SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20552

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

                                   FORM 10-QSB

(Mark One)

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

     For the quarterly period ended December 31, 1998

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _____________ to _____________

                         Commission File Number 0-23645

                          LEEDS FEDERAL BANKSHARES, INC
                          -----------------------------
             (Exact name of registrant as specified in its charter)

          UNITED STATES                                         52-2062351
          -------------                                         ----------
  (State or other jurisdiction                                (IRS Employer
of incorporation or organization)                         Identification Number)

               1101 Maiden Choice Lane, Baltimore, Maryland 21229
               --------------------------------------------------
                    (Address of principal executive offices)

Registrant's telephone number, including area code: 410-242-1234
                                                    ------------


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

     Indicated  by a check  whether  the  Registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

     Yes [X]     No [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date:  There were 5,195,597 shares
of the Registrant's common stock outstanding as of December 31, 1998.

<PAGE>

                          LEEDS FEDERAL BANKSHARES, INC

                                      INDEX

                                                                            PAGE
                                                                            ----
PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

    Consolidated Statements of Financial Condition as of
      December 31, 1998 (unaudited), and June 30, 1998 ...................    1

    Consolidated Statements of Income and Comprehensive Income (unaudited)
      for the three months and six months ended December, 1998 and 1997 ..    2

    Consolidated Statements of Cash Flows (unaudited) for the six months
      ended December 31, 1998 and 1997 ...................................    3

    Notes to Consolidated Financial Statements (unaudited) ...............    5

  Item 2.  Management's Discussion and Analysis of
    Financial Condition and Results of Operations ........................    8

PART II. OTHER INFORMATION ...............................................   12

<PAGE>

PART I. FINANCIAL INFORMATION
-----------------------------

  Item 1. Financial Statements

                          LEEDS FEDERAL BANKSHARES,INC.
                 STATEMENTS OF CONSOLIDATED FINANCIAL CONDITION


                                                     December 31,    June 30,
                                                         1998          1998
                                                     ------------   -----------
                                                      (unaudited)    (audited)
Assets
------
  Cash:
    On hand and due from banks ..................... $    616,894     1,769,493
    Interest-bearing deposits ......................   12,275,778    11,906,061
  Short-term investments ...........................   10,288,180     4,776,681
  Secured short-term loans to commercial banks .....   21,643,903    18,405,234
  Investment securities, net (held to maturity) ....   45,467,066    40,669,525
  Investment securities, net (available for sale) ..    6,090,187     8,034,695
  Mortgage backed securities, net (held to maturity)   13,134,363    16,514,383
  Loans receivable, net ............................  194,095,280   190,965,595
  Investment in Federal Home Loan Bank of Atlanta                              
    stock, at cost .................................    2,377,200     2,377,200
  Property and equipment, net ......................    1,469,675       851,265
  Cash surrender value of life insurance ...........    6,272,363     6,132,929
  Prepaid expenses and other assets ................      191,364       333,630
                                                     ------------   -----------
                                                     $313,922,253   302,736,691
                                                     ------------   -----------
Liabilities and Stockholders' Equity
------------------------------------
  Savings accounts ................................. $257,544,007   245,269,602
  Borrowed funds-Employee Stock Ownership Plan .....      528,000       552,000
  Advance payments by borrowers for taxes, insurance                           
    and ground rents ...............................    2,517,307     5,006,020
  Federal and state income taxes:                                              
    Currently payable ..............................      192,532       133,676
    Deferred .......................................    1,752,827     1,296,001
  Accrued expenses and other liabilities ...........    1,292,218     1,171,882
                                                     ------------   -----------
      Total Liabilities ............................  263,826,891   253,429,181
                                                     ------------   -----------
Stockholders' Equity:
  Common Stock $1 par value:
    20,000,000 shares authorized:
    issued and outstanding 5,195,597 shares ........    5,195,597     5,195,597
  Additional paid-in capital .......................    9,326,153     9,258,917
  Employee stock ownership plan ....................     (437,699)     (487,891)
  Management recognition plan ......................          -0-       (11,907)
  Treasury stock, at cost ..........................   (2,144,550)     (772,430)
  Retained income, substantially restricted ........   35,466,760    34,162,743
  Accumulated other comprehensive income ...........    2,689,101     1,962,481
                                                     ------------   -----------
      Total Stockholders' Equity ...................   50,095,362    49,307,510
                                                     ------------   -----------
                                                     $313,922,253   302,736,691
                                                     ------------   -----------

See accompanying notes to consolidated financial statements.

