**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington      D.C. 20549**

**FORM      10-Q**

| ý | Quarterly                Report Pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934 for the quarterly period ended March 31,                2007 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**OR**

|  ̈ | Transition                Report Pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|

**Commission      File Number 0-25509**

**First      Federal Bankshares, Inc.**

| **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) | (Zip                Code)             |

**712-277-0200**

| Class                                       | Outstanding                at May 7, 2007 |
|---------------------------------------------|-------------------------------------------|
| Common                Stock, $.01 par value | 3,395,371                                 |

----

B

|                                                                                                                                                                                    |                                                                                                                    |  Page |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|------------|
| **PART                  I**.                                                                                                                                                            | FINANCIAL                  INFORMATION                                                                                  |       |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  1**.                                                                                                                                                            | Financial                  Statements of First Federal Bankshares, Inc. and                  Subsidiaries               | 1          |
|                                                                                                                                                                                    |                                                                                                                    |       |
|                                                                                                                                                                                    |                                                                                                |       |
| Consolidated                  Statements of Financial Condition at March 31,                  2007 and June 30, 2006                                                                    | 1                                                                                                                       |
|                                                                                                                                                                                    |                                                                                                                    |       |
| Consolidated                  Statements of Income for the three and nine monthperiods ended                  March 31, 2007 and 2006                                                   | 2                                                                                                                       |
|                                                                                                                                                                                    |                                                                                                |       |
| Consolidated                  Statements of Changes in Stockholders’ Equity for                  the  nine month periods ended March 31, 2007 and                  2006 | 3                                                                                                                       |
|                                                                                                                                                                                    |                                                                                                                    |       |
| Consolidated                  Statements of Comprehensive Income for the three and nine                  month periods ended March 31, 2007 and 2006                               | 4                                                                                                                       |
|                                                                                                                                                                                    |                                                                                                                    |       |
| Consolidated                  Statements of Cash Flows for the nine month periods ended                  March 31, 2007 and 2006                                                   | 5                                                                                                                       |
|                                                                                                                                                                                    |                                                                                                                    |
| Notes                  to Consolidated Financial Statements                                                                                                                             | 6                                                                                                                       |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  2**.                                                                                                                                                            | Management's                  Discussion and Analysis of Financial Condition and                  Results of Operations | 12         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  3**.                                                                                                                                                            | Quantitative                  and Qualitative Disclosures about Market                  Risk                            | 21         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  4**.                                                                                                                                                            | Controls                  and Procedures                                                                                | 22         |
|                                                                                                                                                                                    |                                                                                                                    |       |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **PART                  II**.                                                                                                                                                           | OTHER                  INFORMATION                                                                                      | 22         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  1**.                                                                                                                                                            | Legal                  Proceedings                                                                                      | 22         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  1A**.                                                                                                                                                           | Risk                  Factors                                                                                           | 22         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  2**.                                                                                                                                                            | Unregistered                  Sales of Equity Securities and Use of                  Proceeds                           | 22         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  3**.                                                                                                                                                            | Defaults                  upon Senior Securities                                                                        | 23         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  4**.                                                                                                                                                            | Submission                  of Matters to a Vote of Security                  Holders                                   | 23         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  5**.                                                                                                                                                            | Other                  Information                                                                                      | 23         |
|                                                                                                                                                                                    |                                                                                                                    |       |
| **ITEM                  6**.                                                                                                                                                            | Exhibits                                                                                                                | 23         |
|                                                                                                                                                                                    |                                                                                                                    |       |
|                                                                                                                                                                                    | Signatures                                                                                                              | 24         |

----

*Index*

|                                                                                                                                                            |   |                     |        |   |                    |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|-------------|--------|-------------------------|--------|
| **PART                I.               FINANCIAL  INFORMATION**            |   |                     |        |   |                    |   |
| **  ITEM                1.               FINANCIAL  STATEMENTS** |   |                     |        |   |                    |   |
|                                                                                                                                                            |   |                     |        |   |                    |   |
| **FIRST FEDERAL BANKSHARES,                INC. and SUBSIDIARIES**                                                           |
| **CONSOLIDATED STATEMENTS                OF FINANCIAL CONDITION (Unaudited)**                                                          |
|                                                                                                                                                            |   |                     |        |   |                    |   |
|                                                                                                                                                            |   | March                31, |        |   | June                30, |   |
|                                                                                                                                                            |   | 2007                     |        |   | 2006                    |   |
| ASSETS                                                                                                                                                          |   |                     |        |   |                    |   |
| Cash                and due from banks                                                                                                                          |   | $                        | 9,154,991   |   |                    | $      | 15,157,203 |   |
| Interest-bearing                deposits in other financial institutions                                                                                        |   |                     | 13,316,665  |   |                    |   | 24,747,546 |   |
| Cash                and cash equivalents                                                                                                                        |   |                     | 22,471,656  |   |                    |   | 39,904,749 |   |
| Securities                available-for-sale, at fair value (amortized cost                                                                                     |   |                     |        |   |                    |   |   |   |
| of                $131,416,922 and $47,839,382, respectively)                                                                                                   |   |                     | 131,375,582 |   |                    |   | 47,319,732 |   |
| Securities                held-to-maturity, at amortized cost (fair value                                                                                       |   |                     |        |   |                    |   |   |   |
| of                $11,587,378 and $12,971,633, respectively)                                                                                                    |   |                     | 11,576,265  |   |                    |   | 13,077,053 |   |
| Loans                receivable                                                                                                                                 |   |                     | 429,348,839 |   |                    |   | 462,494,813 |   |
| Less                allowance for loan losses                                                                                                                   |   |                     | 2,031,177   |   |                    |   | 5,465,563 |   |
| Net                loans                                                                                                                                        |   |                     | 427,317,662 |   |                    |   | 457,029,250 |   |
| Office                property and equipment, net                                                                                                               |   |                     | 14,627,056  |   |                    |   | 12,545,414 |   |
| Federal                Home Loan Bank ("FHLB") stock, at cost                                                                                                   |   |                     | 3,826,600   |   |                    |   | 5,161,600 |   |
| Accrued                interest receivable                                                                                                                      |   |                     | 2,966,440   |   |                    |   | 2,627,980 |   |
| Goodwill                                                                                                                                                        |   |                     | 18,417,040  |   |                    |   | 18,417,040 |   |
| Other                assets                                                                                                                                     |   |                     | 15,127,830  |   |                    |   | 16,452,441 |   |
| Total                assets                                                                                                                                     |   | $                        | 647,706,131 |   |                    | $      | 612,535,259 |   |
|                                                                                                                                                            |   |                     |        |   |                    |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                                                             |   |                     |        |   |                    |   |   |   |
|                                                                                                                                                            |   |                     |        |   |                    |   |   |   |
| LIABILITIES                                                                                                                                                     |   |                     |        |   |                    |   |   |   |
| Deposits                                                                                                                                                        |   | $                        | 505,529,672 |   |                    | $      | 446,056,388 |   |
| Advances                from FHLB and other borrowings                                                                                                          |   |                     | 67,154,737  |   |                    |   | 92,753,665 |   |
| Advance                payments by borrowers for taxes and insurance                                                                                            |   |                     | 379,855     |   |                    |   | 976,658 |   |
| Accrued                interest payable                                                                                                                         |   |                     | 2,884,527   |   |                    |   | 2,037,740 |   |
| Accrued                expenses and other liabilities                                                                                                           |   |                     | 1,665,537   |   |                    |   | 2,386,914 |   |
| Total                liabilities                                                                                                                                |   |                     | 577,614,328 |   |                    |   | 544,211,365 |   |
|                                                                                                                                                            |   |                     |        |   |                    |   |   |   |
| STOCKHOLDERS'                EQUITY                                                                                                                             |   |                     |        |   |                    |   |   |   |
| Common                stock, $.01 par value, 12,000,000 shares authorized;                                                                                      |   |                     |        |   |                    |   |   |   |
| 5,066,226                and 5,012,375 shares issued, respectively                                                                                              |   |                     | 50,594      |   |                    |   | 50,109 |   |
| Additional                paid-in capital                                                                                                                       |   |                     | 39,143,757  |   |                    |   | 38,293,233 |   |
| Retained                earnings, substantially restricted                                                                                                      |   |                     | 58,383,625  |   |                    |   | 57,013,427 |   |
| Treasury                stock, at cost, 1,670,855 and 1,632,266 shares,                respectively                                                             |   |                     | (26,765,123 | )      |                    |   | (25,920,685 | ) |
| Accumulated                other comprehensive loss                                                                                                             |   |                     | (26,340     | )      |                    |   | (325,650 | ) |
| Unearned                employee stock ownership plan ("ESOP")                                                                                                  |   |                     | (694,710    | )      |                    |   | (786,540 | ) |
| Total                stockholders' equity                                                                                                                       |   |                     | 70,091,803  |   |                    |   | 68,323,894 |   |
| Total                liabilities and stockholders' equity                                                                                                       |   | $                        | 647,706,131 |   |                    | $      | 612,535,259 |   |

