: Total Loans Delinquent
60-90 Days Over 90 Days 60 Days or more
--------------------------- ------------------------- ---------------------------
Percent of Percent of Percent of
Total Loan Total Loan Total Loan
Number Amount Portfolio Number Amount Portfolio Number Amount Portfolio
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Real Estate:
One- to four-family... 8 $ 87 .92% 5 $ 143 1.51% 13 $ 230 2.43%
Consumer. . . . . ...... 10 25 .27 32 84 .90 42 109 1.17
--- ----- ---- --- ----- ----- --- ---- ----

Total.............. 18 $112 1.19% 37 $ 227 2.41% 55 $ 339 3.60%
=== ==== ==== === ===== ==== === ===== ====

</TABLE>

The following table sets forth information concerning delinquent loans
at September 30, 1997, in dollar amounts and as a percentage of Neodesha's loan
portfolio. The amounts presented represent the total remaining principal
balances of the related loans, rather than the actual payment amounts which are
overdue.

Loans Delinquent for: Total Loans Delinquent
60-90 Days Over 90 Days 60 Days or more
-------------------------- ------------------------- -------------------------
Percent of Percent of Percent of
Total Loan Total Loan Total Loan
Number Amount Portfolio Number Amount Portfolio Number Amount Portfolio
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Real Estate:
One- to four-family.. 2 $ 34 .36% 3 $ 85 .89% 5 $ 119 1.25%
Consumer............. 13 43 .45 30 72 .75 43 115 1.20
----- ----- ----- ----- ----- ---- --- ----- ----

Total................ 15 $ 77 .81% 33 $ 157 1.64% 48 $234 2.45%
===== ====== ===== ===== ===== ==== === ==== ====
</TABLE>

Classification of Assets. Federal regulations require that each
savings institution classify its own assets on a regular basis. In addition, in
connection with examinations of savings institutions, OTS and FDIC examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: Substandard,
Doubtful and Loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that Neodesha will sustain some
loss if the deficiencies are not corrected. Doubtful assets have the weaknesses
of Substandard assets, with the additional characteristics that the weaknesses
make collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high possibility of loss. An
asset classified Loss is considered uncollectible and of such little value that
continuance as an asset on the balance sheet of the institution is not
warranted. Assets classified as Substandard or Doubtful require the institution
to establish prudent general allowances for loan losses. If an asset or portion
thereof is classified as a loss, the institution charges off such amount against
the loan loss allowance. If an institution does not agree with an examiner's
classification of an asset, it may appeal this determination to the District
Director of the OTS.

At June 30, 1998, Neodesha had $198,000 in loans classified as
substandard, zero classified as doubtful and no loans classified as loss.

<PAGE>

Non-Performing Assets. The table below sets forth the amounts and
categories of Neodesha's non-performing assets. Loans are placed on non-accrual
status when the collection of principal and/or interest becomes doubtful. As a
matter of policy, Neodesha does not generally accrue interest on loans past due
more than 90 days. For all periods presented, Neodesha had no troubled debt
restructurings (which involve forgiving a portion of interest or principal on
any loans or making loans at a rate materially less than that of the market
rates). Repossessed assets includes assets acquired in settlement of loans and
reflects the lower of cost or fair value less selling expense.

September 30,
June 30, 1997 1996 1995
1998 ------------------------
(Dollars in Thousands)
Non-accruing loans:
One- to four-family..................... $143 $ 85 $ 60 89
Non-residential real estate............ --- --- --- 58
Consumer................................ 84 72 71 39
----- ----- ----- -----
Total non-accruing loans............ 227 157 131 186

Real estate acquired through foreclosure...
One- to four-family..................... --- --- --- 22
Non-residential......................... --- --- --- 8

Repossessed assets....................... 32 25 --- 4
----- ----- ----- -----

Total non-performing assets................ $259 $ 182 $ 131 $ 220
==== ===== ===== =====
Total as a percentage of total assets...... 1.92% 1.29% .91% 1.59%
==== ==== ==== ====

For the year ended September 30, 1997 and for the nine months ended
June 30, 1998, gross interest income which would have been recorded had the
non-accruing loans been current in accordance with their original terms amounted
to $10,000 and ^ $5,000, respectively. The amounts that were included in
interest income on such loans were $5,000 and ^ $7,000 for the year ended
September 30, 1997, and for the nine months ended June 30, 1998, respectively.

Other Loans of Concern. In addition to the non-performing assets set
forth in the table above, as of June 30, 1998, there were no loans with respect
to which known information about the possible credit problems of the borrowers
or the cash flows of the security properties have caused management to have
concerns as to the ability of the borrowers to comply with present loan
repayment terms and which may result in the future inclusion of such items in
the non-performing asset categories.

Management considers Neodesha's non-performing and "of concern" assets
in establishing its allowance for loan losses.

<PAGE>

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

Nine months
ended Year Ended September 30,
June 30, ----------------------------
1998 1997 1996 1995
----------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>

Balance at beginning of period................ $ 89 $101 $107 $151

Charge-offs:
One- to four-family......................... --- --- --- (37)
Consumer.................................... (16) (21) (14) (13)

Recoveries:
Consumer.................................... 2 3 2 ---
------ ------ ------ ------

Net charge-offs............................. (14) (18) (12) (50)
Provision for the period...................... 5 6 6 6
------ ------ ------ ------
Balance at end of period...................... $ 80 $ 89 $ 101 $ 107
==== ===== ===== =====

Ratio of net charge-offs during the period to
average loans outstanding during the period. .15% .19% .13% .55%
===== ===== ===== =====

Allowance for loan losses to total loans at end
of period.................................. .85% .93% 1.05% 1.17%
===== ===== ==== ====

Allowance for loan losses to non-performing loans
at end of period........................... 35.09% 56.69% 77.10% 57.53%
===== ===== ===== =====
</TABLE>

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

September 30,
June 30, 1998 1997 1996 1995

Percent Percent of Percent of Percent of
of Loans Loans in Loans in Loans in
in Each Each Each Each
Category Category Category Category
to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Real Estate
One- to four-family.. $36 75.44% $32 75.70% $ 33 77.18% $ 35 79.43%
Multi-family......... --- --- --- --- --- .05 --- .10
Non-residential...... --- .51 --- .75 --- 1.09 --- 2.13
Construction......... --- --- --- --- --- .72 --- ---
Consumer................ 19 24.05 24 23.55 10 20.96 8 18.34
Unallocated............. 25 --- 33 --- 58 --- 64 ---
---- ----- --- ------ ---- ------ ---- ------
Total.............. $ 80 100.00% $89 100.00% $101 100.00% $107 100.00%
==== ====== === ====== ==== ====== ==== ======
</TABLE>

The 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 its entire loan portfolio. Such evaluation, which includes a review
of all loans of which full collectibility may not be reasonably assured,
considers the market value of the underlying collateral, growth and composition
of the loan portfolio, delinquency trends, adverse situations that may affect
the borrower's ability to repay, prevailing and projected economic conditions
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 and
prospective loan portfolio and current economic conditions are considered.

While management believes that it uses the best information available
to determine the allowance for loan losses, unforeseen economic and market
conditions could result in adjustments to the allowance for loan losses, and net

<PAGE>

earnings could be significantly affected, if circumstances differ substantially
from the assumptions used in making the final determination.

Investment Activities

General. Neodesha must maintain minimum levels of investments and
other assets that qualify as liquid assets under OTS regulations. Liquidity may
increase or decrease depending upon the availability of funds and comparative
yields on investments in relation to the return on loans. Historically, Neodesha
has maintained liquid assets at levels above the minimum requirements imposed by
the OTS regulations and above levels believed adequate to meet the requirements
of normal operations, including potential deposit outflows. At June 30, 1998,
Neodesha's liquidity ratio for regulatory purposes was 14.45%. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Neodesha - Asset/Liability Management" and "- Liquidity and Capital Resources."

Generally, the investment policy of Neodesha is to invest funds among
categories of investments and maturities based upon the Neodesha's
asset/liability management policies, investment quality, loan and deposit
volume, liquidity needs and performance objectives. As required by SFAS 115,
securities are classified into three categories: trading, held-to-maturity and
available-for-sale. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and are reported at fair value with unrealized gains and losses included in
trading account activities in the statement of operations. Securities that
Neodesha has the positive intent and ability to hold to maturity are classified
as held-to-maturity and reported at amortized cost. All other securities not
classified as trading or held-to-maturity are classified as available-for-sale.
At June 30, 1998, Neodesha had no securities which were classified as trading
and no securities classified as available-for-sale. At June 30, 1998, all of
Neodesha's securities were classified as held-to-maturity.

Securities. Federally chartered savings institutions have the
authority to invest in various types of liquid assets, including United States
Treasury obligations, securities of various federal agencies, certain
certificates of deposit of insured banks and savings institutions, certain
bankers' acceptances, repurchase agreements and federal funds. Subject to
various restrictions, federally chartered savings institutions may also invest
their assets in commercial paper, investment grade corporate debt securities and
mutual funds whose assets conform to the investments that a federally chartered
savings institution is otherwise authorized to make directly.

In order to complement its lending activities and to increase its
holding of short and medium term assets, Neodesha invests in liquidity
investments and in high-quality investments, such as U.S. Treasury and agency
obligations. At June 30, 1998, Neodesha's securities portfolio totaled $2.9
million. At June 30, 1998, Neodesha did not own any investment securities of a
single issuer which exceeded 10% of Neodesha's retained earnings, other than
federal agency obligations. See Notes B and C of the Notes to Financial
Statements of Neodesha for additional information regarding Neodesha's
securities portfolio.