                                       -1-

<PAGE>

                          LEEDS FEDERAL BANKSHARES, INC
           Consolidated Statements of Income and Comprehensive Income
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                Six Months            Three Months
                                                            Ended December 31,     Ended December 31,
                                                          ----------------------  --------------------
                                                             1998        1997        1998       1997   
                                                          ----------  ----------  ---------  ---------
<S>                                                       <C>         <C>         <C>        <C>      
Interest Income:
  First mortgage and other loans .......................  $7,306,304   6,738,520  3,602,410  3,411,883
  Mortgage-backed securities ...........................     524,509     767,374    247,421    370,196
  Investment securities and short-term investments .....   2,583,107   2,597,556  1,297,477  1,291,574
                                                          ----------  ----------  ---------  ---------
    Total interest income ..............................  10,413,920  10,103,450  5,147,308  5,073,653
                                                          ----------  ----------  ---------  ---------
Interest expense:
  Savings accounts .....................................   6,407,575   5,986,656  3,221,916  3,012,953 
  Other ................................................      22,820      28,891     10,597     14,156  
                                                          ----------  ----------  ---------  ---------
    Total interest expense .............................   6,430,395   6,015,547  3,232,513  3,027,109
                                                          ----------  ----------  ---------  ---------
    Net interest income ................................   3,983,525   4,087,903  1,914,795  2,046,544

  Provision for loan losses ............................      30,916      10,886      1,610      8,046
                                                          ----------  ----------  ---------  ---------
    Net interest income after provision for loan losses    3,952,609   4,077,017  1,913,185  2,038,498  
                                                          ----------  ----------  ---------  ---------
Noninterest income:
  Service fees and charges .............................      67,241      73,854     32,906     36,128 
  Other ................................................     140,662      71,666     67,554     37,670  
                                                          ----------  ----------  ---------  ---------
                                                             207,903     145,520    100,460     73,798  
                                                          ----------  ----------  ---------  ---------
Noninterest expense:
  Compensation and employee benefits ...................     783,541     894,863    384,034     463,742 
  Occupancy ............................................     106,115      96,886     52,219      47,321 
  SAIF deposit insurance premiums ......................     112,260     111,005     55,547      55,851 
  Advertising ..........................................      50,019     115,981     19,255      59,857 
  Other ................................................     341,584     345,393    172,663     193,605  
                                                          ----------  ----------  ---------   ---------
                                                           1,393,519   1,564,128    683,718     820,376  
                                                          ----------  ----------  ---------   ---------
  Income before provision for income taxes .............   2,766,993   2,658,409  1,329,927   1,291,920

Provision for income taxes .............................     988,188     975,181    474,292     473,250  
                                                          ----------  ----------  ---------   ---------
    Net Income .........................................   1,778,805   1,683,228    855,635     818,670  
                                                          ----------  ----------  ---------   ---------
Changes in accumulated other comprehensive income--
  unrealized gains on securities available for sale, net     726,620     322,501    595,192     286,208
                                                          ----------  ----------  ---------   ---------
    Comprehensive income ...............................  $2,505,425   2,005,729  1,450,827   1,104,878
                                                          ----------  ----------  ---------   ---------
Net income per share of common stock
  Basic ................................................       $ .35       $ .33      $ .17       $ .16
                                                               -----       -----      -----       -----
  Diluted ..............................................       $ .35       $ .32      $ .17       $ .16
                                                               -----       -----      -----       -----
</TABLE>

See accompanying notes to consolidated financial statements.

