SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                        --------------------------------

                                    FORM 10-Q

[Mark One]
[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended December 31, 1999

[   ]    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: 0-25509

                          First Federal Bankshares,Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                               Delaware 42-1485449
--------------------------------------------------------------------------------
                (State or other jurisdiction of (I.R.S. Employer
              incorporation or organization) Identification Number)

                    329 Pierce Street, Sioux City, Iowa 51101
                    (Address of principal executive offices)

         Registrant's telephone number, including area code 712-277-0200

        ----------------------------------------------------------------
         Former name, former address and former fiscal year, if changed
                                since last report

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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

            Class                               Outstanding at February 9, 2000
            -----                               -------------------------------

  (Common Stock, $.01 par value)                         4,732,678
<PAGE>
                         FIRST FEDERAL BANKSHARES, INC.


                                      INDEX






Part I.  Financial Information

   Item I.  Financial   Statements  of  First  Federal   Bankshares,   Inc.  and
            Subsidiaries

            Consolidated  Condensed Balance Sheets at December 31, 1999 and June
            30, 1999

            Consolidated  Condensed  Statements of Operations for the three- and
            six-month periods ended December 31, 1999 and 1998

            Consolidated Condensed Statements of Changes in Stockholders' Equity
            for the six-month periods ended December 31, 1999 and 1998

            Consolidated  Condensed  Statements of Comprehensive  Income for the
            three- and six-month periods ended December 31, 1999 and 1998

            Consolidated  Condensed  Statements  of Cash Flows for the six-month
            periods ended December 31, 1999 and 1998

            Notes to Consolidated Financial Statements

   Item 2.  Management's  Discussion and Analysis of Financial Condition
            and Results of Operations

Part II. Other Information



<PAGE>
PART I.  FINANCIAL  INFORMATION
  ITEM 1.  FINANCIAL  STATEMENTS
<TABLE>
<CAPTION>
  FIRST  FEDERAL  BANKSHARES, INC  AND  SUBSIDIARIES
  CONSOLIDATED  CONDENSED  BALANCE  SHEETS

                                                       December 31,           June 30,
                                                           1999                 1999
                                                      -------------      -------------
Assets                                                  (Unaudited)
------
<S>                                                   <C>                <C>
Cash and interest bearing deposits                    $  19,304,560      $  15,067,956
Securities available for sale                           118,991,482        122,047,213
   (amortized cost $125,847,438 and $125,558,397)
Securities held to maturity                              30,318,090         32,006,095
   (fair value of $29,648,942 and $31,756,870)
Loans receivable, net                                   475,393,944        457,058,054
Real estate owned and in judgement, net                     302,582             32,350
Real estate held for development                            813,630            599,311
Office property and equipment, net                       15,645,527         15,411,818
Federal Home Loan Bank stock, at cost                     8,453,900          8,094,300
Accrued interest receivable                               4,654,372          4,602,258
Deferred tax asset                                        2,849,000          1,197,000
Excess of cost over fair value of assets acquired        20,359,781         20,946,396
Other assets                                              4,399,946          3,608,987
                                                      -------------      -------------
 Total assets                                         $ 701,486,814      $ 680,671,738
                                                      =============      =============

Liabilities
Deposits                                              $ 457,103,581      $ 464,169,478
Advances from Federal Home Loan Bank                    168,972,544        138,617,385
Advance payments by borrowers for
    taxes and insurance                                   2,336,462          2,557,118
Accrued taxes on income                                     322,264            419,106
Accrued interest payable                                  3,260,455          4,172,328
Accrued expenses and other liabilities                    2,425,115          2,463,316
                                                      -------------      -------------
Total liabilities                                       634,420,421        612,398,731
                                                      -------------      -------------
Stockholders' equity
Common stock, $.01 par value                                 48,277             48,178
Additional paid-in capital                               36,000,819         35,957,560
Treasury stock, at cost  - 44,050 shares                   (397,763)              --
Unearned ESOP shares                                     (1,715,350)        (1,813,758)
Unearned recognition and retention plan                    (621,250)              --
Retained earnings, substantially restricted              38,050,616         36,283,211
Accumulated other comprehensive income                   (4,298,956)        (2,202,184)
                                                      -------------      -------------
Total stockholders' equity                               67,066,393         68,273,007
                                                      -------------      -------------
Total liabilities and stockholders' equity            $ 701,486,814      $ 680,671,738
                                                      =============      =============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST FEDERAL BANKSHARES, INC.  AND SUBSIDIARIES
CONSOLIDATED  CONDENSED  STATEMENTS  OF  OPERATIONS
                                                                         For the three months             For the six months
                                                                           ended December 31,               ended December 31,
                                                                         1999             1998            1999             1998
                                                                    ------------     ------------    ------------     ------------
<S>                                                                 <C>              <C>             <C>              <C>
Interest income:                                                                              (Unaudited)
     Loans receivable                                               $  9,022,732     $  8,146,050    $ 17,876,347     $ 16,225,309
     Mortgage-backed securities                                          579,830          567,756       1,217,630        1,181,396
     Investment securities                                             2,120,430        1,343,987       4,129,137        2,666,343
     Other interest-earning assets                                        41,504           15,791          81,951           56,748
                                                                    ------------     ------------    ------------     ------------
          Total interest income                                       11,764,496       10,073,584      23,305,065       20,129,796
                                                                    ------------     ------------    ------------     ------------
Interest expense:
     Deposits                                                          5,009,054        4,392,219       9,954,212        8,966,512
     Borrowings                                                        2,204,816        1,720,214       4,282,490        3,428,624
                                                                    ------------     ------------    ------------     ------------
          Total interest expense                                       7,213,870        6,112,433      14,236,702       12,395,136
                                                                    ------------     ------------    ------------     ------------
     Net interest income                                               4,550,626        3,961,151       9,068,363        7,734,660
     Provision for loan losses                                           135,000           75,000         240,000          150,000
                                                                    ------------     ------------    ------------     ------------
     Net interest income after provision                               4,415,626        3,886,151       8,828,363        7,584,660
                                                                    ------------     ------------    ------------     ------------

Noninterest income:
     Service charges and other fees                                      767,396          510,565       1,461,089          959,312
     Gain on sale of branch deposits                                        --          1,087,884            --          1,087,884
     Gain on sale of loans held for sale                                  40,246           87,003         125,710          174,411
     Gain on sale of real estate owned and held for investment           187,988             --           361,174             --
     Loss on sale of investments available for sale                      (50,535)            --           (50,535)            --
     Real estate-related activities                                      302,843          174,846         731,583          355,666
     Other income, net                                                   370,345          262,814         733,592          447,496
                                                                    ------------     ------------    ------------     ------------
          Total noninterest income                                     1,618,283        2,123,112       3,362,613        3,024,769
                                                                    ------------     ------------    ------------     ------------