<PAGE>

The following table sets forth the composition of the Association's
securities portfolio at the dates indicated.
<TABLE>
<CAPTION>

September 30,
June 30, 1997 1996 1995
1998 --------------------------------------------------
Book % of Book % of Book % of Book % of
Value Total Value Total Value Total Value Total
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Securities held-to-maturity:
US Treasury........................... $ 799 26.46% $ 897 25.60% $1,097 30.52% $1,098 30.61%
Federal agency obligations............ 1,316 43.58 1,617 46.15 1,516 42.18 1,516 42.26
Municipals............................ 604 20.00 603 17.21 602 16.75 602 16.79
Mortgage-backed securities:........... 159 5.26 253 7.22 253 7.04 253 7.05
------ ------ ------ ------ ------ ------ ----- -----
Total securities held to maturity.. 2,878 95.30 3,370 96.18 3,468 96.49 3,469 96.71

FHLB stock............................ 142 4.70 134 3.82 126 3.51 118 3.29
------ ------ ------- ------ ------- ------ ------ ------
Total securities and FHLB stock.... $3,020 100.00% $3,504 100.00% $3,594 100.00% $3,587 100.00%
====== ====== ====== ====== ====== ====== ====== ======

Average remaining life or term to
repricing of securities (excluding
FHLB stock)........................... 1.95 years 2.12 years 2.67 years 3.54 years
Other Interest-Earning Assets:
Interest-bearing deposits:............ $ 391 100.00% $ 423 100.00% $ 519 100.00% $ 382 100.00%
------- ------- ------- ------- ------- ------- ------ -------
</TABLE>

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

June 30, 1998
-------------------------------------------------
Less Than 1 to 5 5 to 10 Total Investment
1 Year Years Years Securities
Amortized Amortized Amortized Amortized Fair
Cost Cost Cost Cost Value
(Dollars in Thousands)

Held to Maturity:
U.S. Treasury............... $ 599 $ 200 $ --- $ 799 $ 800
Federal agency obligations.. 715 601 --- 1,316 1,325
Municipals.................. --- 410 194 604 603
------- ------- ----- ------- -------

Total investment securities. $ 1,314 $1,211 $ 194 $2,719 $2,728
======= ====== ====== ====== ======
Weighted average yield...... 5.91% 5.32% 4.55% 5.55%
==== ==== ==== ====

Sources of Funds

General. Neodesha's primary sources of funds are deposits, payments
(including prepayments) of loan principal, interest earned on loans and
securities, repayments of securities, borrowings and funds provided from
operations.

Deposits. Neodesha offers deposit accounts having a wide range of
interest rates and terms. Neodesha's deposits consist of passbook, NOW, money
market and various certificate accounts. Neodesha relies primarily on
competitive pricing and customer service to attract and retain these deposits.
Neodesha's customers may access their accounts through Neodesha's main office.
Neodesha only solicits deposits in its market area and does not currently use
brokers to obtain deposits.

Neodesha has attempted to be competitive in obtaining funds and to
respond with flexibility to changes in consumer demand. As a result, as
customers have become more interest rate conscious, Neodesha has become more
susceptible to short-term fluctuations in deposit flows.

Neodesha intends to utilize customer service and marketing initiatives
in an effort to maintain the volume of such deposits. However, there can be no
assurance as to whether Neodesha will be able to maintain or increase its core
deposits in the future.

<PAGE>

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

Nine Months
Ended Year Ended September 30,
June 30, -------------------------------
1998 1997 1996 1995
-------- -------- --------- --------
(Dollars in Thousands)

Opening balance................ $12,854 $12,698 $11,673 $12,742
Deposits....................... 26,857 44,637 43,553 40,035
Withdrawals.................... (28,221) (44,854) (42,887) (41,480)
Interest credited.............. 240 373 359 376
-------- --------- -------- ---------
Ending balance................. $11,730 $12,854 $12,698 $11,673
======= ======= ======= =======

Net increase (decrease)........ $(1,124) $ 156 $ 1,025 $ (1,069)
======= ========= ======== ========

Percent increase (decrease).... (8.74)% 1.23% 8.78% (8.39)%
===== ==== ==== =====

The following table sets forth the dollar amount of savings deposits
in the various types of deposit programs offered by Neodesha for the dates
indicated and the rates offered. See Note G of the Notes to the Financial
Statements of Neodesha for weighted average nominal rates.

September 30,
------------------------------------------------------
June 30, 1997 1996 1995
1998 ------- ------- -------
Percent Percent Percent Percent
of of of of
Amount Total Amount Total Amount Total Amount Total
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Transactions and Savings Deposits

Passbook Demand (3.00%)........ $ ^ 14.29% $2,000 15.55% $1,778 13.98% $ 1,754 15.01%
1,677
NOW Accounts (2.75-3.25%)...... ^ 2,183 18.60 2,453 19.07 2,549 20.05 2,286 19.56
Money Market Accounts
(2.75-3.50%).............. ^ ^ 13.93 2,074 16.12 1,623 12.77 1,741 14.90
------- ------ ------ ----- ----- ------ ----- ------
1,635

Total Transactions and Savings
Deposits.................. 5,495 46.82 6,527 50.74 5,950 46.80 5,781 49.47
------- ------ ------ ------ ----- ------ ------ -------

Certificates:
0.00 - 3.99%................... --- --- --- --- --- --- 74 .63
4.00 - 4.99%................... 732 6.23 1,395 10.85 2,164 17.02 1,808 15.47
5.00 - 5.99%................... 4,331 36.90 3,045 23.67 2,540 19.98 3,038 26.00
6.00 - 6.99%................... 1,172 9.99 1,887 14.67 2,044 16.08 972 8.32
------- ------ ------- ----- ----- ------ ----- ------
Total Certificates............. 6,235 53.12 6,327 49.19 6,748 53.08 5,892 50.42
------- ------ ------- ----- ----- ------ ----- ------
Accrued Interest............... 7 0.06 9 0.07 15 0.12 13 0.11
-------- ------ ------- ----- ----- ------ ----- ------
Total Deposits................. $11,737 100.00% $12,863 100.00% $12,713 100.00% $11,686 100.00%
======= ====== ======= ====== ======= ====== ======= ======

</TABLE>

<PAGE>

The following table shows rate and maturity information for Neodesha's
certificates of deposit as of June 30, 1998.

Certificate accounts 4.00 - 5.00 - 6.00 - Percent of
maturing in quarter ending: 4.99% 5.00% 6.99% Total Total
(Dollars in Thousands)

September 30, 1998.... $ 452 $942 $437 $1,831 29.37
December 31, 1998..... 280 443 83 806 12.93
March 31, 1999........ ^-- 810 11 821 13.17
June 30, 1999......... ^-- 671 16 687 11.02
September 30, 1999.... ^-- 285 30 315 5.05
December 31, 1999..... ^-- 237 224 461 7.40
March 31, 2000........ ^-- 76 371 447 7.17
June 30, 2000......... ^-- 145 ^-- 145 2.32
September 30, 2000.... ^-- 329 ^-- 329 5.27
December 31, 2000..... ^-- 226 ^-- 226 3.62
March 31, 2001........ ^-- 22 ^-- 22 .35
June 30, 2001......... ^-- 11 ^-- 11 .18
September 30, 2001.... 7 7 .11
Thereafter............ ^-- 127 ^-- 127 2.04
------ -------- ------ ------- -------

Total................. $ 732 ^ $4,331 $1,172 $6,235 100.00%
======= ======== ====== ====== ======
Percent of total...... 11.74% 69.46% 18.80%
===== ===== =====

The following table indicates the amount of Neodesha's certificates of
deposit and other deposits by time remaining until maturity as of June 30, 1998.
<TABLE>
<CAPTION>

Maturity
----------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
------------ --------- --------- ---------- ------
(In Thousands)
<S> <C> <C> <C> <C> <C>

Certificates of deposit less than $100,000.. $1,017 $ 706 $1,408 $1,688 $4,819
Certificates of deposit $100,000 or more.... 314 --- 100 402 816
Public funds(1)............................. 500 100 --- --- 600
-------- ------ ------- ------- ------
Total certificates of deposit.......... $1,831 $ 806 $1,508 $2,090 $6,235
====== ====== ====== ====== ======
<FN>

- -------
(1) Deposits from governmental and other public entities.
</FN>
</TABLE>

For additional information regarding the composition of Neodesha's
deposits, see Note G of the Notes to Financial Statements of Neodesha.

Borrowings. Neodesha's other available sources of funds include
advances from the FHLB of Topeka and other borrowings. As a member of the FHLB
of Topeka, the Association is required to own capital stock in the FHLB of
Topeka and is authorized to apply for advances from the FHLB of Topeka. Each
FHLB credit program has its own interest rate, which may be fixed or variable,
and range of maturities. The FHLB of Topeka may prescribe the acceptable uses
for these advances, as well as limitations on the size of the advances and
repayment provisions. See Note H of the Notes to Financial Statements of
Neodesha.

<PAGE>

The following table sets forth the maximum month-end balance and
average balance of Neodesha's FHLB advances and other borrowings at and for the
dates indicated.

At and for the
Nine Months ended
June 30, At and for the Year Ended September 30,
1998 1997 1996 1995
(Dollars in Thousands)
Maximum Balance:
FHLB Advances..... $ 600 $1,100 $1,100 $ 950

Average Balance:
FHLB Advances..... $ 450 $ 633 $ 742 $ 650

The following table sets fort certain information as to Neodesha's
FHLB advances at the dates indicated.

September 30,
June 30, --------------------------
1998 1997 1996 1995
------ ------ ------ -----
(Dollars in Thousands)
FHLB advances....................... $600 $100 $500 $950

Weighted average interest rate of
FHLB advances.................... 6.65% 6.56% 6.03% 6.65%

Subsidiary Activities

As a federally chartered savings and loan association, Neodesha is
permitted by OTS regulations to invest up to 2% of its assets in the stock of,
or loans to, service corporation subsidiaries, and may invest an additional 1%
of its assets in service corporations where such additional funds are used for
inner-city or community development purposes. In addition to investments in
service corporations, federal institutions are permitted to invest an unlimited
amount in operating subsidiaries engaged solely in activities which a federal
savings association may engage in directly. At June 30, 1998, Neodesha did not
have any subsidiaries.

Competition

Neodesha faces strong competition both in originating real estate
loans and in attracting deposits. Competition in originating loans comes
primarily from commercial banks, credit unions, mortgage bankers and other
savings institutions, which also make loans secured by real estate located in
Neodesha's market area. Neodesha competes for loans principally on the basis of
the interest rates and loan fees it charges, the types of loans it originates
and the quality of services it provides to borrowers.

Competition for deposits is principally from commercial banks, credit
unions, mutual funds, securities firms and other savings institutions located in
the same communities. The ability of Neodesha to attract and retain deposits
depends on providing an investment opportunity that satisfies the requirements
of investors as to rate of return, liquidity, risk, convenient locations and
other factors. Neodesha competes for these deposits by offering competitive
rates, convenient business hours and a customer oriented staff.

Employees

At June 30, 1998, Neodesha had a total of 7 employees. None of
Neodesha's employees are represented by any collective bargaining agreement.
Management considers its employee relations to be good.

Properties

Neodesha believes that its current facilities are adequate to meet its
present and foreseeable future needs.

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Neodesha's depositor and borrower customer files are maintained by an
independent data processing company. The net book value of the data processing
and computer equipment utilized by Neodesha at June 30, 1998 was approximately
$18,000.

Legal Proceedings

From time to time, Neodesha is involved as plaintiff or defendant in
various legal proceedings arising in the normal course of its business. While
the ultimate outcome of these various legal proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of these legal
actions should not have a material effect on the Holding Company's and
Neodesha's financial position or results of operations.