                                      -2-

<PAGE>

                         LEEDS FEDERAL BANKSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   Six months ended December 31, 1998 and 1997
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                    1998          1997
                                                                -----------    ----------
<S>                                                             <C>            <C>      
Cash flows from operating activities:
  Net Income .................................................  $ 1,778,805     1,683,228
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Amortization of loan fees, premiums and discounts,net ..     (116,291)      (31,482)
      Provision for loan losses ..............................       30,916        10,886
      Accretion of premiums(discounts) on investments
        securities and mortgage-backed securities, net .......           (2)       (9,978)
      Depreciation ...........................................       63,900        71,502
      Non-cash compensation under stock based  benefit plans .      129,335       196,258
      Increase in accrued interest receivable on  securities
        and loans receivable .................................      240,905       115,653
      Increase in income taxes currently payable .............       58,856        16,319
      Increase in accrued expenses and other liabilities .....      120,336       221,540
      Increase (decrease) in unearned loan fees ..............      (14,457)       12,445
      (Increase) decrease in prepaid expenses and other assets      142,266        50,881
                                                                -----------    ----------
          Net cash provided by operating activities ..........    2,434,569     2,337,252
                                                                -----------    ----------
Cash flows from investing activities:
  Purchase of investment securities held to maturity .........  (41,840,000)   (7,916,506)
  Purchase of securities available for sale ..................          -0-      (975,000)
  Maturity of investment securities held to maturity .........   37,022,452    17,736,031
  Maturity of securities available for sale ..................    3,000,000           -0-
  Loan disbursements, net of repayments ......................   (3,106,817)   (7,986,483)
  Mortgage-backed securities held to maturity principal
    repayments ...............................................    3,364,042     2,635,356
  Purchases of property and equipment ........................     (682,310)      (94,000)
  Investment in life insurance policies ......................     (139,434)   (2,846,236)
                                                                -----------    ----------
          Net cash (used in) provided by investing activities    (2,382,067)      553,162
                                                                -----------    ----------
</TABLE>






Continued

                                      -3-

<PAGE>

                         LEEDS FEDERAL BANKSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   Six months ended December 31, 1998 and 1997
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                    1998          1997
                                                                -----------    ----------
<S>                                                             <C>            <C>      

Cash flows from financing activities:
  Net increase in savings accounts ...........................   12,274,405     4,658,964
  Decrease in advance payments by borrowers for
    taxes, insurance and ground rents ........................   (2,488,713)   (2,366,560)
  Payment of dividends .......................................     (474,788)     (480,907)
  Purchase of treasury stock .................................   (1,372,120)          -0-
  Repayment of borrowed funds ................................      (24,000)      (48,000)
                                                                -----------    ----------
          Net cash provided by financing activities ..........    7,914,784     1,763,497
                                                                -----------    ----------
Net increase in cash and cash equivalents ....................    7,967,286     4,653,911

Cash and cash equivalents at beginning of period .............   36,857,469    31,306,699
                                                                -----------    ----------
Cash and cash equivalents at end of period ...................  $44,824,755    35,960,610
                                                                -----------    ----------
</TABLE>







See accompanying notes to consolidated financial statements.

<PAGE>

                         LEEDS FEDERAL BANKSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 1998
                                   (Unaudited)


(1)  Basis of Presentation

     The accompanying  consolidated financial statements include the accounts of
Leeds Federal  Bankshares,  Inc.(the  Company) and its wholly owned  subsidiary,
Leeds Federal Savings Bank. Leeds Investment Corporation (the Subsidiary),  is a
wholly owned subsidiary of Leeds Federal Savings Bank (collectively,  the Bank).
Adjustments,  consisting of normal recurring adjustments,  which, in the opinion
of management are necessary for a fair  presentation  of financial  position and
results of operations  have been recorded.  The financial  statements  have been
prepared  using the  accounting  policies  described in the June 30, 1998 Annual
Report.  The results of  operations  for the three  months and six months  ended
December 31, 1998 , are not  necessarily  indicative  of the results that may be
expected for the entire year.