----

*Index*

| **FIRST                  FEDERAL BANKSHARES, INC. and                  SUBSIDIARIES**             |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED STATEMENTS OF INCOME (Unaudited)**                                       |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   | Three                  Months |   |   | Nine                  Months |   |
|                                                                                                                                                          |   | Ended                  March 31, |   |   | Ended                  March 31, |   |
|                                                                                                                                                          |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| Interest                  income:                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                  receivable                                                                                                                             |   | $ | 7,341,477 |   |   | $ | 7,497,959 |   |   | $ | 22,512,248 |   |   | $ | 21,628,807 |   |
| Investment                  securities                                                                                                                        |   |   | 1,530,616 |   |   |   | 679,878 |   |   |   | 3,329,176 |   |   |   | 2,009,029 |   |
| Interest-bearing                  deposits in other financial institutions                                                                                    |   |   | 73,503 |   |   |   | 74,976 |   |   |   | 317,336 |   |   |   | 169,405 |   |
| Total                  interest income                                                                                                                        |   |   | 8,945,596 |   |   |   | 8,252,813 |   |   |   | 26,158,760 |   |   |   | 23,807,241 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense:                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                                                      |   |   | 4,183,302 |   |   |   | 2,748,065 |   |   |   | 11,389,579 |   |   |   | 7,537,022 |   |
| Advances                  from FHLB and other borrowings                                                                                                      |   |   | 918,449 |   |   |   | 1,143,565 |   |   |   | 2,958,206 |   |   |   | 3,419,363 |   |
| Total                  interest expense                                                                                                                       |   |   | 5,101,751 |   |   |   | 3,891,630 |   |   |   | 14,347,785 |   |   |   | 10,956,385 |   |
| Net                  interest income                                                                                                                          |   |   | 3,843,845 |   |   |   | 4,361,183 |   |   |   | 11,810,975 |   |   |   | 12,850,856 |   |
| Provision                  for losses on loans                                                                                                                |   |   | 31,424 |   |   |   | 320,000 |   |   |   | 534,087 |   |   |   | 1,070,000 |   |
| Net                  interest income after provision for losses on loans                                                                                      |   |   | 3,812,421 |   |   |   | 4,041,183 |   |   |   | 11,276,888 |   |   |   | 11,780,856 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                  income:                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                  charges on deposit accounts                                                                                                          |   |   | 706,211 |   |   |   | 696,587 |   |   |   | 2,363,426 |   |   |   | 2,318,398 |   |
| Service                  charges on loans                                                                                                                     |   |   | 79,663 |   |   |   | 67,815 |   |   |   | 220,075 |   |   |   | 267,354 |   |
| Gain                  (loss) on sale of real estate held for development                                                                                      |   |   | 15,000 |   |   |   | - |   |   |   | 75,000 |   |   |   | (241,649 | ) |
| Gain                  on sale of securities                                                                                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 202,944 |   |
| Gain                  on sale of loans                                                                                                                        |   |   | 135,387 |   |   |   | 91,473 |   |   |   | 481,294 |   |   |   | 489,441 |   |
| Other                  income                                                                                                                                 |   |   | 365,589 |   |   |   | 388,890 |   |   |   | 1,180,714 |   |   |   | 1,191,026 |   |
| Total                  non-interest income                                                                                                                    |   |   | 1,301,850 |   |   |   | 1,244,765 |   |   |   | 4,320,509 |   |   |   | 4,227,514 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                  expense:                                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation                  and benefits                                                                                                                    |   |   | 2,520,922 |   |   |   | 2,472,831 |   |   |   | 7,535,219 |   |   |   | 7,265,640 |   |
| Office                  property and equipment                                                                                                                |   |   | 751,356 |   |   |   | 722,728 |   |   |   | 2,116,168 |   |   |   | 2,115,380 |   |
| Data                  processing, ATM and debit card transaction                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| costs,                  and other item processing expense                                                                                                     |   |   | 243,867 |   |   |   | 244,479 |   |   |   | 740,887 |   |   |   | 740,868 |   |
| Professional,                  insurance and regulatory expense                                                                                               |   |   | 251,598 |   |   |   | 313,042 |   |   |   | 810,387 |   |   |   | 779,121 |   |
| Advertising,                  donations and public relations                                                                                                  |   |   | 160,197 |   |   |   | 160,360 |   |   |   | 543,872 |   |   |   | 536,360 |   |
| Communications,                  postage and office supplies                                                                                                  |   |   | 212,019 |   |   |   | 202,157 |   |   |   | 614,059 |   |   |   | 595,896 |   |
| Other                  expense                                                                                                                                |   |   | 348,513 |   |   |   | 184,388 |   |   |   | 866,536 |   |   |   | 547,696 |   |
| Total                  non-interest expense                                                                                                                   |   |   | 4,488,472 |   |   |   | 4,299,985 |   |   |   | 13,227,128 |   |   |   | 12,580,961 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before income taxes and discontinued operations                                                                                       |   |   | 625,799 |   |   |   | 985,963 |   |   |   | 2,370,269 |   |   |   | 3,427,409 |   |
| Income                  taxes                                                                                                                                 |   |   | 120,000 |   |   |   | 248,000 |   |   |   | 561,000 |   |   |   | 936,000 |   |
| Income                  from continuing operations                                                                                                            |   |   | 505,799 |   |   |   | 737,963 |   |   |   | 1,809,269 |   |   |   | 2,491,409 |   |
| Income                  from discontinued operations, net of tax (including                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| gain                  on disposal of $510,000, net of tax, in 2007)                                                                                           |   |   | 513,883 |   |   |   | 27,770 |   |   |   | 589,679 |   |   |   | 97,426 |   |
| Net                  income                                                                                                                                   |   | $ | 1,019,682 |   |   | $ | 765,733 |   |   | $ | 2,398,948 |   |   | $ | 2,588,835 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per                  share information:                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  earnings per share from continuing operations                                                                                          |   | $ | 0.15 |   |   | $ | 0.22 |   |   | $ | 0.54 |   |   | $ | 0.73 |   |
| Basic                  earnings per share from discontinued operations                                                                                        |   |   | 0.16 |   |   |   | 0.01 |   |   |   | 0.18 |   |   |   | 0.03 |   |
| Basic                  earnings per share                                                                                                                     |   | $ | 0.31 |   |   | $ | 0.23 |   |   | $ | 0.72 |   |   | $ | 0.76 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                  earnings per share from continuing operations                                                                                        |   | $ | 0.15 |   |   | $ | 0.22 |   |   | $ | 0.54 |   |   | $ | 0.72 |   |
| Diluted                  earnings per share from discontinued operations                                                                                      |   |   | 0.15 |   |   |   | 0.01 |   |   |   | 0.18 |   |   |   | 0.03 |   |
| Diluted                  earnings per share                                                                                                                   |   | $ | 0.30 |   |   | $ | 0.23 |   |   | $ | 0.72 |   |   | $ | 0.75 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  declared per share                                                                                                                 |   | $ | 0.105 |   |   | $ | 0.100 |   |   | $ | 0.310 |   |   | $ | 0.300 |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  notes to consolidated financial statements.                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

*Index*

| **FIRST                FEDERAL BANKSHARES, INC. and SUBSIDIARIES**         |
|----------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                STATEMENTS OF STOCKHOLDERS'                EQUITY (Unaudited)**  |
|                                                                                                     |   |   |   |   |   |   |
|                                                                                                     |   | Nine                Months    |   |
|                                                                                                     |   | Ended                March 31, |   |
|                                                                                                     |   | 2007 |   |   | 2006 |   |
| Capital                Stock:                                                                            |   |   |   |   |   |   |
| Beginning                of year balance                                                                 |   | $ | 50,109 |   |   | $ | 49,770 |   |
| Stock                options exercised: 50,611 and 30,846 shares, respectively                           |   |   | 485 |   |   |   | 309 |   |
| Amortization                of employee stock grants                                                     |   |   | - |   |   |   | 97 |   |
| Reclassification                due to adoption of SFAS 123(R)                                           |   |   | - |   |   |   | (112 | ) |
| End                of period balance                                                                     |   |   | 50,594 |   |   |   | 50,064 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |
| Additional                paid-in capital:                                                               |   |   |   |   |   |   |   |   |
| Beginning                of year balance                                                                 |   |   | 38,293,233 |   |   |   | 37,761,587 |   |
| Stock                options exercised                                                                   |   |   | 655,295 |   |   |   | 299,127 |   |
| Stock                compensation expense                                                                |   |   | 72,196 |   |   |   | 36,942 |   |
| Employee                stock grants awarded                                                             |   |   | (5,742 | ) |   |   | - |   |
| Stock                appreciation of allocated ESOP shares                                               |   |   | 107,179 |   |   |   | 97,376 |   |
| Amortization                of employee stock grants                                                     |   |   | 21,596 |   |   |   | 38,197 |   |
| Reclassification                due to adoption of SFAS 123(R)                                           |   |   | - |   |   |   | (41,807 | ) |
| End                of period balance                                                                     |   |   | 39,143,757 |   |   |   | 38,191,422 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |
| Retained                earnings, substantially restricted:                                              |   |   |   |   |   |   |   |   |
| Beginning                of year balance                                                                 |   |   | 57,013,427 |   |   |   | 55,028,733 |   |
| Net                income                                                                                |   |   | 2,398,948 |   |   |   | 2,588,835 |   |
| Dividends                paid on common stock                                                            |   |   | (1,028,750 | ) |   |   | (1,017,753 | ) |
| End                of period balance                                                                     |   |   | 58,383,625 |   |   |   | 56,599,815 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |
| Treasury                stock, at cost:                                                                  |   |   |   |   |   |   |   |   |
| Beginning                of year balance                                                                 |   |   | (25,920,685 | ) |   |   | (21,747,743 | ) |
| Employee                stock grants awarded (forfeited), net                                            |   |   | 5,742 |   |   |   | - |   |
| Treasury                stock acquired - 38,589 and 203,440 shares, respectively                         |   |   | (850,180 | ) |   |   | (4,172,942 | ) |
| End                of period balance                                                                     |   |   | (26,765,123 | ) |   |   | (25,920,685 | ) |
|                                                                                                     |   |   |   |   |   |   |   |   |
| Accumulated                other comprehensive income (loss):                                            |   |   |   |   |   |   |   |   |
| Beginning                of year balance                                                                 |   |   | (325,650 | ) |   |   | 158,570 |   |
| Net                change in unrealized gains (losses) on securities                                     |   |   |   |   |   |   |   |   |
| available-for-sale,                net of tax expense                                                    |   |   | 299,310 |   |   |   | (208,660 | ) |
| Less:                reclassification adjustment for net realized gains                                  |   |   |   |   |   |   |   |   |
| included                in net income, net of tax expense                                                |   |   | - |   |   |   | 127,246 |   |
| End                of period balance                                                                     |   |   | (26,340 | ) |   |   | (177,336 | ) |
|                                                                                                     |   |   |   |   |   |   |   |   |
| Unearned                ESOP shares:                                                                     |   |   |   |   |   |   |   |   |
| Beginning                of year balance                                                                 |   |   | (786,540 | ) |   |   | (913,890 | ) |
| ESOP                shares allocated                                                                     |   |   | 91,830 |   |   |   | 96,070 |   |
| End                of period balance                                                                     |   |   | (694,710 | ) |   |   | (817,820 | ) |
|                                                                                                     |   |   |   |   |   |   |   |   |
| Unearned                employee stock grants:                                                           |   |   |   |   |   |   |   |   |
| Beginning                of year balance                                                                 |   |   | - |   |   |   | (41,822 | ) |
| Reclassification                due to adoption of SFAS 123(R)                                           |   |   | - |   |   |   | 41,822 |   |
| End                of period balance                                                                     |   |   | - |   |   |   | - |   |
| Total                stockholders' equity                                                                |   | $ | 70,091,803 |   |   | $ | 67,925,460 |   |
|                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |   |
| See                notes to consolidated financial statements.                                           |   |   |   |   |   |   |   |   |

