**EXHIBIT
      99.1**

































































[LOGO]
      First Federal Bankshares, Inc.








**PRESS
      RELEASE**


**August
      1, 2006**


**For
      Immediate Release**








**For
                Further Information Contact:**
            **Michael
                W. Dosland****President
                and Chief Executive Officer****First
                Federal Bankshares, Inc.****329
                Pierce Street, P.O. Box 897****Sioux
                City, IA 51102****712.277.0222**








**FIRST
      FEDERAL BANKSHARES, INC. ANNOUNCES EARNINGS AND**


**DECLARES
      DIVIDEND**





Sioux
      City, Iowa. First Federal Bankshares, Inc. (the “Company”) (Nasdaq Global Market
      - “FFSX”) reported net earnings of $743,000, or basic and diluted earnings per
      share of $0.23 and $0.22, respectively, for the final quarter of fiscal 2006,
      compared to net earnings of $172,000, or basic and diluted earnings per share
      of
      $0.05, for the final quarter of fiscal 2005. Net earnings for fiscal 2006
      totaled $3.3 million, or basic and diluted earnings per share of $0.99 and
      $0.98, respectively. This compares to $4.2 million, or basic and diluted
      earnings per share of $1.19 and $1.16, respectively, for fiscal 2005. During
      fiscal 2005 a gain of $1.4 million, net of tax effect, or basic and diluted
      earnings per share of $0.38, from the sale of two bank branch offices favorably
      impacted the Company’s net earnings. Excluding the branch office sale in the
      prior-year period, net earnings for fiscal 2005 would have been $2.8 million,
      or
      basic and diluted earnings per share of $0.81 and $0.78, respectively.





Discussion
      of Operating Results for the Three Months Ended June 30, 2006





Net
      interest income totaled $4.3 million for both the three-month periods ended
      June
      30, 2006 and 2005. During the final quarter of fiscal 2006, the cost of
      interest-bearing liabilities continued to increase more rapidly than yields
      on
      interest-earning assets resulting in a decrease of 13 basis points in the
      interest rate spread to 2.88% for the three months ended June 30, 2006 from
      3.01% for the three months ended June 30, 2005. The cost of interest-bearing
      liabilities increased by 74 basis points to 3.49% for the three months ended
      June 30, 2006 from 2.75% for the three months ended June 30, 2005 while the
      yield on interest-earning assets increased by 61 basis points to 6.37% for
      the
      three months ended June 30, 2006 from 5.76% for the three months ended June
      30,
      2005. The increases in the cost of interest-bearing liabilities and the yield
      on
      interest-earning assets were due to increases in market interest rates as the
      Federal Reserve continued its measured pace of rate increases during fiscal
      2006. Largely offsetting the decrease in the interest rate spread was an
      increase in the average balance of interest-earning assets. The average balance
      of interest-earning assets increased by $5.8 million, or 1.1%, for the three
      months ended June 30, 2006 as compared to the three months ended June 30, 2005.
      The increase in the average balance of interest-earning assets for the three
      months ended June 30, 2006 was primarily due to an increase of $28.7 million
      in
      the average balance of loans that was partially offset by a $13.7 million
      decrease in the average balance of investment securities and a $9.2 million
      decrease in the average balance of other short-term interest-earning
      assets.







329
          Pierce Street l
          P.O. Box 897 l
          Sioux City IA 51102 l
          712-277-0200


Provision
      for loan loss expense decreased to $850,000 for the three months ended June
      30,
      2006 from $2.0 million for the three months ended June 30, 2005. During the
      three months ended June 30, 2006 the Company established a loss allowance of
      $850,000 against the loans of a construction contractor that has experienced
      negative operating results in recent months. Gross loans to this borrower
      totaled $2.1 million at June 30, 2006 and were placed on nonaccrual status
      during the three months ended June 30, 2006. During the three months ended
      June
      30, 2005, provision expense of $2.0 million was primarily due to an increase
      in
      reserves against the loans of an electrical contractor that was experiencing
      cash flow problems.




Noninterest
      income totaled $1.8 million for both of the three-month periods ended June
      30,
      2006 and 2005. A decrease in income from services charges on deposit accounts
      due to a decrease in the number of transaction accounts was largely offset
      by an
      increase in revenues from the sale of non-FDIC insured investment products.




Noninterest
      expense increased by $174,000, or 4.3%, to $4.3 million for the three months
      ended June 30, 2006 from $4.1 million for the three months ended June 30, 2005.
      Compensation and benefits expense increased by $208,000, or 9.2%, to $2.5
      million for the three months ended June 30, 2006 from $2.3 million for the
      three
      months ended June 30, 2005. Expense was lower for the prior-year period due
      to
      adjustments to the liability for paid time off and bonus at June 30, 2005.
      Advertising expense decreased by $30,000, or 21.0%, to $111,000 for the three
      months ended June 30, 2006 from $141,000 for the three months ended June 30,
      2005 due to the timing of certain advertising campaigns.





