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 March 31, 2003

|_|   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 by check mark whether the Registrant is an accelerated filer.
                                    Yes |_|   No |X|

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 May 9, 2003
  (Common Stock, $.01 par value)                 3,899,491




<PAGE>


                         FIRST FEDERAL BANKSHARES, INC.


                                      INDEX




                                                                     Page

Part I.     Financial Information

   Item I.  Financial Statements of First Federal
            Bankshares, Inc. and Subsidiaries                         1

            Condensed Consolidated Balance Sheets
            at March 31, 2003 and June 30, 2002                       1

            Condensed Consolidated Statements of Operations
            for the three- and nine-month periods ended
            March 31, 2003 and 2002                                   2

            Condensed Consolidated Statements of Changes in
            Stockholders' Equity for the nine-month periods
            ended March 31, 2003 and 2002                             3

            Condensed Consolidated Statements of Comprehensive
            Income for the three- and nine-month periods ended
            March 31, 2003 and 2002                                   4

            Condensed Consolidated Statements of Cash Flows
            for the nine-month periods ended
            March 31, 2003 and 2002                                   5

            Notes to Condensed Consolidated Financial Statements      6

   Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations             9

   Item 3.  Quantitative and Qualitative Disclosures About
            Market Risk                                              20

   Item 4.  Controls and Procedures                                  21


Part II.    Other Information                                        21



<PAGE>

PART I. FINANCIAL INFORMATION
  ITEM 1. FINANCIAL STATEMENTS

  FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES
  CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                     March 31,           June 30,
                                                                       2003                2002
                                                                  -------------       -------------
<S>                                                               <C>                 <C>
Assets
Cash and due from banks                                           $  31,277,704       $  23,114,024
Interest-bearing deposits in other financial institutions             4,279,807             103,197
                                                                  -------------       -------------
       Cash and cash equivalents                                     35,557,511          23,217,221
                                                                  -------------       -------------
Securities available-for-sale, at fair value (amortized
    cost of $93,668,769 and $91,529,014, respectively)               94,617,237          92,313,472
Securities held-to-maturity, at amortized cost
   (fair value of $51,595,409 and $64,009,952, respectively)         50,216,872          63,294,694
Loans receivable                                                    403,137,507         422,965,769
Less: Allowance for loan loss                                         4,579,774           4,583,897
                                                                  -------------       -------------
      Loans receivable, net                                         398,557,733         418,381,872
                                                                  -------------       -------------

Office property and equipment, net                                   13,308,919          13,770,198
Federal Home Loan Bank stock, at cost                                 5,707,300           5,037,800
Accrued interest receivable                                           2,672,531           2,803,663
Refundable income taxes                                                      --             146,741
Goodwill (note 5)                                                    18,523,607          18,523,607
Other assets                                                         15,693,117          13,267,904
                                                                  -------------       -------------
Total assets                                                      $ 634,854,827       $ 650,757,172
                                                                  =============       =============

Liabilities
Deposits                                                          $ 452,467,840       $ 472,648,336
Advances from Federal Home Loan Bank                                103,895,323          99,064,679
Advance payments by borrowers for
    taxes and insurance                                                 596,586           1,482,743
Deferred tax liability                                                  163,000             103,000
Accrued taxes on income                                                  24,467                  --
Accrued interest payable                                              2,512,901           3,640,039
Accrued expenses and other liabilities                                4,112,852           2,555,580
                                                                  -------------       -------------
Total liabilities                                                   563,772,969         579,494,377
                                                                  -------------       -------------

Stockholders' equity
Common stock, $.01 par value, 12,000,000 shares authorized;
    4,892,057 and 4,871,112 shares issued at
    March 31, 2003 and June 30, 2002, respectively                       48,921              48,711
Additional paid-in capital                                           36,459,431          36,247,480
Retained earnings, substantially restricted                          47,098,462          43,542,299
Treasury stock, at cost, 948,966 and 665,764 shares at
   March 31, 2003 and June 30, 2002, respectively                   (11,793,249)         (7,577,646)
Accumulated other comprehensive income                                  594,467             490,458
Unearned ESOP                                                        (1,221,200)         (1,330,000)
Unearned RRP                                                           (104,974)           (158,507)
                                                                  -------------       -------------
Total stockholders' equity                                           71,081,858          71,262,795
                                                                  -------------       -------------
Total liabilities and stockholders' equity                        $ 634,854,827       $ 650,757,172
                                                                  =============       =============
</TABLE>


See notes to condensed consolidated financial statements.


                                       -1-
<PAGE>

FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                         Three months                    Nine months
                                                                        ended March 31,                 ended March 31,
                                                                      2003           2002            2003            2002
                                                                 ----------------------------------------------------------
<S>                                                              <C>            <C>            <C>             <C>
Interest income:
    Loans receivable                                             $ 7,031,157    $ 7,881,878    $ 22,418,585    $ 24,989,780
    Mortgage-backed securities                                       708,711        870,600       2,467,808       1,647,021
    Investment securities                                            669,433        823,796       2,144,336       3,131,767
    Other interest-earning assets                                     30,585         23,874          41,533         666,145
                                                                 ----------------------------------------------------------
         Total interest income                                     8,439,886      9,600,148      27,072,262      30,434,713
                                                                 ----------------------------------------------------------
Interest expense:
    Deposits                                                       2,574,190      4,085,077       8,762,145      14,212,165
    Advances from FHLB and other borrowings                        1,222,914      1,272,290       3,807,420       3,722,053
                                                                 ----------------------------------------------------------
         Total interest expense                                    3,797,104      5,357,367      12,569,565      17,934,218
                                                                 ----------------------------------------------------------
    Net interest income                                            4,642,782      4,242,781      14,502,697      12,500,495
    Provision for losses on loans                                    200,000      1,035,000       1,430,000       2,315,000
                                                                 ----------------------------------------------------------
    Net interest income after provision for losses on loans        4,442,782      3,207,781      13,072,697      10,185,495
                                                                 ----------------------------------------------------------
Noninterest income:
    Fees and service charges                                       1,491,107      1,192,216       4,031,543       3,721,515
    Gain on sale of loans held for sale                              356,215        133,109         679,765         469,574
    Gain on sale of branch deposits                                       --             --              --         164,730
    Gain on sale of real estate owned and held for development        35,960         81,392          84,200         156,483
    Net gain (loss) on sale of securities                            221,143             --         258,643         (23,457)
    Net (loss) gain on sale of office property and equipment          (6,612)          (826)         (5,643)        250,404
    Real estate-related activities                                   409,244        333,825       1,132,259       1,091,226
    Other income                                                     420,452        385,781       1,298,392       1,035,382
                                                                 ----------------------------------------------------------
         Total noninterest income                                  2,927,509      2,125,497       7,479,159       6,865,857
                                                                 ----------------------------------------------------------
Noninterest expense:
    Compensation and benefits (note 7)                             2,576,695      2,300,514       7,529,845       6,836,354
    Office property and equipment                                    726,472        655,168       2,024,145       1,869,747
    Deposit insurance premiums                                        19,093         22,037          59,977          67,575
    Data processing expense                                           82,139         89,879         236,257         259,033
    Advertising                                                       60,509        119,427         296,729         293,499
    Other expense                                                  1,252,935      1,075,907       3,634,950       3,275,850
                                                                 ----------------------------------------------------------
         Total noninterest expense                                 4,717,843      4,262,932      13,781,903      12,602,058
                                                                 ----------------------------------------------------------

    Earnings before taxes on income                                2,652,448      1,070,346       6,769,953       4,449,294
    Taxes on income                                                  870,000        325,000       2,263,000       1,502,000
                                                                 ----------------------------------------------------------
    Net earnings                                                 $ 1,782,448    $   745,346    $  4,506,953    $  2,947,294
                                                                 ==========================================================
Earnings per share:
    Basic earnings per share                                     $      0.46    $      0.18    $       1.15    $       0.71
                                                                 ==========================================================
    Diluted earnings per share                                   $      0.45    $      0.18    $       1.12    $       0.70
                                                                 ==========================================================

    Dividends declared per share                                 $      0.08    $      0.08    $       0.24    $       0.24
                                                                 ==========================================================
</TABLE>


See notes to condensed consolidated financial statements.