REGULATION

General. First Federal and Neodesha are federally chartered savings
and loan associations, the deposits of which are federally insured and backed by
the full faith and credit of the United States Government. Accordingly, First
Federal and Neodesha are subject to broad federal regulation and oversight
extending to all its operations. First Federal and Neodesha are members of the
FHLB of Topeka and are subject to certain limited regulation by the Federal
Reserve Board. As the savings and loan holding company of First Federal, the
Company also is subject to federal regulation and oversight. The purpose of the
regulation of the Company and other holding companies is to protect subsidiary
savings associations. First Federal and Neodesha are members of SAIF, which
together with the BIF are the two deposit insurance funds administered by the
FDIC, and the deposits of First Federal are insured by the FDIC. As a result,
the FDIC has certain regulatory and examination authority over First Federal.

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

Federal Regulation of Savings Associations. The OTS has extensive
authority over the operations of savings associations. As part of this
authority, First Federal is required to file periodic reports with the OTS and
is subject to periodic examinations by the OTS and the FDIC. The last regular
OTS and FDIC examinations of First Federal and Neodesha were commenced as of
July 1996 and October 1992, and June 1997 and June 1990, respectively. Under
agency scheduling guidelines, it is likely that another examination will be
initiated in the near future. When these examinations are conducted by the OTS
and the FDIC, the examiners may require First Federal or Neodesha to provide for
higher general or specific loan loss reserves. All savings associations are
subject to a semi-annual assessment, based upon the savings association's total
assets, to fund the operations of the OTS. First Federal's and Neodesha's OTS
assessment for the fiscal year ended September 30, 1997, was $33,415 and $4,997,
respectively.

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

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

First Federal's and Neodesha's general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired
capital and surplus (except for loans fully secured by certain readily
marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus). At June 30, 1998,

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First Federal's and Neodesha's lending limit under this restriction was
approximately $1.5 million, and $500,000, respectively. At June 30, 1998, the
Association and Neodesha had no loans in excess of their loans-to-one borrower
limits.

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

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

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

The FDIC is authorized to increase assessment rates, on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of SAIF-insured deposits. In setting these
increased assessments, the FDIC must seek to restore the reserve ratio to that
designated reserve level, or such higher reserve ratio as established by the
FDIC. The FDIC may also impose special assessments on SAIF members to repay
amounts borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

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

The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation). Tangible capital generally
includes common stockholders' equity and retained earnings, and certain
noncumulative perpetual preferred stock and related earnings. In addition, all
intangible assets, other than a limited amount of purchased mortgage servicing
rights, must be deducted from tangible capital. At June 30, 1998, neither the
Association nor Neodesha had any intangible assets.

The OTS regulations establish special capitalization requirements for
savings associations that own subsidiaries. In determining compliance with the
capital requirements, all subsidiaries engaged solely in activities permissible
for national banks or engaged in certain other activities solely as agent for
its customers are "includable" subsidiaries that are consolidated for capital
purposes in proportion to the association's level of ownership. For excludable
subsidiaries, the debt and equity investments in such subsidiaries are deducted
from assets and capital. At June 30, 1998, neither the Association nor Neodesha
had any subsidiaries.

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At June 30, 1998, First Federal had tangible capital of $10.2 million,
or 8.38% of adjusted total assets, which is approximately $8.4 million above the
minimum requirement of 1.50% of adjusted total assets in effect on that date. At
June 30, 1998, Neodesha had tangible capital of $1.1 million, or 8.42% of
adjusted total assets, which is approximately $938,000 above the minimum
requirement of 1.5% of adjusted total assets in effect on that date.

The capital standards also require core capital equal to at least 3%
of adjusted total assets. Core capital generally consists of tangible capital
plus certain intangible assets, including a limited amount of purchased credit
card relationships. As a result of the prompt corrective action provisions
discussed below, however, a savings association must maintain a core capital
ratio of at least 4% to be considered adequately capitalized unless its
supervisory condition is such to allow it to maintain a 3% ratio. At June 30,
1998, First Federal and Neodesha each had no intangibles which were subject to
these tests.

At June 30, 1998, First Federal had core capital equal to $10.2
million, or 8.38% of adjusted total assets, which is $6.6 million above the
minimum leverage ratio requirement of 3% in effect on that date. At that date,
Neodesha had core capital equal to $1.1 million or 8.42% of adjusted total
assets, which is $735,000 above the minimum leverage ratio requirement of 3% in
effect on that date.

The OTS risk-based requirement requires savings associations to have
total capital of at least 8% of risk-weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital. The
OTS is also authorized to require a savings association to maintain an
additional amount of total capital to account for concentration of credit risk
and the risk of non-traditional activities. At June 30, 1998, First Federal and
Neodesha had no capital instruments that qualify as supplementary capital and
$656,000 and $77,000 of general loss reserves, respectively, of which neither
was in excess of 1.25% of risk-weighted assets, respectively.

Certain exclusions from capital and assets are required to be made for
the purpose of calculating total capital. Such exclusions consist of equity
investments (as defined by regulation) and that portion of land loans and
non-residential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments. First Federal and
Neodesha had no such exclusions from capital and assets at June 30, 1998.

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

OTS regulations also require that every savings association with more
than normal interest rate risk exposure to deduct from its total capital, for
purposes of determining compliance with such requirement, an amount equal to 50%
of its interest-rate risk exposure multiplied by the present value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings association, greater than 2% of the present value of its
assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline). Net portfolio value is
the present value of expected cash flows from assets, liabilities and
off-balance sheet contracts. The rule will not become effective until the OTS
evaluates the process by which savings associations may appeal an interest rate
risk deduction determination. It is uncertain as to when this evaluation may be
completed. Any savings association with less than $300 million in assets and a
total capital ratio in excess of 12%, such as the Association and Neodesha, is
exempt from this requirement unless the OTS determines otherwise.

On June 30, 1998, First Federal had total risk-based capital of $10.9
million (including $10.2 million in core capital and $656,000 in qualifying
supplementary capital) and risk-weighted assets of $61.2 million; or total
capital of 17.80% of risk-weighted assets. This amount was $6.0 million above
the 8% requirement in effect on that date.

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On June 30, 1998, Neodesha had total risk-based capital of $1.2
million (including $1.1 million in core capital and $77,000 in qualifying
supplementary capital) and risk-weighted assets of $7.2 million; or total
capital of 16.83% of risk-weighted assets. This amount was $639,000 above the 8%
requirement in effect on that date.

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

As a condition to the approval of the capital restoration plan, any
company controlling an undercapitalized association must agree that it will
enter into a limited capital maintenance guarantee with respect to the
institution's achievement of its capital requirements.

Any savings association that fails to comply with its capital plan or
is "significantly undercapitalized" (i.e., Tier 1 risk-based or core capital
ratios of less than 3% or a risk-based capital ratio of less than 6%) must be
made subject to one or more of additional specified actions and operating
restrictions which may cover all aspects of its operations and include a forced
merger or acquisition of the association. An association that becomes
"critically undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator with the concurrence of the FDIC) for a
savings association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized. Any undercapitalized association is also
subject to the general enforcement authority of the OTS and the FDIC, including
the appointment of a conservator or receiver.

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

The imposition by the OTS or the FDIC of any of these measures on
First Federal may have a substantial adverse effect on First Federal's
operations and profitability and the value of the Company's common stock.
Company shareholders do not have preemptive rights, and therefore, if the
Company is directed by the OTS or the FDIC to issue additional shares of common
stock, such issuance may result in the dilution in the percentage of ownership
of the Company's shareholders.

Limitations on Dividends and Other Capital Distributions. OTS
regulations impose various restrictions on savings associations with respect to
their ability to make distributions of capital, which include dividends, stock
redemptions or repurchases, cash-out mergers and other transactions charged to
the capital account. OTS regulations also prohibit a savings association from
declaring or paying any dividends or from repurchasing any of its stock if, as a
result, the regulatory capital of the association would be reduced below the
amount required to be maintained for the liquidation account established in
connection with its mutual to stock conversion.

Generally, savings associations, such as First Federal and Neodesha,
that before and after the proposed distribution meet their capital requirements,
may make capital distributions during any calendar year equal to the greater of
100% of net income for the year-to-date plus 50% of the amount by which the
lesser of the association's tangible, core or risk-based capital exceeds its
capital requirement for such capital component, as measured at the beginning of
the calendar year, or 75% of its net income for the most recent four quarter
period. However, an association deemed to be in need of more than normal
supervision by the OTS may have its dividend authority restricted by the OTS.
The Company may be paid dividends in accordance with this general authority.

Savings associations proposing to make any capital distribution need
only submit written notice to the OTS 30 days prior to such distribution.
Savings associations that do not, or would not meet their current minimum
capital requirements following a proposed capital distribution, however, must
obtain OTS approval prior to making such

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distribution. The OTS may object to the distribution during that 30-day period
notice based on safety and soundness concerns. See "- Regulatory Capital
Requirements."

The OTS has proposed regulations that would revise the current capital
distribution restrictions. Under the proposal a savings association may make a
capital distribution without notice to the OTS (unless it is a subsidiary of a
holding company) provided that it has a CAMEL 1 or 2 rating, is not of
supervisory concern, and would remain adequately capitalized (as defined in the
OTS prompt corrective action regulations) following the proposed distribution.
Savings associations that would remain adequately capitalized following the
proposed distribution but do not meet the other noted requirements must notify
the OTS 30 days prior to declaring a capital distribution. The OTS stated it
will generally regard as permissible that amount of capital distributions that
do not exceed 50% of the institution's excess regulatory capital plus net income
to date during the calendar year. A savings association may not make a capital
distribution without prior approval of the OTS and the FDIC if it is
undercapitalized before, or as a result of, such a distribution. As under the
current rule, the OTS may object to a capital distribution if it would
constitute an unsafe or unsound practice. No assurance may be given as to
whether or in what form the regulations may be adopted.

Liquidity. All savings associations, including First Federal and
Neodesha, are required to maintain an average daily balance of liquid assets
equal to a certain percentage of the sum of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. For a
discussion of what the Association and Neodesha include in liquid assets, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company - Liquidity and Capital Resources." This liquid asset
ratio requirement may vary from time to time (between 4% and 10%) depending upon
economic conditions and savings flows of all savings associations. At the
present time, the minimum liquid asset ratio is 4%. At June 30, 1998, First
Federal and Neodesha were both in compliance with this requirement, with liquid
asset ratios of 9.71% and 14.45%, respectively.

Accounting. An OTS policy statement applicable to all savings
associations clarifies and re-emphasizes that the investment activities of a
savings association must be in compliance with approved and documented
investment policies and strategies, and must be accounted for in accordance with
generally accepted accounting principles ("GAAP"). Under the policy statement,
management must support its classification of and accounting for loans and
securities (i.e., whether held for investment, sale or trading) with appropriate
documentation. First Federal and Neodesha are in compliance with these amended
rules.