Income
      before income taxes increased by $949,000, to $972,000 for the three months
      ended June 30, 2006 from $23,000 for the three months ended June 30, 2005.
      Income tax expense totaled $229,000, or an effective tax rate of 23.6% for
      the
      three months ended June 30, 2006. An income tax benefit of $149,000 was recorded
      for the three months ended June 30, 2005.





Discussion
      of Operating Results for the Twelve Months Ended June 30, 2006





Net
      interest income decreased by $152,000, or 0.9%, to $17.2 million for fiscal
      2006
      from $17.4 million for fiscal 2005. The decrease in net interest income was
      primarily due to a decrease in the interest rate spread to 2.89% for fiscal
      2006
      from 3.06% for fiscal 2005 as the cost of interest-bearing liabilities increased
      more rapidly than the yield on interest-earning assets. The cost of
      interest-bearing deposits increased by 86 basis points to 2.86% for fiscal
      2006
      from 2.00% for fiscal 2005 while the yield on interest-earning assets increased
      by 53 basis points to 6.11% for fiscal 2006 from 5.58% for fiscal 2005. The
      increases in the cost of interest-bearing liabilities and the yield on
      interest-earning assets were due to increases in market interest rates as the
      Federal Reserve continued its measured pace of rate increases during fiscal
      2006. In addition, during fiscal 2006 there was a change in the mix of
      interest-earning assets. An increase of $25.2 million in the average balance
      of
      loans was largely funded by a $21.0 million decrease in the average balance
      of
      investment securities. This change in the mix of interest-earning assets
      contributed to the increase in the yield on interest-earning assets since loans
      generally carry higher yields than investment securities. The mix of
      interest-bearing liabilities also changed. The average balance of
      interest-bearing deposits increased by $7.5 million and was offset by a decrease
      of $7.7 million in the average balance of borrowings. The increase in
      interest-bearing deposits resulted from more aggressive and consistent pricing
      of retail deposit offerings during fiscal 2006.





Provision
      for loan loss expense decreased by $1.1 million, or 35.7%, to $1.9 million
      in
      fiscal 2006 from $3.0 million for fiscal 2005 primarily due to the decrease
      in
      provision expense to $850,000 for the quarter ended June 30, 2006 from $2.0
      million for the quarter ended June 30, 2005 as discussed above. Non-performing
      loans increased to $6.5 million or 1.41% of total loans, at June 30, 2006 from
      $1.6 million, or 0.37% of total loans at June 30, 2005 primarily due to loans
      to
      three


2


construction-related
      contractors with balances totaling $4.9 million at June 30, 2006 that were
      placed on nonaccrual status during fiscal 2006. Noninterest income decreased
      by
      $2.8 million, or 29.6%, to $6.5 million for fiscal 2006 from $9.3 million for
      fiscal 2005. The decrease in noninterest income was primarily due to a
      prior-year pre-tax gain of $2.2 million on the sale of two northwest Iowa branch
      offices that was completed in September 2004. Service charges on deposit
      accounts decreased by $469,000, or 13.1%, for fiscal 2006 as compared to fiscal
      2005 due to a decrease in transaction accounts.




Noninterest
      expense decreased by $340,000, or 1.9%, to $17.3 million for fiscal 2006 from
      $17.6 million for fiscal 2005. Compensation and benefits expense decreased
      by
      $108,000, or 1.1%, for fiscal 2006 as compared to fiscal 2005 partially due
      to a
      decrease in the number of full-time-equivalent employees. In addition, other
      noninterest expense for the prior fiscal year was higher due to a loss on real
      estate owned totaling $94,000 and a charge of $68,000 for a credit life
      insurance settlement.





Income
      tax expense totaled $1.2 million, or an effective tax rate of 26.4%, and $1.8
      million, or an effective tax rate of 30.1%, for fiscal 2006 and 2005,
      respectively. The effective tax rate decreased for the current-year period
      primarily because tax-exempt income comprised a larger percentage of pre-tax
      income for fiscal 2006 than for fiscal 2005.





Dividend





On
      July
      20, 2006, the Company’s Board of Directors declared a quarterly dividend of
      $0.10 per share, the same as that distributed last quarter. The dividend is
      payable on August 31, 2006 to stockholders of record on August 17,
      2006.