                                      -2-


<PAGE>

FIRST FEDERAL BANKSHARES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                     Nine months ended March 31,
                                                                         2003           2002
                                                                     --------------------------
<S>                                                                  <C>            <C>
Capital Stock
   Beginning of year balance                                         $    48,711    $    48,495
   Stock options exercised                                                   210            166
-----------------------------------------------------------------------------------------------
End of period balance                                                     48,921         48,661
-----------------------------------------------------------------------------------------------

Additional paid-in capital
   Beginning of year balance                                          36,247,480     36,053,892
   RRP awarded                                                             9,600         17,500
   RRP forfeited                                                            (550)        (1,800)
   Stock options exercised                                               161,240        111,757
   Stock appreciation of allocated ESOP shares                            41,661         23,796
-----------------------------------------------------------------------------------------------
End of period balance                                                 36,459,431     36,205,145
-----------------------------------------------------------------------------------------------

Retained earnings, substantially restricted
   Beginning of year balance                                          43,542,299     41,357,535
   Net earnings                                                        4,506,953      2,947,294
   Dividends paid on common stock                                       (950,790)      (997,394)
-----------------------------------------------------------------------------------------------
End of period balance                                                 47,098,462     43,307,435
-----------------------------------------------------------------------------------------------

Treasury stock, at cost
   Beginning of year balance                                          (7,577,646)    (2,803,832)
   RRP awarded                                                            18,000         63,000
   RRP forfeited                                                         (19,800)       (64,800)
   Treasury stock purchased                                           (4,213,803)    (3,671,914)
-----------------------------------------------------------------------------------------------
End of period balance                                                (11,793,249)    (6,477,546)
-----------------------------------------------------------------------------------------------

Accumulated other comprehensive income (loss)
   Beginning of year balance                                             490,458       (343,831)
   Net change in unrealized gains on securities available-for-sale       266,178        642,629
   Less: reclassification adjustment for net realized gains (losses)
         included in net income, net of tax expense                      162,169        (14,708)
-----------------------------------------------------------------------------------------------
End of period balance                                                    594,467        313,506
-----------------------------------------------------------------------------------------------

Unearned ESOP shares
   Beginning of year balance                                          (1,330,000)    (1,473,470)
   ESOP shares allocated                                                 108,800        106,560
-----------------------------------------------------------------------------------------------
End of period balance                                                 (1,221,200)    (1,366,910)
-----------------------------------------------------------------------------------------------

Unearned recognition and retention plan shares
   Beginning of year balance                                            (158,507)      (251,342)
   RRP awarded                                                           (27,600)       (80,500)
   RRP forfeited                                                          20,350         66,600
   Amortization of RRP expense                                            60,783         76,171
-----------------------------------------------------------------------------------------------
End of period balance                                                   (104,974)      (189,071)
-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------
Total stockholders' equity                                           $71,081,858    $71,841,220
===============================================================================================
</TABLE>

See notes to condensed consolidated financial statements.


                                       -3-
<PAGE>

FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                   Three Months Ended            Nine months ended
                                                                         March 31,                    March 31,
                                                                    2003          2002           2003           2002
                                                                -----------     ---------     ----------    -----------
<S>                                                             <C>             <C>           <C>           <C>
Net earnings                                                    $ 1,782,448     $ 745,346     $4,506,953    $ 2,947,294
Other comprehensive income:
    Unrealized holding gains (losses) arising during
          the period, net of tax                                     14,351      (150,384)       266,178        642,629
    Less: reclassification adjustment for net realized gains
         (losses) included in net income, net of tax expense        138,657            --        162,169        (14,708)
                                                                -------------------------------------------------------
Other comprehensive income, net of tax                             (124,306)     (150,384)       104,009        657,337
                                                                -------------------------------------------------------

Comprehensive income                                            $ 1,658,142     $ 594,962     $4,610,962    $ 3,604,631
                                                                =======================================================
</TABLE>


See notes to condensed consolidated financial statements.


                                       -4-

<PAGE>

FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          Nine months ended March 31,
Cash flows from operating activities:                                                       2003              2002
                                                                                        ------------------------------
<S>                                                                                     <C>               <C>
Net earnings                                                                            $  4,506,953      $  2,947,294
Adjustments to reconcile net earnings to net cash provided by operating activities:
   Loans originated for sale to investors                                                (47,917,013)      (54,266,000)
   Proceeds from sale of loans originated for sale                                        47,979,698        55,487,880
   Provision for loan losses                                                               1,430,000         2,315,000
   Depreciation and amortization                                                           1,408,083         1,518,315
   Net gain on sale of loans                                                                (679,765)         (469,574)
   Net (gain) loss on sale of securities available-for-sale                                 (258,643)           23,457
   Net gain on sale of branch deposits                                                            --          (164,730)
   Net loss (gain) on sale of office property and equipment                                    5,643          (250,404)
   Net gain on sale of real estate owned and held for development                            (84,200)         (156,483)
   Net loan fees deferred                                                                    183,993           181,225
   Amortization of premiums and discounts on loans and securities                            116,356           482,679
   Decrease in accrued interest receivable                                                   131,132           530,775
   Increase in other assets                                                               (2,453,332)         (439,117)
   Decrease in accrued interest payable                                                   (1,127,138)       (1,210,212)
   Increase in accrued expenses and other liabilities                                      1,557,570           274,819
   Increase in accrued taxes on income                                                       171,208            24,624
                                                                                        ------------------------------
Net cash provided by operating activities                                                  4,970,545         6,829,548
                                                                                        ------------------------------
Cash flows from investing activities:
   Purchase of securities held-to-maturity                                                (1,125,682)      (46,971,082)
   Proceeds from maturities of securities held-to-maturity                                14,099,343         6,267,231
   Proceeds from sale of securities available-for-sale                                    26,171,473         4,162,043
   Purchase of securities available-for-sale                                             (38,748,085)      (51,701,888)
   Proceeds from maturities of securities available-for-sale                              10,610,326        65,008,653
   Purchase of bank owned life insurance                                                          --        (6,984,000)
   (Purchase) redemption of Federal Home Loan Bank Stock                                    (669,500)        4,455,400
   Loans purchased                                                                        (9,787,000)      (15,681,000)
   Decrease in loans receivable                                                           28,146,339        10,072,658
   Proceeds from sale of office property and equipment                                         1,040           520,950
   Purchase of office property and equipment                                                (359,800)         (444,887)
   Proceeds from sale of foreclosed real estate                                              449,101           173,397
   Proceeds from sale of real estate held for development                                     54,298           437,000
   Net expenditures on real estate held for development                                     (125,763)           (5,444)
                                                                                        ------------------------------
Net cash provided by (used in) investing activities                                       28,716,090       (30,690,969)
                                                                                        ------------------------------
Cash flows from financing activities:
   Decrease in deposits                                                                  (20,180,496)       (6,131,737)
   Proceeds from advances from FHLB                                                       50,167,000        22,000,000
   Repayment of advances from FHLB                                                       (45,443,549)      (15,135,891)
   Net decrease in advances from borrowers for taxes and insurance                          (886,157)       (1,268,831)
   Issuance of common stock, net                                                             161,450           111,924
   Repurchase of common stock                                                             (4,213,803)       (3,671,914)
   Cash dividends paid                                                                      (950,790)         (997,394)
                                                                                        ------------------------------
Net cash used in financing activities                                                    (21,346,345)       (5,093,843)
                                                                                        ------------------------------
Net increase (decrease) in cash and cash equivalents                                      12,340,290       (28,955,264)
Cash and cash equivalents at beginning of period                                          23,217,221        77,949,553
                                                                                        ------------------------------
Cash and cash equivalents at end of period                                              $ 35,557,511      $ 48,994,289
                                                                                        ==============================
Supplemental disclosures:
  Cash paid for interest                                                                $ 13,696,703      $ 19,144,430
                                                                                        ==============================
  Cash paid for income taxes                                                               2,091,792         1,477,371
                                                                                        ==============================
</TABLE>

See notes to condensed consolidated financial statements.

