10KSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 FORM 10-KSB

[X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
             For the fiscal year ended September 30, 2002

OR
[   ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
             1934
             For the transition period from                to               

Commission File Number 0-22184

FIRST INDEPENDENCE CORPORATION

(Name of small business issuer as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	36-3899950 (I.R.S. Employer Identification No.)
Myrtle and Sixth Streets, Independence, Kansas (Address of principal executive offices)	67301 (Zip Code)

Registrant's telephone number, including area code:   (620) 331-1660

Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share
(Title of Class)

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

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

             State the issuer's revenues for its most recent fiscal year: $11,154,884.

             The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the bid and asked prices of such stock on The Nasdaq Stock Market as of December 2, 2002, was $10.0 million. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

             As of December 2, 2002, there were issued and outstanding 925,456 shares of the Registrant's Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE Part II of Form 10-KSB - Annual Report to Stockholders for the fiscal year ended September 30, 2002.

Part III of Form 10-KSB - Proxy Statement for 2003 Annual Meeting of Stockholders.

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


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FORWARD-LOOKING STATEMENTS

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

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

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

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

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PART I

Item 1.      Description of Business

General

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

            At September 30, 2002, we had total assets of $156.1 million, and stockholders' equity of $14.6 million.

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

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

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

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

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

            Our executive offices are located at Myrtle and Sixth Streets in Independence, Kansas 67301 and our telephone number is (620) 331-1660.

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Market Area

            Through our offices in Independence, Coffeyville and Neodesha, Kansas, we currently serve primarily Montgomery and Wilson Counties, Kansas and, to a lesser extent, the eastern part of Chautauqua County, Kansas. We also originate construction loans in Douglas County, Kansas through a loan production office in Lawrence, Kansas, which is the County Seat of Douglas County and the home of Kansas University. We compete in loan originations and in attracting deposits with approximately 19 financial institutions serving our primary market area. We estimate our share of the savings market in Montgomery and Wilson Counties to be approximately 15%.

            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 and Wilson Counties have a population of approximately 36,300 and 10,300, respectively. Although the economy of southeast Kansas is closely tied to the gas, oil and agricultural industries, Montgomery and Wilson Counties have attracted a variety of other industries. Major employers in our market area include Cessna Aircraft Company, a manufacturer of single engine airplanes, Dana Engine Controls, a manufacturer of electronic and electrical parts, Cobalt Boats, a manufacturer of boats and car hatch covers and Amazon.com, an online shopping site. The economic environment that will influence the Company over the next year could be described as uncertain. Douglas County, the location of First Federal's loan production office in Lawrence, has good economic projections, portending a continuing opportunity for interim construction lending.

Lending Activities

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

            Our primary focus in lending activities is on the origination of loans secured by first mortgages on owner-occupied, one- to four-family residences. Recently, a significant portion of our lending has been in the form of construction loans. To a much lesser extent, we also originate loans secured by non-residential real estate and consumer loans and a limited amount of multi-family real estate loans. See "- Originations, Purchases and Sales of Loans and Mortgage-Backed Securities." At September 30, 2002, our net loan portfolio totaled $118.7 million.

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

            The aggregate amount of loans that First Federal is permitted to make under applicable federal regulations to any one borrower, including related entities, is generally equal to the greater of 15% of unimpaired capital and surplus or $500,000. At September 30, 2002, the maximum amount which First Federal could have lent to any one borrower and the borrower's related entities was approximately $2.1 million. See "Regulation - Federal Regulation of Savings Associations."

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

	September 30,
	2002		2001		2000
	Amount	Percent	Amount	Percent	Amount	Percent
	(Dollars in Thousands)
Real Estate Loans
One- to four-family	$86,986	69.06%	$ 93,534	64.71%	$ 90,928	66.90%
Multi-family	1,094	.87	865	0.60	339	0.25
Non-residential	9,924	7.88	12,239	8.47	11,080	8.15
Construction	22,901	18.18	32,731	22.65	28,152	20.72
Total real estate loans	120,905	95.99	139,369	96.43	130,499	96.02
Consumer Loans
Automobile	2,338	1.86	2,541	1.75	2,578	1.90
Home equity	1,413	1.12	1,301	0.90	927	0.68
Deposit account	466	.37	487	0.34	980	0.72
Home improvement	79	.06	86	0.06	123	0.09
Other	754	.60	749	0.52	806	0.59
Total consumer loans	5,050	4.01	5,164	3.57	5,414	3.98
Total Loans	125,955	100.00%	144,533	100.00%	135,913	100.00%
Less
Loans in process	6,176		10,614		9,665
Deferred fees and discounts	285		358		371
Allowance for losses	828		723		758
Total loans receivable, net	$ 118,666		$132,838		$125,119

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

	September 30,
	2002		2001		2000
	Amount	Percent	Amount	Percent	Amount	Percent
	(Dollars in Thousands)
Fixed-Rate Loans
Real estate:
One- to four-family	$63,338	50.29%	$ 66,796	46.21%	$ 67,253	49.48%
Multi-family	1,038	.83	803	0.56	--	--
Non-residential	7,440	5.91	9,076	6.28	8,019	5.90
Construction	22,901	18.18	32,731	22.65	28,152	20.72
Total fixed-rate real estate loans	94,717	75.21	109,406	75.70	103,424	76.10
Consumer	3,637	2.89	3,863	2.67	4,487	3.30
Total fixed-rate loans	98,354	78.10	113,269	78.37	107,911	79.40
Adjustable-Rate Loans
Real estate:
One- to four-family	23,648	18.77	26,738	18.50	23,675	17.42
Multi-family	56	.04	62	0.04	339	0.25
Non-residential	2,484	1.97	3,163	2.19	3,061	2.25
Total adjustable-rate real estate loans	26,188	20.78	29,963	20.73	27,075	19.92
Consumer	1,413	1.12	1,301	0.90	927	0.68
Total adjustable-rate loans	27,601	21.90	31,264	21.63	28,002	20.60
Total Loans	125,955	100.00%	144,533	100.00%	135,913	100.00%
Less
Loans in process	6,176		10,614		9,665
Deferred fees and discounts	285		358		371
Allowance for losses	828		723		758
Total loans receivable, net	$118,666		$132,838		$125,119

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            The following schedule shows the scheduled contractual maturities of our loan portfolio at September 30, 2002. 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 Four-Family		Multi-family, and Non-Residential		Construction		Consumer		Total
	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate
	(Dollars in Thousands)
Due During Periods Ending September 31,
2003	$    180	8.07%	$     442	8.13%	$21,601	7.61%	$2,033	7.86%	$24,256	7.64%
2004 and 2007	1,569	7.39	475	8.44	314	7.43	2,778	8.64	5,136	8.16
2008 and following	85,237	7.31	10,101	7.97	986	7.18	239	7.68	96,563	7.38
Total	$86,986		$11,018		$22,901		$ 5,050		$125,955

            The total amount of loans due after September 30, 2003, which have predetermined interest rates is $75.5 million, while the total amount of loans due after such date which have floating or adjustable interest rates is $26.2 million.

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            One- to Four-Family Residential Mortgage Lending. Residential loan originations are generated by our marketing efforts, through our present customers and walk-in customers, and referrals from real estate brokers and builders. We have focused our lending efforts primarily on the origination of loans secured by first mortgages on owner-occupied, single-family residences in our market area. At September 30, 2002, our one- to four-family residential mortgage loans, totaled $87.0 million, or 69.06% of our loan portfolio.

            We currently make adjustable-rate, one- to four-family residential mortgage loans in amounts up to 97% of the appraised value, or selling price, of the security property, whichever is less. For loans with a loan-to-value ratio of 90% or greater, we require private mortgage insurance in order to reduce our exposure level to less than an 80% loan-to-value ratio. For loans with loan-to-value ratios of greater than 80% but less than 90%, we typically require private mortgage insurance to reduce our exposure. The determination as to whether to obtain such insurance is made on a case-by-case basis, based on a variety of factors including the borrower's payment history, the borrower's length of employment, the quality of the property, the term of the loan and the debt to income ratio of the borrower. At September 30, 2002, we had 709 loans totaling $44.8 million with a loan-to-value ratio of greater than 80%, but less than 90% and 396 loans totaling $21.7 million with a loan-to-value ratio of 90% or greater.

            We currently offer mortgage loans with a fixed rate of interest for either the first five years or three years of the loan term that automatically convert to a one-year adjustable-rate mortgage loan during the year following the fixed term. Rates are determined in accordance with market and competitive factors for a term of up to 30 years. The interest rate charged on adjustable-rate mortgage loans currently originated by us is based upon the one year Constant Maturity Treasury Index. The adjustable-rate loans currently originated by us provide for a 2% annual adjustment cap, and a 6% lifetime cap on the interest rate adjustment over the rate in effect on the date of origination. The actual interest rate on these adjustable-rate loans may not be reduced below 5% over the life of the loan. The annual and lifetime caps on interest rate increases reduce the extent to which these loans can help protect us against interest rate risk. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset/Liability Management and Market Risk" in our Annual Report to Stockholders for the year ended September 30, 2002, attached hereto as Exhibit 13 (the "Annual Report to Stockholders"). Approximately 19.3% of the loans secured by one- to four-family real estate originated by us during fiscal 2002 were originated with adjustable rates of interest. See "- Originations, Purchases and Sales of Loans and Mortgage-Backed Securities."

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

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

            In underwriting residential real estate loans, we evaluate the borrower's ability to make monthly payments, employment history, credit history and the value of the property securing the loan. Potential borrowers are typically qualified for both adjustable- and fixed-rate loans based upon the initial or stated rate of the loan. Adjustable rate loans increase the risk of default to the extent the interest rate adjusts upward and the borrower is unable to make the payments at the increased rate. Although borrowers on adjustable-rate loans are qualified based upon the initial rate of the loan, if a borrower's debt to income ratios are marginal, we will take into consideration the borrower's ability to make future payments in the event the interest rate adjusts upward. Since the size of our average new loan originated is approximately $50,000,

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we believe increases in interest rates do not generally increase payment amounts to levels that would significantly impair the borrower's ability to make monthly payments.

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

            Approximately $1.5 million, or 1.68% of our one- to four-family residential mortgage loan portfolio, was purchased by us. These loans are primarily secured by property located in Texas and have been in our portfolio for several years. We have purchased only a limited amount of one- to four-family residential mortgage loans since 1989. The level of delinquencies in our portfolio of purchased loans secured by one- to four-family residential real estate is consistent with that of the loans originated and retained by us.

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

            Construction Lending. We also make construction loans to builders and individuals for the construction of residences. There were $22.9 million of construction loans outstanding at September 30, 2002.

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

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

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            Our Lawrence loan production office also originates loans secured by manufactured homes. These loans generally have terms of twelve months or less and interest rates tied to the prime rate plus a margin. Once the loan rate is determined, however, it remains fixed for the term of the loan. The proceeds from these loans are used to fund the site preparation, purchase and improvements of the manufactured homes, during which time the borrower pays interest only. A take out by a third party lender that provides for the permanent financing is obtained prior to the closing of the construction loan. Once the project is complete, our construction loan is paid-off by the lender providing the permanent financing. At September 30, 2002, we had $2.2 million in loans secured by manufactured homes, representing 1.77% of our loan portfolio.

            During the construction phase a number of factors, such as a borrowers loss of employment, bankruptcy or divorce, could result in our construction loan take out being voided. If circumstances require us to place a manufactured construction loan in portfolio, we may be faced with a situation where the value of the property is insufficient to ensure full repayment of the loan. Because of these uncertainties, loans secured by manufactured homes increase credit quality risk, but also reduce interest rate risk and improve earnings due to their shorter terms and higher rate when compared to permanent one- to four-family loans.

            Non-Residential/Multi-Family Real Estate Lending. In order to enhance the yield on and decrease the average term to maturity of our assets, we have originated and purchased permanent loans and participation interests in loans originated by other lenders secured by non-residential and multi-family real estate. We also have a limited amount of loans secured by land. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset/Liability Management and Market Risk" in the Annual Report to Stockholders. At September 30, 2002, we had $11.0 million in non-residential/ multi-family real estate loans, representing 8.75% of our loan portfolio.

            Approximately 2.10% of the property securing our non-residential/multi-family (including land) real estate loan portfolio is located outside our primary market area. Many of the properties securing these purchased loans or participations are located in Texas and neighboring states. Some of these areas have experienced adverse economic conditions including a general softening in real estate markets and the local economy, which may result in increased loan delinquencies and loan losses. However, most of our non-residential/multi-family real estate loan portfolio is seasoned and, during the past five years, we have had no significant purchases or participations in such loans.

            The table below sets forth, by type of security property, our non-residential/multi-family real estate loans at September 30, 2002.

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	Number of Loans	Outstanding Principal Balance	Amount Non-Performing or of Concern
	(Dollars in Thousands)
Multi-family	4	$1,094	--
Small business facilities and office buildings	68	4,637	--
Health care facility	8	3,032	--
Churches	1	1	--
Warehouse/mini-storage	1	77	--
Hotel/motel	2	71	--
Land	45	2,106	--
Total multi-family residential and non-residential real         estate loans	129	$11,018	$  --

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

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

            At September 30, 2002, we had no non-residential/multi-family real estate loans to one borrower, or group of borrowers, which had an existing carrying value in excess of $500,000, except for the loans to four unrelated borrowers or groups of borrowers described below. The first borrower had three loans on non-residential properties with aggregate borrowings totaling $1,672,000. The first loan is secured by a residential care facility located in Caney, Kansas and had an outstanding balance at September 30, 2002 of $746,000. The second loan is secured by a nursing home located in Caney, Kansas and had an outstanding balance at September 30, 2002 of $695,000. The third loan is secured by a residential care facility located in Chanute, Kansas and had an outstanding balance at September 30, 2002 of $231,000. The other loans in excess of $500,000 at September 30, 2002, included a loan with an outstanding balance of $1,054,000 secured by a nursing home located in Independence, Kansas and a loan with an outstanding balance of $641,000 secured by apartments located in Independence, Kansas. All of these loans were current at September 30, 2002. See "Regulation - Federal Regulation of Savings Associations."

            Non-residential/multi-family real estate lending affords us the opportunity to receive interest at rates higher than that generally available from one- to four-family residential lending. Nevertheless, loans secured by such properties are generally larger and involve a greater degree of risk than one- to four-family residential mortgage loans. Because payments on loans secured by non-residential/multi-family real estate

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properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed), the borrower's ability to repay the loan may be impaired. We have attempted to minimize these risks through our underwriting standards and by lending primarily on existing income-producing properties.

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

            Consumer Lending. We believe that the offering of consumer loan products helps to expand and create stronger ties to our existing customer base, by increasing the number of customer relationships and providing cross-marketing opportunities. In addition, consumer loans generally have shorter terms to maturity, thus reducing our exposure to changes in interest rates, and carry higher rates of interest than do one- to four-family residential mortgage loans. At September 30, 2002, our consumer loan portfolio totaled $5.1 million and was 4.01% of our total loan portfolio. Under applicable federal law, First Federal is authorized to invest up to 35% of our assets in consumer loans.

            First Federal offers a variety of secured consumer loans, including home equity loans, home improvement loans, auto loans, and loans secured by savings deposits and other consumer collateral. We also offer a limited amount of unsecured loans. We currently originate all of our consumer loans in our primary market area solely on a direct basis. Direct loans are made when we extend credit directly to the borrower, in contrast to indirect loans which are obtained when loan contracts are purchased by us or other institution from retailers who have extended credit to their customers for goods or services.

            Automobile loans, which represents the largest percentage of our consumer loan portfolio, comprised approximately 46.30% of our total consumer loan portfolio at September 30, 2002. We originate automobile loans on both new and used automobiles. All of our automobile loans are made on a direct basis. Our automobile loans typically are originated at fixed interest rates with terms up to 66 months for new and used vehicles. Loans secured by automobiles are generally originated for up to 125% of retail value of the automobile securing the loan.