Other
      Information





In
      July
      2006 the Company purchased land in the vicinity of the Jordan Creek Mall, a
      fast-growing residential and commercial area west of Des Moines, Iowa, which
      management expects will afford additional opportunities for retail, mortgage
      and
      business banking development. The Company expects to begin construction
      immediately and to open a new banking office on this site in Spring
      2007.





Total
      assets increased by $25.7 million, or 4.4%, to $612.5 million at June 30, 2006
      from $586.8 million at June 30, 2005. Book value per share increased to $20.21
      at June 30, 2006 from $19.81 at June 30, 2005. Stockholders’ equity to total
      assets was 11.15% and 11.98%, respectively, at June 30, 2006 and 2005. The
      Company had 3,380,109 shares outstanding at June 30, 2006.





The
      Company’s common stock is traded on the NASDAQ Global Market under the symbol
      FFSX. The Company is headquartered in Sioux City, Iowa. The Bank operates eight
      offices in northwest Iowa, an office in South Sioux City, Nebraska, and six
      offices in central Iowa.





Except
      for the historical information contained in this press release, the matters
      discussed may be deemed to be forward-looking statements, within the meaning
      of
      the Private Securities Litigation Reform Act of 1995, that involve risks and
      uncertainties, including changes in economic conditions in the Company’s market
      area, changes in policies by regulatory agencies, fluctuations in interest
      rates, demand for loans in the Company’s market area, competition, and other
      risks detailed from time to time in the Company’s SEC reports. Actual strategies
      and results in future periods may differ materially from those currently
      expected. These forward-looking statements represent the Company’s judgment as
      of the date of this release. The Company disclaims, however, any intent or
      obligation to update these forward-looking statements.





3




**FIRST
        FEDERAL BANKSHARES, INC. and SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED BALANCE SHEETS (unaudited)**
  June
                    30,
                
                June
                    30,2006
                
                2005**ASSETS**
                
                *(Dollars
                    in thousands)*Cash
                    and cash equivalents
                
                $
                39,905
                
                $
                31,336Securities
                    available-for-sale
                
                
                47,320
                
                
                49,559Securities
                    held-to-maturity
                
                
                13,077
                
                
                18,197Loans
                    receivable, net
                
                
                457,029
                
                
                433,447Office
                    property and equipment, net
                
                
                12,545
                
                
                13,109Federal
                    Home Loan Bank stock, at cost
                
                
                5,162
                
                
                5,762Accrued
                    interest receivable
                
                
                2,628
                
                
                2,293Goodwill
                
                
                18,417
                
                
                18,417Other
                    assets
                
                
                16,452
                
                
                14,693Total
                    assets
                
                $
                612,535
                
                $
                586,813**LIABILITIES**Deposits
                
                $
                446,056
                
                $
                407,563Advances
                    from FHLB and other borrowings
                
                
                92,753
                
                
                104,564Advance
                    payments by borrowers for taxes and insurance
                
                
                977
                
                
                953Accrued
                    interest payable
                
                
                2,038
                
                
                1,312Accrued
                    expenses and other liabilities
                
                
                2,387
                
                
                2,126Total
                    liabilities
                
                
                544,211
                
                
                516,518**STOCKHOLDERS'
                    EQUITY**Common
                    stock, $.01 par value
                
                
                50
                
                
                50Additional
                    paid-in capital
                
                
                38,293
                
                
                37,761Retained
                    earnings, substantially restricted
                
                
                57,014
                
                
                55,029Treasury
                    stock, at cost - 1,632,266 and 1,428,826 shares,
                    respectively
                
                
                (25,921
                )
                
                (21,748
                )Accumulated
                    other comprehensive income (loss)
                
                
                (326
                )
                
                159Unearned
                    ESOP
                
                
                (786
                )
                
                (914
                )Unearned
                    RRP
                
                
                -
                
                
                (42
                )Total
                    stockholders' equity
                
                
                68,324
                
                
                70,295Total
                    liabilities and stockholders' equity
                
                $
                612,535
                
                $
                586,813


**CONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS
                (unaudited)**Three
                months ended
            
            Twelve
                months endedJune
                30,
            
            June
                30,2006
            
            2005
            
            2006
            
            2005*(Dollars
                in thousands)*Total
                interest income
            
            $
            8,486
            
            $
            7,575
            
            $
            32,294
            
            $
            29,190Total
                interest expense
            
            
            4,139
            
            
            3,238
            
            
            15,096
            
            
            11,839Net
                interest income
            
            
            4,347
            
            
            4,337
            
            
            17,198
            
            
            17,351Less:
                provision for loan losses
            
            
            850
            
            
            1,990
            
            
            1,920
            
            
            2,985Net
                interest income after provision
            
            
            3,497
            
            
            2,347
            
            
            15,278
            
            
            14,366Noninterest
                income
            
            
            1,759
            
            
            1,786
            
            
            6,544
            
            
            9,298Noninterest
                expense
            
            
            4,284
            
            
            4,110
            
            
            17,295
            
            
            17,635Income
                before income taxes
            
            
            972
            
            
            23
            
            
            4,527
            
            
            6,028Taxes
                on income
            
            
            229
            
            
            (149
            )
            