                                       -5-

<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES



1. Basis of presentation

The condensed consolidated balance sheet information for June 30, 2002 was
derived from the audited Consolidated Balance Sheets of First Federal
Bankshares, Inc. (the "Company") at June 30, 2002. The condensed consolidated
financial statements as of and for the three months and nine months ended March
31, 2003 and 2002 are unaudited.

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 condensed consolidated 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
accounting principles generally accepted in the United States of America have
been omitted.

The Company's critical accounting policies relate to the allowance for loan
losses and accounting for intangible assets. A description of the Company's
critical accounting policy related to intangible assets is summarized in Note 5
of these interim financial statements. With regard to the Company's critical
accounting policy related to the allowance for loan losses, the Company has
established a systematic method of periodically reviewing the credit quality of
the loan portfolio in order to establish an allowance for losses on loans. The
allowance for losses on loans is based on management's current judgments about
the credit quality of individual loans and segments of the loan portfolio. The
allowance for losses on loans is established through a provision for loan losses
based on management's evaluation of the risk inherent in the loan portfolio, and
considers all known internal and external factors that affect loan
collectibility as of the reporting date. Such evaluation, which includes a
review of all loans on which full collectability may not be reasonably assured,
considers among other matters, the estimated net realizable value or the fair
value of the underlying collateral, economic conditions, historical loan loss
experience, management's knowledge of inherent risks in the portfolio that are
probable and reasonably estimable and other factors that warrant recognition in
providing an appropriate loan loss allowance. This evaluation involves a high
degree of complexity and requires management to make subjective judgments that
often require assumptions or estimates about uncertain matters.

A summary of significant accounting policies followed by the Company is set
forth in Note 1 of the Company's 2002 Annual Report to Stockholders and is
incorporated herein by reference. The Company's critical accounting policies and
their application are periodically reviewed by the Audit Committee and the full
Board of Directors.


2. Organization

The Company is the holding company for First Federal Bank (the "Bank"). The
Company owns 100% of the Bank's common stock. Currently, the Company engages in
no other significant activities beyond its ownership of the Bank's common stock.


                                       6
<PAGE>

3. Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

4. 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.

<TABLE>
<CAPTION>
                                            Three months ended         Nine months ended
                                                 March 31,                 March 31,
                                             2003         2002         2003         2002
                                          -----------------------   -----------------------
<S>                                       <C>          <C>          <C>          <C>
Basic earnings per share computation:
   Net earnings                           $1,782,448   $  745,346   $4,506,953   $2,947,294
   Weighted average common shares
         outstanding                       3,837,324    4,091,098    3,931,839    4,129,757
                                          ----------   ----------   ----------   ----------
      Basic earnings per share            $     0.46   $     0.18   $     1.15   $     0.71
                                          ==========   ==========   ==========   ==========

Diluted earnings per share computation:
   Net earnings                           $1,782,448   $  745,346   $4,506,953   $2,947,294
   Weighted average common
      shares outstanding - basic           3,837,324    4,091,098    3,931,839    4,129,757
   Incremental option shares using
      treasury stock method                   92,089       84,570       87,341       87,043
                                          ----------   ----------   ----------   ----------
   Weighted average diluted
      shares outstanding                   3,929,413    4,175,668    4,019,180    4,216,800
                                          ----------   ----------   ----------   ----------
      Diluted earnings per share          $     0.45   $     0.18   $     1.12   $     0.70
                                          ==========   ==========   ==========   ==========
</TABLE>

5. Goodwill and other intangible assets

In July 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 142 (SFAS 142), Goodwill and Other Intangible Assets. SFAS 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of SFAS 142. SFAS 142 also requires that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment. The Company adopted the provisions of SFAS 142 effective July 1,
2001. In connection with SFAS 142's transitional goodwill impairment evaluation,
the Company performed an assessment and determined that goodwill was not
impaired as of the adoption date. As of the adoption date, the Company had
unamortized goodwill in the amount of $18,523,607. Effective July 1, 2001, the
amortization of goodwill was discontinued.

Additionally, during the quarter ended September 30, 2002, management reviewed
the assessment performed on adoption of SFAS 142 and determined that no material
events or circumstances had occurred since the original valuation which would
result in a significantly different conclusion if the valuation were updated for
the purpose of determining any potential goodwill impairment.


                                       7
<PAGE>

Consequently, the outstanding balance of goodwill has not changed since the
adoption of SFAS 142.

The gross carrying amount of intangible assets subject to amortization and the
associated accumulated amortization at March 31, 2003, is presented in the table
below. Amortization expense for intangible assets was $104,640 and $108,618,
respectively, for the three months ended March 31, 2003 and 2002 and $321,880
and $318,608, respectively, for the nine months ended March 31, 2003 and 2002.

                                                   March 31, 2003
                                            --------------------------
                                              Gross
                                             carrying     accumulated
                                              amount      amortization
                                            ----------    ------------
          Intangible assets:
            Core deposit premium            $  690,140     $  409,030
            Mortgage servicing rights          700,250        638,000
                                            ----------     ----------
          Total                             $1,390,390     $1,047,030
                                            ==========     ==========
          Unamortized intangible assets                    $  343,360
                                                           ==========

Projections of amortization expense are based on existing asset balances and the
existing interest rate environment as of March 31, 2003. What the Company
actually experiences may be significantly different depending upon changes in
mortgage interest rates and market conditions. The following table shows the
estimated future amortization expense for amortizing intangible assets:

                       Core deposit       Mortgage servicing
                       premium            rights                 Total
                       ------------       ------------------     --------
Three months ended
  June 30, 2003        $ 14,640           $ 62,250               $ 76,890

Year ended June 30,
       2004              52,374                 --                 52,374
       2005              45,396                 --                 45,396
       2006              44,604                 --                 44,604
       2007              44,604                 --                 44,604
       2008              44,604                 --                 44,604


6. Dividends

On January 16, 2003 the Company declared a cash dividend on its common stock,
payable on February 28, 2003 to stockholders of record as of February 14, 2003,
equal to $.08 per share. Dividends totaling $310,006 were paid to stockholders
on February 28, 2003.

On April 17, 2003 the Company declared a cash dividend on its common stock,
payable on May 30, 2003 to stockholders of record as of May 16, 2003 equal to
$.08 per share. The Company expects to pay approximately $302,000 to
stockholders on May 30, 2003.

7. Stock Options

At March 31, 2003, the Company had two stock-based employee compensation plans,
which are described more fully in Note 12 of the Company's 2002 Annual Report to
Stockholders. The Company accounts for those plans under the recognition

                                       8
<PAGE>

and measurement principles of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
No stock-based compensation cost is reflected in net income, as all options
granted under the plans had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following table illustrates
the effect on net income and earnings per share if the Company had applied the
fair value recognition provisions of SFAS 123, Accounting for Stock-based
Compensation, to stock-based employee compensation.

