================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-K

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

For the fiscal year ended September 30, 2003

                                       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 0-22140.

                          FIRST MIDWEST FINANCIAL, INC.
                (Name of registrant as specified in its charter)

           Delaware                                               42-1406262
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

     Fifth at Erie, Storm Lake, Iowa                                50588
(Address of principal executive offices)                         (Zip Code)

                  Registrant's telephone number: (712) 732-4117

           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 $0.01 per share
                                (Title of Class)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|

           Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. |_|

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). YES |_| NO |X|

      As of March 31, 2003, the Registrant had issued and outstanding 2,493,949
shares of Common Stock. The aggregate market value of the voting stock held by
non-affiliates of the Registrant, computed by reference to the average of the
closing bid and asked prices of such stock on the Nasdaq System as of March 31,
2003, was $29.3 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.)

                       DOCUMENTS INCORPORATED BY REFERENCE

PARTS II and IV of Form 10-K -- Portions of the Annual Report to Shareholders
for the fiscal year ended September 30, 2003. PART III of Form 10-K -- Portions
of the Proxy Statement for the Annual Meeting of Shareholders to be held during
January 2004.

================================================================================


<PAGE>

                           Forward-Looking Statements

      First Midwest Financial, Inc. ("First Midwest," and with its subsidiaries,
the "Company"), and its wholly-owned operating subsidiaries First Federal
Savings Bank of the Midwest and Security State Bank, may from time to time make
written or oral "forward-looking statements", including statements contained in
its filings with the Securities and Exchange Commission (including this Annual
Report on Form 10-K and the Exhibits hereto and thereto), in its reports to
shareholders and in other communications by the Company, which are made in good
faith by the Company pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995.

      These forward-looking statements include statements with respect to the
Company's 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 the Company's control. The words "may", "could", "should", "would",
"believe", "anticipate", "estimate", "expect", "intend", "plan" and similar
expressions are intended to identify forward-looking statements. The important
factors we discuss below and elsewhere in this document, as well as other
factors discussed under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report to
Shareholders and identified in our filings with the SEC and those presented
elsewhere by our management from time to time, could cause actual results to
differ materially from those indicated by the forward-looking statements made in
this prospectus:

      o     the strength of the United States economy in general and the
            strength of the local economies in which the Company conducts
            operations;

      o     the effects of, and changes in, trade, monetary and fiscal policies
            and laws, including interest rate policies of the Federal Reserve
            Board;

      o     inflation, interest rate, market and monetary fluctuations;

      o     the timely development of and acceptance of new products and
            services of the Company and the perceived overall value of these
            products and services by users, including the features, pricing and
            quality compared to competitors' products and services;

      o     the willingness of users to substitute competitors' products and
            services for the Company's products and services;

      o     the success of the Company in gaining regulatory approval of its
            products and services, when required;

      o     the impact of changes in financial services' laws and regulations
            (including laws concerning taxes, banking, securities, agriculture
            and insurance);

      o     technological changes;

      o     acquisitions;

      o     changes in consumer spending and saving habits; and

      o     the success of the Company at managing the risks involved in the
            foregoing.

      The Company wishes to caution readers that such forward-looking statements
speak only as of the date made. The Company does not undertake, and expressly
disclaims any intent or obligation, to update any forward-looking statement,
whether written or oral, that may be made from time to time by or on behalf of
the Company.


                                       1

<PAGE>


                                     PART I


Item 1. Description of Business

General

      First Midwest Financial, Inc. is a Delaware corporation, the principal
assets of which are all the issued and outstanding shares of First Federal
Savings Bank of the Midwest ("First Federal") and Security State Bank
("Security"). First Midwest, on September 20, 1993, acquired all of the capital
stock of First Federal in connection with First Federal's conversion from the
mutual to stock form ownership (the "Conversion"). On September 30, 1996, First
Midwest became a bank holding company upon its acquisition of Security, as
discussed below.

      Since the Conversion, the Company has acquired several financial
institutions. On March 28, 1994, First Midwest acquired Brookings Federal Bank
in Brookings, South Dakota ("Brookings"). On December 29, 1995, First Midwest
acquired Iowa Savings Bank, FSB in Des Moines, Iowa ("Iowa Savings"). Brookings
and Iowa Savings were both merged with, and now operate as divisions of, First
Federal. On September 30, 1996, First Midwest completed the acquisition of
Central West Bancorporation ("CWB"). CWB was the holding company for Security in
Stuart, Iowa, which upon the merger of CWB into First Midwest resulted in
Security becoming a stand-alone banking subsidiary of First Midwest. Unless the
context otherwise requires, references herein to the Company include First
Midwest, Security and First Federal and all subsidiaries on a consolidated
basis.

      First Federal and Security (collectively, the "Banks") are the only
direct, active banking subsidiaries of First Midwest. The Banks are
community-oriented financial institutions offering a variety of financial
services to meet the needs of the communities they serve. The Company, through
the Banks, provides a full range of financial services. The principal business
of First Federal historically has consisted of attracting retail deposits from
the general public and investing those funds primarily in one- to four-family
residential mortgage loans and, to a lesser extent, commercial and multi-family
real estate, agricultural operating and real estate, construction, consumer and
commercial business loans primarily in First Federal's market area. First
Federal's lending activities have expanded to include an increased emphasis on
originations of commercial and multi-family real estate loans and commercial
business loans. The principal business of Security has been and continues to be
attracting retail deposits from the general public and investing those funds in
agricultural real estate and operating loans, commercial and multi-family real
estate loans, one- to four-family residential loans and, to a lesser extent,
commercial business and consumer loans. The Banks also purchase mortgage-backed
securities and invest in U.S. Government and agency obligations and other
permissible investments. At September 30, 2003, the Company had total assets of
$772.3 million, deposits of $435.6 million, and shareholders' equity of $43.0
million.

      The Company's revenues are derived primarily from interest on mortgage
loans, mortgage-backed securities, investments, consumer loans, agricultural
operating loans, commercial business loans, income from service charges and loan
originations, loan servicing fee income, and income from the sale of mutual
funds, insurance products, annuities and brokerage services through its service
corporation subsidiaries.

      First Federal, directly through its wholly-owned subsidiary, First
Services Financial Limited ("First Services"), offers mutual funds, equities,
bonds, insurance products and annuities.

      First Services Trust Company, established in April 2002 as a wholly-owned
subsidiary of First Midwest, provides a full range of trust services. First
Midwest Financial Capital Trust, also a wholly-


                                       2

<PAGE>

owned subsidiary of First Midwest, was established in July 2001 for the purpose
of issuing Company Trust Preferred Securities.

      First Midwest and the Banks are subject to comprehensive regulation. See
"Regulation" herein.

      The executive offices of the Company are located at Fifth at Erie, Storm
Lake, Iowa 50588. Its telephone number at that address is (712) 732-4117.

Market Area

      First Federal Savings Bank of the Midwest has four divisions: First
Federal Savings Bank Storm Lake/Northwest Iowa (FFSL), , Brookings Federal Bank
(BFB), Iowa Savings Bank (ISB), and First Federal Savings Bank Sioux Falls
(FFSF). First Federal's headquarters is located on the corner of Fifth and Erie
streets in Storm Lake, Iowa. FFSL operates a total of six offices in Storm Lake,
Lake View, Laurens, Manson, Odebolt and Sac City, Iowa. BFB operates one office
in Brookings, South Dakota. ISB operates four offices in Des Moines, West Des
Moines and Urbandale, Iowa. FFSF operates one office in Sioux Falls with plans
to open a second office in 2004.

      Security State Bank operates its business through three full-service
offices in Casey, Menlo and Stuart, Iowa.

      The Company's primary market area includes the Iowa counties of Adair,
Buena Vista, Calhoun, Dallas, Guthrie, Ida, Pocahontas, Polk and Sac, and the
South Dakota counties of Brookings, Lincoln and Minnehaha.

      Iowa ranks sixth lowest nationally in business costs (Economy.com Inc.
2003), among the top ten states for "technology sophistication" in K-12 schools
(Market Data Retrieval), third most favorable business liability climate in the
nation (Harris Interactive Survey, U.S. Chamber of Commerce, 2003), second "most
livable" state in the nation (Morgan Qullno State Rankings, 2003), and has low
corporate income taxes.

      South Dakota ranks first in "entrepreneurial friendliness" (Small Business
Survival Foundation, 2002), first in students per computer (Technology Courts
2002), is the second "safest" state (FBI, 2001), and has no corporate income
tax, personal income tax, personal property tax, business inventory tax, or
inheritance tax.

      Storm Lake is located in Iowa's Buena Vista County approximately 150 miles
northwest of Des Moines and 200 miles south of Minneapolis. Like much of the
State of Iowa, Storm Lake and the surrounding market area are highly dependent
upon farming and agricultural markets. Major employers in the area include Buena
Vista Regional Medical Center, Tyson-Foods, Bil Mar Foods of Iowa, and Buena
Vista University, which currently enrolls 1,257 full-time students at its Storm
Lake campus and employs 81 full-time faculty members.

      Brookings is located in east central South Dakota's Brookings County,
approximately 50 miles north of Sioux Falls and 200 miles west of Minneapolis.
BFB's market area encompasses approximately a 30-mile radius of Brookings. The
area is generally rural, and agriculture is a significant industry in the
community. South Dakota State University is the largest employer in Brookings.
The University had 10,561 students enrolled for the 2003 fall term and employs
420 full-time faculty members. The community also has several manufacturing
companies, including 3M, Larson Manufacturing, Daktronics, Falcon Plastics and
Twin City Fan. The Brookings division operates from an office located in
downtown Brookings.


                                       3

<PAGE>

      Des Moines, Iowa's capitol, is located in central Iowa. The Des Moines
market area encompasses Polk County and surrounding counties. ISB's main office
is located in a high growth area just off I-80 at the intersection of two major
streets in Urbandale. The West Des Moines office operates near a high-traffic
intersection, across from a major shopping mall. The Ingersoll office is located
near the heart of Des Moines, on a major thoroughfare, in a densely populated
area. The Highland Park facility is located in a historical district
approximately five minutes north of downtown Des Moines. The Des Moines metro
area is one of the top three insurance centers in the world, with sixty-seven
insurance company headquarters and over one hundred regional insurance offices.
Major employers include Principle Life Insurance Company, Des Moines Community
Schools, Central Iowa Hospital Corporation, Mercy Hospital Medical Center,
Hy-Vee Food Stores, Inc., Wells Fargo Home Mortgage Inc., Pioneer Hi Bred
International Inc., Bridgestone/Firestone, Communications Data Services Inc.,
and Meredith Corporation. Universities and colleges in the area include Des
Moines Area Community College, Drake University, Simpson College, Des Moines
University - Osteopathic Medical Center, Grand View College, AIB College of
Business, and Upper Iowa University. Unemployment rate in the Des Moines metro
area was 3.2% as of October 2003.

      Sioux Falls is located at the crossroads of Interstates 29 and 90 in
southeast South Dakota, 270 miles southwest of Minneapolis. The Sioux Falls
market area encompasses Minnehaha and Lincoln counties. Sioux Falls ranks third
in a national list of top cities to start a company according to a report by
Cognetics, Inc. (Kiplinger Report, April 2001). Sioux Falls received an "A+" on
Zero Population Growth's 2001 Kid-Friendly Cities Report Card, excelling in
health, public safety, education, economics, environment, and community life;
ranking third out of 140 cities. The city was called a "Diamond in the Rough" as
a great smaller market for businesses to make a move. The magazine cited the
community's growth rates as a hugh opportunity and recognized the state's
friendly tax laws. (Sales & Marketing Management April 2002.) The bank is
located at a high-traffic intersection of Minnesota and 33rd in the heart of
Sioux Falls. The second location, expected to open in 2004, is located at the
high-traffic intersection of 12th and Elmwood. Major employers in the area
include Sioux Valley Hospital, Avera McKennan Hospital, John Morrell & Company,
Gateway, Inc., and Hy-Vee Food Stores. Sioux Falls is home to Augustana College
with 2003 fall enrollment of 1,848 and The University of Sioux Falls with 2003
fall enrollment of 1,485. Unemployment rate in Sioux Falls was 2.6% as of
September 2003.

      Security's main office operates in Stuart, which is located in
west-central Iowa on the border of Adair and Guthrie counties, approximately 40
miles west of Des Moines. Security's market area is highly dependent on farming
and agriculture. Local businesses include Agri-Drain Corporation, Cardinal
Glass, Rose Acre Farms, Wausau Supply and Schafer Systems, Inc. In addition, a
large number of area residents commute to the Des Moines metro area for work. In
recent years, efforts of the West Central I-80 Development Corporation have
resulted in significant development of new service-related businesses in the
area, associated with the westward expansion of Des Moines and direct interstate
highway access. Seven industrial parks exist in these two counties with rail
access recently added to the Stuart area. This development provides economic
diversity to Security's market area.

      Several of the Company's market areas are dependant on agriculture-related
businesses. Iowa land values are currently near the all-time high of 1981.
Agriculture-related businesses in recent years have performed well due to a
relatively stable agricultural environment in the Company's market area.
Generally low commodity prices have challenged area farmers over the past few
years; however, commodity prices have improved over the past year to help
stabilize the agricultural economy. Although there has been minimal effect
observed to date, an extended period of low commodity prices could result in a
reduced demand for goods and services provided by agriculture-related
businesses, which could also affect other businesses in the Company's market
area.


                                       4

<PAGE>

Lending Activities

      General. Historically, the Company has originated fixed-rate, one- to
four-family mortgage loans. In the early 1980's, the Company began to focus on
the origination of adjustable-rate mortgage ("ARM") loans and short-term loans
for retention in its portfolio in order to increase the percentage of loans in
its portfolio with more frequent repricing or shorter maturities, and in some
cases higher yields, than fixed-rate residential mortgage loans. The Company,
however, has continued to originate fixed-rate residential mortgage loans in
response to consumer demand, although most such loans are sold in the secondary
market. See "Management's Discussion and Analysis -- Asset/Liability Management"
in the Annual Report.

      While the Company historically has focused its lending activities on the
origination of loans secured by first mortgages on owner-occupied one- to
four-family residences, it also originates and purchases commercial and
multi-family real estate loans and originates consumer, commercial business,
residential and commercial construction and agriculturally related loans. The
Company originates most of its loans in its primary market area. More recently,
the Company has increased its emphasis, both in absolute dollars and as a
percentage of its gross loan portfolio, on all types of commercial lending. At
September 30, 2003, the Company's net loan portfolio totaled $349.7 million, or
45.3% of the Company's total assets.

      Loan applications are initially considered and approved at various levels
of authority, depending on the type, amount and loan-to-value ratio of the loan.
The Company has loan committees for each of the Banks. Loans in excess of
certain amounts require the approval of at least two committee members who must
also be executive officers, by the Bank's Board loan committee or by the Bank's
Board of Directors, which has responsibility for the overall supervision of the
loan portfolio. The Company reserves the right to discontinue, adjust or create
new lending programs to respond to its needs and to competitive factors.

      At September 30, 2003, the Company's largest lending relationship to a
single borrower or group of related borrowers totaled $9.8 million. This lending
relationship has total borrowings outstanding with the Company of $23.8 million,
with $14.0 million sold to other participants. The Company had twenty-two other
lending relationships in excess of $3.0 million as of September 30, 2003 with
the average outstanding balance of such loans totaling approximately $4.4
million. At September 30, 2003, each of these loans was performing in accordance
with its repayment terms.


                                       5

<PAGE>

      Loan Portfolio Composition. The following table provides information about
the composition of the Company's loan portfolio in dollar amounts and in
percentages (before deductions for loans in process, deferred fees and discounts
and allowances for losses) as of the dates indicated.


<TABLE>
<CAPTION>
                                                                                    September 30,
                                              ------------------------------------------------------------------------------------
                                                        2003                            2002                          2001
                                              ------------------------        ------------------------       ---------------------
                                                Amount         Percent         Amount          Percent        Amount       Percent
                                              --------        --------        --------        --------       --------     --------
<S>                                           <C>                <C>          <C>                <C>         <C>             <C>
Real Estate Loans
   One- to four-family ...................    $ 52,193            14.4%       $ 72,678            20.5%      $ 95,612         27.9%
   Commercial and multi-family ...........     171,791            47.2         151,806            42.9        123,636         36.0
   Agricultural ..........................      11,639             3.2          12,067             3.4         11,729          3.4
   Construction or development ...........      19,435             5.3          25,745             7.3         21,884          6.4
                                              --------        --------        --------        --------       --------     --------
   Total real estate loans ...............     255,058            70.1         262,296            74.1        252,861         73.7
                                              --------        --------        --------        --------       --------     --------

Other Loans:
   Consumer Loans:
      Home equity ........................      18,126             5.0          14,669             4.2         17,458          5.1
      Automobile .........................       3,271             0.9           3,287             0.9          4,160          1.2
      Other(1) ...........................       5,237             1.4           5,637             1.6          6,551          1.9
                                              --------        --------        --------        --------       --------     --------
        Total consumer loans .............      26,634             7.3          23,593             6.7         28,169          8.2
   Agricultural operating ................      22,599             6.2          25,308             7.1         25,253          7.4
   Commercial business ...................      59,468            16.4          42,844            12.1         36,773         10.7
                                              --------        --------        --------        --------       --------     --------
        Total other loans ................     108,701            29.9          91,745            25.9         90,195         26.3
                                              --------        --------        --------        --------       --------     --------
        Total loans ......................     363,759           100.0%        354,041           100.0%       343,056        100.0%
                                                              ========                        ========                    ========

Less:
   Loans in process ......................       8,895                           7,155                          5,859
   Deferred fees and discounts ...........         210                             256                            266
   Allowance for losses ..................       4,962                           4,693                          3,869
                                              --------                        --------                       --------

   Total loans receivable, net ...........    $349,692                        $341,937                       $333,062
                                              ========                        ========                       ========

<CAPTION>
                                                                    September 30,
                                              --------------------------------------------------------
                                                        2000                            1999
                                              ------------------------        ------------------------
                                               Amount          Percent         Amount          Percent
                                              --------        --------        --------        --------
<S>                                           <C>                <C>          <C>                <C>
Real Estate Loans
   One- to four-family ...................    $105,702            31.6%       $110,317            34.8%
   Commercial and multi-family ...........     103,595            31.0          85,793            27.1
   Agricultural ..........................      10,895             3.3           9,874             3.1
   Construction or development ...........      31,301             9.4          28,379             9.0
                                              --------        --------        --------        --------
   Total real estate loans ...............     251,493            75.3         234,363            74.0
                                              --------        --------        --------        --------

Other Loans:
   Consumer Loans:
      Home equity ........................      18,144             5.4          14,834             4.7
      Automobile .........................       2,596              .8           3,861             1.3
      Other(1) ...........................       5,743             1.7           4,731             1.4
                                              --------        --------        --------        --------
        Total consumer loans .............      26,483             7.9          23,426             7.4
   Agricultural operating ................      26,810             8.0          29,284             9.2
   Commercial business ...................      29,332             8.8          29,942             9.4
                                              --------        --------        --------        --------
        Total other loans ................      82,625            24.7          82,652            26.0
                                              --------        --------        --------        --------
        Total loans ......................     334,118           100.0%        317,015           100.0%
                                                              ========                        ========

Less:
   Loans in process ......................       5,424                          10,494
   Deferred fees and discounts ...........         401                             350
   Allowance for losses ..................       3,590                           3,093
                                              --------                        --------

   Total loans receivable, net ...........    $324,703                        $303,078
                                              ========                        ========
</TABLE>


----------
(1)   Consist generally of various types of secured and unsecured consumer
      loans.


                                       6

<PAGE>

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


<TABLE>
<CAPTION>
                                                                                      September 30,
                                                         -------------------------------------------------------------------------
                                                                 2003                      2002                       2001
                                                         --------------------      --------------------       --------------------
                                                          Amount      Percent       Amount      Percent        Amount      Percent
                                                         --------    --------      --------    --------       --------    --------
                                                                                  (Dollars in Thousands)
<S>                                                      <C>            <C>        <C>            <C>         <C>            <C>
Fixed Rate Loans
 Real estate:
   One- to four-family ...............................   $ 36,655        10.1%     $ 45,387        12.8%      $ 55,521        16.2%
   Commercial and multi-family .......................     95,976        26.4        72,658        20.5         40,778        11.9
   Agricultural ......................................      5,311         1.5         5,498         1.6          5,605         1.6
   Construction or development .......................     11,528         3.1         2,788         0.8          5,545         1.6
                                                         --------    --------      --------    --------       --------    --------
      Total fixed-rate real estate loans .............    149,470        41.1       126,331        35.7        107,449        31.3
   Consumer ..........................................     17,889         4.9        20,282         5.7         25,834         7.5
   Agricultural operating ............................      5,238         1.4         9,339         2.6          7,402         2.2
   Commercial business ...............................     27,967         7.7        14,455         4.1         14,986         4.4
                                                         --------    --------      --------    --------       --------    --------
      Total fixed-rate loans .........................    200,564        55.1       170,407        48.1        155,671        45.4
                                                         --------    --------      --------    --------       --------    --------

Adjustable Rate Loans:
 Real estate:
   One- to four-family ...............................     15,538         4.3        27,291         7.7         40,091        11.7
   Commercial and multi-family .......................     75,815        20.8        79,148        22.4         82,858        20.5
   Agricultural ......................................      6,328         1.7         6,569         1.9          6,124         1.8
   Construction or development .......................      7,907         2.2        22,957         6.5         16,339         4.8
                                                         --------    --------      --------    --------       --------    --------
      Total adjustable-rate real estate loans ........    105,588        29.0       135,965        38.5        145,412        42.4
   Consumer ..........................................      8,745         2.4         3,311         0.9          2,335          .7
   Agricultural operating ............................     17,361         4.8        15,969         4.5         17,851         5.2
   Commercial business ...............................     31,501         8.7        28,389         8.0         21,787         6.4
                                                         --------    --------      --------    --------       --------    --------
      Total adjustable rate loans ....................    163,195        44.9       183,634        51.9        187,385        54.6
                                                         --------    --------      --------    --------       --------    --------
     Total loans .....................................    363,759       100.0%      354,041       100.0%       343,056       100.0%
                                                                     ========                  ========                   ========

Less:
   Loans in process ..................................      8,895                     7,155                      5,859
   Deferred fees and discounts .......................        210                       256                        266
   Allowance for losses ..............................      4,962                     4,693                      3,869
                                                         --------                  --------                   --------
     Total loans receivable, net .....................   $349,692                  $341,937                   $333,062
                                                         ========                  ========                   ========

<CAPTION>
                                                                          September 30,
                                                         -----------------------------------------------
                                                                 2000                       1999
                                                         --------------------       --------------------
                                                          Amount      Percent        Amount      Percent
                                                         --------    --------       --------    --------
                                                                      (Dollars in Thousands)
<S>                                                      <C>            <C>         <C>            <C>
Fixed Rate Loans
 Real estate:
   One- to four-family ...............................   $ 50,813        15.2%      $ 52,943        16.7%
   Commercial and multi-family .......................     35,277        10.6         34,326        10.8
   Agricultural ......................................      3,147          .9          5,080         1.6
   Construction or development .......................      4,001         1.2          2,322          .8
                                                         --------    --------       --------    --------
      Total fixed-rate real estate loans .............     93,238        27.9         94,671        29.9
   Consumer ..........................................     25,066         7.5         21,803         6.9
   Agricultural operating ............................     10,396         3.1         14,896         4.7
   Commercial business ...............................     14,215         4.3         23,206         7.3
                                                         --------    --------       --------    --------
      Total fixed-rate loans .........................    142,915        42.8        154,576        48.8
                                                         --------    --------       --------    --------

Adjustable Rate Loans:
 Real estate:
   One- to four-family ...............................     54,889        16.4         57,374        18.1
   Commercial and multi-family .......................     68,318        20.5         51,467        16.2
   Agricultural ......................................      7,748         2.3          4,794         1.6
   Construction or development .......................     27,300         8.2         26,057         8.2
                                                         --------    --------       --------    --------
      Total adjustable-rate real estate loans ........    158,255        47.4        139,692        44.1
   Consumer ..........................................      1,417          .4          1,623          .5
   Agricultural operating ............................     16,414         4.9         14,388         4.5
   Commercial business ...............................     15,117         4.5          6,736         2.1
                                                         --------    --------       --------    --------
      Total adjustable rate loans ....................    191,203        57.2        162,439        51.2
                                                         --------    --------       --------    --------
     Total loans .....................................    334,118       100.0%       317,015       100.0%
                                                                     ========                   ========

Less:
   Loans in process ..................................      5,424                     10,494
   Deferred fees and discounts .......................        401                        350
   Allowance for losses ..............................      3,590                      3,093
                                                         --------                   --------
     Total loans receivable, net .....................   $324,703                   $303,078
                                                         ========                   ========
</TABLE>



                                       7

<PAGE>

      The following table illustrates the interest rate sensitivity of the
Company's loan portfolio at September 30, 2003. Mortgages which have adjustable
or renegotiable interest rates are shown as maturing in the period during which
the contract reprices. The table does not reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.


<TABLE>
<CAPTION>
                                       Real Estate
                         -----------------------------------------
                                                                                                   Agricultural
                             Mortgage(1)           Construction             Consumer                 Operating
                         ------------------    -------------------     -------------------      ------------------
                                   Weighted               Weighted                Weighted                Weighted
                                    Average                Average                 Average                 Average
                          Amount     Rate       Amount      Rate        Amount       Rate        Amount     Rate
                         --------  --------    --------   --------     --------   --------      --------  --------
                                                           (Dollars in Thousands)
Due During Years
Ending September 30
<S>                      <C>         <C>       <C>          <C>        <C>           <C>        <C>         <C>
2004(2)                  $ 91,891    5.93%     $ 12,735     6.46%      $ 13,021      5.78%      $ 17,989    6.42%
2005-2008                 103,798    6.28         6,116     6.38         10,094      7.33          3,502    6.18
2009 and following         39,934    6.43           584     4.50          3,519      7.56          1,108    6.48

<CAPTION>
                            Commercial
                              Business                 Total
                         -------------------    ------------------
                                    Weighted              Weighted
                                     Average               Average
                          Amount       Rate      Amount     Rate
                         --------   --------    --------  --------
                                    (Dollars in Thousands)
Due During Years
Ending September 30
<S>                      <C>           <C>      <C>         <C>
2004(2)                  $ 35,092      5.45%    $170,728    5.91%
2005-2008                  22,960      5.51      146,470    6.23
2009 and following          1,416      6.04       46,561    6.48
</TABLE>


----------
(1)   Includes one- to four-family, multi-family, commercial and agricultural
      real estate loans.

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


                                       8

<PAGE>

      The total amount of loans due after September 30, 2004 which have
predetermined interest rates is $153.6 million, while the total amount of loans
due after such date which have floating or adjustable interest rates is $100.9
million.

      One- to Four-Family Residential Mortgage Lending. One- to four-family
residential mortgage loan originations are generated by the Company's marketing
efforts, its present customers, walk-in customers and referrals from real estate
agents and builders. At September 30, 2003, the Company's one- to four-family
residential mortgage loan portfolio totaled $52.2 million, or 14.4% of the
Company's total gross loan portfolio. Approximately 11.0% of the Company's one-
to four-family mortgage loans or 1.6% of the Company's gross loans have been
purchased, generally from other financial institutions. The majority of these
are ARM loans. See "--Originations, Purchases, Sales and Servicing of Loans and
Mortgage-Backed Securities." At September 30, 2003, the average outstanding
principal balance of a one- to four-family residential mortgage loan was
$54,000.

      The Company offers fixed-rate and ARM loans. During the year ended
September 30, 2003, the Company originated $1.7 million of adjustable-rate loans
and $76.2 million of fixed-rate loans secured by one- to four-family residential
real estate, of which approximately $31.6 million was held in portfolio. The
Company's one- to four-family residential mortgage originations are secured
primarily by properties located in its primary market area and surrounding
areas.

      The Company originates one- to four-family residential mortgage loans with
terms up to a maximum of 30-years and with loan-to-value ratios up to 97% of the
lesser of the appraised value of the security property or the contract price.
The Company generally requires that private mortgage insurance be obtained in an
amount sufficient to reduce the Company's exposure to at or below the 80%
loan-to-value level or the loans are sold. Residential loans generally do not
include prepayment penalties.

      The Company currently offers one, three, five and seven year ARM loans.
These loans have a fixed-rate for the stated period and, thereafter, such loans
adjust annually. These loans generally provide for an annual cap of up to a 200
basis points and a lifetime cap of 600 basis points over the initial rate. As a
consequence of using an initial fixed-rate and caps, the interest rates on these
loans may not be as rate sensitive as is the Company's cost of funds. The
Company's ARMs do not permit negative amortization of principal and are not
convertible into a fixed rate loan. The Company's delinquency experience on its
ARM loans has generally been similar to its experience on fixed rate residential
loans.

      Due to consumer demand, the Company also offers fixed-rate mortgage loans
with terms up to 30 years, most of which conform to secondary market standards,
i.e., Fannie Mae, Ginnie Mae, and Freddie Mac standards. Interest rates charged
on these fixed-rate loans are competitively priced according to market
conditions. The Company currently sells most, but not all, of its fixed-rate
loans with terms greater than 15 years. Historically, the Company had held in
portfolio a higher percentage of its fixed rate mortgage loans.

      In underwriting one- to four-family residential real estate loans, the
Company evaluates both the borrower's ability to make monthly payments and the
value of the property securing the loan. Most properties securing real estate
loans made by the Company are appraised by independent fee appraisers approved
by the Board of Directors. The Company generally requires borrowers to obtain an
attorney's title opinion or title insurance, and fire and property insurance
(including flood insurance, if necessary) in an amount not less than the amount
of the loan. Real estate loans originated by the Company generally contain a
"due on sale" clause allowing the Company to declare the unpaid principal
balance due and payable upon the sale of the security property.


                                       9

<PAGE>

      Commercial and Multi-Family Real Estate Lending. The Company is also
engaged in commercial and multi-family real estate lending in its primary market
area and surrounding areas and has purchased whole loan and participation
interests in loans from other financial institutions. At September 30, 2003, the
Company's commercial and multi-family real estate loan portfolio totaled $171.8
million, or 47.2% of the Company's total gross loan portfolio. The purchased
loans and loan participation interests are generally secured by properties
located in the Midwest and Northwest. See " - Originations, Purchases, Sales and
Servicing of Loans and Mortgage-Backed Securities." The Company, in order to
supplement its loan portfolio and consistent with management's objectives to
expand the Company's commercial and multi-family loan portfolio, purchased $26.2
million, $24.5 million, and $24.0 million of such loans during fiscal 2003, 2002
and 2001, respectively. At September 30, 2003, $417,000 or 0.2% of the Company's
commercial and multi-family real estate loans were non-performing. See " --
Non-Performing Assets, Other Loans of Concern and Classified Assets."

      The Company's commercial and multi-family real estate loan portfolio is
secured primarily by apartment buildings, nursing homes, assisted
living/retirement facilities, office buildings and hotels. Commercial and
multi-family real estate loans generally have terms that do not exceed 20 years,
have loan-to-value ratios of up to 80% of the appraised value of the security
property, and are typically secured by personal guarantees of the borrowers. The
Company has a variety of rate adjustment features and other terms in its
commercial and multi-family real estate loan portfolio. Commercial and
multi-family real estate loans provide for a margin over a number of different
indices. In underwriting these loans, the Company currently analyzes the
financial condition of the borrower, the borrower's credit history, and the
reliability and predictability of the cash flow generated by the property
securing the loan. Appraisals on properties securing commercial real estate
loans originated by the Company are performed by independent appraisers.

      At September 30, 2003, the Company's largest commercial and multi-family
real estate loan was a $7.4 million loan secured by residential housing
developments. The Company had eighteen other commercial and/or multi-family
loans in excess of $3.0 million at such date. All of these loans are currently
performing in accordance with their terms. At September 30, 2003, the average
outstanding principal balance of a commercial or multi-family real estate loan
held by the Company was $545,000.

      Multi-family and commercial real estate loans generally present a higher
level of risk than loans secured by one- to four-family residences. This greater
risk is due to several factors, including the concentration of principal in a
limited number of loans and borrowers, the effect of general economic conditions
on income producing properties and the increased difficulty of evaluating and
monitoring these types of loans. Furthermore, the repayment of loans secured by
multi-family and commercial real estate is typically dependent upon the
successful operation of the related real estate project. If the cash flow from
the project is reduced (for example, if leases are not obtained or renewed, or a
bankruptcy court modifies a lease term, or a major tenant is unable to fulfill
its lease obligations), the borrower's ability to repay the loan may be
impaired.

      Construction Lending. The Company makes construction loans to individuals
for the construction of their residences as well as to builders for the
construction of one- to four-family residences and commercial and multi-family
real estate. At September 30, 2003, the Company's construction loan portfolio
totaled $19.4 million, or 5.3% of the Company's total gross loan portfolio.

      Construction loans to individuals for their residences are structured to
be converted to permanent loans at the end of the construction phase, which
typically runs up to twelve months. These construction loans have rates and
terms which generally match the one- to four-family loan rates then offered by
the Company, except that during the construction phase the borrower pays
interest only. Generally, the maximum loan-to-value ratio of owner occupied
single family construction loans is 80% of appraised


                                       10

<PAGE>

value. Residential construction loans are generally underwritten pursuant to the
same guidelines used for originating permanent residential loans. At September
30, 2003, the Company had $1.4 million of construction loans to borrowers
intending to live in the properties upon completion of construction.

      Generally, construction loans to builders of one- to four-family
residences require the payment of interest only for up to 12 months and have
terms of up to 12 months. These loans may provide for the payment of interest
and loan fees from loan proceeds and carry adjustable rates of interest. Loan
fees charged in connection with the origination of such loans are generally 1%.

      Construction loans on commercial and multi-family real estate projects may
be secured by apartments, agricultural facilities, small office buildings,
medical facilities, assisted living facilities, hotels or other property, and
are generally structured to be converted to permanent loans at the end of the
construction phase, which generally runs up to 18 months. During the
construction phase the borrower pays interest only. These loans generally
provide for the payment of interest and loan fees from loan proceeds. At
September 30, 2003, the Company had approximately $18.0 million of loans for the
construction of commercial and multi-family real estate. This amount consisted
of three loans totaling $496,000 for the construction of non-owner occupied
single family residences, two loans totaling $2.9 million for the construction
of churches, and nine loans totaling $14.6 million for the construction of
commercial facilities. All of these loans were performing in accordance with
their terms at September 30, 2003.

      Construction loans are obtained principally through continued business
from builders who have previously borrowed from the Company and from existing
customers who are building new facilities. The application process includes a
submission to the Company of accurate plans, specifications, costs of the
project to be constructed and projected revenues from the project. These items
are also used as a basis to determine the appraised value of the subject
property. Loans are based on the lesser of the current appraised value of the
property or the cost of construction (land plus building).

      Because of the uncertainties inherent in estimating construction costs and
the market for the project upon completion, it is relatively difficult to
evaluate accurately the total loan funds required to complete a project, the
related loan-to-value ratios and the likelihood of ultimate success of the
project. Construction loans to borrowers other than owner-occupants also involve
many of the same risks discussed above regarding multi-family and commercial
real estate loans and tend to be more sensitive to general economic conditions
than many other types of loans. 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.

      Agricultural Lending. The Company originates loans to finance the purchase
of farmland, livestock, farm machinery and equipment, seed, fertilizer and for
other farm related products. At September 30, 2003, the Company had agricultural
real estate loans secured by farmland of $11.6 million or 3.2% of the Company's
gross loan portfolio. At the same date, $22.6 million, or 6.2% of the Company's
gross loan portfolio, consisted of secured loans related to agricultural
operations.

      Agricultural operating loans are originated at either an adjustable or
fixed rate of interest for up to a one year term or, in the case of livestock,
upon sale. Most agricultural operating loans have terms of one year or less.
Such loans provide for payments of principal and interest at least annually, or
a lump sum payment upon maturity if the original term is less than one year.
Loans secured by agricultural machinery are generally originated as fixed-rate
loans with terms of up to seven years. At September 30, 2003, the average
outstanding principal balance of an agricultural operating loan held by the
Company was $47,000. At September 30, 2003, $291,000, or 1.3%, of the Company's
agricultural operating loans were non-performing.


                                       11

<PAGE>

      Agricultural real estate loans are frequently originated with adjustable
rates of interest. Generally, such loans provide for a fixed rate of interest
for the first one to five years, which then balloon or adjust annually
thereafter. In addition, such loans generally amortize over a period of ten to
20 years. Adjustable-rate agricultural real estate loans provide for a margin
over the yields on the corresponding U.S. Treasury Security or prime rate.
Fixed-rate agricultural real estate loans generally have terms up to five years.
Agricultural real estate loans are generally limited to 75% of the value of the
property securing the loan. At September 30, 2003, none of the Company's
agricultural real estate portfolio was non-performing.

      Agricultural lending affords the Company the opportunity to earn yields
higher than those obtainable on one- to four-family residential lending.
Nevertheless, agricultural lending involves a greater degree of risk than one-
to four-family residential mortgage loans because of the typically larger loan
amount. In addition, payments on loans are dependent on the successful operation
or management of the farm property securing the loan or for which an operating
loan is utilized. The success of the loan may also be affected by many factors
outside the control of the farm borrower.

      Weather presents one of the greatest risks as hail, drought, floods, or
other conditions, can severely limit crop yields and thus impair loan repayments
and the value of the underlying collateral. This risk can be reduced by the
farmer with a variety of insurance coverages which can help to ensure loan
repayment. Government support programs and the Company generally require that
farmers procure crop insurance coverage.

      Grain and livestock prices also present a risk as prices may decline prior
to sale resulting in a failure to cover production costs. These risks may be
reduced by the farmer with the use of futures contracts or options to mitigate
price risk. The Company frequently requires borrowers to use future contracts or
options to reduce price risk and help ensure loan repayment.

      Another risk is the uncertainty of government programs and other
regulations. During periods of low commodity prices, the income from government
programs can be a significant source of cash to make loan payments and if these
programs are discontinued or significantly changed, cash flow problems or
defaults could result.

      Finally, many farms are dependent on a limited number of key individuals
upon whose injury or death may result in an inability to successfully operate
the farm.

      Consumer Lending. The Company offers a variety of secured consumer loans,
including automobile, boat, home equity, home improvement, federally guaranteed
student loans, and loans secured by savings deposits. In addition, the Company
offers other secured and unsecured consumer loans. The Company currently
originates substantially all of its consumer loans in its primary market area
and surrounding areas. The Company originates consumer loans on both a direct
and indirect basis. At September 30, 2003, the Company's consumer loan portfolio
totaled $26.6 million, or 7.3% of its total gross loan portfolio. Of the
consumer loan portfolio at September 30, 2003, most were short- and
intermediate-term, fixed-rate loans.