Noninterest expense:
     Compensation and employee benefits                                2,307,856        1,821,847       4,489,410        3,742,356
     Adjusted compensation - stock appreciation rights                      --            386,192            --            (82,244)
     Office property and equipment                                       569,445          431,412       1,153,660          878,534
     Deposit insurance premiums                                           69,213           57,448         140,105          118,145
     Data processing expense                                             106,378          100,072         222,350          196,072
     Advertising                                                         141,351          168,525         259,838          287,104
     Amortization of intangibles                                         245,949           85,989         494,585          171,978
     Other general and administrative                                    749,911          707,141       1,649,101        1,408,921
                                                                    ------------     ------------    ------------     ------------
          Total noninterest expense                                    4,190,103        3,758,626       8,409,049        6,720,866
                                                                    ------------     ------------    ------------     ------------

     Earnings before taxes on income                                   1,843,806        2,250,637       3,781,927        3,888,563
     Taxes on income                                                     578,000          799,076       1,318,000        1,419,000
                                                                    ------------     ------------    ------------     ------------
     Net earnings                                                   $  1,265,806     $  1,451,561    $  2,463,927     $  2,469,563
                                                                    ============     ============    ============     ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                 <C>              <C>             <C>              <C>
Per share data: (1)
     Basic earnings                                                 $       0.27     $       0.31    $       0.53     $       0.53
                                                                    ============     ============    ============     ============
     Diluted earnings                                               $       0.27     $       0.31    $       0.53     $       0.52
                                                                    ============     ============    ============     ============
     Dividends declared                                             $      0.075     $      0.073    $      0.150     $      0.146
                                                                    ============     ============    ============     ============

</TABLE>
     (1)  Adjusted for April 1999 second step offering and exchange.

See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST FEDERAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                                                     Six months ended December 31,
                                                                                        1999              1998
                                                                                    ------------      ------------
                                                                                             (Unaudited)
<S>                                                                                 <C>               <C>
Capital Stock
   Beginning of year balance                                                        $     48,178      $     46,773
   Stock options exercised                                                                    99                99
                                                                                    ------------      ------------
End of period balance                                                                     48,277            46,872
                                                                                    ------------      ------------

Additional paid-in capital
   Beginning of year balance                                                          35,957,560        11,059,966
   Stock options exercised                                                                30,429            33,786
   Stock depreciation of allocated ESOP shares                                            (5,420)             --
   Grant of RRP shares at market                                                          18,250              --
                                                                                    ------------      ------------
End of period balance                                                                 36,000,819        11,093,752
                                                                                    ------------      ------------
Treasury stock, at cost
   Beginning of year balance                                                                --                --
   Treasury stock purchased                                                           (1,054,763)             --
   RRP shares granted                                                                    657,000              --
                                                                                    ------------      ------------
End of period balance                                                                   (397,763)             --
                                                                                    ------------      ------------
Unearned ESOP shares
   Beginning of year balance                                                          (1,813,758)             --
   Principal payment on ESOP borrowing                                                    98,408              --
                                                                                    ------------      ------------
End of period balance                                                                 (1,715,350)             --
                                                                                    ------------      ------------
Unearned recognition and retention plan shares
   Beginning of year balance                                                                --                --
   RRP shares granted                                                                   (675,250)             --
   Amortization of RRP expense                                                            54,000              --
                                                                                    ------------      ------------
End of period balance                                                                   (621,250)             --
                                                                                    ------------      ------------
Retained earnings, substantially restricted
   Beginning of year balance                                                          36,283,211        30,678,991
   Net earnings                                                                        2,463,927         2,469,563
   Dividends paid on common stock                                                       (696,522)         (316,616)
                                                                                    ------------      ------------
End of period balance                                                                 38,050,616        32,831,938
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                 <C>               <C>
Accumulated other comprehensive income
   Beginning of year balance                                                          (2,202,184)          234,353
   Net change in unrealized losses on securities available for sale                   (2,070,718)         (149,343)
   Less: reclassification adjustment for net realized gains included
         in net income (net of tax expense)                                              (26,054)             --
                                                                                    ------------      ------------
End of period balance                                                                 (4,298,956)           85,010
                                                                                    ------------      ------------
Total stockholders' equity                                                          $ 67,066,393      $ 44,057,572
                                                                                    ------------      ------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST FEDERAL BANKSHARES, INC.  AND SUBSIDIARIES
CONSOLIDATED  CONDENSED STATEMENTS  OF COMPREHENSIVE INCOME

                                                                        Three Months Ended               Six months ended
                                                                            December 31,                     December 31,
                                                                   ----------------------------      ----------------------------
                                                                       1999              1998            1999             1998
                                                                   -----------      -----------      -----------      -----------
                                                                                              (Unaudited)
<S>                                                                <C>              <C>              <C>              <C>
Net earnings                                                       $ 1,265,806      $ 1,451,561      $ 2,463,927      $ 2,469,563
                                                                   -----------      -----------      -----------      -----------
Other comprehensive income:
        Unrealized holding losses arising during
              the period, net of tax                                (1,253,941)        (407,188)      (2,070,718)        (149,343)
        Plus: reclassification adjustment for net realized
              gains included in net income (net of tax expense)        (26,054)            --            (26,054)            --
Other comprehensive income (loss), net of tax                       (1,279,995)        (407,188)      (2,096,772)        (149,343)
Comprehensive income (loss)                                        ($   14,189)     $ 1,044,373      $   367,155      $ 2,320,220
</TABLE>
See accompanying notes to consolidated condensed financial statements.

<PAGE>
<TABLE>
<CAPTION>
  FIRST FEDERAL BANKSHARES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                                                                    Six months ended December 31,
                                                                                      1999                 1998
                                                                                   ----------        ----------
                                                                                            (Unaudited)
<S>                                                                                <C>               <C>
Cash flows from operating activities:
Net earnings                                                                       $2,463,927        $2,469,563
Adjustments to reconcile net earnings to net cash
     provided by operating activities:
   Loans originated for sale to investors                                          (9,753,019)      (16,349,544)
   Proceeds from sale of loans originated for sale                                 10,564,990        16,510,589
   Provision for losses on loans and other assets                                     240,000           150,000
   Depreciation and amortization                                                    1,249,918           606,331
   Provision for deferred taxes                                                      (437,000)          190,000
   Net gain on sale of loans                                                         (125,710)         (174,411)
   Net realized loss on sale of securities available for sale                          50,535               -
   Net gain on sale of branch deposits                                                     -         (1,087,884)
   Net gain on sales of real estate owned and held for development                   (361,174)              -
   Net loan fees deferred                                                               7,300            88,538
   Amortization of premiums and discounts on loans,
     mortgage-backed securities, and investment securities                            355,663           (47,433)
   (Increase) decrease in other assets                                               (785,839)          536,227
   Decrease in accrued expenses and other liabilities                                (998,916)       (1,884,940)
                                                                                   ----------        ----------
Net cash provided by operating activities                                           2,470,675         1,007,036
                                                                                   ----------        ----------