----

*Index*

| **FIRST                FEDERAL BANKSHARES, INC. and                SUBSIDIARIES**           |
|----------------------------------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)**                                                 |
|                                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                               |   | Three                Months Ended |   |   | Nine                Months Ended |   |
|                                                                                                                                               |   | March                31,    |   |   | March                31,    |   |
|                                                                                                                                               |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| Net                income                                                                                                                          |   | $ | 1,019,682 |   |   | $ | 765,733 |   |   | $ | 2,398,948 |   |   | $ | 2,588,835 |   |
| Other                comprehensive income (loss):                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                holding gains (losses) arising during                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| the                period, net of tax                                                                                                              |   |   | 53,212 |   |   |   | (57,043 | ) |   |   | 299,310 |   |   |   | (208,660 | ) |
| Less:                reclassification adjustment for net realized gains                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| included                in net income, net of tax expense                                                                                          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 127,246 |   |
| Other                comprehensive income (loss), net of tax                                                                                       |   |   | 53,212 |   |   |   | (57,043 | ) |   |   | 299,310 |   |   |   | (335,906 | ) |
| Total                comprehensive income                                                                                                          |   | $ | 1,072,894 |   |   | $ | 708,690 |   |   | $ | 2,698,258 |   |   | $ | 2,252,929 |   |

----

*Index*

| **FIRST                  FEDERAL BANKSHARES, INC. and                  SUBSIDIARIES**       |
|---------------------------------------------------------------------------------------------------------------------------|
| **CONSOLIDATED                  STATEMENTS OF CASH FLOWS (Unaudited)**                                |
|                                                                                                                      |   | Nine                  Months Ended |   |
|                                                                                                                      |   | March                  31,    |   |
|                                                                                                                      |   | 2007 |   |   | 2006 |   |
| Cash                  flows from continuing operating activities:                                                         |   |   |   |   |   |   |
| Net                  income                                                                                               |   | $ | 2,398,948 |   |   | $ | 2,588,835 |   |
| Income                  from discontinued operations                                                                      |   |   | (589,679 | ) |   |   | (97,426 | ) |
| Adjustments                  to reconcile net income to net cash:                                                         |   |   |   |   |   |   |   |   |
| Loans                  originated for sale to investors                                                                   |   |   | (30,512,000 | ) |   |   | (28,026,000 | ) |
| Proceeds                  from sale of loans originated for sale                                                          |   |   | 31,639,058 |   |   |   | 27,587,349 |   |
| Provision                  for losses on loans                                                                            |   |   | 534,087 |   |   |   | 1,070,000 |   |
| Depreciation                  and amortization                                                                            |   |   | 794,345 |   |   |   | 980,647 |   |
| Provision                  for deferred taxes                                                                             |   |   | 438,000 |   |   |   | (4,000 | ) |
| Equity-based                  compensation                                                                                |   |   | 292,801 |   |   |   | 172,515 |   |
| Tax                  benefit resulting from stock options exercised                                                       |   |   | (151,000 | ) |   |   | (24,000 | ) |
| Net                  gain on sale of loans                                                                                |   |   | (481,294 | ) |   |   | (489,441 | ) |
| Net                  gain on sale of securities available-for-sale                                                        |   |   | - |   |   |   | (202,944 | ) |
| Net                  (gain) loss on sale of real estate held for development                                              |   |   | (75,000 | ) |   |   | 241,649 |   |
| Amortization                  of premiums and discounts on loans and securities                                           |   |   | (291,507 | ) |   |   | (161,534 | ) |
| Increase                  in accrued interest receivable                                                                  |   |   | (338,460 | ) |   |   | (429,921 | ) |
| Decrease                  (increase) in other assets                                                                      |   |   | 1,169,427 |   |   |   | (344,113 | ) |
| Increase                  in accrued interest payable                                                                     |   |   | 846,787 |   |   |   | 590,247 |   |
| Decrease                  in accrued expenses and other liabilities                                                       |   |   | (210,153 | ) |   |   | (318,799 | ) |
| Increase                  (decrease) in accrued taxes on income                                                           |   |   | (888,269 | ) |   |   | 629,821 |   |
| Net                  cash provided by continuing operating activities                                                     |   |   | 4,576,091 |   |   |   | 3,762,885 |   |
| Cash                  flows from continuing investing activities:                                                         |   |   |   |   |   |   |   |   |
| Proceeds                  from maturities of securities held-to-maturity                                                  |   |   | 1,510,893 |   |   |   | 3,771,408 |   |
| Proceeds                  from sale of securities available-for-sale                                                      |   |   | - |   |   |   | 264,466 |   |
| Purchase                  of securities available-for-sale                                                                |   |   | (92,479,223 | ) |   |   | (9,859,625 | ) |
| Proceeds                  from maturities of securities available-for-sale                                                |   |   | 8,945,286 |   |   |   | 19,529,168 |   |
| Redemption                  of Federal Home Loan Bank Stock, net                                                          |   |   | 1,335,000 |   |   |   | 378,300 |   |
| Loans                  purchased                                                                                          |   |   | (10,247,000 | ) |   |   | (21,526,000 | ) |
| Proceeds                  from sales of loans                                                                             |   |   | 10,356,585 |   |   |   | - |   |
| Decrease                  (increase) in loans receivable                                                                  |   |   | 27,944,279 |   |   |   | (7,873,558 | ) |
| Proceeds                  from sale of office property and equipment                                                      |   |   | 66,511 |   |   |   | 155 |   |
| Purchase                  of office property and equipment                                                                |   |   | (3,044,909 | ) |   |   | (359,703 | ) |
| Proceeds                  from sale of foreclosed real estate                                                             |   |   | 365,168 |   |   |   | 260,725 |   |
| Proceeds                  from sale of real estate held for development                                                   |   |   | 1,989,961 |   |   |   | 487,249 |   |
| Net                  expenditures on real estate held for development                                                     |   |   | (1,754,991 | ) |   |   | (1,206,526 | ) |
| Net                  cash used in continuing investing activities                                                         |   |   | (55,012,440 | ) |   |   | (16,133,941 | ) |
| Cash                  flows from continuing financing activities:                                                         |   |   |   |   |   |   |   |   |
| Increase                  in deposits                                                                                     |   |   | 59,473,284 |   |   |   | 23,446,423 |   |
| Proceeds                  from FHLB advances and other borrowings                                                         |   |   | 4,401,072 |   |   |   | 9,797,066 |   |
| Repayment                  of FHLB advances and other borrowings                                                          |   |   | (30,000,000 | ) |   |   | (17,000,000 | ) |
| Decrease                  in advances from borrowers for taxes and insurance                                              |   |   | (596,803 | ) |   |   | (551,140 | ) |
| Issuance                  of common stock under stock options exercised                                                   |   |   | 504,780 |   |   |   | 275,436 |   |
| Tax                  benefit resulting from stock options exercised                                                       |   |   | 151,000 |   |   |   | 24,000 |   |
| Repurchase                  of common stock                                                                               |   |   | (850,180 | ) |   |   | (4,172,942 | ) |
| Cash                  dividends paid                                                                                      |   |   | (1,028,750 | ) |   |   | (1,017,753 | ) |
| Net                  cash provided by continuing financing activities                                                     |   |   | 32,054,403 |   |   |   | 10,801,090 |   |
| Cash                  flows from discontinued operations:                                                                 |   |   |   |   |   |   |   |   |
| Net                  cash provided by operating activities of discontinued                  operations                    |   |   | 96,686 |   |   |   | 57,272 |   |
| Net                  cash provided by investing activities of discontinued                  operations                    |   |   | 1,027,167 |   |   |   | - |   |
| Net                  cash used in financing activities of discontinued                  operations                        |   |   | (175,000 | ) |   |   | (135,000 | ) |
| Net                  cash provided by (used in) discontinued operations                                                   |   |   | 948,853 |   |   |   | (77,728 | ) |
| Decrease                  in cash and cash equivalents                                                                    |   |   | (17,433,093 | ) |   |   | (1,647,694 | ) |
| Cash                  and cash equivalents at beginning of period                                                         |   |   | 39,904,749 |   |   |   | 31,335,707 |   |
| Cash                  and cash equivalents at end of period                                                               |   | $ | 22,471,656 |   |   | $ | 29,688,013 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
| Supplemental                  disclosures:                                                                                |   |   |   |   |   |   |   |   |
| Cash                  paid during the period for interest                                                                 |   | $ | 13,500,998 |   |   | $ | 10,366,138 |   |
| Cash                  paid during the period for income taxes                                                             |   | $ | 953,279 |   |   | $ | 353,122 |   |
|                                                                                                                      |   |   |   |   |   |   |   |   |
|   See                  notes to consolidated financial statements.                                              |   |   |   |   |   |   |   |   |