<TABLE>
<CAPTION>
                                           Three months ended                 Nine months ended
                                                 March 31,                          March 31,
                                           2003             2002              2003             2002
                                      ------------------------------     ------------------------------
<S>                                   <C>              <C>               <C>              <C>
 Net income, as reported              $   1,782,448    $     745,346     $   4,506,953    $   2,947,294
 Deduct: Total stock-based employee
   compensation expense determined
   under fair value based method
   for all awards, net of related
   tax effects                              (18,681)         (16,135)          (52,256)         (48,404)
                                      -------------    -------------     -------------    -------------
  Pro forma net income                $   1,763,767    $     729,211     $   4,454,697    $   2,898,890
                                      =============    =============     =============    =============
 Earnings per share:
   Basic - as reported                $        0.46    $        0.18     $        1.15    $        0.71
   Basic - pro forma                  $        0.46    $        0.18     $        1.13    $        0.70
                                      =============    =============     =============    =============
   Diluted - as reported              $        0.45    $        0.18     $        1.12    $        0.70
   Diluted - pro forma                $        0.45    $        0.18     $        1.11    $        0.69
                                      =============    =============     =============    =============
</TABLE>

The fair value of each option grant has been estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in all periods presented: dividend yield of 3.41%; expected volatility of
22.76%; risk free interest rate of 6.29%; and expected life of 7.5 years.




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

Forward-looking statements

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 and
regulatory changes, U.S. monetary and fiscal policies, demand for products and


                                       9
<PAGE>

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.

Financial condition

Total assets decreased by $15.9 million, or 2.4%, to $634.9 million at March 31,
2003 from $650.8 million at June 30, 2002. Cash and cash equivalents increased
by $12.4 million, or 53.2%, to $35.6 million at March 31, 2003 from $23.2
million at June 30, 2002 as proceeds from sales, maturities and principal
payments on investment securities exceeded purchases. In addition, higher
compensating balances for services were required at correspondent banks due to
the historically low market interest rate environment. Proceeds from maturities
and sales of investment securities totaled $50.9 million for the nine months
ended March 31, 2003 while purchases of investment securities for the same
period totaled $39.9 million. Securities available-for-sale increased by $2.3
million, or 2.5%, to $94.6 million at March 31, 2003 from $92.3 million at June
30, 2002. Securities held-to-maturity decreased by $13.1 million, or 20.7%, to
$50.2 million at March 31, 2003 from $63.3 million at June 30, 2002. Loans
receivable decreased by $19.9 million, or 4.7%, to $403.1 million from $423.0
million at June 30, 2002. Other assets increased by $2.4 million, or 18.3%, to
$15.7 million at March 31, 2003 from $13.3 million at June 30, 2002 largely due
to an increase in receivables for mortgage loans sold to other investors.
Mortgage refinance activity was strong during the nine months ended March 31,
2003 due to the continued low market interest rate environment. FHLB Stock
increased by $670,000, or 13.3%, to $5.7 million at March 31, 2003 from $5.0
million at June 30, 2002 due to FHLB stock purchase requirements related to
outstanding advance balances.

Deposits decreased by $20.1 million, or 4.3%, to $452.5 million at March 31,
2003 from $472.6 million at June 30, 2002 largely due to a special Money Market
promotion in place at June 30, 2002, that concluded during the current fiscal
year period. Customers that had been attracted by the promotional rate generally
withdrew funds and sought higher yields when the promotion ended. During the
nine months ended March 31, 2003 the Company changed its pricing strategy for
retail deposits and is generally not a market rate leader for term deposits. In
response to historically low market interest rates, deposit customers have
withdrawn funds from matured time deposits and transferred those funds to more
liquid accounts. The Company offers premium rates to customers with multiple
relationships in order to retain existing deposits and attract new customers.
Partially offsetting the decrease in the balance of deposits was an increase in
FHLB advances as the Company took down fixed-rate fixed-term advances at
generally lower rates than comparable-term retail certificates of deposit. FHLB
advances increased by $4.8 million, or 4.9%, to $103.9 million at March 31, 2003
from $99.1 million at June 30, 2002.

Total stockholders' equity was $71.1 million and $71.3 million, respectively, at
March 31, 2003 and June 30, 2002. The Company purchased 282,500 shares of its
common stock during the nine months ended March 31, 2003 at a cost of $4.2
million. The purchase of 40,500 shares of common stock completed a repurchase
program commenced in December 2000 and the remaining 242,000 shares were
purchased under a new repurchase program announced in August 2002. Under this
new stock repurchase program the Company expects to acquire up to 184,000
additional shares of its common stock, subject to market conditions and other
factors. The Company's management believes that its common stock is an
attractive value at current trading prices and that stock repurchases are an
appropriate deployment of a portion of the Company's capital that enhances


                                       10
<PAGE>

shareholder value. With capital levels in excess of regulatory requirements, as
demonstrated in the capital table included later in this report, and an average
liquidity position of $149.6 million for the quarter ended March 31, 2003, the
Company implemented these repurchase programs without adversely affecting its
capital or liquidity positions or its ability to pay future dividends. In
addition, stock repurchase programs may reduce price volatility and enhance the
liquidity of the Company's common stock, which is generally advantageous for
shareholders.

Earnings totaled $4.5 million for the first nine months of the fiscal year.
Excluding dividends on unallocated Employee Stock Ownership Plan ("ESOP")
shares, dividends declared during the nine months ended March 31, 2003 totaled
$951,000.

Asset quality

Management believes that asset quality has improved during fiscal 2003.
Non-performing assets totaled $5.1 million at March 31, 2003 and $6.6 million at
June 30, 2003. The March 31, 2003 balance was 0.81% of total assets, as compared
to 1.01% of total assets at June 30, 2002.

The decrease in non-performing assets was due to a decrease in the balance of
non-performing loans. Non-performing loans decreased to $4.6 million at March
31, 2003 from $6.2 million at June 30, 2002, representing 1.16% and 1.48%,
respectively, of total loans at those dates.

The allowance for loan losses is increased by the provision for loan losses
charged to operations and reduced by reversals and net charge-offs. Management
establishes the allowance for loan losses through a process that begins with
estimates of probable loss inherent in the portfolio based on various
statistical analyses. These analyses consider historical and projected default
rates and loss severities; internal risk ratings; and geographic, industry and
other environmental factors. In establishing the allowance for loan losses,
management also considers the Company's current business strategy and credit
processes, including compliance with established guidelines for credit limits,
credit approvals, loan underwriting criteria and loan workout procedures.

The policy of the Company is to segment the allowance to correspond to the
various types of loans in the loan portfolio according to the underlying
collateral, which corresponds to the respective levels of quantified and
inherent risk. The initial assessment takes into consideration non-performing
loans and the valuation of the collateral supporting each loan. Non-performing
loans are risk-rated generally on a case-by-case basis based on qualitative and
quantitative factors that include, but are not limited to, collateral type and
estimated value, financial statement analysis, specific economic factors, cash
flow analysis, delinquency history and loan workout situations and progress.
Based upon this analysis, a quantified risk factor is assigned to each
non-performing loan. This results in an allocation to the overall allowance for
the corresponding type and severity of each non-performing loan.

Performing loans are also reviewed by collateral type, with similar risk factors
being assigned. These risk factors take into consideration, among other matters,
the borrower's ability to pay and the Company's past loan loss experience with
each type of loan. The assigned risk factors result in allocations to the
allowance corresponding to the risk-rated portfolio of performing loans.