      The largest component of the Company's consumer loan portfolio consists of
home equity loans and lines of credit. Substantially all of the Company's home
equity loans and lines of credit are secured by second mortgages on principal
residences. The Company will lend amounts which, together with all prior liens,
may be up to 100% of the appraised value of the property securing the loan. Home
equity loans and lines of credit have maximum terms of up to 15 years and five
years, respectively.


                                       12

<PAGE>

      The Company primarily originates automobile loans on a direct basis, but
also originates indirect automobile loans on a very limited basis. Direct loans
are loans made when the Company extends credit directly to the borrower, as
opposed to indirect loans, which are made when the Company purchases loan
contracts, often at a discount, from automobile dealers which have extended
credit to their customers. The Company's automobile loans typically are
originated at fixed interest rates with terms up to 60 months for new and used
vehicles. Loans secured by automobiles are generally originated for up to 80% of
the N.A.D.A. book value of the automobile securing the loan.

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

      Consumer loans may entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans which are unsecured or are
secured by rapidly depreciable assets, such as automobiles or recreational
equipment. 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. At September 30, 2003, 17,000, or 0.1%, of
the Company's consumer loan portfolio was non-performing.

      Commercial Business Lending. The Company also originates commercial
business loans. Most of the Company's commercial business loans have been
extended to finance local and regional businesses and include short-term loans
to finance machinery and equipment purchases, inventory and accounts receivable.
Commercial loans also involve the extension of revolving credit for a
combination of equipment acquisitions and working capital in expanding
companies. At September 30, 2003, $59.5 million, or 16.4% of the Company's total
gross loan portfolio was comprised of commercial business loans.

      The maximum term for loans extended on machinery and equipment is based on
the projected useful life of such machinery and equipment. Generally, the
maximum term on non-mortgage lines of credit is one year. The loan-to-value
ratio on such loans and lines of credit generally may not exceed 80% of the
value of the collateral securing the loan. The Company's commercial business
lending policy includes credit file documentation and analysis of the borrower's
character, capacity to repay the loan, the adequacy of the borrower's capital
and collateral as well as an evaluation of conditions affecting the borrower.
Analysis of the borrower's past, present and future cash flows is also an
important aspect of the Company's current credit analysis. Nonetheless, such
loans are believed to carry higher credit risk than more traditional
investments.

      The largest commercial business loan outstanding at September 30, 2003 was
a $7.9 million warehouse line of credit secured primarily by the assignment of
automobile contracts and new and used automobiles. The next largest commercial
business loan outstanding at September 30, 2003 was a $5.8 million loan secured
by operating assets used in the manufacture and sale of commercial signs. The
Company had ten other commercial business loans outstanding in excess of $1.0
million at September 30, 2003. All of these loans are currently performing in
accordance with their terms. At September 30, 2003, the average outstanding
principal balance of a commercial business loan held by the Company was
$142,000.


                                       13

<PAGE>

      Unlike residential mortgage loans, which generally are made on the basis
of the borrower's ability to make repayment from his or her employment and other
income and which are secured by real property whose value tends to be more
easily ascertainable, commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business loans may be substantially dependent on the success of the business
itself (which, in turn, is likely to be dependent upon the general economic
environment). The Company's commercial business loans are usually, but not
always, secured by business assets and personal guarantees. However, the
collateral securing the loans may depreciate over time, may be difficult to
appraise and may fluctuate in value based on the success of the business. At
September 30, 2003, $126,000 or 0.2% of the Company's commercial business loan
portfolio was non-performing.

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

      Loans are generally originated by the Company's staff of salaried loan
officers. Loan applications are taken and processed in the branches and the main
office of the Company. While the Company originates both adjustable-rate and
fixed-rate loans, its ability to originate loans is dependent upon the relative
customer demand for loans in its market. Demand is affected by the interest rate
and economic environment.

      The Company, from time to time, sells whole loans and loan participations
generally without recourse. At September 30, 2003, there were no loans
outstanding sold with recourse. When loans are sold the Company typically
retains the responsibility for collecting and remitting loan payments, making
certain that real estate tax payments are made on behalf of borrowers, and
otherwise servicing the loans. The servicing fee is recognized as income over
the life of the loans. The Company services loans that it originated and sold
totaling $48.1 million at September 30, 2003, of which $26.0 million were sold
to Fannie Mae and $22.1 million were sold to others.

      In periods of economic uncertainty, the Company's ability to originate
large dollar volumes of loans may be substantially reduced or restricted, with a
resultant decrease in related loan origination fees, other fee income and
operating earnings. In addition, the Company's ability to sell loans may
substantially decrease as potential buyers (principally government agencies)
reduce their purchasing activities.


                                       14

<PAGE>

      The following table shows the loan origination (including undisbursed
portions of loans in process), purchase and repayment activities of the Company
for the periods indicated.


<TABLE>
<CAPTION>
                                                                                           September 30,
                                                                            ------------------------------------------
                                                                               2003             2002            2001
                                                                            ---------        ---------        --------
                                                                                       (Dollars in Thousands)
<S>                                                                         <C>              <C>              <C>
Originations by type:
   Adjustable rate:
      Real estate - one- to four-family ......................              $   1,748        $   1,892        $  1,957
           - commercial and multi-family .....................                 24,452           23,781           5,691
           - agricultural real estate ........................                  5,861            3,807           3,622
      Non-real estate - consumer .............................                 10,424            3,161           7,288
           - commercial business .............................                 68,088           83,479          31,016
           - agricultural operating ..........................                 25,133           20,036          23,748
                                                                            ---------        ---------        --------
      Total adjustable-rate ..................................                135,706          136,156          73,322
                                                                            ---------        ---------        --------

   Fixed rate:
      Real estate - one- to four-family ......................                 76,215           49,493          37,116
           - commercial and multi-family .....................                 52,282           50,848           6,504
      Non-real estate - consumer .............................                 12,578           13,823          17,894
           - commercial business .............................                 33,405           33,277          15,776
           - agricultural operating ..........................                 14,502           16,265           8,980
                                                                            ---------        ---------        --------
      Total fixed-rate .......................................                188,982          163,706          86,270
                                                                            ---------        ---------        --------
      Total loans originated .................................                324,688          299,862         159,592
                                                                            ---------        ---------        --------

Purchases:
Real estate- one-to-four-family ..............................                     --               --           4,735
           - commercial and multi-family .....................                 26,163           24,542          23,960
Non-real estate - commercial business ........................                     --            2,563           4,514
                                                                            ---------        ---------        --------
        Total loans ..........................................                 26,163           27,105          33,209
      Total mortgage-backed securities .......................                428,753          128,494          22,886
                                                                            ---------        ---------        --------
        Total purchased ......................................                454,916          155,599          56,095
                                                                            ---------        ---------        --------

Sales and Repayments:
Sales:
   Real estate - one- to four family .........................                 46,418           21,486          14,085
   Non-real estate - commercial business .....................                     --               --              --
                                                                            ---------        ---------        --------
        Total loans ..........................................                 46,418           21,486          14,085
   Mortgaged-backed securities ...............................                 88,210               --              --
                                                                            ---------        ---------        --------
        Total sales ..........................................                134,628           21,486          14,085
                                                                            ---------        ---------        --------
Repayments:
   Loan principal repayments .................................                294,761          293,241         169,809
   Mortgage-backed securities repayments .....................                185,621           48,519          16,447
                                                                            ---------        ---------        --------
   Total principal repayments ................................                480,382          341,760         186,256
                                                                            ---------        ---------        --------
        Total reductions .....................................                615,010          363,246         200,341
                                                                            ---------        ---------        --------

   Increase (decrease) in other items, net ...................                 (7,067)          (1,389)          4,816
                                                                            ---------        ---------        --------
        Net increase (decrease) ..............................              $ 157,527        $  90,826        $ 20,162
                                                                            ---------        ---------        --------
</TABLE>


      At September 30, 2003, approximately $76.3 million, or 21.0%, of the
Company's gross loan portfolio consisted of purchased loans. The Company
believes that purchasing loans secured by real estate located outside of its
market area assists the Company in diversifying its portfolio and may lessen the
adverse affects on the Company's business or operations which could result in
the event of a downturn or weakening of the local economy in which the Company
conducts its operations. However,


                                       15

<PAGE>

additional risks are associated with purchasing loans secured by real estate
outside of the Company's market area, including the lack of knowledge of the
local real estate market and difficulty in monitoring and inspecting the
property securing the loans. The Company does not record any adjustments to the
allowance for loan losses as a result of these loan purchases.

      The following table provides information regarding the Company's balance
of wholly purchased real estate loans and real estate loan participations for
each state in which the balance of such loans exceeded $1.0 million at September
30, 2003. Not included in the following table are purchased commercial business
loans totaling $631,000, approximately 45% of which are located in the Company's
market area.


<TABLE>
<CAPTION>
                                      One- to four-            Commercial and            Construction              Total Purchased
                                      Family Loans              Multi-Family                Loans                       Loans
                                      ------------              ------------                -----                       -----

                                                 Number                    Number                    Number                   Number
                                                  of                         of                        of                       of
           Location                 Balance      Loans       Balance       Loans      Balance        Loans        Balance     Loans
           --------                 -------      -----       -------       -----      -------        -----        -------     -----
                                                                        (Dollars in Thousands)
<S>                                 <C>           <C>        <C>            <C>       <C>               <C>       <C>          <C>
Arizona ....................        $   34          1        $ 6,516         2        $   --            --        $ 6,550        3
California .................             1          1          2,667         2            --            --          2,668        3
Colorado ...................            --         --          5,105         8            --            --          5,105        8
Iowa .......................           728         18          5,049         6            --            --          5,777       24
Minnesota ..................            --         --          4,053         5            --            --          4,053        5
Missouri ...................           478          9          3,712         3            --            --          4,190       12
Montana ....................            --         --          1,491         1            --            --          1,491        1
North Carolina .............         2,689         13             --        --            --            --          2,689       13
Oregon .....................            --         --             --        --         2,496             1          2,496        1
South Dakota ...............            92          7          3,773         3            --            --          3,865       10
Washington .................           639          2         24,404        10         3,395             1         28,438       13
Wisconsin ..................            --         --          5,596         4            --            --          5,596        4
Other states ...............         1,089         65          1,631         4            --            --          2,720       69
                                    ------        ---        -------        --        ------        ------        -------      ---

   Total ...................        $5,750        116        $63,997        48        $5,891             2        $75,638      166
                                    ======        ===        =======        ==        ======        ======        =======      ===

   Percent of loan Portfolio          11.0%                     37.3%                   30.3%                       20.8%
                                    ======                   =======                  ======                      ======
</TABLE>


Non-Performing Assets, Other Loans of Concern, and Classified Assets

      When a borrower fails to make a required payment on real estate secured
loans and consumer loans within 16 days after the payment is due, the Company
generally initiates collection procedures by mailing a delinquency notice. The
customer is contacted again, by written notice or telephone, before the payment
is 30 days past due and again before 60 days past due. In most cases,
delinquencies are cured promptly; however, if a loan has been delinquent for
more than 90 days, satisfactory payment arrangements must be adhered to or the
Company will initiate foreclosure or repossession.

      Generally, when a loan becomes delinquent 90 days or more or when the
collection of principal or interest becomes doubtful, the Company will place the
loan on a non-accrual status and, as a result, previously accrued interest
income on the loan is taken out of current income. The loan will remain on a
non-accrual status until the loan becomes current.


                                       16

<PAGE>

      The following table sets forth the Company's loan delinquencies by type,
before allowance for loan losses, by amount and by percentage of type at
September 30, 2003.


<TABLE>
<CAPTION>
                                                                         Loans Delinquent For:
                                  -------------------------------------------------------------------------------------------------
                                            30-59 Days                         60-89 Days                    90 Days and Over
                                  -------------------------------    ------------------------------    ----------------------------
                                                          Percent                           Percent                         Percent
                                                            of                                of                              of
                                  Number      Amount     Category    Number      Amount    Category    Number     Amount   Category
                                  ------      ------     --------    ------      ------    --------    ------     ------   --------
                                                                         (Dollars in Thousands)
<S>                                   <C>     <C>           <C>          <C>     <C>           <C>          <C>   <C>         <C>
Real Estate:
   One- to four-family .......         1      $   69         .13%         1      $   27        .05%         1     $  156       .30%
   Commercial and multi-
   family ....................        --          --          --         --          --         --          1        417       .24
Consumer .....................        10         111         .42          2          14        .05          2         17       .06
Agricultural operating .......        --          --          --         --          --         --          1        291      1.29
Commercial business ..........         5         757        1.27         --          --         --          3        126       .21
                                  ------      ------                 ------      ------                ------     ------
      Total ..................        16      $  937         .26%         3      $   41        .01%         8     $1,007       .28%
                                  ======      ======                 ======      ======                ======     ======
</TABLE>


Delinquencies 90 days and over constituted .28% of total loans and .13% of total
assets.


                                       17

<PAGE>

      The table below sets forth the amounts and categories of non-performing
assets in the Company's loan portfolio. Loans, with some exceptions, are
typically placed on non-accrual status when the loan becomes 90 days or more
delinquent or when the collection of principal and/or interest become doubtful.
For all years presented, the Company's troubled debt restructurings (which
involved 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
table and were performing as agreed.


<TABLE>
<CAPTION>
                                                                                         September 30,
                                                             ----------------------------------------------------------------------
                                                              2003            2002            2001            2000            1999
                                                             ------          ------          ------          ------          ------
<S>                                                          <C>             <C>             <C>             <C>             <C>
Non-accruing loans:
   One- to four-family .............................         $  156          $   51          $  168          $  206          $  613
   Commercial and multi-family .....................            417             417             464              --           1,055
   Agricultural real estate ........................             --              41              --              37              70
   Consumer ........................................             17              --              33              --             140
   Agricultural operating ..........................            291             394             569              17             285
   Commercial business .............................            126             408             369              51              75
                                                             ------          ------          ------          ------          ------
      Total non-accruing loans .....................          1,007           1,311           1,603             311           2,238

Accruing loans delinquent
   90 days or more .................................             --             819              --              --              --
                                                             ------          ------          ------          ------          ------
      Total non-performing loans ...................          1,007           2,130           1,603             311           2,238
                                                             ------          ------          ------          ------          ------

Restructured Loans:
   Consumer ........................................             --              --              10              --              --
   Agricultural operating ..........................             28               9              14             918             923
   Commercial business .............................             31              71              --              43              53
                                                             ------          ------          ------          ------          ------
      Total restructured loans .....................             59              80              24             961             976
                                                             ------          ------          ------          ------          ------

Foreclosed assets:
   One- to four-family .............................             --              --              --              --              94
   Commercial real estate ..........................            912           1,310             889             430              --
   Consumer ........................................              4              18              51              15              24
   Commercial business .............................            193              --              --              --              25
                                                             ------          ------          ------          ------          ------
      Total ........................................          1,109           1,328             940             445             143
   Less: Allowance for losses ......................             --              --              --              --              --
                                                             ------          ------          ------          ------          ------
      Total foreclosed assets, net .................          1,109           1,328             940             445             143
                                                             ------          ------          ------          ------          ------

   Total non-performing assets .....................         $2,175          $3,538          $2,567          $1,717          $3,357
                                                             ======          ======          ======          ======          ======
   Total as a percentage of total assets ...........            .28%            .58%            .49%            .34%            .66%
                                                             ======          ======          ======          ======          ======
</TABLE>


      For the year ended September 30, 2003, gross interest income which would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to approximately $128,000, of which none was
included in interest income.

      Non-accruing Loans. At September 30, 2003, the Company had $1.0 million in
non-accruing loans, which constituted .28% of the Company's gross loan
portfolio. At such date, there were no non-accruing loans or aggregate
non-accruing loans to one borrower in excess of $500,000 in net book value.

      Accruing Loans Delinquent 90 Days or More. At September 30, 2003, the
Company has no accruing loans delinquent 90 days or more.


                                       18

<PAGE>

      Other Loans of Concern. At September 30, 2003, there were loans totaling
$8.5 million not included in the table above where known information about the
possible credit problems of borrowers caused management to have concern as to
the ability of the borrower to comply with the present loan repayment terms.
This amount consisted of three one- to four-family residential mortgage loans
totaling $95,000, six commercial business loans totaling $724,000, six
agricultural operating loans totaling $1.7 million, eleven consumer loans
totaling $209,000 and three commercial real estate loans totaling $5.8 million.

      Commercial real estate loans of concern at September 30, 2003 included a
$4.1 million participation loan secured by a hotel located in Federal Way,
Washington. A slow down in the travel industry after 9/11 contributed to
delinquency issues with this loan during fiscal 2002. The travel industry is in
process of recovering from this slow down and the loan was current at September
30, 2003.

      Classified Assets. Federal regulations provide for the classification of
loans and other assets such as debt and equity securities considered by the
Office of Thrift Supervision (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 savings association 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 minimal value that
their continuance as assets without the establishment of a specific loss reserve
is not warranted. The loans held by Security are subject to similar
classification by its regulatory authorities.

      When assets are classified as either substandard or doubtful, the Bank may
establish general allowances for loan losses in an amount deemed prudent by
management. General allowances represent loss allowances which have been
established to recognize the inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular
problem assets. When assets are classified as "loss," the Bank 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. The Banks'
determinations as to the classification of their assets and the amount of their
valuation allowances are subject to review by their regulatory authorities, who
may order the establishment of additional general or specific loss allowances.

      On the basis of management's review of its assets, at September 30, 2003,
the Company had classified a total of $9.5 million of its assets as substandard,
$33,000 as doubtful and none as loss.

      Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity, including those loans which are being specifically monitored by
management. Such evaluation, which includes a review of 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 loss allowance.

      Current economic conditions in the agricultural sector of the Company's
market area are generally stable due to improved commodity prices. The
agricultural economy is accustomed to commodity price fluctuations and is
generally able to handle such fluctuations without significant problem. Although
the Company underwrites its agricultural loans based on the current level of


                                       19

<PAGE>

commodity prices, an extended period of low commodity prices or adverse growing
conditions could result in weakness in the agricultural loan portfolio and could
create a need for the Company to increase its allowance for loan losses through
increased charges to provision for loan losses.

      Real estate properties acquired through foreclosure are recorded at the
lower of cost or fair value. If fair value at the date of foreclosure is lower
than the balance of the related loan, the difference will be charged-off to the
allowance for loan losses at the time of transfer. Valuations are periodically
updated by management and if the value declines, a specific provision for losses
on such property is established by a charge to operations.

      Although management believes that it uses the best information available
to determine the allowances, unforeseen market conditions could result in
adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Company's allowances will be the result
of periodic loan, property and collateral reviews and thus cannot be predicted
in advance.


                                       20

<PAGE>

      The following table sets forth an analysis of the Company's allowance for
loan losses.


<TABLE>
<CAPTION>
                                                                                       September 30
                                                        ---------------------------------------------------------------------------
                                                          2003             2002             2001             2000             1999
                                                        -------          -------          -------          -------          -------
                                                                                   (Dollars in Thousands)
<S>                                                     <C>              <C>              <C>              <C>              <C>
Balance at beginning of period .....................    $ 4,693          $ 3,869          $ 3,590          $ 3,093          $ 2,909

Charge-offs:
   One-to four family ..............................         (4)             (11)             (37)             (65)             (84)
   Agricultural operating ..........................         --              (84)            (308)              --           (1,160)
   Commercial and multi-family .....................        (31)              --               --             (370)              --
   Consumer ........................................        (49)            (139)             (61)            (104)            (202)
   Commercial business .............................        (29)             (86)             (76)            (731)            (420)
                                                        -------          -------          -------          -------          -------
      Total charge-offs ............................       (113)            (320)            (482)          (1,270)          (1,866)
                                                        -------          -------          -------          -------          -------
Recoveries:
   One-to-four family ..............................          2                2                2               --               --
   Consumer ........................................         13               39               29               55               39
   Commercial business .............................         10                4                3               33                8
   Commercial and multi-family .....................         --               --               --               --               --
   Agricultural operating ..........................          7                9               17               39               11
                                                        -------          -------          -------          -------          -------
      Total recoveries .............................         32               54               51              127               58
                                                        -------          -------          -------          -------          -------

      Net charge-offs ..............................        (81)            (266)            (431)          (1,143)          (1,808)
   Additions charged to operations .................        350            1,090              710            1,640            1,992
                                                        -------          -------          -------          -------          -------
   Balance at end of period ........................    $ 4,962          $ 4,693          $ 3,869          $ 3,590          $ 3,093
                                                        =======          =======          =======          =======          =======

   Ratio of net charge-offs during the period to
   average loans outstanding during the period .....        .02%             .08%             .13%             .37%             .63%
                                                        =======          =======          =======          =======          =======

   Ratio of net charge-offs during the period to
   average non-performing assets ...................       2.50%            4.54%           16.04%           64.53%           43.12%
                                                        =======          =======          =======          =======          =======
</TABLE>


      For more information on the provision for loan losses, see "Management's
Discussion and Analysis - Results of Operations" in the Annual Report.


                                       21

<PAGE>

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


<TABLE>
<CAPTION>
                                                                         September 30,
                               ---------------------------------------------------------------------------------------------------
                                    2003                2002                 2001                  2000                 1999
                               ---------------    ----------------     ----------------      ----------------     ----------------
                                         Percent             Percent             Percent               Percent              Percent
                                        of Loans            of Loans             of Loans              of Loans             of Loans
                                         in Each             in Each              in Each               in Each              in Each
                                        Category            Category             Category              Category             Category
                                        to Total            to Total             to Total              to Total             to Total
                               Amount    Loans    Amount     Loans     Amount     Loans      Amount     Loans     Amount     Loans
                               ------   ------    ------    ------     ------    ------      ------    ------     ------    ------
                                                                    (Dollars in Thousands)
<S>                            <C>       <C>      <C>        <C>       <C>        <C>        <C>        <C>       <C>        <C>
One- to four-family .......    $  135    14.35%   $  170     20.53%    $  222     27.87%     $  250     31.63%    $  331     34.80%
Commercial and multi-family
real estate ...............     2,390    46.99     2,536     42.88      1,604     36.04       1,183     31.01        772     27.06
Agricultural real estate ..       116     3.20       131      3.41        128      3.42         124      3.26        114      3.11
Construction ..............       122     5.58       129      7.27         88      6.38         125      9.37        123      8.95
Consumer ..................       344     7.32       317      6.66        403      8.21         335      7.93        308      7.39
Agricultural operating ....       628     6.21       639      7.15        617      7.36         611      8.02        806      9.24
Commercial business .......     1,027    16.35       663     12.10        618     10.72         592      8.78        449      9.45
Unallocated ...............       200       --       108        --        189        --         370        --        190        --
                               ------   ------    ------    ------     ------    ------      ------    ------     ------    ------

   Total ..................    $4,962   100.00%   $4,693    100.00%    $3,869    100.00%     $3,590    100.00%    $3,093    100.00%
                               ======   ======    ======    ======     ======    ======      ======    ======     ======    ======
</TABLE>



                                       22

<PAGE>

Investment Activities

      General. The investment policy of the Company generally is to invest funds
among various categories of investments and maturities based upon the Company's
need for liquidity, to achieve the proper balance between its desire to minimize
risk and maximize yield, to provide collateral for borrowings, and to fulfill
the Company's asset/liability management policies. The Company's investment and
mortgage-backed securities portfolios are managed in accordance with a written
investment policy adopted by the Board of Directors, which is implemented by
members of the Bank's Investment Committee.

      As of September 30, 2003, the Company's entire investment and
mortgage-backed securities portfolios were classified as available for sale. For
additional information regarding the Company's investment and mortgage-backed
securities portfolios, see Notes 1 and 3 of the Notes to Consolidated Financial
Statements in the Annual Report.

      Investment Securities. It is the Company's general policy to purchase
investment securities which are U.S. Government securities and federal agency
obligations, state and local government obligations, commercial paper, corporate
debt securities and overnight federal funds.

      The following table sets forth the carrying value of the Company's
investment security portfolio, excluding mortgage-backed securities, at the
dates indicated.


<TABLE>
<CAPTION>
                                                                                                          September 30,
                                                                                             ---------------------------------------
                                                                                               2003            2002            2001
                                                                                             -------         -------         -------
                                                                                                     (Dollars in Thousands)
<S>                                                                                          <C>             <C>             <C>
Investment Securities:
   Trust preferred securities(1) ...................................................         $23,323         $24,128         $24,680
   Federal agency obligations ......................................................              --              --           5,080
   Municipal bonds .................................................................             606             764           1,023
   Equity investments ..............................................................             494             660             420
   Freddie Mac preferred stock .....................................................             226             191             249
   Fannie Mae common stock .........................................................             140             156             160
   Other ...........................................................................           1,001              --              --
                                                                                             -------         -------         -------
      Subtotal .....................................................................          25,790          25,899          31,612

FHLB stock .........................................................................          10,930           6,843           6,399
                                                                                             -------         -------         -------

      Total investment securities and FHLB stock ...................................         $36,720         $32,742         $38,011
                                                                                             =======         =======         =======

Other Interest-Earning Assets:
   Interest bearing deposits in other financial institutions and Federal
   Funds sold ......................................................................         $ 7,667         $ 6,051         $ 7,750
                                                                                             =======         =======         =======
</TABLE>


----------
(1)   Within the trust preferred securities presented above, there are
      securities from individual issuers that exceed 10% of the Company's total
      equity. The name and the aggregate market value of securities of each
      individual issuer are as follows, as of September 30, 2003: Key Corp
      Capital I, $4.4 million; Bank Boston Capital Trust IV, $4.3 million;
      BankAmerica Capital III, $4.6 million.


                                       23

<PAGE>

      The composition and maturities of the Company's investment securities
portfolio, excluding equity securities, FHLB stock and mortgage-backed
securities, are indicated in the following table.


<TABLE>
<CAPTION>
                                                                                   September 30, 2003
                                                 ----------------------------------------------------------------------------------
                                                               After 1        After 5
                                                                 Year          Years
                                                 1 Year or     Through        Through        After             Total Investment
                                                    Less       5 Years       10 Years      10 Years               Securities
                                                 ---------     --------      ---------     ---------       ------------------------
                                                  Carrying     Carrying       Carrying      Carrying       Amortized         Market
                                                   Value        Value          Value         Value           Cost            Value
                                                 ---------     --------      ---------     ---------       ---------        -------
                                                                              (Dollars in Thousands)
<S>                                               <C>          <C>            <C>           <C>             <C>             <C>
Trust preferred securities ...............        $    --      $    --        $    --       $23,323         $26,741         $23,323
Municipal bonds ..........................            319          287             --            --             585             606
Other ....................................             --        1,001             --            --             998           1,001
                                                  -------      -------        -------       -------         -------         -------

Total investment securities ..............        $   319      $ 1,288        $    --       $23,323         $28,324         $24,930
                                                  =======      =======        =======       =======         =======         =======

Weighted average yield(1) ................           5.90%        5.57%          0.00%         2.66%           2.69%           2.85%
</TABLE>


(1)   Yields on tax-exempt obligations have not been computed on a
      tax-equivalent basis.

      Mortgage-Backed Securities. The Company's mortgage-backed and related
securities portfolio consists of securities issued under government-sponsored
agency programs, including those of Ginnie Mae, Fannie Mae and Freddie Mac. The
Company also holds Collateralized Mortgage Obligations ("CMOs"), as well as a
limited amount of privately issued mortgage pass-through certificates. The
Ginnie Mae, Fannie Mae and Freddie Mac certificates are modified pass-through
mortgage-backed securities that represent undivided interests in underlying
pools of fixed-rate, or certain types of adjustable-rate, predominantly
single-family and, to a lesser extent, multi-family residential mortgages issued
by these government-sponsored entities. Fannie Mae and Freddie Mac generally
provide the certificate holder a guarantee of timely payments of interest,
whether or not collected. Ginnie Mae's guarantee to the holder is timely
payments of principal and interest, backed by the full faith and credit of the
U.S. Government. Privately issued mortgage pass-through certificates generally
provide no guarantee as to timely payment of interest or principal, and reliance
is placed on the creditworthiness of the issuer, which the Company monitors on a
regular basis.

      CMOs are special types of pass-through debt in which the stream of
principal and interest payments on the underlying mortgages or mortgage-backed
securities is used to create classes with different maturities and, in some
cases, amortization schedules, as well as a residual interest, with each such
class possessing different risk characteristics. At September 30, 2003, the
Company held CMOs totaling $3.8 million, all of which were secured by underlying
collateral issued under government-sponsored agency programs or residential real
estate mortgage loans. Premiums associated with the purchase of these CMOs are
not significant, therefore, the risk of significant yield adjustments because of
accelerated prepayments is limited. Yield adjustments are encountered as
interest rates rise or decline, which in turn slows or increases prepayment
rates and affect the average lives of the CMOs.

      At September 30, 2003, $339.7 million or 99.8% of the Company's
mortgage-backed securities portfolio had fixed rates of interest and $614,000 or
0.2% of such portfolio had adjustable rates of interest.


                                       24

<PAGE>

      Mortgage-backed securities generally increase the quality of the Company's
assets by virtue of the insurance or guarantees that back them, are more liquid
than individual mortgage loans and may be used to collateralize borrowings or
other obligations of the Company. At September 30, 2003, $288.8 million or 84.9%
of the Company's mortgage-backed securities were pledged to secure various
obligations of the Company.

      While mortgage-backed securities carry a reduced credit risk as compared
to whole loans, such securities remain subject to the risk that a fluctuating
interest rate environment, along with other factors such as the geographic
distribution of the underlying mortgage loans, may alter the prepayment rate of
such mortgage loans and so affect both the prepayment speed, and value, of such
securities. The prepayment risk associated with mortgage-backed securities is
monitored periodically, and prepayment rate assumptions adjusted as appropriate
to update the Company's mortgage-backed securities accounting and
asset/liability reports. Classification of the Company's mortgage-backed
securities portfolio as available for sale is designed to minimize that risk.

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


<TABLE>
<CAPTION>
                                                                                                     September 30,
                                                                                    ------------------------------------------------
                                                                                      2003                2002                2001
                                                                                    --------            --------            --------
                                                                                                 (Dollars in Thousands)
<S>                                                                                 <C>                 <C>                 <C>
Ginnie Mae .............................................................            $ 12,548            $ 23,484            $ 39,490
CMO ....................................................................               3,824              43,259              68,845
Freddie Mac ............................................................             183,899              33,320               3,180
Fannie Mae .............................................................             139,848              92,075               1,952
Privately Issued Mortgage Pass-Through Certificates ....................                 166                 210                 295
                                                                                    --------            --------            --------

      Total ............................................................            $340,285            $192,348            $113,762
                                                                                    ========            ========            ========
</TABLE>


      The following table sets forth the contractual maturities of the Company's
mortgage-backed securities at September 30, 2003. Not considered in the
preparation of the table below is the effect of prepayments, periodic principal
repayments and the adjustable-rate nature of these instruments.


<TABLE>
<CAPTION>
                                                                                Due in
                                                     -----------------------------------------------------------      -------------
                                                                     After 1           After 5                        September 30,
                                                                       Year             Years                             2003
                                                     1 Year or       Through           Through           After           Balance
                                                        Less         5 Years          10 Years          10 Years       Outstanding
                                                     ---------       -------          --------          --------      -------------
                                                                               (Dollars in Thousands)
<S>                                                     <C>            <C>            <C>                <C>            <C>
Ginnie Mae ...................................          $ --           $ --           $     10           $12,538        $ 12,548
CMO ..........................................            --             --              3,371               453           3,824
Freddie Mac ..................................           184            117            183,460               138         183,899
Fannie Mae ...................................            --             10            130,586             9,252         139,848
Privately Issued Mortgage ....................            --             --                 --               166             166
   Pass-Through Certificates(1) ..............
                                                        ----           ----           --------           -------        --------
        Total ................................          $184           $127           $317,427           $22,547        $340,285
                                                        ====           ====           ========           =======        ========

Weighted average yield .......................          6.62%          8.83%              2.75%             4.72%           2.87%
</TABLE>


----------
(1)   This security is rated Aaa by a nationally recognized rating agency.


                                       25

<PAGE>

      At September 30, 2003, the contractual maturity of 6.6% of all of the
Company's mortgage-backed securities was in excess of ten years. The actual
maturity of a mortgage-backed security is typically less than its stated
maturity due to scheduled principal payments and prepayments of the underlying
mortgages. Prepayments that are different than anticipated will affect the yield
to maturity. The yield is based upon the interest income and the amortization of
any premium or discount related to the mortgage-backed security. In accordance
with generally accepted accounting principles, premiums and discounts are
amortized over the estimated lives of the loans, which decrease and increase
interest income, respectively. The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the
yield of the mortgage-backed security, and these assumptions are reviewed
periodically to reflect actual prepayments. Although prepayments of underlying
mortgages depend on many factors, including the type of mortgages, the coupon
rate, the age of mortgages, the geographical location of the underlying real
estate collateralizing the mortgages and general levels of market interest
rates, the difference between the interest rates on the underlying mortgages and
the prevailing mortgage interest rates generally is the most significant
determinant of the rate of prepayments. During periods of falling mortgage
interest rates, if the coupon rate of the underlying mortgages exceeds the
prevailing market interest rates offered for mortgage loans, refinancing
generally increases and accelerates the prepayment of the underlying mortgages
and the related security. Under such circumstances, the Company may be subject
to reinvestment risk because to the extent that the Company's mortgage-backed
securities amortize or prepay faster than anticipated, the Company may not be
able to reinvest the proceeds of such repayments and prepayments at a comparable
rate.

Sources of Funds

      General. The Company's sources of funds are deposits, borrowings,
amortization and repayment of loan principal, interest earned on or maturation
of investment securities and short-term investments, and funds provided from
operations.

      Borrowings, including Federal Home Loan Bank ("FHLB") of Des Moines and
Federal Reserve Bank of Chicago ("FRB") advances, reverse repurchase agreements
and retail repurchase agreements, may be used at times to compensate for
seasonal reductions in deposits or deposit inflows at less than projected
levels, may be used on a longer-term basis to support expanded lending
activities, and may also be used to match the funding of a corresponding asset.

      Deposits. The Company offers a variety of deposit accounts having a wide
range of interest rates and terms. The Company's deposits consist of passbook
savings accounts, money market savings accounts, NOW and regular checking
accounts, and certificate accounts currently ranging in terms from fourteen days
to 60 months. The Company only solicits deposits from its primary market area
and does not currently use brokers to obtain deposits. The Company relies
primarily on competitive pricing policies, advertising and customer service to
attract and retain these deposits.

      The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates, and
competition.

      The variety of deposit accounts offered by the Company has allowed it to
be competitive in obtaining funds and to respond with flexibility to changes in
consumer demand. The Company has become more susceptible to short-term
fluctuations in deposit flows, as customers have become more interest rate
conscious. The Company endeavors to manage the pricing of its deposits in
keeping with its asset/liability management and profitability objectives. Based
on its experience, the Company believes that its passbook savings, money market
savings accounts, NOW and regular checking accounts are relatively stable
sources of deposits. However, the ability of the Company to attract and maintain


                                       26

<PAGE>

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 savings flows at the Company during the
periods indicated.


<TABLE>
<CAPTION>
                                                                                     September 30,
                                                                 ------------------------------------------------------
                                                                     2003                 2002                  2001
                                                                 -----------            ---------             ---------
                                                                                 (Dollars in Thousands)
<S>                                                              <C>                    <C>                   <C>
Opening balance .................................                $   355,780            $ 338,782             $ 318,654
Deposits ........................................                  1,528,054              978,256               723,458
Withdrawals .....................................                 (1,457,277)            (972,856)             (718,006)
Interest credited ...............................                      8,996               11,598                14,676
                                                                 -----------            ---------             ---------

   Ending balance ...............................                $   435,553            $ 355,780             $ 338,782
                                                                 ===========            =========             =========

   Net increase .................................                $    79,773            $  16,998             $  20,128
                                                                 ===========            =========             =========

   Percent increase .............................                      22.42%                5.02%                 6.32%
                                                                 ===========            =========             =========
</TABLE>



                                       27

<PAGE>

      The following table sets forth the dollar amount of savings deposits in
the various types of deposit programs offered by the Company for the periods
indicated.


<TABLE>
<CAPTION>
                                                                             September 30,
                                       -------------------------------------------------------------------------------------------
                                                 2003                             2002                             2001
                                       -------------------------        -------------------------        -------------------------
                                                         Percent                          Percent                          Percent
                                        Amount          of Total         Amount          of Total         Amount          of Total
                                       --------         --------        --------         --------        --------         --------
                                                                          (Dollars in Thousands)
Transactions and Savings
Deposits:
<S>                                    <C>                <C>           <C>                <C>           <C>                <C>
Commercial Demand ...............      $ 17,458             4.01%       $ 11,935             3.35%       $  7,733             2.28%
Passbook Accounts ...............        21,323             4.89          15,064             4.23          12,221             3.61
NOW Accounts ....................        24,603             5.65          20,088             5.65          19,511             5.76
Money Market Accounts ...........        73,572            16.89          55,261            15.53          51,185            15.11
                                       --------         --------        --------         --------        --------         --------

Total Non-Certificate ...........       136,956            31.44         102,348            28.76          90,650            26.76
                                       --------         --------        --------         --------        --------         --------

Certificates:

Variable ........................         2,210             0.51           2,169             0.61           1,011             0.30
0.00 - 1.99% ....................       110,833            25.45          10,252             2.88              --               --
2.00 - 3.99% ....................       130,236            29.90         134,446            37.79          19,598             5.78
4.00 - 5.99% ....................        38,633             8.87          61,541            17.30         106,841            31.54
6.00 - 7.99% ....................        16,685             3.83          45,024            12.66         120,682            35.62
                                       --------         --------        --------         --------        --------         --------

Total Certificates ..............       298,597            68.56         253,432            71.24         248,132            73.24
                                       --------         --------        --------         --------        --------         --------
Total Deposits ..................      $435,553           100.00%       $355,780           100.00%       $338,782           100.00%
                                       ========         ========        ========         ========        ========         ========
</TABLE>



                                       28

<PAGE>

      The following table shows rate and maturity information for the Company's
certificates of deposit as of September 30, 2003.