     In preparing the consolidated financial statements,  management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities aa of the date of the  statements of financial  condition and income
and expenses for the period.  Actual  results  could differ  significantly  from
those estimates.


(2)  Net Income per Share of Common Stock

     Basic EPS is  calculated  by dividing  net income by the  weighted  average
number of common shares  outstanding for the applicable  period.  Diluted EPS is
calculated  after  adjusting the numerator and the  denominator of the basic EPS
calculation for the effect of all dilutive  potential common shares  outstanding
during the  period.  Information  related to the  calculation  of net income per
share of common stock is summarized as follows:



                                      -5-

<PAGE>

<TABLE>
<CAPTION>
                                             Six Months               Six Months
                                         Ended December 31,       Ended December 31,
                                                1998                     1997
                                       ----------------------   ---------------------
                                          Basic      Diluted      Basic      Diluted
                                       ----------   ---------   ---------   ---------
<S>                                    <C>          <C>         <C>         <C>       
Net Income ..........................  $1,778,805   1,778,805   1,683,228   1,683,228

Dividends on unvested common stock ..      (4,032)     (2,362)     (7,680)     (3,182)
                                       ----------   ---------   ---------   ---------
Adjusted net income used in EPS
  calculations ......................  $1,774,773   1,776,443   1,675,548   1,680,046
                                       ----------   ---------   ---------   ---------
Weighted average shares outstanding .   5,053,102   5,053,102   5,072,582   5,072,582

Diluted securities:
  Options ...........................                  73,702                  94,924
  Unvested common stock awards ......                     -0-                  16,870
                                       ----------   ---------   ---------   ---------
Adjusted weighted-average shares used
  in EPS computation ................   5,053,102   5,126,804   5,072,582   5,184,376
                                       ----------   ---------   ---------   ---------
</TABLE>

<TABLE>
<CAPTION>
                                            Three Months              Three Months
                                         Ended December 31,       Ended December 31,
                                                1998                     1997
                                       ----------------------   ---------------------
                                          Basic      Diluted      Basic      Diluted
                                       ----------   ---------   ---------   ---------
<S>                                    <C>          <C>         <C>         <C>       
Net Income ..........................  $  855,635     855,635     818,670     818,670

Dividends on unvested common stock ..      (2,016)     (1,285)     (4,032)     (1,462)
                                       ----------   ---------   ---------   ---------
Adjusted net income used in EPS
  calculations ......................  $  853,619     854,350     814,638     817,208
                                       ----------   ---------   ---------   ---------
Weighted average shares outstanding .   5,029,281   5,029,281   5,072,582   5,072,582

Diluted securities:
  Options ...........................                  66,281                 103,251
  Unvested common stock awards ......                     -0-                  18,351
                                       ----------   ---------   ---------   ---------
Adjusted weighted-average shares used
  in EPS computation ................   5,029,281   5,095,562   5,072,582   5,194,184
                                       ----------   ---------   ---------   ---------
</TABLE>







                                      -6-

<PAGE>

(3)  Dividends on Common Stock

     On December 16,1998, the Company declared a quarterly cash dividend of $.14
per share. The dividends were payable to stockholders of record as of January 6,
1999 and were paid on January 20, 1999. Leeds Federal  Bankshares,  M.H.C.  (the
MHC) , which owns 3,300,000  shares of stock in the Bank,  waived receipt of its
quarterly dividend, thereby reducing the actual dividend payout to approximately
$247,300.  The dollar  amount of dividends  waived by the MHC is considered as a
restriction on the retained earnings of the Company.  The amount of any dividend
waived by the MHC shall be available for declaration of a dividend solely to the
MHC. At December 31, 1998,  the cumulative  amount of such waived  dividends was
$6,857,400.