                                       11
<PAGE>

In order to determine its overall adequacy, the allowance for loan losses is
reviewed by management on a monthly basis. While management uses available
information to recognize losses on loans, future additions to the allowance may
be necessary, based on changes in economic and local market conditions beyond
management's control. In addition, various regulatory agencies periodically
review the Company's loan loss allowance as an integral part of the examination
process. Accordingly, the Company may be required to take certain charge-offs
and/or recognize additions to the allowance based on the judgment of regulators
as determined by information provided to them during their examinations.

Based on relevant and presently available information, management believes that
the current allowance for loan losses is adequate. Following is (a) Summary of
the allowance for loan losses and (b) Non-performing assets table.

         (a) Summary of the allowance for loan losses

<TABLE>
<CAPTION>

                                     Three months ended             Nine months ended
                                          March 31,                     March 31,
                                     2003           2002           2003           2002
                                 --------------------------    --------------------------

<S>                              <C>            <C>            <C>            <C>
Balance at beginning of period   $ 4,660,178    $ 5,023,344    $ 4,583,897    $ 4,736,738
Provision for losses                 200,000      1,035,000      1,430,000      2,315,000
Charge-offs                         (372,560)    (1,486,115)    (1,744,696)    (2,555,393)
Recoveries                            92,156         36,318        310,573        112,202
                                 -----------    -----------    -----------    -----------
Balance at end of period         $ 4,579,774    $ 4,608,547    $ 4,579,774    $ 4,608,547
                                 ===========    ===========    ===========    ===========
</TABLE>


         (b) Non-performing assets
                                               March 31, 2003    June 30, 2002
                                               --------------    -------------
                                                   (Dollars in thousands)
Loans accounted for on a non-accrual basis:
  One-to-four family                               $ 1,039        $   527
  Commercial real estate                             2,738          3,681
  Commercial business                                   --            584
  Consumer                                             319            314
                                                   -------        -------
    Total                                          $ 4,096        $ 5,106
                                                   -------        -------
Loans 90 days past due and still accruing (1):
  One-to-four family                               $   535        $   780
  Commercial real estate                                --             --
  Commercial business                                   --             --
  Consumer                                               9            305
                                                   -------        -------
    Total                                          $   544        $ 1,085
                                                   -------        -------
    Total non-performing loans                     $ 4,640        $ 6,191
                                                   -------        -------
Other non-performing assets (2)                    $   480        $   410
                                                   -------        -------
   Total non-performing assets                     $ 5,120        $ 6,601
                                                   =======        =======
Restructured loans not included in other
  non-performing categories above                  $    --        $    --
                                                   =======        =======


                                       12
<PAGE>

Non-performing loans as a % of total loans            1.16%          1.48%
Non-performing loans as a % of total assets           0.73%          0.95%
Non-performing assets as a % of total assets          0.81%          1.01%

-------------------------
(1)   Delinquent FHA/VA guaranteed loans and delinquent loans with past due
      interest that, in the opinion of management, is collectible, are not
      placed on non-accrual.

(2)   Includes the net book value of real property acquired through foreclosure
      or deed in lieu of foreclosure and the net book value of repossessed
      automobiles, boats and trailers. Other non-performing assets are carried
      at the lower of cost or fair market value less estimated disposal costs.

Capital

The Office of Thrift Supervision (the "OTS") requires that the Bank meet minimum
tangible, leverage (core) and risk-based capital requirements. As of March 31,
2003 the Bank was in compliance with all regulatory capital requirements.
Capital levels in excess of regulatory requirements enabled the Bank to pay
dividends to the Company in order to fund common stock repurchases. The Bank's
required, actual and excess capital levels as of March 31, 2003 were as follows:

                                                                  Excess of
                                                                  Actual Over
                        Required    % of      Actual    % of      Regulatory
                          Amount    Assets    Amount    Assets    Requirement
                          ------    ------    ------    ------    -----------
                                       (Dollars in thousands)
Tangible Capital         $ 9,201     1.5%    $49,565     8.08%      $40,364
Core Capital              18,403     3.0%     49,565     8.08%       31,162
Risk-based Capital        31,228     8.0%     54,175    13.88%       22,947


Liquidity

The Company is required by OTS regulation to maintain sufficient liquidity to
assure its safe and sound operation. Liquid assets include cash, certain time
deposits, banker's acceptances and specified United States government, state or
federal agency obligations. For the quarter ended March 31, 2003 the Company's
average liquidity position was $149.6 million, which enabled the Company to
deploy a portion of that liquidity for stock repurchases. The Company adjusts
its liquidity levels in order to meet funding needs for deposit outflows,
payment of real estate taxes from escrowed funds, when applicable, and loan
commitments. The Company also adjusts liquidity as appropriate to meet its
asset/liability objectives.

Effect 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 of Others (FIN 45). FIN 45 requires disclosures be made by a
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also requires the recognition of
a liability by a guarantor at the inception of certain guarantees that it has
issued and that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and initial measurement provisions of this


                                       13
<PAGE>

Interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of FIN 45 does not have a material effect on the Company's
financial statements since the Company does not presently issue such guarantees.

In December 2002, the FASB issued Statement No. 148 (SFAS 148), Accounting for
Stock-Based Compensation - Transition and Disclosure, an amendment to FASB
Statement 123. SFAS 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS
No. 123 to require prominent disclosures in both the 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. SFAS 148 is
effective for financial statements for fiscal years ending after December 15,
2002 and for condensed interim financial statements issued after December 15,
2002. The Company has not adopted the voluntary change to the fair value based
method of accounting for stock-based employee compensation as of March 31, 2003.
Refer to Note 7 for required disclosures relating to stock-based compensation.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46). FIN 46 addresses consolidation by business
enterprises of variable interest entities that have certain characteristics. It
requires a business enterprise that has a controlling interest in a variable
interest entity (as defined by FIN 46) to include the assets, liabilities, and
results of the activities of the variable interest entity in the consolidated
financial statements of the business enterprise. FIN 46 applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
For variable interest entities acquired before February 1, 2003, it applies in
the first fiscal year or interim period beginning after June 15, 2003. The
impact of adopting FIN 46 will not be material, as the Company does not
presently have any variable interest entities.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
March 31, 2003 and 2002

General. Net earnings for the three months ended March 31, 2003 increased by
$1.0 million, or 139.1%, to $1.8 million, or $0.45 per diluted share, from
$745,000, or $0.18 per diluted share, for the three months ended March 31, 2002.

Interest Income. Interest income decreased by $1.2 million, or 12.1%, to $8.4
million for the three months ended March 31, 2003 from $9.6 million for the
three months ended March 31, 2002, primarily due to a decrease in the average
yield on interest-earning assets. The average yield on interest-earning assets
decreased by 72 basis points to 6.00% for the three months ended March 31, 2003
from 6.72% for the three months ended March 31, 2002, due to changes in the mix
of interest-earning assets and lower yields on all categories of
interest-earning assets in the continued low market interest rate environment.
In addition, the average balance of interest-earning assets decreased by $9.1
million, or 1.6%, to $562.7 million for the three months ended March 31, 2003
from $571.8 million for the three months ended March 31, 2002.


                                       14
<PAGE>

Interest income on loans receivable decreased by $851,000, or 10.8%, to $7.0
million for the three months ended March 31, 2003 from $7.9 million for the
three months ended March 31, 2002. The decrease in interest income on loans was
primarily due to a decrease in the average yield on loans. The average yield on
loans receivable decreased by 63 basis points to 6.80% for the three months
ended March 31, 2003 from 7.43% for the three months ended March 31, 2002. The
decrease in the average yield on loans was due to refinancing activity and to
interest rate reductions for adjustable-rate loans in the generally lower market
interest rate environment during the current year period. In addition, the
average balance of loans receivable decreased by $10.7 million, or 2.5%, to
$413.7 million for the three months ended March 31, 2003 from $424.4 million for
the three months ended March 31, 2002.