Cash flows from investing activities:
   Purchase of securities held to maturity                                           (519,205)       (8,977,262)
   Proceeds from maturities of securities held to maturity                          2,199,586         9,589,668
   Purchase of securities available for sale                                       (7,875,000)      (37,461,356)
   Proceeds from sale of securities available for sale                              3,131,067               -
   Purchase of Federal Home Loan Bank Stock                                          (359,600)         (623,700)
   Proceeds from maturities of securities available for sale                        4,450,070        34,315,174
   Loans purchased                                                                 (4,547,000)       (3,672,000)
   (Increase) decrease in loans receivable                                        (16,839,277)        7,652,174
   Proceeds from sale of real estate owned and held for development                 2,355,736           495,644
   Net expenditures on real estate owned and held for development                    (756,039)              -
   Proceeds from sale of office property and equipment                                 49,295               -
   Purchase of office property and equipment                                         (868,117)       (1,093,978)
                                                                                   ----------        ----------
Net cash (used in) provided by investing activities                               (19,578,484)          224,364
                                                                                   ----------        ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                <C>               <C>
Cash flows from financing activities:
   (Decrease) increase in deposits                                                 (7,065,897)       10,215,163
   Branch deposits transferred due to sale, net                                            -        (18,281,111)
   Proceeds from advances from FHLB                                                45,500,000        29,000,000
   Repayment of advances from FHLB                                                (15,148,276)      (23,281,907)
   Issuance of common stock                                                            30,527            33,886
   Purchase of treasury stock                                                      (1,054,763)              -
   Cash dividends paid                                                               (696,522)         (316,616)
   Net decrease in advances from borrowers for taxes and insurance                   (220,656)         (303,543)
                                                                                   ----------        ----------
Net cash provided by (used in) financing activities                                21,344,413        (2,934,128)
                                                                                   ----------        ----------
Net increase (decrease) in cash and cash equivalents                                4,236,604        (1,702,728)
Cash and cash equivalents at beginning of period                                   15,067,956        17,225,007
                                                                                   ----------        ----------
Cash and cash equivalents at end of period                                        $19,304,560       $15,522,279
                                                                                  ===========       ===========
</TABLE>

See accompanying notes to consolidated condensed financial statements.
<PAGE>
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                 FIRST FEDERAL BANKSHARES, INC. AND SUBSIDIARIES

1. BASIS OF PRESENTATION

The  consolidated  condensed  balance  sheet  information  for June 30, 1999 was
derived from the Company's  audited  Consolidated  Balance Sheets for the fiscal
year ended June 30, 1999. The consolidated condensed financial statements at and
for the  three  months  and six  months  ended  December  31,  1999 and 1998 are
unaudited.  The financial  statements at and for the three months and six months
ended  December  31, 1998 are those of First  Federal  Savings Bank of Siouxland
(the "Bank" or "First Federal")  rather than those of First Federal  Bankshares,
Inc. (the "Registrant" or the "Company"). The Registrant was formed as a holding
company to own all of the capital stock of the Bank following its  "second-step"
offering in April 1999, in which each share of First Federal's  common stock was
exchanged for 1.64696 shares of Company common stock.

In the opinion of management of the Company these financial  statements  reflect
all  adjustments,  consisting  only of normal  recurring  accruals  necessary to
present fairly these consolidated condensed financial statements. The results of
operations  for the interim  periods are not  necessarily  indicative of results
that may be  expected  for an entire  year.  Certain  information  and  footnote
disclosure normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted.

This report contains certain  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.   The  Company  intends  such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking  statements  contained in the Private  Securities  Reform Act of
1995,  and is  including  this  statement  for the purposes of these safe harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally  identifiable  by use  of the  words  "believe,"  "expect,"  "intend,"
"anticipate,"  "estimate,"  "project"  or  similar  expressions.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse effect on the
Company's future activities and operating  results include,  but are not limited
to,    changes   in:    interest    rates,    general    economic    conditions,
legislative/regulatory  changes,  U.S. monetary and fiscal policies,  demand for
products and services,  deposit  flows,  competition  and  accounting  policies,
principles and guidelines. These risks and uncertainties should be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements.

2. REORGANIZATION, CONVERSION AND ACQUISITION

Prior to April  13,  1999,  the Bank was  owned  approximately  53.49%  by First
Federal  Bankshares,  M.H.C. (the "Mutual Holding Company") and 46.51% by public
shareholders.  On  April  13,  1999,  pursuant  to  a  plan  of  conversion  and
reorganization,  and after a series of transactions:  (1) the Company was formed
to own all of the capital stock of the Bank,  (2) the Company sold the ownership
interest in the Bank previously held by the Mutual Holding Company to the public
in a subscription  offering (the Offering),  (3) previous public shareholders of
the Bank had their shares  exchanged  (the  Exchange)  into common shares of the
Company  (exchange  ratio of 1.64696 to 1) and (4) the  Mutual  Holding  Company
ceased to exist.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

As a result of the  reorganization,  the consolidated  financial  statements for
prior  periods  have been  restated  to reflect  the changes in the par value of
common stock from $1.00 to $.01 per share and in the number of authorized shares
of common stock from 20,000,000 to 12,000,000.

The primary  purpose of the  Offering  was to fund the  acquisition  of Mid-Iowa
Financial Corp.  (Mid-Iowa) and its  wholly-owned  subsidiary,  Mid-Iowa Savings
Bank,  FSB. The  shareholders  of Mid-Iowa  received  $28.3 million cash for all
outstanding  shares on April 13, 1999, the effective  date. The  acquisition was
accounted for as a purchase;  accordingly,  Mid-Iowa's results of operations are
included in the financial  statements  from the  acquisition  date forward.  The
excess of purchase price over the fair value of the net  identifiable  assets of
$12.6 million was recorded as goodwill and is being amortized on a straight-line
basis over 25 years.

3. EARNINGS PER SHARE

The following information was used in the computation of net earnings per common
share on both a basic and diluted basis for the periods presented.  Prior period
information was restated for the Offering and Exchange.
<TABLE>
<CAPTION>
                                                             Three months ended                Six months ended
                                                                December 31,                      December 31,
                                                          1999             1998            1999            1998
                                                      -----------      -----------     -----------      -----------
<S>                                                   <C>              <C>             <C>              <C>
Basic earnings per share:
------------------------
   Net earnings                                       $ 1,265,806      $ 1,451,561     $ 2,463,927      $ 2,469,563
   Weighted average shares
         outstanding                                    4,813,395        4,685,881       4,817,352        4,683,559
   Less: unearned ESOP shares                            (175,746)            --          (177,922)            --
                                                      -----------      -----------     -----------      -----------
      Weighted average common
        shares - basic                                  4,637,649        4,685,881       4,639,430        4,683,559

 Basic earnings per share                             $       .27      $       .31     $       .53      $       .53
                                                      ===========      ===========     ===========      ===========

Diluted earnings per share:
--------------------------
   Weighted average common
     shares outstanding - basic                         4,637,649        4,685,881       4,639,430        4,683,559
   Assumed incremental common shares issued upon:
       vesting of RRP shares                                4,439             --              --               --
       exercise of stock options                           11,974           35,765          17,646           43,150
                                                      -----------      -----------     -----------      -----------
   Weighted average diluted
     shares outstanding                                 4,654,062        4,721,646       4,657,076        4,726,709

 Diluted earnings per share                           $       .27      $       .31     $       .53      $       .52
                                                      ===========      ===========     ===========      ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)

4. DIVIDENDS

On October 21, 1999 the Company  declared a cash  dividend on its common  stock,
payable on November 30, 1999 to  stockholders of record as of November 15, 1999,
equal to $.075 per share.