----

*Index*

**FIRST      FEDERAL BANKSHARES, INC. and SUBSIDIARIES**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note      1.  Basis of presentation**

***Critical      Judgments and Estimates***

**Note      2.  Organization**

**Note      3.  Use of Estimates**

**Note      4.  Discontinued Operations**

----

*Index*

|                                                                 |   | Three                  Months    |    |   | Nine                  Months     |   |
|----------------------------------------------------------------------|--------|----------------------------------|---------|--------|----------------------------------|--------|
|                                                                 |   | Ended                  March 31, |    |   | Ended                  March 31, |   |
|                                                                 |   | 2007                             |    |   | 2006                             |   |   | 2007 |   |   | 2006 |   |
| Non-interest                  income                                 |   | $                                | 118,349 |   |                             | $      | 173,581 |   |   | $ | 478,684 |   |   | $ | 512,246 |   |
| Non-interest                  expense                                |   |                             | 103,787 |   |                             |   | 128,811 |   |   |   | 339,326 |   |   |   | 355,820 |   |
| Income                  before income taxes                          |   |                             | 14,562  |   |                             |   | 44,770 |   |   |   | 139,358 |   |   |   | 156,426 |   |
| Income                  taxes                                        |   |                             | 11,000  |   |                             |   | 17,000 |   |   |   | 60,000 |   |   |   | 59,000 |   |
| Operating                  income from discontinued operations       |   |                             | 3,562   |   |                             |   | 27,770 |   |   |   | 79,358 |   |   |   | 97,426 |   |
| Gain                  on sale of discontinued operations             |   |                             | 821,321 |   |                             |   | - |   |   |   | 821,321 |   |   |   | - |   |
| Tax                  on gain on sale of discontinued operations      |   |                             | 311,000 |   |                             |   | - |   |   |   | 311,000 |   |   |   | - |   |
| Gain                  on sale of discontinued operations, net of tax |   |                             | 510,321 |   |                             |   | - |   |   |   | 510,321 |   |   |   | - |   |
| Income                  from discontinued operations                 |   | $                                | 513,883 |   |                             | $      | 27,770 |   |   | $ | 589,679 |   |   | $ | 97,426 |   |
|                                                                 |   |                             |    |   |                             |   |   |   |   |   |   |   |   |   |   |   |

**Note      5.  Effect of New Accounting Standards**

*Accounting for Servicing of      Financial Assets (as Amended)*
*Accounting for      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities      *

*Accounting for Uncertainty in Income Taxes*
*Accounting for Income Taxes *

*Accounting for Deferred Compensation and Postretirement Benefit Aspects      of      Endorsement Split-Dollar Life Insurance Arrangements *

*, Fair Value Measurements*
*,*

----

*Index*

*, Employers’ Accounting for      Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB      Statements No. 87, 88, 106 and 132 (R) *
*.*

*The Fair Value Option for Financial Assets and Financial      Liabilities *
* *

**Note      6.  Earnings Per Share**

|                                                                          |   | Three                  Months Ended          |      |   | Nine                  Months Ended           |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|--------|----------------------------------------------|--------|
|                                                                          |   | March                  31,    |      |   | March                  31,    |   |
|                                                                          |   | 2007                                         |      |   | 2006                                         |   |   | 2007 |   |   | 2006 |   |
| Basic                  earnings per share computation:                        |   |                                         |      |   |                                         |   |   |   |   |   |   |   |
| Income                  from continuing operations                            |   | $                                            | 505,799   |   |                                         | $      | 737,963 |   |   | $ | 1,809,269 |   |   | $ | 2,491,409 |   |
| Income                  from discontinued operations                          |   |                                         | 513,883   |   |                                         |   | 27,770 |   |   |   | 589,679 |   |   |   | 97,426 |   |
| Net                  income                                                   |   | $                                            | 1,019,682 |   |                                         | $      | 765,733 |   |   | $ | 2,398,948 |   |   | $ | 2,588,835 |   |
| Weighted                  average common shares outstanding                   |   |                                         | 3,329,442 |   |                                         |   | 3,311,516 |   |   |   | 3,316,039 |   |   |   | 3,389,694 |   |
| Basic                  earnings per share from continuing operations          |   | $                                            | 0.15      |   |                                         | $      | 0.22 |   |   | $ | 0.54 |   |   | $ | 0.73 |   |
| Basic                  earnings per share from discontinued operations        |   |                                         | 0.16      |   |                                         |   | 0.01 |   |   |   | 0.18 |   |   |   | 0.03 |   |
| Basic                  earnings per share                                     |   | $                                            | 0.31      |   |                                         | $      | 0.23 |   |   | $ | 0.72 |   |   | $ | 0.76 |   |
|                                                                          |   |                                         |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                  earnings per share computation:                      |   |                                         |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Income                  from continuing operations                            |   | $                                            | 505,799   |   |                                         | $      | 737,963 |   |   | $ | 1,809,269 |   |   | $ | 2,491,409 |   |
| Income                  from discontinued operations                          |   |                                         | 513,883   |   |                                         |   | 27,770 |   |   |   | 589,679 |   |   |   | 97,426 |   |
| Net                  income                                                   |   | $                                            | 1,019,682 |   |                                         | $      | 765,733 |   |   | $ | 2,398,948 |   |   | $ | 2,588,835 |   |
| Weighted                  average common shares outstanding                   |   |                                         | 3,329,442 |   |                                         |   | 3,311,516 |   |   |   | 3,316,039 |   |   |   | 3,389,694 |   |
| Incremental                  option and recognition and retention plan shares |   |                                         |      |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| using                  treasury stock method                                  |   |                                         | 19,673    |   |                                         |   | 48,199 |   |   |   | 30,072 |   |   |   | 51,279 |   |
| Diluted                  shares outstanding                                   |   |                                         | 3,349,115 |   |                                         |   | 3,359,715 |   |   |   | 3,346,111 |   |   |   | 3,440,973 |   |
| Diluted                  earnings per share from continuing operations        |   | $                                            | 0.15      |   |                                         | $      | 0.22 |   |   | $ | 0.54 |   |   | $ | 0.72 |   |
| Diluted                  earnings per share from discontinued operations      |   |                                         | 0.15      |   |                                         |   | 0.01 |   |   |   | 0.18 |   |   |   | 0.03 |   |
| Diluted                  earnings per share                                   |   | $                                            | 0.30      |   |                                         | $      | 0.23 |   |   | $ | 0.72 |   |   | $ | 0.75 |   |