            Our home equity and home improvement loans comprised approximately 29.54% of our total consumer loan portfolio at September 30, 2002. Borrowers may qualify for loans in amounts, together with the amount of the existing first mortgage, of up to 100% of the appraised value of the property securing the loan. The term to maturity on such loans may be up to ten years.

            Other consumer loan terms vary according to the type of collateral, length of contract and credit worthiness of the borrower. Our consumer loans generally have a fixed rate of interest, except for the home equity lines of credit which adjust based upon changes in the prime rate. At September 30, 2002, we had $750,000 of unused credit available under our home equity line of credit program.

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

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            Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans which are unsecured, such as checking account overdraft privilege loans, or are secured by rapidly depreciable assets, such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. Although the level of delinquencies in our consumer loan portfolio has generally been low (at September 30, 2002, $74,000, or approximately 1.47% of the consumer loan portfolio, was 60 days or more delinquent), there can be no assurance that delinquencies will not increase in the future.

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

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

            We have underwritten our loan purchases using the same criteria we use in originating loans. Servicing of purchased loans is generally performed by the seller. At September 30, 2002, approximately $1.0 million of First Federal's loan portfolio was serviced by others.

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

            We had $612,000 in loans serviced for others as of September 30, 2002. We originate loans to either resell in the secondary market or to retain in our portfolio, depending on the yield on the loan and our asset/liability management objectives. Our one-to-four family, fixed rate, residential real estate loans originated for portfolio are generally originated and underwritten according to standards that qualify such loans to be included in Federal Home Loan Mortgage Corporation's ("FHLMC") purchase and guarantee program. For the year ended September 30, 2002, we sold $149,000 of one-to-four family residential mortgage loans. However, our approval to sell loans to FHLMC was not received until the fourth quarter of fiscal 2002. Therefore, we anticipate an increased volume of loan sales during the 2003 fiscal year as compared to the 2002 fiscal year. We do not currently retain servicing rights to those loans sold in the secondary market.

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

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	Year Ended September 30,
	2002	2001	2000
	(In Thousands)
Originations by type
Adjustable-rate:
Real estate - one- to four-family	$2,667	$ 4,411	$ 8,055
- non-residential	790	725	25
Consumer - home equity	346	231	192
Total adjustable-rate	3,803	5,367	8,272
Fixed-rate:
Real estate - one- to four-family	11,136	14,313	12,056
- non-residential	1,495	1,753	876
Construction	23,948	32,802	37,245
Consumer - non-residential	3,290	4,431	3,960
Total fixed-rate	39,869	53,299	54,137
Total loans originated	43,672	58,666	62,409
Purchases
Mortgage-backed securities (excluding REMICs and CMOs)	4,146	--	--
Real estate - one- to four-family	--	615	--
- non-residential	--	--	1,242
Total purchased	4,146	615	1,242
Sales and Repayments
Loan Sales	149	--	--
Mortgage-backed securities	1,916	1,440	2,118
Principal repayments(1)	62,258	50,661	52,167
Total reductions	64,323	52,101	54,285
Increase (decrease) in other items, net(2)	4,541	(926)	695
Net increase (decrease)	($11,964)	$ 6,254	$10,061

___________________________

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

Asset Quality

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

            Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying

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amount or fair value less cost to sell. See Note A of the Notes to Consolidated Financial Statements in the Annual Report to Stockholders. Upon acquisition, revenues and expenses from operations and changes in the valuation allowance are included in foreclosed assets expense. However, costs relating to the development and improvement of the property are capitalized to the extent of net realizable value.

            Delinquent Loans. The following table sets forth information concerning delinquent loans at September 30, 2002, in dollar amounts and as a percentage of our loan portfolio. The amounts presented represent the total remaining principal balances of the related loans, rather than the actual payment amounts which are overdue.

	Loans Delinquent for:						Total Loans Delinquent
	60-90 Days			Over 90 Days			60 Days or More
	Number	Amount	Percent of Total Loan Portfolio	Number	Amount	Percent of Total Loan Portfolio	Number	Amount	Percent of Total Loan Portfolio
	(Dollars in Thousands)
Real Estate:
One- to four-family	7	$ 343	.27%	28	$1,574	1.25%	35	$1,917	1.52%
Non-residential	1	56	.04	--	--	--	1	56	.04
Construction	1	58	.05	--	--	--	1	58	.05
Consumer	5	41	.03	10	33	.03	15	74	.06
Total	14	$498	.39%	38	$1,607	1.28%	52	$2,105	1.67%

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




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	Year Ended September 30,
	2002	2001	2000
	(Dollars in Thousands)
Non-accruing loans:
One- to four-family	$1,351	$1,022	$ 587
Non-residential/multi-family real estate	--	--	50
Construction	212	670	408
Consumer	34	103	56
Total non-accruing loans	1,597	1,795	1,101
Accruing loans delinquent 90 days or more:
One- to four-family	223	607	169
Non-residential/multi-family real estate	--	--	18
Total accruing loans delinquent 90 days or more	223	607	187
Troubled debt restructurings:
Consumer	--	--	23
Total non-performing loans	1,820	2,402	1,311
Real estate acquired through foreclosure:
One- to four-family	730	356	423
Total non-performing assets	$ 2,550	$2,758	$1,734
Total as a percentage of total assets	1.63%	1.81%	1.16%

            For the year ended September 30, 2002, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $66,000. The amount included in interest income on such loans was $47,000 for the year ended September 30, 2002.

            Except as discussed under the caption "Classified Assets" below, as of September 30, 2002, there were no loans which were not included in the table above where known information about the possible credit problems of borrowers caused management to have serious doubts as to the ability of the borrower to comply with present loan repayment terms and which may result in disclosure of such loans in the future.

            Real Estate Acquired Through Foreclosure. At September 30, 2002, our real estate acquired through foreclosure consisted of 16 single family residences located in our market area. The properties have a carrying value of $730,000 and are currently held for sale.

            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.

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

            In connection with the filing of our periodic reports with the OTS and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations. We had classified assets, all of which at September 30, 2002 are included in the table of non-performing assets on the previous page, as follows:

	September 30,
	2002	2001	2000
	(Dollars in Thousands)
Substandard	$2,550	$2,758	$1,640
Doubtful	--	--	71
Loss	--	--	--
Watch List	--	--	--
Total classified assets	$2,550	$2,758	$1,711

            Allowance for Loan Losses. The allowance for loan losses is established through a provision for loan losses based on our evaluation of the probable losses in our loan portfolio and changes in the nature and volume of our loan activity. Such evaluation, which includes a review of all loans for which full collectibility may not be reasonably assured, considers among other matters, the estimated fair value of the underlying collateral, economic conditions, historical loan loss experience and other factors that warrant recognition in providing for an adequate loan allowance. Although we believe we use the best information available to make such determinations, future adjustments to the allowance may be necessary, and net income could be significantly affected if circumstances differ substantially from the assumptions used in making the initial determinations. At September 30, 2002, we had an allowance for loan losses of $828,000.





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

	Year Ended September 30,
	2002	2001	2000
	(Dollars in Thousands)
Balance at beginning of fiscal year	$ 723	$758	$753
Provision	220	177	99
Charge-offs:
One- to four-family	28	176	78
Construction Loans	59	--	--
Consumer Loans	35	36	16
Total Charge-offs	122	212	94
Recoveries:
Consumer Loans	7	--	--
Net charge-offs	115	212	94
Balance at end of fiscal year	$ 828	$723	$758
Ratio of net charge-offs during the fiscal year to total loans at end of    fiscal year	0.10%	0.16%	0.08%
Allowance for loan losses to total loans at end of fiscal year	0.70%	0.54%	0.61%
Allowance for loan losses to non-performing loans at end of fiscal year	45.51%	30.09%	57.86%

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

	September 30,
	2002		2001		2000
	Amount	Percent of Loans in Each Category to Total Loans	Amount	Percent of Loans in Each Category to Total Loans	Amount	Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
Real Estate
One- to four-family	$491	69.06%	$283	64.71%	$353	66.90%
Multi-family	--	.87	--	0.60	--	0.25
Non-residential	54	7.88	98	8.47	103	8.15
Construction	224	18.18	309	22.65	275	20.72
Consumer	59	4.01	33	3.57	27	3.98
Total	$828	100.00%	$723	100.00%	$758	100.00%

Investment Activities

            General. First Federal must maintain minimum levels of investments that qualify as liquid assets under OTS regulations. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid

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assets at levels above the minimum requirements imposed by the OTS regulations and at levels believed adequate to meet the requirements of normal operations, including repayments of maturing debt and potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. At September 30, 2002, our liquidity ratio (liquid assets as a percentage of net withdrawable savings deposits and current borrowings) was 13.04%. If liquidity is required beyond what we are able to generate internally, we also have additional borrowing capacity with the FHLB of Topeka of approximately $30.4 million at September 30, 2002. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in the Annual Report to Stockholders.

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

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

            Investment Securities. Our securities portfolio is managed in accordance with a written investment policy adopted by the Board of Directors. Investments may be made by First Federal officers within specified limits and must be approved in advance by the Board of Directors for transactions over certain limits. At September 30, 2002, investment securities totaled $10.3 million, or 6.6% of total assets. As of that date, we also had a $2.0 million investment in FHLB stock, satisfying our requirement for membership in the FHLB of Topeka. It is our general policy to purchase investment securities which are U.S. Government securities or federal agency obligations or other issues that are rated investment grade or have credit enhancements.

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

	September 30,
	2002		2001		2000
	Book Value	% of Total	Book Value	% of Total	Book Value	% of Total
	(Dollars in Thousands)
Securities held to maturity:
Federal agency obligations	$10,122	98.07%	$3,998	76.75%	$6,100	71.86%
U.S. Government Securities	--	--	--	--	200	2.36
Municipal Securities	199	1.93	197	3.78	196	2.31
Total Securities held to maturity	10,321	100.00	4,195	80.53	6,496	76.53
Securities available for sale:
Federal agency obligations	--	--	1,014	19.47	1,992	23.47
Total securities	$10,321	100.00%	$5,209	100.00%	$8,488	100.00%
Average remaining life or term to   repricing of securities	2.32 yrs.		4.77 yrs.		3.16 yrs.
Other Interest-Earning Assets:
Short-term money market investments	$11,709	100.00%	$1,905	100.00%	$1,471	100.00%
Average remaining life or term to    repricing of securities and other    interest-earning assets	1.10 yrs.		3.50 yrs.		2.69 yrs.

            The composition and maturities of the securities portfolio are indicated in the following table.

	September 30, 2002
	1 Year or Less	After 1 Year through 5 Years	After 5 Years to 10 Years	After 10 Years	Total Investment Securities
	Amortized Cost	Amortized Cost	Amortized Cost	Amortized Cost	Amortized Cost	Fair Value
	(Dollars in Thousands)
Held to Maturity:
Municipal securities	$ --	$ 199	$ --	$ --	$ 199	$ 204
Federal agency obligations	1,000	9,122	--	--	10,122	10,344
Total investment securities	$1,000	$9,321	--	$ --	$10,321	$10,548
Weighted average yield	5.55%	3.90%	--%	--%	4.06%

            Our securities portfolio at September 30, 2002, did not contain securities of any issuer with an aggregate book value in excess of 10% of our stockholders' equity, excluding securities issued by the United States Government, or its agencies.

            Mortgage-Backed Securities. We have a portfolio of mortgage-backed securities and have utilized such investments to complement our mortgage lending activities. At September 30, 2002, our mortgage-backed securities totaled $9.5 million. For information regarding the carrying and fair values of our mortgage-backed securities portfolio, see Note D of the Notes to Consolidated Financial Statements in the Annual Report to Stockholders.

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            At September 30, 2002, $4.3 million, or 45.3%, of First Federal's mortgage-backed securities carried adjustable-rates of interest. Under the OTS's risk-based capital requirements, Ginnie Mae mortgage-backed securities have a zero percent risk weighting and Fannie Mae, Freddie Mac and AA-rated mortgage-backed securities have a 20% risk weighting, in contrast to the 50% risk weighting carried by one- to four-family performing residential mortgage loans.

            The following table sets forth the contractual maturities of the mortgage-backed securities at September 30, 2002.

	Due in
	1 Year or Less	After 1 Year to 5 Years	After 5 Years to 10 Years	After 10 Years	Book Value
	(Dollars in Thousands)
Held to Maturity
Adjustable-Rate Mortgage-Backed  Securities:
Freddie Mac	$ --	$ --	$ --	$1,728	$1,728
Fannie Mae	--	--	--	2,570	2,570
Total adjustable-rate	--	--	--	4,298	4,298
Fixed-Rate Mortgage-Backed  Securities:
Freddie Mac	--	320	235	123	678
Fannie Mae	--	132	206	4,147	4,485
Ginnie Mae	--	--	--	27	27
Total fixed-rate	--	452	441	4,297	5,190
Total mortgage-backed securities held to maturity	$ --	$452	$441	$8,595	$9,488

Sources of Funds

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

            Borrowings may be used on a short-term basis to compensate for seasonal reductions in deposits or deposit inflows at less than projected levels, and have been used in the past on a longer-term basis to support lending activities.

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

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

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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.

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

	September 30,
	2002		2001		2000
	Amount	Percent of Total	Amount	Percent of Total	Amount	Percent of Total
	(Dollars in Thousands)
Transactions and Savings Deposits:
Passbook Demand (1.25-2.85%)	$ 6,208	5.74%	$ 5,109	4.93%	$ 4,527	4.80%
NOW Accounts (.25-2.25%)	8,458	7.81	8,545	8.24	7,182	7.62
Money Market Accounts (1.00-5.25%)	27,208	25.13	26,464	25.53	24,729	26.24
Total Transactions and Savings Deposits	41,874	38.68	40,118	38.70	36,438	38.66
Certificates:
1.00 - 1.99%	1,151	1.07	--	--	--	--
2.00 - 2.99%	6,771	6.26	--	--	--	--
3.00 - 3.99%	31,576	29.16	1,262	1.22	--	--
4.00 - 4.99%	11,892	10.98	12,537	12.09	2,519	2.67
5.00 - 5.99%	11,729	10.83	31,982	30.85	44,596	47.32
6.00 - 6.99%	3,228	2.99	17,670	17.05	10,575	11.22
Total Certificates	66,347	61.29	63,451	61.21	57,690	61.21
Accrued Interest	40	0.03	98	0.09	118	0.13
Total Deposits	$108,261	100.00%	$103,667	100.00%	$94,246	100.00%

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

	Year Ended September 30,
	2002	2001	2000
	(Dollars in Thousands)
Opening balance	$103,569	$ 94,128	$ 95,453
Deposits	172,978	169,374	145,613
Withdrawals	(171,433)	(163,724)	(150,535)
Interest credited	3,107	3,791	3,597
Ending balance	$ 108,221	$ 103,569	$ 94,128
Net increase (decrease)	$ 4,652	$ 9,441	$ (1,325)
Percent increase (decrease)	4.49%	10.03%	(1.39)%

            The following table shows rate and maturity information for our certificates of deposit as of September 30, 2002.

	1.00- 1.99%	2.00- 2.99%	3.00- 3.99%	4.00- 4.99%	5.00- 5.99%	6.00- 6.99%	Total	Percent of Total
	(Dollars in Thousands)
Certificate accounts   maturing in  quarter ending:
December 31, 2002	$ 229	$ 587	$ 3,449	$ 1,886	$ 4,631	$ 1	$10,783	16.25%
March 31, 2003	922	713	4,646	4,020	570	--	10,871	16.39
June 30, 2003	--	707	7,906	1,359	874	--	10,846	16.35
September 30, 2003	--	3,430	5,408	--	892	122	9,852	14.85
December 31, 2003	--	102	2,985	256	744	439	4,526	6.82
March 31, 2004	--	1,232	4,500	832	548	--	7,112	10.72
June 30, 2004	--	--	801	83	383	14	1,281	1.93
September 30, 2004	--	--	920	--	676	99	1,695	2.56
December 31, 2004	--	--	209	--	413	5	627	.95
March 31, 2005	--	--	652	--	233	176	1,061	1.60
June 30, 2005	--	--	--	--	18	589	607	.91
September 30, 2005	--	--	--	39	--	367	406	.61
December 31, 2005	--	--	20	--	--	427	447	.67
Thereafter	--	--	80	3,417	1,747	989	6,233	9.39
TOTAL	$1,151	$6,771	$31,576	$11,892	$11,729	$3,228	$66,347	100.00%
Percent of Total	1.73%	10.21%	47.59%	17.92%	17.68%	4.87%	100%

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            The following table indicates the amount of our certificates of deposit and other deposits by time remaining until maturity as of September 30, 2002.