(4)  Impact of New Accounting Standards

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other   contracts   (collectively   referred  to  as
derivatives),  and for hedging activities.  SFAS No. 133 requires that an entity
recognize all  derivatives  as either assets or  liabilities in the statement of
financial  position and measure those instruments at fair value. It is effective
for all fiscal quarters of fiscal years  beginning after June 15, 1999.  Initial
application  of this  Statement  should be as of the  beginning  of an  entity's
fiscal quarter. On that date, hedging  relationships must be designated anew and
documented  pursuant to the provisions of SFAS No. 133.  Earlier  application is
encouraged, but is permitted only as of the beginning of any fiscal quarter that
begins after issuance of SFAS No. 133. It should not be applied retroactively to
financial  statements of prior periods.  Management  has not determined  when it
will adopt the  provisions  of SFAS No. 133 but believes that it will not have a
material effect on the Company's financial position or results of operations.







                                      -7-

<PAGE>

                         LEEDS FEDERAL BANKSHARES, INC.
     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS


Forward Looking Statements
--------------------------

     In addition to  historical  information,  this  Quarterly  Report  contains
forward-looking  statements.  The forward-looking  statements  contained in this
document are subject to certain risks and uncertainties  that could cause actual
results  to  differ  materially  from  those  projected  in the  forward-looking
statements.  Important factors that might cause such a difference  include,  but
are not limited to,  those  discussed  in this  section  entitled  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations."
Readers should not place undue reliance on these forward-looking  statements, as
they reflect  management's  analysis as of the date of this report.  The Company
has no  obligation  to update  or revise  these  forward-looking  statements  to
reflect  events or  circumstances  that  occur  after  the date of this  report.
Readers should  carefully  review the risk factors  described in other documents
the Company files from time to time with the Securities and Exchange Commission,
including current reports filed on Form 8-K.


Discussion of Financial Condition Changes from June 30, 1998 to
December 31, 1998
---------------------------------------------------------------

     Cash on hand and due from banks,  interest bearing  deposits,  other liquid
investments and investment  securities  totaled  approximately  $98.8 million at
December  31, 1998,  an increase of  approximately  $10.9  million from June 30,
1998.  Mortgage-backed  securities  totaled  $13.1  million,  a decrease of $3.4
million,  due to  repayments  of  principal.  Loans  receivable  totaled  $194.1
million,  an increase of $3.1 million,  due primarily to an increase in mortgage
originations.

     Deposits  increased  approximately  $12.2  million,  to a total  of  $257.5
million at December  31,  1998.  Such  increase was  primarily  attributable  to
general  market  trends.   The  Company  has  offered  savings  rates  that  are
competitive  with other banks.  However,  it has not relied on brokered funds or
negotiated jumbo certificates to achieve increased deposit levels.

     The Company is subject to capital  standards  which  generally  require the
maintenance  of  regulatory  capital  sufficient  to meet  each of three  tests,
hereinafter  described as the  tangible  capital  requirement,  the core capital
requirement and the risk-based  capital  requirement.  At December 31, 1998, the
Company  had  tangible  capital  of $47.4  million,  or 15.3% of total  adjusted
assets, which was $42.8 million in excess of the requirement of minimum tangible
capital of $4.6 million, or 1.5% of total adjusted assets; core capital of $47.4
million, or 15.3% of total adjusted assets, which was $37.8 million in excess of
the  requirement  of  minimum  core  capital of $9.3  million,  or 3.0% of total
adjusted  assets;  and  risk-based  capital of $48.1  million,  or 32.3% of risk
weighted  assets,  which was $36.2  million  in excess of the  requirement  of a
minimum risk-based capital of 8% of risk weighted assets.