**Note      7.  Dividends**

----

*Index*

**Note      8.  Stock-Based Compensation**

*Share-Based Payment*

|                                                               |   |   |    |   |      |   |   | Weighted-                     |   |   |      |   |
|--------------------------------------------------------------------|--------|--------|---------|--------|-----------|--------|--------|-------------------------------|--------|--------|-----------|--------|
|                                                               |   |   |    |   | Weighted- |   |   | Average                       |   |   |      |   |
|                                                               |   |   |    |   | Average   |   |   | Remaining                     |   |   | Aggregate |   |
|                                                               |   |   |    |   | Exercise  |   |   | Contractual                   |   |   | Intrinsic |   |
|                                                               |   | Number |    |   | Price     |   |   | Term                  (years) |   |   | Value     |   |
| Outstanding                  options as of June 30, 2006           |   |   | 118,061 |   |      | $      | 14.10  |                          |   |   |      |   |   |   |
| Granted                                                            |   |   | 25,000  |   |      |   | 21.72  |                          |   |   |      |   |   |   |
| Exercised                                                          |   |   | (50,611 | )      |      |   | 10.89  |                          |   |   |      |   |   |   |
| Outstanding                  at March 31, 2007                     |   |   | 92,450  |   |      | $      | 17.92  |                          |   |   | 6.9       |   |   | $ | 357,283 |   |
| Vested,                  or expected to vest, as of March 31, 2007 |   |   | 86,878  |   |      | $      | 17.72  |                          |   |   | 6.8       |   |   | $ | 353,856 |   |
| Exercisable                  at March 31, 2007                     |   |   | 52,650  |   |      | $      | 15.53  |                          |   |   | 5.3       |   |   | $ | 332,805 |   |

|                                          |   |   |   |   | Weighted-Average            |   |
|-----------------------------------------------|--------|--------|--------|--------|-----------------------------|--------|
|                                          |   |   |   |   | Grant-Date                  |   |
|                                          |   | Number |   |   | Fair                  Value |   |
| Non-vested                  at July 1, 2006   |   |   | 1,500  |   |                        | $      | 12.73 |   |
| Granted                                       |   |   | 6,000  |   |                        |   | 21.50 |   |
| Vested                                        |   |   | (1,100 | )      |                        |   | 21.34 |   |
| Non-vested                  at March 31, 2007 |   |   | 6,400  |   |                        | $      | 21.02 |   |

----

*Index*

**Note      9.    Operating Segments**

|                                                                        |   | Three                  Months Ended March 31, 2007 |   |
|-----------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
| *(Dollars                  in Thousands)*                                   |   | Banking                                            |   |   | Other |   |   | Consolidated |   |
| Interest                  income                                            |   | $                                                  | 8,945  |   |   |   | - |   |   | $ | 8,945 |   |
| Interest                  expense                                           |   |                                               | 5,102  |   |   |   | - |   |   |   | 5,102 |   |
| Net                  interest income                                        |   |                                               | 3,843  |   |   |   | - |   |   |   | 3,843 |   |
| Provision                  for loan losses                                  |   |                                               | 31     |   |   |   | - |   |   |   | 31 |   |
| Net                  interest income after provision for loan losses        |   |                                               | 3,812  |   |   |   | - |   |   |   | 3,812 |   |
| Non-interest                  income                                        |   |                                               | 1,287  |   |   | $ | 15 |   |   |   | 1,302 |   |
| Non-interest                  expense                                       |   |                                               | 4,475  |   |   |   | 13 |   |   |   | 4,488 |   |
| Income                  before income taxes and discontinued operations     |   |                                               | 624    |   |   |   | 2 |   |   |   | 626 |   |
| Income                  taxes                                               |   |                                               | 120    |   |   |   | - |   |   |   | 120 |   |
| Income                  from continuing operations                          |   |                                               | 504    |   |   |   | 2 |   |   |   | 506 |   |
| Income                  from discontinued operations, net of tax (including |   |                                               |   |   |   |   |   |   |   |   |   |   |
| gain                  on disposal of $510, net of tax, in 2007)             |   |                                               | -      |   |   |   | 514 |   |   |   | 514 |   |
| Net                  income                                                 |   | $                                                  | 504    |   |   | $ | 516 |   |   | $ | 1,020 |   |
| Depreciation                  and amortization                              |   | $                                                  | 206    |   |   |   | - |   |   | $ | 206 |   |
|                                                                        |   |                                               |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   | Three                  Months Ended March 31, 2006 |   |
| *(Dollars                  in Thousands)*                                   |   | Banking                                            |   |   | Other |   |   | Consolidated |   |
| Interest                  income                                            |   | $                                                  | 8,253  |   |   |   | - |   |   | $ | 8,253 |   |
| Interest                  expense                                           |   |                                               | 3,892  |   |   |   | - |   |   |   | 3,892 |   |
| Net                  interest income                                        |   |                                               | 4,361  |   |   |   | - |   |   |   | 4,361 |   |
| Provision                  for loan losses                                  |   |                                               | 320    |   |   |   | - |   |   |   | 320 |   |
| Net                  interest income after provision for loan losses        |   |                                               | 4,041  |   |   |   | - |   |   |   | 4,041 |   |
| Non-interest                  income                                        |   |                                               | 1,245  |   |   |   | - |   |   |   | 1,245 |   |
| Non-interest                  expense                                       |   |                                               | 4,286  |   |   | $ | 14 |   |   |   | 4,300 |   |
| Income                  before income taxes and discontinued operations     |   |                                               | 1,000  |   |   |   | (14 | ) |   |   | 986 |   |
| Income                  taxes                                               |   |                                               | 254    |   |   |   | (6 | ) |   |   | 248 |   |
| Income                  from continuing operations                          |   |                                               | 746    |   |   |   | (8 | ) |   |   | 738 |   |
| Income                  from discontinued operations, net of tax            |   |                                               | -      |   |   |   | 28 |   |   |   | 28 |   |
| Net                  income                                                 |   | $                                                  | 746    |   |   | $ | 20 |   |   | $ | 766 |   |
| Depreciation                  and amortization                              |   | $                                                  | 324    |   |   |   | - |   |   | $ | 324 |   |
|                                                                        |   |                                               |   |   |   |   |   |   |   |   |   |   |

----

*Index*

|                                                                        |   | Nine                  Months Ended March 31, 2007 |    |
|-----------------------------------------------------------------------------|--------|---------------------------------------------------|---------|
| *(Dollars                  in Thousands)*                                   |   | Banking                                           |    |   | Other |   |   | Consolidated |   |
| Interest                  income                                            |   | $                                                 | 26,159  |   |   |   | - |   |   | $ | 26,159 |   |
| Interest                  expense                                           |   |                                              | 14,348  |   |   |   | - |   |   |   | 14,348 |   |
| Net                  interest income                                        |   |                                              | 11,811  |   |   |   | - |   |   |   | 11,811 |   |
| Provision                  for loan losses                                  |   |                                              | 534     |   |   |   | - |   |   |   | 534 |   |
| Net                  interest income after provision for loan losses        |   |                                              | 11,277  |   |   |   | - |   |   |   | 11,277 |   |
| Non-interest                  income                                        |   |                                              | 4,245   |   |   | $ | 75 |   |   |   | 4,320 |   |
| Non-interest                  expense                                       |   |                                              | 13,165  |   |   |   | 62 |   |   |   | 13,227 |   |
| Income                  before income taxes and discontinued operations     |   |                                              | 2,357   |   |   |   | 13 |   |   |   | 2,370 |   |
| Income                  taxes                                               |   |                                              | 556     |   |   |   | 5 |   |   |   | 561 |   |
| Income                  from continuing operations                          |   |                                              | 1,801   |   |   |   | 8 |   |   |   | 1,809 |   |
| Income                  from discontinued operations, net of tax (including |   |                                              |    |   |   |   |   |   |   |   |   |   |
| gain                  on disposal of $510, net of tax, in 2007)             |   |                                              | -       |   |   |   | 590 |   |   |   | 590 |   |
| Net                  income                                                 |   | $                                                 | 1,801   |   |   | $ | 598 |   |   | $ | 2,399 |   |
| Depreciation                  and amortization                              |   | $                                                 | 794     |   |   |   | - |   |   | $ | 794 |   |
| Total                  assets                                               |   | $                                                 | 646,769 |   |   | $ | 937 |   |   | $ | 647,706 |   |
|                                                                        |   |                                              |    |   |   |   |   |   |   |   |   |   |
|                                                                        |   | Nine                  Months Ended March 31, 2006 |    |
| *(Dollars                  in Thousands)*                                   |   | Banking                                           |    |   | Other |   |   | Consolidated |   |
| Interest                  income                                            |   | $                                                 | 23,807  |   |   |   | - |   |   | $ | 23,807 |   |
| Interest                  expense                                           |   |                                              | 10,956  |   |   |   | - |   |   |   | 10,956 |   |
| Net                  interest income                                        |   |                                              | 12,851  |   |   |   | - |   |   |   | 12,851 |   |
| Provision                  for loan losses                                  |   |                                              | 1,070   |   |   |   | - |   |   |   | 1,070 |   |
| Net                  interest income after provision for loan losses        |   |                                              | 11,781  |   |   |   | - |   |   |   | 11,781 |   |
| Non-interest                  income                                        |   |                                              | 4,470   |   |   | $ | (242 | ) |   |   | 4,228 |   |
| Non-interest                  expense                                       |   |                                              | 12,527  |   |   |   | 54 |   |   |   | 12,581 |   |
| Income                  before income taxes and discontinued operations     |   |                                              | 3,724   |   |   |   | (296 | ) |   |   | 3,428 |   |
| Income                  taxes                                               |   |                                              | 1,047   |   |   |   | (111 | ) |   |   | 936 |   |
| Income                  from continuing operations                          |   |                                              | 2,677   |   |   |   | (185 | ) |   |   | 2,492 |   |
| Income                  from discontinued operations, net of tax            |   |                                              | -       |   |   |   | 97 |   |   |   | 97 |   |
| Net                  income                                                 |   | $                                                 | 2,677   |   |   | $ | (88 | ) |   | $ | 2,589 |   |
| Depreciation                  and amortization                              |   | $                                                 | 981     |   |   |   | - |   |   | $ | 981 |   |
| Total                  assets                                               |   | $                                                 | 599,586 |   |   | $ | 1,142 |   |   | $ | 600,728 |   |