<TABLE>
<CAPTION>
                                                      0.00 -         2.00-          4.00-        6.00-                    Percent
                                       Variable       1.99%          3.99%          5.99%        7.99%         Total     of Total
                                       --------     --------       --------       --------      --------      --------   --------
                                                                            (Dollars in Thousands)
Certificate accounts maturing
in quarter ending:
<S>                                    <C>          <C>            <C>            <C>           <C>           <C>            <C>
December 31, 2003 ...............      $    639     $ 45,175       $ 24,354       $  2,282      $  2,531      $ 74,981       25.1%
March 31, 2004 ..................           318       25,304          6,692          3,385         1,176        36,875       12.3
June 30, 2004 ...................           455       12,984         27,403          1,647         1,204        43,693       14.6
September 30, 2004 ..............           209       14,392         11,104          2,500           639        28,844        9.7
December 31, 2004 ...............           217        3,189          8,813            679         1,893        14,791        5.0
March 31, 2005 ..................           271        4,762         10,671            737         1,307        17,748        5.9
June 30, 2005 ...................           101        1,971         11,352          1,394         2,691        17,509        5.9
September 30, 2005 ..............            --        2,023          3,763            731         1,091         7,608        2.5
December 31, 2005 ...............            --          846          6,741            352         3,646        11,585        3.9
March 31, 2006 ..................            --          114          5,376            524           210         6,224        2.1
June 30, 2006 ...................            --           10          1,929            976           297         3,212        1.1
September 30, 2006 ..............            --           60          2,430            700            --         3,190        1.1
   Thereafter ...................            --            3          9,608         22,726            --        32,337       10.8
                                       --------     --------       --------       --------      --------      --------   --------
   Total ........................      $  2,210     $110,833       $130,236       $ 38,633      $ 16,685      $298,597      100.0%
                                       ========     ========       ========       ========      ========      ========   ========

   Percent of total .............          0.74%       37.11%         43.62%         12.94%         5.59%       100.00%
                                       ========     ========       ========       ========      ========      ========
</TABLE>


      The following table indicates the amount of the Company's certificates of
deposit and other deposits by time remaining until maturity as of September 30,
2003.


<TABLE>
<CAPTION>
                                                                                         Maturity
                                                           ----------------------------------------------------------------------
                                                                            After          After
                                                           3 Months        3 to 6         6 to 12         After
                                                            or Less         Months         Months       12 Months          Total
                                                           --------        -------        -------       ---------        --------
                                                                                       (In Thousands)
<S>                                                         <C>            <C>            <C>            <C>             <C>
Certificates of deposit less than $100,000 .........        $28,453        $16,201        $48,935        $ 95,579        $189,168

Certificates of deposit of $100,000 or more ........         46,528         20,674         23,602          18,625         109,429
                                                            -------        -------        -------        --------        --------

Total certificates of deposit ......................        $74,981        $36,875        $72,537        $114,204        $298,597(1)
                                                            =======        =======        =======        ========        ========
</TABLE>


----------
(1)   Includes deposits from governmental and other public entities totaling
      $71.5 million.

      Borrowings. Although deposits are the Company's primary source of funds,
the Company's policy has been to utilize borrowings when they are a less costly
source of funds, can be invested at a positive interest rate spread, or when the
Company desires additional capacity to fund loan demand.

      The Company's borrowings historically have consisted of advances from the
FHLB of Des Moines upon the security of a blanket collateral agreement of a
percentage of unencumbered loans and the pledge of specific investment
securities. Such advances can be made pursuant to several different credit
programs, each of which has its own interest rate and range of maturities. At
September 30, 2003, the Company had $223.8 million of advances from the FHLB of
Des Moines and the ability to borrow up


                                       29

<PAGE>

to an approximate additional $95.5 million. At September 30, 2003, advances
totaling $110.8 million had terms to maturity of one year or less. The remaining
$112.9 million had maturities ranging up to 16 years.

      On July 16, 2001, the Company issued all of the 10,000 authorized shares
of Company Obligated Mandatorily Redeemable Preferred Securities of First
Midwest Financial Capital Trust I (preferred securities of subsidiary trust)
holding solely subordinated debt securities. Distributions are paid
semi-annually. Cumulative cash distributions are calculated at a variable rate
of LIBOR (as defined) plus 3.75%, not to exceed 12.5%. The Company may, at one
or more times, defer interest payments on the capital securities for up to 10
consecutive semi-annual periods, but not beyond July 25, 2031. At the end of any
deferral period, all accumulated and unpaid distributions will be paid. The
capital securities will be redeemed on July 25, 2031; however, the Company has
the option to shorten the maturity date to a date not earlier than July 25,
2006. The redemption price is $1,000 per capital security plus any accrued and
unpaid distributions to the date of redemption plus, if redeemed prior to July
25, 2011, a redemption premium as defined in the Indenture Agreement. Holders of
the capital securities have no voting rights, are unsecured and rank junior in
priority of payment to all of the Company's indebtedness and senior to the
Company's common stock.

      From time to time, the Company has offered retail repurchase agreements to
its customers. These agreements typically range from 14 days to five years in
term, and typically have been offered in minimum amounts of $100,000. The
proceeds of these transactions are used to meet cash flow needs of the Company.
At September 30, 2003, the Company had $202,000 of retail repurchase agreements
outstanding.

      Historically, the Company has entered into reverse repurchase agreements
through nationally recognized broker-dealer firms. These agreements are
accounted for as borrowings by the Company and are secured by certain of the
Company's investment and mortgage-backed securities. The broker-dealer takes
possession of the securities during the period that the reverse repurchase
agreement is outstanding. The terms of the agreements have typically ranged from
7 days to a maximum of six months. At September 30, 2003, the Company had $57.5
million of reverse repurchase agreements outstanding.

      The following table sets forth the maximum month-end balance and average
balance of FHLB advances, retail and reverse repurchase agreements and Preferred
Securities of Subsidiary Trust for the periods indicated.


<TABLE>
<CAPTION>
                                                                                                     September 30,
                                                                                      ---------------------------------------------
                                                                                        2003               2002              2001
                                                                                      --------           --------          --------
                                                                                                 (Dollars in Thousands)
<S>                                                                                   <C>                <C>               <C>
Maximum Balance:
   FHLB advances........................................................              $226,165           $125,090          $129,010
   Retail and reverse repurchase agreements.............................               110,488             70,176            20,239
   Preferred securities of subsidiary trust.............................                10,000             10,000            10,000

Average Balance:
   FHLB advances........................................................              $176,961           $118,415          $126,208
   Retail and reverse repurchase agreements.............................                78,209             39,288             6,490
   Preferred securities of subsidiary trust.............................                10,000             10,000             1,981
</TABLE>



                                       30

<PAGE>

      The following table sets forth certain information as to the Company's
FHLB advances and other borrowings at the dates indicated.


<TABLE>
<CAPTION>
                                                                                                   September 30,
                                                                                 --------------------------------------------------
                                                                                   2003                 2002                 2001
                                                                                 --------             --------             --------
                                                                                              (Dollars in Thousands)
<S>                                                                              <C>                  <C>                  <C>
FHLB advances .......................................................            $223,784             $125,090             $126,352
Retail and reverse repurchase agreements ............................              57,702               70,176                1,993
Preferred securities of subsidiary trust ............................              10,000               10,000               10,000
                                                                                 --------             --------             --------

      Total borrowings ..............................................            $291,486             $205,266             $138,345
                                                                                 ========             ========             ========

Weighted average interest rate of FHLB advances .....................                3.40%                5.46%                5.76%

Weighted average interest rate of retail and reverse
repurchase agreements ...............................................                1.16%                1.90%                4.57%

Weighted average interest rate of preferred securities
of subsidiary trust .................................................                4.90%                5.61%                7.57%
</TABLE>




Subsidiary Activities

      The only subsidiaries of the Company are First Federal, Security, First
Services Trust Company and First Midwest Financial Capital Trust I. First
Federal has one service subsidiary, First Services Financial Limited ("First
Services"). At September 30, 2003, the net book value of First Federal's
investment in First Services was approximately $84,000. Security does not have
any subsidiaries. First Federal organized First Services, its sole service
corporation, in 1983. First Services is located in Storm Lake, Iowa and offers
mutual funds, equities, bonds, insurance products and annuities. First Services
recognized a net loss of $35,000 during fiscal 2003.

Regulation

      Recent Legislation - USA Patriot Act of 2001. In October 2001, the USA
Patriot Act of 2001 was enacted in response to the terrorist attacks in New
York, Pennsylvania and Washington, D.C. which occurred on September 11, 2001.
The Patriot Act is intended to strengthen U.S. law enforcement's and the
intelligence communities' abilities to work cohesively to combat terrorism on a
variety of fronts. The potential impact of the Patriot Act on financial
institutions of all kinds is significant and wide ranging. The Patriot Act
contains sweeping anti-money laundering and financial transparency laws and
imposes various regulations, including standards for verifying client
identification at account opening, and rules to promote cooperation among
financial institutions, regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering.

      Sarbanes-Oxley Act of 2002. On July 30, 2002, President Bush signed into
law the Sarbanes-Oxley Act of 2002, or the SOA. The SOA is the most far-reaching
U.S. securities legislation enacted in many years, and includes many substantive
and disclosure-based requirements. 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 generally applies to all companies, both U.S. and
non-U.S., that file or are required to file periodic reports with the Securities
and


                                       31

<PAGE>

Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange
Act"). Given the extensive and continuing SEC role in implementing rules
relating to many of the SOA's new requirements, the effects of these
requirements remain to be determined, although it is likely that the Company's
costs will increase somewhat, at least in the short term, as a result of SOA
implementation.

      General. Bank holding companies, such as First Midwest, are subject to
comprehensive regulation by the FRB under the BHCA and the regulations of the
FRB. As a bank holding company, First Midwest is required to file reports with
the FRB and such additional information as the FRB may require, and is subject
to regular inspections by the FRB. The FRB also has extensive enforcement
authority over bank holding companies, including, among other things, the
ability to assess civil money penalties, to issue cease and desist or removal
orders and to require that a holding company divest subsidiaries (including its
bank subsidiaries). In general, enforcement actions may be initiated for
violations of law and regulations and unsafe or unsound practices.

      Under FRB policy, a bank holding company must serve as a source of
strength for its subsidiary banks. Under this policy the FRB may require a
holding company to contribute additional capital to an undercapitalized
subsidiary bank.

      Under the BHCA, a bank holding company must obtain FRB approval before:
(i) acquiring, directly or indirectly, ownership or control of any voting shares
of another bank or bank holding company if, after such acquisition, it would own
or control more than 5% of such shares (unless it already owns or controls the
majority of such shares); (ii) acquiring all or substantially all of the assets
of another bank or bank holding company; or (iii) merging or consolidating with
another bank holding company.

      The BHCA prohibits a bank holding company, with certain exceptions, from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company which is not a bank or bank holding company, or from
engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by FRB regulation or order, have been identified as
activities closely related to the business of banking or managing or controlling
banks. The list of activities permitted by the FRB includes, among other things,
operating a savings institution (such as First Federal), mortgage company,
finance company, credit card company or factoring company; performing certain
data processing operations; providing certain investment and financial advice;
underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; real estate and personal property appraising; and, subject to certain
limitations, providing securities brokerage services for customers. The scope of
permissible activities may be expanded from time to time by the FRB. Such
activities may also be affected by federal legislation.

      First Midwest currently has four wholly-owned subsidiaries, First Federal,
a federally-chartered thrift institution, Security, an Iowa-chartered commercial
bank, First Midwest Financial Capital Trust I, a statutory business trust
organized under the Delaware Business Trust Act and First Services Trust
Company, a South Dakota corporation that provides trust services. First Federal
is subject to extensive regulation, supervision and examination by the OTS, as
its chartering authority and primary federal regulator, and by the Federal
Deposit Insurance Corporation (the "FDIC"), which insures its deposits up to
applicable limits. First Federal is a member of the FHLB System and is subject
to certain limited regulation by the FRB. Such regulation and supervision
governs the activities in which an institution can engage and the manner in
which such activities are conducted, and is intended primarily for the
protection of the insurance fund and depositors. Security is subject to
extensive regulation, supervision and examination by the Iowa Superintendent of
Banking (the "ISB") and the FRB, which are its state and primary federal
regulators, respectively. It is also subject to regulation by the FDIC, which
insures its


                                       32

<PAGE>

deposits up to applicable limits. As with First Federal, such regulation and
supervision governs the activities in which Security can engage and the manner
in which such activities are conducted and is intended primarily for the
protection of the insurance fund and depositors.

      First Midwest is regulated as a bank holding company by the FRB. Bank
holding companies are subject to comprehensive regulation and supervision by the
FRB under the Bank Holding Company Act of 1956, as amended (the "BHCA") and the
regulations of the FRB. As a bank holding company, First Midwest must file
reports with the FRB and such additional information as the FRB may require, and
is subject to regular inspections by the FRB. First Midwest is subject to the
activity limitations imposed under the BHCA and in general may engage in only
those activities that the FRB has determined to be closely related to banking.

      Regulatory authorities have been granted extensive discretion in
connection with their supervisory and enforcement activities which are intended
to strengthen the financial condition of the banking industry, including the
imposition of restrictions on the operation of an institution, the
classification of assets by the institution and the adequacy of an institution's
allowance for loan losses. Any change in the nature of such regulation and
oversight, whether by the OTS, the FDIC, the FRB or legislatively by Congress,
could have a material impact on First Midwest, First Federal or Security and
their respective operations.

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

      Federal Regulation of Financial Institutions. The OTS has extensive
supervisory and regulatory 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 examination by the OTS
and the FDIC. The last regular OTS examination of First Federal was as of March
24, 2003. Security is subject to similar regulation and oversight by the ISB and
the FRB and was last examined as of April 1, 2003.

      Each federal and state banking regulator has extensive enforcement
authority over its regulated institutions. This enforcement authority includes,
among other things, the power to compel higher reserves, 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. Except under certain
circumstances, public disclosure of final enforcement actions by the regulator
is required.

      In addition, 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 such laws. Security is subject to such restrictions
under state law as administered by the ISB. Federal savings associations are
generally authorized to branch nationwide, whereas Iowa chartered banks, such as
Security, are limited to establishing branches in the counties contiguous to or
cornering upon the county where their home office is located.

      Both First Federal's and Security's general permissible lending limit 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). Security is subject to similar restrictions. At September 30,
2003, First Federal's and Security's lending limit under these restrictions was
$7.6 million and $972,000, respectively. First Federal and Security are in
compliance with their lending limits.


                                       33

<PAGE>

      Insurance of Accounts and Regulation by the FDIC. First Federal is a
member of the Savings Association Insurance Fund (the "SAIF") and Security is a
member of the Bank Insurance Fund (the "BIF"), each of which is administered by
the FDIC. Deposits are insured up to applicable limits by the FDIC and such
insurance is backed by the full faith and credit of the United States
Government. As insurer, the FDIC imposes deposit insurance premiums and is
authorized to conduct examinations of and to require reporting by FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC determines by regulation or order to pose a serious risk
to the SAIF or the BIF. The FDIC also has the authority to initiate enforcement
actions against any FDIC insured institution after giving its primary federal
regulator the opportunity to take such action, and may terminate the deposit
insurance if it determines that the institution has engaged in unsafe or unsound
practices or is in an unsafe or unsound condition.

      The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation. The current assessment rates range from zero
to .27% per $100 of assessable deposits. Risk classification of all insured
institutions will be made by the FDIC for each semi-annual assessment period.
Institutions that are well-capitalized and have a high supervisory rating are
subject to the lowest assessment rate. At September 30, 2003, each of First
Federal and Security met the capital requirements of a "well capitalized"
institution and were not subject to any assessment. See Note 13 of Notes to
Consolidated Financial Statements in the Annual Report.

      Regulatory Capital Requirements. Federally insured financial institutions,
such as First Federal and Security, are required to maintain a minimum level of
regulatory capital. These capital requirements mandate that an institution
maintain at least the following ratios: (1) a core (or Tier 1) capital to
adjusted total assets ratio of 4% (which can be reduced to 3% for highly rated
institutions); (2) a Tier 1 capital to risk-weighted assets ratio of 4% and (3)
a risk-based capital to risk-weighted assets ratio of 8%. Capital requirements
in excess of these standards may be imposed on individual institutions on a
case-by-case basis. See Note 13 of Notes to Consolidated Financial Statements in
the Annual Report.

      An FDIC-insured institution's primary federal regulator is also authorized
and, under certain circumstances required, to take certain actions against an
"undercapitalized institution" (generally defined to be one with less than
either a 4% core capital ratio, a 4% Tier 1 risked-based capital ratio or an 8%
risk-based capital ratio). Any such institution must submit a capital
restoration plan and until such plan is approved by the OTS may not increase its
assets, acquire another institution, establish a branch or engage in any new
activities, and generally may not make capital distributions. The primary
federal regulator is also authorized, and with respect to institution's whose
capital is further depleted, required to impose additional restrictions that can
affect all aspects of the institution's operations, including the appointment of
a receiver for a "critically undercapitalized" institution (i.e., one with a
tangible capital ratio of 2% or less). As a condition to the approval of the
capital restoration plan, any company controlling an undercapitalized
institution must agree that it will enter into a limited capital maintenance
guarantee with respect to the institution's achievement of its capital
requirements.

      Though not anticipated, the imposition of any of these measures on First
Federal or Security may have a substantial adverse effect on Company's
operations and profitability. First Midwest shareholders do not have preemptive
rights, and therefore, if First Midwest is directed by the OTS, the FRB or the
FDIC to issue additional shares of Common Stock, such issuance may result in the
dilution in shareholders percentage of ownership of First Midwest.

      Limitations on Dividends and Other Capital Distributions. The OTS imposes
various restrictions on savings associations with respect to their ability to
make distributions of capital, which include dividends, stock redemptions or
repurchases, cash-out mergers and other transactions charged to the


                                       34

<PAGE>

capital account. The OTS also prohibits a savings association from declaring or
paying any dividends or from repurchasing any of its stock if, as a result of
such action, the regulatory capital of the association would be reduced below
the amount required to be maintained for the liquidation account established in
connection with the association's mutual to stock conversion.

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

      Security may pay dividends, in cash or property, only out of its undivided
profits. In addition, FRB regulations prohibit the payment of dividends by a
state member bank if losses have at any time been sustained by such bank that
equal or exceed its undivided profits then on hand, unless (i) the prior
approval of the FRB has been obtained and (ii) at least two-thirds of the shares
of each class of stock outstanding have approved the dividend payment. FRB
regulations also prohibit the payment of any dividend by a state member bank
without the prior approval of the FRB if the total of all dividends declared by
the bank in any calendar year exceeds the total of its net profits for that year
combined with its retained net profits of the previous two calendar years (minus
any required transfers to a surplus or to a fund for the retirement of any
preferred stock).

      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 (as defined by
regulation) in qualified thrift investments on a monthly average for nine out of
every 12 months on a rolling basis or meet the requirements for a domestic
building and loan association under the Internal Revenue Code. Under either
test, the required assets primarily consist of residential housing related loans
and investments. At September 30, 2003, 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 within one year and
thereafter remains a QTL, or limits its new investments and activities to those
permissible for both a savings association and a national bank. In addition, the
association is subject to national bank limits for payment of dividends and
branching authority. If such association has not requalified or converted to a
national bank within three years after the failure, it must divest of all
investments and cease all activities not permissible for a national bank.

      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 and the FRB, in
connection with the examination of First Federal and Security, respectively, 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 the institution. An
unsatisfactory rating may be used as the basis for the denial of such an
application. First Federal was


                                       35

<PAGE>

examined for CRA compliance in January 2002 and Security was examined in June
2003 and both received a rating of "satisfactory."

      Interstate Banking and Branching. The FRB may approve an application of an
adequately capitalized and adequately managed bank holding company to acquire
control of, or acquire all or substantially all of the assets of, a bank located
in a state other than such holding company's home state, without regard to
whether the transaction is prohibited by the laws of any state. The FRB may not
approve the acquisition of a bank that has not been in existence for the minimum
time period (not exceeding five years) specified by the statutory law of the
host state or if the applicant (and its depository institution affiliates)
controls or would control more than 10% of the insured deposits in the United
States or 30% or more of the deposits in the target bank's home state or in any
state in which the target bank maintains a branch. Iowa has adopted a five year
minimum existence requirement. States are authorized to limit the percentage of
total insured deposits in the state which may be held or controlled by a bank or
bank holding company to the extent such limitation does not discriminate against
out-of-state banks or bank holding companies. Individual states may also waive
the 30% state-wide concentration limit.

      The federal banking agencies are also generally authorized to approve
interstate merger transactions without regard to whether such transaction is
prohibited by the law of any state. Interstate acquisitions of branches or the
establishment of a new branch is permitted only if the law of the state in which
the branch is located permits such acquisitions. Interstate mergers and branch
acquisitions are also subject to the nationwide and statewide insured deposit
concentration amounts described above. Iowa permits interstate branching only by
merger.

      Holding Company Dividends. The FRB has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the FRB's
view that a bank holding company should pay cash dividends only to the extent
that its net income for the past year is sufficient to cover both the cash
dividends and a rate of earning retention that is consistent with the holding
company's capital needs, asset quality and overall financial condition. The FRB
also indicated that it would be inappropriate for a company experiencing serious
financial problems to borrow funds to pay dividends. Furthermore, under the
prompt corrective action regulations adopted by the FRB, the FRB may prohibit a
bank holding company from paying any dividends if the holding company's bank
subsidiary is classified as "undercapitalized."

      Bank holding companies are required to give the FRB prior written notice
of any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of their consolidated net worth. The FRB may
disapprove such a purchase or redemption if it determines that the proposal
would constitute an unsafe or unsound practice or would violate any law,
regulation, FRB order, or any condition imposed by, or written agreement with,
the FRB. This notification requirement does not apply to any company that meets
the well-capitalized standard for commercial banks, has a safety and soundness
examination rating of at least a "2" and is not subject to any unresolved
supervisory issues.

      Holding Company Capital Requirements. The FRB has established capital
requirements for bank holding companies that generally parallel the capital
requirements for commercial banks and federal thrift institutions such as First
Federal and Security. First Midwest is in compliance with these requirements.

      Federal Home Loan Bank System. First Federal and Security are both members
of the FHLB of Des Moines, which is one of 12 regional FHLBs, that administers
the home financing credit function of savings associations. Each FHLB serves as
a reserve or central bank for its members within its assigned region. It makes
loans to members (i.e., advances) in accordance with policies and procedures
established


                                       36

<PAGE>

by the board of directors of the FHLB. These policies and procedures are subject
to the regulation and 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 must be used for
residential home financing.

      As members of the FHLB System, First Federal and Security are required to
purchase and maintain stock in the FHLB of Des Moines. At September 30, 2003,
the Banks had in the aggregate $10.9 million in FHLB stock, which was in
compliance with this requirement. For the fiscal year ended September 30, 2003,
dividends paid by the FHLB of Des Moines to First Federal and Security totaled
$286,000. Over the past five calendar years such dividends have averaged 3.0%
and were 3.0% for the first three quarters of the calendar year 2003.

      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. Recent legislative changes will require
the FHLB to change the characteristics and amount of FHLB stock held by its
members. It is also anticipated that these changes will restrict the ability of
FHLB members to redeem their shares of FHLB stock.

Federal and State Taxation

      Federal Taxation. First Midwest and its subsidiaries file consolidated
federal income tax returns on a fiscal year basis using the accrual method of
accounting. In addition to the regular income tax, corporations, including
savings banks such as 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.

      To the extent earnings appropriated to a savings bank's bad debt reserves
and deducted for federal income tax purposes exceed the allowable amount of such
reserves computed under the experience method and to the extent of the bank's
supplemental reserves for losses on loans ("Excess"), such Excess may not,
without adverse tax consequences, be utilized for the payment of cash dividends
or other distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of September 30, 2003, First Federal's Excess for tax purposes
totaled approximately $6.7 million.

      First Midwest and its consolidated subsidiaries have not been audited by
the IRS within the past ten years. In the opinion of management, any examination
of still open returns (including returns of subsidiaries and predecessors of, or
entities merged into, First Midwest) would not result in a deficiency which
could have a material adverse effect on the financial condition of First Midwest
and its subsidiaries.

      Iowa Taxation. First Federal and Security file Iowa franchise tax returns.
First Midwest and First Federal's subsidiary file a consolidated Iowa
corporation tax return on a fiscal year-end basis.


                                       37

<PAGE>

      Iowa imposes a franchise tax on the taxable income of mutual and stock
savings banks and commercial banks. The tax rate is 5%, which may effectively be
increased, in individual cases, by application of a minimum tax provision.
Taxable income under the franchise tax is generally similar to taxable income
under the federal corporate income tax, except that, under the Iowa franchise
tax, no deduction is allowed for Iowa franchise tax payments and taxable income
includes interest on state and municipal obligations. Interest on U.S.
obligations is taxable under the Iowa franchise tax and under the federal
corporate income tax. The taxable income for Iowa franchise tax purposes is
apportioned to Iowa through the use of a one-factor formula consisting of gross
receipts only.

      Taxable income under the Iowa corporate income tax is generally similar to
taxable income under the federal corporate income tax, except that, under the
Iowa tax, no deduction is allowed for Iowa income tax payments; interest from
state and municipal obligations is included in income; interest from U.S.
obligations is excluded from income; and 50% of federal corporate income tax
payments are deductible from income. The Iowa corporate income tax rates range
from 6% to 12% and may be effectively increased, in individual cases, by
application of a minimum tax provision.

      South Dakota Taxation. First Federal and First Services Trust Company file
a consolidated South Dakota franchise tax return due to their operations in
Sioux Falls and Brookings. The South Dakota franchise tax is imposed on
depository institutions and trust companies. First Midwest, Security and First
Federal's subsidiaries are therefore not subject to the South Dakota franchise
tax.

      South Dakota imposes a franchise tax on the taxable income of depository
institutions and trust companies at the rate of 6%. Taxable income under the
franchise tax is generally similar to taxable income under the federal corporate
income tax, except that, under the South Dakota franchise tax, no deduction is
allowed for state income and franchise taxes, bad debt deductions are determined
on the basis of actual charge-offs, income from municipal obligations exempt
from federal taxes are included in the franchise taxable income, and there is a
deduction allowed for federal income taxes accrued for the fiscal year. The
taxable income for South Dakota franchise tax purposes is apportioned to South
Dakota through the use of a three-factor formula consisting of tangible real and
personal property, payroll and gross receipts.

      Delaware Taxation. As a Delaware holding company, First Midwest 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 Midwest is
also subject to an annual franchise tax imposed by the State of Delaware.

Competition

      The Company faces strong competition, both in originating real estate and
other loans and in attracting deposits. Competition in originating real estate
loans comes primarily from commercial banks, savings banks, credit unions,
insurance companies, and mortgage bankers making loans secured by real estate
located in the Company's market area. Commercial banks and credit unions provide
vigorous competition in consumer lending. The Company competes for real estate
and other loans principally on the basis of the quality of services it provides
to borrowers, interest rates and loan fees it charges, and the types of loans it
originates.

      The Company attracts all of its deposits through its retail banking
offices, primarily from the communities in which those retail banking offices
are located; therefore, competition for those deposits is principally from other
commercial banks, savings banks, credit unions and brokerage offices located in
the same communities. The Company competes for these deposits by offering a
variety of deposit accounts at competitive rates, convenient business hours, and
convenient branch locations with interbranch deposit and withdrawal privileges
at each.


                                       38

<PAGE>

      The Company serves Adair, Buena Vista, Calhoun, Dallas, Guthrie, Ida,
Pocahontas, Polk and Sac counties in Iowa and Brookings, Lincoln and Minnehaha
counties in South Dakota. There are thirty-six commercial banks, one savings
bank, other than First Federal, and one credit union which compete for deposits
and loans in First Federal's primary market area in northwest Iowa and eight
commercial banks, one savings bank, other than First Federal, and one credit
union which compete for deposits and loans in First Federal's market area in
Brookings, South Dakota. In addition, there are twelve commercial banks in
Security's primary market area in west central Iowa. First Federal competes for
deposits and loans with numerous financial institutions located throughout the
metropolitan market areas of Des Moines, Iowa and Sioux Falls, South Dakota.

Employees

      At September 30, 2003, the Company and its subsidiaries had a total of 178
employees, including 20 part-time employees. The Company's employees are not
represented by any collective bargaining group. Management considers its
employee relations to be good.

Executive Officers of the Company Who Are Not Directors

      The following information as to the business experience during the past
five years is supplied with respect to the executive officers of the Company who
do not serve on the Company's Board of Directors. There are no arrangements or
understandings between such persons named and any persons pursuant to which such
officers were selected.

      Donald J. Winchell - Mr. Winchell, age 51, serves as Senior Vice
President, Secretary, Treasurer and Chief Financial Officer of First Midwest and
First Federal, and is responsible for the formulation and implementation of
policies and objectives for First Federal's finance and accounting functions.
His duties include financial planning, interest rate risk management,
accounting, investments, financial policy development and compliance, budgeting
and asset/liability management. Mr. Winchell also serves as Secretary of
Security State Bank, Director and Secretary/Treasurer of First Services Trust
Company, and Treasurer of First Services Financial Limited and Brookings Service
Corporation. Mr. Winchell joined First Federal in 1989 as Vice President and
Chief Financial Officer, was appointed Treasurer in 1990, and Senior Vice
President in 1992. Prior to joining First Federal, Mr. Winchell served as Senior
Vice President and Chief Financial Officer of Midwest Federal Savings and Loan
Association of Nebraska City, Nebraska since 1981. Mr. Winchell received a
Bachelor of Science degree and a Bachelor of Business Administration degree from
Washburn University, Topeka, Kansas. Mr. Winchell is a certified public
accountant.

      On December 5, 2003, Mr. Ronald J. Walters was hired to assume the
position of Chief Financial Officer in the place of Mr. Winchell, who is leaving
the company effective January 9, 2004 to pursue other interests. Mr. Walters,
age 54, joined First Midwest as Senior Vice President. Prior to joining the
Company, Mr. Walters served as Vice President, Treasurer and Chief Financial
Officer of Kankakee Bancorp, Inc. of Kankakee, Illinois, (now known as Centrue
Financial Corporation) having worked for the company since 1984. Mr. Walters
received a Bachelor of Science degree from the University of Illinois, Chicago,
Illinois. Mr. Walters is a certified public accountant.


I
tem 2. Properties

      The Company conducts its business at its main office and branch office in
Storm Lake, Iowa, and five other locations in its primary market area in
Northwest Iowa. The Company also operates one office in Brookings, South Dakota,
through the Company's Brookings Federal Bank division of the Bank; four offices
in Des Moines, Iowa, through the Company's Iowa Savings Bank division of the
Bank; one office


                                       39

<PAGE>

in Sioux Falls, South Dakota, through the Company's Sioux Falls division of the
Bank; and three offices in West Central Iowa through the Company's Security
State Bank subsidiary.

      The Company owns all of its offices, except for the branch offices located
at Storm Lake Plaza, Storm Lake, Iowa and West Des Moines, Iowa as to which the
land is leased. The total net book value of the Company's premises and equipment
(including land, building and leasehold improvements and furniture, fixtures and
equipment) at September 30, 2003 was $11.4 million. See Note 6 of Notes to
Consolidated Financial Statements in the Annual Report.

      The Company believes that its current facilities are adequate to meet the
present and foreseeable needs of the Company and the Banks.

      The Bank maintains an on-line data base with a service bureau, whose
primary business is providing such services to financial institutions. The net
book value of the data processing and computer equipment utilized by the Company
at September 30, 2003 was approximately $791,000.


Item 3. Legal Proceedings

      The Company is involved as plaintiff or defendant in various legal actions
arising in the normal course of its business. While the ultimate outcome of
these proceedings cannot be predicted with certainty, it is the opinion of
management, after consultation with counsel representing Company in the
proceedings, that the resolution of these proceedings should not have a material
effect on Company's consolidated financial position or results of operations.


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,
2003.


                                     PART II


Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

      Page 48 of the attached 2003 Annual Report to Shareholders is herein
incorporated by reference.


Item 6. Selected Financial Data

      Page 14 of the attached 2003 Annual Report to Shareholders is herein
incorporated by reference.


Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

      Pages 15 through 23 of the attached 2003 Annual Report to Shareholders are
herein incorporated by reference.


Item 7A. Quantitative and Qualitative Disclosure About Market Risk

      Pages 19 through 20 of the attached 2003 Annual Report to Shareholders are
herein incorporated by reference.


                                       40

<PAGE>


Item 8. Financial Statements and Supplementary Data

      Pages 24 through 45 of the attached 2003 Annual Report to Shareholders are
herein incorporated by reference.


Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure

      Not applicable.


Item 9a. Controls and Procedures

      Any control system, no matter how well designed and operated, can provide
only reasonable (not absolute) assurance that its objectives will be met.
Furthermore, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, have been detected.

Disclosure Controls and Procedures

      The Corporation's management, with the participation of the Corporation's
Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of its disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(Exchange Act)) as of the end of the period covered by this report. Based on
such evaluation, the Corporation's Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of such period, the Corporation's
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by the Corporation in the reports that it files or submits under the
Exchange Act.

Internal Control Over Financial Reporting

      There have not been any changes in the Corporation's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fourth quarter of the fiscal year to which
this report relates that have materially affected, or are reasonably likely to
materially affect, the Corporation's internal control over financial reporting.


                                    PART III


Item 10. Directors and Executive Officers of the Registrant

Directors

      Information concerning directors of the Company is incorporated herein by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held in January 2004 filed on December 17, 2003.

The Company has adopted a Code of Ethics that applies to its principal executive
officer and principal financial officers of the Company. A copy of the Code
Ethics, included as an exhibit to this Form 10-K and filed with the Securities
and Exchange Commission, may also be found on the Company's website at
www.fmficash.com.


Executive Officers

      Information concerning the executive officers of the Company is
incorporated herein by reference from the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held in January 2004, filed on
December 17, 2003 and from the information set forth under the caption
"Executive Officers of the Company Who Are Not Directors" contained in Part I of
this Form 10-K.


                                       41

<PAGE>

Compliance with Section 16(a)

      Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than 10% shareholders are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.

      To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended September 30, 2003, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with except that during
the fiscal year ended September 30, 2003, Mr. Gaskill and Mr. Thure each
inadvertently failed to file a timely Form 4 and Form 3, respectively. Both
forms were subsequently filed.


Item 11. Executive Compensation

      Information concerning executive compensation is incorporated herein by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held in January 2004, filed on December 17, 2003.


Item 12. Security Ownership of Certain Beneficial Owners and Management

      Information concerning securities authorized for issuance under equity
compensation plans and information concerning security ownership of certain
beneficial owners and management is incorporated herein by reference from the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held in January 2004, filed on December 17, 2003, and Note 11 of Notes to
Consolidated Financial Statements.


Item 13. Certain Relationships and Related Transactions

      Information concerning certain relationships and transactions is
incorporated herein by reference from the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held in January 2004, filed on
December 17, 2003.


Item 14. Principal Accountant Fees and Services

      Audit Fees

1.    Fees paid to McGladrey & Pullen, LLP and its associated entity, RSM
McGladrey, Inc., for each of the last two fiscal years are set forth below.

        Fiscal          Audit       Audit-Related        Tax          All Other
         Year           Fees             Fees           Fees             Fees
         ----           ----             ----           ----             ----
         2003          $83,000          $7,000         $9,000           $   --
         2002          $62,000          $6,000         $11,000          $6,000

Audit fees include fees for services performed to comply with generally accepted
auditing standards, including the recurring audit of the Company's consolidated
financial statements. This category also includes fees for audits provided in
connection with statutory filings or services that generally only the principal
auditor reasonably can provide to a client, such as procedures related to audit
of income tax


                                       42

<PAGE>

provisions and related reserves, consents and assistance with and review of
documents filed with the Securities and Exchange Commission.

Audit-related fees include fees associated with assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's financial statements. This category includes fees related to
assistance in financial due diligence related to mergers and acquisitions,
consultations regarding generally accepted accounting principles, reviews and
evaluations of the impact of new regulatory pronouncements, general assistance
with implementation of the new SEC and Sarbanes-Oxley Act of 2002 requirements
and audit services not required by statute or regulation. Audit-related fees
also include audits of employee benefit plans, as well as the review of
information systems and general internal controls unrelated to the audit of the
financial statements.

Tax fees primarily include fees associated with tax audits, tax compliance, tax
consulting, as well as tax planning. This category also includes services
related to tax disclosure and filing requirements.

The Audit Committee has not authorized any non-audit services by the independent
auditor. The Audit Committee must approve any such services prior to the
services being performed. The Audit Committee's considerations would include
whether such services are consistent with the SEC's rules on auditor
independence.


                                     PART IV


Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)   The following is a list of documents filed as part of this report:

            (1)   Financial Statements:

                        The following financial statements are incorporated by
                  reference under Part II, Item 8 of this Form 10-K:

                        1.    Report of Independent Auditors.

                        2.    Consolidated Balance Sheets as of September 30,
                              2003 and 2002.

                        3.    Consolidated Statements of Income for the Years
                              Ended September 30, 2003, 2002 and 2001.

                        4.    Consolidated Statements of Changes in
                              Shareholders' Equity for the Years Ended September
                              30, 2003, 2002 and 2001.

                        5.    Consolidated Statements of Cash Flows for the
                              Years Ended September 30, 2003, 2002 and 2001.

                        6.    Notes to Consolidated Financial Statements.

            (2)   Financial Statement Schedules:

                        All financial statement schedules have been omitted as
                  the information is not required under the related instructions
                  or is inapplicable.

            (3)   Exhibits:

                        See Index of Exhibits.


                                       43

<PAGE>

      (b)   Reports on Form 8-K:

      During the three month period ended September 30, 2003, the Registrant
filed and furnished, respectively, two current reports on Form 8-K, one dated
July 7, 2003, to report the issuance of a press release announcing the
authorization of a stock repurchase program, and another dated July 18, 2003, to
report the issuance of a press release announcing the Company's earnings for the
three months and nine months ended June 30, 2003.


                                       44

<PAGE>


                                   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 MIDWEST FINANCIAL, INC.


Date: December 26, 2003                     By: /s/ James S. Haahr
                                                --------------------------------
                                                James S. Haahr
                                                (Duly Authorized Representative)

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


By: /s/ James S. Haahr                                 Date: December 26, 2003
    -----------------------------------------
    James S. Haahr, Chairman of the Board
      and Chief Executive Officer
      (Principal Executive Officer)

By: /s/ J. Tyler Haahr                                 Date: December 26, 2003
    -----------------------------------------
    J. Tyler Haahr, Director, President and
      Chief Operating Officer

By: /s/ E. Wayne Cooley                                Date: December 26, 2003
    -----------------------------------------
    E. Wayne Cooley, Director

By: /s/ E. Thurman Gaskill                             Date: December 26, 2003
    -----------------------------------------
    E. Thurman Gaskill, Director

By: /s/ Rodney G. Muilenburg                           Date: December 26, 2003
    -----------------------------------------
    Rodney G. Muilenburg, Director

By: /s/ Jeanne Partlow                                 Date: December 26, 2003
    -----------------------------------------
    Jeanne Partlow, Director

By: /s/ G. Mark Mickelson                              Date: December 26, 2003
    -----------------------------------------
    G. Mark Mickelson, Director

By: /s/ John Thune                                     Date: December 26, 2003
    -----------------------------------------
    John Thune, Director

By: /s/ Donald J. Winchell                             Date: December 26, 2003
    -----------------------------------------
    Donald J. Winchell, Senior Vice
      President, Secretary, Treasurer and
      Chief Financial Officer
      (Principal Financial and Accounting Officer)


<PAGE>


                                INDEX TO EXHIBITS

Exhibit
Number                             Description
--------------------------------------------------------------------------------

3(i)  Registrant's Articles of Incorporation as currently in effect, filed on
      June 17, 1993 as an exhibit to the Registrant's registration statement on
      Form S-1 (Commission File No. 33-64654), are incorporated herein by
      reference.