OTS accounting regulations, which may be made more stringent than GAAP
by the OTS, require that transactions be reported in a manner that best reflects
their underlying economic substance and inherent risk and that financial reports
must incorporate any other accounting regulations or orders prescribed by the
OTS.

Qualified Thrift Lender Test. All savings associations, including
First Federal and Neodesha, are required to meet a qualified thrift lender
("QTL") test to avoid certain restrictions on their operations. This test
requires a savings association to have at least 65% of its portfolio assets (as
defined by regulation) in qualified thrift investments on a monthly average for
nine out of every 12 months on a rolling basis. As an alternative, the savings
association may maintain 60% of its assets in those assets specified in Section
7701(a)(19) of the Internal Revenue Code. Under either test, such assets
primarily consist of residential housing related loans and investments. At June
30, 1998, First Federal and Neodesha met the test and have always met the test
since its effectiveness. At June 30, 1998, First Federal's and Neodesha's QTL
percentage was 90.05% and 89.4%, respectively.

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

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company must register as a bank holding company and become subject to all
restrictions on bank holding companies. See "- Holding Company Regulation."

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

The federal banking agencies, including the OTS, have recently revised
the CRA regulations and the methodology for determining an institution's
compliance with the CRA. Due to the heightened attention being given to the CRA
in the past few years, the Association and Neodesha may be required to devote
additional funds for investment and lending in its local community. The
Association was last examined for CRA compliance in September 1995 and received
a rating of satisfactory. Neodesha was last examined for CRA compliance in April
1996 and received a rating of satisfactory.

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

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

Holding Company Regulation. The Company is a unitary savings and loan
holding company subject to regulatory oversight by the OTS. As such, the Company
is required to register and file reports with the OTS and is subject to
regulation and examination by the OTS. In addition, the OTS has enforcement
authority over the Company and its non-savings association subsidiaries which
also permits the OTS to restrict or prohibit activities that are determined to
be a serious risk to the subsidiary savings association.

As a unitary savings and loan holding company, the Company generally
is not subject to activity restrictions. If the Company acquires control of
another savings association as a separate subsidiary, it would become a multiple
savings and loan holding company, and the activities of the Company and any of
its subsidiaries (other than the Association or any other SAIF-insured savings
association) would become subject to such restrictions, unless such other
associations each qualify as a QTL and were acquired in a supervisory
acquisition.

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

The Company must obtain approval from the OTS before acquiring control
of any other SAIF-insured association. Such acquisitions are generally
prohibited if they result in a multiple savings and loan holding company

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controlling savings associations in more than one state. However, such
interstate acquisitions are permitted based on specific state authorization or
in a supervisory acquisition of a failing savings association.

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

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

Federal Reserve System. The Federal Reserve Board requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts). At June 30, 1998, First Federal and Neodesha were in
compliance with these reserve requirements. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements that may be imposed by the OTS. See "- Liquidity."

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

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

As members, First Federal and Neodesha are required to purchase and
maintain stock in the FHLB of Topeka. At June 30, 1998, First Federal and
Neodesha had $1.4 million and ^ $142,000, respectively, in FHLB stock, which was
in compliance with this requirement. In past years, First Federal and Neodesha
have received substantial dividends on their FHLB stock. Over the past five
fiscal years such dividends have averaged 6.56% and such dividends were 6.84%
for fiscal year 1997.

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

For the fiscal year ended September 30, 1997, dividends paid by the
FHLB of Topeka to First Federal and Neodesha totaled $89,181 and $8,600, which
constitute an $18,783 and $1,000 increase, respectively, over the amount of
dividends received in fiscal year 1996.

Federal Taxation. Savings associations such as the Association and
Neodesha that met certain definitional tests relating to the composition of
assets and other conditions prescribed by the Internal Revenue Code of 1986, as
amended (the "Code"), were permitted to establish reserves for bad debts and to
make annual additions thereto which could, within specified formula limits, be
taken as a deduction in computing taxable income for federal income tax purposes
for taxable years beginning prior to January 1, 1997. The amount of the bad debt
reserve deduction for "non-qualifying loans" was computed under the experience
method. The amount of the bad debt reserve deduction for "qualifying real

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property loans" (generally loans secured by improved real estate) could be
computed under either the experience method or the percentage of taxable income
method (based on an annual election).

Under the experience method, the bad debt reserve deduction was an
amount determined under a formula based generally upon the bad debts actually
sustained by the savings association over a period of years.

The percentage of specially computed taxable income that was used to
compute a savings association's bad debt reserve deduction under the percentage
of taxable income method (the "percentage bad debt deduction") was 8%. The
percentage bad debt deduction thus computed was reduced by the amount permitted
as a deduction for non-qualifying loans under the experience method. The
availability of the percentage of taxable income method permitted qualifying
savings associations to be taxed at a lower effective federal income tax rate
than that applicable to corporations generally (approximately 31.3% assuming the
maximum percentage bad debt deduction).

Under the percentage of taxable income method, the percentage bad debt
deduction could not exceed the amount necessary to increase the balance in the
reserve for "qualifying real property loans" to an amount equal to 6% of such
loans outstanding at the end of the taxable year or the greater of (i) the
amount deductible under the experience method or (ii) the amount which when
added to the bad debt deduction for "non-qualifying loans" equaled the amount by
which 12% of the amount comprising savings accounts at year end exceeded the sum
of surplus, undivided profits and reserves at the beginning of the year.

In August 1996, legislation was enacted that repeals the
above-described reserve method of accounting (including the percentage of
taxable income method) used by many thrift institutions to calculate their bad
debt reserve for federal income tax purposes. Thrift institutions with $500
million or less in assets may, however, continue to use the experience method.
As a result, First Federal must recapture that portion of the reserve that
exceeds the amount that could have been taken under the experience method for
post-1987 tax years. Neodesha does not have an excess reserve subject to this
provision and no recapture is required The legislation also requires thrifts to
account for bad debts for federal income tax purposes on the same basis as
commercial banks for tax years beginning after December 31, 1995. The recapture
will occur over a six-year period commencing with the year ended September 30,
1997. The legislation also requires thrift institutions to account for bad debts
for federal income tax purposes on the same basis as commercial banks for tax
years beginning after December 31, 1995.

In addition to the regular income tax, corporations, including savings
associations such as the Association, generally are subject to a minimum tax. An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income. For taxable years beginning
after 1986 and before 1997, corporations, including savings associations such as
First Federal and Neodesha, are also subject to an environmental tax equal to
.12% of the excess of alternative minimum taxable income for the taxable year
(determined without regard to net operating losses and the deduction for the
environmental tax) over $2 million.

To the extent earnings appropriated to a savings association's bad
debt reserves for "qualifying real property loans" and deducted for federal
income tax purposes exceed the allowable amount of such reserves computed under
the experience method and to the extent of the association's supplemental
reserves for losses on loans ("Excess"), such Excess may not, without adverse
tax consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of September 30, 1997, the Association's and Neodesha's Excess for
tax purposes totaled approximately $2.5 million and $47,000, respectively.

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

108

<PAGE>

Neither the Company nor Neodesha has been audited by the Internal
Revenue Service for the last 10 years and both have federal income tax returns
which are open and subject to audit for the years 1994 through 1996. In the
opinion of their respective managements, any examination of still open returns
would not result in a deficiency which could have a material adverse effect on
the financial condition of the Company or Neodesha.

Kansas Taxation. The Company and Association file separate Kansas
income and Kansas privilege tax returns on a fiscal year basis using the accrual
method of accounting.

Kansas law permits savings and loan associations to deduct from net
income, a reserve established for the sole purpose of meeting or absorbing
losses, in the amount of five percent of such net income determined without the
benefit of such deduction, or, in the alternative, a reasonable addition to a
reserve for losses based on past experiences. The Kansas privilege tax is
computed on the basis of 4.5% of taxable income, plus 2.25% of taxable income in
excess of $25,000 for tax years commencing prior to January 1, 1998. For years
commencing on or after January 1, 1998, the Kansas privilege tax is computed on
the basis of 2.5% of taxable income, plus 2.25% of taxable income in excess of
$25,000.

Neither the Company nor Neodesha has been audited by the Kansas
Department of Revenue for the last ten years and both have Kansas privilege tax
returns which are open and subject to audit for the years 1994 through 1996. In
the opinion of their respective managements, any examination of such open
returns would not result in a deficiency which could have a material adverse
effect on the financial condition of the Company or Neodesha.

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

For additional information regarding taxation, see Note K of the Notes
to the Consolidated Financial Statements of the Company and Note I of the Notes
to the Financial Statements of Neodesha.

109

<PAGE>

VOTING SECURITIES AND PRINCIPAL HOLDINGS THEREOF

As of June 30, 1998, First Independence had 957,319 shares of Common
Stock issued and outstanding. No persons other than those listed below are known
by management to own beneficially more than 5% of the outstanding shares of the
Company's Common Stock.

Shares Percent
Beneficially of
Beneficial Owner Owned(1) Class
First Independence Corporation Employee Stock Ownership Plan
Myrtle and Sixth Streets
Independence, Kansas 67301 101,832(2) 10.64
John Hancock Mutual Life Insurance Company
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117 71,000(3) 7.42
Athena Capital Management, Inc.
621 E. Germantown Pike
Plymouth Valley, Pennsylvania 19401 78,236(4) 8.17
Jeffrey Gendell
31 West 52nd Street
17th Floor
New York, New York 10019 97,800(7) 10.22
Larry G. Spencer
President, Chief Executive Officer and Director
901 Birdie Drive
Independence, Kansas 67301 68,975(5) 6.99

Directors and executive officers as a group (10 persons) 260,680(6) 24.57
<FN>

- -----------------------
(1) Reflects a two-for-one stock split which occurred in fiscal 1997.
(2) The amount reported represents shares held by the Employee Stock Ownership
Plan (the "ESOP"), 58,190 of which have been allocated to accounts of
participants. First Bankers Trust Company, Quincy, Illinois, the trustee of
the ESOP, may be deemed to beneficially own the shares held by the ESOP
which have not been allocated to the accounts of participants.
(3) As reported by John Hancock Mutual Life Insurance Company ("John Hancock")
and certain of John Hancock's subsidiaries, including John Hancock
Advisors, Inc. ("JHA"), a registered investment adviser, and John Hancock
Freedom Regional Bank Fund ("JHFRBF") in an amended Schedule 13G dated
February 2, 1996. JHA reported sole voting and investment power with
respect to the 35,500 shares held through JHFRBF.
(4) As reported by Athena Capital Management, Inc. in a Schedule 13G dated
January 26, 1998. Athena Capital Management, Inc., a registered investment
adviser, reported sole voting and investment power with respect to 836
shares of the Common Stock and shared voting and investment power with
respect to 77,400 shares of the Common Stock.
(5) Includes 26,256 shares held directly, 600 shares held solely by Mr.
Spencer's spouse, 600 shares held by minor children of Mr. Spencer, 3,492
shares awarded under the Company's Recognition and Retention Plan (the
"RRP") which have not vested and over which shares Mr. Spencer has sole
voting but no dispositive power, 8,933 shares allocated to Mr. Spencer's
account under the ESOP and 29,094 shares subject to options granted to Mr.
Spencer under the 1993 Stock Option and Incentive Plan (the "Stock Option
Plan"), which are exercisable within 60 days of the date hereof.
(6) Includes shares held directly, as well as shares held jointly with family
members, shares held in retirement accounts, held in a fiduciary capacity
or by certain family members, with respect to which shares the listed
individuals or group members may be deemed to have sole or shared voting
and/or investment power. This amount includes the shares held by Larry G.
Spencer and listed separately on this table. This amount also includes an
aggregate of 103,844