            1,195
            
            
            1,815Net
                income
            
            $
            743
            
            $
            172
            
            $
            3,332
            
            $
            4,213











**FIRST
                    FEDERAL BANKSHARES, INC and SUBSIDIARIES****FINANCIAL
                    HIGHLIGHTS (unaudited)**At
                    or for the three months
                
                At
                    or for the twelve monthsJune
                    30,
                
                June
                    30,**Financial
                    condition data:**
                
                2006
                
                2005
                
                2006
                
                2005*(Dollars
                    in thousands, except per share amounts)*Average
                    interest-earning assets
                
                $
                538,293
                
                $
                532,484
                
                $
                532,135
                
                $
                527,732Average
                    interest-bearing liabilities
                
                $
                476,220
                
                $
                471,804
                
                $
                469,403
                
                $
                469,666Average
                    interest-earning assets toaverage
                    interest-bearing liabilities
                
                
                113.03
                %
                
                112.86
                %
                
                113.36
                %
                
                112.36
                %Non-performing
                    loans
                
                $
                6,543
                
                $
                1,635
                
                $
                6,543
                
                $
                1,635Non-performing
                    loans to total loans
                
                
                1.41
                %
                
                0.37
                %
                
                1.41
                %
                
                0.37
                %Non-performing
                    assets
                
                $
                6,616
                
                $
                1,777
                
                $
                6,616
                
                $
                1,777Non-performing
                    assets to total assets
                
                
                1.08
                %
                
                0.30
                %
                
                1.08
                %
                
                0.30
                %Allowance
                    for loan losses
                
                $
                5,466
                
                $
                6,717
                
                $
                5,466
                
                $
                6,717Allowance
                    for loan losses to total loans
                
                
                1.18
                %
                
                1.52
                %
                
                1.18
                %
                
                1.52
                %Shareholders'
                    equity to assets
                
                
                11.15
                %
                
                11.98
                %
                
                11.15
                %
                
                11.98
                %**Selected
                    operating data: (1)**Return
                    on average assets
                
                
                0.50
                %
                
                0.11
                %
                
                0.57
                %
                
                0.72
                %Return
                    on average equity (2)
                
                
                4.31
                %
                
                0.89
                %
                
                4.75
                %
                
                5.87
                %Net
                    interest rate spread
                
                
                2.88
                %
                
                3.01
                %
                
                2.89
                %
                
                3.06
                %Net
                    yield on average interest-earningassets
                    (3)
                
                
                3.27
                %
                
                3.31
                %
                
                3.28
                %
                
                3.34
                %Efficiency
                    ratio (4)
                
                
                70.04
                %
                
                67.14
                %
                
                73.46
                %
                
                71.64
                %





(1)
                Annualized except for efficiency ratio.(2)
                Net income divided by average equity capital excluding average unrealized
                gains on available-for-sale securities.(3)
                Net interest income, tax-effected, divided by average interest-earning
                assets.(4)
                Noninterest expense, excluding minority interest, divided by net
                interest
                income before provision for loanlosses
                plus noninterest income, less gain (loss) on sale of other real estate
                owned, less gain (loss) on saleof
                investments, less gain (loss) on sale of fixed
                assets.




**Per
                  share data:**Earnings
                  per share:Basic
              
              $
              0.23
              
              $
              0.05
              
              $
              0.99
              
              $
              1.19Diluted
              
              $
              0.22
              
              $
              0.05
              
              $
              0.98
              
              $
              1.16Book
                  value per share
              
              $
              20.21
              
              $
              19.81
              
              $
              20.21
              
              $
              19.81Market
                  price per share:High
                  for the period
              
              $
              22.75
              
              $
              22.97
              
              $
              22.90
              
              $
              24.00Low
                  for the period
              
              $
              21.00
              
              $
              19.60
              
              $
              17.30
              
              $
              19.60Close
                  at end of period
              
              $
              21.70
              
              $
              20.51
              
              $
              21.70
              
              $
              20.51Cash
                  dividends declared per share
              
              $
              0.10
              
              $
              0.10
              
              $
              0.40
              
              $
              0.40Weighted-average
                  common shares outstanding:Basic
              
              
              3,295,004
              
              
              3,505,347
              
              
              3,366,086
              
              
              3,552,072Diluted
              
              
              3,338,981
              
              
              3,589,758
              
              
              3,417,367
              
              
              3,625,408