----

*Index*

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

**Forward-Looking      Statements**

**Results      of Operations**

***Quarter      Overview***

***Nine      Month      Overview   ***

***Net      Interest Income***

----

*Index*

|                                                         |   | Three                    months ended March 31,           |
|--------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|
|                                                         |   | 2007                                                                          |   |   | 2006       |   |
|                                                         |   | Average                                                                                                     |   |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
| *(Dollars                    in thousands)*                  |   | Balance                                                                                                     |   |   | Interest |   |   | Yield/Cost |   |   | Balance |   |   | Interest |   |   | Yield/Cost |   |
| Interest-earning                    assets:                  |   |                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                    receivable (1)                      |   | $                                                                                                           | 446,975 |   |   | $ | 7,341 |   |   |   | 6.66 | % |   | $ | 468,668 |   |   | $ | 7,498 |   |   |   | 6.49 | % |
| Investment                    securities (2)                 |   |                                                                                                        | 107,646 |   |   |   | 1,531 |   |   |   | 5.99 | % |   |   | 62,267 |   |   |   | 680 |   |   |   | 4.79 | % |
| Short-term                    investments and other          |   |                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-earning                    assets                   |   |                                                                                                        | 5,482 |   |   |   | 74 |   |   |   | 5.44 | % |   |   | 6,809 |   |   |   | 75 |   |   |   | 4.47 | % |
| Total                    interest-earning assets             |   |                                                                                                        | 560,103 |   |   |   | 8,946 |   |   |   | 6.52 | % |   |   | 537,744 |   |   |   | 8,253 |   |   |   | 6.27 | % |
| Non-interest-earning                    assets               |   |                                                                                                        | 56,164 |   |   |   |   |   |   |   |   |   |   |   | 52,759 |   |   |   |   |   |   |   |   |   |
| Total                    assets                              |   | $                                                                                                           | 616,267 |   |   |   |   |   |   |   |   |   |   | $ | 590,503 |   |   |   |   |   |   |   |   |   |
| Interest-bearing                    liabilities:             |   |                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposit                    liabilities                       |   | $                                                                                                           | 427,384 |   |   |   | 4,183 |   |   |   | 3.97 | % |   | $ | 376,597 |   |   |   | 2,748 |   |   |   | 2.96 | % |
| Borrowings                                                   |   |                                                                                                        | 72,804 |   |   |   | 919 |   |   |   | 5.12 | % |   |   | 99,836 |   |   |   | 1,144 |   |   |   | 4.65 | % |
| Total                    interest-bearing liabilities        |   |                                                                                                        | 500,188 |   |   |   | 5,102 |   |   |   | 4.14 | % |   |   | 476,433 |   |   |   | 3,892 |   |   |   | 3.31 | % |
| Non-interest-bearing:                                        |   |                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposit                    liabilities                       |   |                                                                                                        | 41,614 |   |   |   |   |   |   |   |   |   |   |   | 41,505 |   |   |   |   |   |   |   |   |   |
| Other                    liabilities                         |   |                                                                                                        | 4,185 |   |   |   |   |   |   |   |   |   |   |   | 3,782 |   |   |   |   |   |   |   |   |   |
| Total                    liabilities                         |   |                                                                                                        | 545,987 |   |   |   |   |   |   |   |   |   |   |   | 521,720 |   |   |   |   |   |   |   |   |   |
| Stockholders’                    equity                |   |                                                                                                        | 70,280 |   |   |   |   |   |   |   |   |   |   |   | 68,783 |   |   |   |   |   |   |   |   |   |
| Total                    liabilities and                     |   |                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'                    equity                      |   | $                                                                                                           | 616,267 |   |   |   |   |   |   |   |   |   |   | $ | 590,503 |   |   |   |   |   |   |   |   |   |
| Net                    interest income                       |   |                                                                                                        |   |   |   | $ | 3,844 |   |   |   |   |   |   |   |   |   |   | $ | 4,361 |   |   |   |   |   |
| Interest                    rate spread                      |   |                                                                                                        |   |   |   |   |   |   |   |   | 2.38 | % |   |   |   |   |   |   |   |   |   |   | 2.96 | % |
| Net                    yield on average                      |   |                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-earning                    assets (3)               |   |                                                                                                        |   |   |   |   |   |   |   |   | 2.79 | % |   |   |   |   |   |   |   |   |   |   | 3.29 | % |
| Ratio                    of average interest -earning assets |   |                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to                    average interest-bearing liabilities   |   |                                                                                                        |   |   |   |   |   |   |   |   | 111.98 | % |   |   |   |   |   |   |   |   |   |   | 112.87 | % |

| (1)    | Average                    balances include nonaccrual loans and loans held for                    sale.  Interest income includes amortization of deferred                    loan fees, which is not material.      |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)    | Investment                    securities income is presented without the benefit of the tax                    effect of                    tax exempt income; yields are presented                    on a tax-effected basis. |
| (3)    | Net                    yield on average interest-earning assets represents net interest                    income,                    tax-effected, as a percentage of average                    interest-earning assets.      |
|   |                                                                                                                                                                                                                            |   |   |   |   |   |   |   |

----

*Index*

|                                                       |   | Nine                  months ended March 31,          |
|------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
|                                                       |   | 2007                                                                 |   |   | 2006       |   |
|                                                       |   | Average                                                                                            |   |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
| *(Dollars                  in thousands)*                  |   | Balance                                                                                            |   |   | Interest |   |   | Yield/Cost |   |   | Balance |   |   | Interest |   |   | Yield/Cost |   |
| Interest-earning                  assets:                  |   |                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                  receivable (1)                      |   | $                                                                                                  | 453,741 |   |   | $ | 22,512 |   |   |   | 6.61 | % |   | $ | 456,923 |   |   | $ | 21,629 |   |   |   | 6.31 | % |
| Investment                  securities (2)                 |   |                                                                                               | 83,762 |   |   |   | 3,329 |   |   |   | 5.56 | % |   |   | 67,584 |   |   |   | 2,009 |   |   |   | 4.33 | % |
| Short-term                  investments and other          |   |                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-earning                  assets                   |   |                                                                                               | 8,166 |   |   |   | 318 |   |   |   | 5.18 | % |   |   | 5,974 |   |   |   | 169 |   |   |   | 3.78 | % |
| Total                  interest-earning assets             |   |                                                                                               | 545,669 |   |   |   | 26,159 |   |   |   | 6.43 | % |   |   | 530,481 |   |   |   | 23,807 |   |   |   | 6.03 | % |
| Non-interest-earning                  assets               |   |                                                                                               | 55,626 |   |   |   |   |   |   |   |   |   |   |   | 52,260 |   |   |   |   |   |   |   |   |   |
| Total                  assets                              |   | $                                                                                                  | 601,295 |   |   |   |   |   |   |   |   |   |   | $ | 582,741 |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:             |   |                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposit                  liabilities                       |   | $                                                                                                  | 403,661 |   |   |   | 11,390 |   |   |   | 3.76 | % |   | $ | 365,407 |   |   |   | 7,537 |   |   |   | 2.75 | % |
| Borrowings                                                 |   |                                                                                               | 81,028 |   |   |   | 2,958 |   |   |   | 4.86 | % |   |   | 101,734 |   |   |   | 3,419 |   |   |   | 4.48 | % |
| Total                  interest-bearing liabilities        |   |                                                                                               | 484,689 |   |   |   | 14,348 |   |   |   | 3.94 | % |   |   | 467,141 |   |   |   | 10,956 |   |   |   | 3.12 | % |
| Non-interest-bearing:                                      |   |                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposit                  liabilities                       |   |                                                                                               | 42,055 |   |   |   |   |   |   |   |   |   |   |   | 41,322 |   |   |   |   |   |   |   |   |   |
| Other                  liabilities                         |   |                                                                                               | 4,680 |   |   |   |   |   |   |   |   |   |   |   | 3,790 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities                         |   |                                                                                               | 531,424 |   |   |   |   |   |   |   |   |   |   |   | 512,253 |   |   |   |   |   |   |   |   |   |
| Stockholders’                  equity                |   |                                                                                               | 69,871 |   |   |   |   |   |   |   |   |   |   |   | 70,488 |   |   |   |   |   |   |   |   |   |
| Total                  liabilities and                     |   |                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stockholders'                  equity                      |   | $                                                                                                  | 601,295 |   |   |   |   |   |   |   |   |   |   | $ | 582,741 |   |   |   |   |   |   |   |   |   |
| Net                  interest income                       |   |                                                                                               |   |   |   | $ | 11,811 |   |   |   |   |   |   |   |   |   |   | $ | 12,851 |   |   |   |   |   |
| Interest                  rate spread                      |   |                                                                                               |   |   |   |   |   |   |   |   | 2.49 | % |   |   |   |   |   |   |   |   |   |   | 2.91 | % |
| Net                  yield on average                      |   |                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-earning                  assets (3)               |   |                                                                                               |   |   |   |   |   |   |   |   | 2.93 | % |   |   |   |   |   |   |   |   |   |   | 3.28 | % |
| Ratio                  of average interest -earning assets |   |                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to                  average interest-bearing liabilities   |   |                                                                                               |   |   |   |   |   |   |   |   | 112.58 | % |   |   |   |   |   |   |   |   |   |   | 113.56 | % |

| (1)    | Average                  balances include nonaccrual loans and loans held for                  sale.  Interest income includes amortization of deferred                  loan fees, which is not material.    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)    | Investment                  securities income is presented without the benefit of the tax effect                  of                  tax exempt income; yields are presented                  on a tax-effected basis. |
| (3)    | Net                  yield on average interest-earning assets represents net interest                  income,                  tax-effected, as a percentage of average                  interest-earning assets.      |
|   |                                                                                                                                                                                                                    |   |   |   |   |   |   |   |

