PRESS
RELEASE
 May
2, 2008
 For
Immediate Release
 
 
 For
      Further Information Contact:
              Michael
      W. DoslandPresident
      and Chief Executive OfficerFirst
      Federal Bankshares, Inc.329
      Pierce Street, P.O. Box 897Sioux
      City, IA  51102712.277.0222
 
 FIRST
FEDERAL BANKSHARES, INC. REPORTS NET LOSS IN FISCAL THIRD
 QUARTER
AND SUSPENDS FISCAL FOURTH QUARTER DIVIDEND
 
 Sioux
City, Iowa.    First Federal Bankshares, Inc. (the
“Company”) (Nasdaq Global Market: FFSX), the parent company of Vantus Bank (the
“Bank”), recorded a net loss for the three months ended March 31, 2008, of $1.5
million or $0.47 per diluted share, compared to net income of $1.0 million, or
$0.30 per diluted share for the three months ended March 31,
2007.   For the nine months ended March 31, 2008, the Company
recorded a net loss of $802,000, or $0.25 per diluted share, compared to net
income of $2.4 million, or $0.72 per diluted share for the nine months ended
March 31, 2007.
 
 Results
of operations during the three months ended March 31, 2008, were negatively
affected by a significant increase in the Company’s provision for loan losses
for the period.  Non-performing loans increased from $3.1 million or
0.72% of loans receivable at December 31, 2007, to $9.3 million or 2.24% of
loans receivable at March 31, 2008.  In addition, adversely classified
assets (which include non-performing loans) increased from $8.5 million or 1.36%
of total assets at December 31, 2007, to $14.2 million or 2.38% of total assets
at March 31, 2008.    Adversely classified assets consist of
loans rated “Substandard”, “Doubtful”, or “Loss”, as well as foreclosed and
repossessed assets.  Loans rated “Special Mention” increased from
$13.9 million at December 31, 2007, to $21.7 million at March 31,
2008.
 
 The
increase in non-performing loans and adversely classified assets was primarily
driven by four large loan relationships totaling $5.6 million, which defaulted
during the quarter.   Two of these loans totaling $3.5 million
are in the renewable fuels industry and two totaling $2.1 million are in real
estate development.  As a result of these defaults, the loans were
downgraded to “Substandard” and were placed on non-accrual.   In
addition to these loans, the Company downgraded to “Special Mention” a $6.1
million loan on a land development project and a $3.2 million loan to a clothing
distributor that is secured by commercial real estate.
 
 In all of
the instances cited in the preceding paragraph, management of the Company
currently believes the estimated fair value of the collateral securing these
loans exceeds the amounts due the Company.  Accordingly, the Company
does not anticipate a need for specific loss allowance on these relationships at
this time, although there can be no assurances.  However, in addition
to the Company’s absolute level of classified assets, management’s assessment of
current economic conditions and expectations for near-term losses are key
components in the calculation of the Company’s allowance for loan
losses.   Changes in these assessments and/or expectations
warranted an increase in certain subjective factors used in the Company’s
computation of its allowance for loan loss.  As a result of these
developments, as well as
  3
  $380,000
specific loss allowance on an additional loan relationship discussed in the next
paragraph, the Company recorded a provision for loan losses of approximately
$2.7 million during the three months ended March 31, 2008, compared to $31,000
for the corresponding quarter in 2007.    In addition, the
Company recorded a loss of $171,000 as a result of the disposition of certain
foreclosed real estate properties during the period.  This amount has
been included in other non-interest expense.
 
 In
addition to the developments discussed in the previous paragraph, a $1.4 million
loan to an out-of-market concrete pumping contractor deteriorated further during
the quarter.  Management now believes the probable outcome for this
loan relationship will be the complete liquidation of the loan collateral to
satisfy the amounts owed to the Company.  Accordingly, during the
quarter the Company increased its specific allowance on this loan relationship
from $180,000 to $560,000 based on management’s current assessment of the value
of the collateral.  However, there can be no assurances that the
Company will be able to liquidate the collateral for the value estimated by
management.
 