3(ii) Registrant's Bylaws, as amended and restated, filed as Exhibit 3(ii) to
      Registrant's Report on Form 10-K for the fiscal year ended September 30,
      1998 (Commission File No. 0-22140), is incorporated herein by reference.

4     Registrant's Specimen Stock Certificate, filed on June 17, 1993 as an
      exhibit to the Registrant's registration statement on Form S-1 (Commission
      File No. 33-64654), is incorporated herein by reference.

10.1  Registrant's 1995 Stock Option and Incentive Plan, filed as Exhibit 10.1
      to Registrant's Report on Form 10-KSB for the fiscal year ended September
      30, 1996 (Commission File No. 0-22140), is incorporated herein by
      reference.

10.2  Registrant's 1993 Stock Option and Incentive Plan, filed on June 17, 1993
      as an exhibit to the Registrant's registration statement on Form S-1
      (Commission File No. 33-64654), is incorporated herein by reference.

10.3  Registrant's Recognition and Retention Plan, filed on June 17, 1993 as an
      exhibit to the Registrant's registration statement on Form S-1 (Commission
      File No. 33-64654), is incorporated herein by reference.

10.4  Employment agreement between First Federal Savings Bank of the Midwest and
      J. Tyler Haahr, filed as an exhibit to Registrant's Report on Form 10-K
      for the fiscal year ended September 30, 1997 (Commission File No.
      0-22140), is incorporated herein by reference.

10.5  Registrant's Supplemental Employees' Investment Plan, filed as an exhibit
      to Registrant's Report on Form 10-KSB for the fiscal year ended September
      30, 1994 (Commission File No. 0-22140), is incorporated herein by
      reference.

10.6  Employment agreements between First Federal Savings Bank of the Midwest
      and James S. Haahr and Donald J. Winchell, filed on June 17, 1993 as an
      exhibit to the Registrant's registration statement on Form S-1 (Commission
      File No. 33-64654), is incorporated herein by reference.

10.7  Registrant's Executive Officer Compensation Program, filed as Exhibit 10.6
      to Registrant's Report on Form 10-K for the fiscal year ended September
      30, 1998 (Commission File No. 0-22140), is incorporated herein by
      reference.


<PAGE>

10.8  Registrant's Executive Officer Incentive Stock Option Plan for Mergers and
      Acquisitions, filed as Exhibit 10.7 to Registrant's Report on Form 10-K
      for the fiscal year ended September 30, 1998 (Commission File No.
      0-22140), is incorporated herein by reference.

10.9  Registrant's 2002 Omnibus Incentive Plan.*

11    Statement re: computation of per share earnings (included under Note 2 of
      Notes to Consolidated Financial Statements in the Annual Report to
      Shareholders' attached hereto as Exhibit 13).

13    Annual Report to Shareholders.

21    Subsidiaries of the Registrant.

23    Consent of McGladrey & Pullen, LLP.

31.1  Certification of Principal Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002

31.2  Certification of Principal Financial Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002

32.1  Certification of the CEO pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002

32.2  Certification of the CFO pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002

99    Code of Ethics*

----------
*     Filed Herewith





                                                                    EXHIBIT 10.9

                          FIRST MIDWEST FINANCIAL, INC.

                           2002 OMNIBUS INCENTIVE PLAN

      1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Company and its stockholders by providing a means for
attracting and retaining directors, advisory directors, officers and employees
of the Company and its Affiliates.

      2. Definitions. The following definitions are applicable to the Plan:

            "Affiliate" -- means any "parent corporation" or "subsidiary
corporation" of the Company as such terms are defined in Section 424(e) and (f),
respectively, of the Code.

            "Award" -- means the grant by the Committee under this Plan of an
Incentive Stock Option, a Non-Qualified Stock Option, a Stock Appreciation
Right, Restricted Stock or a Performance Award, or any combination thereof, as
provided in the Plan.

            "Award Agreement" -- means the agreement evidencing the grant of an
Award made under the Plan.

            "Cause" -- means termination of service by reason of personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties or gross
negligence.

            "Code" -- means the Internal Revenue Code of 1986, as amended.

            "Committee" -- means the Committee referred to in Section 3 hereof.


            "Company" -- means First Midwest Financial Inc. and any successor
thereto.

            "Continuous Service" -- means the absence of any interruption or
termination of service as a director, advisory director, officer or employee of
the Company or an Affiliate, except that when used with respect to a person
granted an Incentive Stock Option means the absence of any interruption or
termination of service as an employee of the Company or an Affiliate. Service
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of transfers
between payroll locations of the Company or between the Company, its parent, its
subsidiaries or its successor.

            "ERISA" -- means the Employee Retirement Income Security Act of
1974, as amended.

            "Incentive Stock Option" -- means an option to purchase Shares
granted by the Committee which is intended to qualify as an Incentive Stock
Option under Section 422 of the Code. Unless otherwise set forth in the Award
Agreement, any Option which does not qualify as an Incentive Stock Option for
any reason shall be deemed a Non-Qualified Stock Option.

            "Market Value" -- means the closing high bid with respect to a Share
on the date in question on the Nasdaq Stock Market, or any similar system then
in use, or, if the Shares are not then traded on the Nasdaq Stock Market or any
similar system, the closing sales price on such date (or, if there is no
reported sale on such date, on the last preceding date on which any reported
sale occurred) of a Share on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if on such date the Shares are not quoted on the
Composite Tape, on the New York Stock Exchange, or if the Shares are not listed
or


                                       1

<PAGE>

admitted to trading on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 (the "Exchange
Act") on which the Shares are listed or admitted to trading, or, if the Shares
are not listed or admitted to trading on any such exchange, the fair market
value on such date of a Share as the Committee shall determine.

            "Non-Qualified Stock Option" -- means an option to purchase Shares
granted by the Committee which does not qualify, for any reason, as an Incentive
Stock Option under Section 422 of the Code.

            "Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option awarded to a Participant pursuant to Section 5(a) hereof.

            "Participant" -- means any director, advisory director, officer or
employee of the Company or any Affiliate who is selected by the Committee to
receive an Award.

            "Performance Award" -- means an Award granted pursuant to Section
5(d) herein.

            "Plan" -- means this 2002 Omnibus Incentive Plan of the Company.

            "Related" -- means (i) in the case of a Stock Appreciation Right, a
Stock Appreciation Right which is granted in connection with, and to the extent
exercisable, in whole or in part, in lieu of, an Option or another Stock
Appreciation Right and (ii) in the case of an Option, an Option with respect to
which and to the extent a Stock Appreciation Right is exercisable, in whole or
in part, in lieu thereof.

            "Restricted Stock" -- means Shares awarded to a Participant pursuant
to Section 5(c) hereof.

            "Retirement" -- means retirement from employment with the Company or
an Affiliate thereof, as an employee, director, director emeritus or advisory
director thereof, having reached the age of 65.

            "Shares" -- means the shares of common stock of the Company.

            "Stock Appreciation Right" -- means a stock appreciation right with
respect to Shares granted by the Committee pursuant to the Plan.

            "Ten Percent Holder" -- means any individual who owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company and any Affiliate.

            "Termination of Service" - means cessation of service, for any
reason, whether voluntary or involuntary, so that the affected individual is not
either (i) an employee of the Corporation or any Affiliate for purposes of an
Incentive Stock Option, or (ii) a director, advisory director or employee of the
Corporation or any affiliate for purpose of any other Award.

      3. Administration. The Plan shall be administered by a Committee
consisting of two or more members of the Board of Directors of the Company, each
of whom (i) shall be an outside director as defined under Section 162(m) of the
Code and the regulations thereunder and (ii) shall be a Non-Employee Director as
defined under Rule 16(b) of the Securities Exchange Act of 1934 or any similar
or successor provision. The members of the Committee shall be appointed by the
Board of Directors of the Company. Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board of Directors of the Company,
the Committee shall have sole and complete authority and discretion to


                                       2

<PAGE>

(i) select Participants and grant Awards; (ii) determine the number of Shares to
be subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards shall
be granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, to correct any defect or supply
an omission or reconcile any inconsistency in the Plan, and make all
determinations deemed necessary or advisable for the administration of the Plan.

      A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by a majority of the Committee without a meeting, shall
be acts of the Committee.

      4. Shares Subject to Plan.

            (a) Subject to adjustment by the operation of Section 7, the maximum
number of Shares with respect to which Awards may be made under the Plan is
200,000 Shares. The Shares with respect to which Awards may be made under the
Plan may be either authorized and unissued shares or previously issued shares
reacquired and held as treasury shares. Shares which are subject to Related
Stock Appreciation Rights and Related Options shall be counted only once in
determining whether the maximum number of Shares with respect to which Awards
may be granted under the Plan has been exceeded. An Award shall not be
considered to have been made under the Plan with respect to any Option or Stock
Appreciation Right which terminates or with respect to Restricted Stock which is
forfeited, and new Awards may be granted under the Plan with respect to the
number of Shares as to which such termination or forfeiture has occurred.

            (b) During any calendar year, no Participant may be granted Awards
under the Plan of more than 100,000 Shares, subject to adjustment as provided in
Section 7.

      5. Awards.

            (a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine, including the granting of Options in tandem with
other Awards under the Plan:

                  (i) Exercise Price. The exercise price per Share for an Option
            shall be determined by the Committee; provided that, in the case of
            an Incentive Stock Option, the exercise price thereof shall not be
            less than 100% of the Market Value of a Share on the date of grant
            of such Option; provided further that, in the case of an Incentive
            Stock Option granted to a Ten Percent Holder, the exercise price
            thereof shall not be less than 110% of the Market Value of a Share
            on the date of grant of such Option.

                  (ii) Option Term. The term of each Option shall be fixed by
            the Committee, but shall be no greater than 15 years; provided that,
            in the case of an Incentive Stock Option, the term of such Option
            shall not exceed ten years; provided further that, in the case of an
            Incentive Stock Option granted to a Ten Percent Holder, the term of
            such option shall not exceed five years.

                  (iii) Time and Method of Exercise. Except as provided in
            paragraph (a) of Section 6, no Option granted hereunder may be
            exercised unless at the time the Participant exercises such Option,
            such Participant has maintained Continuous Service since the date of
            grant of such Option. To exercise an Option under the Plan, the


                                       3

<PAGE>

            Participant to whom such Option was granted shall give written
            notice to the Company in form satisfactory to the Committee (and, if
            partial exercises have been permitted by the Committee, by
            specifying the number of Shares with respect to which such
            Participant elects to exercise such Option) together with full
            payment of the exercise price, if any and to the extent notice is
            received by the Company. Payment, if any is required, shall be made
            either (i) in cash (including check, bank draft or money order) or,
            if the Committee specifically approves in writing on an individual
            basis, (ii) by delivering (A) Shares already owned by the
            Participant and having a fair market value equal to the applicable
            exercise price, such fair market value to be determined in such
            appropriate manner as may be provided by the Committee or as may be
            required in order to comply with or to conform to requirements of
            any applicable laws or regulations, or (B) a combination of cash and
            such Shares.

                  (iv) Option Agreements. At the time of an Award of an Option,
            the Participant shall enter into an Award Agreement with the Company
            in a form specified by the Committee, agreeing to the terms and
            conditions of the Award and such other matters as the Committee
            shall in its sole discretion determine.

                  (v) Limitations on Value of Exercisable Incentive Stock
            Options. The aggregate Market Value of the Shares with respect to
            which Incentive Stock Options are exercisable for the first time by
            a Participant in any calendar year shall not exceed $100,000.

                  (vi) Eligible Recipients of Incentive Stock Options. Incentive
            Stock Options may be granted by the Committee only to employees of
            the Company or its Affiliates.

                  (vii) Incentive Stock Options must be granted no later than 10
            years from the date the Plan is adopted or approved by the
            stockholders, whichever is earlier.

            (b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants with the following terms and
conditions and with such additional terms and conditions not inconsistent with
the provisions of the Plan as the Committee shall determine:

                  (i) General. A Stock Appreciation Right shall, upon its
            exercise, entitle the Participant to whom such Stock Appreciation
            Right was granted to receive a number of Shares or cash or
            combination thereof, as the Committee in its discretion shall
            determine, the aggregate value of which (i.e., the sum of the amount
            of cash and/or Market Value of such Shares on date of exercise)
            shall equal (as nearly as possible, it being understood that the
            Company shall not issue any fractional shares) the amount by which
            the Market Value per Share on the date of such exercise shall exceed
            the exercise price of such Stock Appreciation Right, multiplied by
            the number of Shares with respect to which such Stock Appreciation
            Right shall have been exercised.

                  (ii) Related Options. A Stock Appreciation Right may be
            Related to an Option or may be granted independently of any Option
            as the Committee shall from time to time in each case determine. In
            the case of a Related Option, such Related Option shall cease to be
            exercisable to the extent of the Shares with respect to which the
            Related Stock Appreciation Right was exercised. Upon the exercise or
            termination of a Related Option, any Related Stock Appreciation
            Right shall terminate to the extent of the Shares with respect to
            which the Related Option was exercised or terminated. If the Related
            Option is an Incentive Stock Option, the Related Option shall
            satisfy all restrictions and


                                       4

<PAGE>

            the limitations imposed on Incentive Stock Options under paragraph
            (a) of this Section 5 (including, without limitation, restrictions
            on exercise price and term).

                  (iii) Exercise Price and Term. The exercise price and term of
            each Stock Appreciation Right shall be fixed by the Committee;
            provided that, that the term of a Stock Appreciation Right shall not
            exceed 15 years.

                  (iv) Stock Appreciation Right Agreements. At the time of an
            Award of a Stock Appreciation Right, the Participant shall enter
            into an Award Agreement with the Company in a form specified by the
            Committee, agreeing to the terms and conditions of the Award and
            such other matters as the Committee shall in its sole discretion
            determine.

                  (v) Time and Method of Exercise. Except as provided in
            paragraph (a) of Section 6, no Stock Appreciation Right may be
            exercised unless at the time the Participant exercises such Stock
            Appreciation Right, such Participant has maintained Continuous
            Service since the date of grant of such Stock Appreciation Right. To
            exercise a Stock Appreciation Right under the Plan, the Participant
            to whom such Stock Appreciation Right was granted shall give written
            notice to the Company in form satisfactory to the Committee (and, if
            partial exercises have been permitted by the Committee, by
            specifying the number of Shares with respect to which such
            Participant elects to exercise such Stock Appreciation Right)
            together with full payment of the exercise price, if any and to the
            extent required. The date of exercise shall be the date on which
            such notice is received by the Company. Payment, if any is required,
            shall be made either (i) in cash (including check, bank draft or
            money order) or with the specific written permission of the
            Committee (ii) by delivering (A) Shares already owned by the
            Participant and having a fair market value equal to the applicable
            exercise price, such fair market value to be determined in such
            appropriate manner as may be provided by the Committee or as may be
            required in order to comply with or to conform to requirements of
            any applicable laws or regulations, or (B) a combination of cash and
            such Shares.

            (c) Restricted Stock. The Committee is hereby authorized to grant
Awards of Restricted Stock to Participants with the following terms and
conditions and with such additional terms and conditions not inconsistent with
the provisions of the Plan as the Committee shall determine:

                  (i) Restrictions. Shares of Restricted Stock shall be subject
            to such restrictions as the Committee may impose (including, without
            limitation, any limitation on the right to vote a Share of
            Restricted Stock or the right to receive any dividend or other right
            or property with respect thereto), which restrictions may lapse
            separately or in combination at such time or times, in such
            installments or otherwise as the Committee may deem appropriate.
            During the period of time in which the Shares awarded as Restricted
            Stock are subject to the restrictions contemplated herein (a
            "Restricted Period"), unless otherwise permitted by the Plan or by
            the Committee as provided in the applicable Award Agreement, such
            Shares may not be sold, assigned, transferred, pledged or otherwise
            encumbered by the Participant. Except for the restrictions which may
            be imposed on Restricted Stock, a Participant to whom Shares of
            Restricted Stock have been awarded shall have all the rights of a
            stockholder, including but not limited to the right to receive all
            dividends paid on such Shares and the right to vote such Shares.

                  (ii) Restricted Stock Agreements. At the time of an Award of
            Shares of Restricted Stock, the Participant shall enter into an
            Award Agreement with the Company


                                       5

<PAGE>

            in a form specified by the Committee, agreeing to the terms and
            conditions of the Award and such other matters as the Committee
            shall in its sole discretion determine.

                  (iii) Stock Certificates. Any Restricted Stock granted under
            the Plan shall be evidenced by issuance of a stock certificate or
            certificates, which certificate or certificates shall be held by the
            Company. Such certificate or certificates shall be registered in the
            name of the Participant and shall bear the following (or similar)
            legend:

                  "The transferability of this certificate and the shares of
                  stock represented hereby are subject to the terms and
                  conditions (including forfeiture) contained in the Company's
                  2002 Omnibus Incentive Plan and an Agreement entered into
                  between the registered owner and the Company. Copies of such
                  Plan and Agreement are on file in the offices of the Secretary
                  of the Company, Fifth at Erie, Storm Lake, Iowa 50588."

                  (iv) Removal of Restrictions. Shares representing Restricted
            Stock that are no longer subject to restrictions shall be delivered
            to the holder thereof promptly after the applicable restrictions
            lapse or are waived.

            (d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and the
applicable Award Agreement. At the time of grant of a Performance Award, the
Participant shall enter into an Award Agreement with the Company in a form
specified by the Committee, agreeing to the terms and conditions of the
Performance Award and such other matters as the Committee shall in its sole
discretion determine. A Performance Award granted under the Plan (i) may be
denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan, the
performance goals to be achieved during any performance period, the length of
any performance period, the amount of any Performance Award granted and the
amount of any payment or transfer to be made pursuant to any Performance Award
shall be determined by the Committee as provided in the applicable Award
Agreement. Unless otherwise provided in the Performance Award, the term of a
Performance Award shall not exceed 15 years.

      6. Termination of Service.

            (a) Options and Stock Appreciation Rights.

                  (i) If a Participant to whom an Option or Stock Appreciation
            Right was granted shall cease to maintain Continuous Service for any
            reason (including total and partial disability but excluding
            Retirement, death and termination of employment by the Company or
            any Affiliate for Cause), such Participant may, but only within the
            period of three months, in the case of an Incentive Stock Option, or
            one year, in the case of a Non-Qualified Stock Option or Stock
            Appreciation Right, immediately succeeding such cessation of
            Continuous Service and in no event after the expiration date of such
            Option or Stock Appreciation Right, exercise such Option or Stock
            Appreciation Right to the extent that such Participant was entitled
            to exercise such Option or Stock Appreciation Right at the date of
            such cessation of Continuous Service. If the Continuous Service of a
            Participant to whom an Option or Stock Appreciation Right was
            granted by the Company is terminated for Cause, all rights under any
            Option or Stock Appreciation Right of such


                                       6

<PAGE>

            Participant shall expire immediately upon the giving to the
            Participant of notice of such termination.

                  (ii) If a Participant to whom an Option or Stock Appreciation
            Right was granted shall cease to maintain Continuous Service due to
            Retirement, such Participant may, but only within the period of
            three months, in the case of an Incentive Stock Option, or two
            years, in the case of a Non-Qualified Stock Option or Stock
            Appreciation Right, immediately succeeding such cessation of
            Continuous Service and in no event after the expiration date of such
            Option or Stock Appreciation Right, exercise such Option or Stock
            Appreciation Right to the extent that such Participant was entitled
            to exercise such Option or Stock Appreciation Right at the date of
            such cessation of Continuous Service.

                  (iii) In the event of the death of a Participant while in the
            Continuous Service of the Company or an Affiliate or within the
            periods referred to in paragraphs (a)(i) and (a)(ii) of this Section
            6, the person to whom any Option or Stock Appreciation Right held by
            the Participant at the time of his or her death is transferred by
            will or the laws of descent and distribution or in the case of an
            Award other than an Incentive Stock Option, pursuant to a qualified
            domestic relations order, as defined in the Code or Title I of ERISA
            or the rules thereunder, or as otherwise permitted to be transferred
            under Section 10 of the Plan may, but only within the period of two
            years immediately succeeding the date of death of such Participant,
            and in no event after the expiration date of such Option or Stock
            Appreciation Right, exercise such Option or Stock Appreciation Right
            to the extent that such Participant was entitled to exercise such
            Option or Stock Appreciation Right immediately prior to his death.
            Following the death of any Participant to whom an Option was granted
            under the Plan, irrespective of whether any Related Stock
            Appreciation Right shall have theretofore been granted to the
            Participant or whether the person entitled to exercise such Related
            Stock Appreciation Right desires to do so, the Committee may, as an
            alternative means of settlement of such Option, elect to pay to the
            person to whom such Option is transferred as permitted by Section 10
            of this Plan, the amount by which the Market Value per Share on the
            date of exercise of such Option shall exceed the exercise price of
            such Option, multiplied by the number of Shares with respect to
            which such Option is properly exercised. Any such settlement of an
            Option shall be considered an exercise of such Option for all
            purposes of the Plan.

                  (iv) Notwithstanding the provisions of subparagraphs (i)
            through (iii) above, the Committee may, in its sole discretion,
            establish different terms and conditions pertaining to the effect of
            termination to the extent permitted by applicable federal and state
            law.

            (b) Restricted Stock. Except as otherwise provided in this Plan, if
a Participant ceases to maintain Continuous Services for any reason (other than
death, total or partial disability or Retirement) unless the Committee, in its
sole discretion, shall otherwise determine, all shares of Restricted Stock
theretofore awarded to such Participant and which at the time of such
termination of Continuous Service are subject to the restrictions imposed by
paragraph (c)(i) of Section 5 shall upon such termination of Continuous Service
be forfeited and returned to the Company. Unless the Committee, in its sole
discretion, shall otherwise determine, if a Participant ceases to maintain
Continuous Service by reason of death, total or partial disability or
Retirement, all shares of Restricted Stock theretofore awarded to such
Participant and which at the time of such termination of Continuous Service are
subject to the restrictions imposed by paragraph (c)(i) of Section 5 shall upon
such termination of Continuous Service be free of restrictions and shall not be
forfeited.


                                       7

<PAGE>

            (c) Performance Awards. In the event that a Participant to whom a
Performance Award has been granted shall cease to maintain Continuous Service
for any reason, the rights of such Participant or any person to whom the Award
may have been transferred as permitted by Section 10 shall be governed by the
terms of the Plan and the applicable Award Agreement.

      7. Adjustments Upon Changes in Capitalization. In the event of any change
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Company, the maximum aggregate number and
class of shares and exercise price of the Award, if any, as to which Awards may
be granted under the Plan and the number and class of shares and exercise price
of the Award, if any, with respect to which Awards have been granted under the
Plan shall be appropriately adjusted by the Committee, whose determination shall
be conclusive. Any Award which is adjusted as a result of this Section 7 shall
be subject to the same restrictions as the original Award.

      8. Effect of Merger on Options and Stock Appreciation Rights. In the case
of any merger, consolidation or combination of the Company (other than a merger,
consolidation or combination in which the Company is the continuing corporation
and which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property, or any combination
thereof), any Participant to whom an Option or Stock Appreciation Right has been
granted shall have the additional right (subject to the provisions of the Plan
and any limitation applicable to such Option or Stock Appreciation Right),
thereafter and during the term of each such Option or Stock Appreciation Right,
to receive upon exercise of any such Option or Stock Appreciation Right an
amount equal to the excess of the fair market value on the date of such exercise
of the securities, cash or other property, or combination thereof, receivable
upon such merger, consolidation or combination in respect of a Share over the
exercise price of such Stock Appreciation Right or Option, multiplied by the
number of Shares with respect to which such Option or Stock Appreciation Right
shall have been exercised. Such amount may be payable fully in cash, fully in
one or more of the kind or kinds of property payable in such merger,
consolidation or combination, or partly in cash and partly in one or more of
such kind or kinds of property, all in the discretion of the Committee.

      9. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 9 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, shall become the
beneficial owner of shares of the Company with respect to which 25% or more of
the total number of votes for the election of the Board of Directors of the
Company may be cast, (ii) as a result of, or in connection with, any cash tender
offer, merger or other business combination, sale of assets or contested
election, or combination of the foregoing, the persons who were directors of the
Company shall cease to constitute a majority of the Board of Directors of the
Company, or (iii) the stockholders of the Company shall approve an agreement
providing either for a transaction in which the Company will cease to be an
independent publicly-owned corporation or for a sale or other disposition of all
or substantially all the assets of the Company. Upon a change in control, unless
the Committee shall have otherwise provided in the applicable Award Agreement,
any restrictions or vesting period with respect to any outstanding Awards shall
lapse and all such Awards shall become fully vested in the Participant to whom
such Awards were awarded; provided, however, that no Award which has previously
been exercised or otherwise terminated shall become exercisable.

      10. Assignments and Transfers. No Award granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution,
except that an Award other than an Incentive Stock Option may be transferred
pursuant to a qualified domestic relations order or by gift to any member of the
Participant's immediate family or to a trust for the benefit of one or more of
such


                                       8

<PAGE>

immediate family members. During the lifetime of an Award recipient, an Award
shall be exercisable only by the Award recipient unless it has been transferred
as permitted hereby, in which case it shall be exercisable only by such
transferee. For the purpose of this Section 10, a Participant's "immediate
family" shall mean the Participant's spouse, children and grandchildren.

      11. Employee Rights Under the Plan. No person shall have a right to be
selected as a Participant nor, having been so selected, to be selected again as
a Participant and no officer, employee or other person shall have any claim or
right to be granted an Award under the Plan or under any other incentive or
similar plan of the Company or any Affiliate. Neither the Plan nor any action
taken thereunder shall be construed as giving any employee any right to be
retained in the employ of or serve as a director or advisory director of the
Company or any Affiliate.

      12. Delivery and Registration of Stock. The Company's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933, as amended, or any other federal,
state or local securities legislation. It may be provided that any
representation requirement shall become inoperative upon a registration of the
Shares or other action eliminating the necessity of such representation under
such Securities Act or other securities legislation. The Company shall not be
required to deliver any Shares under the Plan prior to (i) the admission of such
Shares to listing on any stock exchange on which Shares may then be listed, and
(ii) the completion of such registration or other qualification of such Shares
under any state or federal law, rule or regulation, as the committee shall
determine to be necessary or advisable.

      13. Withholding Tax. Upon the termination of the restricted period with
respect to any shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
any successor provision thereto, to include the value of such shares in taxable
income), the Company shall have the right to require the Participant or other
person receiving such shares to pay the Company the amount of any taxes which
the Company is required to withhold with respect to such shares, or, in lieu
thereof, to retain or sell without notice, a sufficient number of shares held by
it to cover the amount required to be withheld. The Company shall have the right
to deduct from all dividends paid with respect to shares of Restricted Stock the
amount of any taxes which the Company is required to withhold with respect to
such dividend payments.

      The Company shall have the right to deduct from all amounts paid in cash
with respect to the exercise of a Stock Appreciation Right under the Plan any
taxes required by law to be withheld with respect to such cash payments. Where a
Participant or other person is entitled to receive Shares pursuant to the
exercise of an Option or Stock Appreciation Right pursuant to the Plan, the
Company shall have the right to require the Participant or such other person to
pay the Company the amount of any taxes which the Company is required to
withhold with respect to such Shares, or, in lieu thereof, to retain, or sell
without notice, a number of such Shares sufficient to cover the amount required
to be withheld.

      All withholding decisions pursuant to this Section 13 shall be at the sole
discretion of the Committee or the Company.

      14. Amendment or Termination.

            (a) Subject to paragraph (b) of this Section 14, the Board of
Directors of the Company may amend, alter, suspend, discontinue, or terminate
the Plan at any time without the consent of shareholders or Participants, except
that any such action will be subject to the approval of the Company's
shareholders if, when and to the extent such shareholder approval is necessary
or required for


                                       9

<PAGE>

purposes of any applicable federal or state law or regulation or the rules of
any stock exchange or automated quotation system on which the Shares may then be
listed or quoted, or if the Board of Directors of the Company, in its
discretion, determines to seek such shareholder approval.

            (b) Except as otherwise provided herein, the Committee may waive any
conditions of or rights of the Company or modify or amend the terms of any
outstanding Award. The Committee may not, however, amend, alter, suspend,
discontinue or terminate any outstanding Award without the consent of the
Participant or holder thereof, except as otherwise herein provided.

      15. Effective Date and Term of Plan. The Plan shall become effective upon
its adoption by the Board of Directors of the Company, subject to the approval
of the Plan by the shareholders of the Company. It shall continue in effect for
a term of 15 years unless sooner terminated under Section 14 hereof.


                                       10



                               [GRAPHIC OMITTED]

                                     PEOPLE
                                     HELPING
                                     PEOPLE

                                     [LOGO]

                          FIRST MIDWEST FINANCIAL, INC.

                               2003 ANNUAL REPORT


<PAGE>

                               2003 ANNUAL REPORT

                               [GRAPHIC OMITTED]

JESSICA J. STRUVE, Account Services "Working in a numbers-focused industry, I
believe a company's success still comes from its people. That's why I am proud
to be part of the First Midwest family. We know that a handshake and smile,
along with the financial services we provide, can make life a little easier for
our customers."

Fun Fact: Recently accepted a marriage proposal while working at our bank's
drive-up window.


<PAGE>

                              FINANCIAL HIGHLIGHTS

                                    CONTENTS

Financial Highlights .................................................      1
Letter to Shareholders ...............................................    2-3
Company Profile & History ............................................      4
Highlights ...........................................................   5-12

Office Locations .....................................................     13
Financials ...........................................................  14-45
Directors & Executive Officers .......................................  46-47
Investor Information .................................................     48


<TABLE>
<CAPTION>
(Dollars in Thousands except Per Share Data)        2003        2002        2001        2000        1999
---------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>         <C>         <C>         <C>
AT SEPTEMBER 30
   Total assets .......................         $772,285    $607,648    $523,183    $505,590    $511,213
   Total loans, net ...................          349,692     341,937     333,062     324,703     303,079
   Total deposits .....................          435,553     355,780     338,782     318,654     304,780
   Shareholders' equity ...............           43,031      44,588      43,727      40,035      39,771
   Book value per common share ........         $  17.25    $  18.06    $  17.71    $  16.48    $  15.86
   Total equity to assets .............             5.57%       7.34%       8.36%       7.93%       7.78%

FOR THE FISCAL YEAR
   Net interest income
 ................         $ 15,728    $ 13,700    $ 12,833    $ 14,177    $ 13,559
   Net income .........................            3,397       2,157       1,910       2,328       2,641
   Diluted earnings per share .........         $   1.36    $   0.87    $   0.78    $   0.93    $   1.04
   Return on average assets ...........              .47%        .38%        .37%        .46%        .54%
   Return on average equity ...........             7.57%       4.95%       4.57%       5.98%       6.35%
   Net yield on interest-earning assets             2.31%       2.56%       2.59%       2.86%       2.91%
</TABLE>


 [THE FOLLOWING TABLES WERE REPRESENTED BY BAR CHARTS IN THE PRINTED MATERIAL.]


<TABLE>
<S>   <C>   <C>   <C>   <C>     <C>   <C>   <C>   <C>   <C>     <C>   <C>   <C>   <C>  <C>      <C>   <C>    <C>    <C>    <C>
$511  $506  $523  $608  $772    $303  $325  $333  $342  $350    $305  $319  $339  $356 $436     $2.6  $2.3   $1.9   $2.2   $3.4
----------------------------    ----------------------------    ---------------------------     -------------------------------
  99   00    01    02    03      99    00    01    02     03     99    00    01    02    03      99    00     01     02     03

TOTAL ASSETS                    TOTAL LOANS, NET                TOTAL DEPOSITS                  NET INCOME
In Millions                     In Millions                     In Millions                     In Millions
</TABLE>


The Company and its subsidiaries exceed regulatory capital requirements.

Banks are Members FDIC and Equal Housing Lenders.


                                       1

<PAGE>

                             LETTER TO SHAREHOLDERS

                               TO OUR SHAREHOLDERS
--------------------------------------------------------------------------------

2003 WAS A STRONG YEAR FOR OUR COMPANY. FIRST MIDWEST FINANCIAL, INC.'S EARNINGS
ROSE 57 PERCENT DURING THE FISCAL YEAR. NET INCOME WAS $3.4 MILLION OR $1.36 PER
DILUTED SHARE FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003 COMPARED TO $2.2
MILLION OR $0.87 PER DILUTED SHARE THE PREVIOUS YEAR. THE 57 PERCENT JUMP IN
EARNINGS FOLLOWS A 13 PERCENT INCREASE THE PREVIOUS YEAR.

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

Net interest income rose 15 percent, or more than $2 million, compared to the
previous fiscal year. Loan-to-deposit interest rate spreads were wider in 2003
due, in part, to our 34 percent growth in low-cost deposit balances (checking,
money market, and savings accounts) and 44 percent growth in originated
commercial loans.

      Total deposit balances grew 22 percent, or $80 million, to total $436
million at year end. The Company's five-year deposit trends are most telling:
118 percent increase in low-cost deposit balances and 53.5 percent increase in
total deposit balances. Both our low-cost and total deposit balance growth
outperformed the average deposit percent growth for national commercial banks,
savings banks and total FDIC-insured domestic deposits in 2003 and the last five
years.(1)

[GRAPHIC OMITTED]

"Our goal is to make financial management easy for customers through every life
stage."

      Our commitment to attract low-cost deposits has shifted the percentage of
low-cost funds from 22 percent of total deposits to 31.5 percent during the past
five years. The shift directly improves loan-to-deposit interest rate spreads
and enhances the Company's ability to cultivate banking relationships that start
from core services.

                                                [BAR CHART]

                                                LOW-COST
                                                DEPOSIT BALANCES
                                                In millions

                                                Low-cost deposits include
                                                checking, money market, and
                                                savings accounts.

                                                [LINE GRAPH]

                                                LOW-COST DEPOSIT BALANCES AS A
                                                PERCENTAGE OF TOTAL DEPOSIT
                                                BALANCES

      As our concentration and volume of originated commercial loans increase,
the Company benefits with the related deposit accounts, better loan-to-deposit
spreads, less interest rate sensitivity, and more fee income. Originated
commercial loans grew $53 million, or 44 percent during fiscal 2003. This
follows a 68 percent increase in 2002.


                                       2

<PAGE>

                             LETTER TO SHAREHOLDERS


<TABLE>
<CAPTION>
                                                                  FMFIB    NAT     NAB     IAB
------------------------------------------------------------------------------------------------
<S>                                                               <C>     <C>     <C>     <C>
LOAN QUALITY AND ALLOWANCE COMPARISON
   Delinquent Loans >30 Days to Total Loans ...................   0.57%      NA      NA      NA
   Non-Performing Loans to Total Loans ........................   0.30%   0.84%   1.33%   0.91%
   Non-Performing Assets to Total Assets ......................   0.28%   0.63%   0.84%   0.57%
   Net Charge-Offs to Average Loans (Fiscal Year Annualized) ..   0.02%   0.32%   0.93%   0.19%
   Allowance for Loan Losses to Total Loans ...................   1.42%   0.90%   1.81%   1.36%
</TABLE>


FMFIB (First Midwest Financial, Inc. Banks) statistics are as of September 30,
2003. The most current statistics available for NAT (National Average Thrift),
NAB (National Average Bank), and IAB (Iowa Average Bank) are as of June 30,
2003. Peer group data, institutions with assets greater than $100 million, is
taken from the FDIC.

Credit quality ratios outpaced the Company's state and national peer group in
2003.(1)

      Centralization and expansion are two words that best describe our mortgage
operation in 2003. We streamlined mortgage lending processes and purchased new
software to make getting home loans easier for our customers, and more
profitable for our banks. Now customers can choose from over 160 mortgage
programs and customize the loan to suit their needs. Plus, we are increasing our
mortgage lending staff to make service more responsive and personalized, so we
can increase market share.

      Start up costs associated with the mortgage operation and the new Des
Moines and Urbandale, Iowa bank facilities contributed to an increase in
noninterest expense for fiscal 2003 compared to 2002. The Company opened its
Urbandale banking office in November 2002. At September 2003, the new Urbandale
office has attracted more than $28 million in deposits and is quickly becoming a
profitable branch for the Company.

LOOKING AHEAD

Former South Dakota Congressman John Thune joined our board of directors in
January 2003. We are pleased and honored to welcome him. He brings a wealth of
local, regional, and national insight that will benefit our customers, our
banks, and First Midwest shareholders.

      J. Tyler Haahr was promoted to president and chief operating officer in
October of this year. He joined First Midwest's Board of Directors in 1992 and
became an executive officer for First Midwest and its affiliates in March 1997.
Tyler's new position reflects the leadership and contributions he has provided
to our people and to our organization.

      In recent years, the Company has focused primarily on managing credit
quality, profitable growth, and streamlining operations. These areas are still
top of mind as we implement plans for the next fiscal year.

2004 strategies include initiatives such as:

1. Maintain exceptional credit quality.

2. Increase low-cost deposits.

3. Establish more full-service commercial relationships.

4. Increase mortgage business and streamline operations.

5. Implement branch expansion plans.

      On October 6, 2003 First Midwest announced a definitive agreement with
Manson State Bank (MSB) under which MSB will acquire First Federal's branch
office in Manson, Iowa. The transaction is expected to close by January 31, 2004
and is subject to regulatory approval.

      In July 2003, First Midwest announced its intention to repurchase up to
150,000 shares or approximately 6 percent of the Company's outstanding shares
during the following twelve months. Since initiating its first stock repurchase
program in 1994, the Company has invested a total of $14.7 million in the
repurchase of more than 1 million shares. The Company's stock repurchase program
confirms that we believe "CASH" is an attractive investment.

      First Midwest Financial is a company of people helping people. It is that
simple. Our goal is to make financial management easy for customers through
every life stage. We know banking is not just about money. It is about making
money work so customers have more time for what is really important in life. Our
team remains dedicated to increasing shareholder value and enhancing your
return. Thank you for your investment in First Midwest Financial.


/s/ James S. Haahr                      /s/ J. Tyler Haahr

JAMES S. HAAHR                          J. TYLER HAAHR
Chairman of the Board & CEO             President & COO

(1)   Based on reports distributed by the FDIC.


                                       3

<PAGE>

                               2003 ANNUAL REPORT

                                COMPANY STRUCTURE


<TABLE>
<S>                     <C>                   <C>                               <C>
                                              ----------------------------
                                              First Midwest Financial,Inc.
                                              ----------------------------
                       ----------------------------     |    -----------------------
                       First Services Trust Company     |    First Midwest Financial
                                                        |          Capital Trust
                       ----------------------------     |    -----------------------
                                                        |
            |----------------------------------------------------------------------------
            |                                                                           |
--------------------------                    ------------------                -------------------
First Federal Savings Bank -----------------    First Services                  Security State Bank
     of the Midwest                           Financial Limited
--------------------------                    ------------------                -------------------
            |
            |----------------------------------------------------------------------------
            |                          |                      |                         |
-------------------------    ----------------------    -----------------     -------------------------
First Federal Storm Lake/    Brookings Federal Bank    Iowa Savings Bank     First Federal Sioux Falls
 Northwest Iowa Division            Division                Division                  Division
-------------------------    ----------------------    -----------------     -------------------------
</TABLE>


                                 COMPANY PROFILE

First Midwest Financial, Inc. is a $772 million bank holding company for First
Federal Savings Bank of the Midwest and Security State Bank. Headquartered in
Storm Lake, Iowa, the Company converted from mutual ownership to stock ownership
in 1993. Its primary business is marketing financial deposit and loan products
to meet the needs of retail bank customers.