Comparison of Operating Results for Three and Six Month Periods Ended
December 31, 1998 and 1997.
---------------------------------------------------------------------

     The  Company's  net income for the three  months  ended  December 31, 1998,
totaled  $856,000,  an increase of $37,000,  or 4.5% as compared to $819,000 for
the three months  ended  December 31,  1997,  due  principally  to a decrease in
noninterest  expenses partially offset by a decrease in net interest income. The
Company's  net income for the six months ended  December 31, 1998,  totaled $1.8
million,  an increase of $96,000,  or 5.7%,  as compared to $1.7 million for the
same period last year.


                                      -8-

<PAGE>

Net Interest Income
-------------------

     Interest  income on loans for the three  months  ended  December  31, 1998,
totaled  $3.6  million,  an increase of $190,000,  or 5.6%,  as compared to $3.4
million for the three months ended December 31, 1997, due to a $13.8 million, or
7.6%,  increase in average balance in loans to $194.0 million,  partially offset
by a  decrease  in  average  yield on loans to 7.4% for the three  months  ended
December  31,  1998,  from 7.6% for the three  months  ended  December 31, 1997.
Interest  income on loans for the six months ended  December  31, 1998,  totaled
$7.3  million,  an increase of $568,000,  or 8.4%, as compared to the six months
ended December 31, 1997.  Average  balances on loans increased by $15.2 million,
or 8.5%,  to  $193.3  million,  for the  period,  while  average  yield on loans
remained relatively unchanged at 7.6%.

     Interest income on  mortgage-backed  securities  decreased by $123,000,  to
$247,000  for the three months ended  December 31, 1998,  from  $370,000 for the
three  months  ended  December  31,  1997.   Average  yield  on  mortgage-backed
securities   decreased   to  7.0%,   from  7.2%,   while   average   balance  of
mortgage-backed securities decreased by $6.4 million to $14.1 million from $20.5
million,  for the three  months ended  December  31, 1998,  compared to the same
period last year.  Interest income on  mortgage-backed  securities  decreased by
$242,000, to $525,000 for the six months ended December 31, 1998, as compared to
$767,000 for the prior period,  due principally to a decrease in average balance
of  mortgage-backed  securities  of $6.2  million  to $14.9  million  from $21.1
million,  and a decrease in the average yield on  mortgage-backed  securities to
7.1%, from 7.3%.

     Interest  income  on  investment  securities  and  short-term   investments
("Investments")  remained relatively  unchanged at $1.3 million during the three
months ended  December 31, 1998,  compared with the three months ended  December
31, 1997. Interest on Investments  remained relatively unchanged at $2.6 million
during the six months  ended  December 31,  1998,  compared  with the six months
ended  December  31,  1997.  Average  balance of  Investments  increased by $5.6
million to $87.8 million for the six months ended December 31, 1998,  from $82.1
million  for the same  period  in the prior  year,  while  yield on  Investments
decreased to 5.9% from 6.3%.

     Total  interest  expense  increased by  approximately  $206,000  during the
quarter  ended  December  31,  1998 to $3.2  million  from $3.0  million for the
quarter ended December 31, 1997.  This increase was the result of an increase in
average balances of interest bearing  liabilities  outstanding to $253.4 million
from $235.7 million,  while average rates paid on deposits  remained  relatively
unchanged at 5.1%.  For the six months ended  December 31, 1998,  total interest
expense  increased  by $414,000 to $6.4  million,  as compared to the six months
ended  December 31, 1997.  The increase was the result of an increase in average
balance  outstanding to $250.5 million from $234.8 million,  while average rates
paid on deposits remained relatively unchanged at 5.1%.

     As a result of the foregoing  changes,  the increase in interest income was
more than offset by an increase in interest  expense  resulting in a decrease in
net interest  income of  $132,000,  or 6.4%,  to $1.9  million  during the three
months ended  December 31,  1998,  as compared to $2.0 million  during the three
months ended  December 31, 1997.  During the six months ended December 31, 1998,
net interest  income  decreased by 104,000,  or 2.6%,  to $4.0 million from $4.1
million for the same period in the previous year.