Interest income on mortgage-backed securities ("MBS") decreased by $162,000, or
18.6%, to $709,000 for the three months ended March 31, 2003 from $871,000 for
the three months ended March 31, 2002 primarily due to a decrease in the average
yield on MBS. The average yield on MBS decreased by 94 basis points to 4.52% for
the three months ended March 31, 2003 from 5.46% for the three months ended
March 31, 2002. The decrease in the average yield on MBS was partly due to
purchases yielding relatively lower rates since the prior year period. In
addition, adjustable-rate MBS repriced at lower rates in the generally lower
market interest rate environment. The average balance of MBS totaled $62.8
million and $63.8 million, respectively, for the three months ended March 31,
2003 and 2002.

Interest income on investment securities decreased by $154,000, or 18.7%, to
$669,000 for the three months ended March 31, 2003 from $824,000 for the three
months ended March 31, 2002. The average yield on investment securities
decreased by 67 basis points to 3.61% for the three months ended March 31, 2003
from 4.28% for the three months ended March 31, 2002 in the generally lower
market interest rate environment. In addition, the average balance of investment
securities decreased by $2.7 million, or 3.5% to $74.2 million for the three
months ended March 31, 2003 from $77.0 million for the three months ended March
31, 2002.

Interest Expense. Interest expense decreased by $1.6 million, or 29.1%, to $3.8
million for the three months ended March 31, 2003 from $5.4 million for the
three months ended March 31, 2002 primarily due to a decrease in interest on
deposits. Interest on deposits decreased by $1.5 million, or 37.0%, to $2.6
million for the three months ended March 31, 2003 from $4.1 million for the
three months ended March 31, 2002. The average cost of deposits decreased by 120
basis points to 2.41% for the three months ended March 31, 2003 from 3.61% for
the three months ended March 31, 2002. The decrease in the average cost of
deposits was due to changes in the mix of deposit types and to the generally
lower market interest rate environment during the three months ended March 31,
2003. Also contributing to the decrease in interest on deposits was a decrease
in the average balance of deposits. The average balance of deposits decreased by
$25.0 million, or 5.5%, to $428.0 million for the three months ended March 31,
2003 from $453.0 million for the three months ended March 31, 2002. In addition,
the Company lowered rates on deposit products and increased its use of wholesale
funding from the FHLB with generally lower interest costs than term deposits.

Interest on FHLB advances totaled $1.2 million and $1.3 million, respectively,
for the three months ended March 31, 2003 and 2001. The decrease in interest on
borrowings was primarily due to a decrease in the average cost of borrowings.
The average cost of borrowings decreased by 75 basis points to 4.65% for the
three months ended March 31, 2003 from 5.40% for the three months


                                       15
<PAGE>

ended March 31, 2002. Largely offsetting the decrease in the average cost of
borrowings was an increase in the average balance of borrowings. The average
balance of borrowings increased by $10.9 million, or 11.6%, to $105.2 million
for the three months ended March 31, 2003 from $94.3 million for the three
months ended March 31, 2002.

Net Interest Income. The decrease in interest income was more than offset by the
decrease in interest expense. As a result, net interest income before provision
for losses on loans increased by $400,000, or 9.4%, to $4.6 million for the
three months ended March 31, 2003 from $4.2 million for the three months ended
March 31, 2002. The Company's interest rate spread for the three months ended
March 31, 2003 increased to 3.15% from 2.80% for the three months ended March
31, 2002. In addition, the Company's net yield on interest-earning assets
increased to 3.30% for the three months ended March 31, 2003 from 2.97% for the
three months ended March 31, 2002.

Provision for Losses on Loans. Provision for losses on loans totaled $200,000
for the three months ended March 31, 2003 and $1.0 million for the three months
ended March 31, 2002. During the three months ended March 31, 2003 and 2002 the
Company recorded net charge-offs totaling $280,000 and $1.4 million,
respectively. For more information on asset quality see the asset quality
discussion which begins on page 11 of this report.

Noninterest Income. Noninterest income increased by $802,000, or 37.7%, to $2.9
million for the three months ended March 31, 2003 from $2.1 million for the
three months ended March 31, 2002. The increase in noninterest income was
largely due to increases in fees and service charges and gain on sale of loans.
Income from fees and service charges increased by $299,000, or 25.1%, to $1.5
million for the three months ended March 31, 2003 from $1.2 million for the
three months ended March 31, 2002. The increase in fees and service charges was
largely due to an increase in overdraft fees related to increases in overdraft
activity during the three months ended March 31, 2003. Gain on sale of loans
increased by $223,000, or 167.6%, to $356,000 for the three months ended March
31, 2003 from $133,000 for the three months ended March 31, 2002. The increase
in gain on sale of loans was primarily due to the Company's sale of its credit
card portfolio in January 2003. Principal balances sold totaled $2.2 million and
a gain of $165,000 was recorded on the sale. The Company chose to sell its
credit card portfolio due to competitive pressures and the prohibitive costs
related to offering a quality card to its customers. During the three months
ended March 31, 2003 the Company recorded a gain on the sale of investment
securities totaling $221,000. No gains on the sale of securities were recorded
for the three months ended March 31, 2002. Income from real estate-related
activities of the Company's subsidiaries increased by $75,000, or 22.6%, to
$409,000 for the three months ended March 31, 2003 from $334,000 for the three
months ended March 31, 2002 due to continued strong mortgage origination and
refinancing activity.

Noninterest expense. Noninterest expense increased by $455,000, or 10.7%, to
$4.7 million for the three months ended March 31, 2003 from $4.3 million, for
the three months ended March 31, 2002. The increase in noninterest expense was
largely due to an increase of $276,000, or 12.0%, in compensation and benefits
expense to $2.6 million for the three months ended March 31, 2003 from $2.3
million for the three months ended March 31, 2002. The increase in compensation
and benefits expense was due to pension contribution expense in addition to
annual salary and benefit cost increases and an increase of approximately three
full-time-equivalent employees. The Company is a participant in the Financial
Institutions Retirement Fund (the "FIRF"). FIRF has notified the Company that a
contribution will be required for fiscal 2003. During the three months ended


                                       16
<PAGE>

March 31, 2003 the Company recorded an $82,000 expense for pension
contributions. The FIRF had been in fully-funded status since July 1987;
therefore, no pension contribution expense was recorded for fiscal 1988 through
fiscal 2002. Noninterest expense also increased due to an increase in office
property and equipment and other expense. Office property and equipment expense
increased by $71,000, or 10.9%, to $726,000 for the three months ended March 31,
2003 from $655,000 for the three months ended March 31, 2002 primarily due to an
adjustment to the Company's accrual for real estate taxes on its office
buildings. Other expense increased by $177,000, or 16.5%, to $1.3 million for
the three months ended March 31, 2003 from $1.1 million for the three months
ended March 31, 2002. The increase in other expense was primarily due to a
$100,000 write-down on commercial real estate owned and to losses on the sale of
repossessed vehicles as the Company experienced generally depressed prices in
its market area on the disposal of previously owned automobiles. Advertising
expense decreased by $59,000, or 49.3%, to $61,000 for the three months ended
March 31, 2003 from $119,000 for the three months ended March 31, 2002, partly
offsetting the increases in other noninterest expense. The decrease in
advertising expense when compared to the prior year period was primarily due to
advertising promotion schedule variations. On a year-to-date basis advertising
expense increased by only 1.1% over the same period of the prior year.