      First Midwest operates under a super-community banking philosophy that
allows the Company to grow while maintaining its community bank roots, with
local decision making and customer service. Administrative functions,
transparent to the customer, are centralized to enhance the banks' operational
efficiencies and to improve customer service capabilities.

      First Federal Savings Bank of the Midwest operates as a thrift with four
divisions: First Federal Storm Lake/Northwest Iowa, Brookings Federal Bank, Iowa
Savings Bank, and First Federal Sioux Falls. Security State Bank operates as a
state-chartered commercial bank. Sixteen offices support customers in Brookings
and Sioux Falls, South Dakota, and throughout central and northwest Iowa.

      First Services Trust Company, a subsidiary of First Midwest Financial,
Inc., provides professional trust services to bank customers. First Midwest
Financial Capital Trust, also a wholly-owned subsidiary of First Midwest, was
established in July 2001 for the purpose of issuing Company Trust Preferred
Securities. First Services Financial Limited, a subsidiary of First Federal
Savings Bank of the Midwest, is a full-service brokerage operation that offers a
wide range of noninsured investment products to customers through LaSalle St.
Securities, LLC.

                                 COMPANY HISTORY

1954 Storm Lake Savings and Loan Association was granted a charter by the State
of Iowa. Founder, Stanley H. Haahr, invested $2,000 of his personal savings and
raised another $8,000 from friends to meet the $10,000 capital requirement. The
first office was equipped with a desk, a cash box, and a borrowed vault in the
back of Mr. Haahr's Buena Vista Abstract and Mortgage business.

1955 The Association applied for a Federal Charter. Stan Haahr collected
deposits from one hundred friends to meet the required number of deposit
accounts.

1957 The Association was converted to a Federal Charter and named First Federal
Savings and Loan Association of Storm Lake (FFSLASL).

1971-1981 The Association maintained a subsidiary, Colonial Service Corporation,
for the purpose of making consumer loans.

1973 Branch opened in Sac City, Iowa.

1975 Branches opened in Manson, Laurens, Odebolt and Lake View, Iowa.

1977-1981 The Association maintained a mortgage banking operation, First
Services Mortgage Corporation, in Sioux Falls and Rapid City, South Dakota.

1979 Storm Lake Plaza branch opened.

1983 First Services Financial Limited, a subsidiary of the Association, was
incorporated to serve as a full-service brokerage operation that offers a wide
range of noninsured investments through LaSalle St. Securities, LLC.

1993 FFSLASL became First Federal Savings Bank of the Midwest, a subsidiary of
First Midwest Financial, Inc. (FMFI). First Federal changed from a mutual
savings institution to a public company through its association with FMFI. 1.9
million shares of FMFI stock were issued at $10.00 per share ($6.67 per share
stock split adjusted) and began trading on the NASDAQ under the symbol "CASH."

1994 Brookings Federal Bank in Brookings, South Dakota was purchased.

1995 Iowa Savings Bank in Des Moines, Iowa was purchased.

1996 Security State Bank in Stuart, Iowa was purchased.

1997 Iowa Savings Bank opened its second office in West Des Moines, Iowa.

2000 First Federal opened a new bank in Sioux Falls, South Dakota.

2001 Iowa Savings Bank opened its third office in Des Moines, Iowa.

2002 Iowa Savings Bank built a new main office in Urbandale, Iowa, the fourth
facility in the Des Moines area.

      First Services Trust Company, a subsidiary of the Company, was established
in Sioux Falls, South Dakota. The South Dakota charter allows the Company's
customers to benefit from some of the most favorable trust and tax laws in the
nation.

2003 First Federal Savings Bank leased land for a second Sioux Falls bank
location. Keep reading for more 2003 highlights.


                                       4

<PAGE>

                               2003 ANNUAL REPORT

                                [GRAPHIC OMITTED]

STANLEY H. HAAHR, Founder "It's been nearly 50 years since we hung our shingle
above the door. In my wildest dreams, I didn't image our little $10,000 shop
would become what it is today. I guess that's what happens when you are honest
and you take care of people. I'm proud to be associated with such a fine
organization, as a customer and an investor."

Fun Facts: Recently celebrated his 88th birthday, with only one candle on the
cake. Still follows "CASH" daily.


                                       5

<PAGE>

                                 BANK HIGHLIGHTS

                              BANK EASY. LIVE LIFE.
                           Making life easier for you.

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

BANKING IS MORE THAN SIMPLY DEPOSITS AND LOANS. MUCH MORE.

      OUR COMPANY MAKES FINANCIAL MANAGEMENT EASY FOR CUSTOMERS THROUGH EVERY
LIFE STAGE. THAT IS BECAUSE WE KNOW BANKING IS NOT JUST ABOUT MONEY. IT IS ABOUT
YOU. A GREAT BANK GIVES YOU CHOICES, AND HAS PEOPLE READY TO WORK WITH YOU EVERY
STEP OF THE WAY. OUR COMPANY PUTS YOUR MONEY TO WORK, NO MATTER WHERE YOU ARE IN
LIFE, SO YOU HAVE LESS WORRIES AND MORE TIME FOR WHAT IS REALLY IMPORTANT...
LIVING LIFE.

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

                HOW CAN WE MAKE MONEY MANAGEMENT EASIER FOR YOU?


<TABLE>
<S>                                             <C>                                      <C>
PERSONAL FINANCIAL SERVICES                     Agricultural Lending                     INVESTMENT AND

Checking Choices                                Consumer Lending                         INSURANCE SERVICES(1)

Online Express Check Reorder                    Lines of Credit                          Stocks

Online Banking                                  Ready Reserve                            Bonds

Online Bill Payment                             24-Hour Online Loan Applications         Mutual Funds

QUICKbank 24-Hour Telebanking                   Credit Cards                             Fixed and Variable Annuities

Overdraft Protection                            Retirement Planning                      Life Insurance

Privileged Status PhotoSecure QUICKcard         Credit Life and Disability Insurance     Disability Insurance

Privileged Status ATM Card                      Direct Deposits                          Long-term Care Insurance

Money Market                                    Automatic Payment                        Retirement Planning

Silver Savings                                  Safe Deposit Boxes                       Tax-advantaged Investments

Moola Moola Kids Savings Club                   Notary Service and Signature Guarantee
                                                                                         TRUST SERVICES
Certificates of Deposit                         Travelers Cheques
                                                                                         Trust and Estate Planning
Switch Kit                                      Cashier's Checks
                                                                                         Investment Management Services
Commercial Lending                              American Express Gift Checks
                                                                                         Custody Services
Mortgage Lending                                Interactive Web Sites
                                                                                         Retirement Planning

                                                                                         Employee Benefit Services
</TABLE>


(1)   Non-traditional bank products offered through LaSalle St. Securities, LLC
      are not FDIC insured, nor are they guaranteed by the banks of First
      Midwest or any affiliate.


                                       6

<PAGE>

                               2003 ANNUAL REPORT

                                [GRAPHIC OMITTED]

RHONDA KIMBLE, Vice President and Residential Lending Manager "People helping
people is a core philosophy that helps our team do the right things right. From
first-time homebuyer programs to new construction and refinances, we offer more
than 160 mortgage loan programs that can be customized to suit your needs."

Fun Fact: Started fun-thing-of-the-month program. In November team members
mailed care packages to U.S. troops overseas.


                                       7

<PAGE>

                               2003 ANNUAL REPORT

                                [GRAPHIC OMITTED]

LARRY RINGGENBERG, Vice President "Agriculture is a constantly changing
industry, and an integral part of midwestern life. It is exciting to be part of
an organization that is committed to helping our ag customers succeed."

Fun Facts: Serves as chairman of the South Dakota Bankers Ag Credit Committee.
Once caught a 17 pound brown trout.


                                       8

<PAGE>

                                 BANK HIGHLIGHTS

                              BANK EASY. LIVE LIFE.
                         Making business easier for you.

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

IN TODAY'S DOG-EAT-DOG WORLD IT TAKES MORE THAN JUST HARD WORK TO RUN A
SUCCESSFUL BUSINESS. YOU NEED THE RIGHT PEOPLE, THE RIGHT PRODUCT, AND THE RIGHT
LOCATION. NOW, MORE THAN EVER, YOU ALSO NEED THE RIGHT FINANCIAL PARTNER.

      FROM INVENTORY AND REAL ESTATE LOANS TO ONLINE CASH MANAGEMENT AND
AUTOMATED PAYROLL SERVICES, OUR HOMETOWN KNOW-HOW AND BIG BANK RESOURCES CAN
GIVE YOUR BUSINESS THE FINANCIAL BACKING IT NEEDS TO REACH ITS TRUE POTENTIAL.
LET US ROLL UP OUR SLEEVES AND WORK WITH YOU EVERY STEP OF THE WAY. WE KEEP IT
SIMPLE SO YOU HAVE MORE TIME AND MORE MONEY TO GET DOWN TO BUSINESS.

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

           HOW CAN WE MAKE MONEY MANAGEMENT EASIER FOR YOUR BUSINESS?


<TABLE>
<S>                                <C>                                     <C>
BUSINESS FINANCING SERVICES        CASH MANAGEMENT SOLUTIONS               OTHER SERVICES

Commercial Real Estate Loans       Business Advantage Checking             Business Retirement Planning

Lines of Credit                    Monthly, Quarterly, or Annual Analysis  Personal Trust Services

Term Loans                         Business Money Market Accounts          Merchant Credit Card Processing

Equipment Financing                Interest Advantage Accounts for         Business Credit Cards
                                      Non-Profit Entities
Construction Lending                                                       Online Business Resource Center
                                   Online Balance and Activity Reporting
Management Buyouts                                                         Business and Cash Management
                                   Loan and Investment Sweeps
Employee Stock Ownership Plan                                              Planning
                                   Zero Balance Accounts
Financing                                                                  Interactive Web Sites
                                   Online Services and Administration
Specialized Industries
                                   Automated Clearinghouse Origination
Small Business Administration
   (SBA) Lending                   Automated Payroll Services

Beginning Farmer Loan Programs     Domestic and International Wire

Crop Loans and Insurance           Transfers

Livestock Loans                    Federal Tax Payments

Alternative Lending Options        Ready Reserve Overdraft Protection

Letters of Credit                  Cash Concentration Services
</TABLE>



                                       9

<PAGE>

                                 BANK HIGHLIGHTS

                              BANK EASY. LIVE LIFE.
                     Making life better in our communities.

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

WE HAVE A SPECIAL CONNECTION TO OUR COMMUNITIES JUST BY THE NATURE OF OUR
BUSINESS. LENDING MONEY FOR A FIRST HOME, A NEW BUSINESS, AND OTHER LIFE EVENTS
IS ONE WAY OUR BANKS WORK TO ENHANCE PEOPLE'S LIVES.

      OUR COMPANY ACTIVELY PARTICIPATES IN THE FEDERAL COMMUNITY REINVESTMENT
ACT (CRA) TO MEET THE CREDIT NEEDS IN OUR COMMUNITIES. THAT MEANS YOUR
INVESTMENTS WITH US ARE REINVESTED RIGHT BACK INTO OUR NEIGHBORHOODS TO MAKE
THEM A BETTER PLACE TO LIVE, WORK, AND PLAY.

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

VOLUNTEERISM

Through our Volunteer of the Year program, we encourage every employee to become
actively involved in community improvement programs. This year alone, employees
volunteered 14,000 hours to more than 550 community projects. From sponsoring
youth sports teams and providing volunteer coaches to feeding those in need, our
company dedicates financial resources and employee talent to make our
communities stronger.

BANK OF PROMISE

Each of our banks is recognized as a Bank of Promise. We are dedicated to
building the character and competence of our nation's youth by fulfilling five
promises:

1 CARING ADULTS - Provide ongoing relationships with caring adults, parents,
mentors, tutors or coaches.

2 SAFE PLACES - Provide safe places with structured activities during nonschool
hours.

3 HEALTHY START AND FUTURE - Provide adequate nutrition, health care and health
education.

4 MARKETABLE SKILLS - Increase marketable skills through effective education.

5 OPPORTUNITIES TO SERVE - Provide opportunities to give back through community
service.

TOUCHDOWN SCHOLARSHIPS

Our company partners with local schools to provide scholarships to high school
seniors who typify leadership, community and school involvement, and scholastic
achievement. Each year the bank contributes to the Touchdown Scholarship Fund
each time a touchdown is made for our community school teams during home
football games. The scholarship amount ranges from a minimum of $250 to $1,000
for each student. We have awarded more than $18,500 in scholarships to 50 area
students who are interested in further education.

SCHOOL EDUCATION PROGRAMS

In collaboration with the American Bankers Association Education Foundation and
local schools, our employees have taught more than 180 financial education
lessons to more than 6,000 children from preschool through high school. These
age-appropriate lessons help teach children basic money management skills. We
are proud to invest in the future of our youth by teaching them how to make
smart financial decisions.

CHARITY COOKOUTS

Charity Cookouts are held throughout our bank communities each Fall. For the
past eight years, the bank has provided food, entertainment, and prizes for
customers and friends. Together, we have raised more than $53,000 for local fire
departments, community playgrounds, the United Way and other charities in need.

COMMITMENT

We remain committed to these and other community-centered programs that make
life better for our neighbors and friends. When you get right down to it, we are
in the business of helping people. Our success comes from the efforts of
talented people working together to do the right things right--for our
customers, for our communities, and for each other.


                                       10

<PAGE>
                               2003 ANNUAL REPORT

                                [GRAPHIC OMITTED]

KATHY M. THORSON, Vice President "We have business banking services that can
help customers manage cash flow, fund operations, and better serve their
employees. Just as important, we have the hands-on service they deserve.
Customers can talk with us and get answers."

Fun Facts: Enjoys rollerblading with her daughter. Active board member and past
president of Rotary North in Sioux Falls.


                                       11

<PAGE>

                               2003 ANNUAL REPORT

                                [GRAPHIC OMITTED]

LISA RICHMOND-KIRBY, Trust Officer "First Services Trust Company provides a full
range of trust services to customers at all bank office locations. Thanks to its
South Dakota charter, our customers benefit from some the most favorable trust
and tax laws in the nation."

Fun Facts: Is an energetic room mother in both her daughters' classes at school.
Serves on the Children's Inn and the Children's Home Society Boards to enhance
the lives of Sioux Falls children.


                                       12

<PAGE>

                                OFFICE LOCATIONS


<TABLE>
<S>                                                                 <C>                          <C>
FIRST FEDERAL SAVINGS BANK OF THE MIDWEST                                                        SECURITY STATE BANK

[GRAPHIC OMITTED]                [GRAPHIC OMITTED]                  [GRAPHIC OMITTED]             [GRAPHIC OMITTED]

First Federal Storm Lake,        Brookings Federal Bank,            Iowa Savings Bank,            Security State Bank,
Main Office                      Main Office                        Main Office                   Main Office

FIRST FEDERAL                    BROOKINGS FEDERAL BANK             IOWA SAVINGS BANK DIVISION    MAIN OFFICE
STORM LAKE/NORTHWEST             DIVISION                                                         615 South Division
IOWA DIVISION                                                       MAIN OFFICE                   P.O. Box 606
                                 MAIN OFFICE                        4848 86th Street              Stuart, Iowa 50250
MAIN OFFICE                      600 Main Avenue                    Urbandale, Iowa 50322         515.523.2203
Fifth at Erie                    P.O. Box 98                        515.309.9800                  800.523.8003
P.O. Box 1307                    Brookings, South Dakota 57006      515.309.9801 fax              515.523.2460 fax
Storm Lake, Iowa 50588           605.692.2314
712.732.4117                     800.842.7452                       HIGHLAND PARK                 CASEY
800.792.6815                     605.692.7059 fax                   3624 Sixth Avenue             101 East Logan
712.732.7105 fax                 brookingsfed.com                   Des Moines, Iowa 50313        P.O. Box 97
                                                                    515.288.4866                  Casey, Iowa 50048
STORM LAKE PLAZA                 [GRAPHIC OMITTED]                  515.288.3104 fax              641.746.3366
1413 North Lake Avenue                                                                            800.746.3367
Storm Lake, Iowa 50588           First Federal Sioux Falls,         INGERSOLL                     641.746.2828 fax
712.732.6655                     Main Office                        3401 Ingersoll Avenue
712.732.7924 fax                                                    Des Moines, Iowa 50312        MENLO
                                 FIRST FEDERAL                      515.274.9674                  501 Sherman
LAKE VIEW                        SIOUX FALLS DIVISION               515.274.9675 fax              P.O. Box 36
Fifth at Main                                                                                     Menlo, Iowa 50164
P.O. Box 649                     MAIN OFFICE                        WEST DES MOINES               641.524.4521
Lake View, Iowa 51450            2500 South Minnesota Avenue        3448 Westown Parkway          esecuritystate.com
712.657.2721                     Sioux Falls, South Dakota 57105    West Des Moines, Iowa 50266
712.657.2896 fax                 605.977.7500                       515.226.8474
                                 605.977.7501 fax                   515.226.8475 fax
LAURENS                                                             iowasavings.com
104 North Third Street           12th AT ELMWOOD
Laurens, Iowa 50554              (coming soon)
712.841.2588                     2104 West 12th Street
712.841.2029 fax                 Sioux Falls, South Dakota 57104
                                 605.336.8900
MANSON                           605.336.8901 fax
11th at Main                     firstfedsf.com
P.O. Box 130
Manson, Iowa 50563               FIRST SERVICES FINANCIAL LIMITED
712.469.3319                     and FIRST SERVICES TRUST COMPANY
712.469.2458 fax
                                 Investment(1) and trust services are
ODEBOLT                          available at all bank locations.                       [GRAPHIC OMITTED]
219 South Main Street
P.O. Box 465                     (1)   Non-traditional bank products offered
Odebolt, Iowa 51458                    through LaSalle St. Securities, LLC
712.668.4881                           are not FDIC insured, nor are they
712.668.4882 fax                       guaranteed by the banks of First
                                       Midwest or any affiliate.
SAC CITY
518 Audubon Street
Sac City, Iowa 50583
712.662.7195
712.662.7196 fax
efirstfed.com
</TABLE>



                                       13

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   SELECTED CONSOLIDATED FINANCIAL INFORMATION


<TABLE>
<CAPTION>
SEPTEMBER 30,                                             2003       2002       2001       2000       1999
----------------------------------------------------------------------------------------------------------
<S>                                                   <C>        <C>        <C>        <C>        <C>
SELECTED FINANCIAL CONDITION DATA
(In Thousands)

Total assets                                          $772,285   $607,648   $523,183   $505,590   $511,213
Loans receivable, net                                  349,692    341,937    333,062    324,703    303,079
Securities available for sale                          366,075    218,247    145,374    147,479    178,489
Excess of cost over net assets acquired, net             3,403      3,403      3,403      3,768      4,133
Deposits                                               435,553    355,780    338,782    318,654    304,780
Total borrowings                                       291,486    205,266    138,344    143,993    164,369
Shareholders' equity                                    43,031     44,588     43,727     40,035     39,771

YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------------------

SELECTED OPERATIONS DATA
(In Thousands, Except Per Share Data)

Total interest income                                 $ 35,179   $ 35,434   $ 38,224   $ 38,755   $ 35,735
Total interest expense                                  19,451     21,734     25,391     24,578     22,176
----------------------------------------------------------------------------------------------------------
    Net interest income                                 15,728     13,700     12,833     14,177     13,559
    Provision for loan losses                              350      1,090        710      1,640      1,992
----------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses     15,378     12,610     12,123     12,537     11,567
Total noninterest income                                 3,555      2,781      1,492        782      1,556
Total noninterest expense                               13,858     12,268     10,695      9,408      8,645
----------------------------------------------------------------------------------------------------------
    Income before income taxes                           5,075      3,123      2,920      3,911      4,478
Income tax expense                                       1,678        966      1,010      1,583      1,837
----------------------------------------------------------------------------------------------------------
    Net income                                        $  3,397   $  2,157   $  1,910   $  2,328   $  2,641
==========================================================================================================

Earnings per common and common equivalent share:

    Basic earnings per share                          $   1.37   $   0.88   $   0.79   $   0.95   $   1.07
    Diluted earnings per share                        $   1.36   $   0.87   $   0.78   $   0.93   $   1.04

<CAPTION>

YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------------------------------

SELECTED FINANCIAL RATIOS
AND OTHER DATA
PERFORMANCE RATIOS
<S>                                                        <C>        <C>        <C>       <C>         <C>
    Return on average assets                                  0.47%      0.38%      0.37%      0.46%      0.54%
    Return on average shareholders' equity                    7.57%      4.95%      4.57%      5.98%      6.35%
    Interest rate spread information:
      Average during the year                                 2.18%      2.37%      2.24%      2.46%      2.51%
      End of year                                             1.90%      2.53%      2.21%      2.32%      2.40%
    Net yield on average interest-earning assets              2.31%      2.56%      2.59%      2.86%      2.91%
    Ratio of operating expense to average total assets        1.93%      2.16%      2.09%      1.85%      1.80%

QUALITY RATIOS

    Non-performing assets to total assets at end of year      0.28%      0.58%      0.49%      0.34%      0.66%
    Allowance for loan losses to non-performing loans       492.75%    220.33%    240.02%  1,156.13%    137.16%

CAPITAL RATIOS

    Shareholders' equity to total assets at end of period     5.57%      7.34%      8.36%      7.93%      7.78%
    Average shareholders' equity to average assets            6.25%      7.68%      8.17%      7.67%      8.65%
    Ratio of average interest-earning assets to average
         interest-bearing liabilities                       104.53%    104.86%    106.90%    108.02%    108.39%

OTHER DATA

    Book value per common share outstanding                $ 17.25    $ 18.06    $ 17.71    $ 16.48    $ 15.86
    Dividends declared per share                           $  0.52    $  0.52    $  0.52    $  0.52    $  0.52
    Dividend payout ratio                                       38%        59%        65%        55%        48%
    Number of full-service offices                              16         15         14         14         13
</TABLE>



                                       14

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

MANAGEMENT'S DISCUSSION AND ANALYSIS

GENERAL

First Midwest Financial, Inc. (the "Company" or "First Midwest") is a bank
holding company whose primary subsidiaries are First Federal Savings Bank of the
Midwest ("First Federal") and Security State Bank ("Security"). The Company was
incorporated in 1993 as a unitary non-diversified savings and loan holding
company and, on September 20, 1993, acquired all of the capital stock of First
Federal in connection with First Federal's conversion from mutual to stock form
of ownership. On September 30, 1996, the Company became a bank holding company
in conjunction with the acquisition of Security.

      The Company focuses on establishing and maintaining long-term
relationships with customers, and is committed to serving the financial service
needs of the communities in its market area. The Company's primary market area
includes the following counties: Adair, Buena Vista, Calhoun, Dallas, Ida,
Guthrie, Pocahontas, Polk, and Sac located in Iowa, and the counties of
Brookings and Minnehaha located in east central South Dakota. The Company
attracts retail deposits from the general public and uses those deposits,
together with other borrowed funds, to originate and purchase residential and
commercial mortgage loans, to make consumer loans, and to provide financing for
agricultural and other commercial business purposes.

      The Company's basic mission is to maintain and enhance core earnings while
serving its primary market area. As such, the Board of Directors has adopted a
business strategy designed to (i) maintain the Company's tangible capital in
excess of regulatory requirements, (ii) maintain the quality of the Company's
assets, (iii) control operating expenses, (iv) maintain and, as possible,
increase the Company's interest rate spread, and (v) manage the Company's
exposure to changes in interest rates.

FINANCIAL CONDITION

The following discussion of the Company's consolidated financial condition
should be read in conjunction with the Selected Consolidated Financial
Information and Consolidated Financial Statements and the related notes included
elsewhere herein.

      The Company's total assets at September 30, 2003 were $772.3 million, an
increase of $164.7 million, or 27.1%, from $607.6 million at September 30, 2002.
The increase in assets was due primarily to increases in securities available
for sale and to a lesser extent in net loans receivable, total cash and cash
equivilants, and Federal Home Loan Bank (FHLB) stock, and was funded by
increases in deposits and advances from the FHLB, offset in part by a decrease
in securities sold under agreements to repurchase.

      The Company's portfolio of securities available for sale increased $147.9
million, or 67.8%, to $366.1 million at September 30, 2003 from $218.2 million
at September 30, 2002. The increase reflects the purchase of mortgage-backed
securities, primarily with balloon maturities, which have relatively short
expected average lives and limited maturity extension. (See Note 3 of Notes to
Consolidated Financial Statements.)

      The Company's portfolio of net loans receivable increased by $7.8 million,
or 2.3%, to $349.7 million at September 30, 2003 from $341.9 million at
September 30, 2002. Net loans receivable increased as a result of the increased
origination of commercial and multi-family real estate loans on existing and
newly constructed properties and the increased origination of commercial
business loans. In addition, the increase reflects an increase in consumer
loans. Conventional one to four family residential mortgage loans declined as
existing originated and purchased loans were repaid in amounts greater than new
originations retained in portfolio during the period. (See Note 4 of Notes to
Consolidated Financial Statements.)

      The Company's investment in FHLB stock increased $4.1 million, or 60.3%,
to $10.9 million at September 30, 2003 from $6.8 million at September 30, 2002.
The increase is due to an increase in the level of borrowings from the FHLB,
which require a calculated level of stock investment based on a formula
determined by the FHLB.

      Customer deposit balances increased by $79.8 million, or 22.4%, to $435.6
million at September 30, 2003 from $355.8 million at September 30, 2002. The
increase in deposits reflects the opening of a new office in Des Moines, Iowa,
and management's continued efforts to enhance deposit product design and
marketing programs. Deposit balances increased for noninterest-bearing demand
accounts, interest-bearing transaction accounts, which include savings, NOW and
money market demand accounts, and time certificates of deposit in the amounts of
$5.5 million, $29.1 million, and $45.2 million, respectively. Included in the
increase in time certificates of deposit is a $61.0 million increase in jumbo
certificates of deposit. (See Note 7 of Notes to Consolidated Financial
Statements.)

      The Company's borrowings from the Federal Home Loan Bank increased by
$98.7 million, or 78.9%, to $223.8 million at September 30, 2003 from $125.1
million at September 30, 2002. The balance in securities sold under agreements
to repurchase decreased by $12.5 million, or 17.8%, to $57.7 million at
September 30, 2003 from $70.2 million at September 30, 2002. The overall
increase in borrowings, in conjunction with the increase in deposits, was used
to fund balance sheet growth during the period. (See Notes 8 and 9 of Notes to
Consolidated Financial Statements.)

      Shareholders' equity decreased $1.6 million, or 3.6%, to $43.0 million at
September 30, 2003 from $44.6 million at September 30, 2002. The decrease in
shareholders' equity was primarily due to dividends declared and an increase in
unrealized loss on securities available for sale in accordance with SFAS 115,
which was partially offset by net earnings during the period. (See Note 15 of
Notes to Consolidated Financial Statements.)

RESULTS OF OPERATIONS

The following discussion of the Company's results of operations should be read
in conjunction with the Selected Consolidated Financial Information and
Consolidated Financial Statements and the related notes included elsewhere
herein.

      The Company's results of operations are primarily dependent on net
interest income, noninterest income, and operating expenses. Net interest income
is the difference, or spread, between the average yield on interest-earning
assets and the average rate paid on interest-bearing liabilities. The interest
rate spread is affected by regulatory, economic, and competitive factors that
influence interest rates, loan demand, and deposit flows. The Company, like
other financial institutions, is subject to interest rate risk to the extent
that its interest-earning assets mature or reprice at different times, or on a
different basis, than its interest-bearing liabilities.

      The Company's noninterest income consists primarily of fees charged on
transaction accounts, which help offset the costs associated with establishing
and maintaining these deposit accounts. In addition, noninterest income is
derived from the activities of First Federal's wholly-owned sub-


                                       15

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries


                      MANAGEMENT'S DISCUSSION AND ANALYSIS

sidiary, First Services Financial Limited, which is engaged in the sale of
various non-insured investment products as well as gains or losses on the sale
of loans and securities available for sale. During fiscal year 2002, the Company
established First Services Trust Company, a wholly-owned subsidiary of First
Midwest that provides a variety of professional trust services.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND
SEPTEMBER 30, 2002

GENERAL

Net income for the year ended September 30, 2003 increased $1,240,000, or 57.5%,
to $3,397,000, from $2,157,000 for the same period ended September 30, 2002. The
increase in net income reflects an increase in net interest income, an increase
in noninterest income and a decrease in provision for loan losses, which were
partially offset by an increase in noninterest expense.

The following table sets forth the weighted average effective interest rate on
interest-earning assets and interest-bearing liabilities at the end of each of
the years presented.


<TABLE>
<CAPTION>
AT SEPTEMBER 30,                                                          2003    2002    2001
-----------------------------------------------------------------------------------------------
<S>                                                                       <C>     <C>     <C>
WEIGHTED AVERAGE YIELD ON
    Loans receivable                                                      6.17%   7.02%   7.93%
    Mortgage-backed securities available for sale                         2.87    5.29    6.46
    Securities available for sale                                         2.23    2.85    4.61
    FHLB stock                                                            3.00    3.00    4.08
    Combined weighted average yield on interest-earning assets            4.42    6.16    7.27

WEIGHTED AVERAGE RATE PAID ON
    Demand, NOW and money market demand deposits                          0.83    1.27    2.06
    Savings deposits                                                      1.14    1.46    1.69
    Time deposits                                                         2.78    4.07    5.73
    FHLB advances                                                         3.40    5.46    5.76
    Other borrowed money                                                  1.71    2.36    7.07
    Combined weighted average rate paid on interest-bearing liabilities   2.52    3.63    5.06

Spread                                                                    1.90    2.53    2.21
</TABLE>


RATE/VOLUME ANALYSIS

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


<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,                                          2003 VS. 2002                           2002 VS. 2001
-----------------------------------------------------------------------------------------------------------------------------------

                                                        Increase     Increase       Total        Increase     Increase        Total
(in Thousands)                                        (Decrease)   (Decrease)    Increase      (Decrease)   (Decrease)     Increase
                                                   Due to Volume  Due to Rate  (Decrease)   Due to Volume  Due to Rate   (Decrease)
<S>                                                   <C>          <C>          <C>            <C>          <C>          <C>
INTEREST-EARNING ASSETS
    Loans receivable                                  $     360    $  (1,575)   $  (1,215)     $     874    $  (3,312)   $  (2,438)
    Mortgage-backed securities available for sale         4,876       (3,355)       1,521          2,427         (860)       1,567
    Securities available for sale                           (84)        (535)        (619)          (471)      (1,248)      (1,719)
    FHLB stock                                               72          (14)          58            (42)        (158)        (200)
-----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets                         $   5,224    $  (5,479)   $    (255)     $   2,788    $  (5,578)   $  (2,790)
-----------------------------------------------------------------------------------------------------------------------------------

INTEREST-BEARING LIABILITIES
    Demand, NOW and money market deposits             $     236    $    (398)   $    (162)     $     168    $    (904)   $    (736)
    Savings deposits                                         32          (63)         (31)            57         (108)         (51)
    Time deposits                                           693       (3,468)      (2,775)            26       (3,327)      (3,301)
    FHLB advances                                         2,414       (2,008)         406           (453)         (29)        (482)
    Other borrowed money                                    734         (455)         279          1,128         (215)         913
-----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities                    $   4,109    $  (6,392)   $  (2,283)     $     926    $  (4,583)   $  (3,657)
-----------------------------------------------------------------------------------------------------------------------------------

Net effect on net interest income                     $   1,115    $     913    $   2,028      $   1,862    $    (995)   $     867
===================================================================================================================================
</TABLE>



                                       16

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

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 the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments have been
made. Non-accruing loans have been included in the table as loans carrying a
zero yield.


<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,                           2003                            2002                            2001
---------------------------------------------------------------------------------------------------------------------------------
                                       Average   Interest              Average   Interest              Average   Interest
(Dollars in Thousands)             Outstanding     Earned  Yield   Outstanding     Earned  Yield   Outstanding     Earned  Yield
                                       Balance      /Paid  /Rate       Balance      /Paid  /Rate       Balance      /Paid  /Rate
---------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>         <C>    <C>          <C>         <C>    <C>          <C>         <C>
INTEREST-EARNING ASSETS
    Loans receivable (1)           $   343,879  $  24,099   7.01%  $   338,736  $  25,314   7.47%  $   327,036  $  27,752   8.49%
    Mortgage-backed securities
      available for sale               288,560      9,900   3.43       146,435      8,379   5.72       104,012      6,812   6.55
    Securities available for sale       38,623        894   2.31        42,273      1,513   3.58        55,442      3,232   5.83
    FHLB stock                           9,188        286   3.11         6,861        228   3.32         8,118        428   5.27
                                   -----------  ---------          -----------  ---------          -----------  ---------
Total interest-earning assets          680,250  $  35,179   5.17%      534,305  $  35,434   6.63%      494,608  $  38,224   7.73%
                                                =========                       =========                       =========
    Noninterest-earning assets          37,737                          32,374                          18,251
                                   -----------                     -----------                     -----------
Total assets                       $   717,987                     $   566,679                     $   512,859
                                   ===========                     ===========                     ===========

INTEREST-BEARING LIABILITIES
    Demand, NOW and money market
      demand deposits              $    95,118  $   1,099   1.16%  $    74,656  $   1,261   1.69%  $    64,711  $   1,997   3.09%
    Savings deposits                    17,239        207   1.20        14,582        238   1.63        11,115        289   2.60
    Time deposits                      273,214      9,185   3.36       252,606     11,960   4.73       252,171     15,261   6.05
    FHLB advances                      176,961      7,297   4.12       118,415      6,891   5.82       126,208      7,373   5.84
    Other borrowed money                88,209      1,663   1.89        49,288      1,384   2.81         8,471        471   5.56
                                   -----------  ---------          -----------  ---------          -----------  ---------
Total interest-bearing
      liabilities                      650,741  $  19,451   2.99%      509,547  $  21,734   4.27%      462,676  $  25,391   5.49%
                                                =========                       =========                       =========
    Noninterest-bearing:
         Deposits                       15,375                          10,105                           6,551
         Liabilities                     6,978                           3,501                           1,751
                                   -----------                     -----------                     -----------
Total liabilities                      673,094                         523,153                         470,978
    Shareholders' equity                44,893                          43,526                          41,881
                                   -----------                     -----------                     -----------
Total liabilities and
    shareholders equity            $   717,987                     $   566,679                     $   512,859
                                   ===========                     ===========                     ===========
Net interest-earning assets        $    29,509                     $    24,758                     $    31,932
                                   ===========                     ===========                     ===========
Net interest income                             $  15,728                       $  13,700                       $  12,833
                                                =========                       =========                       =========
Net interest rate spread                                    2.18%                           2.37%                           2.24%
                                                            ====                            ====                            ====
Net yield on average
    interest-earning assets                                 2.31%                           2.56%                           2.59%
                                                            ====                            ====                            ====
Average interest-earning assets
    to average interest-bearing
    liabilities                         104.53%                         104.86%                         106.90%
                                   ===========                     ===========                     ===========
</TABLE>


(1)   Calculated net of deferred loan fees, loan discounts, loans in process and
      allowance for loan losses.

NET INTEREST INCOME

Net interest income for the year ended September 30, 2003 increased by
$2,029,000, or 14.8%, to $15,728,000 compared to $13,699,000 for the period
ended September 30, 2002. The increase in net interest income reflects a $145.9
million increase in the average balance of interest-earning assets, which was
partially offset by a decrease in the net yield on average earning assets.

      The net yield on average earning assets decreased to 2.31% for the period
ended September 30, 2003 from 2.56% for the same period in 2002. The decrease in
net yield on average earning assets was due primarily to balance sheet growth
during the year through the purchase of securities available for sale funded
primarily with borrowings, which provided a net interest spread relatively lower
than the spread received on the Company's loans and deposits. The average
interest rate spread between loans and deposits increased to 4.29% for the
fiscal year ended September 30, 2003 from 3.53% for the previous year. This
increase reflects a reduction in the average cost of deposits due to an increase
in the level of transactional deposit accounts and an increased percentage of
originated commercial loans at relatively higher yields during the period.

INTEREST AND DIVIDEND INCOME

Interest and dividend income for the year ended September 30, 2003 decreased
$254,000, or 0.7%, to $35,179,000 from $35,433,000 for the same period in 2002.
The decrease is due primarily to a $1,215,000 decline in interest income from
loans receivable as a result of a decrease in the average yield on these assets
during the period. The decrease was partially offset by a $902,000 increase in
interest income on securities available for sale due to a higher average balance
of these assets during the period.

INTEREST EXPENSE

Interest expense decreased $2,283,000 or 10.5%, to $19,451,000 for the year
ended September 30, 2003 from $21,734,000 for the same period in 2002. Interest
expense was reduced due primarily to a $2,968,000 decrease in interest expense
on deposits as a result of a decline in the average rates paid on deposits
during the period. The decrease was partially offset by a $685,000 increase in
interest expense on FHLB advances and other borrowings due to an increase in the
average balance outstanding during the period.


                                       17

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

PROVISION FOR LOAN LOSSES

The provision for loan losses for the year ended September 30, 2003 was $350,000
compared to $1,090,000 for the same period in 2002. Management believes that,
based on a detailed review of the loan portfolio, historic loan losses, current
economic conditions, and other factors, the current level of provision for loan
losses, and the resulting level of the allowance for loan losses, reflects an
adequate allowance against probable losses from the loan portfolio at such date.

      Economic conditions in the agricultural sector of the Company's market
area are currently stable due to improved commodity prices. The agricultural
economy is accustomed to commodity price fluctuations and is generally able to
handle such fluctuations without significant problem. However, an extended
period of low commodity prices could result in weakness of the Company's
agricultural loan portfolio and could create a need for the Company to increase
its allowance for loan losses through increased charges to provision for loan
losses.

      During recent years, the Company has increased its origination and
purchase of multi-family and commercial real estate loans and has increased its
origination of commercial business loans. The Company anticipates activity in
this type of lending to continue in future years. While generally carrying
higher rates, this lending activity is considered to carry a higher level of
risk due to the nature of the collateral and the size of individual loans. As
such, the Company anticipates continued increases in its allowance for loan
losses as a result of this lending activity.

      Although the Company maintains its allowance for loan losses at a level
that it considers to be adequate, there can be no assurance that future losses
will not exceed estimated amounts, or that additional provisions for loan losses
will not be required in future periods. In addition, the Company's determination
of the allowance for loan losses is subject to review by its regulatory
agencies, which can require the establishment of additional general or specific
allowances, though they have chosen not to do so in recent years.