On January 20, 2000 the Company  declared a cash  dividend on its common  stock,
payable on February 29, 2000 to  stockholders  of record as of February 15, 2000
equal to $.075 per share.

5. EMPLOYEE BENEFIT PLANS

On October 21, 1999, the First Federal  Bankshares,  Inc. 1999  Recognition  and
Retention  Plan (RRP) and the First Federal  Bankshares,  Inc. 1999 Stock Option
Plan (SOP) were approved by the  stockholders  of the Company at its 1999 annual
meeting. In December 1999, the Company acquired 79,050 shares of common stock to
be reserved  for RRP awards to certain  officers and  directors.  On October 21,
1999,  73,000  shares were awarded under the RRP.  Shares  awarded under the RRP
vest in five equal annual installments beginning on the first anniversary of the
award. RRP expense for the six months ended December 31, 1999 totaled $54,000.

The SOP permits the board of directors to grant options to certain  officers and
directors to purchase up to 263,500  shares of the Company's  common stock.  The
price at which  options may be  exercised  cannot be less than the fair value of
the shares at the date the options are granted.  The options become  exercisable
at a rate of 20% each year for five years after the date of the grant and have a
fixed maximum term of ten years.

6. SHARE REPURCHASE PLAN

On December 10, 1999 the Company announced a stock repurchase program to acquire
up to 241,239 shares of the Company's  Common Stock,  which represents 5% of the
outstanding Common Stock. During the quarter ended December 31, 1999 the Company
purchased  38,000  shares of its common  stock at an  average  cost of $9.03 per
share.

<PAGE>
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FINANCIAL CONDITION

Total assets increased by $20.8 million,  or 3.1%, to $701.5 million at December
31, 1999 from $680.7  million at June 30, 1999. The increase in total assets was
largely due to an increase in loans  receivable.  Loans receivable  increased by
$18.3  million,  or 4.0%,  to $475.4  million at  December  31, 1999 from $457.1
million  at June 30,  1999.  In  addition,  cash and  interest-bearing  deposits
increased by $4.2 million,  or 28.1%, to $19.3 million at December 31, 1999 from
$15.1  million at June 30,  1999.  The  increase  in cash was  largely due to an
increase in cash at the Bank's office  locations for potential Year 2000 demand.
Partially  offsetting  the increase in loan and cash balances were  decreases in
the balance of investment  securities.  The balance of securities  available for
sale decreased by $3.0 million,  or 2.5%, to $119.0 million at December 31, 1999
from $122.0  million at June 30, 1999.  In addition,  the balance of  securities
held to  maturity  decreased  by $1.7  million,  or 5.3%,  to $30.3  million  at
December  31,  1999 from $32.0  million at June 30,  1999.  The  balance of real
estate owned increased by $270,000 to $302,000 at December 31, 1999 from $32,000
at June 30, 1999. During the six months ended December 31, 1999 the Company took
possession  of one  12-unit  apartment  building  and  four  4-unit  condominium
properties in Madison,  Wisconsin by voluntary deed in lieu of foreclosure.  The
related  loan  balance  of the two  separate  borrowing  entities  involved  was
approximately  $1.6 million.  The sale of the 12-unit  apartment and five of the
condominium units generated  proceeds totaling  approximately  $1.4 million that
reduced  the  balance in real estate  owned.  Real  estate held for  development
increased by $214,000, or 35.8%, to $813,000 at December 31, 1999, from $599,000
at June 30, 1999 due to investment in a new 50-lot development.  Twenty-seven of
the newly developed lots were sold in December 1999.

Deposits  decreased by $7.1 million,  or 1.5%, to $457.1 million at December 31,
1999 from $464.2 million at June 30, 1999.  Competition for deposits accelerated
during the six-month period ended December 31, 1999 in the generally higher rate
environment brought on by a series of Federal Reserve Board rate hikes. Advances
from the Federal Home Loan Bank increased by $30.4 million,  or 21.9%, to $169.0
million at December 31, 1999 from $138.6  million at June 30, 1999. The increase
in FHLB  advances  funded the increase in loans  receivable  and the decrease in
deposits.

Total  stockholders'  equity  decreased  by $1.2  million  to $67.1  million  at
December  31, 1999 from $68.3  million at June 30, 1999.  Earnings  totaled $2.5
million for the first half of the fiscal year.  Largely  offsetting the earnings
for the period was a decrease  of $2.1  million in other  comprehensive  income.
This  decrease  was  primarily  due to an increase in  unrealized  losses in the
Company's available-for-sale securities portfolio due to lower valuations in the
generally  higher interest rate  environment.  During the quarter ended December
31,  1999  the  Company   commenced  a  share  repurchase   program  to  acquire
approximately  241,000  shares,  or 5%,  of its  outstanding  common  stock.  In
December 1999 the Company purchased 38,000 shares of its common stock,  pursuant
to the repurchase  program,  at an average cost of $9.03 per share. In addition,
the Company purchased 79,050 common shares at an average cost of $9.00 per share
for the First Federal  Bankshares,  Inc. 1999  Recognition  and Retention  Plan.
Awards under the RRP totaled  73,000  shares  during the quarter.  The remaining
6,050 RRP shares are held as treasury stock pending award.
<PAGE>
LIQUIDITY

OTS regulations  require that thrift  institutions  such as the Bank maintain an
average daily balance of liquid assets (cash,  certain time  deposits,  banker's
acceptances  and specified  United States  government,  state or federal  agency
obligations)  in each calendar  quarter of not less than 4% of the average daily
balance  of its  liquidity  base (net  withdrawable  deposits  plus  short  term
borrowings)  during the preceding  quarter.  For the quarter ended  December 31,
1999 the Company's  average liquidity  position was $151.4 million,  or 30.9% of
its liquidity base for the preceding quarter.