110

<PAGE>

shares subject to options granted under the Stock Option Plan, 26,868
shares allocated to the accounts of participants under the ESOP, as well as
an aggregate of 7,860 shares awarded under the RRP to the group members
which have not vested and over which such persons have sole voting but no
dispositive power.
(7) As reported by Jeffrey L. Gendell, in a Schedule 13D dated January 9, 1998.
Mr. Gendell serves as the Managing Member of Tontine Management, L.L.C. and
Tontine Overseas Associates, LTD. The principal business of Tontine
Management is serving as general partner to Tontine Financial Partners,
L.P. and to Tontine Partners, L.P., an affiliated private investment
limited partnership. Tontine Financial Partners, L.P. reported shared
voting and investment power with respect to 72,800 shares of the Common
Stock. Tontine Overseas Associates, L.L.C. reported shared voting and
investment power with respect to 25,000 shares of the Common Stock.
</FN>
</TABLE>

MANAGEMENT OF THE COMPANY

General

The Company's Board of Directors currently consists of seven members.
Except for Directors Strecker and Smith, who have served on the Board since
January 1994, each of the current directors of the Company has served in such
capacity since its incorporation in June 1993. The Board is divided into three
classes, each of which contains approximately one-third of the Board.
Approximately one-third of the Board is elected annually. Directors of the
Company are generally elected to serve for a three-year period or until their
respective successors are elected and qualified.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>

Shares of
Common
Term Stock Percent
Director to Beneficially of
Name Age Position(s) Held in the Company Since(1) Expire Owned(2) Class
William T. Newkirk II 42 Director 1992 2001 9,818(3) 1.02%
Joseph M. Smith 53 Director 1993 2001 5,878(5) (4)
Larry G. Spencer 50 President, Chief Executive Officer
and Director 1993 2000 68,975(6) 6.99%
Harold L. Swearingen 60 Director 1992 2000 9,418(7) (4)
Donald E. Aitken 72 Chairman of the Board 1968 1999 28,818(8) 2.99
John T. Updegraff 71 Vice Chairman of the Board 1979 1999 14,518(9) 1.51
Lavern W. Strecker 57 Director 1993 1999 6,118(10) (4)
<FN>

(1) Includes service as a director of the Association.
(2) Reflects a two-for-one stock split which occurred in fiscal 1997. Amounts
include shares held directly and jointly with family members, as well as
shares which are held in retirement accounts, or held by certain members of
the named individuals' families, or held by trusts of which the named
individual is a trustee or substantial beneficiary, with respect to which
shares the respective directors may be deemed to have sole or shared voting
and/or investment power. Amounts also include 29,094 and 5,818 shares
subject to options granted under the Stock Option Plan to Mr. Spencer and
each non-employee director, respectively, (except Mr. Swearingen, who has
5,658 remaining options) which were exercisable within 60 days of the
Record Date.
(3) Includes 4,000 shares held directly and 5,818 shares subject to options, as
described in footnote 2.
(4) Less than 1.0%.
(5) Includes 60 shares held jointly with Mr. Smith's spouse and 5,818 shares
subject to options, as described in footnote 2.
(6) See footnote 7 under "Voting Securities and Certain Holders Thereof" for
information regarding Mr. Spencer's stock ownership.
(7) Amount includes 3,360 shares held in a trust of which Mr. Swearingen is a
trustee, 400 shares held by children of Mr. Swearingen and 5,658 shares
subject to options, as described in footnote 2.
(8) Includes 5,360 shares held through an IRA, 13,060 shares held jointly with
Mr. Aitken's spouse, 1,580 shares held by Mr. Aitken's spouse, 3,000 shares
held by children of Mr. Aitken and 5,818 shares subject to options, as
described in footnote 2.
(9) Includes 7,500 shares held through an IRA, 900 shares held jointly by Mr.
and Mrs. Updegraff and certain family members, 300 shares held in custodial
accounts for the benefit of Mr. Updegraff's grandchildren and 5,818 shares
subject to options, as described in footnote 2.
10) Represents 300 shares held in a trust, for the benefit of Mr. Strecker's
wife, for which Mr. Strecker is a co-trustee, and 5,818 shares subject to
options, as described in footnote 2.
</FN>
</TABLE>
111

<PAGE>

The principal occupation of each director of the Company is set forth
below. All directors have held their present position for at least five years
unless otherwise indicated.

William T. Newkirk II. Mr. Newkirk is an insurance agent with the
Newkirk, Dennis & Buckles Insurance Co. located in Independence, Kansas. Mr.
Newkirk has been in the insurance business for 18 years.

Joseph M. Smith. Mr. Smith is currently the County Extension
Agent-Agriculture and Coordinator with the Montgomery County Extension Council.
Mr. Smith has been employed by the Montgomery County Extension Council for the
past 24 years.

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

Harold L. Swearingen. Prior to his retirement in 1992, Mr. Swearingen
was employed as a telecommunications manager by ARCO Pipe Line Company,
Independence, Kansas. Mr. Swearingen had been employed by Atlantic Richfield Co.
and its subsidiaries since 1960. He is a graduate of Kansas State University
(Manhattan). Mr. Swearingen is a member of the Institute of Electrical and
Electronic Engineers.

Donald E. Aitken. Mr. Aitken is currently retired. Prior to his
retirement in 1996, he was the manager of City Publishing Co., Inc., a
publishing company located in Independence, Kansas, a position he had held for
29 years.

John T. Updegraff. Mr. Updegraff is currently retired. Prior to his
retirement in 1990, Mr. Updegraff was Vice President and Senior Counsel for ARCO
Pipe Line Company, a wholly owned subsidiary of Atlantic Richfield Company,
located in Independence, Kansas, a position he had held for 15 years.

Lavern W. Strecker. Mr. Strecker is currently retired. Prior to his
retirement in 1992, Mr. Strecker was employed by ARCO Pipe Line Company for 26
years with his last position being Manager of Accounting and Control.

Meetings and Committees of the Board of Directors

Meetings and Committees of the Company. Meetings of the Company's
Board of Directors are generally held on a quarterly basis. The Board of
Directors met five times during fiscal 1997. During fiscal 1997, no incumbent
director of the Company attended fewer than 75% of the aggregate of the total
number of Board meetings and the total number of meetings held by the committees
of the Board of Directors on which he served.

The Board of Directors of the Company has standing Executive, Audit
and Compensation Committees.

The Executive Committee is comprised of Chairman Aitken and Directors
Strecker and Updegraff, with Director Newkirk serving as an alternate. The
Executive Committee meets on an as needed basis and exercises the power of the
Board of Directors between Board meetings to the extent permitted by Delaware
law. This committee did not meet during fiscal 1997.

The Audit Committee recommends independent auditors to the Board,
reviews the results of the auditors' services, reviews with management and the
internal auditors the systems of internal control and internal audit reports and
assures that the books and records of the Company are kept in accordance with
applicable accounting principles and standards. The members of the Audit
Committee are Chairman Aitken and Directors Strecker and Updegraff. During the
fiscal year ended September 30, 1997, this committee did not meet; however, the
entire Board of Directors performed its function during fiscal 1997.

112

<PAGE>

The Compensation Committee is composed of Chairman Aitken and
Directors Strecker and Updegraff. This Committee is responsible for
administering the Stock Option Plan and RRP and also reviews compensation and
benefit matters. This committee did not meet during the fiscal year ended
September 30, 1997.

The entire Board of Directors acts as a nominating committee for
selecting nominees for election as directors. While the Board of Directors of
the Company will consider nominees recommended by stockholders, the Board has
not actively solicited such nominations. Pursuant to the Company's Bylaws,
nominations by stockholders must be delivered in writing to the Secretary of the
Company at least 30 days before the date of the Meeting.

Meetings and Committees of the Association. The Association's Board of
Directors meets monthly and may have additional special meetings upon the
written request of the Chairman of the Board or at least three directors. The
Board of Directors met 13 times during the fiscal year ended September 30, 1997.
During fiscal 1997, no incumbent director of the Association attended fewer than
75% of the aggregate of the total number of Board meetings and the total number
of meetings held by the committees of the Board of Directors on which he served.

The Association has standing Executive, Investment/Interest Rate Risk,
Loan and Asset Review Committees.

The Association's Executive Committee exercises the powers of the full
Board of Directors between board meetings, except that this committee does not
have the authority of the board to amend the charter or bylaws, adopt a plan of
merger, consolidation, dissolution, or provide for the disposition of all or
substantially all of the property and assets of the Association. The Executive
Committee also serves as the Association's Audit Committee and selects the
Association's independent accountants and meets with the accountants to discuss
the scope and to review the results of the annual audit. The Executive Committee
is composed of Chairman Aitken and Directors Strecker and Updegraff, with
Director Newkirk serving as an alternate. The Executive Committee met two times
during the fiscal year ended September 30, 1997.

The Investment/Interest Rate Risk Committee is comprised of Director
Spencer, Senior Vice President and Senior Loan Officer Gary L. Overfield and
Vice President and Chief Financial Officer James B. Mitchell. The Investment
Committee is responsible for the formulation of the Association's strategy and
monitoring its investment performance and implementation of the Association's
interest rate risk management strategy. This committee met four times during
fiscal 1997.

The Loan Committee is composed of Director Spencer, Mr. Overfield,
Vice President and Asset Manager Jim L. Clubine and Vice President Gregg S.
Webster. This committee meets weekly to evaluate and approve all loan
applications. During fiscal 1997, this committee met 52 times.

The Asset Review Committee is comprised of Director Spencer, Messrs.
Overfield, Clubine and Webster and Ms. Lori L. Kelley, an Assistant Vice
President of the Association. This committee identifies and reviews the
Association's problem assets. This committee met four times during fiscal 1997.

Director Compensation

The Company's directors are not paid fees for their service in such
capacity. Directors of the Association are paid a fee of $500 per month plus
$500 per special Association Board meeting and $300 per Association Executive
Committee meeting attended. With the exception of the Association's Executive
Committee, no fee is paid for membership on the Association's committees.