	Maturity
	3 Months or Less	Over 3 to 6 Months	Over 6 to 12 Months	Over 12 Months	Total
	(In Thousands)
Certificates of deposit less than $100,000	$ 9,172	$ 9,009	$ 17,435	$20,686	$56,302
Certificates of deposit of $100,000 or more	1,411	1,462	3,263	3,309	9,445
Public funds(1)	200	400	--	--	600
Total certificates of deposit	$10,783	$10,871	$20,698	$23,995	$66,347

_____________________

⁽¹⁾  Deposits from governmental and other public entities.

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

            We may obtain advances from the FHLB of Topeka upon the security of our capital stock in the FHLB of Topeka and certain of our mortgage loans and mortgage-backed securities. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. At September 30, 2002, we had $32.0 million in FHLB advances outstanding.

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

	At and For the Year Ended September 30,
	2002	2001	2000
	(In Thousands)
Maximum Balance:  FHLB advances	$32,300	$42,000	$39,100
Average Balance:  FHLB advances	$29,192	$38,583	$34,975

            The following table sets forth certain information as to our FHLB advances at the dates indicated.

	September 30,
	2002	2001	2000
	(Dollars in Thousands)
FHLB advances	$32,000	$33,000	$39,100
Weighted average interest rate of FHLB advances	5.289%	5.635%	6.123%

Regulation

            General. First Federal is a federally chartered savings association, the deposits of which are federally insured and backed by the full faith and credit of the United States Government. Accordingly, First Federal is subject to broad federal regulation, primarily by the OTS and oversight extending to all its

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operations. First Federal is a member of the FHLB of Topeka and is subject to certain limited regulation by the Board of Governors of the Federal Reserve System ("Federal Reserve Board"). As the savings and loan holding company of First Federal, First Independence is also subject to federal regulation by the OTS and oversight which is designed to protect subsidiary savings associations, like First Federal. First Federal is a member of the SAIF, which together with the Bank Insurance Fund (the "BIF") are the two deposit insurance funds administered by the FDIC, and the deposits of First Federal are insured by the FDIC. As a result, the FDIC has certain regulatory and examination authority over First Federal.

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

            Federal Regulation of Savings Associations. The OTS has extensive authority over the operations of savings associations. As part of this authority, First Federal is required to file periodic reports with the OTS and is subject to periodic examinations by the OTS and the FDIC. The last regular OTS examination of First Federal was as of September 30, 2001. When these examinations are conducted by the OTS and the FDIC, the examiners may require First Federal to provide for higher general or specific loan loss reserves. All savings associations are subject to a semi-annual assessment, based upon the savings association's total assets, to fund the operations of the OTS. First Federal's OTS assessment for the fiscal year ended September 30, 2002 was $44,038.

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

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

            First Federal's general permissible lending limit for loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus). At September 30, 2002, First Federal's lending limit under this restriction was $2.1 million. First Federal is in compliance with the loans-to-one-borrower limitation.

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

            Insurance of Accounts and Regulation by the FDIC. First Federal is a member of the SAIF, which is administered by the FDIC. Deposits are insured up to applicable limits by the FDIC and the insurance is backed by the full faith and credit of the United States Government. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured

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institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the SAIF or the BIF. The FDIC also has the authority to initiate enforcement actions against savings associations, after giving the OTS an opportunity to take action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

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

            FDIC-insured institutions are subject to assessments to repay obligations issued by a federally chartered corporation to provide financing for resolving the thrift crisis in the 1980's. Currently, the rate established by the FDIC for this purpose is a 1.68 basis points per dollar of SAIF deposits and BIF deposits.

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

            The OTS capital regulations require tangible capital of at least 1.5% of adjusted total assets (as defined by regulation). Tangible capital generally includes common stockholders' equity and retained income, and certain noncumulative perpetual preferred stock and related income. In addition, all intangible assets, other than a limited amount of purchased mortgage servicing rights, must be deducted from tangible capital for calculating compliance with the requirement. At September 30, 2002, First Federal did not have any intangible assets.

            At September 30, 2002, First Federal had tangible capital of $14.2 million, or 9.12% of adjusted total assets, which is approximately $11.9 million above the minimum requirement of 1.5% of adjusted total assets in effect on that date.

            As a result of the prompt corrective action provisions discussed below, a savings association must maintain a core capital ratio of at least 4% to be considered adequately capitalized unless its supervisory condition allows it to maintain a 3% ratio. Core capital generally consists of tangible capital plus certain intangible assets, including a limited amount of purchased credit card receivables. At September 30, 2002, First Federal had no intangible assets which were included in core capital.

            At September 30, 2002, First Federal had core capital equal to $14.2 million, or 9.12% of adjusted total assets, which is $8.0 million above the requirement of 4% as in effect on that date.

            The OTS risk-based requirement requires savings associations to have total capital of at least 8% of risk-weighted assets. Total capital consists of core capital, as defined above, and supplementary capital. Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as

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core capital and loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used to satisfy the risk-based requirement only to the extent of core capital. The OTS is also authorized to require a savings association to maintain an additional amount of total capital to account for concentration of credit risk and the risk of non-traditional activities. At September 30, 2002, First Federal had $828,000 of loan and lease loss allowances, which was less than 1.25% of risk-weighted assets.

            Certain exclusions from capital and assets are required to be made for the purpose of calculating total capital. Such exclusions consist of equity investments (as defined by regulation) and reciprocal holdings of qualifying capital instruments. First Federal had no exclusions from capital and assets at September 30, 2002.

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

            On September 30, 2002, First Federal had total capital of $15.1 million (including $14.2 million in core capital and $828,000 in qualifying supplementary capital) and risk-weighted assets of $83.6 million, or total capital of 18.01% of risk-weighted assets. This amount was $8.4 million above the 8% requirement in effect on that date.

            Under the prompt corrective action regulations, 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 a 4% core capital ratio, a 4% Tier 1 risked-based capital ratio or an 8% risk-based capital ratio). Any undercapitalized association must submit a capital restoration plan and until the plan is approved by the OTS may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions. The OTS is authorized to impose the additional restrictions that are applicable to significantly undercapitalized associations.

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

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

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

             Liquidity. All savings associations, including First Federal, are required to maintain a sufficient level of liquid assets to ensure their safe and sound operation. For a discussion of what First Federal includes in

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liquid assets, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in the Annual Report to Stockholders.

             Qualified Thrift Lender Test. All savings associations, including First Federal, are required to meet a qualified thrift lender ("QTL") test to avoid certain restrictions on their operations. This test requires a savings association to have at least 65% of its portfolio assets in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis. As an alternative, the savings association may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code of 1986, as amended. Under either test, such assets primarily consist of residential housing related loans and investments. At September 30, 2002, First Federal met the test and has always met the test since its effectiveness.

            Any savings association that fails to meet the QTL test must convert to a national bank charter, unless it requalifies as a QTL and thereafter remains a QTL. If an association does not requalify and converts to a national bank charter, it must remain SAIF-insured until the FDIC permits it to transfer to the BIF. If the association has not yet requalified or converted to a national bank, its new investments and activities are limited to those permissible for both a savings association and a national bank. It is limited to national bank branching rights and it is subject to national bank limits for payment of dividends. If the association has not requalified or converted to a national bank within three years after the failure, it must divest all investments and cease all activities not permissible for a national bank. If any association that fails the QTL test is controlled by a holding company, then within one year after the failure, the holding company must register as a bank holding company and become subject to all restrictions on bank holding companies. See "- 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, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as a merger or the establishment of a branch, by First Federal. An unsatisfactory rating may be used as the basis for the denial of an application by the OTS.

            Due to the heightened attention being given to the CRA in recent years, First Federal may be required to devote additional funds for investment and lending in its local community. First Federal was examined for CRA compliance in 2002 and received a rating of "satisfactory."

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

            Certain transactions with directors, officers or controlling persons are also subject to restrictions under statutes and regulations enforced by the OTS. These statutes and regulations 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.

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             Holding Company Regulation. First Independence is a unitary savings and loan holding company subject to regulatory oversight by the OTS. As a result, First Independence is required to register and file reports with the OTS and is subject to regulation and examination by the OTS. In addition, the OTS has enforcement authority over First Independence and its non-savings association subsidiaries which also permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings association.

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

            If First Federal fails the QTL test, within one year of the failure First Independence must register as, and will become subject to, the restrictions applicable to bank holding companies. See "- Qualified Thrift Lender Test."

            First Independence must obtain approval from the OTS before acquiring control of any other savings association. Interstate acquisitions are permitted based on specific state authorization or in a supervisory acquisition of a failing savings association.

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

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

            

Federal Reserve System. The Federal Reserve Board requires all depository institutions to maintain noninterest bearing reserves at specified levels against their transaction accounts (primarily checking, NOW and Super NOW checking accounts). At September 30, 2002, First Federal was in compliance with these reserve requirements. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements that may be imposed by the OTS. See "- Liquidity."

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

            

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

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            As a member, First Federal is required to purchase and maintain stock in the FHLB of Topeka. At September 30, 2002, First Federal had $2.0 million in FHLB stock, which was in compliance with this requirement. In past years, First Federal has received substantial dividends on its FHLB stock. Over the past five fiscal years these dividends have averaged 6.99% and were 5.0% for fiscal 2002.

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

            For the fiscal year ended September 30, 2002, dividends paid by the FHLB of Topeka to First Federal totaled $105,409, which constitutes a $60,623 decrease over the amount of dividends received in fiscal year 2002.

            Sarbanes-Oxley Act. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "SOA"). The stated goals of the SOA are to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.

            The SOA is the most far-reaching U.S. securities legislation enacted in some time. The SOA generally applies to all companies, both U.S. and non-U.S., that file or are required to file periodic reports with the SEC under the Exchange Act. Given the extensive SEC role in implementing rules relating to many of the SOA's new requirements, the final scope of many of these requirements remains to be determined.

            The SOA includes very specific additional disclosure requirements and new corporate governance rules, requires the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules and mandates further studies of certain issues by the SEC and the Comptroller General. The SOA represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.

            The SOA addresses, among other matters:

• audit committees;
• certification of financial statements by the chief executive officer and the chief financial officer;
• the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer's securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement;
• a prohibition on insider trading during pension plan black out periods;
• disclosure of off-balance sheet transactions;
• a prohibition on personal loans to directors and officers;
• expedited filing requirements for Form 4s;
• disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code;
• "real time" filing of periodic reports;
• the formation of a public accounting oversight board;
• auditor independence; and
• various increased criminal penalties for violations of securities laws.

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            The SOA contains provisions which became effective upon enactment on July 30, 2002 and provisions which become effective from within 30 days to one year from enactment. The SEC has been delegated the task of enacting rules to implement various of the provisions with respect to, among other matters, disclosure in periodic filings pursuant to the Exchange Act.

Federal and State Taxation

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

            A portion of First Federal's reserves for losses on loans may not, without adverse tax consequences, be utilized for the payment of cash dividends or other distributions to a shareholder (including distributions on redemption, dissolution or liquidation) or for any other purpose (except to absorb bad debt losses). As of September 30, 2002, the portion of First Federal's reserves subject to this treatment for tax purposes totaled approximately $2.8 million.

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

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

            For additional information regarding federal income taxation, see Note L of the Notes to Consolidated Financial Statements in the Annual Report to Stockholders.

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

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

            We have not been audited by the Kansas Department of Revenue for the last ten years and have Kansas privilege tax returns which are open and subject to audit for the years 1999 through 2001. In our opinion, any examination of such open returns would not result in a deficiency which could have a material adverse effect on our financial condition.

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

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Competition

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

            We attract all of our deposits, primarily from Montgomery and Wilson Counties where our offices are located; therefore, competition for those deposits is principally from commercial banks and credit unions located in the same communities. We compete for these deposits by offering a variety of deposit accounts at competitive rates and convenient business hours. We estimate our share of the savings market in our primary market area to be approximately 15%.

Executive Officers of First Independence

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

NAME	AGE(1)	POSITION(S) HELD
Larry G. Spencer	54	President, Chief Executive Officer and Director
Gary L. Overfield	50	Senior Vice President and Secretary
James B. Mitchell	47	Vice President and Chief Financial Officer

________________

⁽¹⁾   At September 30, 2002.

Executive Officers of First Federal

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

NAME	AGE(1)	POSITION(S) HELD
Larry G. Spencer	54	President, Chief Executive Officer and Director
Gary L. Overfield	50	Senior Vice President, Secretary and Chief Loan Officer
Jim L. Clubine	49	Vice President and Asset Manager
James B. Mitchell	47	Vice President and Chief Financial Officer

________________

⁽¹⁾   At September 30, 2002.

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

            Gary L. Overfield. Mr. Overfield is Senior Vice President and Secretary of First Independence, positions he has held since inception, and Senior Vice President, Secretary and Chief Loan Officer of First Federal, positions 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

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is a graduate of Pittsburg State University. He is currently licensed by the State of Kansas as a Life and Accident and Health Insurance agent. He is a member and previous Director and Secretary of the Independence Rotary Club, previous Treasurer for the local chapter of Duck's Unlimited, and previous Director and Treasurer for the Independence Chamber of Commerce.

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

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

Employees

            At September 30, 2002, we had a total of 38 employees. Our employees are not represented by any collective bargaining group. We consider our employee relations to be good.

Item 2.             Description of Property

            First Independence owns its offices located at Myrtle and Sixth in Independence, Kansas, McArthur and Eleventh in Coffeyville, Kansas and Eight and Main in Neodesha, Kansas. The total net book value of First Independence's premises and equipment at September 30, 2002, was $1,511,000.

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

            We maintain depositor and borrower customer files on an on-line basis with the FiServ Data Processing System, Milwaukee, Wisconsin. The net book value of the data processing and computer equipment utilized by us at September 30, 2002, was approximately $111,000.

Item 3.            Legal Proceedings

            From time to time, we are involved as plaintiff or defendant in various legal actions arising in the normal course of business. We were not involved in any legal proceedings of a material nature at September 30, 2002.

Item 4.             Submission of Matters to a Vote of Security Holders

            No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended September 30, 2002.

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PART II

Item 5.             Market for Common Equity and Related Stockholder Matters

            Page 39 of the 2002 Annual Report to Stockholders is incorporated herein by reference.

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

            Pages 4 through13 of the 2002 Annual Report to Stockholders are incorporated herein by reference.

Item 7.            Financial Statements

            The following information appearing in the 2002 Annual Report to Stockholders is incorporated herein by reference.

Annual Report Section	Pages in Annual Report
Report of Independent Certified Public Accountants	14
Consolidated Balance Sheets (September 30, 2002 and 2001)	15-16
Consolidated Statements of Earnings (For the Years Ended September 30, 2002 and 2001)	17
Consolidated Statements of Comprehensive Income (For the Years Ended September 30, 2002   and 2001)	18
Consolidated Statements of Stockholders' Equity (For the Years Ended September 30, 2002   and 2001)	19
Consolidated Statements of Cash Flows (For the Years Ended September 30, 2002 and 2001)	20-21
Notes to Consolidated Financial Statements	22

            With the exception of the aforementioned information in Part II of this Form 10-KSB, the 2002 Annual Report to Stockholders is not deemed filed as part of this Annual Report on Form 10-KSB.

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

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

PART III

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

Directors

            Information concerning our directors is incorporated herein by reference from the definitive proxy statement for the annual meeting of stockholders to be held in January 2003, a copy of which will be filed not later than 120 days after the close of the fiscal year.