NONINTEREST INCOME

Noninterest income increased by $774,000, or 27.8%, to $3,555,000 for the year
ended September 30, 2003 from $2,781,000 for the same period in 2002. The
increase in noninterest income reflects a $168,000 increase in service charges
collected on deposit accounts, and a $334,000 increase in gain on sales of
loans. The increase also reflects a gain on sale of securities available for
sale in the amount of $243,000 during fiscal 2003 compared to a gain on sale of
$86,000 in the previous year. Other noninterest income increased $177,000 for
the year ended September 30, 2003 compared to the previous year due primarily to
a gain on the sale of a building formerly used as a drive- up branch facility.

NONINTEREST EXPENSE

Noninterest expense increased by $1,590,000, or 13.0%, to $13,858,000 for the
year ended September 30, 2003 from $12,268,000 for the same period in 2002. The
increase in noninterest expense primarily reflects the costs associated with
opening new offices during the period. In November 2001, the Company opened its
third Des Moines, Iowa, location and in November 2002, the Company opened its
newly constructed facility in Urbandale, Iowa, which serves as the Company's Des
Moines area main office. Noninterest expense also increased by $501,000 due to
prepayment fees associated with the early extinguishment of FHLB advances that
were repaid in conjunction with the sale of securities available for sale and
early repayments received on loans.

INCOME TAX EXPENSE

Income tax expense increased by $712,000, or 73.7%, to $1,678,000 for the year
ended September 30, 2003 from $966,000 for the same period in 2002. The increase
in income tax expense reflects the increase in the level of taxable income
between the comparable periods.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND
SEPTEMBER 30, 2001

GENERAL

Net income for the year ended September 30, 2002 increased $247,000, or 12.9%,
to $2,157,000, from $1,910,000 for the same period ended September 30, 2001. The
increase in net income reflects increases in net interest income and noninterest
income, which were partially offset by an increase in noninterest expense and an
increase in the provision for loan losses.

NET INTEREST INCOME

Net interest income for the year ended September 30, 2002 increased by $866,000,
or 6.7%, to $13,699,000 compared to $12,833,000 for the period ended September
30, 2001. The increase in net interest income reflects a $39.7 million increase
in the average balance of interest-earning assets. The net yield on average
earning assets decreased slightly to 2.56% for the period ended September 30,
2002 from 2.59% for the same period in 2001. The average interest rate spread
increased to 2.37% for the fiscal year ended September 30, 2002 from 2.24% for
the previous year. This increase reflects a reduction in the average cost of
deposits due to an increase in the level of transactional deposit accounts and
an increased percentage of originated commercial loans at relatively higher
yields during the period.

INTEREST AND DIVIDEND INCOME

Interest and dividend income for the year ended September 30, 2002 decreased
$2,791,000, or 7.3%, to $35,433,000 from $38,224,000
for the same period in 2001. The decrease is due primarily to a $2,438,000
decline in interest income from loans receivable as a result of a decrease in
the average yield on these assets during the period. In addition, dividend
income from FHLB stock decreased by $200,000 due primarily to a decline in
average yield received.

INTEREST EXPENSE

Interest expense decreased $3,657,000, or 14.4%, to $21,734,000 for the year
ended September 30, 2002 from $25,391,000 for the same period in 2001. Interest
expense was reduced due to a $4,088,000 decrease in interest expense on deposits
as a result primarily of a decline in the average rate paid on deposits during
the period. In addition, interest expense was reduced by $482,000 on FHLB
advances due primarily to a decrease in the average balance outstanding during
the period. These decreases were partially offset by a $913,000 increase in
expense on other borrowings due to an increase in the average balance
outstanding during the period.

PROVISION FOR LOAN LOSSES

The provision for loan losses for the year ended September 30, 2002 was
$1,090,000 compared to $710,000 for the same period in 2001. Management believes
that, based on a detailed review of the loan portfolio,


                                       18

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

historic loan losses, current economic conditions, and other factors, the
current level of provision for loan losses, and the resulting level of the
allowance for loan losses, reflects an adequate allowance against probable
losses from the loan portfolio at such date.

NONINTEREST INCOME

Noninterest income increased by $1,289,000, or 86.4%, to $2,781,000
for the year ended September 30, 2002 from $1,492,000 for the same period in
2001. The increase in noninterest income reflects a $421,000 increase in gain on
sales of loans and a $566,000 increase in the accretion of income from bank
owned life insurance, which was purchased in August 2001. In addition, the
increase reflects a $78,000 increase in service charges collected on deposit
accounts, an $84,000 increase in commissions received through the Company's
brokerage subsidiary, and a gain on sale of securities available for sale in the
amount of $86,000 during fiscal 2002 compared to a loss on sale of $60,000 in
the previous year.

NONINTEREST EXPENSE

Noninterest expense increased by $1,573,000, or 14.7%, to $12,268,000 for the
year ended September 30, 2002 from $10,695,000 for the same period in 2001. The
increase in noninterest expense primarily reflects the costs associated with
opening new offices during the period. In April 2001, the Company moved into its
newly constructed facility in Sioux Falls, South Dakota and opened its third Des
Moines, Iowa, location in November 2001. In November 2002, the Company opened
its newly constructed facility in Urbandale, Iowa, which is the Company's fourth
Des Moines area location and serves as the Company's Des Moines area main
office. Noninterest expense also increased as a result of the Company's on-going
effort to maintain and enhance its technology systems for the efficient delivery
of products and customer service. This includes internet banking, which became
available to customers in January 2002.

INCOME TAX EXPENSE

Income tax expense decreased by $45,000, or 4.5%, to $966,000 for the year ended
September 30, 2002 from $1,011,000 for the same period in 2001. The decrease in
income tax expense reflects a decrease in taxable income between the comparable
periods. Taxable income decreased due to an increase in the accretion of income
from bank owned life insurance attributable to a buildup in cash surrender
value, which is not taxable.

CRITICAL ACCOUNTING POLICY

The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The financial
information contained within these statements is, to a significant extent,
financial information that is based on approximate measures of the financial
effects of transactions and events that have already occurred. Based on its
consideration of accounting policies that involve the most complex and
subjective decisions and assessments, management has identified its most
critical accounting policy to be that related to the allowance for loan losses.
The Company's allowance for loan loss methodology incorporates a variety of risk
considerations, both quantitative and qualitative in establishing an allowance
for loan loss that management believes is appropriate at each reporting date.
Quantitative factors include the Company's historical loss experience,
delinquency and charge-off trends, collateral values, changes in nonperforming
loans, and other factors. Quantitative factors also incorporate known
information about individual loans, including borrowers' sensitivity to interest
rate movements. Qualitative factors include the general economic environment in
the Company's markets, including economic conditions throughout the Midwest and
in particular, the state of certain industries. Size and complexity of
individual credits in relation to loan structure, existing loan policies and
pace of portfolio growth are other qualitative factors that are considered in
the methodology. As the Company adds new products and increases the complexity
of its loan portfolio, it will enhance its methodology accordingly. Management
may report a materially different amount for the provision for loan losses in
the statement of operations to change the allowance for loan losses if its
assessment of the above factors were different. This discussion and analysis
should be read in conjunction with the Company's financial statements and the
accompanying notes presented elsewhere herein, as well as the portion of this
Management's Discussion and Analysis section entitled "Asset Quality." Although
management believes the levels of the allowance as of both September 30, 2003
and September 30, 2002 were adequate to absorb losses inherent in the loan
portfolio, a decline in local economic conditions, or other factors, could
result in increasing losses.

ASSET/LIABILITY MANAGEMENT AND MARKET RISK

QUALITATIVE ASPECTS OF MARKET RISK

As stated above, the Company derives its income primarily from the excess of
interest collected over interest paid. The rates of interest the Company earns
on assets and pays on liabilities generally are established contractually for a
period of time. Market interest rates change over time. Accordingly, the
Company's results of operations, like those of many financial institution
holding companies and financial institutions, are impacted by changes in
interest rates and the interest rate sensitivity of its assets and liabilities.
The risk associated with changes in interest rates and the Company's ability to
adapt to these changes is known as interest rate risk and is the Company's only
significant "market" risk as defined in rules adopted by the Securities and
Exchange Commission.

QUANTITATIVE ASPECTS OF MARKET RISK

In an attempt to manage the Company's exposure to changes in interest rates and
comply with applicable regulations, we monitor the Company's interest rate risk.
In monitoring interest rate risk, we analyze and manage assets and liabilities
based on their payment streams and interest rates, the timing of their
maturities, and their sensitivity to actual or potential changes in market
interest rates.

      An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the Company's
assets mature or reprice more rapidly or to a greater extent than its
liabilities, then net portfolio value and net interest income would tend to
increase during periods of rising rates and decrease during periods of falling
interest rates. Conversely, if the Company's assets mature or reprice more
slowly or to a lesser extent than its liabilities, then net portfolio value and
net interest income would tend to decrease during periods of rising interest
rates and increase during periods of falling interest rates.

      The Company currently focuses lending efforts toward originating and
purchasing competitively priced adjustable-rate and fixed-rate loan products
with short to intermediate terms to maturity, generally 15 years or less. This
theoretically allows the Company to maintain a portfolio of loans that will be
relatively sensitive to changes in the level of interest rates while providing a


                                       19

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

reasonable spread to the cost of liabilities used to fund the loans.

      The Company's primary objective for its investment portfolio is to provide
the liquidity necessary to meet the funding needs of the loan portfolio. The
investment portfolio is also used in the ongoing management of changes to the
Company's asset/liability mix, while contributing to profitability through
earnings flow. The investment policy generally calls for funds to be invested
among various categories of security types and maturities based upon the
Company's need for liquidity, desire to achieve a proper balance between
minimizing risk while maximizing yield, the need to provide collateral for
borrowings, and to fulfill the Company's asset/liability management goals.

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

      The Company emphasizes and promotes its savings, money market, demand and
NOW accounts and, subject to market conditions, certificates of deposit with
maturities of six months through five years, principally in its primary market
area. The savings and NOW accounts tend to be less susceptible to rapid changes
in interest rates.

      In managing its asset/liability mix, the Company, at times, depending on
the relationship between long- and short-term interest rates, market conditions,
and consumer preference, may place somewhat greater emphasis on maximizing its
net interest margin than on strictly matching the interest rate sensitivity of
its assets and liabilities. Management believes the increased net income that
may result from an acceptable mismatch in the actual maturity or repricing of
its asset and liability portfolios can, during periods of declining or stable
interest rates, provide sufficient returns to justify the increased exposure to
sudden and unexpected increases in interest rates that may result from such a
mismatch. The Company has established limits, which may change from time to
time, on the level of acceptable interest rate risk. There can be no assurance,
however, that in the event of an adverse change in interest rates, the Company's
efforts to limit interest rate risk will be successful.

NET PORTFOLIO VALUE

      The Company uses a net portfolio value ("NPV") approach to the
quantification of interest rate risk. This approach calculates the difference
between the present value of expected cash flows from assets and the present
value of expected cash flows from liabilities, as well as cash flows from
off-balance-sheet contracts. Management of the Company's assets and liabilities
is performed within the context of the marketplace, but also within limits
established by the Board of Directors on the amount of change in NPV that is
acceptable given certain interest rate changes.

      Presented below, as of September 30, 2003 and 2002, is an analysis of the
Company's interest rate risk as measured by changes in NPV for an instantaneous
and sustained parallel shift in the yield curve, in 100 basis point increments,
up and down 200 basis points. As illustrated in the table, the Company's NPV at
September 30, 2003 was more sensitive to increasing interest rates than to
declining interest rates. This occurs primarily because, as rates rise, the
market value of fixed-rate loans and mortgage-backed securities declines due to
both the rate increase and the related slowing of prepayments on loans. When
rates decline, the Company does not experience a significant rise in market
value for these loans and mortgage-backed securities because borrowers prepay at
relatively higher rates. The value of the Company's deposits and borrowings
change in approximately the same proportion in rising and falling rate
scenarios. The Company experienced an increase in interest rate sensitivity at
September 30, 2003 compared to September 30, 2002 due primarily to an increase
in fixed-rate mortgage-backed securities and a reduction in the average maturity
of its borrowings.

Certain shortcomings are inherent in the method of analysis presented in the
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 that 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,
prepayments and early withdrawal levels would likely deviate from those assumed
in calculating the table. Finally, the ability of some borrowers to service
their debt may decrease in the event of an interest rate increase. The Company
considers all of these factors in monitoring its exposure to interest rate risk.


<TABLE>
<CAPTION>
Change in Interest Rate      Board Limit        At September 30, 2003         At September 30, 2002
         (Basis Points)         % Change        $ Change     % Change        $ Change      % Change
-------------------------------------------------------------------------------------------------------
   Dollars In Thousands
<S>                 <C>              <C>        <C>               <C>          <C>               <C>
                   +200 bp           (40)%      $ (6,062)         (19)%        $ 1,543            4%
                   +100 bp           (25)         (2,451)          (8)           1,898            5
                      0               --              --           --               --            --
                   -100 bp           (25)          1,085            3           (4,362)          (12)
                   -200 bp           (40)            925            3           (8,873)          (25)
</TABLE>


      Management reviews the OTS measurements and related peer reports on NPV
and interest rate risk on a quarterly basis. In addition to monitoring selected
measures of NPV, management also monitors the effects on net interest income
resulting from increases or decreases in interest rates. This measure is used in
conjunction with NPV measures to identify excessive interest rate risk.

ASSET QUALITY

It is management's belief, based on information available at fiscal year end,
that the Company's current asset quality is satisfactory. At September 30, 2003,
non-performing assets, consisting of non-accruing loans, accruing


                                       20

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

loans delinquent 90 days or more, restructured loans, foreclosed real estate,
and repossessed consumer property, totaled $2,175,000, or 0.28% of total assets,
compared to $3,538,000, or 0.58% of total assets, for the fiscal year ended
2002.

      Non-accruing loans at September 30, 2003 include, among others, a
commercial real estate loan in the amount of $417,000 secured by a casino and an
agricultural operating loan in the amount of $291,000 secured by agricultural
land.

      Foreclosed real estate at September 30, 2003 consists primarily of a
nursing home in the amount of $889,000 and a car wash facility in the amount of
$193,000.

      The Company maintains an allowance for loan losses because of the
potential that some loans may not be repaid in full. (See Note 1 of Notes to
Consolidated Financial Statements.) At September 30, 2003, the Company had an
allowance for loan losses in the amount of $4,962,000 as compared to $4,693,000
at September 30, 2002. Management's periodic review of the adequacy of the
allowance for loan losses is based on various subjective and objective factors
including the Company's past loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to repay,
the estimated value of any underlying collateral, and current economic
conditions. While management may allocate portions of the allowance for
specifically identified problem loan situations, the majority of the allowance
is based on judgmental factors related to the overall loan portfolio and is
available for any loan charge-offs that may occur.

      In determining the allowance for loan losses, the Company specifically
identifies loans that it considers to have potential collectibility problems.
Based on criteria established by Statement of Financial Accounting Standards
(SFAS) No. 114, some of these loans are considered to be "impaired" while others
are not considered to be impaired, but possess weaknesses that the Company
believes merit additional analysis in establishing the allowance for loan
losses. All other loans are evaluated by applying estimated loss ratios to
various pools of loans. The Company then analyzes other factors (such as
economic conditions) in determining the aggregate amount of the allowance
needed.

      At September 30, 2003, $312,000 of the allowance for loan losses was
allocated to impaired loans (See Note 4 of Notes to Consolidated Financial
Statements), $1,522,000 was allocated to identified problem loan situations, and
$3,128,000 was allocated as a reserve against losses from the overall loan
portfolio based on historical loss experience and general economic conditions.
At September 30, 2002, $304,000 of the allowance for loan losses was allocated
to impaired loans, $1,701,000 was allocated to identified problem loan
situations, and $2,688,000 was allocated as a reserve against losses from the
overall loan portfolio based on historical loss experience and general economic
conditions.

      The September 30, 2003 allowance for loan losses that was allocated to
impaired loans was $312,000, which is 39.5% of impaired loans as of that date.
The September 30, 2002 allowance allocated to impaired loans was $304,000, which
is 25.6% of impaired loans at that date. The increase in the dollar amount and
percentage of the allocated allowance is a result of the specific analysis
performed on a loan-by-loan basis as described above.

      The September 30, 2003 allowance allocated to other identified problem
loan situations was $1,522,000 as compared to $1,701,000 at September 30, 2002,
a decrease of $179,000. The decrease in the dollar amount of the allocated
allowance is due to a relative decrease in identified problem loan situations
between the periods and is the result of a specific analysis performed on a
loan-by-loan basis as described above.

      The portion of the September 30, 2003 allowance that was not specifically
allocated to individual loans was $3,128,000 as compared to $2,688,000 at
September 30, 2002, an increase of $440,000. The increase primarily reflects a
change in the composition of the loan portfolio, which reduced one-to-four
family residential mortgage loans and increased commercial and multi-family real
estate loans.

LIQUIDITY AND SOURCES OF FUNDS

The Company's primary sources of funds are deposits, borrowings, principal and
interest payments on loans and mortgage-backed securities, and maturing
investment securities. While scheduled loan repayments and maturing investments
are relatively predictable, deposit flows and early loan repayments are
influenced by the level of interest rates, general economic conditions, and
competition.

      The Company relies on competitive pricing policies, advertising and
customer service to attract and retain its deposits and only solicits these
deposits from its primary market area. Based on its experience, the Company
believes that its passbook savings, money market savings accounts, NOW and
regular checking accounts are relatively stable sources of deposits. The
Company's ability to attract and retain time deposits has been, and will
continue to be, significantly affected by market conditions. However, the
Company does not foresee significant funding issues resulting from
disintermediation of its portfolio of time deposits.

      First Federal and Security are required by regulation to maintain
sufficient liquidity to assure their safe and sound operation. In the opinion of
management, both First Federal and Security are in compliance with this
requirement.

      Liquidity management is both a daily and long-term function of the
Company's management strategy. The Company adjusts its investments in liquid
assets based upon management's assessment of (i) expected loan demand, (ii) the
projected availability of purchased loan products, (iii) expected deposit flows,
(iv) yields available on interest-bearing deposits, and (v) the objectives of
its asset/liability management program. Excess liquidity is generally invested
in interest-earning overnight deposits and other short-term government agency
obligations. If the Company requires funds beyond its ability to generate them
internally, it has additional borrowing capacity with the FHLB and has
collateral eligible for use with reverse repurchase agreements. The Company is
not aware of any significant trends in the Company's liquidity or its ability to
borrow additional funds if needed.

      The primary investing activities of the Company are the origination and
purchase of loans and the purchase of securities. During the years ended
September 30, 2003, 2002 and 2001, the Company originated loans totaling $324.7
million, $299.9 million and $159.6 million, respectively. Purchases of loans
totaled $26.2 million, $27.1 million and $32.8 million during the years ended
September 30, 2003, 2002 and 2001, respectively. During fiscal 2003, the mix of
loans outstanding changed, with commercial and multi-family real estate loans,
commercial business loans and consumer loans increasing while one-to-four family
residential mortgage loans and other categories of loans decreased. (See Note 4
of Notes to Consolidated Financial Statements.) During the years ended September
30, 2003, 2002 and 2001, the Company purchased mortgage-backed securities and
other securities available for sale in the amount of $431.7 million, $135.5
million and $22.9 million, respectively. (See Note 3 of Notes to Consolidated
Financial Statements.)


                                       21

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

      At September 30, 2003, the Company had outstanding commitments to
originate and purchase loans of $63.4 million. (See Note 14 of Notes to
Consolidated Financial Statements.) Certificates of deposit scheduled to mature
in one year or less from September 30, 2003 total $184.4 million. Based on its
historical experience, management believes that a significant portion of such
deposits will remain with the Company, however, there can be no assurance that
the Company can retain all such deposits. Management believes that loan
repayment and other sources of funds will be adequate to meet the Company's
foreseeable short- and long-term liquidity needs.

      During July 2001, the Company's trust subsidiary, First Midwest Financial
Capital Trust I, sold $10 million in floating rate cumulative preferred
securities. Proceeds from the sale were used to purchase subordinated debentures
of First Midwest, which mature in the year 2031, and are redeemable at any time
after five years. The Company used the proceeds for general corporate purposes.

      During fiscal year 2002, the Company initiated construction of a new
office facility in Urbandale, Iowa. Construction was completed in October 2002
and the facility opened as a branch office in November 2002. The source of funds
for capital improvements of this type is from the normal operations of the
Company.

      On September 20, 1993, the Bank converted from a federally chartered
mutual savings and loan association to a federally chartered stock savings bank.
At that time, a liquidation account was established for the benefit of eligible
account holders who continue to maintain their account with the Bank after the
conversion. The liquidation account is reduced annually to the extent that
eligible account holders have reduced their qualifying deposits. At September
30, 2003, the liquidation account approximated $2.6 million.

      The Company, First Federal and Security are in compliance with their
capital requirements and are considered "well capitalized" under current
regulatory guidelines. (See Note 13 of Notes to Consolidated Financial
Statements.) The Company does not anticipate any significant changes to its
capital structure.

      On July 7, 2003, the Company announced its intention to repurchase up to
150,000 shares, or approximately 6% of the Company's outstanding shares, through
open market and privately negotiated transactions. The shares will be purchased
at prevailing market prices during the next twelve months, depending upon market
conditions. The repurchased shares will become treasury shares to be used for
general corporate purposes, including the issuance of shares in connection with
grants and awards under the Company's stock-based benefits plans. The Company
also believes the repurchase of shares to be an attractive investment that will
benefit the Company and its shareholders. Through December 1, 2003, no shares
had been purchased under the program.

      The payment of dividends and repurchase of shares has the effect of
reducing stockholders' equity. Prior to authorizing such transactions, the Board
of Directors considers the effect the dividend or repurchase of shares would
have on liquidity and capital ratios. The Banks and the Company may not declare
or pay cash dividends if the effect thereof would cause equity to be reduced
below applicable regulatory capital requirements.

IMPACT OF INFLATION AND CHANGING PRICES

The Consolidated Financial Statements and Notes thereto presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time due to inflation. The primary impact of inflation is
reflected in the increased cost of the Company's operations. Unlike most
industrial companies, virtually all the assets and liabilities of the Company
are monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than do the effects
of general levels of inflation. Interest rates do not necessarily move in the
same direction, or to the same extent, as the prices of goods and services.

IMPACT OF NEW ACCOUNTING STANDARDS

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57, and 107
and a rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued and clarifies that a
guarantor is required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The effects of implementation on
the Company's financial statements were not material.

      In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Certain of
the disclosure modifications are required for fiscal years ending after December
15, 2002 and are included in the notes to these consolidated financial
statements.

      FIN No. 46, Consolidation of Variable Interest Entities, an interpretation
of Accounting Research Bulletin No. 51, establishes accounting guidance for
consolidation of variable interest entities (VIE) that function to support the
activities of the primary beneficiary. Prior to the implementation of FIN 46,
VIEs were generally consolidated by an enterprise when the enterprise had a
controlling financial interest through ownership of a majority of voting
interest in the entity. The provisions of FIN 46 were effective immediately for
all arrangements entered into after January 31, 2003. For existing VIEs, the
implementation date of FIN 46 is the first period ending after December 15,
2003.

      The Company expects to adopt FIN 46 in connection with its consolidated
financial statements beginning October 1, 2003. In its current form, FIN 46 may
require the Company to deconsolidate its investment in First Midwest Financial
Capital Trust I in future financial statements. The potential deconsolidation of
subsidiary trusts of bank holding companies formed in connection with the
issuance of trust preferred securities, like First Midwest Financial Capital
Trust I, appears to be an unintended consequence of FIN 46. It is currently
unknown if, or when, the FASB will address this issue. In July 2003, the Board
of Governors of the Federal Reserve System issued a supervisory letter
instructing bank holding companies to continue to include the trust preferred


                                       22

<PAGE>
                 First Midwest Financial, Inc. and Subsidiaries

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

securities in their Tier I capital for regulatory capital purposes until notice
is given to the contrary. The Federal Reserve intends to review the regulatory
implications of any accounting treatment changes and, if necessary or warranted,
provide further appropriate guidance. There can be no assurance that the Federal
Reserve will continue to permit institutions to include trust preferred
securities in Tier I capital for regulatory capital purposes. As of September
30, 2003, assuming the Company was not permitted to include the $10 million in
trust preferred securities issued by First Midwest Financial Capital Trust I in
its Tier 1 capital, the Company would still exceed the regulatory required
minimums for capital adequacy purposes (see Note 13 of Notes to Consolidated
Financial Statements). If the trust preferred securities were no longer
permitted to be included in Tier 1 capital, the Company would also be permitted
to redeem the capital securities, which bear interest at 4.9%, without penalty.

      The interpretations of FIN 46 and its application to various transaction
types and structures are evolving. Management continuously monitors emerging
issues related to FIN 46, some of which could potentially impact the Company's
financial statements.

      In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, (SFAS 149). SFAS 149 amends
Statement 133 for certain items. The Company adopted SFAS 149 on July 1, 2003
and such adoption did not have a material effect on its financial position or
results of operations.

      In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity (SFAS
150). SFAS 150 established standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or asset in some circumstances). The Company
adopted SFAS 150 on July 1, 2003 and such adoption did not have a material
effect on its financial position or results of operations.

FORWARD-LOOKING STATEMENTS

The Company, and its wholly-owned subsidiaries First Federal and Security, may
from time to time make written or oral "forward-looking statements," including
statements contained in its filings with the Securities and Exchange Commission,
in this its annual report to shareholders, in other reports to shareholders, and
in other communications by the Company, which are made in good faith by the
Company pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.

      These forward-looking statements include statements with respect to the
Company's beliefs, expectations, 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 the Company's control. Such statements address
the following subjects: future operating results; customer growth and retention;
loan and other product demand; earnings growth and expectations; new products
and services; credit quality and adequacy of reserves; technology; and our
employees. The following factors, among others, could cause the Company's
financial performance to differ materially from the expectations, estimates, and
intentions expressed in such forward-looking statements: the strength of the
United States economy in general and the strength of the local economies in
which the Company conducts 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 new products and
services of the Company and the perceived overall value of these products and
services by users; the impact of changes in financial services' laws and
regulations; technological changes; acquisitions; changes in consumer spending
and saving habits; and the success of the Company at managing the risks involved
in the foregoing.

      The foregoing list of factors is not exclusive. Additional discussion of
factors affecting the Company's business and prospects is contained in the
Company's periodic filings with the SEC. The Company does not undertake, and
expressly disclaims any intent or obligation, to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.


                                       23

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries


                          INDEPENDENT AUDITOR'S REPORT

TO THE BOARD OF DIRECTORS
FIRST MIDWEST FINANCIAL, INC. AND SUBSIDIARIES
STORM LAKE, IOWA

We have audited the accompanying consolidated balance sheets of First Midwest
Financial, Inc. and Subsidiaries as of September 30, 2003 and 2002, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended September 30, 2003.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Midwest Financial, Inc. and Subsidiaries as of September 30, 2003 and 2002, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 2003, in conformity with accounting principles
generally accepted in the United States of America.


/s/ McGladrey & Pullen, LLP

Des Moines, Iowa
October 23, 2003



                                       24

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                                          2003            2002
--------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>             <C>
ASSETS
    Cash and due from banks                                                      $   2,090,221   $   1,325,139
    Interest-bearing deposits in other financial institutions                        7,666,594       6,051,295
--------------------------------------------------------------------------------------------------------------
       Total cash and cash equivalents                                               9,756,815       7,376,434
    Securities available for sale                                                  366,075,033     218,247,310
    Loans receivable, net of allowance for loan losses of $4,961,777
       in 2003 and $4,692,988 in 2002                                              349,691,995     341,937,408
    Loans held for sale                                                              1,126,310       1,254,962
    Federal Home Loan Bank (FHLB) stock, at cost                                    10,930,300       6,842,600
    Accrued interest receivable                                                      3,932,076       4,320,514
    Premises and equipment, net                                                     11,353,365      11,054,243
    Foreclosed real estate                                                           1,109,338       1,327,802
    Bank owned life insurance                                                       11,301,390      10,742,301
    Other assets                                                                     7,008,505       4,544,886
--------------------------------------------------------------------------------------------------------------

       Total assets                                                              $ 772,285,127   $ 607,648,460
==============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
    Noninterest-bearing demand deposits                                          $  17,457,662   $  11,934,712
    Savings, NOW and money market demand deposits                                  119,497,887      90,413,488
    Time certificates of deposit                                                   298,597,193     253,431,553
--------------------------------------------------------------------------------------------------------------
       Total deposits                                                              435,552,742     355,779,753
    Advances from FHLB                                                             223,784,394     125,089,999
    Securities sold under agreements to repurchase                                  57,702,034      70,176,228
    Trust preferred securities                                                      10,000,000      10,000,000
    Advances from borrowers for taxes and insurance                                    268,682         355,884
    Accrued interest payable                                                           506,861         671,033
    Accrued expenses and other liabilities                                           1,439,615         987,797
--------------------------------------------------------------------------------------------------------------
       Total liabilities                                                           729,254,328     563,060,694
--------------------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
    Preferred stock, 800,000 shares authorized; none issued                                 --              --
    Common stock, $.01 par value; 5,200,000 shares authorized; 2,957,999 shares
       issued and 2,493,949 shares outstanding at September 30, 2003; 2,957,999
       shares issued and 2,468,804 shares outstanding at September 30, 2002             29,580          29,580
    Additional paid-in capital                                                      20,538,879      20,593,768
    Retained earnings - substantially restricted                                    34,057,741      31,940,648
    Accumulated other comprehensive income (loss)                                   (3,028,762)        494,834
    Unearned Employee Stock Ownership Plan shares                                     (401,676)        (46,142)
    Treasury stock, 464,050 and 489,195 common shares, at cost,
       at September 30, 2003 and 2002, respectively                                 (8,164,963)     (8,424,922)
--------------------------------------------------------------------------------------------------------------
       Total shareholders' equity                                                   43,030,799      44,587,766
--------------------------------------------------------------------------------------------------------------

       Total liabilities and shareholders' equity                                $ 772,285,127   $ 607,648,460
==============================================================================================================
</TABLE>


See Notes to Consolidated Financial Statements.


                                       25

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                        CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                        2003           2002           2001
----------------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
Interest and dividend income:
    Loans receivable, including fees                            $ 24,098,700   $ 25,313,828   $ 27,752,278
    Securities available for sale                                 10,794,142      9,891,529     10,043,154
    Dividends on FHLB stock                                          286,311        228,137        428,472
----------------------------------------------------------------------------------------------------------
                                                                  35,179,153     35,433,494     38,223,904
----------------------------------------------------------------------------------------------------------

Interest expense:
    Deposits                                                      10,490,920     13,458,794     17,546,621
    FHLB advances and other borrowings                             8,959,831      8,275,256      7,843,978
----------------------------------------------------------------------------------------------------------
                                                                  19,450,751     21,734,050     25,390,599
----------------------------------------------------------------------------------------------------------
       Net interest income                                        15,728,402     13,699,444     12,833,305

Provision for loan losses                                            350,000      1,090,000        710,000
----------------------------------------------------------------------------------------------------------
       Net interest income after provision for loan losses        15,378,402     12,609,444     12,123,305
----------------------------------------------------------------------------------------------------------

Noninterest income:
    Deposit service charges and other fees                         1,324,769      1,157,217      1,078,904
    Gain on sales of loans, net                                      955,469        621,491        199,623
    Bank owned life insurance                                        628,957        671,136        105,000
    Gain (loss) on sales of securities available for sale, net       242,562         86,194        (60,275)
    Gain (loss) on sales of foreclosed real estate, net               (5,372)       (42,866)        27,017
    Brokerage commissions                                            125,374        181,296         96,808
    Other income                                                     283,297        106,481         44,745
----------------------------------------------------------------------------------------------------------
                                                                   3,555,056      2,780,949      1,491,822
----------------------------------------------------------------------------------------------------------

Noninterest expense:
    Employee compensation and benefits                             8,400,501      7,528,999      6,552,712
    Occupancy and equipment expense                                2,154,355      2,077,885      1,569,387
    Deposit insurance premium                                         61,950         61,508         63,944
    Data processing expense                                          634,098        563,485        457,766
    Prepayment fee on FHLB advances                                  500,674             --             --
    Other expense                                                  2,106,590      2,036,006      2,051,029
----------------------------------------------------------------------------------------------------------
                                                                  13,858,168     12,267,883     10,694,838
----------------------------------------------------------------------------------------------------------

       Net income before income tax expense                        5,075,290      3,122,510      2,920,289

Income tax expense                                                 1,678,286        965,882      1,010,546
----------------------------------------------------------------------------------------------------------

       Net income                                               $  3,397,004   $  2,156,628   $  1,909,743
==========================================================================================================

Earnings per common and common equivalent share:
    Basic earnings per common share                             $       1.37   $       0.88   $       0.79
    Diluted earnings per common share                                   1.36           0.87           0.78
</TABLE>


See Notes to Consolidated Financial Statements.


                                       26

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                                                 Accumulated
                                                                                     Additional                        Other
                                                                           Common       Paid-in      Retained  Comprehensive
                                                                            Stock       Capital      Earnings  Income (Loss)
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>           <C>           <C>
Balance, September 30, 2000                                           $    29,580   $20,976,107   $30,404,386   $(2,553,891)
    Comprehensive income:
       Net income for the year ended September 30, 2001                        --            --     1,909,743            --
       Net change in net unrealized gains and losses on securities
         available for sale, net of reclassification adjustments and
         tax effects                                                           --            --            --     2,892,318
    Total comprehensive income
    Purchase of 1,847 common shares of treasury stock                          --            --            --            --
    Purchase of 30,000 common shares for ESOP                                  --            --            --            --
    15,000 common shares committed to be released under the ESOP               --        (5,340)           --            --
    Issuance of 40,000 common shares from treasury stock due
       to exercise of stock options                                            --      (181,388)           --            --
    Tax benefit from exercise of stock options                                 --        74,000            --            --
    Cash dividends declared on common stock ($.52 per share)                   --            --    (1,247,486)           --
----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2001                                           $    29,580   $20,863,379   $31,066,643   $   338,427
============================================================================================================================

Balance, September 30, 2001                                           $    29,580   $20,863,379   $31,066,643   $   338,427
    Comprehensive income:
       Net income for the year ended September 30, 2002                        --            --     2,156,628            --
       Net change in net unrealized gains and losses on securities
         available for sale, net of reclassification adjustments and
         tax effects                                                           --            --            --       156,407
    Total comprehensive income
    Purchase of 62,447 common shares of treasury stock                         --            --            --            --
    Purchase of 10,238 common shares for ESOP                                  --            --            --            --
    22,000 common shares committed to be released under the ESOP               --        24,718            --            --
    Issuance of 61,524 common shares from treasury stock due to
       exercise of stock options                                               --      (369,364)           --            --
    Tax benefit from exercise of stock options                                 --        75,035            --            --
    Cash dividends declared on common stock ($.52 per share)                   --            --    (1,282,623)           --
----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2002                                           $    29,580   $20,593,768   $31,940,648   $   494,834
============================================================================================================================

Balance, September 30, 2002                                           $    29,580   $20,593,768   $31,940,648   $   494,834
    Comprehensive income:
       Net income for the year ended September 30, 2003                        --            --     3,397,004            --
       Net change in net unrealized gains and losses on securities
         available for sale, net of reclassification adjustments and
         tax effects                                                           --            --            --    (3,523,596)
    Total comprehensive (loss)
    Purchase of 10,147 common shares of treasury stock                         --            --            --            --
    Purchase of 35,574 common shares for ESOP                                  --            --            --            --
    15,000 common shares committed to be released under the ESOP               --        10,005            --            --
    Issuance of 35,292 common shares from treasury stock due to
       exercise of stock options                                               --      (189,770)           --            --
    Tax benefit from exercise of stock options                                 --       124,876            --            --
    Cash dividends declared on common stock ($.52 per share)                   --            --    (1,279,911)           --
----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2003                                           $    29,580   $20,538,879   $34,057,741   $(3,028,762)
============================================================================================================================

<CAPTION>

                                                                         Unearned
                                                                         Employee
                                                                            Stock                          Total
                                                                        Ownership      Treasury   Sharehholders'
                                                                      Plan Shares         Stock           Equity
-----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>              <C>
Balance, September 30, 2000                                           $        --   $(8,821,097)     $40,035,085
    Comprehensive income:
       Net income for the year ended September 30, 2001                        --            --        1,909,743
       Net change in net unrealized gains and losses on securities
         available for sale, net of reclassification adjustments and
         tax effects                                                           --            --        2,892,318
                                                                                                     -----------
    Total comprehensive income                                                                         4,802,061
    Purchase of 1,847 common shares of treasury stock                          --       (17,777)         (17,777)
    Purchase of 30,000 common shares for ESOP                            (360,000)           --         (360,000)
    15,000 common shares committed to be released under the ESOP          180,000            --          174,660
    Issuance of 40,000 common shares from treasury stock due
       to exercise of stock options                                            --       448,055          266,667
    Tax benefit from exercise of stock options                                 --            --           74,000
    Cash dividends declared on common stock ($.52 per share)                   --            --       (1,247,486)
-----------------------------------------------------------------------------------------------------------------
Balance, September 30, 2001                                           $  (180,000)  $(8,390,819)     $43,727,210
=================================================================================================================

Balance, September 30, 2001                                           $  (180,000)  $(8,390,819)     $43,727,210
    Comprehensive income:
       Net income for the year ended September 30, 2002                        --            --        2,156,628
       Net change in net unrealized gains and losses on securities
         available for sale, net of reclassification adjustments and
         tax effects                                                           --            --          156,407
                                                                                                     -----------
    Total comprehensive income                                                                         2,313,035
    Purchase of 62,447 common shares of treasury stock                         --      (843,327)        (843,327)
    Purchase of 10,238 common shares for ESOP                            (145,892)           --         (145,892)
    22,000 common shares committed to be released under the ESOP          279,750            --          304,468
    Issuance of 61,524 common shares from treasury stock due to
       exercise of stock options                                               --       809,224          439,860
    Tax benefit from exercise of stock options                                 --            --           75,035
    Cash dividends declared on common stock ($.52 per share)                   --            --       (1,282,623)
-----------------------------------------------------------------------------------------------------------------
Balance, September 30, 2002                                           $   (46,142)  $(8,424,922)     $44,587,766
=================================================================================================================

Balance, September 30, 2002                                           $   (46,142)  $(8,424,922)     $44,587,766
    Comprehensive income:
       Net income for the year ended September 30, 2003                        --            --        3,397,004
       Net change in net unrealized gains and losses on securities
         available for sale, net of reclassification adjustments and
         tax effects                                                           --            --       (3,523,596)
                                                                                                     -----------
    Total comprehensive (loss)                                                                          (126,592)
    Purchase of 10,147 common shares of treasury stock                         --      (165,092)        (165,092)
    Purchase of 35,574 common shares for ESOP                            (608,584)           --         (608,584)
    15,000 common shares committed to be released under the ESOP          253,050            --          263,055
    Issuance of 35,292 common shares from treasury stock due to
       exercise of stock options                                               --       425,051          235,281
    Tax benefit from exercise of stock options                                 --            --          124,876
    Cash dividends declared on common stock ($.52 per share)                   --            --       (1,279,911)
-----------------------------------------------------------------------------------------------------------------
Balance, September 30, 2003                                           $  (401,676)  $(8,164,963)     $43,030,799
=================================================================================================================
</TABLE>


See Notes to Consolidated Financial Statements.