113

<PAGE>

Executive Officers of the Company

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

NAME AGE(1) POSITION(S) HELD
Larry G. Spencer 50 President and Chief Executive Officer
Gary L. Overfield 46 Senior Vice President and Secretary
James B. Mitchell 43 Vice President and Chief Financial Officer
- ----------------
(1)At June 30, 1998.

Executive Officers of the Association

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

NAME AGE(1) POSITION(S) HELD
- ----------------- ------ ---------------------------------------------
Larry G. Spencer 50 President and Chief Executive Officer and Director
Gary L. Overfield 46 Senior Vice President, and Secretary and Chief Loan Officer
Jim L. Clubine 45 Vice President and Asset Manager
James B. Mitchell 43 Vice President and Chief Financial Officer
<FN>

- ----------------
(1)At June 30, 1998.
</FN>
</TABLE>

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

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

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

James B. Mitchell. Mr. Mitchell is Vice President and Chief Financial
Officer of the Association, a position he has held since March 1992. Prior to
joining First Federal, he was employed by Eureka Savings Bank, Eureka,

114

<PAGE>

Kansas, in the capacity of Strategic Asset Manager from 1988 to 1991 and Chief
Financial Officer from 1991 to 1992. From 1976 to 1988, Mr. Mitchell was Chief
Financial Officer for Peoples Savings and Loan, Parsons, Kansas. Mr. Mitchell
has an accounting degree from Pittsburgh State University.

Executive Compensation

The Company has not paid any compensation to its executive officers
since its formation. The Company does not presently anticipate paying any
compensation to such persons until it becomes actively involved in the operation
or acquisition of businesses other than the Association.

The following table sets forth information regarding compensation paid
by the Company and the Association to their Chief Executive Officer for services
rendered during the fiscal year ended September 30, 1997. No other executive
officer made $100,000 or more during the fiscal year ended September 30, 1997.

SUMMARY COMPENSATION TABLE
======================================================================================================================
Annual Compensation(1) Long-Term Compensation
Awards
<S> <C> <C> <C> <C> <C> <C>

Restricted
Stock Options/ All Other
Salary Bonus Award(s) SARs Compensation
Name and Principal Position Year ($)(2) ($) ($) (#) ($)
- -------------------------------------- --------- ------- ------------- ------------ ----------- ----------------
Larry G. Spencer, President and Chief 1997 $99,837 $9,184 $ --- --- $11,119(3)
Executive Officer 1996 89,434 8,919 --- --- 11,185
1995 83,542 9,593 --- --- 11,643
====================================== ========= ======== ============ ============ =========== ================
<FN>

(1) Pursuant to Securities and Exchange Commission rules, perquisites equal to
the lesser of either $50,000 or 10% of salary and bonus are excluded from
the table above.

(2) Includes directors' fees of $5,575, $4,800 and $5,400 during fiscal 1997,
1996 and 1995, respectively.

(3) Includes the dollar value of 2,141 shares allocated to Mr. Spencer's
account under the ESOP and excess group life insurance premiums of $414
paid by the Association.
</FN>
</TABLE>

No stock appreciation rights ("SARs") were granted during fiscal 1997.
The following table sets forth certain information concerning the number and
value of unexercised stock options held by the Company's Chief Executive Officer
at September 30, 1997. No options were exercised during fiscal 1997.

115

<PAGE>

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at FY-End (#) at FY-End ($)(1)
<S> <C> <C> <C> <C> <C> <C>

Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
Larry G. Spencer N/A N/A 29,094 N/A $276,393 N/A
================ =============== ============ ============ ============== ========== ===========
<FN>

(1) Represents the aggregate market value (market price of the Common Stock
less the exercise price) of the option granted based upon the average
of the bid and asked prices of $14.50 per share of the Common Stock on
September 30, 1997.
</FN>
</TABLE>

Employment Agreements

The Association has entered into employment agreements with Mr.
Spencer and two other executive officers. The employment agreements are designed
to assist the Association in maintaining a stable and competent management team
upon which the continued success of the Association depends. These agreements
were filed with, and approved by, the Office of Thrift Supervision ("OTS") as
part of the Association's application for conversion from mutual to stock form.
The employment agreements provide for annual base salary in an amount not less
than the employee's current salary and an initial term of three years. Each
agreement provides for extensions of one year, in addition to the then-remaining
term under the agreement, on each anniversary of the effective date of the
agreement, subject to a formal performance evaluation performed by disinterested
members of the Board of Directors of the Association. The agreements provide for
termination upon the employee's death, for cause or in certain events specified
by OTS regulations. The employment agreements are also terminable by the
employee upon 90 days' notice to the Association.

The employment agreements provide for payment to the employee of his
salary for the remainder of the term of the agreement, plus up to 299% of the
employee's base compensation, in the event there is a "change in control" of the
Association where employment terminates involuntarily in connection with such
change in control or within twelve months thereafter. This termination payment
is subject to reduction by the amount of all other compensation to the employee
deemed for purposes of the Internal Revenue Code of 1986, as amended (the
"Code") to be contingent on a "change in control," and may not exceed three
times the employee's average annual compensation over the most recent five year
period or be non-deductible by the Association for federal income tax purposes.
For the purposes of the employment agreements, a "change in control" is defined
as any event which would require the filing of an application for acquisition of
control or notice of change in control pursuant to 12 C.F.R. ss. 574.3 or 574.4.
Such events are generally triggered prior to the acquisition or control of 10%
of the Common Stock. The agreements also guarantee participation in an equitable
manner in employee benefits applicable to executive personnel.

Certain Transactions

The Association has followed a policy of granting consumer loans and
loans secured by the borrower's personal residence to officers, directors and
employees. Loans to employees, executive officers and directors are made in the
ordinary course of business and on the same terms and conditions, including
interest rates and collateral, as those of comparable transactions prevailing at
the time with other persons, in accordance with the Association's underwriting
guidelines, and do not involve more than the normal risk of collectibility or
present other unfavorable features, which is consistent with current federal
requirements. Loans to executive officers and directors must be approved by a
majority of the disinterested directors and loans to other officers and
employees must be approved by the Association's loan committee.

116

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MANAGEMENT OF NEODESHA

Directors and Executive Officers of Neodesha

Prior to the Conversion, the direction and control of Neodesha, as a
mutual savings institution, was vested in its Board of Directors. Upon
conversion of Neodesha to stock form, each of the directors of Neodesha will
continue to serve as a director until consummation of the acquisition. The Board
of Directors of Neodesha currently consists of six members. Each director of
Neodesha has served as such at least since 1990. The directors serve three-year
staggered terms so that approximately one-third of the directors are elected at
each annual meeting of members.

The following table sets forth certain information regarding the
directors of Neodesha.

Director Term
Name Position(s) Held With Neodesha Age(1) Since Expires
- -------------------------- ------------------------------- --------- -------- --------
JoVonnah Boecker Chairman of the Board 50 1990 1999
Patrick Porter Director 58 1982 2001
Loren Peck Director 70 1979 2000
Jerry Webster Director 60 1983 1999
Doug Buckles Director 46 1988 2001
Richard Stewart Director 58 1976 2000
- ------------
<FN>

(1) At June 30, 1998.
</FN>
</TABLE>

The business experience of each director for at least the past five
years is set forth below.

JoVonnah Boecker. Ms. Boecker is the City Clerk of Neodesha, a
position she has held for approximately 18 years.

Patrick Porter. Mr. Porter is a pharmacist and owner of the Porter
Drug Store located in Neodesha, Kansas.

Loren Peck. Mr. Peck is a semi-retired associate of the Loran Fawcett
Funeral Home located in Neodesha, Kansas. Mr. Peck has been affiliated with the
funeral home for more than 35 years.

Jerry Webster. Mr. Webster is a retired superintendent of the Neodesha
school system.

Doug Buckles. Mr. Buckles is an insurance agent and owner of an
insurance agency located in Neodesha, Kansas. He is also a partner with the
Newkirk, Dennis & Buckles Insurance Agency of Independence, Kansas.

Richard Stewart. Mr. Stewart is the former owner of a lumber yard
located in Neodesha, Kansas. Currently, he is employed with Woods Lumber of
Independence, Kansas.

Meetings and Committees of Board of Directors

Neodesha. Neodesha's Board of Directors meets on a monthly basis. The
Board of Directors met 12 times during the fiscal year ended September 30, 1997.
During fiscal 1997, no director of Neodesha attended fewer than 75% of the
aggregate of the total number of Board meetings and the total number of meetings
held by the committees of the Board of Directors on which he served.

Neodesha has standing Executive, Loan and Asset Liability Committees.

The Executive Committee provides oversight of Board-related matters
in-between regularly scheduled Board Meetings. The Executive Committee is
comprised of the entire Board of Directors. This committee met approximately 40
times during calendar 1998.

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The Loan Committee is comprised of the entire Board of Directors, and
approves all real estate loans and consumer loans. This committee met 40 times
during fiscal 1998.

The Asset Liability Committee is comprised of the entire Board of
Directors. This committee met 6 times during fiscal 1998.

Director Compensation

Directors of Neodesha are paid $75 per board meeting. Directors do not
receive any additional compensation for committee meetings attended.

Executive Officers who are not Directors

Franklin C. Miller, age 52. Mr. Miller has been President of Neodesha
since 1986. In his capacity as President, Mr. Miller oversees the day-to-day
operations of Neodesha.

Diane K. Holmquist, age 48. Ms. Holmquist is currently serving as Vice
President and Secretary of Neodesha, a position she has held since 1984. In her
capacity as such, she is primarily responsible for real estate lending.

Executive Compensation

The following table sets forth information concerning the compensation
accrued for services in all capacities to Neodesha for the fiscal year ended
September 30, 1997 for the President. No executive officer's aggregate annual
compensation (salary plus bonus) exceeded $100,000 in fiscal 1997.

Summary Compensation Table
Long Term
Annual Compensation (1) Compensation Awards All Other
Compensation
($)
<S> <C> <C> <C> <C> <C> <C> <C>

Other Annual Restricted Stock Options/
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Award ($) SARs (#)
Frank Miller, President 1997 49,169 4,097 6,085 N/A N/A ---
- --------------------------- -------- ----------- ----------- ------------------ ----------------- ------------- ----------------
<FN>

(1) In accordance with the transitional provisions applicable to the revised
rules on executive officer and director compensation disclosure adopted by
the SEC, as informally interpreted by the SEC's Staff, Summary Compensation
information is excluded for the fiscal years ended September 30, 1996 and
1995.
</FN>
</TABLE>

Employment Agreement

The Plan provides for a three year employment agreement between the
Association and Mr. Miller. The employment agreement provides for annual base
salary in an amount not less than the employee's current salary and a term of
three years. The agreement provides, among other things, for participation in an
equitable manner in employee benefits available to Association employees at
equivalent levels. In addition, the contract provides Mr. Miller with the use of
a car during the term of the agreement. The agreement also provides for
termination upon the employee's death, for cause or in certain events specified
by OTS regulation. The employment agreement is also terminable by the employee
upon 90 days' notice to the Association.