 As a
result of the developments described in the preceding paragraphs, the Company’s
allowance for loan loss increased from $2.1 million or 0.47% of total loans at
December 31, 2007, to $4.7 million or 1.13% of total loans at March 31,
2008.  Although management believes that the Company’s present level
of allowance for loan losses is adequate, there can be no assurance that future
adjustments to the allowance will not be necessary, which could adversely affect
the Company’s results of operations.
 
 Net
interest income for the three-month period ended March 31, 2008, increased $0.1
million from $3.8 million for the three months ended March 31, 2007, to $3.9
million for the three months ended March 31, 2008.  For the three
months ended March 31, 2008, the Company’s net interest margin was 2.86%
compared to 2.79% for the same period a year ago.  The increase in
margin was due to liability costs falling faster than the yield of the Company’s
interest-earning assets.  Asset yields decreased 20 basis
points.  Approximately half of this decrease was due to a decline in
yields on the Company’s loan portfolio.  The remaining decrease was
related to the reversal of interest on loans that were placed on non-accrual
during the period.  During the most recent quarter, the Company’s cost
of interest-bearing liabilities declined 40 basis points in response to overall
decreases in market interest rates.   The increase in margin was
partially offset by a decrease in the Company’s average interest-earning
assets.  Average interest-earning assets decreased $7.0 million to
$553.1 million during the most recent quarter compared to $560.1 million for the
three months ended March 31, 2007.
 
 For the
nine month period ended March 31, 2008, net interest income increased to $12.2
million compared to $11.8 million for the same period ended March 31,
2007.  For the nine months ended    March 31,
2008, the Company’s net interest margin remained at 2.93%.  However,
average interest-earning assets for the nine month period ended March 31, 2008,
increased $15.9 million to $561.5 million compared to $545.7 million for the
nine months ended March 31, 2007.  The change was primarily due to
increases in the Company’s investment portfolio.
 
 Non-interest
income for the three months ended March 31, 2008 and 2007, totaled $1.4 million.
For the nine months ended March 31, 2008 and 2007, non-interest income totaled
$4.5 million.  A decline in service fees on deposits was offset by an
increase in fees charged on consumer and commercial loans.  The
decrease in service fees on deposits was due to the elimination of fees on
internet banking services and lower income from overdraft fees as a result of
the implementation of an overdraft protection product.  These changes
were driven by competitive forces in the Company’s market areas.  The
corresponding increase in the amount of service fees on commercial and consumer
loans was due to the collection of prepayment penalties on a number of large
commercial real estate loans that refinanced during the period.
 
 Non-interest
expense for the three months ended March 31, 2008, increased $0.7 million or
14.4% over the same period last year.  For the nine months ended March
31, 2008, non-interest expense increased
  4
  $1.8
million or 13.5% as compared to the nine months ended March 31,
2007.  Personnel expense increased $0.9 million or 11.1% for the nine
months ended March 31, 2008, as compared to the same period last
year.  This increase was primarily due to merit increases and an
increase in the number of full-time equivalent employees as compared to last
year.  The number of full-time equivalent employees was 196 as of
March 31, 2008, as compared to 182 at the same time last year.  This
increase was primarily due to the opening of two new banking centers in the Des
Moines market, as well as the hiring of certain key employees over the past
twelve months.  Advertising, donations, and public relations for the
nine months ended March 31, 2008, increased $0.5 million to $1.0 million as
compared to the same period last year.  This change was due to
increased costs associated with the promotion of the Bank’s new name and
brand.  Data processing, ATM, and other item processing expense
increased $0.3 million from $0.9 million for the nine months ended March 31,
2007, to $1.2 million for the nine months ended March 31, 2008.  This
increase was partially due to costs associated with the purchase of new debit
card stock in association with the name change.  In addition, the
Company has been successful at increasing the number of internet banking and
cell phone users.  As a result, processing costs to service these
channels have increased as compared to the previous year.
 
 Income
tax benefit for the nine months ended March 31, 2008, was $890,000 compared to
an expense of $561,000 for the nine months ended March 31,
2007.  Income tax benefit for the three months ended March 31, 2008,
was $1.0 million compared to an expense of $120,000 for the same period a year
ago.
 