Provision for Loan Losses
-------------------------

     The Bank had a provision  for loan  losses of $2,000 for the quarter  ended
December  31,  1998,  and $31,000 for the six months  ended  December  31, 1998.
During the three and six months ended December 31, 1997, the Bank had provisions
for loan losses of $8,000 and $11,000 respectively. Based on management's review
and analysis the allowance  for loan losses as of December 31, 1998,  management
considered the allowance for loan losses to be adequate.


                                      -9-

<PAGE>

Noninterest Income
------------------

     Noninterest  income increased by  approximately  $26,000 to $100,000 during
the three months ended  December  31,  1998,  as compared to $74,000  during the
three months ended  December  31,  1997.  For the six months ended  December 31,
1998, noninterest income increased to $208,000, from $146,000 for the six months
ended December 31, 1997. The increase was primarily the result of an increase in
income from life insurance contracts for the three and six months ended December
31, 1998.


Noninterest Expense
-------------------

     Noninterest expense for the three months ended December 31, 1998, decreased
by $136,000 to  $684,000,  from  $820,000,  compared to the three  months  ended
December  31, 1997.  Compensation  and employee  benefits  decreased  $80,000 to
$384,000  for the three months ended  December 31, 1998,  from  $464,000 for the
same period last year,  as the noncash  charge to expense for ESOP shares earned
reflected a decrease in the market price of the Company's stock. Advertising and
other expenses decreased by $62,000 for the quarter ended December 31, 1998, due
to a decrease in  marketing  and other  activities.  During the six months ended
December 31, 1998,  noninterest expense decreased $170,000 to $1.4 million, from
$1.6 million,  compared to the six months ended December 31, 1997. This decrease
was also due to reduced  compensation  cost  relating to ESOP  expense and lower
levels of advertising.


Provision for Income Taxes
--------------------------

     The effective  income tax rate for the three and six months ended  December
31,  1998,  was  35.7%,  compared  to 36.6% for the three and six  months  ended
December 31, 1997. The decrease was due to increased state tax free investments.


Classified Loans
----------------

     Loans  which were 90 or more days  delinquent  but still  accruing  totaled
$19,000 at December 31, 1998, and $5,000 at June 30, 1998. Loans 90 or more days
delinquent  and not  accruing  totaled $2.5 million at December 31, and June 30,
1998. At December 31, 1998, the Company had a $2.5 million loan which matured in
June,  1998,  and has not been repaid.  Subsequent  to December  31,  1998,  the
Company began  foreclosure  proceedings on the loan.  Management has obtained an
appraisal,  and based on the appraisal and other  factors,  believes the Company
will not incur a material loss on this loan.


Liquidity
---------

     The Company is required to maintain  levels of liquid  assets as defined by
OTS regulations. This requirement, which varies from time to time (currently set
at 4%) depending upon economic  conditions  and deposit  flows,  is based upon a
percentage of deposits and short-term borrowings.  The Company's liquidity ratio
averaged  40.26% during the quarter ended  December 31, 1998, and equaled 41.89%
at December 31, 1998.


Capability of the Bank's Data Processing Software to Accommodate the Year 2000
------------------------------------------------------------------------------

     The following information consitutes "Year 2000 Readiness Disclosure" under
the Year 2000 Information and Readiness Disclosure Act.

     The Company relies upon computers for the daily conduct of its business and
for data  processing  generally.  There is concern among  industry  experts that
commencing on January 1, 2000,  computers  will be unable to "read" the new year
and there may be widespread  computer malfunctions.  The Year 2000 issue  is the