CAPITAL
The  Company's  total  equity  decreased  by $1.2  million  to $67.1  million at
December 31, 1999 from $68.3 million at June 30, 1999. The OTS requires that the
Company  meet  minimum   tangible,   leverage  (core)  and  risk-based   capital
requirements.  As of December  31, 1999 the Company was in  compliance  with all
regulatory  capital  requirements.  The  Company's  required,  actual and excess
capital levels as of December 31, 1999 were as follows:
                                                                  Excess of
                                                                  Actual Over
                    Required      % of      Actual        % of    Regulatory
                      Amount     Assets     Amount       Assets   Requirement
                      ------     ------     ------       ------   -----------
                                 (Dollars in thousands)
Tangible Capital      $10,192       1.5%   $44,980         6.62%  $34,788
Core Capital           20,384       3.0%    44,980         6.62%   24,596
Risk-based Capital     30,073       8.0%    48,193        12.82%   18,120


COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998

General.  Net earnings decreased by $186,000,  or 12.8%, to $1.3 million for the
three  months  ended  December  31, 1999 from $1.5  million for the three months
ended  December 31,  1998.  Diluted  earnings  per share  totaled $.27 and $.31,
respectively,  for the three  months  ended  December  31,  1999 and  1998.  The
acquisition of Mid-Iowa  Financial Corp.  (Mid-Iowa),  effective April 13, 1999,
was  accounted  for using the  purchase  method of  accounting;  therefore,  the
results of  operations  for the three  months  ended  December  31,  1998 do not
include Mid-Iowa results.

Interest Income.  Interest income increased by $1.7 million,  or 16.8%, to $11.8
million for the three months ended  December 31, 1999 from $10.1 million for the
three months ended December 31, 1998,  largely due to an increase in the average
balance of  interest-earning  assets.  The average  balance of  interest-earning
assets  increased by $115.4  million,  or 22.1%, to $637.8 million for the three
months ended  December  31, 1999 from $522.4  million for the three months ended
December 31, 1998. The increase in average balances of  interest-earning  assets
was  primarily  due to  the  acquisition  of  Mid-Iowa.  The  average  yield  on
interest-earning  assets  decreased to 7.38% for the three months ended December
31, 1999 from 7.71% for the three months ended December 31, 1998,  primarily due
to lower  yields  on loans  receivable  and  mortgage-backed  securities  and to
changes  in the mix of  interest-earning  assets.  Investment  securities,  with
generally  lower  yields  than  yields  on  loans  receivable,  made up 20.4% of
interest-earning assets for the three months ended December 31, 1999 as compared
to 15.7% of  interest-earning  assets for the three  months  ended  December 31,
1998. The change in the mix of interest-earning  assets was primarily due to the
acquisition of Mid-Iowa.  Mid-Iowa's investment portfolio totaled $46.1 million,
or 29.7%,  of Mid-Iowa's  interest-earning  assets on the effective  date of the
acquisition.
<PAGE>
Interest  income on loans for the three months ended December 31, 1999 increased
by $877,000,  or 10.8%,  to $9.0 million for the three months ended December 31,
1999 from $8.1  million  for the three  months  ended  December  31,  1998.  The
increase in interest  income on loans was  primarily due to an increase of $63.5
million, or 15.7%, in the average balance of loans receivable, to $468.8 million
for the three months ended  December 31, 1999 from $405.3  million for the three
months ended  December 31, 1998.  The average yield on loans  decreased to 7.70%
for the three  months  ended  December  31, 1999 from 8.04% for the three months
ended December 31, 1998.

Interest  income  on  mortgage-backed  securities  for the  three  months  ended
December 31, 1999  increased  by $12,000,  or 2.1%,  when  compared to the three
months  ended  December  31,  1998.  The increase was due to an increase of $2.2
million, or 6.6%, in the average balance of mortgage-backed  securities to $36.0
million for the three months ended  December 31, 1999 from $33.8 million for the
three months  ended  December 31,  1998.  The average  yield on  mortgage-backed
securities  decreased to 6.45% for the three months ended December 31, 1999 from
6.72% for the three months ended December 31, 1998.

Interest income on investment securities increased by $776,000, or 57.8%, as the
average balance of investment  securities  increased by $47.9 million, or 58.4%,
to $129.9  million at December 31, 1999 from $82.0 million at December 31, 1998.
The average yield on investment  securities  decreased by only 2 basis points to
6.53% for the three  months  ended  December  31,  1999 from 6.55% for the three
months ended December 31, 1998.

Interest Expense.  Interest expense increased by $1.1 million, or 18.0%, to $7.2
million for the three months  ended  December 31, 1999 from $6.1 million for the
three  months  ended  December  31,  1998.  Interest  on deposits  increased  by
$617,000, or 14.0%, to $5.0 million for the three months ended December 31, 1999
from $4.4 million for the three months ended  December 31, 1998. The increase in
interest on deposits was primarily due to an increase in the average  balance of
deposits  as a result  of the  Mid-Iowa  acquisition.  The  average  balance  of
deposits increased by $69.0 million, or 18.3%, to $446.0 million at December 31,
1999 from $377.0  million at December 31, 1998. The increase in interest paid on
deposits due to increased average balances was partly offset by a 17 basis point
decrease in the average  cost of  deposits to 4.49% for the three  months  ended
December 31, 1999 from 4.66% for the three months ended December 31, 1998.

Interest on borrowings increased by $485,000,  or 28.2%, to $2.2 million for the
three  months  ended  December  31, 1999 from $1.7  million for the three months
ended  December 31, 1998.  The increase in interest on borrowings  was primarily
due to an increase in the average balance of advances.  Average advance balances
increased by $35.3  million,  or 30.6%,  to $150.4  million at December 31, 1999
from $115.2 million at December 31, 1998.  The increase in interest  expense due
to increased advance balances was partly offset by a decrease of 11 basis points
in the average cost of borrowings  to 5.86% for the three months ended  December
31, 1999 from 5.97% for the three months ended December 31, 1998.

Net Interest  Income.  Net interest income  increased by $589,000,  or 14.9%, to
$4.6 million for the three months ended  December 31, 1999 from $4.0 million for
the three months ended  December 31, 1998.  The increase was primarily due to an
increase   in  the   average   balance   of   interest-earning   assets  net  of
interest-bearing  liabilities  to $41.3  million at December  31,1999 from $30.6
million at December 31, 1998.  Partially  offsetting the increase in net earning
<PAGE>
assets was a decrease in the Company's  interest rate spread. The spread for the
three months ended December 31, 1999  decreased by 21 basis points,  or 7.6%, to
2.54% from 2.75% for the quarter  ended  December 31, 1998.  The decrease in the
interest rate spread resulted from a decrease of 33 basis points in the yield on
interest-earning  assets  that was partly  offset by a decrease of only 13 basis
points in the cost of interest-bearing liabilities.

Provision for Loan Loss.  Provision for loan loss expense  totaled  $135,000 and
$75,000,  respectively,  for the three months ended  December 31, 1999 and 1998.
Provision for loan loss expense was  increased due to the growing  percentage of
commercial real estate and commercial business loans in the loan portfolio.  The
allowance for losses on loans is based on  management's  periodic  evaluation of
the loan  portfolio and reflects an amount that,  in  management's  opinion,  is
adequate  to  absorb  losses  in  the  existing  portfolio.  In  evaluating  the
portfolio,  management  takes into  consideration  numerous  factors,  including
current economic conditions,  prior loan loss experience, the composition of the
loan portfolio, and management's estimate of anticipated credit losses.