The employment agreement provides for payment to the employee of his
salary for the remainder of the term of the agreement, plus up to 299% of the
employee's base compensation, in the event there is a "change in control" of the
Association where employment terminates involuntarily in connection with such
change in control or within twelve months thereafter. This termination payment
is subject to reduction by the amount of all other compensation to the employee
deemed for purposes of the Internal Revenue Code of 1986, as amended (the
"Code") to be contingent on a "change in control," and may not exceed three
times the employee's average annual compensation over the most recent five year
period or be non-deductible by the Association for federal income tax purposes.
For the purposes of the employment agreements, a "change in control" is defined
as any event which would require the filing of an application for acquisition of
control or notice of change in control pursuant to 12 C.F.R. ss. 574.3 or 574.4.
Such events are generally triggered prior to the acquisition or control of 10%
of the Common Stock. The agreements also guarantee

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participation in a equitable manner in employee benefits applicable to executive
personnel. See also "The Merger Conversion -- Business Purposes."

Benefit Plans

Neodesha currently provides insurance benefits to its employees,
including health insurance, subject to certain deductibles and copayments.

Certain Transactions

Neodesha follows a policy of granting its loans to its directors,
officers and employees. The loans to executive officers and directors are made
in the ordinary course of business and on the same terms and conditions as those
of comparable transactions prevailing at the time, in accordance with Neodesha's
underwriting guidelines and do not involve more than the normal risk of
collectibility or present other unfavorable terms. Loans to all directors and
executive officers and their associates, including outstanding balances and
commitments totaled $43,000 at June 30, 1998, which was 3.8% of Neodesha's
retained earnings at that date. At June 30, 1998, there were no loans to any
single director, executive officer or their affiliates made at preferential
rates or terms which in the aggregate exceeded $60,000 during the three years
ended June 30, 1998.

RESTRICTIONS ON ACQUISITIONS OF THE COMPANY

As discussed below, federal and Delaware law and the Company's
certificate of incorporation include certain provisions to protect the interests
of the Company and its stockholders from hostile takeovers which the Board of
Directors of the Company believe would not be in the best interests of the
Company, the Association or the Company's stockholders. The following
description of certain of these provisions is general and not necessarily
complete, with respect to provisions contained in the Company's certificate of
incorporation and bylaws. Reference should be made in each case to the document
in question, each of which is part of Neodesha's and the Company's application
to the OTS and the Company's Registration Statement filed with the SEC. See
"Additional Information."

Provisions of the Company's Certificate of Incorporation and Bylaws

Directors. Certain provisions of the Company's certificate of
incorporation and bylaws may impede changes in majority control of the Board of
Directors. The Company's certificate of incorporation provides that the Board of
Directors of the Company will be divided into three classes, with directors in
each class elected for three-year staggered terms. Thus, it would take two
annual elections to replace a majority of the Company's Board. The certificate
of incorporation provides that any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, shall be
filled for the remainder of the unexpired term by a majority vote of the
directors then in office. Finally, the bylaws impose certain notice and
information requirements in connection with the nomination by stockholders of
candidates for election to the Board of Directors or the proposal by
stockholders of business to be acted upon at an annual meeting of stockholders.

The certificate of incorporation provides that a director may only be
removed for cause by the affirmative vote of a majority of the directors then in
office and the affirmative vote of 80% of the shares eligible to vote at a duly
constituted meeting of the stockholders called for that purpose.

Restrictions on Call of Special Meetings. The certificate of
incorporation of the Company provides that a special meeting of stockholders may
be called at any time but only by the chairman of the board, the president or a
majority of the directors then in office. Stockholders are not authorized to
call a special meeting.

Absence of Cumulative Voting. The Company's certificate of
incorporation does not provide for cumulative voting rights in the election of
directors.

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<PAGE>

Authorization of Preferred Stock. The certificate of incorporation of
the Company authorizes 500,000 shares of serial preferred stock, par value $.01
per share. The Company is authorized to issue preferred stock from time to time
in one or more series subject to applicable provisions of law, and the Board of
Directors is authorized to fix the designations, powers, preferences and
relative participating, optional and other special rights of such shares,
including voting rights (which could be multiple or as a separate class) and
conversion rights. In the event of a proposed merger, tender offer or other
attempt to gain control of the Company that the Board of Directors does not
approve, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede the completion of such a transaction. If the Company issued any preferred
stock which disparately reduced the voting rights of the Common Stock within the
meaning of Rule 19c-4 under the Exchange Act, the Company Common Stock could be
required to be delisted from the Nasdaq System. An effect of the possible
issuance of preferred stock, therefore, may be to deter a future takeover
attempt. The Board of Directors has no present plans or understandings for the
issuance of any preferred stock and does not intend to issue any preferred stock
except on terms which the Board of Directors deems to be in the best interests
of the Company and its stockholders.

Limitation on Voting Rights. The certificate of incorporation of the
Company provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit"), be entitled or permitted to any vote in respect of the
shares held in excess of the Limit. This limitation would not inhibit any person
from soliciting (or voting) proxies from other beneficial owners for more than
10% of the Common Stock or from voting such proxies. Beneficial ownership is to
be determined pursuant to Rule 13d-3 of the General Rules and Regulations of the
Exchange Act, and in any event includes shares beneficially owned by any
affiliate of such person, shares which such person or his affiliates (as defined
in the certificate of incorporation) have the right to acquire upon the exercise
of conversion rights or options and shares as to which such person and his
affiliates have or share investment or voting power but shall not include shares
beneficially owned by directors, officers and employees of the Association or
the Company. This provision will be enforced by the Board of Directors to limit
the voting rights of persons beneficially owning more than 10% of the stock and
thus could be utilized in a proxy contest or other solicitation to defeat a
proposal that is desired by a majority of the stockholders.

Procedures for Certain Business Combinations. The Company's
certificate of incorporation requires that certain business combinations between
the Company (or any majority-owned subsidiary thereof) and a 10% or more
stockholder either (i) be approved by at least 80% of the total number of
outstanding voting shares of the Company or (ii) approved by a majority of the
continuing Board of Directors (i.e., persons serving prior to the 10%
stockholder becoming such) or (iii) involve consideration per share generally
equal to that paid by such 10% stockholder when the block of stock was acquired.

Amendment to Certificate of Incorporation and Bylaws. Amendments to
the Company's certificate of incorporation must be approved by a two-thirds vote
of the Company's Board of Directors and also by a majority of the outstanding
shares of the Company's voting stock, provided, however, that approval by 80% of
the outstanding voting stock is generally required for certain provisions (i.e.,
provisions relating to number, classification, election and removal of
directors; amendment of bylaws; call of special stockholder meetings; offers to
acquire and acquisitions of control; certain business combinations; stockholder
action without a meeting; and amendments to provisions relating to the foregoing
in the certificate of incorporation).

The bylaws of the Company may be amended by either a majority vote of
the Board of Directors or at least 80% of the total votes eligible to be voted
at a duly constituted meeting of stockholders.

Purpose and Takeover Defensive Effects of the Company's Certificate of
Incorporation and Bylaws. The Board of Directors of the Company believes that
the provisions described above are prudent and reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by its Board of Directors. The Board of
Directors believes these provisions are in the best interest of the Company and
its stockholders. In the judgment of the Board of Directors, the Company's Board
will be in the best position to determine the true value of the Company and to
negotiate more effectively for what may be in the best interests of its
stockholders. Accordingly, the Board of Directors believes that it is in the
best interests of the Company and its stockholders to encourage potential
acquirors to negotiate directly with the Board of Directors of the Company and
that these provisions

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<PAGE>

will encourage such negotiations and discourage hostile takeover attempts. It is
also the view of the Board of Directors that these provisions should not
discourage persons from proposing a merger or other transaction at prices
reflective of the true value of the Company and which is in the best interests
of all stockholders.

Attempts to take over financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for the Company
and its stockholders, with due consideration given to matters such as the
management and business of the acquiring corporation and maximum strategic
development of the Company's assets.

An unsolicited takeover proposal can seriously disrupt the business
and management of a corporation and cause it great expense. Although a tender
offer or other takeover attempt may be made at a price substantially above then
current market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
which is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Company's remaining stockholders of the benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners becomes less
than the 300 required for Exchange Act registration.

Despite the belief of the Company as to the benefits to stockholders
of these provisions of the Company's certificate of incorporation and bylaws,
these provisions may also have the effect of discouraging a future takeover
attempt which would not be approved by the Company's Board, but pursuant to
which stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to participate
in such a transaction may not have any opportunity to do so. Such provisions
will also render the removal of the Company's Board of Directors and of
management more difficult. The Board will enforce the voting limitation
provisions of the charter in proxy solicitations and accordingly could utilize
these provisions to defeat proposals that are favored by a majority of the
stockholders. The Boards of Directors of the Company, however, have concluded
that the potential benefits outweigh the possible disadvantages.

Pursuant to applicable law, at any annual or special meeting of its
stockholders, the Company may adopt additional charter provisions regarding the
acquisition of its equity securities that would be permitted to a Delaware
corporation. The Company does not presently intend to propose the adoption of
further restrictions on the acquisition of the Company's equity securities.

Other Restrictions on Acquisitions of Stock

Delaware Anti-Takeover Statute. The Delaware General Corporation Law
(the "DGCL") provides that buyers who acquire more than 15% of the outstanding
stock of a Delaware corporation, such as the Company, are prohibited from
completing a hostile takeover of such corporation for three years. However, the
takeover can be completed if (i) the buyer, while acquiring the 15% interest,
acquires at least 85% of the corporation's outstanding stock (the 85%
requirement excludes shares held by directors who are also officers and certain
shares held under employee stock plans), or (ii) the takeover is approved by the
target corporation's board of directors and two-thirds of the shares of
outstanding stock of the corporation (excluding shares held by the bidder).

However, these provisions of the DGCL do not apply to Delaware
corporations with less than 2,000 stockholders or which do not have voting stock
listed on a national exchange or listed for quotation with a registered national
securities association. The Company is currently listed on the Nasdaq Stock
Market.

Federal Regulation. A federal regulation prohibits any person prior to
the completion of a merger conversion from transferring, or entering into any
agreement or understanding to transfer, the legal or beneficial ownership of the
subscription rights issued under a plan of merger conversion or the stock to be
issued upon their exercise. This

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regulation also prohibits any person prior to the completion of a merger
conversion from offering, or making an announcement of an offer or intent to
make an offer, to purchase such subscription rights or stock.