Net earnings and income tax expense. Net earnings before income taxes increased
by $1.6 million, or 147.8%, to $2.7 million for the three months ended March 31,
2003 from $1.1 million for the three months ended March 31, 2002. Income tax
expense totaled $870,000 and $325,000, respectively, for the three months ended
March 31, 2003 and 2002. The Company's effective tax rate was 32.8% and 30.4%,
respectively, for the three months ended March 31, 2003 and 2002. Tax-exempt
income related to municipal bonds and bank owned life insurance comprised 9.0%
and 21.8%, respectively, of pretax earnings for the three months ended March 31,
2003 and 2002. The higher concentration of tax-exempt income for the three
months ended March 31, 2002 resulted in the relatively lower effective tax rate
for that period as compared to the three months ended March 31, 2003.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
March 31, 2003 and 2002

General. Net earnings for the nine months ended March 31, 2003 increased by $1.6
million, or 52.9%, to $4.5 million, or $1.12 per diluted share, from $2.9
million, or $0.70 per diluted share, for the nine months ended March 31, 2002.

Interest Income. Interest income decreased by $3.3 million, or 11.1%, to $27.1
million for the nine months ended March 31, 2003 from $30.4 million for the nine
months ended March 31, 2002, primarily due to a decrease in the average yield on
interest-earning assets. The average yield on interest-earning assets decreased
by 66 basis points to 6.36% for the nine months ended March 31, 2003 from 7.02%
for the nine months ended March 31, 2002, due to changes in the mix of
interest-earning assets and lower yields on all categories of interest-earning
assets in the continued low market interest rate environment. In addition, the
average balance of interest-earning assets decreased by $10.8 million, or 1.9%,
to $567.3 million for the nine months ended March 31, 2003 from $578.1 million
for the nine months ended March 31, 2002.

Interest income on loans receivable decreased by $2.6 million, or 10.3%, to
$22.4 million for the nine months ended March 31, 2003 from $25.0 million for
the nine months ended March 31, 2002. The decrease in interest income on loans
was primarily due to a decrease in the average yield on loans. The average


                                       17
<PAGE>

yield on loans receivable decreased by 70 basis points to 7.17% for the nine
months ended March 31, 2003 from 7.87% for the nine months ended March 31, 2002.
The decrease in the average yield on loans was due to refinancing activity and
to interest rate reductions for adjustable-rate loans in the generally lower
market interest rate environment during the current year period. In addition,
the average balance of loans receivable decreased by $6.9 million, or 1.6%, to
$416.7 million for the nine months ended March 31, 2003 from $423.6 million for
the nine months ended March 31, 2002.

Interest income on mortgage-backed securities increased by $821,000, or 49.8%,
to $2.5 million for the nine months ended March 31, 2003 from $1.6 million for
the nine months ended March 31, 2002 primarily due to an increase in the average
balance of such securities. The average balance of MBS increased by $28.3
million, or 73.3%, to $67.0 million for the nine months ended March 31, 2003
from $38.7 million for the nine months ended March 31, 2002. The Company's
investment policy allows that up to 60% of the investment portfolio may consist
of MBS issued by United States Agencies. These securities are consistent with
the Company's primary business of offering mortgage loans and generally have a
shorter duration than their stated maturity due to regular amortization and
refinancing activity. The average yield on MBS decreased by 77 basis points to
4.91% for the nine months ended March 31, 2003 from 5.68% for the nine months
ended March 31, 2002. The decrease in the average yield on MBS was primarily due
to purchases at relatively lower yields and to repricing of adjustable-rate MBS
at lower rates in the generally lower market interest rate environment.

Interest income on investment securities decreased by $987,000, or 31.5%, to
$2.1 million for the nine months ended March 31, 2003 from $3.1 million for the
nine months ended March 31, 2002. The average yield on investment securities
decreased by 141 basis points to 3.65% for the nine months ended March 31, 2003
from 5.06% for the nine months ended March 31, 2002 in the generally lower
market interest rate environment. In addition, the average balance of investment
securities decreased by $4.1 million, or 5.0%, to $78.4 million for the nine
months ended March 31, 2003 from $82.5 million for the nine months ended March
31, 2002. For the nine months ended March 31, 2003 the Company increased its
average investment in short-term mutual funds by $13.5 million to $34.4 million
from $20.9 million for the nine months ended March 31, 2002 rather than commit
to longer-term investments in the historically low market interest rate
environment during the period. The average yield on these funds for the nine
months ended March 31, 2003 was 2.78%.

Interest Expense. Interest expense decreased by $5.3 million, or 29.9%, to $12.6
million for the nine months ended March 31, 2003 from $17.9 million for the nine
months ended March 31, 2002. Interest on deposits decreased by $5.4 million, or
38.4%, to $8.8 million for the nine months ended March 31, 2003 from $14.2
million for the nine months ended March 31, 2002. The average cost of deposits
decreased by 144 basis points to 2.71% for the nine months ended March 31, 2003
from 4.15% for the nine months ended March 31, 2002. The decrease in the average
cost of deposits was due to changes in the mix of deposit types and to the
generally lower market interest rate environment during the nine months ended
March 31, 2003. During the nine months ended March 31, 2003 the percentage of
balances in transaction accounts increased to 45% of total deposits compared to
40% of total deposits during the same period of the prior year. Transaction
accounts generally carry a lower interest cost than certificates of deposit.
Also contributing to the decrease in interest on deposits was a decrease in the
average balance of deposits. The average balance of deposits decreased by $25.4
million, or 5.6%, to $431.2 million for the nine months ended March 31, 2003
from $456.6 million for the nine months


                                       18
<PAGE>

ended March 31, 2002 as depositors realigned their savings patterns in the
generally low market interest rate environment and chose higher-yielding
alternative investment products or deposit products offered by the Company's
competitors at attractive rates. During the three months ended March 31, 2003
the Company generally decreased interest rates paid on deposits in the continued
low market interest rate environment.

Interest on FHLB advances increased by $85,000, or 2.3%, to $3.8 million for the
nine months ended March 31, 2003 from $3.7 million for the nine months ended
March 31, 2002. The increase in interest on borrowings was primarily due to an
increase in the average balance of advances. The average balance of advances
increased by $19.9 million, or 22.9%, to $106.8 million for the nine months
ended March 31, 2003 from $86.9 million for the nine months ended March 31,
2002. Largely offsetting the increase in the average balance of borrowings was a
decrease in the average cost of borrowings. The average cost of borrowings
decreased by 96 basis points to 4.75% for the nine months ended March 31, 2003
from 5.71% for the nine months ended March 31, 2002.

Net Interest Income. The decrease in interest income was more than offset by the
decrease in interest expense. As a result, net interest income before provision
for losses on loans increased by $2.0 million, or 16.0%, to $14.5 million for
the nine months ended March 31, 2003 from $12.5 million for the nine months
ended March 31, 2002. The Company's interest rate spread for the nine months
ended March 31, 2003 increased to 3.25% from 2.62% for the nine months ended
March 31, 2002. In addition, the Company's net yield on interest-earning assets
increased to 3.41% for the nine months ended March 31, 2003 from 2.88% for the
nine months ended March 31, 2002.

Provision for Losses on Loans. Provision for losses on loans decreased by
$885,000, or 38.2%, to $1.4 million for the nine months ended March 31, 2003
from $2.3 million for the nine months ended March 31, 2002. During the nine
months ended March 31, 2003 and 2002 the Company recorded net charge-offs
totaling $1.4 million and $2.4 million, respectively.