Noninterest Income.  Noninterest income decreased by $505,000, or 23.8%, to $1.6
million for the three months  ended  December 31, 1999 from $2.1 million for the
three months ended  December 31, 1998.  The decrease in  noninterest  income was
primarily due to  recognition  of a $1.1 million gain on sale of the deposits of
three branch  offices  during the prior year quarter.  Partially  offsetting the
lack of a similar gain during the current year quarter were increases in several
other  noninterest  income items.  Service  charges and other fees  increased by
$257,000,  or 50.3%,  to $767,000 for the three  months ended  December 31, 1999
from  $510,000  for the three months  ended  December 31, 1998.  The increase in
service charges and other fees was largely due to growth related to the Mid-Iowa
acquisition.  Additionally, fee schedule changes, which included several service
fee increases,  went into effect in June 1999.  Gains on the sale of real estate
held for  development  totaled  $188,000 for the three months ended December 31,
1999.  No  comparable  gains on real  estate  were  recorded  in the prior  year
quarter. Income from other real estate-related activities increased by $128,000,
or 73.2%, to $303,000 for the three months ended December 31, 1999 from $175,000
for  the  three   months  ended   December  31,  1998.   The  increase  in  real
estate-related  income  was  primarily  due to  earnings  from the  real  estate
brokerage  company acquired in the merger with Mid-Iowa.  Other income increased
by $107,000,  or 40.9%, to $370,000 for the three months ended December 31, 1999
from  $263,000  for the three  months  ended  December  31, 1998  largely due to
earnings in the Company's non-bank  subsidiaries.  During the three months ended
December 31, 1999, gain on sale of loans held for sale decreased by $47,000,  or
53.8%,  when  compared to the same  quarter of 1998.  During the  December  1999
quarter  there was some  slowdown in mortgage  activity  due to rising  mortgage
interest rates.  Contributing  to the decrease in noninterest  income during the
three months ended December 31, 1999 was a loss totaling  $51,000 on the sale of
mortgage-backed investment securities  available-for-sale.  The proceeds of this
sale, which totaled $3.1 million,  were reinvested in higher yielding investment
securities.

Noninterest  expense.  Noninterest  expense increased by $431,000,  or 11.5%, to
$4.2 million for the three months ended  December 31, 1999 from $3.8 million for
the three months ended  December 31,  1998.  Compensation  and benefits  expense
increased  by  $486,000,  or 26.7%,  to $2.3  million for the three months ended
December  31, 1999 from $1.8  million for the three  months  ended  December 31,
1998.  Staff increased by 26  full-time-equivalent  employees,  or 13.8%, to 215
employees  at December 31, 1999 from 189  employees  at December  31,  1998.  In
addition, compensation expense related to the 1999 RRP approved in October 1999,
<PAGE>
totaled  $54,000 for the three months ended December 31, 1999.  During the three
months ended December 31, 1998 the Company recorded a charge to expense totaling
$386,000.  The charge  related to stock  appreciation  rights  (SAR)  which were
required to be  periodically  re-valued  due to  fluctuations  in the  Company's
common stock price  during the period.  The Company  eliminated  the SAR and the
potential  distortion resulting from stock price changes through cash payouts to
SAR holders in December 1998 and January 1999.

Office property and equipment expense increased by $138,000,  or 32.0%, over the
prior  year,  partially  due to  the  completion  of a new  office  building  in
Grinnell,  Iowa and to the  addition  of the  seven  Mid-Iowa  offices.  Deposit
insurance premium expense and data processing  expense increased by $12,000,  or
20.5%, and $6,000,  or 6.3%,  respectively,  for the three months ended December
31, 1999 as compared to the three months ended  December 31, 1998.  Amortization
of  intangibles  increased  by $160,000 to $246,000  for the three  months ended
December 31, 1999 from $86,000 for the three months ended  December 31, 1998 due
to  amortization  of the  goodwill  related  to the  Mid-Iowa  acquisition  that
commenced in April 1999. Other general and administrative  expenses increased by
$43,000,  or 6.1%,  for the three months ended  December 31, 1999 as compared to
the three months ended December 31, 1998.  Partially  offsetting these increases
in  noninterest  expense was a decrease in  advertising  expense of $27,000,  or
16.1%,  for the three  months  ended  December  31, 1999 as compared to the same
period of 1998.

Net earnings and income tax expense.  Net earnings  before  income taxes totaled
$1.8  million for the three months  ended  December  31, 1999,  compared to $2.2
million  for the three  months  ended  December  31,  1998.  Income tax  expense
decreased by $221,000, or 27.7%, to $578,000 for the three months ended December
31, 1999 from $799,000 for the three months ended December 31, 1998.



COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
DECEMBER 31, 1999 AND 1998

General.  Net earnings totaled $2.5 million, or $.53 per diluted share, for each
of the six-month  periods ended December 31, 1999 and 1998.  The  acquisition of
Mid-Iowa was accounted for using the purchase  method of accounting;  therefore,
the results of  operations  for the six months  ended  December  31, 1998 do not
include Mid-Iowa results.

Interest Income.  Interest income increased by $3.2 million,  or 15.8%, to $23.3
million for the six months ended  December  31, 1999 from $20.1  million for the
six months ended  December  31, 1998,  largely due to an increase in the average
balance of  interest-earning  assets.  The average  balance of  interest-earning
assets  increased by $110.0  million,  or 21.0%,  to $634.6  million for the six
months  ended  December  31, 1999 from $524.6  million for the six months  ended
December 31, 1998. The increase in average balances of  interest-earning  assets
was  primarily  due to  the  acquisition  of  Mid-Iowa.  The  average  yield  on
interest-earning assets decreased to 7.34% for the six months ended December 31,
1999 from 7.67% for the six months ended  December 31,  1998,  primarily  due to
lower yields on loans receivable and  mortgage-backed  securities and to changes
in the mix of interest-earning  assets.  Investment  securities,  with generally
lower yields than yields on loans receivable,  made up 20.1% of interest-earning
assets  for the six months  ended  December  31,  1999 as  compared  to 15.4% of
interest-earning  assets for the six months ended  December 31, 1998. The change
in the mix of  interest-earning  assets was primarily due to the  acquisition of
Mid-Iowa.
<PAGE>
Interest income on loans for the six months ended December 31, 1999 increased by
$1.7 million,  or 10.2%,  to $17.9 million for the six months ended December 31,
1999 from $16.2 million for the six months ended December 31, 1998. The increase
in interest  income on loans was primarily due to an increase of $59.2  million,
or 14.6%, in the average balance of loans receivable,  to $465.7 million for the
six months ended  December 31, 1999 from $406.5 million for the six months ended
December 31,  1998.  The average  yield on loans  decreased to 7.68% for the six
months ended  December 31, 1999 from 7.98% for the six months ended December 31,
1998.

Interest income on mortgage-backed  securities for the six months ended December
31, 1999  increased by $36,000,  or 3.1%,  when compared to the six months ended
December 31, 1998. The increase was due to an increase of $2.9 million, or 8.2%,
in the average  balance of  mortgage-backed  securities to $38.0 million for the
six months ended  December 31, 1999 from $35.1  million for the six months ended
December 31, 1998. The average yield on mortgage-backed  securities decreased to
6.42% for the six months  ended  December 31, 1999 from 6.73% for the six months
ended December 31, 1998.