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Executive Officers

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

Section 16(a) Beneficial Ownership Reporting Compliance

            Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), requires First Independence's directors and executive officers, and persons who own more than 10% of First Independence's equity securities to report their initial ownership of First Independence's common stock and other equity securities, and any subsequent changes in that ownership to the Securities and Exchange Commission (the "SEC"). Specific due dates for these reports have been established by the SEC and First Independence is required to disclose in this proxy statement any late filings or failures to file.

            To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required during the fiscal year ended September 30, 2002, all Section 16(a) filing requirements applicable to First Independence's executive officers, directors and greater than 10% beneficial owners were complied with, except that Mr. Lavern Strecker, Director, filed one late report relating to the sale of shares.

Item 10.            Executive Compensation

            Information concerning executive compensation is incorporated herein by reference from the definitive proxy statement for the annual meeting of stockholders to be held in January 2003, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters

            Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the definitive proxy statement for the annual meeting of stockholders to be held in January 2003, a copy of which will be filed not later than 120 days after the close of the fiscal year.

            Equity Compensation Plan Information. The following table summarizes our equity compensation plans as of September 30, 2002.

Plan Category	Number of securities to be issued upon exercise of outstanding options warrants and rights	Weighted-average exercise price of outstanding options warrants and rights	Number of Securities remaining available for future issuance under equity compensation plans
Equity compensation plans    approved by security    holders	49,327	$6.27	2,689(1)
Equity compensation plans    not approved by security    holders	--	--	--

___________

(1) Includes 2,689 shares available for future grants under First Independence Corporation's 1993 Stock Option and Incentive Plan and -0- shares available for future grants under First Independence Corporation's Recognition and Retention Plan.

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Item 12.            Certain Relationships and Related Transactions

            Information concerning certain relationships and related transactions is incorporated herein by reference from the definitive proxy statement for the annual meeting of stockholders to be held in January 2003, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 13.            Exhibits and Reports on Form 8-K

            (a)    Exhibits

Regulation S-B Exhibit Number	Document	Reference to Prior Filing or Exhibit Number Attached Hereto
2	Plan of acquisition, reorganization, arrangement, liquidation, or succession	None
3(i)	Articles of Incorporation	*
3(ii)	By-Laws	*
4	Instruments defining the rights of security holders, including indentures	*
9	Voting trust agreement	None
10	Material contracts
	(a)  1993 Stock Option and Incentive Plan	*
	(b)  Recognition and Retention Plan	*
	(c)  Employment Agreements	*
11	Statement re: computation of per share earnings	**
13	Annual report to stockholders	13
16	Letter on change in certifying accountant	None
18	Letter on change in accounting principles	None
21	Subsidiaries of the registrant	***
22	Published report regarding matters submitted to vote	None
23	Consent of experts and counsel	23
24	Power of attorney	None
99	Additional exhibits	None

____________________

*	Filed as an exhibit to First Independence's Form S-1 registration statement filed on June 22, 1994 (File No. 33-64812) pursuant to Section 5 of the Securities Act of 1933. All of such previously filed documents are hereby incorporated herein by reference in accordance with Item 601 of Regulation S-B.
**	See Note A of Notes to Consolidated Financial Statements in the 2002 Annual Report to Stockholders attached hereto as Exhibit 13.
***	Filed as Exhibit 21 to the First Independence's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2001 (File No. 0-22184). All of such previously filed documents are hereby incorporated herein by reference in accordance with Item 601 of Regulation S-B.

            (b)    Reports on Form 8-K

            During the quarter ended September 30, 2002, we did not file any Current Reports on Form 8-K.

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Item 14.            Controls and Procedures

            (a)    Evaluation of Disclosure Controls and Procedures: An evaluation of the Company's disclosure controls and procedures (as defined in Section 13(a)-14(c) of the Exchange Act) was carried out under the supervision and with the participation of the Registrant's Chief Executive Officer, Chief Financial Officer and several other members of the Company's senior management within the 90-day period preceding the filing date of this annual report. The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

            (b)   Changes in Internal Controls: During the year ended September 30, 2002, the Registrant did not make any significant changes in, nor take any corrective actions regarding, its internal controls or other factors that could significantly affect these controls.

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SIGNATURES

            Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FIRST INDEPENDENCE CORPORATION
Date: December 30, 2002	By:	/s/ Larry G. Spencer Larry G. Spencer, President, Chief Executive Officer and Director (Duly Authorized Representative)

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

/s/ Larry G. Spencer Larry G. Spencer, President, Chief Executive Officer and Director (Principal Executive and Operating Officer) Date:  December 30, 2002	/s/ James B. Mitchell James B. Mitchell, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Date:  December 30, 2002
/s/ E. JoVonnah Boecker E. JoVonnah Boecker, Director Date: December 30, 2002	/s/ William T. NewKirk II William T. NewKirk II, Director Date:  December 30, 2002
/s/ Harold L. Swearingen Harold L. Swearingen, Director Date: December 30, 2002	/s/ Joseph M. Smith Joseph M. Smith, Director Date: December 30, 2002
/s/ Lavern W. Strecker Lavern W. Strecker, Director Date:  December 30, 2002	/s/ Robert A. Johnson Robert A. Johnson, Director Date: December 30, 2002

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CERTIFICATIONS

            I, Larry G. Spencer, Principal Executive Officer, certify that:

            1. I have reviewed this annual report on Form 10-KSB of First Independence Corporation (the "Registrant");

            2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

            3. Based on my knowledge, the consolidated financial statements, and other financial information included in this annual report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

            4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

             a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

             b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

             c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

            5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):

             a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and

             b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

            6. The Registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: December 30_, 2002

/s/ Larry G. Spencer
Larry G. Spencer ]
President and Chief Executive Officer

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            I, James B. Mitchell, Principal Financial Officer, certify that:

            1. I have reviewed this annual report on Form 10-KSB of First Independence Corporation (the "Registrant");

            2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

            3. Based on my knowledge, the consolidated financial statements, and other financial information included in this annual report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

            4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

             a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

             b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

             c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

            5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):

             a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and

             b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

            6. The Registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: December_____, 2002

/s/ James B. Mitchell
James B. Mitchell
Vice President and Chief Financial Officer

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CERTIFICATION (Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

            Each of the undersigned hereby certifies in his capacity as an officer of First Independence Corporation (the "Registrant") that the Annual Report of the Registrant on Form 10-KSB for the period ended September 30, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the consolidated financial condition of the Registrant at the end of such period and the results of operations of the Registrant for such period.

Date: December 30, 2002	/s/ Larry G. Spencer Larry G. Spencer President and Chief Executive Officer
Date: December 30, 2002	/s/ James B. Mitchell James B. Mitchell Vice President and Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit Number	Document
13	Annual Report to Stockholders
23	Consent of Accountants

EX-23

Exhibit 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated November 1, 2002, accompanying the consolidated financial statements included in the Annual Report of First Independence Corporation and Subsidiary on Form 10-KSB for the year ended September 30, 2002. We hereby consent to the incorporation by reference of said report in the Registration Statements of First Independence Corporation on Forms S-8 (File No. 33-58095, effective March 13, 1995 and File No. 33-75404, effective February 16, 1994).

GRANT THORNTON LLP

/s/ Grant Thornton LLP

Wichita, Kansas
December 27, 2002

EX-13

[LOGO]














FIRST
INDEPENDENCE
CORPORATION






2002 Annual Report






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TABLE OF CONTENTS

	Page
President's Message to Stockholders	1
Selected Consolidated Financial Information	2
Management's Discussion and Analysis	4
Report of Independent Certified Public Accountants	14
Consolidated Balance Sheets	15
Consolidated Statements of Earnings	17
Consolidated Statements of Comprehensive Income	18
Consolidated Statements of Stockholders' Equity	19
Consolidated Statements of Cash Flows	20
Notes to Consolidated Financial Statements	22
Stockholder Information	39
Directors and Executive Officers	40

ANNUAL MEETING

The Annual Meeting of Stockholders will be held at our main office located at Myrtle and Sixth Streets, Independence, Kansas at 10:30 a.m. Independence, Central Standard Time, on January 29, 2003.

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[LOGO] First Independence Corporation

To Our Stockholders, Depositors and Friends:

         It is my pleasure to present to you the 2002 Annual Report of First Independence Corporation, parent of First Federal Savings and Loan Association of Independence, which reflects results from our ninth complete year as a stock company. As you will see by reading the accompanying financial statements, First Independence had another excellent year with $2,032,000 in net earnings. Diluted earnings per share for the 2002 fiscal year were $2.09 based upon 974,485 weighted average common shares outstanding during the year ended September 30, 2002.

         An additional way to judge the strength of a company is by its capital. First Independence Corporations stockholders equity at September 30, 2002, was $14.6 million. This represents an equity-to-asset ratio of 9.34% and a book value per share of $15.92. This financial position has allowed First Independence Corporation to distribute to stockholders a portion of its net earnings in the form of a dividend. During fiscal 2002, a total dividend of $.4875 per share was authorized by the Board of Directors, which resulted in a payment to stockholders of an aggregate dividend of approximately $463,000. The current $.125 quarterly dividend per share represents an 11.1% increase over the fiscal 2001 quarterly dividend per share. As with every decision we make, our dividend policy is designed to take into consideration our responsibility to and interest in our stockholders.

         First Independence continues to be committed to our market. This is evidenced by the $43.7 million in loans originated by the company during the fiscal year. These loans provide funds for many people in our community to build, buy, remodel, or consolidate other financial obligations. Additionally, we strive to provide our savings customers a safe, secure bank where they can deposit their funds and earn a fair rate of return, as well as chose from the variety of accounts we offer. The success of this commitment is evidenced by the increase in deposits of $4.7 million, which translates to a 4.49% increase over last year.

         At our March Board meeting, the directors approved a resolution to open a new branch in Pittsburg, Kansas located in Crawford County. This area showed a 7.5% increase in population between 1990 and 2000 according to the 2000 census. Crawford County is the only county in Southeast Kansas to show a population increase during that time period. We look forward to expanding into this new and growing market.

         On behalf of the directors, officers and staff of First Federal and First Independence Corporation, we thank you for your continued support and confidence.

Sincerely,


Larry G. Spencer
President and Chief Executive Officer

MYRTLE & SIXTH • P.O. DRAWER 947 • INDEPENDENCE, KANSAS 67301 • 620/331-1660

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SELECTED CONSOLIDATED FINANCIAL INFORMATION

	September 30,
	2002	2001	2000	1999	1998
	(In Thousands)
Selected Financial Condition Data:
Total assets	$156,050	$152,730	$149,130	$138,131	$124,337
Cash and cash equivalents	12,336	2,293	1,921	1,440	914
Loans receivable	118,578	132,838	125,119	112,893	93,684
Loans held for sale	88	--	--	--	--
Mortgage-backed securities held to maturity	9,488	7,281	8,747	10,912	17,274
Investment securities held to maturity	10,321	4,195	6,496	7,005	5,000
Investment securities available for sale	--	1,014	1,992	2,000	3,418
Real estate acquired through foreclosure	730	356	423	109	72
Deposits	108,221	103,569	94,128	95,453	80,573
Advances from Federal Home Loan Bank	32,000	33,000	39,100	27,500	30,100
Total stockholders equity	14,577	14,175	13,764	13,107	12,099

	September 30,
	2002	2001	2000	1999	1998
	(In Thousands)
Selected Operations Data
Total interest income	$10,777	$11,931	$11,186	$10,101	$9,075
Total interest expense	5,520	6,967	6,562	5,989	5,556
Net interest income	5,257	4,964	4,624	4,112	3,519
Provision for loan losses	220	177	99	66	--
Net interest income after provision for
loan losses	5,037	4,787	4,525	4,046	3,519
Non-interest income	378	479	451	389	192
Non-interest expense	3,288	2,911	2,813	2,604	2,161
Earnings before income taxes and cumulative
effect of change in accounting principle	2,127	2,355	2,163	1,831	1,550
Income tax expense	777	814	787	688	649
Earnings before cumulative effect of change
in accounting principle	1,350	1,541	1,376	1,143	901
Cumulative effect of change in
accounting principle	682	--	--	--	--
Net earnings	$  2,032	$  1,541	$  1,376	$  1,143	$  901
Basic earnings per share	$   2.15	$   1.55	$   1.36	$   1.13	$   $  .98
Diluted earnings per share	$   2.09	$   1.49	$   1.30	$   1.07	$     .92

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FINANCIAL RATIOS

	September 30,
	2002	2001	2000	1999	1998
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net earnings to
average total assets)	1.33%	1.01%	0.95%	0.84%	0.75%
Interest rate spread information:
Average during period	3.18	2.89	2.83	2.69	2.52
End of period	2.93	2.65	2.59	2.58	2.29
Net interest margin (1)	3.52	3.34	3.26	3.11	2.99
Ratio of operating expense to average total
assets	2.04	1.92	1.92	1.89	1.80
Return on equity (ratio of net earnings to
average equity)	13.74	11.03	10.30	8.95	7.72
Quality Ratios:
Non-performing assets to total assets,
at end of period (2)	1.63	1.81	1.16	1.84	1.07
Allowance for loan losses to non-performing
assets, at end of period (2)	32.48	26.20	43.74	29.65	49.48
Allowance for loan losses to non-performing
loans at end of period	45.51	30.09	57.86	30.99	52.30
Capital Ratios:
Equity to total assets, at end of period	9.34	9.28	9.23	9.49	9.73
Average equity to average assets	9.67	9.19	9.21	9.38	9.70
Ratio of average interest-earning assets to
average interest-bearing liabilities	109.15	109.56	109.47	109.26	109.98
Dividend payout ratio (3)	23.33	29.36	29.81	31.54	31.25
Number of full service offices	3	3	3	3	2

(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.
(3)  Dividends paid per share divided by earnings per share.

EARNINGS PER SHARE GRAPH			DIVIDENDS PAID PER SHARE GRAPH
	Basic	Diluted
2002	$2.15	$2.09	2002 - $0.4875
2001	$1.55	$1.49	2001 - $0.4375
2000	$1.36	$1.30	2000 - $0.3875
1999	$1.13	$1.07	1999 - $0.3375
1998	$0.98	$0.92	1998 - $0.2875

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Managements Discussion and Analysis of Financial Condition and Results of Operations

General

         On October 5, 1993, First Federal Savings and Loan Association of Independence, Kansas ("First Federal" or the "Association") converted from a federally chartered mutual savings association to a federally chartered stock savings association and concurrently became a wholly-owned subsidiary of First Independence Corporation ("First Independence" or the "Company"). First Independence earnings are primarily dependent on the operations of First Federal. Currently, First Independence has no business activity other than acting as the holding company for First Federal. As a result, the following discussion relates primarily to the activities of First Federal. This discussion should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this report.

         Our business consists of attracting deposits from the general public and using these deposits primarily to make residential mortgage and other loans. Our 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, we receive fees from loan originations, late payments and for various services related to transaction and other deposit accounts, and dividends on our Federal Home Loan Bank stock. Operating expenses consist primarily of employee compensation and benefits, occupancy and equipment expenses, data processing fees and other general and administrative expenses.

         Our operations, and the operations of 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. The primary sources of funds for lending activities include deposits, loan repayments and sales, borrowings, sales and maturities of securities available for sale and funds provided from operations.

Forward-Looking Statements

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

Asset/Liability Management and Market Risk

         Qualitative Aspects of Market Risk. We derive our income primarily from the excess of interest collected over interest paid. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of many financial institutions, are impacted by changes in interest rates. Our ability to adapt to changes in interest rates is known as interest rate risk, and is our 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, we monitor our interest rate risk. In monitoring interest rate risk, we continually analyze and manage our assets and liabilities based on their payment streams and interest rates, the timing oftheir 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 institutions 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. During a period of falling interest rates, the opposite would be expected to occur.