***Provision      for Losses on      Loans***
* *

----

*Index*

|                                                                     |   | March                  31,    |   |   | March                  31,    |   |
|--------------------------------------------------------------------------|--------|----------------------------------------------|--------|--------|----------------------------------------------|--------|
| *(Dollars                  in Thousands)*                                |   | 2007                                         |   |   | 2006                                         |   |   | 2007 |   |   | 2006 |   |
| Balance                  at beginning of period                          |   | $                                            | 2,044  |   |                                         | $      | 5,572 |   |   | $ | 5,466 |   |   | $ | 6,718 |   |
| Provision                  for loan losses (1)                           |   |                                         | 31     |   |                                         |   | 320 |   |   |   | 534 |   |   |   | 1,070 |   |
| Charge-offs:                                                             |   |                                         |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Single-family                  mortgage loans                            |   |                                         | (4     | )      |                                         |   | - |   |   |   | (24 | ) |   |   | (29 | ) |
| Commercial                  real estate loans                            |   |                                         | -      |   |                                         |   | (16 | ) |   |   | - |   |   |   | (58 | ) |
| Commercial                  business loans                               |   |                                         | (3     | )      |                                         |   | (273 | ) |   |   | (2,620 | ) |   |   | (1,867 | ) |
| Consumer                  loans                                          |   |                                         | (63    | )      |                                         |   | (85 | ) |   |   | (190 | ) |   |   | (367 | ) |
| Total                  loans charged-off                                 |   |                                         | (70    | )      |                                         |   | (374 | ) |   |   | (2,834 | ) |   |   | (2,321 | ) |
| Loans                  transferred to held for sale (2)                  |   |                                         | -      |   |                                         |   | - |   |   |   | (1,300 | ) |   |   | - |   |
| Recoveries                                                               |   |                                         | 26     |   |                                         |   | 12 |   |   |   | 165 |   |   |   | 63 |   |
| Charge-offs,                  net of recoveries                          |   |                                         | (44    | )      |                                         |   | (362 | ) |   |   | (3,969 | ) |   |   | (2,258 | ) |
| Balance                  at end of period                                |   | $                                            | 2,031  |   |                                         | $      | 5,530 |   |   | $ | 2,031 |   |   | $ | 5,530 |   |
|                                                                     |   |                                         |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                  for loan losses to total loans                |   |                                         | 0.46   | %      |                                         |   | 1.18 | % |   |   | 0.46 | % |   |   | 1.18 | % |
| Allowance                  for loan losses to non-performing loans       |   |                                         | 65.64  | %      |                                         |   | 119.75 | % |   |   | 65.64 | % |   |   | 119.75 | % |
| Net                  annualized charge-offs to average loans outstanding |   |                                         | 0.04   | %      |                                         |   | 0.31 | % |   |   | 1.17 | % |   |   | 0.66 | % |

| (1)    | Data                  for the nine months ended March 31, 2007, includes a $1.3 million                  loss on                  transfer of $11.6 million of non-performing                  and classified loans to held for sale and $0.6 million of losses                  on other                  commercial business loans.  These                  amounts are net of a $1.5 million reduction in the allowance for                  loans                  losses due to the significant                  decline in non-performing and classified assets resulting from                  the                  aforementioned transfer to loans held                  for sale. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)    | Data                  for the nine months ended March 31, 2007 consists of $2.0 million                  relating                  to commercial real estate loans and                  $0.1 million relating to single-family mortgage loans, offset by                  $0.8                  million in commercial business loans.                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |

***Non-Interest      Income***

**Service      Charges on Deposit Accounts  **

**Service      Charges on Loans**

**Gain      (Loss) on Sale of Real Estate Held for Development   **

----

*Index*

**Gain      on the Sale of Securities**

**Gain      on Sale of Loans   **

**Other      Income   **

***Non-Interest      Expense***

**Compensation      and Benefits**

**Office      Property and Equipment**

**Data      Processing   **

**Professional,      Insurance, and Regulatory   **

**Advertising,      Donations, and Public Relations   **

----

*Index*

**Communication,      Postage, and Office Supplies   **

**Other      Non-Interest Expense   **
** **

***Income      Tax      Expense   ***

**Financial      Condition**

***Overview***

***Interest-Bearing      Deposits      with Banks***

***Securities      Available-for-Sale and Held-for-Investment   ***

***Loans      Receivable***

----

*Index*

|                                                                |   | March                  31, 2007    |    |   | June                  30, 2006    |   |
|---------------------------------------------------------------------|--------|---------------------------------------------------|---------|--------|--------------------------------------------------|--------|
| *(Dollars                  in Thousands)*                           |   | Amount                                            |    |   | %                                                |   |   | Amount |   |   | % |   |
| One-                  to four-family residential (1)                |   | $                                                 | 127,953 |   |                                             |   | 29.95 |   |   | $ | 133,630 |   |   |   | 29.25 |   |
| Multi-family                  residential (2)                       |   |                                              | 48,796  |   |                                             |   | 11.42 |   |   |   | 51,984 |   |   |   | 11.37 |   |
| Non-residential  real                  estate (3)         |   |                                              | 146,629 |   |                                             |   | 34.31 |   |   |   | 157,099 |   |   |   | 34.38 |   |
| Commercial                  business loans                          |   |                                              | 47,849  |   |                                             |   | 11.20 |   |   |   | 54,586 |   |   |   | 11.94 |   |
| Home                  equity and second mortgage loans              |   |                                              | 27,925  |   |                                             |   | 6.53 |   |   |   | 29,850 |   |   |   | 6.53 |   |
| Other                  non-mortgage loans (4)                       |   |                                              | 30,549  |   |                                             |   | 7.15 |   |   |   | 35,724 |   |   |   | 7.81 |   |
| Loans                  in process, unearned discounts and premiums, |   |                                              |    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| and                  net deferred loan fees and costs               |   |                                              | (352    | )      |                                             |   | (0.08 | ) |   |   | (378 | ) |   |   | (0.08 | ) |
| Subtotal                                                            |   |                                              | 429,349 |   |                                             |   | 100.48 |   |   |   | 462,495 |   |   |   | 101.20 |   |
| Allowance                  for  loan losses               |   |                                              | 2,031   |   |                                             |   | 0.48 |   |   |   | 5,466 |   |   |   | 1.20 |   |
| Total                  loans, net                                   |   | $                                                 | 427,318 |   |                                             |   | 100.00 |   |   | $ | 457,029 |   |   |   | 100.00 |   |

|   |                                                                                                                                                       |   |   |   |   |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| (1)    | Includes                  construction loans of $9.1 million and $6.8 million,                  respectively.                                              |   |   |   |   |
| (2)    | Includes                  construction loans of $10.2 million and $11.5 million,                  respectively.                                            |   |   |   |
| (3)    | Includes                  construction loans of $8.4 million and $28.6 million,                  respectively.                                             |   |   |   |
| (4)    | Includes                  other secured non-mortgage loans, secured and unsecured personal                  loans,                  and loans on deposits. |
|   |                                                                                                                                                       |   |   |   |   |   |

***Office      property and equipment***

***FHLB      Stock***

***Deposit      Liabilities***

|                                                |   | March                  31, 2007    |    |   | June                  30, 2006    |   |
|-----------------------------------------------------|--------|---------------------------------------------------|---------|--------|--------------------------------------------------|--------|
| *(Dollars                  in Thousands)*           |   | Amount                                            |    |   | %                                                |   |   | Amount |   |   | % |   |
| Non-interest-bearing                  checking      |   | $                                                 | 42,769  |   |                                             |   | 8.46 |   |   | $ | 46,890 |   |   |   | 10.51 |   |
| Interest-bearing                  checking accounts |   |                                              | 87,490  |   |                                             |   | 17.31 |   |   |   | 67,411 |   |   |   | 15.11 |   |
| Money                  market accounts              |   |                                              | 58,160  |   |                                             |   | 11.50 |   |   |   | 72,964 |   |   |   | 16.36 |   |
| Savings                  accounts                   |   |                                              | 26,251  |   |                                             |   | 5.19 |   |   |   | 27,856 |   |   |   | 6.24 |   |
| Certificates                  of deposit            |   |                                              | 290,860 |   |                                             |   | 57.54 |   |   |   | 230,935 |   |   |   | 51.78 |   |
| Total                  deposits                     |   | $                                                 | 505,530 |   |                                             |   | 100.00 |   |   | $ | 446,056 |   |   |   | 100.00 |   |