Federal law provides that no company, "directly or indirectly or
acting in concert with one or more persons, or through one or more subsidiaries,
or through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. In addition,
federal regulations require that, prior to obtaining control of a savings
association, a person, other than a company, must give 60 days' prior notice to
the OTS and have received no OTS objection to such acquisition of control. Any
company that acquires such control becomes a "savings and loan holding company"
subject to registration, examination and regulation as a savings and loan
holding company. Under federal law (as well as the regulations referred to
below) the term "savings association" includes state and federally chartered
SAIF-insured institutions and federally chartered savings banks whose accounts
are insured by the FDIC's BIF and holding companies thereof.

Control, as defined under federal law, in general means ownership,
control of or holding irrevocable proxies representing more than 25% of any
class of voting stock, control in any manner of the election of a majority of a
savings association's directors, or a determination by the OTS that the acquiror
has the power to direct, or directly or indirectly to exercise a controlling
influence over, the management or policies of the institution. Acquisition of
more than 10% of any class of a savings association's voting stock, if the
acquiror also is subject to any one of eight "control factors," constitutes a
rebuttable determination of control under the OTS regulations. Such control
factors include the acquiror being one of the two largest stockholders. The
determination of control may be rebutted by submission to the OTS, prior to the
acquisition of stock or the occurrence of any other circumstances giving rise to
such determination, of a statement setting forth facts and circumstances which
would support a finding that no control relationship will exist and containing
certain undertakings. The OTS regulations provide that persons or companies
which acquire beneficial ownership exceeding 10% or more of any class of a
savings association's stock must file with the OTS a certification that the
holder is not in control of such institution, is not subject to a rebuttable
determination of control and will take no action which would result in a
determination or rebuttable determination of control without prior notice to or
approval of the OTS, as applicable.

DESCRIPTION OF CAPITAL STOCK

The 3,000,000 shares of capital stock authorized by the Company
certificate of incorporation are divided into two classes consisting of
2,500,000 shares of common stock (par value $.01 per share) and 500,000 shares
of serial preferred stock (par value $.01 per share).

Each share of the common stock has the same relative rights and is
identical in all respects with each other share of the common stock. The common
stock of the Company represents non-withdrawable capital, is not of an insurable
type and is not insured by the SAIF.

Under Delaware law, the holders of the common stock possess exclusive
voting power in the Company. Each stockholder is entitled to one vote for each
share held on all matters voted upon by stockholders. If the Company issues
preferred stock subsequent to the Merger Conversion, holders of the preferred
stock may also possess voting rights.

In the unlikely event of the liquidation or dissolution of the
Company, the holders of the common stock will be entitled to receive -- after
payment or provision for payment of all debts and liabilities of the Company
(including all deposits in the Resulting Institution and accrued interest
thereon) -- all assets of the Company available for distribution, in cash or in
kind. See "The Merger Conversion - Effects on Depositors and Borrowers of
Neodesha -Liquidation Rights." If preferred stock is issued subsequent to the
Merger Conversion, the holders thereof may have a priority over the holders of
common stock in the event of liquidation or dissolution.

Holders of the common stock are not entitled to preemptive rights with
respect to any shares which may be issued. The common stock is not subject to
call for redemption, and, upon receipt by the Company of the full purchase price
therefor, each share of the common stock will be validly issued, fully paid and
nonassessable.

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The Board of Directors of the Company is authorized to issue preferred
stock in series and to fix and state the voting powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each such series and the qualifications, limitations and restrictions
thereof. Preferred stock may rank prior to the common stock as to dividend
rights, liquidation preferences, or both, and may have full or limited voting
rights. The holders of preferred stock may be entitled to vote as a separate
class or series under certain circumstances, regardless of any other voting
rights which such holders may have.

Except as discussed above, the Company has no present plans for the
issuance of the additional authorized shares of common stock or for the issuance
of any shares of preferred stock. In the future, the authorized but unissued and
unreserved shares of common stock will be available for general corporate
purposes, including but not limited to possible issuance as stock dividends or
stock splits, in future mergers or acquisitions, in a future underwritten or
other public offering, or under an employee stock ownership plan. The authorized
but unissued shares of preferred stock will similarly be available for issuance
in future mergers or acquisitions, in a future underwritten public offering or
private placement or for other general corporate purposes. Except as described
above or as otherwise required to approve the transaction in which the
additional authorized shares of common stock or authorized shares of preferred
stock would be issued, no stockholder approval will be required for the issuance
of these shares. Accordingly, the Board of Directors of the Company, without
stockholder approval, can issue preferred stock with voting and conversion
rights which could adversely affect the voting power of the holders of common
stock.

As of September 30, 1998, the Company had 959,319 shares of issued and
outstanding capital stock. The Company's Common Stock is quoted on the Nasdaq
SmallCap Market under the symbol "FFSL." See "Common Stock Prices and
Dividends."

See "Restrictions on Acquisitions of Stock and Related Takeover
Defensive Provisions - Provisions of the Company's Certificate of Incorporation
and Bylaws" for a description of certain provisions of the Company's certificate
of incorporation and bylaws which may affect the ability of the Company's
stockholders to participate in certain transactions relating to acquisitions of
control of the Company. Also, see "Common Stock Prices and Dividends" for a
description of certain matters relating to the possible future payment of
dividends on the Company's common stock.

The Company's stock transfer agent and registrar is Registrar and
Transfer Company, Cranford, New Jersey.

LEGAL OPINIONS

The validity of the issuance of the Common Stock and the federal
income tax consequences of the Merger Conversion will be passed upon for
Neodesha and the Company by the firm of Silver, Freedman & Taff, L.L.P. (a
limited liability partnership including professional corporations), 7th Floor,
East Tower, 1100 New York Avenue, N.W., Washington, D.C. Matters of Kansas tax
law will be passed upon for the Company by Grant Thornton, LLP, 100 N. Broadway,
Suite 800, Wichita, Kansas. Silver, Freedman & Taff, L.L.P. and Grant Thornton,
LLP, have consented to the references herein to their opinions. Trident has been
represented in the Merger Conversion by Elias, Matz, Tiernan & Herrick, 734 15th
Street, N.W., Washington, D.C.

EXPERTS

The Consolidated Financial Statements of the Company and the Financial
Statements of Neodesha as of September 30, 1997 and 1996 and for each of the
years in the two year period ended September 30, 1997 included in this
Prospectus have been audited by Grant Thornton, LLP, independent auditors, as
indicated in their reports which are included herein, and have been so included
in reliance upon such reports, given upon their authority as experts in
accounting and auditing.

Ferguson has consented to the inclusion herein of the summary of its
letter to Neodesha setting forth its opinion as to the estimated pro forma
market value of Neodesha as converted and to the reference to its opinion that
subscription

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rights received by Eligible Account Holders, Supplemental Eligible Account
Holders and other eligible subscribers do not have any economic value.

ADDITIONAL INFORMATION

The Company has filed with the SEC a Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the Registration Statement. However, the prospectus
does contain a description of the material provisions of the documents contained
therein. Such information can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, NW, Washington, DC 20549, and
copies of such material can be obtained from the SEC at prescribed rates. In
addition, the SEC maintains a Web site. The address of the SEC's Web site is
"http://www.sec.gov." The statements contained herein as to the contents of any
contract or other document filed as an exhibit to the Registration Statement
are, of necessity, brief descriptions thereof which describe only the material
provisions of such documents; each such statement is qualified by reference to
such contract or document.

Neodesha has filed an Application for Approval of Merger Conversion
with the OTS with respect to the Merger Conversion. Pursuant to the rules and
regulations of the OTS, this Prospectus omits certain information contained in
that application. The application may be examined at the principal offices of
the OTS, 1700 G Street, N.W., Washington, D.C. 20552, at the Midwest Regional
Office of the OTS, 122 W. John Carpenter Freeway, Suite 600, Irving, Texas
75039, without charge.

The Common Stock is registered with the SEC under Section 12(g) of the
Exchange Act. The Company is subject to the informational requirements of the
Exchange Act in accordance therewith files reports and other information with
the SEC. The holders of the Company's Common Stock are and will continue to be
subject to the reporting requirements and restrictions on stock purchases and
sales by directors, officers and greater than 10% stockholders and certain other
requirements of the Exchange Act. Under the Plan, the Company has undertaken
that it will not terminate such registration for a period of at least three
years following the Merger Conversion.

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No person has been authorized to give any information or to make any
representation other than as contained in this Prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by First Independence Corporation. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the shares of Common Stock offered hereby to any person in any First
jurisdiction in which such offer or solicitation is not authorized, or in which Independence
the person making such offer or solicitation is not qualified to do so, or to Corporation
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale hereunder shall, under any
circumstances, create any implication that information herein is correct as of
any time subsequent to the date hereof. Table of Contents Page

Summary...................................................1
Selected Consolidated Financial Information
of First Independence Corporation.......................5
Selected Consolidated Financial Information
of The Neodesha Savings and Loan Association, FSA7
Recent Financial Data of First Independence Corporation ..9
Recent Financial Data of The Neodesha Savings and Loan ..13

Association, FSA ^ 165,518 Shares
Risk Factors.............................................17 of Common Stock
First Independence Corporation...........................19 (Anticipated Maximum)

The Neodesha Savings and Loan Association, FSA...........20
Pro Forma Data...........................................20
Pro Form Condensed Financial Statements..................23 PROSPECTUS
Unaudited Pro Form Consolidated Condensed
Financial Statements...................................24
Capitalization...........................................28 Trident
Use of Proceeds..........................................28 Securities, Inc.
Common Stock Prices and Dividends........................29
The Merger Conversion....................................30
Management's Discussion and Analysis of Financial

Condition and Results of Operations of the Company.....42
Business of the Company................................^ 55
Management's Discussion and Analysis of Financial
Condition and Results of Operations of Neodesha......^ 78
Business of Neodesha...................................^ 88
Regulation............................................^ 102
Voting Securities and Principal Holders Thereof.......^ 111
Management of the Company^..............................112
Management of Neodesha................................^ 118
Restrictions on the Acquisition of the Company........^ 120
Description of Capital Stock..........................^ 123
Legal Opinions........................................^ 124
Experts...............................................^ 124
Additional Information................................^ 125
Index to Financial Statements...........................F-1

Until the later of ^ December 14, 1998 or 25 days after ^ November 9, 1998
the commencement of the Offering, all dealers
effecting transactions in the registered securities, THESE SECURITIES ARE NOT
whether or not participating in this distribution, may be DEPOSITS OR ACCOUNTS AND
required to deliver a Prospectus. This is in addition to ARE NOT FEDERALLY
the obligation of dealers to deliver a Prospectus when INSURED OR GUARANTEED
acting as under writers and with respect to their unsold
allotments or subscriptions.
===================================================== =========================

</TABLE>