         Since the early 1980's, we have emphasized, subject to market conditions, the origination and holding of adjustable-rate mortgage loans and loans with shorter terms to maturity than traditional 30-year, fixed-rate loans. Our strategy has been to increase the percentage of assets in our portfolio with more frequent repricing or shorter maturities. In response to customer demand, however, we continue to originate for our loan portfolio fixed-rate mortgages with terms not greater than 30 years. In the past, we have also purchased adjustable-rate mortgage-backed securities. At September 30, 2002, approximately $26.2 million, or 21.7% of the total loans secured by real estate, were adjustable-rate mortgage loans. On the same date, we also had $4.3 million in adjustable-rate mortgage-backed securities.

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         Our adjustable-rate mortgage loans and mortgage-backed securities adjust to various indices. We monitor the mix of indices on our adjustable rate assets and seek, consistent with market conditions, to achieve a close match in the repricing characteristics of our assets and liabilities.

         To increase the interest rate sensitivity of our assets, we have also maintained short and intermediate-term investment securities and other assets. At September 30, 2002, we had $18.8 million of investment securities and interest-bearing deposits maturing or repricing within three years. Finally, we have undertaken various marketing programs from time to time over the last decade in order to extend the term of our deposit liabilities. We offer a longer term certificate of deposit program in an attempt to reduce deposit outflows which were being lost as a result of the general decline in market rates of interest. This program offers two certificate products which have 4- and 5-year terms. At September 30, 2002, we had approximately $11.5 million in these two products.

         In the future, in managing our interest rate sensitivity, we intend to continue to stress the origination ofadjustable-rate mortgage loans, 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.

         As part of our effort to monitor and manage interest rate risk, we use the "net portfolio value" methodology adopted by the Office of Thrift Supervision. This approach calculates the difference between the present value of expected cash flows from assets and liabilities, as well as cash flows from off balance sheet contracts, arising from an assumed 200 basis point increase or decrease in interest rates. The net portfolio value indicates the cushion of economic capital an association would retain should an adverse change in interest rates occur.

         Presented below, as of September 30, 2002, is an analysis of First Federals interest rate risk as measured by changes in net portfolio value for instantaneous and sustained parallel shifts in the yield curve, in 100 basis point increments, and compared to Board policy limits. The table was prepared and furnished to us by the Office ofThrift Supervision. Assumptions used in calculating the amounts in this table were determined by the Office ofThrift Supervision (dollars in thousands):

Interest Rate Sensitivity of Net Portfolio Value (NPV)

	Net Portfolio Value			NPV as % of PV of Assets
Change				Board Limit
In Rates	$ Amount	$ Change	% Change	NPV Ratio	NPV Ratio	Change
+200 bp	14,731	-2,309	-14%	7.00%	9.29%	-108 bp
+l00 bp	16,547	-493	-3	7.50	10.22	-15 bp
0 bp	17,040	--	--	8.00	10.37	--
-100 bp	16,661	-379	-2	8.50	10.02	-35 bp

         As illustrated in the table, we have structured our assets and liabilities to minimize our exposure to interest rate risk. In the event of a 100 basis point decrease in interest rates, we would experience a 2% decrease in net portfolio value while a 200 basis point increase in interest rates produces a 14% decrease in net portfolio value. 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 change in value under a specific rate decline may not equal the amount of change in value 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 adjustable-rate mortgage loans, 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.

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

         Asset Quality

         The ratio of non-performing assets to total assets is one indicator of our exposure to credit risk. Our non-performing assets 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 September 30, 2002, non-performing assets were approximately $2,550,000, which represents a decrease of $208,000, or 7.5% as compared to September 30, 2001 . The ratio of non-performing assets to total assets at September 30, 2002 was 1.63% compared to 1.81% at September 30, 2001. Included in non-accruing loans at September 30, 2002, were twenty one loans totaling $1,351,000 secured by one- to four-family real estate, one construction loan totaling $212,000 secured by one- to four-family real estate and twelve consumer loans totaling $34,000. All non-accruing loans at September 30, 2002, were located in our primary market area except for two loans. The first loan totaled $304,000 and is secured by a single family residence located in Texas, while the second loan totaled $29,000 and is secured by a single family residence located in Wichita, Kansas. At September 30, 2002, accruing loans delinquent 90 days or more included seven loans totaling $223,000 secured by one- to four-family real estate. All of our accruing loans delinquent 90 days or more were secured by real estate located in our primary market area. At September 30, 2002, real estate acquired through foreclosure consisted of sixteen single family residences located in our primary market area. The properties have a total carrying value of $730,000 and are currently offered for sale.

         We have taken into account our non-performing assets and the composition of the loan portfolio in establishing our allowance for loan losses. The allowance for loan losses totaled $828,000 at September 30, 2002, which represented a $106,000 increase from the allowance for loan losses at September 30, 2001. The ratio ofthe allowance for loan losses as a percent oftotal loans increased from .54% at September 30, 2001 to .69% at September 30, 2002, partially due to the decrease in total loans receivable and partially due to the increase in the amount of the allowance at September 30, 2002. The allowance for loan losses as a percent of non-performing loans increased from 30.09% at September 30, 2001 to 45.51% at September 30, 2002, primarily due to the increase in the allowance for loan losses at September 30, 2002.

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

NON-PERFORMING ASSETS TO TOTAL ASSETS GRAPH

2002 - 1.63%

2001 - 1.81%

2000 - 1.16%

1999 - 1.84%

1998 - 1.07%

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Results of Operations

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

	Year Ended September 30,
	2002			2001			2000
	Average Outstanding Balance	Interest Earned/ Paid	Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Yield/ Rate
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable (1)	$125,915	$9,967	7.92%	$130,336	$10,764	8.26%	$120,198	$9,776	8.13%
Mortgage-backed securities	6,515	323	4.96	8,042	536	6.66	9,709	646	6.65
Investment securities	5,728	241	4.21	6,358	403	6.33	8,813	568	6.44
Federal Home Loan Bank stock	2,086	105	5.05	2,206	166	7.53	1,758	134	7.64
Federal funds sold	7,625	128	1.68	400	23	5.77	325	17	5.29
Other	1,360	13	0.92	1,355	39	2.86	848	45	5.26
Total interest-earning assets	149,229	10,777	7.22	148,697	11,931	8.02	141,651	11,186	7.90
Interest-bearing liabilities:
Demand and NOW deposits	35,560	685	1.93	32,744	1,227	3.75	32,490	1,333	4.10
Savings deposits and
certificates	71,965	3,195	4.44	64,389	3,467	5.38	61,931	3,219	5.20
Federal Home Loan Bank
advances	29,192	1,640	5.62	38,584	2,273	5.89	34,975	2,010	5.75
Total interest-bearing
liabilities	136,717	5,520	4.04	135,717	6,967	5.13	129,396	6,562	5.07
Net interest income		$5,257			$4,964			$4,624
Net interest rate spread			3.18%			2.89%			2.83%
Net earnings assets	$  12,512			$  12,980			$  12,255
Net yield on average
interest-earning assets			3.52%			3.34%			3.26%
Average interest-earning
assets to average interest-
bearing liabilities		109.15%			109.56%			109.47%

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

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

Rate/Volume Analysis ofNet Interest Income

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

	Year Ended September 30,
	2002 vs. 2001			2001 vs. 2000
	Increase (Decrease) Due to			Increase (Decrease) Due to
	Volume	Rate	Total Increase (Decrease)	Volume	Rate	Total Increase (Decrease)
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable	$  (358)	$  (439)	$  (797)	$  835	$ 153	$  988
Mortgage-backed securities	(91)	(122)	(213)	(111)	1	(110)
Investment securities	(37)	(125)	(162)	(155)	(10)	(165)
Federal Home Loan Bank stock	(9)	(52)	(61)	34	(2)	32
Federal funds sold	133	(28)	105	4	2	6
Other	--	(26)	(26)	20	(26)	(6)
Total interest-earning assets	(362)	(792)	(1,154)	627	118	745
Interest-bearing liabilities:
Demand and NOW deposits	98	(640)	(542)	10	(116)	(106)
Savings deposits and certificates	378	(650)	(272)	132	116	248
Federal Home Loan Bank advances	(533)	(100)	(633)	213	50	263
Total interest-bearing liabilities	$    (57)	$(1,390)	(1,447)	$355	$50	405
Net interest income			$   293			$   340

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

	At September 30,
	2002	2001	2000
Weighted average yield on:
Loans receivable	7.39%	7.74%	8.00%
Mortgage-backed securities	5.01	5.82	7.08
Investment securities	3.78	6.15	6.62
Federal funds sold	1.60	2.75	6.38
Other interest-earning assets	--	--	--
Combined weighted average yield on
interest-earning assets	6.51	7.50	7.83
Weighted average rate paid on:
Savings deposits and certificates	3.83	5.31	5.35
Demand and NOW deposits	1.50	3.10	4.05
Federal Home Loan Bank advances	5.38	5.71	6.12
Combined weighted average rate paid
on interest-bearing liabilities	3.58	4.85	5.24
Spread	2.93	2.65	2.59

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FINANCIAL CONDITION

         Total assets increased $3.4 million, or 2.2%, from $1 52.7 million at September 30, 2001 to $156.1 million at September 30, 2002. This increase consisted primarily of increases in cash and cash equivalents of $10.0 million, investment securities of $5.1 million and mortgage-backed securities of $2.2 million. These increases in assets, along with reductions in advances from the Federal Home Loan Bank ofTopeka of $1.0 million and accrued expenses and other of $700,000, were funded by the redeployment of funds received from repayments of loans receivable of $14.2 million, and increases in deposits of $4.6 million. We are attempting to reduce the amount of excess cash by implementing a laddered investment strategy; however, loan payoffs and prepayments are currently exceeding our investment rate.

         Loans receivable decreased $14.2 million from $132.8 million at September 30, 2001, to $118.6 million at September 30, 2002. The decrease was primarily due to loan repayments (primarily due to refinancings), exceeding new loan originations. In accordance with the Companys asset/liability management strategy, we have chosen to limit the amount of 30-year fixed-rate loans placed in our portfolio. This is being accomplished by pricing our loan products held in portfolio above current market rates and selling market rate loans into the secondary market. Consequently, our loan portfolio has decreased during this period of declining interest rates as customers seek to lock in lower long-term fixed rates.

         Deposits increased $4.6 million from $103.6 million at September 30, 2001, to $108.2 million at September 30, 2002. The increase was primarily the result of a $2.9 million increase in certificate of deposit accounts due to customers depositing funds into the "Millennium" twelve month certificate account. To a lesser extent, the increase was due to new account growth at the Coffeyville, Kansas branch office. The "Millennium" twelve month certificate provides customers with a fixed interest rate throughout the term of the certificate along with the option to make additions of $1,000 or more during the certificates term. Due to the Millennium certificate interest rates being fixed at rates higher than current market rates, customers have continued to add to their certificate balances.

         Advances from the Federal Home Loan Bank decreased $1.0 million from $33.0 million at September 30, 2001 to $32.0 million at September 30, 2002. The decrease was primarily due to the repayment of scheduled principal payments using deposit funds obtained at an average rate less than the average rate currently being paid on advances. Most of the advances obtained from the Federal Home Loan Bank ofTopeka were used by the Company to fund loans originated at a positive spread over the term of the advances.

         Total stockholders equity increased $402,000 from $14.2 million at September 30, 2001 to $14.6 million at September 30, 2002. The increase was primarily due to net earnings of $2,032,000, common stock option exercises of $150,000, repayment ofemployee stock ownership debt of $20,000 and a fair value adjustment of $12,000 on ESOP shares committed for release. These increases were partially offset by the use of $1,341,000 to repurchase 88,579 shares of common stock, by dividends of $463,000 paid to stockholders and a decrease in unrealized gains on securities available for sale of $8,000.

TOTAL ASSETS GRAPH	LOANS GRAPH	STOCKHOLDERS' EQUITY TO TOTAL ASSETS GRAPH
2002 - $156,050 2001 - $152,730 2000 - $149,130 1999 - $138,131 1998 - $124,337	1-4 Family - 69.06% Multi-family - 0.87% Non-Residential - 7.88% Construction - 18.18% Home Equity - 1.12% Other Consumer - 2.89%	2002 - 9.34% 2001 - 9.28% 2000 - 9.23% 1999 - 9.49% 1998 - 9.73%

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

Comparison of Fiscal Years Ended September 30, 2002 and September 30, 2001

         General. Net earnings for the fiscal year ended September 30, 2002 were $2,032,000 as compared to $1,541,000 for the fiscal year ended September 30, 2001, an increase of $491,000, or 31.9%. The increase in net earnings was primarily due to the recognition of a $682,000 gain resulting from the cumulative effect of a change in accounting principle and, to a lesser extent, an increase in net interest income of $293,000 and a decrease in income tax expense of $37,000. These increases to net earnings were partially offset by increases in non-interest expense of $377,000 and the provision for loan losses of $43,000, and a decrease in non-interest income of $101,000. Excluding the cumulative effect of a change in accounting principle, net earnings for the fiscal year ended September 30, 2002, would have been $1,350,000 or a decrease of $191,000 from the fiscal year ended September 30, 2001.

         Net Interest Income. Net interest income increased $293,000, or 5.9%, for the fiscal year ended September 30, 2002 as compared to the fiscal year ended September 30, 2001. This increase was due primarily to a decrease in interest expense of $1,447,000, or 20.8%, offset partially by a decrease in interest income of $1,154,000, or 9.7%. Interest expense decreased primarily due to a 109 basis point decrease in the average rate paid on interest-bearing liabilities offset partially by a $1.0 million increase in the average balance of interest-bearing liabilities. Interest income decreased primarily due to an 80 basis point decrease in the average yield on interest-earning assets offset partially by a $531,000 increase in the average balance of interest-earning assets. This increase in spread is due to our negative gap position, which results in a greater amount of interest-bearing liabilities repricing more often than interest-earning assets. As our balance sheet becomes less interest rate sensitive in the future, or if we move to a positive gap position, we anticipate the benefits of a low interest rate environment to diminish. The ratio of average interest-earning assets to average interest-bearing liabilities decreased from 109.56% for the fiscal year ended September 30, 2001 to 109.15% for the fiscal year ended September 30, 2002.

         Interest Income. Interest income for the fiscal year ended September 30, 2002, decreased to $10.8 million from $11.9 million for the fiscal year ended September 30, 2001. This decrease resulted primarily from a decrease in the average yield on interest-earning assets. The average yield on interest-earning assets decreased by 80 basis points to 7.22% during fiscal year 2002, from 8.02% during fiscal year 2001. This decrease was caused primarily by the general decline in interest rates resulting in a reduction in yield on the Companys loan portfolio from 8.26% to 7.92%, mortgage-backed securities from 6.66% to 4.96%, investment securities from 6.33% to 4.21% and Federal Home Loan Bank stock from 7.53% to 5.05%. To a lesser extent, the decrease in yield was caused by a change in mix of interest-earning assets to a higher percentage of federal funds sold. This was due to decreases in the loans receivable, investment and mortgage-backed securities portfolios, all of which earn a higher rate of interest than federal funds sold. The decrease in the average yield was partially offset by a $531,000 increase in the average outstanding balance of interest-earning assets during the fiscal year ended September 30, 2002 as compared to the fiscal year ended September 30, 2001.

         Interest Expense. Interest expense for the fiscal year ended September 30, 2002, decreased by $1,447,000 to $5.5 million as compared to $7.0 million for the fiscal year ended September 30, 2001. This decrease was primarily the result of a 109 basis point decrease in the average interest rate paid on interest-bearing liabilities, caused by a decrease in interest rates on savings deposits and Federal Home Loan Bank advances. The decrease in the average interest rate paid was partially offset by a $1.0 million increase in the average outstanding balance of interest-bearing liabilities during the fiscal year ended September 30, 2002 as compared to the fiscal year ended September 30, 2001. The increase in interest-bearing liabilities was primarily due to a $10.4 million increase in the average balance of savings deposits offset partially by a $9.4 million decrease in the average balance of advances outstanding from the Federal Home Loan Bank of Topeka. The outstanding balance of advances was lower throughout the fiscal year than at year end due to a $4.0 million advance obtained during the last month of the fiscal year.