Interest income on investment securities increased by $1.5 million, or 54.9%, as
the average  balance of investment  securities  increased by $46.7  million,  or
57.7%, to $127.5 million at December 31, 1999 from $80.8 million at December 31,
1998. The average yield on investment securities decreased by 12 basis points to
6.48% for the six months  ended  December 31, 1999 from 6.60% for the six months
ended December 31, 1998.

Interest Expense. Interest expense increased by $1.8 million, or 14.9%, to $14.2
million for the six months ended  December  31, 1999 from $12.4  million for the
six months  ended  December  31,  1998.  Interest on deposits  increased by $1.0
million,  or 11.0%,  to $10.0 million for the six months ended December 31, 1999
from $9.0  million for the six months ended  December 31, 1998.  The increase in
interest on deposits was primarily due to an increase in the average  balance of
deposits  as a result  of the  Mid-Iowa  acquisition.  The  average  balance  of
deposits increased by $67.1 million, or 17.7%, to $447.4 million at December 31,
1999 from $380.3  million at December 31, 1998. The increase in interest paid on
deposits due to increased average balances was partly offset by a 27 basis point
decrease  in the  average  cost of  deposits  to 4.45% for the six months  ended
December 31, 1999 from 4.72% for the six months ended December 31, 1998.

Interest on borrowings increased by $854,000,  or 24.9%, to $4.3 million for the
six months  ended  December  31, 1999 from $3.4 million for the six months ended
December 31, 1998.  The increase in interest on borrowings  was primarily due to
an  increase  in the  average  balance of  advances.  Average  advance  balances
increased by $32.1  million,  or 28.1%,  to $146.2  million at December 31, 1999
from $114.1 million at December 31, 1998.  The increase in interest  expense due
to increased advance balances was partly offset by a decrease of 15 basis points
in the average cost of borrowings to 5.86% for the six months ended December 31,
1999 from 9.01% for the six months ended December 31, 1998.

Net Interest Income. Net interest income increased by $1.3 million, or 17.2%, to
$9.0  million for the six months  ended  December 31, 1999 from $7.7 million for
the six months ended December 31, 1998.  The Company's  interest rate spread for
the six months ended December 31, 1999 decreased by 11 basis points, or 4.1%, to
2.55% from 2.66% for the six months ended December 31, 1998.
<PAGE>
Provision for Loan Loss.  Provision for loan loss expense  totaled  $240,000 and
$150,000, respectively, for the six months ended December 31, 1999 and 1998.

Noninterest Income.  Noninterest income increased by $338,000, or 11.2%, to $3.3
million for the six months ended December 31, 1999 from $3.0 million for the six
months  ended  December 31, 1998.  Service  charges and other fees  increased by
$502,000,  or 52.3%,  to $1.5 million for the six months ended December 31, 1999
from $1.0  million for the six months ended  December 31, 1998.  The increase in
service charges and other fees was largely due to growth related to the Mid-Iowa
acquisition.  Gains on the sale of real  estate  owned and held for  development
totaled $361,000 for the six months ended December 31, 1999. No comparable gains
on real estate were recorded in the prior year  quarter.  Income from other real
estate-related  activities increased by $376,000, or 105.7%, to $732,000 for the
six months  ended  December  31,  1999 from  $356,000  for the six months  ended
December 31, 1998. The increase in real estate-related  income was primarily due
to earnings from the real estate  brokerage  company acquired in the merger with
Mid-Iowa.  Other income increased by $286,000, or 63.9%, to $733,000 for the six
months ended  December 31, 1999 from $447,000 for the six months ended  December
31, 1998 largely due to earnings in the Company's non-bank subsidiaries.  During
the six months  ended  December  31,  1999,  gain on sale of loans held for sale
decreased  by  $49,000,  or 27.9%,  when  compared  to the same  period of 1998,
reflecting  the slowdown in mortgage  activity due to higher  mortgage  interest
rates. The increases in noninterest  income during the six months ended December
31,  1999 when  compared  to the six months  ended  December  31, 1998 more than
offset the $1.1 million gain on sale of branch deposits that was recorded in the
December 1998 quarter.

Noninterest expense. Noninterest expense increased by $1.7 million, or 25.1%, to
$8.4  million for the six months  ended  December 31, 1999 from $6.7 million for
the six months  ended  December  31, 1998.  Compensation  and  benefits  expense
increased  by  $747,000,  or 20.0%,  to $4.5  million  for the six months  ended
December 31, 1999 from $3.7 million for the six months ended  December 31, 1998.
During the six months ended  December 31, 1998 the charge to expense for the SAR
adjustment totaled $82,000.

Office property and equipment expense increased by $275,000,  or 31.3%, over the
prior  year.  Deposit  insurance  premium  expense and data  processing  expense
increased  by  $22,000  and  $27,000,  respectively,  for the six  months  ended
December  31,  1999 as  compared  to the six months  ended  December  31,  1998.
Amortization of intangibles increased by $323,000 to $495,000 for the six months
ended December 31, 1999 from $172,000 for the six months ended December 31, 1998
due to amortization  of the goodwill  related to the Mid-Iowa  acquisition  that
commenced in April 1999.  Advertising  expense decreased by $27,000, or 9.5%, to
$260,000  for the six months ended  December 31, 1999 from  $287,000 for the six
months ended  December  31,  1998.  Other  general and  administrative  expenses
increased by $240,000,  or 17.1%,  for the six months ended December 31, 1999 as
compared  to the six months  ended  December  31,  1998.  The  increase in other
noninterest  expense was primarily due to  noninterest  expenses of the Mid-Iowa
real estate brokerage firm.

Net earnings and income tax expense.  Net earnings  before  income taxes totaled
$3.8  million  for the six months  ended  December  31, 1999 as compared to $3.9
million for the six months ended December 31, 1998. Income tax expense decreased
by $101,000, or 7.1%, to $1.3 million for the six months ended December 31, 1999
from $1.4 million for the six months ended  December  31,  1998.  The  Company's
effective tax rate decreased to 34.8% for the six months ended December 31, 1999
from 36.5% for the six months ended December 31, 1998 partially due to increased
balances in the Company's tax-exempt  investment portfolio during the six months
ended December 31, 1999 as compared to the same period in 1998.
<PAGE>
YEAR 2000 (Y2K)

The Company has devoted significant  resources to minimize the risk of potential
disruption due to Y2K issues.  The Company has  identified its  mission-critical
systems including its "core" data processing system for loans,  deposits and the
general  ledger.  In  addition,  the Company has  identified  and  assessed  its
computer operating systems and networking software;  applications software; data
processing  hardware  platforms such as personal  computers and automated teller
machines; third party interfaces; and environmental systems,  including, but not
limited to, climate control systems, sprinklers, elevators and security systems.
The costs of addressing  and correcting  Year 2000 issues totaled  approximately
$100,000, all of which has been incurred.