***FHLB      Advances and Other      Borrowings   ***

***Stockholders’      Equity***

----

*Index*

***Non-Performing      and Classified Assets   ***

| *(Dollars                  in Thousands)*                                        |   | March                  31, 2007 |   |   | June                  30, 2006 |   |
|----------------------------------------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
| Loans                  held for investment accounted for on a non-accrual basis: |   |                            |   |   |                           |   |
| Single-family                  mortgage loans                                    |   | $                               | 350    |   |                           | $      | 1,104 |   |
| Commercial                  real estate loans                                    |   |                            | 2,335  |   |                           |   | 346 |   |
| Commercial                  business loans                                       |   |                            | 128    |   |                           |   | 4,835 |   |
| Consumer                  loans                                                  |   |                            | 281    |   |                           |   | 258 |   |
| Total                  non-performing loans held for investment                  |   |                            | 3,094  |   |                           |   | 6,543 |   |
| Other                  non-performing assets (1)                                 |   |                            | 560    |   |                           |   | 73 |   |
| Total                  non-performing assets                                     |   | $                               | 3,654  |   |                           | $      | 6,616 |   |
| Restructured                  loans not included in                              |   |                            |   |   |                           |   |   |   |
|    other                  non-performing categories above         |   | $                               | 1,059  |   |                           | $      | 2,126 |   |
|                                                                             |   |                            |   |   |                           |   |   |   |
| Non-performing                  loans to total loans receivable                  |   |                            | 0.72   | %      |                           |   | 1.41 | % |
| Non-performing                  assets to total assets                           |   |                            | 0.56   | %      |                           |   | 1.08 | % |

| (1)    | Includes                  the net book value of real property acquired by the Company through                  foreclosure or deed in lieu of  foreclosure.                  Upon acquisition, this property is carried at the lower of cost                  or fair                  market value less estimated  costs                  of disposition.  Also includes repossessed automobiles, boats,                  and trailers carried at the lower of cost or fair                  market value less estimated                  cost-to-sell. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |

----

*Index*

**Liquidity      and Capital**

|                                       |   | March                  31, 2007                                        |
|--------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                       |   |                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   | To                  Be Well    |   |
|                                       |   |                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   | Capitalized                  Under |   |
|                                       |   |                                                                                                                                                   |   |   |   |   |   | For                  Capital    |   |   | Prompt                  Corrective |   |
|                                       |   | Actual                                                                                                                                  |   |   | Adequacy                  Purposes |   |   | Action                  Provisions |   |
|                                       |   | Amount                                                                                                                                                 |   |   | Ratio |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                       |   | *Dollars                  in Thousands*                                                    |   |
| Tangible                  capital          |   | $                                                                                                                                                      | 48,309 |   |   |   | 7.70 | % |   | $ | 9,415 |   |   |   | 1.50 | % |   |   | - |   |   |   | - |   |
| Tier                  1 leverage (core)    |   |                                                                                                                                                   | 48,309 |   |   |   | 7.70 |   |   |   | 25,106 |   |   |   | 4.00 |   |   | $ | 31,383 |   |   |   | 5.00 | % |
| Tier                  1 risk-based capital |   |                                                                                                                                                   | 48,309 |   |   |   | 9.86 |   |   |   | 19,607 |   |   |   | 4.00 |   |   |   | 29,410 |   |   |   | 6.00 |   |
| Risk-based                  capital        |   |                                                                                                                                                   | 50,159 |   |   |   | 10.23 |   |   |   | 39,214 |   |   |   | 8.00 |   |   |   | 49,017 |   |   |   | 10.00 |   |
|                                       |   |                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   | June                  30, 2006                     |   |
|                                       |   |                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | To                  Be Well     |   |
|                                       |   |                                                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Capitalized                  Under |   |
|                                       |   |                                                                                                                                                   |   |   |   |   |   |   |   | For                  Capital     |   |   | Prompt                  Corrective |   |
|                                       |   | Actual                                                                                                                             |   |   | Adequacy                  Purposes |   |   | Action                  Provisions |   |
|                                       |   | Amount                                                                                                                                                 |   |   | Ratio |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                       |   | *Dollars                  in Thousands*                                |   |
| Tangible                  capital          |   | $                                                                                                                                                      | 45,386 |   |   |   | 7.66 | % |   | $ | 8,891 |   |   |   | 1.50 | % |   |   | - |   |   |   | - |   |
| Tier                  1 leverage (core)    |   |                                                                                                                                                   | 45,386 |   |   |   | 7.66 |   |   |   | 23,709 |   |   |   | 4.00 |   |   | $ | 29,636 |   |   |   | 5.00 | % |
| Tier                  1 risk-based capital |   |                                                                                                                                                   | 45,386 |   |   |   | 10.04 |   |   |   | 18,080 |   |   |   | 4.00 |   |   |   | 27,121 |   |   |   | 6.00 |   |
| Risk-based                  capital        |   |                                                                                                                                                   | 48,972 |   |   |   | 10.83 |   |   |   | 36,161 |   |   |   | 8.00 |   |   |   | 45,201 |   |   |   | 10.00 |   |

----

*Index*

|                                   |   | Payments                  Due in:           |
|----------------------------------------|--------|-----------------------------------------------------------------------------------------------|
| *(In                  thousands)*      |   | Less                  than One Year                                                           |   |   | One                  Year to Less                  Than Three                  Years |   |   | Three                  Years to                  Less Than Five                  Years |   |   | Five                  Years or Greater |   |   | Total |   |
| FHLB                  advances         |   | $                                                                                             | 18,500 |   |   | $ | 40,500 |   |   |   | - |   |   |   | - |   |   | $ | 59,000 |   |
| Other                  borrowings (1)  |   |                                                                                          | 5,155 |   |   |   | 3,000 |   |   |   | - |   |   |   | - |   |   |   | 8,155 |   |
| Operating                  lease       |   |                                                                                          | 127 |   |   |   | 276 |   |   | $ | 322 |   |   | $ | 585 |   |   |   | 1,310 |   |
| Off-balance-sheet                  (2) |   |                                                                                          | 70,293 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 70,293 |   |
| Total                                  |   | $                                                                                             | 94,075 |   |   | $ | 43,776 |   |   | $ | 322 |   |   | $ | 585 |   |   | $ | 138,758 |   |

| (1) | Includes                  securities sold under repurchase agreements.                                     |   |   |   |   |
|-----|------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| (2) | Includes                  commitments to extend credit, net of commitments to sell                  loans. |   |   |

**Off-Balance      Sheet Arrangements**

**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

----

*Index*

**ITEM4.      CONTROLS AND PROCEDURES**

**PART      II.            OTHER      INFORMATION**

**ITEM      1.  Legal Proceedings**

**ITEM      1A. Risk Factors**

**ITEM2.  Unregistered      Sales of Equity Securities and Use of      Proceeds**

| Period                                                |   | Total                  Number of                  Shares Purchased |   |   | Average                  Price                  Paid Per                  Share |   |   | Total                  Number of Shares Purchased                  as Part of Publicly                  Announced Program                  (1) |   |   | Maximum                  Number of                  Shares that May Yet                  be Purchased Under                  the Program (1) |   |
|-------------------------------------------------------|--------|--------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| January                  1 through January 31, 2007   |   | none                                                               |   |   |                                                                            | -      |   |                                                                                                                                                | none   |   |                                                                                                                                              |   | 211,495 |   |
| Feburary                  1 through February 28, 2007 |   |                                                               | 10,000 |   |                                                                            |   | $21.75 |                                                                                                                                                |   |   | 10,000                                                                                                                                            |   |   |   | 201,495 |   |
| March                  1 through March 31, 2007       |   |                                                               | 15,000 |   |                                                                            |   | $21.60 |                                                                                                                                                |   |   | 15,000                                                                                                                                            |   |   |   | 186,495 |   |

| (1)    | On                  December 12, 2005 the Company announced that its Board of Directors                  authorized a stock repurchase program pursuant                  to which the Company intends to repurchase up to 10% of its issued                  and                  outstanding shares, or up to 346,000                  shares.  The program expires on November 22, 2007, pursuant to a                  one-year extension approved by the Board                  of Directors on October 26, 2006. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |

----

*Index*

**ITEM3.  Default      upon Senior      Securities**

**ITEM      4.  Submission of Matters to a Vote of Security      Holders**

**ITEM      5.  Other Information**

**ITEM      6.  Exhibits**

| Exhibit                31.1 | Certification                of Chief Executive Officer Pursuant to Section                302 |
|-----------------------------|------------------------------------------------------------------------------------------------|

| Exhibit                31.2 | Certification                of Chief Financial Officer Pursuant to Section                302 |
|-----------------------------|------------------------------------------------------------------------------------------------|

| Exhibit                32 | Certification                Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002 |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

**SIGNATURES**

|                                        | FIRST                FEDERAL BANKSHARES, INC. |
|---------------------------------------------|-----------------------------------------------|
|                                        |                                          |   |   |
|                                        |                                          |   |   |
|                                        |                                          |   |   |
| DATE:  May                9, 2007 |                                          | BY: | /s/                Michael W. Dosland |
|                                        |                                          |   | Michael                W. Dosland |
|                                        |                                          |   | President                and Chief Executive Officer |
|                                        |                                          |   |   |
|                                        |                                          |   |   |
|                                        |                                          |   |   |
|                                        |                                          |   |   |
| DATE:  May                9, 2007 |                                          | BY: | /s/                Michael S. Moderski |
|                                        |                                          |   | Michael                S. Moderski |
|                                        |                                          |   | Senior                Vice President, Chief Financial Officer |
|                                        |                                          |   | and                Treasurer |
|                                        |                                          |   |   |
|                                        |                                          |   |   |
|                                        |                                          |   |   |