         Provision for Loan Losses. The provision for loan losses represents a charge to earnings to maintain the allowance for loan losses at a level we believe is adequate to absorb potential losses in the loan portfolio. The provision for loan losses amounted to $220,000 for the fiscal year ended September 30, 2002 as compared to $177,000 for the same period in 2001 . This increase in provision for loan losses was in recognition of managements assessment of relevant factors, including the types and amounts of non-performing loans, the continued increase in the amount of historical charge-offs and anticipated loss experience on such types of loans, and the current and projected economic conditions. We believe we use the best information available in providing for probable loan losses and we believe that the allowance is adequate at September 30, 2002. Future adjustments to the allowance could be necessary, however, and net earnings could be affected if circumstances and/or economic conditions differ substantially from the assumptions used in making the initial determinations.

NET EARNINGS GRAPH
(In Thousands)

2002 - $2,032
2001 - $1,541
2000 - $1,376
1999 - $1,143
1998 - $901

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         Noninterest Income. Noninterest income decreased $101,000 to $378,000 during the fiscal year ended September 30, 2002 as compared to $479,000 for the fiscal year ended September 30, 2001. The decrease was primarily due to a $94,000 reduction in negative goodwill amortization during the fiscal year ended September 30, 2002 as compared to the fiscal year ended September 30, 2001. The reduction in negative goodwill amortization was a result of the adoption of Statement of Financial Accounting Standards 141 and 142 as of October 1, 2001 . Recurring non-interest income generally consists of late charges and other fees associated with mortgage loans and checking and deposit account fees.

         NoninterestExpense. Total noninterest expense increased to $3.3 million for the fiscal year ended September 30, 2002 from $2.9 million for the fiscal year ended September 30, 2001, an increase of $377,000, or 12.9%. The increase was primarily due to increases in employee

         compensation and benefits of $ 190,000, foreclosed assets expense of $172,000 and occupancy and equipment of $28,000. These increases were partially offset by a decrease in other operating expense of $14,000. The increase in compensation and benefits expense was primarily the result of normal, annual cost of living increases in salaries and bonuses and, to a lesser extent, a reduction in loan originations resulting in less deferral of compensation expense. The increase in foreclosed assets expense was a result of an increase in the number of foreclosed assets, which contributed to an increase in real estate owned repairs and maintenance, taxes and insurance.

         Income Tax Expense. Income tax expense was $777,000 for the fiscal year ended September 30, 2002 compared to $814,000 for the fiscal year ended September 30, 2001, a decrease of $37,000. Our effective tax rates were 36.5% and 34.6% for the fiscal year ended September 30, 2002 and September 30, 2001, respectively, based on earnings before the cumulative effect of the change in accounting for negative goodwill. There is no income tax effect as a result of this change. However, rates were lower for the September 30, 2001 period due primarily to negative goodwill amortization which is not included in income for income tax calculation purposes, resulting in a lower effective tax rate.

         Liquidity and Capital Resources

         Our primary sources of funds are deposits, principal and interest payments on loans and mortgage-backed securities, Federal Home Loan Bank of Topeka advances and funds provided by operations. While scheduled loan and mortgage-backed security repayments and maturity of short-term investments are a relatively predictable source of funds, deposit flows are greatly influenced by general interest rates, economic conditions and competition. We use our liquid resources principally to meet ongoing 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. Current Office ofThrift Supervision regulations require First Federal to maintain adequate cash and eligible investments in order to meet our liquidity needs deemed necessary to fund deposit withdrawals and other short-term funding needs. Management believes that we have and will continue to have adequate liquidity for the foreseeable future. As of September 30, 2002, First Federals liquidity ratio was 13.04% as compared to 1.96% at September 30, 2001 . This increase in liquidity was primarily due to the reduction in the loan portfolio and reinvestment of the proceeds into liquid assets.

         Our primary investing activity is the origination of mortgage loans and the purchase of mortgage-backed and other securities. At September 30, 2002, mortgage loans and mortgage-backed securities accounted for 82.2% of total assets. We have been able to generate sufficient cash through the retail deposit market, our traditional funding source, and through short-term borrowings, to provide the cash utilized in investing activities. A line of credit has also been in place with the Federal Home Loan Bank of Topeka since 1995. Line of credit draws, as with all other credit transactions, are subject to the maximum amount of credit available under the Federal Home Loan Bank of Topekas credit policy. The line of credit is scheduled to mature on January 31, 2003, and will be renewed for another one-year term at that time. The line of credit is subject to various conditions, including the pledge of acceptable collateral. The primary purpose of the line of credit is to serve as a back-up liquidity facility, however, we may also utilize the line of credit to purchase investment securities and fund other commitments. At September 30, 2002, there was no outstanding balance on the line of credit.

         Liquidity management is both a daily and long-term responsibility of management. We adjust our investments in liquid assets based upon our assessment of (i) expected loan demand, (ii) expected deposit flows, (iii) yields available on interest-bearing deposits, and (iv) the objectives of our asset/liability management program. Excess liquidity is invested generally in interest-bearing overnight deposits and other short-term government and agency obligations. If we require additional funds, beyond our internal ability to generate, we have additional borrowing capacity with the Federal Home Loan Bank of Topeka of approximately $30.4 million at September 30, 2002.

         We anticipate that we will have sufficient funds available to meet current loan commitments. At September 30, 2002, we had outstanding commitments to extend credit which amounted to $2.6 million, including commitments on construction loans and unfunded lines of credit. We are not aware of any trends, events or uncertainties which will have or that are reasonably likely to have a material effect on our liquidity, capital resources or operations.

         Certificates of deposit scheduled to mature in one year or less at September 30, 2002 totaled approximately $42.4 million. We believe that a significant portion of these deposits will remain with First Federal. There can be no assurance, however, that we can retain all of these deposits. At September 30, 2002, we had $32.0 million in advances from the Federal Home Loan Bank of Topeka with $1.4 million maturing in one year or less.

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

         First Federal has minimum capital standards which 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 4.0% 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, we multiply the book value of each asset on our balance sheet by a defined risk-weighting factor (e.g. , one- to four-family residential loans carry a risk-weighted factor of 50%). We have reviewed these capital standards and determined that we are in compliance with each of the three requirements. As of September 30, 2002, our tangible capital, core capital, and risk-based capital of $14.2 million, $14.2 million, and $15. 1 million exceeded the applicable minimum requirements by $11.9 million, $8.0 million, and $8.4 million, respectively.

         The following table sets forth our compliance with such requirements at September 30, 2002.

	Office of Thrift		First Federal's capital level
	Supervision requirement		at September 30, 2002
	% of		% of		Amount
Capital standard	Assets	Amount	Assets	Amount	of Excess
		(Dollars in Thousands)		(Dollars in Thousands)
Tangible capital	1.50%	$2,340	9.12%	$14,230	$11,890
Core capital	4.00	6,239	9.12	14,230	7,991
Risk-based capital	8.00	6,689	18.01	15,058	8,369

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

         We have reviewed our regulatory restrictions relating to loans to one borrower, qualification as a qualified thrift lender, and other restrictions on lending and investment, and have determined that, based on our capital position and lending and investment policies, these restrictions have not had a material impact on our operations.

         Impact of lnflation and Changing Prices

         The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and results of operations in terms of historical dollars without considering changes in the relative purchasing power of money over time because of inflation. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services.

         Effects of Recent Accounting Pronouncements

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 carries over the recognition and measurement provisions in SFAS No. 121. Accordingly, an entity must recognize an impairment loss if the carrying value of a long-lived asset or asset group (a) is not recoverable and (b) exceeds its fair value. Similar to SFAS No. 121 , SFAS No. 144 requires an entity to test an asset or asset group for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. SFAS No. 144 differs from SFAS No. 121 in that it provides guidance on estimating future cash flows to test recoverability. An entity may use either a probability-weighted approach or best-estimate approach in developing estimates of cash flows to test recoverability. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. Management adopted SFAS No. 144 effective October 1, 2002, without material effect on the Companys financial condition or results of operations.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 provides financial accounting and reporting guidance for costs associated with exit or disposal activities, including one-time termination benefits, contract termination costs other than for a capital lease, and costs to consolidate facilities or relocate employees. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. SFAS No. 146 is not expected to have a material effect on the Companys financial condition or results of operations.

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         In October 2002, the FASB issued SFAS No. 147, "Accounting for Certain Financial Institutions: An Amendment ofFASB Statements No. 72 and 144 and FASB Interpretation No. 9," which removes acquisitions of financial institutions from the scope of SFAS No. 72, "Accounting for Certain Acquisitions of Banking and Thrift Institutions," except for transactions between mutual enterprises. Accordingly, the excess ofthe fair value ofliabilities assumed over the fair value oftangible and intangible assets acquired in a business combination should be recognized and accounted for as goodwill in accordance with SFAS No. 141 , "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets."

         SFAS No. 147 also requires that the acquisition of a less-than-whole financial institution, such as a branch, be accounted for as a business combination if the transferred assets and activities constitute a business. Otherwise, the acquisition should be accounted for as the acquisition of net assets.

         SFAS No. 147 also amends the scope of SFAS No. 144, "Accounting for the Impairment or Disposal ofLong-Lived Assets," to include long-term customer relationship assets of financial institutions (including mutual enterprises) such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets.

         The provisions of SFAS No. 147 related to unidentifiable intangible assets and the acquisition of a less-than-whole financial institution are effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to impairment of long-term customer relationship assets are effective October 1, 2002. Transition provisions for previously recognized unidentifiable intangible assets are effective on October 1, 2002, with earlier application permitted.

         Management adopted SFAS No. 147 on October 1, 2002 without material effect on the Company's financial condition or results of operations.

         The foregoing discussion of the effects of recent accounting pronouncements contains forward-looking statements that involve risks and uncertainties. Changes in economic circumstances or interest rates could cause the effects of the accounting pronouncements to differ from managements foregoing assessment.

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
First Independence Corporation and Subsidiary

We have audited the accompanying consolidated balance sheets of First Independence Corporation and Subsidiary as of September 30, 2002 and 2001, and the related consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Independence Corporation and Subsidiary as of September 30, 2002 and 2001, and the consolidated results of their operations and their consolidated cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note B to the consolidated financial statements, the Corporation adopted Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets effective October 1, 2001.

Wichita, Kansas
November 1, 2002

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First Independence Corporation and Subsidiary

CONSOLIDATED BALANCE SHEETS

September 30,

ASSETS

			2002	2001
Cash and due from banks			$      626,399	$      388,664
Federal funds sold			10,000,000	700,000
Other interest-bearing deposits			1,709,170	1,204,563
		Cash and cash equivalents	12,335,569	2,293,227
Investment securities available for sale			--	1,013,700
Investment securities held to maturity (estimated
	fair value of $10,548,221 in 2002 and $4,238,780
	in 2001)		10,320,618	4,194,513
Mortgage-backed securities held to maturity
	(estimated fair value of $9,578,350 in 2002
	and $7,307,557 in 2001)		9,488,370	7,280,822
Loans receivable			118,578,448	132,838,231
Loans held for sale			88,000	--
Premises and equipment			1,510,688	1,472,029
Federal Home Loan Bank stock, at cost			1,996,800	2,265,000
Accrued interest receivable			770,529	944,606
Real estate acquired through foreclosure			730,252	356,325
Deferred taxes			93,958	--
Other			137,023	71,177
		Total assets	$156,050,255	$152,729,630

The accompanying notes are an integral part of these statements.

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LIABILITIES AND STOCKHOLDERS' EQUITY

				2002	2001
Deposits				$108,221,461	$103,569,165
Advances from borrowers for taxes and
	insurance			799,937	890,795
Income taxes payable				68,721	--
Advances from Federal Home Loan Bank				32,000,000	33,000,000
Accrued expenses and other				383,242	1,094,586
			Total liabilities	141,473,361	138,554,546
Stockholders' equity
	Preferred stock, $.01 par value, 500,000 shares
		authorized; none issued		--	--
	Common stock, $.01 par value, 2,500,000 shares
		authorized; 1,649,288 shares issued		16,493	16,493
	Additional paid-in capital			8,163,239	8,179,514
	Retained earnings - substantially restricted			14,536,885	12,968,146
	Accumulated other comprehensive income,
		net of related taxes		--	8,207
	Required contributions for shares acquired by
		Employee Stock Ownership Plan (ESOP)		(66,010)	(86,321)
	Treasury stock 733,691 shares in 2002 and
		672,651 shares in 2001 - at cost		(8,073,713)	(6,910,955)
			Total stockholders' equity	14,576,894	14,175,084
			Total liabilities and stockholders' equity	$156,050,255	$152,729,630

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First Independence Corporation and Subsidiary

CONSOLIDATED STATEMENTS OF EARNINGS

Year ended September 30,

			2002	2001
Interest income
	Loans		$  9,966,705	$10,764,416
	Mortgage-backed securities		323,046	535,656
	Investment securities		241,364	402,714
	Interest-bearing deposits and other		245,877	227,864
		Total interest income	10,776,992	11,930,650
Interest expense
	Deposits		3,880,022	4,693,601
	Borrowed funds		1,639,495	2,272,817
		Total interest expense	5,519,517	6,966,418
Net interest income			5,257,475	4,964,232
Provision for loan losses			220,425	177,000
Net interest income after provision for loan losses			5,037,050	4,787,232
Noninterest income
	Service charges		267,889	281,195
	Other		110,003	197,345
			377,892	478,540
Noninterest expense
	Employee compensation and benefits		1,824,208	1,634,166
	Occupancy and equipment		396,714	368,852
	Data processing fees		226,675	226,113
	Foreclosed assets, net		167,055	(5,101)
	Other operating		673,104	686,870
			3,287,756	2,910,900
Earnings before income taxes and cumulative effective of
	change in accounting principle		2,127,186	2,354,872
Income tax expense			777,230	813,649
Earnings before cumulative effect of change in accounting principle			1,349,956	1,541,223
Cumulative effect of change in accounting principle			681,922	--
		NET EARNINGS	$  2,031,878	$  1,541,223
Basic earnings per share
	Earnings before cumulative effect of change in accounting principle		$1.43	$1.55
	Cumulative effect of change in accounting principle		.72	--
		Net earnings per share	$2.15	$1.55
Fully diluted earnings per share
	Earnings before cumulative effect of change in accounting principle		$1.39	$1.49
	Cumulative effect of change in accounting principle		.70	--
		Net earnings per share	$2.09	$1.49

The accompanying notes are an integral part of these statements.

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First Independence Corporation and Subsidiary

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended September 30,

			2002	2001
Net earnings			$2,031,878	$1,541,223
Other comprehensive income (loss), net of tax
	Unrealized gains (losses) on securities available
		for sale arising during the period, net
		of income tax benefit of $5,030 in 2002 and
		income tax expense of $7,906 in 2001	(8,207)	12,899
Comprehensive income			$2,023,671	$1,554,122

The accompanying notes are an integral part of these statements.

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First Independence Corporation and Subsidiary

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Years ended September 30, 2002 and 2001

	Common stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss), net	Required contributions for shares acquired by ESOP	Treasury stock	Total
Balance at October 1, 2000	$16,493	$8,190,682	$11,863,034	$(4,692)	$(106,632)	$(6,194,540)	$13,764,345
Net earnings for the year	--	--	1,541,223	--	--	--	1,541,223
Cash dividends of $.4375 per share	--	--	(436,111)	--	--	--	(436,111)
Common stock options exercised	--	(17,008)	--	--	--	147,898	130,890
Appreciation of securities available
for sale	--	--	--	12,899	--	--	12,899
ESOP loan repayments	--	--	--	--	20,311	--	20,311
Fair value adjustment on ESOP
shares committed for release	--	5,840	--	--	--	--	5,840
Purchase of 66,687 shares of
treasury stock	--	--	--	--	--	(864,313)	(864,313)
Balance at September 30, 2001	16,493	8,179,514	12,968,146	8,207	(86,321)	(6,910,955)	14,175,084
Net earnings for the year	--	--	2,031,878	--	--	--	2,031,878
Cash dividends of $.4875 per share	--	--	(463,139)	--	--	--	(463,139)
Common stock options exercised	--	(28,058)	--	--	--	178,024	149,966
Depreciation of securities available
for sale	--	--	--	(8,207)	--	-	(8,207)
ESOP loan repayments	--	--	--	--	20,311	--	20,311
Fair value adjustment on ESOP
shares committed for release	--	11,783	--	--	--	--	11,783
Purchase of 88,579 shares of
treasury stock	--	--	--	--	--	(1,340,782)	(1,340,782)
Balance at September 30, 2002	$16,493	$8,163,239	$14,536,885	$--	$(66,010)	$(8,073,713)	$14,576,894

The accompanying notes are an integral part of these statements.