It is the intention of the Company to maintain normal business operations during
the Year 2000 transition and beyond; including, for example,  potential problems
related to the first leap year of the new  millennium:  February 29,  2000.  The
Company has developed a Year 2000 Business Continuity and Contingency Plan as an
addition to the Company's  Disaster  Recovery Plan.  Together,  these plans help
insure the  continuity  of daily  operations in the event of a loss of essential
resources due to Year 2000 induced  failures.  These plans  describe  individual
contingency plans concerning specific software and hardware issues,  operational
plans for continuing operations, and specific policies and procedures that would
be put in place upon the occurrence of a power outage,  computer  interruptions,
telecommunications  interruptions,  natural  disaster,  etc. Such plans identify
participants,  processes  and  equipment  that will be  necessary  to permit the
Company to resume and continue operations until the problem is resolved.

Based on our  assessment  of  operations  through  February 6, 2000, we have not
experienced any significant Year 2000 issues. In addition to expenses related to
its own computer  systems,  the Company is aware of potential Year 2000 risks to
third  parties,  including  vendors,  depositors  and borrowers and the possible
adverse  impact on the  Company  resulting  from  failures  by these  parties to
adequately  address the Year 2000  problem.  As of February 6, 2000,  we are not
aware of any significant Year 2000 issues of vendors, borrowers or depositors of
the Company.

However,  the risk exists that some of the  Company's  commercial  borrowers may
fail to correct Year 2000 issues during the Year 2000 transition  period and may
suffer financial harm as a result. This, in turn, represents risk to the Company
regarding the repayment of loans from those  commercial  customers.  The Company
has surveyed its commercial  customers with aggregate  outstanding loan balances
of $250,000 or more regarding their Year 2000 preparedness. Based on the results
of this  survey  process the  overall  level of Year 2000 risk in the  Company's
commercial  loan  portfolio  is believed  to be  relatively  low.  In  addition,
repayment  sources for the majority of loans in the  Company's  commercial  loan
portfolio  are from  multi-family  real  estate  projects  that  tend to be less
computer-dependent  than, for example,  a  manufacturing  business.  The Company
analyzes Year 2000 risk posed by prospective  commercial loan customers prior to
approving  their loan requests.  Commercial  loan customers are asked to sign an
acknowledgement  demonstrating  their  commitment  to address Year 2000 problems
inherent in their  operations  and agreeing to provide the Company with specific
information regarding their Year 2000 status.
<PAGE>
The  Company  has also  analyzed  the Year  2000  risk  posed by its 20  largest
commercial  depositors.  The Company currently  considers its commercial deposit
portfolio to contain a relatively low level of Year 2000 risk since the majority
of  these  depositors  are   small-business   customers  with  limited  computer
technology  dependence in their core business  functions.  The Company  analyzes
potential Year 2000 risk of prospective  commercial  deposit  customers prior to
accepting their deposits.

The  preceding  paragraphs  include  forward-looking   statements  that  involve
inherent risks and  uncertainties.  The actual costs of Year 2000 compliance and
the impact of Year 2000 issues  could differ  materially  from what is currently
anticipated.  Factors that might result in such differences  include  incomplete
inventory  and  assessment  results,  higher  than  anticipated  costs to update
software  and  hardware  and  vendors',  customers'  and  other  third  parties'
inability to effectively address the Year 2000 issue.


<PAGE>
PART II. OTHER INFORMATION

Legal Proceedings.

   There are various claims and lawsuits in which the Registrant is periodically
involved incidental to the Registrant's  business. In the opinion of management,
no   material   loss  is   expected   from  any  of  such   pending   claims  or
lawsuits.

Submission of Matters to a Vote of Security Holders.

   The Company  convened its 1999 Annual Meeting of  Stockholders on October 21,
1999. At the meeting,  the  stockholders of the Company  considered and voted on
the following:

Ballot No. 1.

The election of Gary L. Evans, Allen J. Johnson and Harland D. Johnson,  each to
serve  as  directors  for  terms of  three  years  and  until  their  respective
successors  have been elected and qualified.  The results of Ballot No. 1 are as
follows:

                                                     For           Withheld
                                                  ---------         -------
                  Gary L. Evans                   3,814,062         183,915
                  Allen J. Johnson                3,783,596         178,059
                  Harland D. Johnson              3,776,160         185,784

Ballot No. 2.

The  ratification of the appointment of KPMG LLP as auditors for the Company for
the  fiscal  year  ending  June 30,  2000.  The  results  of Ballot No. 2 are as
follows:


                                    For         Against        Abstain
                                    ----        --------       -------
   Number of Votes              3,886,503        61,320        14,121
   Percentage of votes present
     in person or by proxy           98.1%          1.6%          0.4%

Ballot No. 3.

The  approval  of the  First  Federal  Bankshares,  Inc.  1999  Recognition  and
Retention Plan. The results of Ballot No. 3 are as follows:


                                    For          Against       Abstain
                                    ----        --------       -------
   Number of Votes               2,682,898       662,077        39,389
   Percentage of total votes
    eligible to be cast               55.6%         18.7%          0.8%

<PAGE>
Ballot No. 4.

The approval of First  Federal  Bankshares,  Inc.  1999 Stock  Option Plan.  The
results of Ballot No. 4 are as follows:

                                    For          Against       Abstain
                                    ----        --------       -------
 Number of Votes                2,676,972       658,053        48,695
   Percentage of total votes
     eligible to be cast             55.5%        13.6%          1.0%

Each of the  proposals,  having  received  the  requisite  favorable  vote,  was
declared to be duly approved by the stockholders of the Company.


Exhibits and Reports on Form 8-K.
(a)      Exhibits

      10 - Material Contracts

      10.1 Employment agreement - First Federal Bank and Barry E. Backhaus
      10.2 Employment agreement - First Federal Bank and Jon G. Cleghorn
      10.3 Employment agreement - First Federal Bank and Steven L. Opsal
      10.4 Employment agreement - First Federal Bank and Sandra Sabel
      10.5 First Federal Bankshares, Inc. 1999 Recognition and Retention Plan
      10.6 First Federal Bankshares, Inc. 1999 Stock Option Plan


      27 - Financial Data Schedule


(b)      Reports on Form 8-K

      On  January  5, 2000 the  Registrant  filed a  current  report on Form 8-K
      relating  to the  Company's  announcement  that it is  commencing  a share
      repurchase  program calling for the repurchase of up to 241,239 shares, or
      approximately 5% of the shares outstanding, in open market purchases.

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this  report to be signed by the  undersigned
thereunto duly authorized.


                                             FIRST FEDERAL BANKSHARES, INC.



         DATE:  February 9, 2000            BY:    /s/Barry E. Backhaus
                                                   --------------------
                                                   Barry E. Backhaus
                                                   President and
                                                   Chief Executive Officer



         DATE:  February 9, 2000            BY:    /s/Katherine Bousquet
                                                   ---------------------
                                                   Katherine Bousquet
                                                   Chief Financial Officer