                                      -10-

<PAGE>

result of computer  programs  being written using two digits rather than four to
define the applicable  year. Any of the Company's  computer  programs that would
have date  sensitive  software may recognize a date during "00" as the year 1900
rather  than  the  year  2000.  This  could  result  in  a  systems  failure  or
miscalculations  causing disruptions of operations.  Management has assessed its
electronic systems, programs,  applications and other electronic components used
in the operation of the Company.  The Company  contracts with service bureaus to
provide the  majority of its data  processing  and is dependent  upon  purchased
application  software.  Management  believes  that  it  has  implemented  a plan
pursuant to which the progress  toward full compliance of its service bureau and
other software  vendors will be tracked and tested well in advance of January 1,
2000. The Company has completed  end-to-end tests with primary servicers,  which
allowed the Company to simulate daily processing on sensitive century dates. The
Company  is  currently   developing  a  contingency   plan  in  the  event  that
unforseeable  external  factors disrupt it's normal  operations as the year 2000
approaches,  and expects to complete the plan by March 31, 1999. There can be no
assurance that the Company's contingency plan will fully mitigate the effects of
such potential failures.  The Company has contacted its commercial borrowers and
has been  informed  that they are either  compliant  or in  process of  becoming
compliant in connection with the Year 2000 issue. As commercial  loans represent
less than 2% of its  assets,  the Company  believes  that the effect of the Year
2000 issue on the Company's commercial borrowers will not have an adverse effect
on the Company in general.  The Company has not incurred any material costs, and
management  believes  that it  will  incur  costs  of no more  than  $25,000  in
connection with the Year 2000 issue, although there can be no assurances in this
regard.


Stock Repurchase Plan To Repurchase Up To 275,000 Shares of Common Stock
------------------------------------------------------------------------

     As of December 31, 1998, the Company has repurchased  128,928 shares of its
common stock in connection with its plan to repurchase up to 275,000 shares,  or
approximately  5.3%,  of its  outstanding  shares of common stock as part of its
capital management strategy.


                                      -11-

<PAGE>

PART II.  OTHER INFORMATION
---------------------------


Legal Proceedings
-----------------

     The  Company  is not  involved  in any  litigation,  nor is it aware of any
pending  litigation,  other  than  legal  proceedings  incidental  to the Bank's
business.  In the opinion of  management,  no material loss is expected from any
such claims or lawsuits.


Submission of Matters to a Vote of Security-Holders
---------------------------------------------------

(A)  On October 21, 1998, the Company held its annual meeting of stockholders.

(B)  At the annual  meeting  Directors  Amer and Wolf were elected to three year
     terms. The following table shows the terms of all directors.

     Director's Name                  Term Began     Term Expires
     ---------------                  ----------     ------------
     John F. Amer                        1998            2001
     Gordon E. Clark                     1996            1999
     John F. Doyle                       1996            1999
     Raymond J. Hartman, Jr.             1997            2000
     Joan H. McCleary                    1997            2000
     Marguerite E. Wolf                  1998            2001

(C)  There were present at the Annual  Meeting in person or by proxy the holders
     of  4,867,733  votes,  said votes  constituting  a majority and more than a
     quorum of the outstanding votes entitled to be cast.

     The stockholders  acted on the following two matters at the Annual Meeting,
     approving each. Set forth below are the results of the stockholder  vote on
     the matters considered at the Annual Meeting.

     (1)  The following  directors were elected by the stockholders to serve for
          three year terms:

                                           Votes For     Withheld
                                           ---------     --------
          John F. Amer.                    4,860,718       7,015
          Marguerite E. Wolf               4,860,568       7,165

     (2)  The  appointment  of KPMG LLP, to be the  Company's  auditors  for the
          fiscal year ending June 30, 1999, was approved as follows:

                                              For         Against
                                           ---------      -------
          Number of Votes                  4,851,561       7,325


Exhibits and Report on Form 8-K
-------------------------------

     No Form 8-K reports were filed during the quarter.


                                      -12-

<PAGE>

                                   SIGNATURES


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


                                       LEEDS FEDERAL BANKSHARES, INC.



Date: February 10, 1999                By: /s/ Gordon E. Clark
      ---------------------                -------------------------------------
                                           Gordon E. Clark
                                           President and Chief Executive Officer



Date: February 10, 1999                By: /s/ Kathleen Trumpler
      ---------------------                -------------------------------------
                                           Kathleen Trumpler
                                           Treasurer and Chief Financial Officer


                                      -13-