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First Independence Corporation and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended September 30,

					2002	2001
Cash flows from operating activities
	Net earnings				$2,031,878	$1,541,223
	Adjustments to reconcile net earnings to net cash
		provided by operating activities
			Provision for loan losses		220,425	177,000
			Depreciation		155,005	143,163
			Amortization of premiums and discounts on
				investments and mortgage-backed securities	35,554	24,209
			Amortization of deferred loan origination fees		(211,813)	(246,850)
			Amortization of expense related to employee
				benefit plans	32,094	26,151
			Negative goodwill		(681,922)	(94,058)
			(Gain) loss on sale of real estate acquired
				through foreclosure, net	15,578	(42,768)
			Deferred income taxes		94,916	2,848
			Gains on sales of loans receivable held for sale		(1,541)	-
			Originations of loans receivable held for sale		(235,120)	--
			Proceeds from sales of loans receivable held for sale		148,661	-
			Increase (decrease) in cash due to changes in
				Accrued interest receivable	174,077	15,367
				Other assets	(93,667)	(9,254)
				Accrued expenses and other liabilities	(5,967)	(34,801)
				Income taxes payable	(109,404)	(26,023)
				Net cash provided by operating activities	1,568,754	1,476,207
Cash flows from investing activities
	Proceeds from maturities and repayment of securities
		Available for sale			1,000,000	1,000,000
		Held to maturity			4,915,665	9,740,084
	Purchase of securities
		Held to maturity			(13,284,410)	(5,997,188)
	Loan purchases				--	(614,731)
	Net (increase) decrease in loans				13,317,156	(7,245,857)
	Purchase of Federal Home Loan Bank stock				--	(310,000)
	Capital expenditures				(304,220)	(211,950)
	Proceeds from redemption of Federal Home Loan Bank Stock				268,200	-
	Proceeds from sale of real estate acquired through
		foreclosure			653,714	359,811
			Net cash provided by (used in) investing activities		6,566,105	(3,279,831)

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First Independence Corporation and Subsidiary

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

Year ended September 30,

			2002	2001
Cash flows from financing activities
	Net increase in deposits		$4,652,296	$9,441,628
	Net increase (decrease) in advances from borrowers
	for taxes and insurance		(90,858)	3,715
	Advances from Federal Home Loan Bank		7,200,000	28,900,000
	Repayment of Federal Home Loan Bank advances		(8,200,000)	(35,000,000)
	Cash dividends paid		(463,139)	(436,111)
	Purchase of treasury stock		(1,340,782)	(809,051)
	Stock options exercised		149,966	75,628
		Net cash provided by financing activities	1,907,483	2,175,809
Net increase in cash and cash equivalents			10,042,342	372,185
Cash and cash equivalents at beginning of year			2,293,227	1,921,042
Cash and cash equivalents at end of year			$12,335,569	$  2,293,227
Supplemental disclosures of cash flow information
	Cash paid during the year for
	Income taxes		$     819,718	$     857,218
	Interest		5,593,654	7,022,819
	Noncash investing and financing activities
	Transfer from loans to real estate acquired
	through foreclosure		1,314,425	546,537
	Issuance of loans receivable in connection with
	the sale of real estate acquired through
	foreclosure		309,054	230,350
	Common stock received in payment of stock options
	exercised		60,690	55,262

The accompanying notes are an integral part of these statements.

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2002 and 2001

NOTE A - SUMMARY OF ACCOUNTING POLICIES

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

The consolidated financial information presented herein has been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and general accounting practices within the financial services industry. In preparing consolidated financial statements in accordance with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from such estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of real estate acquired through foreclosure.

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

1. Principles of consolidation

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

2. Cash equivalents

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

3. Investment securities and mortgage-backed securities

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

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

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

4. Loans receivable

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

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans based on historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent, net of costs of disposal.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual 1-4 family residential real estate, home equity or consumer loans for impairment disclosures.

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

5. Loan origination fees and related costs

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

6. Loans held for sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

7. Real estate acquired through foreclosure

Real estate properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets.

8. Premises and equipment

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

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

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

9. Employee stock ownership plan

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

10. Stock-based compensation

The Corporation uses the intrinsic value based method of accounting for stock options. Under the intrinsic method, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Corporation's stock over the exercise price at the measurement date.

11. Income taxes

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

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

12. Earnings per share

Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the year plus the common share equivalents related to outstanding stock options. Weighted average common shares outstanding and diluted shares deemed outstanding are as follows:

	Year ended September 30,
	2002	2001
Weighted average common shares outstanding	945,878	991,799
Common share equivalents related to outstanding stock options	28,607	39,699
Adjusted weighted average common shares    deemed to be outstanding	974,485	1,031,498

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

NOTE B - CHANGE IN ACCOUNTING PRINCIPLE

The Corporation elected to adopt Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets effective October 1, 2001. SFAS 141 requires that the amount of any unamortized deferred credit related to an excess of fair value of acquired net assets over cost (negative goodwill) arising from a business combination for which the acquisition date was before July 1, 2001, be written off and recognized as the effect of a change in accounting principle.

The cumulative effect of this change in accounting for negative goodwill of $681,922 is determined as of October 1, 2001 and is reported separately in the consolidated statement of earnings for the year ended September 30, 2002. There is no income tax effect as a result of this change. Prior years' financial statements have not been restated to apply the provisions of SFAS 141.

The effect on net earnings for the year ended September 30, 2002 of adopting SFAS 141 was to increase net earnings $587,864 and basic and diluted earnings per share $.62 and $.60, respectively.

The following pro forma schedule summarizes the net earnings and per share data for the year ended September 30, 2001 as if the accounting change was made retroactively.

	Year ended September 30, 2001
Net earnings - as reported	$1,541,223
Net earnings - pro forma	1,447,165
Basic earnings per share - as reported	$         1.55
Basic earnings per share - pro forma	1.46
Diluted earnings per share - as reported	1.49
Diluted earnings per share - pro forma	1.40

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE C - INVESTMENT SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair value of investment securities are as follows:

	September 30, 2002
Held to maturity	Amortized cost	Gross unrealized gains	Gross unrealized losses	Estimated fair value
U.S. Government and agency obligations	$10,122,133	$221,908	$         --	$10,344,041
Municipal securities	198,485	5,695	--	202,580
	$10,320,618	$227,603	$         --	$10,548,221
	September 30, 2001
Held to maturity	Amortized cost	Gross unrealized gains	Gross unrealized losses	Estimated fair value
U.S. Government and agency obligations	$3,997,262	$38,938	$         -	$4,036,200
Municipal securities	197,251	5,329	-	202,580
	$4,194,513	$44,267	$         -	$4,238,780
Available for sale
U.S. Government agency obligations	$1,000,462	$13,238	$         -	$1,013,700

The amortized cost and estimated fair value of investment securities at September 30, 2002, by term to maturity are as follows:

	Amortized cost	Estimated fair value
Held to maturity
Due in less than one year	$  1,000,000	$  1,018,400
Due in one to two years	4,074,192	4,113,900
Due in two to five years	5,246,426	5,415,921
	$10,320,618	$10,548,221

Investment securities with an estimated fair value of $6,262,260 and $5,052,550 at September 30, 2002 and 2001, respectively, are pledged to secure government deposits.

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE D - MORTGAGE-BACKED SECURITIES

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

	September 30, 2002
Held to maturity	Amortized cost	Gross unrealized gains	Gross unrealized losses	Estimated fair value
GNMA certificates	$     27,135	$   3,758	$           --	$       30,893
FHLMC certificates	1,556,531	50,522	--	1,607,053
FNMA certificates	5,444,276	46,241	(3,739)	5,486,778
Collateralized mortgage obligations
FHLMC	849,920	4,250	--	854,170
FNMA	1,610,508	--	(11,052)	1,599,456
	$9,488,370	$104,771	$(14,791)	$9,578,350

	September 30, 2001
Held to maturity	Amortized cost	Gross unrealized gains	Gross unrealized losses	Estimated fair value
GNMA certificates	$     27,839	$   3,955	$          --	$     31,794
FHLMC certificates	2,305,770	64,106	--	2,369,876
FNMA certificates	1,895,740	57,699	(1,722)	1,951,717
Collateralized mortgage obligations
FHLMC	1,050,742	--	(67,639)	983,103
FNMA	2,000,731	--	(29,664)	1,971,067
	$7,280,822	$125,760	$(99,025)	$7,307,557

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

Mortgage-backed securities with an estimated fair value of $5,417,093 and $7,280,004 at September 30, 2002 and 2001, respectively, are pledged to secure government and other deposits.

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE E - LOANS RECEIVABLE

Loans receivable at September 30 are summarized as follows:

	2002	2001
First mortgage loans
One-to-four family residences	$86,898,362	$93,534,426
Multi-family residences	1,094,113	864,571
Nonresidential	9,924,434	12,238,965
Construction	22,900,470	32,731,094
Total first mortgage loans	120,817,379	139,369,056
Consumer and other loans
Savings	466,360	486,793
Automobile	2,337,795	2,540,700
Home equity and second mortgages	1,413,040	1,300,883
Unsecured home improvement	79,082	86,425
Other	753,868	748,886
Total consumer and other loans	5,050,145	5,163,687
Less
Allowance for loan losses	(828,335)	(722,682)
Loans in process	(6,176,305)	(10,613,506)
Unearned discounts	(5,066)	(6,453)
Deferred loan origination fees	(279,370)	(351,871)
	(7,289,076)	(11,694,512)
Net loans receivable	$118,578,448	$132,838,231

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

	2002	2001
Balance at beginning of year	$ 722,682	$ 758,333
Provision	220,425	177,000
Loans charged off	(121,569)	(212,651)
Recoveries of loans previously charged off	6,797	--
Balance at end of year	$ 828,335	$ 722,682

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE E - LOANS RECEIVABLE - Continued

The Association's lending efforts have historically focused on one-to-four family residential real estate loans, which comprise approximately 69% (2002) and 65% (2001) of the total loan portfolio. Approximately 2% (2002 and 2001) of the Association's one-to-four family residential real estate loans are collateralized by properties located outside of the primary lending area of Montgomery and surrounding Kansas counties. Generally, such loans have been underwritten on the basis of 80% to 90% loan-to-value ratio or mortgage insurance was required. The Association, as with any lending institution, is subject to the risk that real estate values could deteriorate in its primary lending area thereby impairing collateral values. Management believes, however, that real estate values in the Association's primary lending area are currently stable.

During the year ended September 30, 1998 the Association began originating construction loans at its new loan production office in Lawrence, Kansas. These construction loans generally are to builders and individuals for the construction of residences and have terms of nine months or less with permanent financing provided by other lenders. Construction loans comprise approximately 18% (2002) and 23% (2001) of the Association's total loan portfolio.

Approximately 9% (2002 and 2001) of the loan portfolio is comprised of nonresidential and multi-family real estate loans with approximately 2% (2002 and 2001) of this total collateralized by properties located outside the Association's primary lending area.

Serviced loans were $611,718 and $559,530 at September 30, 2002 and 2001, respectively.

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

Loans outstanding at October 1, 2001	$  680,886
Repayments	(114,715)
Loans outstanding at September 30, 2002	$   566,171

Loan impairment is measured by estimating the expected future cash flows and discounting them at the respective effective interest rate or by valuing the underlying collateral. The recorded investment in these loans and the valuation allowance for losses related to loan impairment at September 30, 2001 are as follows:

Principal amount of impaired loans	$  670,095
Less valuation allowance	(3,505)
	$  636,590
Average investment in impaired loans	$  428,577

There were no impaired loans at September 30, 2002 that are not collectively evaluated in large groups of smaller balance homogeneous loans.

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE F - ACCRUED INTEREST RECEIVABLE

Accrued interest receivable at September 30 is summarized as follows:

	2002	2001
Loans receivable	$675,660	$860,870
Investment securities	48,156	38,678
Mortgage-backed securities	46,713	45,058
	$  770,529	$  944,606

NOTE G - PREMISES AND EQUIPMENT

Premises and equipment at September 30 are summarized as follows:

	2002	2001
Land	$  206,789	$74,958
Building	1,473,924	1,451,459
Furniture, fixtures and equipment	700,246	669,426
Automobiles	29,499	29,499
	2,410,458	2,225,342
Less accumulated depreciation	899,770	753,313
	$1,510,688	$1,472,029

NOTE H - FORECLOSED ASSETS

A summary of income (expenses) applicable to foreclosed assets is as follows for the years ended September 30:

	2002	2001
Gain (loss) on sale of real estate acquired
through foreclosure, net	$   (4,858)	$ 42,768
Operating expenses	(162,197)	(37,667)
Foreclosed asset income (expense), net	$(167,055)	$   5,101

Operating expenses on foreclosed assets consist primarily of property taxes and general maintenance expenses on the properties held.

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE I - DEPOSITS

Deposits at September 30 are summarized as follows:

	Weighted average rate at September 30,		2002		2001
	2002	2001	Amount	Percent	Amount	Percent
NOW accounts	.25%	1.28%	$   5,293,229	4.89%	$   5,376,751	5.19%
First Super NOW accounts	.49	1.52	3,164,836	2.92	3,167,848	3.06
First Money Fund accounts	1.90	3.61	27,207,762	25.14	26,463,910	25.55
Total demand deposits	1.60	3.16	35,665,827	32.95	35,008,509	33.80
Passbook savings accounts	1.26	2.71	6,208,341	5.74	5,109,467	4.93
Certificates of deposit
1.00% to 1.99%	1.74	--	1,151,389	1.06	--	--
2.00% to 2.99%	2.76	--	6,771,211	6.26	--	--
3.00% to 3.99%	3.41	3.63	31,576,069	29.18	1,262,154	1.22
4.00% to 4.99%	4.58	4.70	11,891,821	10.99	12,536,691	12.11
5.00% to 5.99%	5.58	5.59	11,728,531	10.84	31,981,793	30.88
6.00% to 6.99%	6.14	6.33	3,228,272	2.98	17,670,551	17.06
Total certificates of deposit	4.04	5.58	66,347,293	61.31	63,451,189	61.27
Total savings	3.80	5.37	72,555,634	67.05	68,560,656	66.20
Total deposits	3.08	4.62	$108,221,461	100.00%	$103,569,165	100.00%

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The aggregate amount of certificates of deposit and savings with a minimum denomination of $100,000 was $10,045,337 and $7,617,501 at September 30, 2002 and 2001, respectively.