                                       27

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                              2003            2002            2001
-------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                     $     3,397,004   $   2,156,628   $   1,909,743
    Adjustments to reconcile net income to net cash provided
     by operating activities:
       Depreciation, amortization and accretion, net                     3,380,213       2,186,335         849,695
       Provision for loan losses                                           350,000       1,090,000         710,000
       Prepayment fee on FHLB advances                                     500,674              --              --
       (Gain) loss on sales of securities available for sale, net         (242,562)        (86,194)         60,275
       (Gain) on sales of office property, net                            (134,700)             --              --
       Proceeds from sales of loans held for sale                       76,465,663      22,107,878      14,284,441
       Originations of loans held for sale                             (75,381,542)    (22,741,349)    (14,084,818)
       (Gain) on sales of loans, net                                      (955,469)       (621,491)       (199,623)
       (Gain) loss on sales of foreclosed real estate, net                   5,372          42,866         (27,017)
       Net change in:
          Accrued interest receivable                                      388,438         430,278         466,137
          Other assets                                                    (809,716)       (836,105)         88,031
          Accrued interest payable                                        (164,172)       (197,248)       (138,060)
          Accrued expenses and other liabilities                           451,818          48,015        (425,537)
-------------------------------------------------------------------------------------------------------------------
              Net cash provided by operating activities                  7,251,021       3,579,613       3,493,267
-------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of securities available for sale                         (431,711,574)   (135,493,814)    (22,886,271)
    Proceeds from sales of securities available for sale                90,473,567       7,464,706         795,000
    Proceeds from maturities and principal repayments of
      securities available for sale                                    185,761,348      54,277,854      28,670,713
    Loans purchased                                                    (26,162,845)    (27,104,383)    (32,754,225)
    Net change in loans                                                 17,696,050      16,402,377      22,830,506
    Proceeds from sales of foreclosed real estate                          631,156         317,000         521,074
    Proceeds from sale of office building                                  197,169              --              --
    Purchase of shares by ESOP                                            (608,584)             --              --
    Purchase of FHLB stock                                              (7,786,600)       (443,700)        (71,300)
    Proceeds from redemption of FHLB stock                               3,698,900              --       2,000,000
    Purchase of other investment                                                --              --     (10,000,000)
    Purchase of premises and equipment                                  (1,254,819)     (2,532,542)     (3,914,687)
-------------------------------------------------------------------------------------------------------------------
              Net cash (used in) investing activities                 (169,066,232)    (87,112,502)    (14,809,190)
-------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net change in noninterest-bearing demand, savings, NOW
      and money market demand deposits                             $    34,607,349   $  11,698,102   $  12,100,577
    Net change in time deposits                                         45,165,640       5,299,773       8,027,580
    Proceeds from advances from FHLB                                 1,219,200,000     275,520,000     133,265,000
    Repayments of advances from FHLB                                (1,121,006,279)   (276,781,762)   (146,651,690)
    Net change in securities sold under agreements to repurchase       (12,474,194)     68,183,508      (2,262,245)
    Proceeds from issuance of trust preferred securities                        --              --      10,000,000
    Net change in advances from borrowers for taxes and insurance          (87,202)        (90,513)        (15,117)
    Debt issuance costs incurred                                                --              --        (305,812)
    Cash dividends paid                                                 (1,279,911)     (1,282,623)     (1,247,486)
    Proceeds from exercise of stock options                                235,281         439,860         266,667
    Purchase of treasury stock                                            (165,092)       (843,327)        (17,777)
-------------------------------------------------------------------------------------------------------------------
              Net cash provided by financing activities                164,195,592      82,143,018      13,159,697
-------------------------------------------------------------------------------------------------------------------

Net change in cash and cash equivalents                                  2,380,381      (1,389,871)      1,843,774

CASH AND CASH EQUIVALENTS
    Beginning of year                                                    7,376,434       8,766,305       6,922,531
-------------------------------------------------------------------------------------------------------------------
    End of year                                                    $     9,756,815   $   7,376,434   $   8,766,305
===================================================================================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid during the year for:
       Interest                                                    $    19,614,923   $  21,931,298   $  25,528,659
       Income taxes                                                      1,757,440         889,568         926,543

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
    Loans transferred to foreclosed real estate                    $       418,064   $     747,525   $     989,067
</TABLE>


See Notes to Consolidated Financial Statements.


                                       28

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of First Midwest
Financial, Inc. (the Company) a bank holding company located in Storm Lake,
Iowa, and its wholly-owned subsidiaries which include First Federal Savings Bank
of the Midwest (the Bank or First Federal), a federally chartered savings bank
whose primary regulator is the Office of Thrift Supervision, Security State Bank
(Security), a state chartered commercial bank whose primary regulator is the
Federal Reserve, First Services Financial Limited and Brookings Service
Corporation, which offer brokerage services and non-insured investment products,
First Services Trust Company, which offers various trust services, and First
Midwest Financial Capital Trust I, which was capitalized in July 2001, for the
purpose of issuing trust preferred securities. All significant intercompany
balances and transactions have been eliminated.

NATURE OF BUSINESS, CONCENTRATION OF CREDIT RISK AND INDUSTRY SEGMENT
INFORMATION

The primary source of income for the Company is the purchase or origination of
consumer, commercial, agricultural, commercial real estate, and residential real
estate loans. See Note 4 for a discussion of concentrations of credit risk. The
Company accepts deposits from customers in the normal course of business
primarily in northwest and central Iowa and eastern South Dakota. The Company
operates primarily in the banking industry which accounts for more than 90% of
its revenues, operating income and assets. While the Company's management
monitors the revenue streams of the various Company products and services,
operations are managed and financial performance is evaluated on a Company-wide
basis. Accordingly, all of the Company's banking operations are considered by
management to be aggregated in one reportable operating segment.

      Assets held in trust or fiduciary capacity are not assets of the Company
and, accordingly, are not included in the accompanying consolidated financial
statements. At September 30, 2003 and 2002, trust assets totaled approximately
$15,383,000 and $13,842,000, respectively.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

      The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

CERTAIN SIGNIFICANT ESTIMATES

The allowance for loan losses and fair values of securities and other financial
instruments involve certain significant estimates made by management. These
estimates are reviewed by management regularly and it is reasonably possible
that circumstances that exist at September 30, 2003, may change in the near-term
future and that the effect could be material to the consolidated financial
statements.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, cash and cash equivalents is defined to
include the Company's cash on hand and due from financial institutions and
short-term interest-bearing deposits in other financial institutions. The
Company reports net cash flows for customer loan transactions, deposit
transactions, and short-term borrowings with maturities of 90 days or less.

SECURITIES

The Company classifies all securities as available for sale. Available for sale
securities are those the Company may decide to sell if needed for liquidity,
asset-liability management or other reasons. Available for sale securities are
reported at fair value, with net unrealized gains and losses reported as other
comprehensive income or loss and as a separate component of shareholders'
equity, net of tax.

      Gains and losses on the sale of securities are determined using the
specific identification method based on amortized cost and are reflected in
results of operations at the time of sale. Interest and dividend income,
adjusted by amortization of purchase premium or discount over the estimated life
of the security using the level yield method, is included in income as earned.

LOANS HELD FOR SALE

Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized in a valuation allowance by charges to income.

LOANS RECEIVABLE

Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal balances reduced by the allowance for loan losses and any
deferred fees or costs on originated loans.

      Premiums or discounts on purchased loans are amortized to income using the
level yield method over the remaining period to contractual maturity, adjusted
for anticipated prepayments.

      Interest income on loans is accrued over the term of the loans based upon
the amount of principal outstanding except when serious doubt exists as to the
collectibility of a loan, in which case the accrual of interest is discontinued.
Interest income is subsequently recognized only to the extent that cash payments
are received until, in management's judgment, the borrower has the ability to
make contractual interest and principal payments, in which case the loan is
returned to accrual status.

LOAN ORIGINATION FEES, COMMITMENT FEES, AND RELATED COSTS

Loan fees and certain direct loan origination costs are deferred, and the net
fee or cost is recognized as an adjustment to interest income using the interest
method.

ALLOWANCE FOR LOAN LOSSES

Because some loans may not be repaid in full, an allowance for loan losses is
recorded. The allowance for loan losses is increased by a provision for loan
losses charged to expense and decreased by charge-offs (net of recoveries).
Estimating the risk of loss and the amount of loss on any loan is necessarily
subjective. Management's periodic evaluation of the adequacy of the allowance is
based on the Company's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of any underlying collateral, and current economic
conditions. While management may periodically allocate portions of the allowance
for specific problem loan situations, the whole allowance is available for any
loan charge-offs that occur.


                                       29

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Loans are considered impaired if full principal or interest payments are
not anticipated in accordance with the contractual loan terms. Impaired loans
are carried at the present value of expected future cash flows discounted at the
loan's effective interest rate or at the fair value of the collateral if the
loan is collateral dependent. A portion of the allowance for loan losses is
allocated to impaired loans if the value of such loans is deemed to be less than
the unpaid balance. If these allocations cause the allowance for loan losses to
require an increase, such increase is reported as a component of the provision
for loan losses.

      Smaller-balance homogeneous loans are evaluated for impairment in total.
Such loans include residential first mortgage loans secured by one-to-four
family residences, residential construction loans, and automobile, manufactured
homes, home equity and second mortgage loans. Commercial and agricultural loans
and mortgage loans secured by other properties are evaluated individually for
impairment. When analysis of borrower operating results and financial condition
indicates that underlying cash flows of the borrower's business are not adequate
to meet its debt service requirements, the loan is evaluated for impairment.
Often this is associated with a delay or shortfall in payments of 90 days or
more. Nonaccrual loans are often also considered impaired. Impaired loans, or
portions thereof, are charged off when deemed uncollectible.

FORECLOSED REAL ESTATE

Real estate properties acquired through, or in lieu of, loan foreclosure are
initially recorded at fair value at the date of acquisition, establishing a new
cost basis. Any reduction to fair value from the carrying value of the related
loan at the time of acquisition is accounted for as a loan loss and charged
against the allowance for loan losses. Valuations are periodically performed by
management and valuation allowances are adjusted through a charge to income for
changes in fair value or estimated selling costs.

INCOME TAXES

The Company records income tax expense based on the amount of taxes due on its
tax return plus deferred taxes computed based on the expected future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities, using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.

PREMISES AND EQUIPMENT

Land is carried at cost. Buildings, furniture, fixtures and equipment are
carried at cost, less accumulated depreciation and amortization computed
principally by using the straight-line method over the estimated useful lives of
the assets, which range from 15 to 39 years for buildings and 3 to 7 years for
furniture, fixtures and equipment. These assets are reviewed for impairment
under Statement of Financial Accounting Standards (SFAS) No. 144 when events
indicate the carrying amount may not be recoverable.

BANK OWNED LIFE INSURANCE

Bank owned life insurance consists of investments in life insurance contracts.
Earnings on the contracts are based on the earnings on the cash surrender value,
less mortality costs.

EMPLOYEE STOCK OWNERSHIP PLAN

The Company accounts for its employee stock ownership plan (ESOP) in accordance
with AICPA Statement of Position (SOP) 93-6. Under SOP 93-6, the cost of shares
issued to the ESOP, but not yet allocated to participants, are presented in the
consolidated balance sheets as a reduction of shareholders' equity. Compensation
expense is recorded based on the market price of the shares as they are
committed to be released for allocation to participant accounts. The difference
between the market price and the cost of shares committed to be released is
recorded as an adjustment to additional paid-in capital. Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings. Dividends on
unearned shares are used to reduce the accrued interest and principal amount of
the ESOP's loan payable to the Company.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Company, in the normal course of business, makes commitments to make loans
which are not reflected in the consolidated financial statements. A summary of
these commitments is disclosed in Note 14.

INTANGIBLE ASSETS

On October 1, 2001, the Company elected early adoption of Statement of Financial
Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and
Other Intangible Assets (SFAS 141 and 142). SFAS 141 addresses financial
accounting and reporting for business combinations and replaces APB Opinion No.
16, Business Combinations (APB 16). SFAS 141 no longer allows the pooling of
interests method of accounting for acquisitions, provides new recognition
criteria for intangible assets and carries forward without reconsideration the
guidance in APB 16 related to the application of the purchase method of
accounting. SFAS 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and replaces APB Opinion No. 17, Intangible
Assets. SFAS 142 addresses how intangible assets should be accounted for upon
their acquisition and after they have been initially recognized in the financial
statements. The standards provide specific guidance on measuring goodwill for
impairment annually using a two-step process. The first step identifies
potential impairment and the second step measures the amount of goodwill
impairment loss to be recognized.

      The Company has undertaken to identify those intangible assets that remain
separable under the provisions of the new standard and those that are to be
included in goodwill and has concluded that all amounts should be included in
goodwill. Goodwill results from the acquisition of three banks. At the time of
each acquisition, the purchase price of the acquisition was allocated to various
assets and liabilities with the remainder allocated to goodwill. The Company has
completed the annual goodwill impairment tests and has determined that there has
been no impairment of goodwill.

As of September 30, 2003 and 2002, the Company had intangible assets of
$3,403,019, all of which has been determined to be goodwill. There was no
goodwill impairment loss or amortization related to goodwill during the years
ended September 30, 2003 and 2002.


                                       30

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Had the provisions of SFAS 141 and 142 been applied in fiscal year 2001, the
Company's net income and net income per share would have been as follows:

YEAR ENDED SEPTEMBER 30, 2001
--------------------------------------------------------------------------------
                                                             Basic      Diluted
                                                  Net     Earnings     Earnings
                                               Income    Per Share    Per Share
--------------------------------------------------------------------------------

Net income:
    As reported                            $1,909,743   $     0.79   $     0.78
    Add: Goodwill amortization                364,932         0.15         0.15
                                           -------------------------------------
Pro forma net income                       $2,274,675   $     0.94   $     0.93
                                           ====================================

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Company enters into sales of securities under agreements to repurchase with
primary dealers only, which provide for the repurchase of the same security.
Securities sold under agreements to purchase identical securities are
collateralized by assets which are held in safekeeping in the name of the Bank
or Security by the dealers who arranged the transaction. Securities sold under
agreements to repurchase are treated as financings and the obligations to
repurchase such securities are reflected as a liability. The securities
underlying the agreements remain in the asset accounts of the Company.

EARNINGS PER COMMON SHARE

Basic earnings per common share is based on the net income divided by the
weighted average number of common shares outstanding during the period. ESOP
shares are considered outstanding for earnings per common share calculations as
they are committed to be released; unearned ESOP shares are not considered
outstanding. Diluted earnings per common share shows the dilutive effect of
additional potential common shares issuable under stock options.

COMPREHENSIVE INCOME

Comprehensive income consists of net income and other comprehensive income.
Other comprehensive income includes the net change in net unrealized gains and
losses on securities available for sale, net of reclassification adjustments and
tax effects, and is also recognized as a separate component of shareholders'
equity.

STOCK COMPENSATION

Expense for employee compensation under stock option plans is
based on Accounting Principles Board (APB) Opinion 25, with expense reported
only if options are granted below market price at grant date.

      SFAS No. 123, which became effective for stock-based compensation during
fiscal years beginning after December 15, 1995, requires proforma disclosures
for companies that do not adopt its fair value accounting method for stock-based
employee compensation for awards granted in the first fiscal year beginning
after December 15, 1994. Accordingly, the following proforma information
presents net income and earnings per share had the fair value method been used
to measure compensation cost for stock option plans. The exercise price of
options granted is equivalent to the market value of underlying stock at the
grant date. Accordingly, no compensation cost was actually recognized for stock
options during 2003, 2002 or 2001.




<TABLE>
<CAPTION>
                                                                   2003          2002          2001
----------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>           <C>
Net income as reported                                      $ 3,397,004   $ 2,156,628   $ 1,909,743
Proforma net income                                           3,253,603     2,091,222     1,836,857

Reported earnings per common and common equivalent share:
    Basic                                                   $      1.37   $      0.88   $      0.79
    Diluted                                                        1.36          0.87          0.78

Proforma earnings per common and common equivalent share:
    Basic                                                   $      1.32   $      0.85   $      0.76
    Diluted                                                        1.30          0.84          0.75
</TABLE>


The fair value of options granted during 2003, 2002 and 2001 is estimated using
the following weighted-average information: risk-free interest rate of 3.53%,
3.57% and 4.52%, expected life of 7 years, expected dividends of 2.41%, 3.68%
and 3.85% per year and expected stock price volatility of 22.54%, 21.36% and
22.36% per year, respectively.


NEW ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57, and 107
and a rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued and clarifies that a
guarantor is required to recognize, at inception of a guarantee, a liability for
the fair value of the obligation undertaken. The effects of implementation on
the Company's financial statements were not material.

      In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. Certain of
the disclosure modifications are required for fiscal years ending after December
15, 2002 and are included in the notes to these consolidated financial
statements.


                                       31

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      FIN No. 46, Consolidation of Variable Interest Entities, an interpretation
of Accounting Research Bulletin No. 51, establishes accounting guidance for
consolidation of variable interest entities (VIE) that function to support the
activities of the primary beneficiary. Prior to the implementation of FIN 46,
VIEs were generally consolidated by an enterprise when the enterprise had a
controlling financial interest through ownership of a majority of voting
interest in the entity. The provisions of FIN 46 were effective immediately for
all arrangements entered into after January 31, 2003. For existing VIEs, the
implementation date of FIN 46 is the first period ending after December 15,
2003.

      The Company expects to adopt FIN 46 in connection with its consolidated
financial statements beginning October 1, 2003. In its current form, FIN 46 may
require the Company to deconsolidate its investment in First Midwest Financial
Capital Trust I in future financial statements. The potential deconsolidation of
subsidiary trusts of bank holding companies formed in connection with the
issuance of trust preferred securities, like First Midwest Financial Capital
Trust I, appears to be an unintended consequence of FIN 46. It is currently
unknown if, or when, the FASB will address this issue. In July 2003, the Board
of Governors of the Federal Reserve System issued a supervisory letter
instructing bank holding companies to continue to include the trust preferred
securities in their Tier I capital for regulatory capital purposes until notice
is given to the contrary. The Federal Reserve intends to review the regulatory
implications of any accounting treatment changes and, if necessary or warranted,
provide further appropriate guidance. There can be no assurance that the Federal
Reserve will continue to permit institutions to include trust preferred
securities in Tier I capital for regulatory capital purposes. As of September
30, 2003, assuming the Company was not permitted to include the $10 million in
trust preferred securities issued by First Midwest Financial Capital Trust I in
its Tier 1 capital, the Company would still exceed the regulatory required
minimums for capital adequacy purposes (see Note 13). If the trust preferred
securities were no longer permitted to be included in Tier 1 capital, the
Company would also be permitted to redeem the capital securities, which bear
interest at 4.9%, without penalty.

      The interpretations of FIN 46 and its application to various transaction
types and structures are evolving. Management continuously monitors emerging
issues related to FIN 46, some of which could potentially impact the Company's
financial statements.

      In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, (SFAS 149). SFAS 149 amends
Statement 133 for certain items. The Company adopted SFAS 149 on July 1, 2003
and such adoption did not have a material effect on its financial position or
results of operations.

      In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity (SFAS
150). SFAS 150 established standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or asset in some circumstances). The Company
adopted SFAS 150 on July 1, 2003 and such adoption did not have a material
effect on its financial position or results of operations.

RECLASSIFICATION OF CERTAIN ITEMS

Certain items on the consolidated balance sheets and statements of income for
2002 and 2001, have been reclassified, with no effect on shareholders' equity,
net income or earnings per common share, to be consistent with the
classifications adopted for 2003.


                                       32

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. EARNINGS PER COMMON SHARE

A reconciliation of the numerators and denominators used in the computation of
basic earnings per common share and diluted earnings per common share is
presented below:


<TABLE>
<CAPTION>
                                                                                            2003          2002          2001
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>           <C>           <C>
Basic earnings per common share:
    Numerator, net income                                                            $ 3,397,004   $ 2,156,628   $ 1,909,743
=============================================================================================================================

    Denominator, weighted average common shares outstanding                            2,485,088     2,461,402     2,433,453
    Less weighted average unallocated ESOP shares                                        (13,797)       (8,294)      (13,353)
-----------------------------------------------------------------------------------------------------------------------------

    Weighted average common shares outstanding for basic earnings per common share     2,471,291     2,453,108     2,420,100
=============================================================================================================================

Basic earnings per common share                                                      $      1.37   $      0.88   $      0.79
=============================================================================================================================

Diluted earnings per common share:
    Numerator, net income                                                            $ 3,397,004   $ 2,156,628   $ 1,909,743
=============================================================================================================================

    Denominator, weighted average common shares outstanding for basic earnings per
       common share                                                                    2,471,291     2,453,108     2,420,100
    Add dilutive effects of assumed exercises of stock options, net of tax benefits       33,654        31,428        42,973
-----------------------------------------------------------------------------------------------------------------------------

    Weighted average common and dilutive potential common shares outstanding           2,504,945     2,484,536     2,463,073
=============================================================================================================================

Diluted earnings per common share                                                    $      1.36   $      0.87   $      0.78
=============================================================================================================================
</TABLE>


Stock options totaling 58,566, 136,464 and 171,416 shares were not considered in
computing diluted earnings per common share for the years ended September 30,
2003, 2002 and 2001, respectively, because they were not dilutive.

NOTE 3. SECURITIES

Year end securities available for sale were as follows:


<TABLE>
<CAPTION>
                                                                          Gross           Gross
                                                         Amortized   Unrealized      Unrealized           Fair
2003                                                          Cost        Gains          Losses          Value
---------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>             <C>
Debt securities:
    Trust preferred                                   $ 26,741,317  $   120,200   $  (3,538,252)  $ 23,323,265
    Obligations of states and political subdivisions       585,000       21,395              --        606,395
    Mortgage-backed securities                         341,973,353    1,399,297      (3,088,061)   340,284,589
    Other                                                  998,229        2,711              --      1,000,940
---------------------------------------------------------------------------------------------------------------
                                                       370,297,899    1,543,603      (6,626,313)   365,215,189
Marketable equity securities                               602,331      263,942          (6,429)       859,844
---------------------------------------------------------------------------------------------------------------
                                                      $370,900,230  $ 1,807,545   $  (6,632,742)  $366,075,033
===============================================================================================================

<CAPTION>

                                                                          Gross           Gross
                                                         Amortized   Unrealized      Unrealized           Fair
2002                                                          Cost        Gains          Losses          Value
---------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>           <C>             <C>
Debt securities:
    Trust preferred                                   $ 26,730,670  $    51,000   $  (2,653,690)  $ 24,127,980
    Obligations of states and political subdivisions       725,000       38,978              --        763,978
    Mortgage-backed securities                         189,343,213    3,131,194        (126,217)   192,348,190
---------------------------------------------------------------------------------------------------------------
                                                       216,798,883    3,221,172      (2,779,907)   217,240,148
    Marketable equity securities                           661,913      352,254          (7,005)     1,007,162
---------------------------------------------------------------------------------------------------------------
                                                      $217,460,796  $ 3,573,426   $  (2,786,912)  $218,247,310
===============================================================================================================
</TABLE>


The amortized cost and fair value of debt securities by contractual maturity are
shown below. Certain securities have call features which allow
the issuer to call the security prior to maturity. Expected maturities may
differ from contractual maturities in mortgage-backed securities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Therefore these securities are not included in the
maturity categories in the following maturity summary.


                                       33

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003
--------------------------------------------------------------------------------
                                                       Amortized            Fair
                                                            Cost           Value
--------------------------------------------------------------------------------
Due in one year or less                             $    310,000    $    318,875
Due after one year through five years                  1,273,229       1,288,460
Due after five years through ten years                        --              --
Due after ten years                                   26,741,317      23,323,265
--------------------------------------------------------------------------------
                                                      28,324,546      24,930,600
Mortgage-backed securities                           341,973,353     340,284,589
--------------------------------------------------------------------------------
                                                    $370,297,899    $365,215,189
================================================================================

Activities related to the sale of securities available for sale are summarized
below

                                             2003            2002          2001
--------------------------------------------------------------------------------
Proceeds from sales                  $ 90,473,567      $7,464,706     $ 795,000
Gross gains on sales                      342,871          86,194        76,874
Gross (losses) on sales                  (100,309)             --      (137,149)

NOTE 4. LOANS RECEIVABLE, NET
Year-end loans receivable were as follows:

                                                           2003            2002
--------------------------------------------------------------------------------
One to four family residential mortgage loans     $  52,192,827   $  72,678,866
Construction                                         19,435,319      25,744,856
Commercial and multi-family real estate loans       171,791,575     151,805,753
Agricultural real estate loans                       11,638,780      12,066,776
Commercial business loans                            59,467,802      42,844,163
Agricultural business loans                          22,599,397      25,308,066
Consumer loans                                       26,633,610      23,592,634
--------------------------------------------------------------------------------
                                                    363,759,310     354,041,114
Less:
    Allowance for loan losses                        (4,961,777)     (4,692,988)
    Undistributed portion of loans in process        (8,895,047)     (7,155,273)
    Net deferred loan origination fees                 (210,491)       (255,445)
--------------------------------------------------------------------------------
                                                  $ 349,691,995   $ 341,937,408
================================================================================

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

                                             2003           2002           2001
--------------------------------------------------------------------------------
Beginning balance                     $ 4,692,988    $ 3,868,664    $ 3,589,873
    Provision for loan losses             350,000      1,090,000        710,000
    Recoveries                             32,148         54,240         51,331
    Charge-offs                          (113,359)      (319,916)      (482,540)
--------------------------------------------------------------------------------
Ending balance                        $ 4,961,777    $ 4,692,988    $ 3,868,664
================================================================================

Virtually all of the Company's originated loans are to Iowa and South
Dakota-based individuals and organizations. The Company's purchased loans
totaled approximately $76,269,000 at September 30, 2003, and were secured by
properties located, as a percentage of total loans, as follows: 8% in
Washington, 1% in Colorado, 1% in Minnesota, 2% in Iowa, 2% in Wisconsin, 1% in
South Dakota, 2% in Arizona, 1% in Missouri and the remaining 3% in 14 other
states. The Company's purchased loans totaled approximately $107,279,000 at
September 30, 2002, and were secured by properties located, as a percentage of
total loans, as follows: 12% in Washington, 2% in North Carolina, 2% in
Minnesota, 2% in Iowa, 2% in Wisconsin, 2% in California, 3% in South Dakota, 2%
in Arizona and the remaining 3% in 14 other states.

      The Company originates and purchases commercial real estate loans. These
loans are considered by management to be of somewhat greater risk of
uncollectibility due to the dependency on income production. The Company's
commercial real estate loans include approximately $20,070,000 and $28,470,000
of loans secured by hotel properties and $16,891,000 and $22,416,000 of loans
secured by assisted living facilities at September 30, 2003 and 2002,
respectively. The remainder of the commercial real estate portfolio is
diversified by industry. The Company's policy for requiring collateral and
guarantees varies with the credit-worthiness of each borrower.


                                       34

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impaired loans were as follows:


<TABLE>
<CAPTION>
                                                                  2003        2002
-----------------------------------------------------------------------------------
<S>                                                         <C>         <C>
Year-end loans with no allowance for loan losses allocated  $       --  $       --
Year-end loans with allowance for loan losses allocated        790,430   1,186,739
Amount of the allowance allocated                              312,359     303,730
Average of impaired loans during the year                      910,303   4,676,344
Interest income recognized during impairment                        --          --
</TABLE>


Cash interest collected on impaired loans was not material during the years
ended September 30, 2003, 2002 and 2001.

NOTE 5. LOAN SERVICING

Mortgage loans serviced for others are not reported as assets. The unpaid
principal balances of these loans at year end were as follows:

                                                             2003           2002
--------------------------------------------------------------------------------
Mortgage loan portfolios serviced for FNMA            $25,957,000    $18,164,000
Other                                                  22,095,000     22,170,000
--------------------------------------------------------------------------------
                                                      $48,052,000    $40,334,000
================================================================================

Custodial escrow balances maintained in connection with the foregoing loan
servicing were approximately $112,000 and $168,000 at September 30, 2003 and
2002, respectively.

NOTE 6. PREMISES AND EQUIPMENT, NET
Year end premises and equipment were as follows:

                                                         2003              2002
--------------------------------------------------------------------------------
Land                                             $  2,120,000      $  2,049,135
Buildings                                           9,134,858         9,535,699
Furniture, fixtures and equipment                   4,804,462         4,545,443
--------------------------------------------------------------------------------
                                                   16,059,320        16,130,277
Less accumulated depreciation                      (4,705,955)       (5,076,034)
--------------------------------------------------------------------------------
                                                 $ 11,353,365      $ 11,054,243
================================================================================

Depreciation of premises and equipment included in occupancy and equipment
expense was approximately $893,000, $825,000 and $660,000 for the years ended
September 30, 2003, 2002 and 2001, respectively.


                                       35

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. DEPOSITS

Jumbo certificates of deposit in denominations of $100,000 or more were
approximately $109,429,000 and $48,416,000 at September 30, 2003 and 2002,
respectively.

      At September 30, 2003, the scheduled maturities of certificates of deposit
were as follows for the years ending September 30:

2004                                                                $184,392,769
2005                                                                  57,656,158
2006                                                                  24,210,808
2007                                                                  22,327,729
2008                                                                   8,905,573
Thereafter                                                             1,104,156
--------------------------------------------------------------------------------
                                                                    $298,597,193
================================================================================

NOTE 8. ADVANCES FROM FEDERAL HOME LOAN BANK

At September 30, 2003 advances from the FHLB of Des Moines with fixed and
variable rates ranging from 1.12% to 7.19% (weighted-average rate of 3.41%) are
required to be repaid in the year ending September 30 as presented below.
Advances totaling $49,700,000 contain call features which allow the FHLB to call
for the prepayment of the borrowing prior to maturity.

2004                                                                $110,835,778
2005                                                                  14,884,475
2006                                                                   8,601,886
2007                                                                  11,188,213
2008                                                                  23,568,667
Thereafter                                                            54,705,375
--------------------------------------------------------------------------------
                                                                    $223,784,394
================================================================================

First Federal and Security have executed blanket pledge agreements whereby First
Federal and Security assign, transfer and pledge to the FHLB and grant to the
FHLB a security interest in all property now or hereafter owned. However, First
Federal and Security have the right to use, commingle and dispose of the
collateral they have assigned to the FHLB. Under the agreements, First Federal
and Security must maintain "eligible collateral" that has a "lending value" at
least equal to the "required collateral amount," all as defined by the
agreements.

      At year end 2003 and 2002, First Federal and Security collectively pledged
securities with amortized costs of $168,857,000 and $75,975,000 and fair values
of approximately $167,899,000 and $77,641,000 against specific FHLB advances. In
addition, qualifying mortgage loans of approximately $120,888,000 and
$70,258,000 were pledged as collateral at September 30, 2003 and 2002.

NOTE 9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase totaled $57,702,034 and
$70,176,228 at September 30, 2003 and 2002, respectively.

      An analysis of securities sold under agreements to repurchase is as
follows:

                                                          2003             2002
--------------------------------------------------------------------------------
Highest month-end balance                         $110,488,119      $70,176,228
Average balance                                     78,208,576       39,288,209
Weighted average interest rate
during the period                                         1.42%            2.01%
Weighted average interest rate
at end of period                                          1.16%            1.90%

At year-end 2003, securities sold under agreements to repurchase had a weighted
average maturity of less than 1 month.

      The Company pledged securities with amortized costs of approximately
$81,428,000 and $79,548,000 and fair values of approximately $81,612,000 and
$80,950,000, respectively, at year-end 2003 and 2002 as collateral for
securities sold under agreements to repurchase.

NOTE 10. TRUST PREFERRED SECURITIES

The Company issued all of the 10,000 authorized shares of trust preferred
securities of First Midwest Financial Capital Trust I holding solely
subordinated debt securities. Distributions are paid semi-annually. Cumulative
cash distributions are calculated at a variable rate of LIBOR (as defined) plus
3.75% (4.90% at September 30, 2003 and 5.61% at September 30, 2002), not to
exceed 12.5%. The Company may, at one or more times, defer interest payments on
the capital securities for up to 10 consecutive semi-annual periods, but not
beyond July 25, 2031. At the end of any deferral period, all accumulated and
unpaid distributions will be paid. The capital securities will be redeemed on
July 25, 2031; however, the Company has the option to shorten the maturity date
to a date not earlier than July 25, 2006. The redemption price is $1,000 per
capital security plus any accrued and unpaid distributions to the date of
redemption plus, if redeemed prior to July 25, 2011, a redemption premium as
defined in the Indenture agreement.

      Holders of the capital securities have no voting rights, are unsecured and
rank junior in priority of payment to all of the Company's indebtedness and
senior to the Company's common stock.

      The debentures are included on the balance sheet as of September 30, 2003
as liabilities.


                                       36

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. EMPLOYEE BENEFITS

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

The Company maintains an ESOP for eligible employees who have 1,000 hours of
employment with the Bank, have worked one year at the Bank and who have attained
age 21. In 2001, the ESOP borrowed $360,000 from the Company to purchase 30,000
shares of the Company's common stock. Final payment of this loan was received
during the year ended September 30, 2002. In 2002, the ESOP borrowed $145,982
from the Company to purchase 10,238 shares of the Company's common stock. Final
payment of this loan was received during the year ended September 30, 2003. In
2003, the ESOP borrowed $608,584 from the Company to purchase 35,574 shares of
the Company's common stock. Shares purchased by the ESOP are held in suspense
for allocation among participants as the loan is repaid. ESOP expense of
$263,055, $304,468 and $174,660 was recorded for the years ended September 30,
2003, 2002 and 2001, respectively. Contributions of $253,050, $279,750 and
$180,000 were made to the ESOP during the years ended September 30, 2003, 2002
and 2001, respectively.

      Contributions to the ESOP and shares released from suspense in an amount
proportional to the repayment of the ESOP loan are allocated among ESOP
participants on the basis of compensation in the year of allocation. Benefits
generally become 100% vested after seven years of credited service. Prior to the
completion of seven years of credited service, a participant who terminates
employment for reasons other than death or disability receives a reduced benefit
based on the ESOP's vesting schedule. Forfeitures are reallocated among
remaining participating employees, in the same proportion as contributions.
Benefits are payable in the form of stock upon termination of employment. The
Company's contributions to the ESOP are not fixed, so benefits payable under the
ESOP cannot be estimated.

      For the years ended September 30, 2003, 2002 and 2001, 15,000, 22,000 and
15,000 shares with an average fair value of $17.54, $13.84 and $11.64 per share,
respectively, were committed to be released. Also for the years ended September
30, 2003, 2002 and 2001, allocated shares and total ESOP shares reflect 4,865,
12,629 and 5,514 shares, respectively, withdrawn from the ESOP by participants
who are no longer with the Company and 6,569, 7,760 and 9,312 shares,
respectively, purchased for dividend reinvestment.

Year-end ESOP shares are as follows:

                                                  2003         2002         2001
--------------------------------------------------------------------------------
Allocated shares                               252,448      235,744      218,613
Unearned shares                                 23,812        3,238       15,000
--------------------------------------------------------------------------------
Total ESOP shares                              276,260      238,982      233,613
================================================================================
Fair value of unearned shares                 $525,055     $ 46,142     $202,500
================================================================================

STOCK OPTIONS AND INCENTIVE PLANS

Certain officers and directors of the Company have been granted options to
purchase common stock of the Company pursuant to stock option plans. Stock
option plans are used to reward directors, officers and employees and provide
them with an additional equity interest. Options are issued for 10 year periods,
with 100% vesting generally occurring either at grant date or 48 months after
grant date. At September 30, 2003, 205,277 shares were authorized for future
grants.

Information about option grants follows:

                                                                       Weighted-
                                                    Number of            Average
                                                      Options     Exercise Price
--------------------------------------------------------------------------------
Outstanding, September 30, 2000                      300,318            $  11.51
    Granted                                           31,738               13.61
    Exercised                                        (40,000)               6.67
    Forfeited                                         (4,000)              13.00
--------------------------------------------------------------
Outstanding, September 30, 2001                      288,056               12.40
    Granted                                           27,641               14.27
    Exercised                                        (61,524)               7.14
    Forfeited                                         (3,000)              13.22
--------------------------------------------------------------
Outstanding, September 30, 2002                      251,173               13.88
    Granted                                           36,708               21.45
    Exercised                                        (35,292)               6.67
    Forfeited                                             --                  --
--------------------------------------------------------------
Outstanding, September 30, 2003                      252,589            $  15.99
==============================================================


                                       37

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted-average fair value per option for options granted in 2003, 2002 and
2001 was $4.81, $2.41 and $2.61. At September 30, 2003, options outstanding were
as follows:

                                           Weighted-Average
       Exercise      Weighted-Average        Remaining Life             Number
          Price        Exercise Price               (Years)         of Options
--------------------------------------------------------------------------------
$ 9.63 - $ 9.99               $  9.63                  6.91             21,824
$10.00 - $14.99                 13.68                  7.63             81,234
$15.00 - $19.99                 16.78                  3.55            104,383
$20.00 - $21.77                 21.39                  8.61             45,148
                                                                       -------
                              $ 15.99                  6.06            252,589
                                                                       =======

Options exercisable at year end were as follows:

                                                           Weighted-
                                        Number of            Average
                                          Options     Exercise Price
--------------------------------------------------------------------

2001                                      270,556              12.38
2002                                      237,048              13.95
2003                                      236,464              15.99

PROFIT SHARING PLAN

The Company has a profit sharing plan covering substantially all full-time
employees. Contribution expense for the years ended September 30, 2003, 2002 and
2001, was $283,212, $244,927 and $315,773, respectively.

NOTE 12. INCOME TAXES

The Company, the Bank and its subsidiaries and Security file a consolidated
federal income tax return on a fiscal year basis. Prior to fiscal year 1997, if
certain conditions were met in determining taxable income on the consolidated
federal income tax return, the Bank was allowed a special bad debt deduction
based on a percentage of taxable income (8% for 1996) or on specified experience
formulas. The Bank used the percentage of taxable income method for the tax year
ended September 30, 1996. Tax legislation passed in August l996 now requires the
Bank to deduct a provision for bad debts for tax purposes based on actual loss
experience and recap-ture the excess bad debt reserve accumulated in tax years
beginning after September 30, 1987. The related amount of deferred tax liability
which must be recaptured is approximately $554,000 and is payable over a 6-year
period beginning with the tax year ending September 30, 1999.