 Total
assets decreased by $48.5 million, or 7.5%, to $597.4 million at March 31, 2008,
from $645.8 million at June 30, 2007.  This decrease was due to short
term investments and cash being used to repay wholesale
borrowings.  In addition, loans receivable declined $15.7 million as
loan prepayment activity increased.  Total deposits declined
significantly from June 30, 2007, as a result of management’s decision to
replace $50 million in brokered certificates of deposit with $50 million in
advances from the FHLB.  Excluding brokered certificates, deposit
liabilities increased $6.3 million or 1.4% since June 30, 2007.  This
increase was led by total checking accounts, which were up $4.9 million or
3.6%.
 
 Other
Matters
 
 The
Company’s book value per share was $17.47 at March 31, 2008, compared to $20.72
at June 30, 2007.  This decline was attributable to the Company’s net
loss from operations, as well as a $9.6 million increase in accumulated other
comprehensive loss, which is a component of stockholders’
equity.  This increase was caused by a decline in the fair value of
the Company’s available-for-sale securities, most notably its portfolio of
trust-preferred pooled securities (“TPSs”).  As of March 31, 2008, the
Company owned TPSs with an amortized cost of $65.2 million.  The cash
flows of the Company’s TPSs are derived from trust preferred securities and
subordinated debt issued by well-diversified pools of banks and thrifts (73%),
insurance companies (25%), and REIT/homebuilders (2%).  The Company’s
TPS securities are secured through a combination of subordination from lower
classes within the TPS structures, as well as over-collateralization of
available future contractual cash flows.  At the time of purchase,
each of the securities in the Company’s TPS portfolio were rated either single-A
(61% of the portfolio) or triple-B (39% of the portfolio) by a nationally
recognized rating agency.     In December 2007,
however, a TPS with an amortized cost of $5.1 million was downgraded to triple-C
due to the default of two REITs within the TPS.  This security is the
only TPS in the Company’s portfolio that has an exposure to REITs
(27%).
 
 On March
31, 2008, the fair value of the Company’s TPS portfolio was estimated to be
$49.7 million or 76.3% of unamortized cost, compared to $57.9 million or 88.8%
of unamortized cost at December 31, 2007.    In management’s
judgment, the significant decline in the estimated fair value of the Company’s
TPS portfolio was not the result of a decline in the credit quality of the
community banks, thrifts, and insurance companies that support these
securities.   The Company expects to receive all contractual
principal and interest payments due on these securities, including the security
that was recently
  5
  downgraded
to triple-C.  For these reasons management has concluded that the
decline in the estimated fair value of the Company’s TPS portfolio is
temporary.  As such, the Company recorded the corresponding fair value
adjustment as a component of other comprehensive loss, net of estimated income
tax benefit.  Accumulated other comprehensive loss is a component of
stockholders’ equity.  This loss does not affect the cash flows of the
Company and does not affect the regulatory capital of the Bank.  As of
March 31, 2008, the Bank remained well-capitalized for regulatory capital
purposes.
 
 It should
be noted, however, that future defaults by the companies that underlie the
Company’s TPS portfolio, negative actions by ratings agencies, or deterioration
in market conditions or other factors could result in the Company concluding at
some future date that all or portions of its TPS portfolio have been “other than
temporarily impaired” or “permanently impaired.”   Such
determination could have a material adverse impact on the Company’s future
earnings and stockholders’ equity.
 
 Quarterly
Dividend
  On April
17, 2008, the Board of Directors of the Company elected to suspend the regular
quarterly cash dividend for the Company’s fiscal fourth quarter.  
Michael W. Dosland, President and CEO, stated "While the suspension of the
dividend was a  difficult decision, our Board of Directors believes
that it is in the Company's best interests to preserve capital given recent
negative trends in our operating performance and asset quality, as well as
recent deterioration in economic conditions and financial markets."  The
Company intends to reassess the dividend on a quarterly basis, but does not
anticipate reinstatement until operating results and asset quality improve
and/or economic conditions and financial markets stabilize.  This decision
is expected to preserve approximately $1.4 million in capital on an annualized
basis.
 