First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE I - DEPOSITS - Continued

Scheduled maturities of certificates of deposit are as follows:

September 30, 2002
	Less than one year	One to three years	Three to five years	Total
1.00% to 1.99%	$   1,151,389	$               --	$              --	$   1,151,389
2.00% to 2.99%	5,436,802	1,334,409	--	6,771,211
3.00% to 3.99%	21,409,544	10,067,062	99,453	31,576,069
4.00% to 4.99%	7,264,897	1,209,067	3,417,857	11,891,821
5.00% to 5.99%	6,967,906	3,013,711	1,746,914	11,728,531
6.00% to 6.99%	122,190	1,689,426	1,416,646	3,228,272
	$42,352,728	$17,313,685	$6,680,880	$66,347,293
September 30, 2001
	Less than one year	One to three years	Three to five years	Total
3.00% to 3.99%	$   1,252,802	$         9,352	$               -	$   1,262,154
4.00% to 4.99%	5,736,916	6,730,823	68,952	12,536,691
5.00% to 5.99%	20,455,157	9,011,860	2,514,776	31,981,793
6.00% to 6.99%	14,496,872	658,207	2,515,472	17,670,551
	$41,941,747	$16,410,242	$5,099,200	$63,451,189

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

	2002	2001
NOW accounts	$    11,437	$    74,125
First Super NOW and First Money Fund accounts	673,961	1,152,193
Certificates of deposit and passbook savings accounts	3,194,624	3,467,283
	$  3,880,022	$  4,693,601

NOTE J - ADVANCES FROM FEDERAL HOME LOAN BANK

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

	2002		2001
	Rates	Amount	Rates	Amount
Fixed rates	4.02 - 5.65%	$  5,000,000	5.65 - 6.74%	$  6,000,000
Fixed rate convertible*	4.60 - 6.34	27,000,000	4.60 - 6.34	27,000,000
		$32,000,000		$33,000,000

*The Federal Home Loan Bank has the option to convert $16,000,000 in the year ending 2003 and $11,000,000 in the year ending 2004 to its variable short-term rate. These advances are due in 2008 through 2011 unless converted, at which time the Corporation has the option to prepay the advances.

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE J - ADVANCES FROM FEDERAL HOME LOAN BANK - Continued

The Association can borrow a maximum of approximately $62,000,000 from the Federal Home Loan Bank at September 30, 2002.

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

Aggregate maturities for the years following September 30, 2002 are as follows:

2003	$1,371,553
2004	499,800
2005	498,412
2006	379,033
2007	351,310
Thereafter	28,899,892
	$32,000,000

NOTE K - EMPLOYEE BENEFITS

The Corporation sponsors a leveraged employee stock ownership plan ("ESOP") that covers all full-time employees. All employees of the Corporation are eligible to participate in the ESOP after they attain age 21 and complete one year of service during which they work at least 1,000 hours. The Corporation makes annual contributions to the ESOP equal to at least the ESOP's debt service. All dividends received by the ESOP are credited to the employee's stock ownership account. The unallocated ESOP shares are pledged as collateral for its debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year. Accordingly, unpaid ESOP debt is reflected as a deduction from stockholders' equity. ESOP compensation expense was $156,158 and $150,740 (including annual $120,000 cash contributions) for the years ended September 30, 2002 and 2001, respectively.

The ESOP shares as of September 30, 2002 were as follows:

Allocated shares	111,442
Unreleased shares	7,007
Total ESOP shares	118,449
Fair value of unreleased shares at September 30, 2002	$109,029

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE K - EMPLOYEE BENEFITS - Continued

The Corporation has adopted a Stock Option and Incentive Plan (SOP) for designated participants. The SOP provides for up to 145,474 shares of common stock to be issued to participants. The option price of any options granted may not be less than the market value of the common stock on the date of the grant and unless otherwise specified, the options expire ten years from the date of the grant. All options outstanding at September 30, 2002 are exercisable except 6,164 options which vest equally over five years from the date of the grant. A summary of the Corporation's stock option plan as of September 30, 2002 and 2001 and changes during the years ended as of those dates is presented below:

	Shares	Weighted average exercise price
Outstanding at October 1, 2000	99,729	$   5.74
Issued	3,000	13.28
Exercised	(24,963)	5.24
Forfeited	(900)	10.06
Outstanding at September 30, 2001	76,866	5.97
Exercised	(27,539)	5.45
Outstanding at September 30, 2002	49,327	6.27
Exercisable
September 30, 2001	68,121	$   5.28
September 30, 2002	43,163	5.52

Options outstanding at September 30, 2002 are summarized as follows:

Shares	Exercise price	Remaining life
37,168	$   5.00	1 year
1,000	14.63	5 years 1 month
8,159	10.06	6 years 4 months
3,000	13.28	8 years 10 months
49,327

The stock option plan is accounted for under APB Opinion 25 and related interpretations. The options are exercisable at not less than the market value of the Corporation's stock on the date of grant. Accordingly, no compensation cost has been recognized for the plan. Had compensation cost for the plan been determined based on the fair value of the options at the grant dates consistent with the fair value method of Statement of Financial Accounting Standards 123, Accounting for Stock-Based Compensation (SFAS 123), the Corporation's net earnings and earnings per share for the years ended September 30 would have been reduced to the pro forma amounts indicated below.

	2002	2001
Net earnings - as reported	$2,031,878	$1,541,223
Net earnings - pro forma	2,021,159	1,530,504
Earnings per share
Basic - as reported	$1.43	$1.55
Basic - pro forma	1.42	1.54
Diluted - as reported	1.39	1.49
Diluted - pro forma	1.38	1.48

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE K - EMPLOYEE BENEFITS - Continued

The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model.

The Association participates in a defined benefit multi-employer pension plan. Substantially all employees are eligible and benefits are based on the employee's salary and years of service. No contribution was made or required to be made by the Association for the years ended September 30, 2002 and 2001 due to the plan's overfunded status. Separate actuarial disclosure information is not available due to the plan being a multi-employer pension plan.

NOTE L - INCOME TAXES

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

	2002	2001
Current	$682,314	$810,801
Deferred	94,916	2,848
	$777,230	$813,649

Reconciliation of income tax expense computed at the federal statutory rate of 34% and income tax expense for the years ended September 30 is as follows:

	2002	2001
Income tax expense at statutory rate	$723,243	$800,656
Kansas privilege tax, net of federal tax benefit	59,438	66,322
Nondeductible ESOP fair value adjustment	4,356	2,159
Other	(9,807)	(55,488)
	$777,230	$813,649

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

	2002	2001
Deferred tax assets
Allowance for loan losses	$307,333	$281,194
Accrued bonuses	18,870	15,540
Depreciation of property and equipment	80,148	85,005
Total deferred tax assets	406,351	381,739
Deferred tax liabilities
Securities available for sale	--	4,931
Federal Home Loan Bank stock dividends	286,084	348,318
Other	26,309	34,479
Total deferred tax liabilities	312,393	387,728
Net deferred tax asset (liability)	$  93,958	$  (5,989)

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE L - INCOME TAXES - Continued

Prior to 1997 the Association was allowed a special bad debt deduction, generally limited to 8% of otherwise taxable income subject to certain limitations based on aggregate loans and deposit account balances at the end of the year. If the amounts that qualified as deductions for federal income taxes are later used for purposes other than for bad debt losses, including distributions in liquidation, such distributions will be subject to federal income taxes at the then current corporate income tax rate. Retained earnings at September 30, 2002, includes approximately $2.9 million for which federal income taxes have not been provided. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction at September 30, 2002, is approximately $1,000,000.

NOTE M - STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL

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

Quantitative measures established by regulation to ensure capital adequacy require the Association to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets and of Tier 1 (core) capital and tangible capital to adjusted total assets. Management believes, as of September 30, 2002, that the Association meets all capital adequacy requirements to which it is subject.

As of September 30, 2002, the most recent notification from the OTS categorized the Association as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Association's category. To be categorized as well capitalized the Association must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 (core) ratios as set forth in the table below.

	Actual		Minimum capital requirement		Minimum to be well capitalized under prompt corrective action provisions
	Amount	Ratio	Amount	Ratio	Amount	Ratio
	(Dollars in thousands)
As of September 30, 2002
Total capital to risk-weighted assets	$15,058	18.01%	$6,689	8.0%	$8,362	10.0%
Tier 1 capital to risk-weighted assets	14,230	17.02	N/A	N/A	4,385	6.0
Core capital to adjusted tangible assets	14,230	9.12	6,239	4.0	7,799	5.0
Tangible capital to tangible assets	14,230	9.12	2,340	1.5	N/A	N/A
As of September 30, 2001
Total capital to risk-weighted assets	$14,850	19.36%	$6,136	8.0%	$7,670	10.0%
Tier 1 capital to risk-weighted assets	14,127	18.42	N/A	N/A	4,602	6.0
Core capital to adjusted tangible assets	14,127	9.25	6,111	4.0	7,638	5.0
Tangible capital to tangible assets	14,127	9.25	2,291	1.5	N/A	N/A

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE M - STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL - Continued

Regulations of the OTS impose limitations on the payment of dividends and other capital distributions by savings associations. Under such regulations a savings association that immediately prior to and on a pro forma basis, after giving effect to a proposed capital distribution, has total capital (as defined by OTS regulation) that is equal to or greater than the amount of its fully phased-in capital requirement is generally permitted without OTS approval (but subsequent to 30 days prior notice to the OTS of the planned dividend) to make capital distributions during a calendar year in the amount of up to the greater of (1) 100% of its net earnings to date during the year plus an amount equal to one-half of the amount by which its total capital to assets ratio exceeded its fully phased-in capital to assets ratio at the beginning of the year or (2) 75% of its net income for the most recent four quarters. Pursuant to such OTS dividend regulations, the Association had the ability to pay dividends of approximately $4,100,000 to First Independence Corporation at September 30, 2002.

NOTE N - COMMITMENTS

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

The Association's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Association uses the same credit policies in making commitments and conditional obligations as those utilized for on-balance sheet instruments. The Association's commitments to extend credit at September 30, 2002 include loans in process as disclosed in Note E, first mortgage loans with fixed rates ranging from 6.25% to 9.00% aggregating $1,889,520 and unfunded lines of credit aggregating $749,753. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. Collateral for loans in process and commitments are the same as for other Association loans. The commitment period is generally for forty-five days.

The Association has committed to construction of a branch facility with an estimated cost of $850,000.

NOTE O - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of each class of financial instruments at September 30, 2002 and 2001.

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

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

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

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First Independence Corporation and Subsidiary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

September 30, 2002 and 2001

NOTE O - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued

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

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

Deposit liabilities: The fair values estimated for demand deposits, NOW accounts, savings and certain types of money market accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values of fixed rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered to a schedule of aggregated expected monthly time deposit maturities. The carrying amount of accrued interest payable approximates its fair value.

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

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

	2002
	Carrying	Estimated
	amount of	fair value
	assets and	of assets and
	(liabilities)	(liabilities)
Cash and cash equivalents	$12,335,569	$12,335,569
Investment securities held to maturity	10,320,618	10,548,221
Mortgage-backed securities held to maturity	9,488,370	9,578,350
Loans	119,406,783	123,345,375
Federal Home Loan Bank stock	1,996,800	1,996,800
Deposits	(108,221,461)	(108,540,825)
Advances from Federal Home Loan Bank	(32,000,000)	(36,057,000)
	2001
	Carrying	Estimated
	amount of	fair value
	assets and	of assets and
	(liabilities)	(liabilities)
Cash and cash equivalents	$2,293,227	$2,293,227
Investment securities held to maturity	4,194,513	4,238,780
Investment securities available for sale	1,013,700	1,013,700
Mortgage-backed securities held to maturity	7,280,822	7,307,557
Loans	133,560,913	133,259,869
Federal Home Loan Bank stock	2,265,000	2,265,000
Deposits	(103,569,165)	(103,732,577)
Advances from Federal Home Loan Bank	(33,000,000)	(35,298,000)

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STOCKHOLDER INFORMATION

Stock Listing Information
First Federal Savings and Loan Association of Independence (the "Association") converted from a mutual to a stock savings and loan association effective October 5, 1993, and formed First Independence Corporation (the "Company") to act as its holding company. The Company's common stock (the "Common Stock") is traded on The Nasdaq SmallCap Market under the symbol "FFSL." Stock Price Information and Dividends
As of December 2, 2002, there were approximately 187 shareholders of record of the Company's Common Stock, not including those shares held in nominee or street name through various brokerage firms or banks. The following table sets forth the high and low bid prices of the Common Stock and dividends declared for each fiscal quarter since October 1, 2000. The stock price information was provided by the NASD, Inc.                                                                                                 Dividends
Quarter Ended                           High                   Low                   Declared 

December 31, 2000                  10.563                 10.000                   0.1000
March 31, 2001                       13.000                 10.375                   0.1125
June 30, 2001                         13.250                 12.750                   0.1125
September 30, 2001                 13.500                 12.500                   0.1125

December 31, 2001                  14.250                 12.520                   0.1125
March 31, 2002                       15.150                 13.810                   0.1250
June 30, 2002                         16.700                 15.050                   0.1250
September 30, 2002                 16.400                 15.400                   0.1250 The Company has paid a cash dividend on its Common Stock for each quarter since the Association's conversion to stock form. Future dividends, if any, will be dependent upon the results of operations and financial condition of the Company, tax considerations, industry standards, economic conditions, general business practices and other factors. The Company's ability to pay dividends is dependent on the dividend payments it receives from the Association, which are subject to regulations and the Association's continued compliance with all regulatory capital requirements. See Note M of the Notes to Consolidated Financial Statements for a discussion of regulations governing the Association's ability to pay dividends. Annual Report on Form 10-KSB and Investor Information
A copy of the Company's annual report on Form 10-KSB, filed with the Securities and Exchange Commission, is available without charge by writing to:    Gary L. Overfield
   Senior Vice President and Secretary
   First Independence Corporation
   Myrtle and Sixth
   Independence, Kansas 67301 Stock Transfer Agent
Inquiries regarding stock transfer, registration, lost certificates or changes in name and address should be directed to the stock transfer agent and registrar by writing to:    Registrar and Transfer Company
   10 Commerce Drive
   Cranford, New Jersey 07016
   (800) 368-5948 Investor Information
Stockholders, investors, and analysts interested in additional information may contact:    James B. Mitchell,
   Vice President and Chief Financial Officer
   E-Mail: jimm@firstfederalsl.com Corporate Office
First Independence Corporation
Myrtle and Sixth
Independence, Kansas 67301
(620) 331-1660 Special Counsel
Silver, Freedman & Taff, L.L.P.
1700 Wisconsin Avenue, NW
Washington, DC 20007 Independent Auditor
Grant Thornton, LLP
8300 Thorn Drive, Suite 300
Wichita, Kansas 67226 First Federal Savings and Loan Association of Independence
Myrtle and Sixth
Independence, Kansas 67301
(620) 331-1660

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DIRECTORS AND MANAGEMENT GROUP

BOARD OF DIRECTORS
(First Independence Corporation and
First Federal Savings and Loan Association of Independence) Lavern W. Strecker
Chairman of the Board
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence
Retired - Former Manager of Accounting and Control    ARCO Pipe Line Company William T. Newkirk II
Vice Chairman of the Board
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence
Vice President
   Newkirk, Dennis & Buckles Insurance Co. Larry G. Spencer
President and Chief Executive Officer
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence Robert A. Johnson
Human Resource Manager
   Cobalt Boats Harold L. Swearingen
Retired - Former Telecommunications Manager
   ARCO Pipe Line Company Joseph M. Smith
Retired - Former County Extension Agent
Agriculture and Coordinator
   Montgomery County Extension Council E. JoVonnah Boecker
City Clerk
   Neodesha, Kansas EXECUTIVE OFFICERS Lavern W. Strecker
Chairman of the Board
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence
Retired - Former Manager of Accounting and Control
   ARCO Pipe Line Company William T. Newkirk II
Vice Chairman of the Board
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence
Vice President
   Newkirk, Dennis & Buckles Insurance Co. Larry G. Spencer
President and Chief Executive Officer
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence Gary L. Overfield
Senior Vice President and Secretary
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence James B. Mitchell
Vice President and Chief Financial Officer
   First Independence Corporation and
   First Federal Savings and Loan Association of
    Independence Jim L. Clubine
Vice President and Asset Manager
   First Federal Savings and Loan Association of
   Independence OTHER OFFICERS Lori L. Kelley
Vice President of Retail Banking
   First Federal Savings and Loan Association of
    Independence C. Alan Hoggatt
Vice President
   First Federal Savings and Loan Association of
    Independence Dennis L. Greenhaw
Vice President
   First Federal Savings and Loan Association of
    Independence Phyllis A. Johnson
Assistant Vice President
   First Federal Savings and Loan Association of
    Independence Vicki L. Cranor
Assistant Vice President
   First Federal Savings and Loan Association of
    Independence

40END