Noninterest Income. Noninterest income increased by $613,000, or 8.9%, to $7.5
million for the nine months ended March 31, 2003 from $6.9 million for the nine
months ended March 31, 2002. During the nine months ended March 31, 2003 the
Company recorded a gain on the sale of investment securities totaling $259,000
while a loss of $23,000 on the sale of investment securities was recorded for
the nine months ended March 31, 2002. The increase in noninterest income was
also due to increases in fees and service charges and to gain on sale of loans
held for sale. Fees and service charges increased by $310,000, or 8.33%, to $4.0
million for the nine months ended March 31, 2003 from $3.7 million for the three
months ended March 31, 2002 primarily due to increased overdraft activity and
fees related to that activity. In addition, gain on sale of loans held for sale
increased by $210,000, or 44.8%, to $680,000 for the nine months ended March 31,
2003 from $470,000 for the nine months ended March 31, 2002 largely due to the
gain on the sale of the Company's credit card portfolio. During the nine months
ended March 31, 2002, the Company recorded a pretax gain of $456,000 on the sale
of a branch office to another financial institution. The gain was related to the
sale of deposits, loans and the building and fixtures of the branch office.
Other income increased by $263,000, or 25.4%, to $1.3 million for the nine
months ended March 31, 2003 from $1.0 million for the nine months ended March
31, 2002 partly due to income related to the increase in the cash surrender
value of bank owned life insurance ("BOLI"). BOLI earnings increased by $129,000
for the nine months ended March 31, 2003 as compared to the nine months ended
March 31, 2002.


                                       19
<PAGE>

Noninterest expense. Noninterest expense increased by $1.2 million, or 9.4%, to
$13.8 million for the nine months ended March 31, 2003 from $12.6 million, for
the nine months ended March 31, 2002. The increase in noninterest expense was
largely due to an increase of $693,000, or 10.1%, in compensation and benefits
expense to $7.5 million for the nine months ended March 31, 2003 from $6.8
million for the nine months ended March 31, 2002. The increase in compensation
and benefits expense was due to pension contribution expense and to annual
salary and benefit cost increases. During the nine months ended March 31, 2003
the Company recorded a $262,000 expense for pension contributions while no
expense was recorded for the nine months ended March 31, 2002. Noninterest
expense also increased due to an increase in office property and equipment and
other expense. Office property and equipment expense increased by $154,000, or
8.3%, for the nine months ended March 31, 2003 as compared to the nine months
ended March 31, 2002 partly due to an adjustment to the accrual for real estate
taxes on its office buildings. Other expense increased by $359,000, or 11.0%, to
$3.6 million for the nine months ended March 31, 2003 from $3.3 million for the
nine months ended March 31, 2002. The increase in other expense was partly due
to losses on the sale of repossessed vehicles. In addition, the Company opted to
change to a cash method of payment for certain item processing services rather
than maintaining compensating balances. Those cash payments for the nine months
ended March 31, 2003 totaled $84,000.

Net earnings and income tax expense. Net earnings before income taxes increased
by $2.3 million, or 52.2%, to $6.8 million for the nine months ended March 31,
2003 from $4.5 million for the nine months ended March 31, 2002. Income tax
expense totaled $2.3 million and $1.5 million, respectively, for the nine months
ended March 31, 2003 and 2002. The Company's effective tax rate was 33.4% and
33.8%, respectively, for the nine months ended March 31, 2003 and 2002.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market prices
and interest rates. The Company's market risk is primarily comprised of interest
rate risk resulting from its core banking activities of lending and deposit
taking. Interest rate risk is the risk that changes in market interest rates
might adversely affect the Company's net interest income or the economic value
of its portfolio of assets, liabilities and off-balance-sheet contracts.
Management continually develops and applies strategies to mitigate this risk.
The Company primarily relies on the OTS Net Portfolio Value Model (the "Model")
to measure its susceptibility to interest rate changes. For various assumed
hypothetical changes in market interest rates, the Model estimates the current
economic value of each type of asset, liability and off-balance-sheet contract.
The present value of expected net cash flows from existing assets minus the
present value of expected net cash flows from existing liabilities plus or minus
the present value of expected net cash flows from existing off-balance-sheet
contracts results in a net portfolio value ("NPV") estimate. An analysis of the
changes in NPV in the event of hypothetical changes in interest rates is
presented in the Form 10-K filed by the Company for the fiscal year ended June
30, 2002. Management does not believe that the Company has experienced any
material changes in its market risk position from that disclosed in the
Company's 2002 Form 10-K Annual Report as of June 30, 2002 or that the Company's
primary market risk exposures and how those exposures were managed during fiscal
2003 changed significantly when compared to June 30, 2002. The Company's NPV
ratio after a 200 basis point rate-shock was 8.15%, 8.05% and 8.10%,
respectively, at June 30,2002, September 30,2002 and December 31, 2002 as
measured by the OTS Model.


                                       20
<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on their evaluation within 90 days prior to the filing date of
this report, that the Company's disclosure controls and procedures (as defined
in Securities Exchange Act Rules 13a-14(c) and 15d-14(c)) are effective to
ensure that information required to be disclosed in the reports that the Company
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls subsequent to the date of the
foregoing evaluation.

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

      No matters were submitted to a vote of security holders during the period
covered by this report.

Exhibits and Reports on Form 8-K

(a)   Exhibits

      Exhibit No.
      -----------

            99.1  Written Statement of Chief Executive Officer furnished
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
                  U.S.C. Section 1350

            99.2  Written statement of Chief Financial Officer furnished
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18
                  U.S.C. Section 1350

(b)   Reports on Form 8-K

A report on Form 8-K was filed on January 24, 2003. The event reported was the
Company's announcement of earnings for the quarter ended December 31, 2002 in a
press release dated January 22, 2003.


                                       21
<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:  May 9, 2003             BY: /s/Barry E. Backhaus
                                            --------------------------
                                             Barry E. Backhaus
                                             President and
                                             Chief Executive Officer


         DATE:  May 9, 2003             BY: /s/Colin D. Anderson
                                            --------------------------
                                             Colin D. Anderson
                                             Senior Vice President and
                                             Chief Financial Officer


                                       22
<PAGE>

                    Certification of Chief Executive Officer
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Barry E. Backhaus, President and Chief Executive Officer, certify that:

      1.    I have reviewed this quarterly report on Form 10-Q of First Federal
            Bankshares, Inc.;

      2.    Based on my knowledge, this quarterly 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 quarterly report;

      3.    Based on my knowledge, the financial statements and other financial
            information included in this quarterly 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 quarterly report;

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

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

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

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

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

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

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


                                       23
<PAGE>

      6.    The registrant's other certifying officer and I have indicated in
            this quarterly report whether there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.


May 9, 2003                                /s/Barry E. Backhaus
                                           --------------------
Date                                       Barry E. Backhaus
                                           President and Chief Executive Officer


                                       24
<PAGE>

                    Certification of Chief Financial Officer
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Colin D. Anderson, Senior Vice President and Chief Financial Officer, certify
that:

      1.    I have reviewed this quarterly report on Form 10-Q of First Federal
            Bankshares, Inc.;

      2.    Based on my knowledge, this quarterly 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 quarterly report;

      3.    Based on my knowledge, the financial statements and other financial
            information included in this quarterly 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 quarterly report;

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

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

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

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

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

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

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


                                       25
<PAGE>

      6.    The registrant's other certifying officer and I have indicated in
            this quarterly report whether there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.


May 9, 2003                                /s/Colin D. Anderson
                                           --------------------
Date                                       Colin D. Anderson
                                           Senior Vice President and Chief
                                           Financial Officer


                                       26