 About
Vantus Bank
 
 The
Company’s banking subsidiary, Vantus Bank, is headquartered in Sioux City,
Iowa.  Founded in 1923, Vantus Bank is a community bank serving
business and consumers in seven full-service offices in northwest Iowa, a
full-service office in South Sioux City, Nebraska, and seven full-service
offices in central Iowa, including four in the Des Moines market
area.
 
 Certain
matters in the press release are “forward looking statements” intended to
qualify for the safe harbor from liability as established by the Private
Securities Litigation Reform Act of 1995.  Such forward looking
statements include words and phrases such as “will likely result,” “are expected
to,” “will continue,” “is anticipated,” “estimate,” “project,” “intends to,” or
similar expressions.  Similarly statements that describe the Company’s
future plans, objectives, or goals are forward-looking
statements.  The Company wishes to caution the readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date of the press release, and to advise readers that various factors could
affect the Company’s financial performance and could cause results for future
periods to differ materially from those anticipated or
projected.  Such factors include, but are not limited to: (i) general
market interest rates, (ii) general economic conditions, (iii)
legislative/regulatory changes, (iv) monetary and fiscal policies of the U.S.
Treasury and Federal Reserve, (v) changes in the quality or composition of
Company’s loan and investment portfolios, (vi) demand for loan products, (vii)
deposit flow, (viii) competition, (ix) demand for financial services in
Company’s markets and (x) changes in accounting principles, policies, or
guidelines.
 
 
  6
  FIRST
      FEDERAL BANKSHARES, INC. and SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETS (unaudited)March
      31
              
              
              June
      30
              
              
              March
      31(Dollars
      in thousands, except per share amounts)
              
              2008
              
              
              2007
              
              
              2007ASSETSCash
      and cash equivalents
              
              $
              13,238
              
              
              $
              25,738
              
              
              $
              22,472Securities
      available-for-sale, at fair value
              
              
              96,976
              
              
              
              122,309
              
              
              
              131,376Securities
      held-to-maturity, at cost
              
              
              8,328
              
              
              
              9,549
              
              
              
              11,576Mortgage
      loans held for sale
              
              
              3,042
              
              
              
              2,131
              
              
              
              -Loans
      receivable, net
              
              
              406,312
              
              
              
              427,954
              
              
              
              427,318Office
      property and equipment, net
              
              
              18,858
              
              
              
              16,205
              
              
              
              14,627Federal
      Home Loan Bank stock, at cost
              
              
              4,795
              
              
              
              3,560
              
              
              
              3,827Accrued
      interest receivable
              
              
              2,801
              
              
              
              2,940
              
              
              
              2,966Goodwill
              
              
              18,417
              
              
              
              18,417
              
              
              
              18,417Foreclosed
      and repossessed assets
              
              
              3,419
              
              
              
              2,156
              
              
              
              534Deferred
      tax asset
              
              
              6,637
              
              
              
              165
              
              
              
              183Other
      assets
              
              
              14,531
              
              
              
              14,693
              
              
              
              14,410Total
      assets
              
              $
              597,354
              
              
              $
              645,817
              
              
              $
              647,706LIABILITIESDeposits
              
              $
              464,180
              
              
              $
              507,865
              
              
              $
              505,530Advances
      from FHLB and other borrowings
              
              
              70,125
              
              
              
              62,202
              
              
              
              67,155Advance
      payments by borrowers for taxes and insurance
              
              
              407
              
              
              
              916
              
              
              
              380Accrued
      interest payable
              
              
              3,110
              
              
              
              2,691
              
              
              
              2,884Accrued
      expenses and other liabilities
              
              
              1,819
              
              
              
              1,888
              
              
              
              1,665Total
      liabilities
              
              
              539,641
              
              
              
              575,562
              
              
              
              577,614STOCKHOLDERS'
      EQUITYCommon
      stock, $.01 par value
              
              
              51
              
              
              
              51
              
              
              
              51Additional
      paid-in capital
              
              
              39,460
              
              
              
              39,230
              
              
              