The provision for income taxes consists of:

                                       2003              2002              2001
--------------------------------------------------------------------------------
Federal:
    Current                     $ 1,430,109       $   904,539       $ 1,170,302
    Deferred                        (23,962)          (64,787)         (105,167)
--------------------------------------------------------------------------------
                                  1,406,147           839,752         1,065,135
--------------------------------------------------------------------------------
State:
    Current                         278,015           153,170           (27,756)
    Deferred                         (5,876)          (27,040)          (26,833)
--------------------------------------------------------------------------------
                                    272,139           126,130           (54,589)
--------------------------------------------------------------------------------

Income tax expense              $ 1,678,286       $   965,882       $ 1,010,546
================================================================================

Total income tax expense differs from the statutory federal income tax rate as
follows:


<TABLE>
<CAPTION>
                                                         2003           2002           2001
-------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>
Income taxes at 34% federal tax rate              $ 1,726,000    $ 1,062,000    $   993,000
Increase (decrease) resulting from:
    State income taxes - net of federal benefit       141,000         97,000        113,000
    Nondeductible goodwill                                 --             --        124,000
    Nontaxable buildup in cash surrender value       (190,000)      (217,000)            --
    Resolution of a tax contingency                        --             --       (139,000)
    Other, net                                          1,286         23,882        (80,454)
-------------------------------------------------------------------------------------------
       Total income tax expense                   $ 1,678,286    $   965,882    $ 1,010,546
===========================================================================================
</TABLE>



                                       38

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year-end deferred tax assets and liabilities consist of:


<TABLE>
<CAPTION>
                                                                    2003           2002
---------------------------------------------------------------------------------------
<S>                                                          <C>            <C>
Deferred tax assets:
    Bad debts                                                $ 1,640,000    $ 1,447,000
    Net unrealized losses on securities available for sale     1,796,435             --
    Other                                                             --         54,000
---------------------------------------------------------------------------------------
                                                               3,436,435      1,501,000
---------------------------------------------------------------------------------------
Deferred tax liabilities:
    Federal Home Loan Bank stock dividend                       (452,000)      (452,000)
    Premises and equipment                                      (342,000)      (204,000)
    Deferred loan fees                                          (148,000)       (97,000)
    Net unrealized gains on securities available for sale             --       (291,680)
    Other                                                        (98,335)      (178,173)
---------------------------------------------------------------------------------------
                                                              (1,040,335)    (1,222,853)
---------------------------------------------------------------------------------------
       Net deferred tax assets                               $ 2,396,100    $   278,147
=======================================================================================
</TABLE>


Federal income tax laws provided savings banks with additional bad debt
deductions through September 30, 1987, totaling $6,744,000 for the Bank.
Accounting standards do not require a deferred tax liability to be recorded on
this amount, which liability otherwise would total approximately $2,300,000 at
September 30, 2003 and 2002. If the Bank were liquidated or otherwise ceases to
be a bank or if tax laws were to change, the $2,300,000 would be recorded as
expense.

NOTE 13. CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

The Company has two primary subsidiaries, First Federal and Security. First
Federal and Security are subject to various regulatory capital requirements.
Failure to meet minimum capital requirements can initiate certain mandatory or
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, First Federal and
Security must meet specific quantitative capital guidelines using their assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The requirements 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 First Federal and Security to maintain minimum amounts and ratios (set
forth in the table below) of total risk-based capital and Tier I capital (as
defined in the regulations) to risk-weighted assets (as defined), and a leverage
ratio consisting of Tier I capital (as defined) to average assets (as defined).
Management believes, as of September 30, 2003, that First Federal and Security
meet the capital adequacy requirements.


                                       39

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Federal's and Security's actual capital and required capital amounts and
ratios are presented below:


<TABLE>
<CAPTION>
                                                                                              Minimum Requirement
                                                                       Minimum Requirement  To Be Well Capitalized
                                                                      For Capital Adequacy  Under Prompt Corrective
                                                          Actual             Purposes          Action Provisions
                                                   ----------------------------------------------------------------
                                                    Amount     Ratio     Amount     Ratio       Amount     Ratio
-------------------------------------------------------------------------------------------------------------------
                                                                       (Dollars in thousands)
<S>                                                <C>          <C>     <C>           <C>       <C>        <C>
AS OF SEPTEMBER 30, 2003:
Total capital (to risk-weighted assets):
    First Federal                                  $50,794      12.1%   $33,721       8.0%      $42,152    10.0%
    Security                                         4,588      15.5      2,366       8.0         2,957    10.0
Tier 1 (Core) capital (to risk-weighted assets):
    First Federal                                   46,058      10.9     16,861       4.0        25,291     6.0
    Security                                         4,294      14.5      1,183       4.0         1,774     6.0
Tier 1 (Core) capital (to average total assets):
    First Federal                                   46,058       7.1     26,108       4.0        32,634     5.0
    Security                                         4,294       6.7      2,549       4.0         3,186     5.0
Tier 1 (Core) capital (to total assets),
    First Federal                                   46,058       6.5     28,222       4.0        35,277     5.0

AS OF SEPTEMBER 30, 2002:
Total capital (to risk-weighted assets):
    First Federal                                  $47,800      12.9%   $29,603       8.0%      $37,004    10.0%
    Security                                         4,773      15.0      2,543       8.0         3,179    10.0
Tier 1 (Core) capital (to risk-weighted assets):
    First Federal                                   43,327      11.7     14,801       4.0        22,202     6.0
    Security                                         4,448      14.0      1,272       4.0         1,907     6.0
Tier 1 (Core) capital (to average total assets):
    First Federal                                   43,327       8.5     20,372       4.0        25,465     5.0
    Security                                         4,448       8.3      2,142       4.0         2,677     5.0
Tier 1 (Core) capital (to total assets),
    First Federal                                   43,327       7.9     21,822       4.0        27,277     5.0
</TABLE>


Regulations limit the amount of dividends and other capital distributions that
may be paid by a financial institution without prior approval of its primary
regulator. The regulatory restriction is based on a three-tiered system with the
greatest flexibility being afforded to well-capitalized (Tier 1) institutions.
First Federal and Security are currently Tier 1 institutions. Accordingly, First
Federal and Security can make, without prior regulatory approval, distributions
during a calendar year up to 100% of their retained net income for the calendar
year-to-date plus retained net income for the previous two calendar years (less
any dividends previously paid) as long as they remain well-capitalized, as
defined in prompt corrective action regulations, following the proposed
distribution. Accordingly, at September 30, 2003, approximately $5,662,000 of
First Federal's retained earnings and $119,000 of Security's retained earnings
were potentially available for distribution to the Company.

NOTE 14. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company's subsidiary banks make various
commitments to extend credit which are not reflected in the accompanying
consolidated financial statements.

      At September 30, 2003 and 2002, loan commitments approximated $63,421,000
and $35,562,000, respectively, excluding undisbursed portions of loans in
process. Loan commitments at September 30, 2003 included commitments to
originate fixed-rate loans with interest rates ranging from 4% to 10% totaling
$13,208,000 and adjustable-rate loan commitments with interest rates ranging
from 3% to 18% totaling $30,663,000. The Company also had commitments to
purchase adjustable rate loans of $14,000,000 with interest rates ranging from
5% to 5.79% and fixed-rate loans of $5,550,000 with interest rates ranging from
5.38% to 8%. Loan commitments at September 30, 2002 included commitments to
originate fixed-rate loans with interest rates ranging from 4.6% to 10% totaling
$13,070,000 and adjustable-rate loan commitments with interest rates ranging
from 2.1% to 18% totaling $18,492,000. The Company also had commitments to
purchase adjustable rate loans of $3,000,000 with interest rates of 6.63% and
fixed-rate loans of $1,000,000 with interest rates of 6.75%. Commitments, which
are disbursed subject to certain limitations, extend over various periods of
time. Generally, unused commitments are canceled upon expiration of the
commitment term as outlined in each individual contract.

      The exposure to credit loss in the event of nonperformance by other
parties to financial instruments for commitments to extend credit is represented
by the contractual amount of those instruments. The same credit policies and
collateral requirements are used in making commitments and conditional
obligations as are used for on-balance-sheet instruments.

      Since certain commitments to make loans and to fund lines of credit and
loans in process expire without being used, the amount does not necessarily
represent future cash commitments. In addition, commitments used to extend
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract.

      Securities with amortized costs of approximately $31,349,000 and
$31,381,000 and fair values of approximately $27,858,000 and $28,954,000 at
September 30, 2003 and 2002, respectively, were pledged as collateral for public
funds on deposit.

      Securities with amortized costs of approximately $6,040,000 and $7,280,000
and fair values of approximately $6,220,000 and $7,568,000 at September 30, 2003
and 2002, respectively, were pledged as collateral for individual, trust and
estate deposits.

      Under employment agreements with certain executive officers, certain
events leading to separation from the Company could result in cash pay-


                                       40

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


ments totaling approximately $2,688,000 as of September 30, 2003.

      The Company and its subsidiaries are subject to certain claims and legal
actions arising in the ordinary course of business. In the opinion of
management, after consultation with legal counsel, the ultimate disposition of
these matters is not expected to have a material adverse effect on the
consolidated financial position or results of operations of the Company.

NOTE 15. OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) components and related taxes were as follows:


<TABLE>
<CAPTION>
                                                                                           2003         2002           2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>            <C>          <C>
Net change in net unrealized gains and losses on securities available for sale:
    Unrealized gains (losses) arising during the year                               $(5,369,149)   $ 335,288    $ 4,546,133
    Reclassification adjustment for (gains) losses included in net income              (242,562)     (86,194)        60,275
----------------------------------------------------------------------------------------------------------------------------
       Net change in unrealized gains and losses on securities available for sale    (5,611,711)     249,094      4,606,408
Tax effects                                                                           2,088,115      (92,687)    (1,714,090)
----------------------------------------------------------------------------------------------------------------------------

       Other comprehensive income (loss)                                            $(3,523,596)   $ 156,407    $ 2,892,318
============================================================================================================================
</TABLE>


NOTE 16. LEASE COMMITMENT

The Company has leased property under various noncancelable operating lease
agreements which expire at various times through December 2009, and require
annual rentals ranging from $6,000 to $52,200 plus the payment of the property
taxes, normal maintenance and insurance on the property

      The total minimum rental commitment at September 30, 2003, under the
leases is as follows:

2004                                                                    $ 96,400
2005                                                                     100,600
2006                                                                      99,140
2007                                                                      99,580
2008                                                                      99,015
Thereafter                                                               362,550
--------------------------------------------------------------------------------
                                                                        $857,285
================================================================================

NOTE 17. PARENT COMPANY FINANCIAL STATEMENTS

Presented below are condensed financial statements for the parent company, First
Midwest Financial, Inc.:

CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2003 AND 2002

                                                            2003           2002
--------------------------------------------------------------------------------

ASSETS
Cash and cash equivalents                           $    138,017   $     57,651
Securities available for sale                          2,613,771      2,609,357
Investment in subsidiaries                            50,832,669     51,975,306
Loan receivable from ESOP                                401,676         46,142
Loan receivable                                        1,307,259      1,349,543
Other assets                                             916,660        350,302
--------------------------------------------------------------------------------

       Total assets                                 $ 56,210,052   $ 56,388,301
================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Loan payable to subsidiaries                        $  2,900,000   $  1,755,000
Trust preferred securities                            10,000,000     10,000,000
Accrued expenses and other liabilities                   279,253         45,535
--------------------------------------------------------------------------------

       Total liabilities                              13,179,253     11,800,535
--------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
Common stock                                              29,580         29,580
Additional paid-in capital                            20,538,879     20,593,768
Retained earnings, substantially restricted           34,057,741     31,940,648
Accumulated other comprehensive income (loss)         (3,028,762)       494,834
Unearned Employee Stock Ownership Plan shares           (401,676)       (46,142)
Treasury stock, at cost                               (8,164,963)    (8,424,922)
--------------------------------------------------------------------------------

       Total shareholders' equity                     43,030,799     44,587,766
--------------------------------------------------------------------------------

       Total liabilities and shareholders' equity   $ 56,210,052   $ 56,388,301
================================================================================


                                       41

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                        2003           2002           2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>            <C>            <C>
Dividend income from subsidiaries                                                $ 1,250,000    $   245,000    $ 1,550,000
Interest income                                                                      334,656        322,345        309,054
Gain (loss) on sales of securities available for sale, net                            48,109         48,064        (60,275)
---------------------------------------------------------------------------------------------------------------------------
                                                                                   1,632,765        615,409      1,798,779
---------------------------------------------------------------------------------------------------------------------------

Interest expense                                                                     644,385        682,134        332,250
Operating expenses                                                                   662,046        618,578        550,038
---------------------------------------------------------------------------------------------------------------------------
                                                                                   1,306,431      1,300,712        882,288
---------------------------------------------------------------------------------------------------------------------------

       Income (loss)  before income taxes and equity in undistributed
            net income of subsidiaries                                               326,334       (685,303)       916,491

Income tax (benefit)                                                                (304,000)      (304,000)      (247,000)
---------------------------------------------------------------------------------------------------------------------------

       Income (loss) before equity in undistributed net income of subsidiaries       630,334       (381,303)     1,163,491

Equity in undistributed net income of subsidiaries                                 2,766,670      2,537,931        746,252
---------------------------------------------------------------------------------------------------------------------------

Net income                                                                       $ 3,397,004    $ 2,156,628    $ 1,909,743
===========================================================================================================================
</TABLE>


CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001


<TABLE>
<CAPTION>
                                                                                        2003           2002            2001
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                                   $ 3,397,004    $ 2,156,628    $  1,909,743
    Adjustments to reconcile net income to net cash provided by operating
    activities:
       Equity in undistributed net income of subsidiaries                         (2,766,670)    (2,537,931)       (746,252)
       (Gain) loss on sales of securities available for sale, net                    (48,109)       (48,064)         60,275
       Change in other assets                                                       (465,296)       436,856        (364,088)
       Change in accrued expenses and other liabilities                              233,718         75,539         (61,205)
---------------------------------------------------------------------------------------------------------------------------
            Net cash provided by operating activities                                350,647         83,028         798,473
---------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in subsidiary                                                              --       (250,000)     (7,000,000)
    Repayment of securities                                                               --            342           3,806
    Purchase of securities available for sale                                        (48,325)    (1,000,000)             --
    Proceeds from sales of securities available for sale                             156,016      1,410,770         795,000
    Loan to ESOP                                                                    (608,584)      (145,893)       (360,000)
    Net change in loan receivable                                                     42,284       (450,230)       (574,134)
    Repayments on loan receivable from ESOP                                          253,050        279,751         180,000
---------------------------------------------------------------------------------------------------------------------------
            Net cash (used in) investment activities                                (205,559)      (155,260)     (6,955,328)
---------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from issuance of trust preferred securities                                  --             --      10,000,000
    Proceeds from loan payable to subsidiaries                                     1,975,000      1,755,000              --
    Repayments on loan payable to subsidiaries                                      (830,000)            --      (2,550,000)
    Debt issuance costs incurred                                                          --             --        (305,812)
    Cash dividends paid                                                           (1,279,911)    (1,282,623)     (1,247,486)
    Proceeds from exercise of stock options                                          235,281        439,860         266,667
    Purchase of treasury stock                                                      (165,092)      (843,327)        (17,777)
---------------------------------------------------------------------------------------------------------------------------
            Net cash provided by (used in) financing activities                      (64,722)        68,910       6,145,592
---------------------------------------------------------------------------------------------------------------------------
            Net change in cash and cash equivalents                                   80,366         (3,322)        (11,263)

CASH AND CASH EQUIVALENTS
    Beginning of year                                                                 57,651         60,973          72,236
---------------------------------------------------------------------------------------------------------------------------
    End of year                                                                  $   138,017    $    57,651    $     60,973
===========================================================================================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid during the year for interest                                       $   644,385    $   682,134    $    332,250
</TABLE>



                                       42

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The extent to which the Company may pay cash dividends to shareholders will
depend on the cash currently available at the Company, as well as the ability of
the subsidiary banks to pay dividends to the Company (see Note 13).

NOTE 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)


<TABLE>
<CAPTION>
                                                                            Quarter Ended
---------------------------------------------------------------------------------------------------------------
                                                       December 31      March 31       June 30  September 30
---------------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>           <C>           <C>
FISCAL YEAR 2003:
    Total interest income                              $ 8,952,749   $ 9,001,683   $ 8,773,197   $ 8,451,524
    Total interest expense                               5,027,183     4,854,739     4,841,730     4,727,099
    Net interest income                                  3,925,566     4,146,944     3,931,467     3,724,425
    Provision for loan losses                              175,000       108,000        67,000            --
    Net income                                             844,256       915,186       892,407       741,155
    Earnings per common and common equivalent share:
         Basic                                         $      0.34   $      0.37          0.36   $      0.30
         Diluted                                              0.34          0.37          0.36          0.30

FISCAL YEAR 2002:
    Total interest income                              $ 8,990,799   $ 8,633,888   $ 8,904,424   $ 8,904,383
    Total interest expense                               5,928,035     5,429,196     5,293,508     5,083,311
    Net interest income                                  3,062,764     3,204,692     3,610,916     3,821,072
    Provision for loan losses                              299,000       136,000       280,000       375,000
    Net income                                             436,785       448,123       528,458       743,262
    Earnings per common and common equivalent share:
         Basic                                         $      0.18   $      0.18          0.22   $      0.30
         Diluted                                              0.18          0.18          0.21          0.30

FISCAL YEAR 2001:
    Total interest income                              $ 9,861,440   $ 9,534,327   $ 9,419,259   $ 9,408,878
    Total interest expense                               6,545,052     6,349,019     6,250,738     6,245,790
    Net interest income                                  3,316,388     3,185,308     3,168,521     3,163,088
    Provision for loan losses                              150,000       120,000       200,000       240,000
    Net income                                             606,306       409,127       456,346       437,964
    Earnings per common and common equivalent share:
         Basic                                         $      0.25   $      0.17          0.19   $      0.18
         Diluted                                              0.25          0.17          0.19          0.18
</TABLE>



                                       43

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19. FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures About Fair Value of Financial Instruments, requires
that the Company disclose estimated fair value amounts of its financial
instruments. It is management's belief that the fair values presented below are
reasonable based on the valuation techniques and data available to the Company
as of September 30, 2002 and 2001, as more fully described below. It should be
noted that the operations of the Company are managed from a going concern basis
and not a liquidation basis. As a result, the ultimate value realized for the
financial instruments presented could be substantially different when actually
recognized over time through the normal course of operations. Additionally, a
substantial portion of the Company's inherent value is the subsidiary banks'
capitalization and franchise value. Neither of these components have been given
consideration in the presentation of fair values below.

      The following presents the carrying amount and estimated fair value of the
financial instruments held by the Company at September 30, 2003 and 2002. This
information is presented solely for compliance with SFAS No. 107 and is subject
to change over time based on a variety of factors.


<TABLE>
<CAPTION>
                                                                   2003                               2002
-----------------------------------------------------------------------------------------------------------------------
                                                           Carrying        Estimated         Carrying        Estimated
                                                             Amount       Fair Value           Amount       Fair Value
-----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>              <C>              <C>
Selected assets:
    Cash and cash equivalents                         $   9,756,815    $   9,757,000    $   7,376,434    $   7,376,000
    Securities available for sale                       366,075,033      366,075,000      218,247,310      218,247,000
    Loans receivable, net                               349,691,995      352,547,000      341,937,408      345,473,000
    Loans held for sale                                   1,126,310        1,126,000        1,254,962        1,255,000
    FHLB stock                                           10,930,300       10,930,000        6,842,600        6,843,000
    Accrued interest receivable                           3,932,076        3,932,000        4,320,514        4,321,000

Selected liabilities:
    Noninterest bearing demand deposits                 (17,457,662)     (17,458,000)     (11,934,712)     (11,935,000)
    Savings, NOW and money market demand deposits      (119,497,887)    (119,498,000)     (90,413,488)     (90,413,000)
    Time certificates of deposit                       (298,597,193)    (303,189,000)    (253,431,553)    (257,688,000)
                                                      -----------------------------------------------------------------
         Total deposits                                (435,552,742)    (440,145,000)    (355,779,753)    (360,036,000)

    Advances from FHLB                                 (223,784,394)    (236,829,000)    (125,089,999)    (138,495,000)
    Securities sold under agreements to repurchase      (57,702,034)     (57,703,000)     (70,176,228)     (70,180,000)
    Trust preferred securities                          (10,000,000)     (10,227,000)     (10,000,000)     (10,008,000)
    Advances from borrowers for taxes and insurance        (268,682)        (269,000)        (355,884)        (356,000)
    Accrued interest payable                               (506,861)        (507,000)        (671,033)        (671,000)

Off-balance-sheet instruments, loan commitments                  --               --               --               --
</TABLE>



                                       44

<PAGE>

                 First Midwest Financial, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following sets forth the methods and assumptions used in determining the
fair value estimates for the Company's financial instruments at September 30,
2003 and 2002.

CASH AND CASH EQUIVALENTS

The carrying amount of cash and short-term investments is assumed to approximate
the fair value.

SECURITIES AVAILABLE FOR SALE

Quoted market prices or dealer quotes were used to determine the fair value of
securities available for sale.

LOANS RECEIVABLE, NET AND LOANS HELD FOR SALE

The fair value of loans was estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for similar remaining maturities. When using the discounting
method to determine fair value, loans were gathered by homogeneous groups with
similar terms and conditions and discounted at a target rate at which similar
loans would be made to borrowers as of September 30, 2003 and 2002. In addition,
when computing the estimated fair value for all loans, allowances for loan
losses have been subtracted from the calculated fair value for consideration of
credit issues.

FHLB STOCK

The fair value of such stock approximates book value since the Company is able
to redeem this stock with the Federal Home Loan Bank at par value.

ACCRUED INTEREST RECEIVABLE

The carrying amount of accrued interest receivable is assumed to approximate the
fair value.

DEPOSITS

The fair value of deposits were determined as follows: (i) for noninterest
bearing demand deposits, savings, NOW and money market demand deposits, since
such deposits are immediately withdrawable, fair value is determined to
approximate the carrying value (the amount payable on demand); (ii) for other
time certificates of deposit, the fair value has been estimated by discounting
expected future cash flows by the current rates offered as of September 30, 2003
and 2002, on certificates of deposit with similar remaining maturities. In
accordance with SFAS No. 107. no value has been assigned to the Company's
long-term relationships with its deposit customers (core value of deposits
intangible) since such intangible is not a financial instrument as defined under
SFAS No. 107.

ADVANCES FROM FHLB

The fair value of such advances was estimated by discounting
the expected future cash flows using current interest rates as of September 30,
2003 and 2002, for advances with similar terms and remaining maturities.

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE, OTHER BORROWINGS AND TRUST
PREFERRED SECURITIES

The fair value of securities sold under agreements to repurchase, other
borrowings and trust preferred securities was estimated by
discounting the expected future cash flows using derived interest rates
approximating market as of September 30, 2003 and 2002, over the contractual
maturity of such borrowings.

ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE

The carrying amount of advances from borrowers for taxes and insurance is
assumed to approximate the fair value.

ACCRUED INTEREST PAYABLE

The carrying amount of accrued interest payable is assumed to approximate the
fair value.

LOAN COMMITMENTS

The commitments to originate and purchase loans have terms
that are consistent with current market terms. Accordingly, the Company
estimates that the fair values of these commitments are not significant.

LIMITATIONS

It must be noted that fair value estimates are made at a specific point in time,
based on relevant market information about the financial instrument.
Additionally, fair value estimates are based on existing on and
off-balance-sheet financial instruments without attempting to estimate the value
of anticipated future business, customer relationships and the value of assets
and liabilities that are not considered financial instruments. These estimates
do not reflect any premium or discount that could result from offering the
Company's entire holdings of a particular financial instrument for sale at one
time. Furthermore, since no market exists for certain of the Company's financial
instruments, fair value estimates may be based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with a high level of precision. Changes in
assumptions as well as tax considerations could significantly affect the
estimates. Accordingly, based on the limitations described above, the aggregate
fair value estimates are not intended to represent the underlying value of the
Company, on either a going concern or a liquidation basis.


                                       45

<PAGE>

                               2003 ANNUAL REPORT

                               [GRAPHIC OMITTED]

JOHN THUNE, Board Member "It is a privilege to serve on the Board of Directors
at First Midwest and its banks. From the front-line staff to my peers on the
Board, this organization is filled with quality people. In fact, my wife and I
just experienced the company's first-class service when we refinanced our home."

Fun Fact: Having given up aspirations of making it in the NBA, John now plays in
Sioux Falls' over-40 basketball league.


                                       46

<PAGE>

                               2003 ANNUAL REPORT

                               BOARD OF DIRECTORS

JAMES S. HAAHR

Chairman of the Board and Chief Executive Officer for First Midwest Financial,
Inc. (FMFI) and First Federal Savings Bank of the Midwest (FFSBM); Chairman of
the Board for Security State Bank (SSB)

E. WAYNE COOLEY

Consultant Emeritus of the Iowa Girls' High School Athletic Union

E. THURMAN GASKILL

Iowa State Senator and Owner of a Grain and Livestock Farming Operation

J. TYLER HAAHR

President and Chief Operating Officer for FMFI and FFSBM, Chief Executive
Officer of SSB, Vice President and Secretary of First Services Financial
Limited, and President of First Services Trust Company

G. MARK MICKELSON

Vice President of Operations for Blue Dot Services, Inc.

RODNEY G. MUILENBURG

Retired Dairy Specialist Manager for Purina Mills, Inc.; Consultant for TransOva
Genetics Dairy Division

JEANNE PARTLOW

Retired Chairman of the Board and President of Iowa Savings Bank

JOHN THUNE

Thune Group, LLC, and Senior Government Relations Advisor to Arent Fox Kintner
Plotkin & Kahn, PLLC; Former South Dakota Representative to the U.S. House of
Representatives

                               EXECUTIVE OFFICERS

JAMES S. HAAHR
J. TYLER HAAHR

DONALD J. WINCHELL, CPA

Senior Vice President, Secretary, Treasurer and Chief Financial Officer for FMFI
and FFSBM; and Secretary for SSB

ELLEN E. MOORE

Vice President of Marketing and Sales for FMFI and Senior Vice President of
Marketing and Sales for FFSBM

BEN GUENTHER

P
resident, First Federal Storm Lake/Northwest Iowa Division

TIM D. HARVEY

President, Brookings Federal Bank Division

TROY MOORE

President, Iowa Savings Bank Division

TONY TRUSSELL

President, First Federal Sioux Falls Division

I. EUGENE RICHARDSON, JR.

President, Security State Bank

CHARLES B. FRIEDERICHS

Senior Vice President and Chief Information Officer

JON C. GEISTFELD

Senior Vice President and Chief Lending Officer

SANDRA K. HEGLAND

Senior Vice President of Human Resources

SUSAN C. JESSE

Senior Vice President of Compliance and Operations

                                 BANK DIRECTORS

         FEDERAL SAVINGS BANK                    SECURITY STATE BANK
         OF THE MIDWEST                          James S. Haahr, Chairman
         James S. Haahr, Chairman                Jeffrey N. Bump
         E. Wayne Cooley                         E. Wayne Cooley
         E. Thurman Gaskill                      E. Thurman Gaskill
         J. Tyler Haahr                          J. Tyler Haahr
         G. Mark Mickelson                       G. Mark Mickelson
         Rodney G. Muilenburg                    Rodney G. Muilenburg
         Jeanne Partlow                          Jeanne Partlow
         John Thune                              I. Eugene Richardson, Jr.
                                                 John Thune


                                       47

<PAGE>

                               2003 ANNUAL REPORT

                              INVESTOR INFORMATION

ANNUAL MEETING OF SHAREHOLDERS

The Annual Meeting of Shareholders will convene at 1:00 pm on Monday, January
26, 2004. The meeting will be held in the Board Room of First Federal Savings
Bank, Fifth at Erie, Storm Lake, Iowa. Further information with regard to this
meeting can be found in the proxy statement.

GENERAL COUNSEL

Mack, Hansen, Gadd, Armstrong & Brown, P.C.
316 East Sixth Street
P.O. Box 278
Storm Lake, Iowa 50588

SPECIAL COUNSEL

Katten Muchin Zavis Rosenman
1025 Thomas Jefferson Street NW
East Lobby, Suite 700
Washington, D.C. 20007-5201


INDEPENDENT AUDITORS

McGladrey & Pullen LLP
400 Locust Street, Suite 640
Des Moines, Iowa  50309-2372

SHAREHOLDER SERVICES AND INVESTOR RELATIONS

Shareholders desiring to change the name, address, or ownership of stock; to
report lost certificates; or to consolidate accounts, should contact the
corporation's transfer agent:

REGISTRAR & TRANSFER COMPANY

10 Commerce Drive
Cranford, New Jersey  07016
Telephone: 800.368.5948
Email: invrelations@rtco.com
Web site: www.rtco.com

FORM 10-K

Copies of the Company's Annual Report on Form 10-K for the year ended September
30, 2003 (excluding exhibits thereto) may be obtained without charge by
contacting:

INVESTOR RELATIONS
First Midwest Financial, Inc.
First Federal Building, Fifth at Erie
P.O. Box 1307
Storm Lake, Iowa  50588
Telephone: 712.732.4117
Email: invrelations@fmficash.com
Web site: www.fmficash.com

                      DIVIDEND AND STOCK MARKET INFORMATION

First Midwest Financial, Inc.'s common stock trades on the Nasdaq National
Market under the symbol "CASH." The Wall Street Journal publishes daily trading
information for the stock under the abbreviation, "FstMidwFnl," in the National
Market Listing. Quarterly dividends for 2002 and 2003 were $0.13. The price
range of the common stock, as reported on the Nasdaq System, was as follows:


                                 FISCAL YEAR 2003           FISCAL YEAR 2002
                                 LOW         HIGH           LOW         HIGH
--------------------------------------------------------------------------------
First Quarter                  $14.16       $16.57        $12.90        $14.10
Second Quarter                  15.88        17.16         12.95         14.25
Third Quarter                   16.21        19.25         13.44         14.50
Fourth Quarter                  18.37        24.50         12.90         15.45

Prices disclose inter-dealer quotations without retail mark-up, mark-down
or commissions, and do not necessarily represent actual transactions.

      Dividend payment decisions are made with consideration of a variety of
factors including earnings, financial condition, market considerations, and
regulatory restrictions. Restrictions on dividend payments are described in Note
13 of the Notes to Consolidated Financial Statements included in this Annual
Report.

      As of September 30, 2003, First Midwest had 2,493,949 shares of common
stock outstanding, which were held by 257 shareholders of record, and 252,589
shares subject to outstanding options. The shareholders of record number does
not reflect approximately 433 persons or entities who hold their stock in
nominee or "street" name.

      The following securities firms indicated they were acting as market makers
for First Midwest Financial, Inc. stock as of September 30, 2003: Brokerage
America, LLC; CIBC World Markets Corp.; Fig Partners, LLC; Friedman Billings
Ramsey & Co.; FTN Midwest Research Secs.; Goldman, Sachs & Co.; Howe Barnes
Investments, Inc.; Knight Equity Markets, L.P.; Sandler O'Neill & Partners; and
Schwab Capital Markets.


                                       48

<PAGE>

                               2003 ANNUAL REPORT

                               [GRAPHIC OMITTED]

DIANA GONZALES PAULEY, Bilingual Mortgage Originator "Home ownership is an
American dream. I enjoy sitting down with our customers and really getting to
know them. What I learn helps me recommend a mortgage loan that is right for
their budget and their lifestyle. I'm happiest when helping others."

Fun Facts: Makes homemade enchiladas for teammates and customers over lunch
breaks. Volunteered 265 hours in the community this year.


<PAGE>

[LOGO] First Midwest financial, Inc.
       People helping people

       First Federal Building
       Fifth at Erie
       P.O. Box 1307
       Storm Lake, Iowa 50588

       www.fmficash.com




                                                                      EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT


<TABLE>
<CAPTION>
                                                                                   State of
                                                            Percentage of       Incorporation or
    Parent                         Subsidiary                 Ownership           Organization
    ------                         ----------                 ---------           ------------
<S>                         <C>                                  <C>            <C>
First Midwest               First Federal Savings Bank           100%           Federal
Financial, Inc.             of the Midwest

First Midwest               Security State Bank                  100%           Iowa
Financial, Inc.

First Midwest               First Midwest Financial              100%           Delaware
Financial, Inc.             Capital Trust I

First Midwest               First Services Trust                 100%           South Dakota
Financial, Inc.             Company

First Federal Savings       First Services Financial             100%           Iowa
Bank of the Midwest         Limited

First Services              Brookings Service                    100%           South Dakota
Financial Limited           Corporation
</TABLE>


      The financial statements of First Midwest Financial, Inc. are consolidated
with those of its subsidiaries.





                                                                      EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS


To the Board of Directors
First Midwest Financial, Inc.
Storm Lake, Iowa

We consent to the incorporation by reference in the First Midwest Financial,
Inc. Registration Statements on Form S-8 of First Midwest Financial, Inc.,
pertaining to the First Midwest Financial, Inc. 1995 Stock Option and Incentive
Plan and the First Midwest Financial, Inc. 2002 Omnibus Incentive Plan, of our
report dated October 23, 2003, which appears in the annual report on Form 10-K
of First Midwest Financial, Inc. and subsidiaries for the year ended September
30, 2003.


                                            /s/ McGladrey & Pullen, LLP
                                            ---------------------------
                                            McGladrey & Pullen, LLP

Des Moines, Iowa
December 26, 2003






                                                                    EXHIBIT 31.1


                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James S. Haahr, certify that:

1. I have reviewed this annual report on Form 10-K of First Midwest Financial,
Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
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 officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      a) Designed such disclosure controls and procedures to be designed under
      our supervision, 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 report is being prepared;

      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure and procedures, as of the end of the
      period covered by this report based on such evaluation; and

      c) Disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the registrant
      issuer's most recent fiscal quarter (the registrant's fourth fiscal
      quarter in the case of an annual report) that as materially affected, or
      is reasonably likely to materially affect, the registrant's internal
      control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

      a) All significant deficiencies and material weaknesses in the design or
      operation of internal controls over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.

Date: December 26, 2003


                                              /s/ James S. Haahr
                                              ---------------------------
                                              Chief Executive Officer




                                                                    EXHIBIT 31.2


                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Donald J. Winchell, certify that:

1. I have reviewed this annual report on Form 10-K of First Midwest Financial,
Inc.;

2. Based on my knowledge, this 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 report;

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

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

      a) Designed such disclosure controls and procedures to be designed under
      our supervision, 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 report is being prepared;

      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure and procedures, as of the end of the
      period covered by this report based on such evaluation; and

      c) Disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the registrant's
      most recent fiscal quarter (the registrant's fourth fiscal quarter in the
      case of an annual report) that as materially affected, or is reasonably
      likely to materially affect, the registrant's internal control over
      financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

      a) All significant deficiencies and material weaknesses in the design or
      operation of internal controls over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.

Date: December 26, 2003


                                           /s/ Donald J. Winchell
                                           ---------------------------------
                                           Chief Financial Officer




                                                                    EXHIBIT 32.1


                            CERTIFICATION PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report First Midwest Financial, Inc. (the
"Company") on Form 10-K for the year ended September 30, 2003, as filed with the
Securities and Exchange Commission on the date of this Certification (the
"Report"), I, James S. Haahr, the Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

      (1) the Report complies with the requirements of section 13(a) or 15(d) of
      the Securities Exchange Act of 1934; and

      (2) the information contained in the Report fairly presents, in all
      material respects, the financial condition and result of operations of the
      Company.


By: /s/ James S. Haahr
Name: James S. Haahr
Chief Executive Officer
December 26, 2003






                                                                    Exhibit 32.2


                            CERTIFICATION PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report First Midwest Financial, Inc. (the
"Company") on Form 10-K for the year ended September 30, 2003, as filed with the
Securities and Exchange Commission on the date of this Certification (the
"Report"), I, Donald J. Winchell, the Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

      (1) the Report complies with the requirements of section 13(a) or 15(d) of
      the Securities Exchange Act of 1934; and

      (2) the information contained in the Report fairly presents, in all
      material respects, the financial condition and result of operations of the
      Company.


By: /s/ Donald J. Winchell
Name: Donald J. Winchell
Chief Financial Officer
December 26, 2003





                                   EXHIBIT 99

                                 CODE OF ETHICS



<PAGE>



                                                                      Exhibit 99

             CODE OF ETHICS FOR THE PRINCIPAL EXECUTIVE OFFICER AND
             ------------------------------------------------------
                          SENIOR FINANCIAL OFFICERS OF
                          ----------------------------
                          FIRST MIDWEST FINANCIAL, INC.
                          -----------------------------
Introduction
------------

This Code of Ethics for the  Principal  Executive  Officer and Senior  Financial
Officers (the "Code of Ethics") has been adopted by the Board of Directors  (the
"Board") of First Midwest  Financial Inc. (the  "Company") to promote honest and
ethical conduct, full, fair, accurate,  timely and understandable  disclosure of
information in the Company's  periodic and other public reports,  and compliance
with applicable  laws,  rules, and regulations by the Company's Senior Financial
Officers.

Senior Financial Officers
-------------------------

As used in this Code of Ethics,  the term  Senior  Financial  Officer  means the
Company's  Chief  Executive  Officer,  Chief  Financial  Officer,  Controller or
Principal Accounting Officer, and any other persons performing similar functions
for the Company.

Code of Ethics
--------------
In performing his or her duties, each of the Senior Financial Officers must:

     1.   Maintain  high  standards of honest and ethical  conduct and avoid any
          actual  or  apparent   conflicts  of  interest  between  personal  and
          professional relationships;

     2.   Report to the Audit  Committee  of the
 Board any  conflict of interest
          that may arise  and any  material  transaction  or  relationship  that
          reasonably could be expected to give rise to a conflict of interest;

     3.   Provide, or cause to be provided,  full, fair,  accurate,  timely, and
          understandable  disclosure in reports and  documents  that the Company
          files with or submits to the Securities and Exchange Commission and in
          other public communications;

     4.   Comply and take all reasonable  actions to cause others to comply with
          applicable laws, rules, and regulations; and

     5.   Promptly  report  violations  of this  Code  of  Ethics  to the  Audit
          Committee.

Waiver or Amendments
--------------------

Any request for waiver of any provision of this Code of Ethics must be submitted
in writing to the Company's Audit Committee.  Waivers may only be granted by the
Audit  Committee.  This Code of Ethics may only be  amended  by the  Board.  Any
waiver or  amendment  of this Code of Ethics will be promptly  disclosed  on the
Company's  Internet  website,  a Current  Report on Form 8-K or any other  means
approved by the Securities and Exchange Commission.

Compliance and Accountability
-----------------------------

The Audit  Committee  will assess  compliance  with this Code of Ethics,  report
material violations to the Board, and recommend to the Board appropriate action,
which may include, but is not limited to, reprimand and/or dismissal.