              39,144Retained
      earnings, substantially restricted
              
              
              57,139
              
              
              
              58,704
              
              
              
              58,383Treasury
      stock, at cost
              
              
              (28,536
              )
              
              
              (26,886
              )
              
              
              (26,765
              )Accumulated
      other comprehensive loss
              
              
              (9,824
              )
              
              
              (179
              )
              
              
              (26
              )Unearned
      ESOP
              
              
              (577
              )
              
              
              (665
              )
              
              
              (695
              )Total
      stockholders' equity
              
              
              57,713
              
              
              
              70,255
              
              
              
              70,092Total
      liabilities and stockholders' equity
              
              $
              597,354
              
              
              $
              645,817
              
              
              $
              647,706Actual
      number of shares outstanding at endof
      period, net of treasury stock
              
              
              3,304,471
              
              
              
              3,389,971
              
              
              
              3,395,371Average
      shares outstanding used to compute:Basic
      earnings per share
              
              
              3,245,390
              
              
              
              3,316,774
              
              
              
              3,316,039Diluted
      earnings per share
              
              
              3,262,073
              
              
              
              3,343,532
              
              
              
              3,346,111Shareholders'
      equity to total assets
              
              
              9.66
              %
              
              
              10.88
              %
              
              
              10.82
              %Book
      value per share
              
              $
              17.47
              
              
              $
              20.72
              
              
              $
              20.64






7




FIRST
      FEDERAL BANKSHARES, INC. and SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)Three
      months ended
              
              
              Nine
      months endedMarch
      31
              
              
              March
      31(Dollars
      in thousands, except per share amounts)
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Interest
      on loans
              
              $
              6,641
              
              
              $
              7,341
              
              
              $
              21,474
              
              
              $
              22,512Interest
      on investment securities
              
              
              1,864
              
              
              
              1,531
              
              
              
              5,884
              
              
              
              3,329Interest
      on cash and cash equivalents
              
              
              67
              
              
              
              74
              
              
              
              125
              
              
              
              318Total
      interest income
              
              
              8,572
              
              
              
              8,946
              
              
              
              27,483
              
              
              
              26,159Interest
      on deposit liabilities
              
              
              3,570
              
              
              
              4,183
              
              
              
              12,047
              
              
              
              11,390Interest
      on borrowings
              
              
              1,092
              
              
              
              919
              
              
              
              3,245
              
              
              
              2,958Total
      interest expense
              
              
              4,662
              
              
              
              5,102
              
              
              
              15,292
              
              
              
              14,348Net
      interest income
              
              
              3,910
              
              
              
              3,844
              
              
              
              12,191
              
              
              
              11,811Provision
      for loan losses
              
              
              2,681
              
              
              
              31
              
              
              
              3,194
              
              
              
              534Net
      interest income after provision
              
              
              1,229
              
              
              
              3,813
              
              
              
              8,997
              
              
              
              11,277Service
      charges on deposit accounts
              
              
              774
              
              
              
              771
              
              
              
              2,392
              
              
              
              2,534Fees
      on commercial and consumer loans
              
              
              58
              
              
              
              51
              
              
              
              278
              
              
              
              136Gain
      on sale of real estate held for development
              
              
              -
              
              
              
              15
              
              
              
              47
              
              
              
              75Mortgage
      banking revenue
              
              
              148
              
              
              
              152
              
              
              
              519
              
              
              
              530Other
      income
              
              
              414
              
              
              
              363
              
              
              
              1,252
              
              
              
              1,180Total
      non-interest income
              
              
              1,394
              
              
              
              1,352
              
              
              
              4,488
              
              
              
              4,455Personnel
      expense
              
              
              2,932
              
              
              
              2,567
              
              
              
              8,563
              
              
              
              7,706Office
      property and equipment
              
              
              732
              
              
              
              751
              
              
              
              2,134
              
              
              
              2,116Data
      processing, ATM and debit card transactioncosts,
      and other item processing expense
              
              
              393
              
              
              
              309
              
              
              
              1,179
              
              
              
              912Professional,
      insurance, and regulatory expense
              
              
              283
              
              
              
              252
              
              
              
              790
              
              
              
              810Advertising,
      donations, and public relations
              
              
              288
              
              
              
              160
              
              
              
              1,054
              
              
              
              544Communications,
      postage, and office supplies
              
              
              212
              
              
              
              212
              
              
              
              647
              
              
              
              614Other
      expense
              
              
              350
              
              
              
              288
              
              
              
              810
              
              
              
              660Total
      non-interest expense
              
              
              5,190
              
              
              
              4,539
              
              
              
              15,177
              
              
              
              13,362Income
      (loss) from continuing operations before income taxes
              
              
              (2,567
              )
              
              
              626
              
              
              
              (1,692
              )
              
              
              2,370Income
      tax expense (benefit)
              
              
              (1,033
              )
              
              
              120
              
              
              
              (890
              )
              
              
              561Income
      (loss) from continuing operations
              
              
              (1,534
              )
              
              
              506
              
              
              
              (802
              )
              
              
              1,809Income
      from discontinued operations, net of tax
              
              
              -
              
              
              
              514
              
              
              
              -
              
              
              
              590Net
      income (loss)
              
              $
              (1,534
              )
              
              $
              1,020
              
              
              $
              (802
              )
              
              $
              2,399Basic
      earnings per share:Income
      (loss) from continuing operations
              
              $
              (0.47
              )
              
              $
              0.15
              
              
              $
              (0.25
              )
              
              $
              0.54Income
      from discontinued operations
              
              
              -
              
              
              
              0.16
              
              
              
              -
              
              
              
              0.18Net
      income (loss) per share
              
              $
              (0.47
              )
              
              $
              0.31
              
              
              $
              (0.25
              )
              
              $
              0.72Diluted
      earnings per share:Income
      (loss) from continuing operations
              
              $
              (0.47
              )
              
              $
              0.15
              
              
              $
              (0.25
              )
              
              $
              0.54Income
      from discontinued operations
              
              
              -
              
              
              
              0.15
              
              
              
              -
              
              
              
              0.18Net
      income (loss) per share
              
              $
              (0.47
              )
              
              $
              0.30
              
              
              $
              (0.25
              )
              
              $
              0.72Cash
      dividends declared per share
              
              $
              0.105
              
              
              $
              0.105
              
              
              $
              0.315
              
              
              $
              0.310




8




FIRST
      FEDERAL BANKSHARES, INC and SUBSIDIARIESSELECTED
      FINANCIAL DATA (unaudited)At
      or for the three months ended
              
              
              At
      or for the nine months endedMarch
      31
              
              
              March
      31(Dollars
      in thousands, except per share amounts)
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007Average
      total assets
              
              $
              619,378
              
              
              $
              616,268
              
              
              $
              626,151
              
              
              $
              601,272Average
      interest-earning assets
              
              
              553,125
              
              
              
              560,102
              
              
              
              561,529
              
              
              
              545,670Average
      interest-bearing liabilities
              
              
              505,468
              
              
              
              500,187
              
              
              
              510,444
              
              
              
              484,698Average
      interest-earning assets to averageinterest-bearing
      liabilities
              
              
              109.43
              %
              
              
              111.98
              %
              
              
              110.01
              %
              
              
              112.58
              %Activity
      in the allowance for loan losses during the period:Balance
      at beginning of period
              
              $
              2,056
              
              
              $
              2,044
              
              
              $
              1,797
              
              
              $
              5,466Provision
      for loan losses
              
              
              2,681
              
              
              
              31
              
              
              
              3,194
              
              
              
              534Charge-offs:Single-family
      mortgage loans
              
              
              -
              
              
              
              (4
              )
              
              
              (165
              )
              
              
              (24
              )Commercial
      real estate loans
              
              
              -
              
              
              
              -
              
              
              
              (17
              )
              
              
              -Commercial
      business loans
              
              
              -
              
              
              
              (3
              )
              
              
              (71
              )
              
              
              (2,620
              )Consumer
      loans
              
              
              (70
              )
              
              
              (63
              )
              
              
              (149
              )
              
              
              (190
              )Total
      loans charged-off
              
              
              (70
              )
              
              
              (70
              )
              
              
              (402
              )
              
              
              (2,834
              )Loans
      transferred to held for sale
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,300
              )Recoveries
              
              
              26
              
              
              
              26
              
              
              
              104
              
              
              
              165Charge-offs
      net of recoveries
              
              
              (44
              )
              
              
              (44
              )
              
              
              (298
              )
              
              
              (3,969
              )Balance
      at end of period
              
              $
              4,693
              
              
              $
              2,031
              
              
              $
              4,693
              
              
              $
              2,031Non-performing
      loans receivable
              
              $
              9,286
              
              
              $
              3,094
              
              
              $
              9,286
              
              
              $
              3,094Non-performing
      loans to total loans receivable
              
              
              2.24
              %
              
              
              0.72
              %
              
              
              2.24
              %
              
              
              0.72
              %Allowance
      for loan losses to non-performing loans
              
              
              50.54
              %
              
              
              65.64
              %
              
              
              50.54
              %
              
              
              65.64
              %Ratio
      of allowance for loan losses to total loansheld
      for investment at end of period
              
              
              1.13
              %
              
              
              0.47
              %
              
              
              1.13
              %
              
              
              0.47
              %Selected
      operating data: (1)Return
      on average assets
              
              
              -0.99
              %
              
              
              0.65
              %
              
              
              -0.17
              %
              
              
              0.53
              %Return
      on average equity
              
              
              -9.37
              %
              
              
              5.78
              %
              
              
              -1.58
              %
              
              
              4.57
              %Net
      interest rate spread
              
              
              2.58
              %
              
              
              2.38
              %
              
              
              2.56
              %
              
              
              2.49
              %Net
      yield on average interest-earning assets (2)
              
              
              2.86
              %
              
              
              2.79
              %
              
              
              2.93
              %
              
              
              2.93
              %Efficiency
      ratio (3)
              
              
              97.91
              %
              
              
              87.01
              %
              
              
              90.97
              %
              
              
              81.90
              %(1)   
      Annualized except for efficiency ratio.(2)   
      Net interest income, tax-effected, divided by average interest-earning
      assets.(3)   
      Non-interest expense divided by net interest income plus non-interest
      income, less gain (loss) on sale ofother
      real estate owned, investments, and fixed assets.




9




FIRST
      FEDERAL BANKSHARES, INC and SUBSIDIARIESSELECTED
      FINANCIAL DATA (unaudited)WeightedMarch
      31
              
              
              Average(Dollars
      in thousands, except per share amounts)
              
              2008
              
              
              RateTime
      deposits maturing within ...Three
      months
              
              $
              86,939
              
              
              
              4.84
              %Four
      to six months
              
              
              44,690
              
              
              
              4.15
              %Seven
      to twelve months
              
              
              56,930
              
              
              
              4.12
              %More
      than twelve months
              
              
              53,424
              
              
              
              4.46
              %Total
      time deposits
              
              $
              241,983
              
              
              
              4.46
              %FHLB
      advances and all other borrowings maturing within...Three
      months
              
              $
              40,375
              
              
              
              4.73
              %Four
      to six months
              
              
              13,000
              
              
              
              5.54
              %Seven
      to twelve months
              
              
              12,500
              
              
              
              5.50
              %More
      than twelve months
              
              
              4,250
              
              
              
              4.98
              %Total
      FHLB advances and all other borrowings
              
              $
              70,125
              
              
              
              4.94
              %
  Three
      months ended
              
              
              Nine
      months endedMarch
      31
              
              
              March
      312008
              
              
              2007
              
              
              2008
              
              
              2007Market
      price per share:High
      for the period
              
              $
              15.50
              
              
              $
              22.22
              
              
              $
              19.00
              
              
              $
              22.51Low
      for the period
              
              $
              10.91
              
              
              $
              21.31
              
              
              $
              10.91
              
              
              $
              21.31Close
      at end of period
              
              $
              13.80
              
              
              $
              21.31
              
              
              $
              13.80
              
              
              $
              21.31




10