|UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


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


For the quarterly period ended September 30, 2002 Commission file number 0-37053


FIRST FEDERAL
BANCSHARES, INC. (Exact name of
registrant as specified in its charter)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Delaware(State or other jurisdiction of incorporation or organization) | 37-1397683(IRS Employer
Identification No.)
|---------------------------------------------------------------------- | -------------------------------------------

|109 East Depot Street,
Colchester, Illinois 62326 (Address of Principal
Executive Offices) (Zip Code)

(309) 776-3225(Registrants telephone number, including area code)


Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]


Indicate by check mark whether the  registrant  is an  accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  [ ]       No [ X ]


State the number of shares
outstanding of each of the issuers classes of common equity as of the latest
practicable date.


As of November 12, 2002 the
Registrant had outstanding 1,809,230 shares of common stock.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|FIRST FEDERAL
BANCSHARES, INC.


Form 10-Q Quarterly Report


Index
|-------------------------------------------------------------------

|                               |                                                                                          | Page
|------------------------------ | ---------------------------------------------------------------------------------------- | ----
|PART I  Financial Information
|                              
|Item 1                         | Financial Statements                                                                     | 1   
|                              
|Item 2                         | Managements Discussion and Analysis of Financial Condition and    Results of Operations | 8   
|                              
|Item 3                         | Quantitative and Qualitative Disclosures About Market Risk                               | 12  
|                              
|Item 4                         | Controls and Procedures                                                                  | 13  
|                              
|PART II  Other Information   
|                              
|Item 1                         | Legal Proceedings                                                                        | 14  
|                              
|Item 2                         | Changes in Securities and Use of Proceeds                                                | 14  
|                              
|Item 3                         | Defaults Upon Senior Securities                                                          | 14  
|                              
|Item 4                         | Submission of Matters to a Vote of Securities Holders                                    | 14  
|                              
|Item 5                         | Other Information                                                                        | 14  
|                              
|Item 6                         | Exhibits and Reports on Form 8-K                                                         | 14  
|                              
|SIGNATURES                     |                                                                                          | 15  

---

|PART I  FINANCIAL
INFORMATION


ITEM 1. FINANCIAL
STATEMENTS


First Federal
Bancshares, Inc. and Subsidiary Consolidated Statements
of Financial Condition
(in thousands of dollars, except share data)
(unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                | September 30,2002 | December 31,2001
|--------------------------------------------------------------- | ----------------- | ----------------
|ASSETS                                                          |                   |                 
|Cash and cash equivalents                                       |                   |                 
|Time deposits in other financial institutions                   |                   |                 
|Securities available-for-sale                                   |                   |                 
|Securities held-to-maturity (fair value: September 30 - $24,886 |                   |                 
|December 31 - $10,033)                                          |                   |                 
|Loans receivable, net                                           |                   |                 
|Real estate owned, net                                          |                   |                 
|Premises and equipment                                          |                   |                 
|Accrued interest receivable                                     |                   |                 
|Other assets                                                    |                   |                 
|                                                                |                   |                 
|                                                               
|TOTAL ASSETS                                                    |                   |                 
|                                                                |                   |                 
|                                                               
|LIABILITIES AND SHAREHOLDERS EQUITY                            |                   |                 
|LIABILITIES                                                     |                   |                 
|Deposits                                                        |                   |                 
|Advances from borrowers for taxes and insurance                 |                   |                 
|Federal Home Loan Bank advances                                 |                   |                 
|Accrued interest payable                                        |                   |                 
|Other liabilities                                               |                   |                 
|                                                                |                   |                 
|Total liabilities                                               |                   |                 
|                                                               
|SHAREHOLDERS EQUITY                                            |                   |                 
|Preferred stock, $.01 par value, 1,000,000 shares authorized;   |                   |                 
|none issued or outstanding                                      |                   |                 
|Common stock, $.01 par value, 4,000,000 shares authorized;      |                   |                 
|2,242,500 shares issued                                         |                   |                 
|Additional paid-in capital                                      |                   |                 
|Unearned ESOP shares                                            |                   |                 
|Unearned stock awards                                           |                   |                 
|Treasury stock (September 30 - 434,660 shares,                  |                   |                 
|December 31 - 134,550)                                          |                   |                 
|Retained earnings                                               |                   |                 
|Accumulated other comprehensive income                          |                   |                 
|                                                                |                   |                 
|Total shareholders equity                                      |                   |                 
|                                                                |                   |                 
|                                                               
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                      |                   |                 
|                                                                |                   |                 

|See notes to
consolidated financial statements.


1
|---------------------------------------------------

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|First Federal
Bancshares, Inc. and Subsidiary Consolidated Statements of Income
(in thousands of dollars, except share data) 
(unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------

|                                        | Three MonthsEnded September 30, | Nine MonthsEnded September 30,
|--------------------------------------- | ------------------------------- | ------------------------------
|
|Interest income                         |                                 |                               
|Loans                                   |                                 |                               
|Securities                              |                                 |                               
|Other interest income                   |                                 |                               
|                                        |                                 |                               
|Total interest income                   |                                 |                               
|                                        |                                 |                               
|Interest expense                        |                                 |                               
|Deposits                                |                                 |                               
|Federal Home Loan Bank advances         |                                 |                               
|                                        |                                 |                               
|Total interest expense                  |                                 |                               
|                                        |                                 |                               
|                                        |                                 |                               
|Net interest income                     |                                 |                               
|                                        |                                 |                               
|Provision for loan losses               |                                 |                               
|                                        |                                 |                               
|                                        |                                 |                               
|Net interest income after provision for |                                 |                               
|loan losses                             |                                 |                               
|                                        |                                 |                               
|Noninterest income                      |                                 |                               
|Service charges                         |                                 |                               
|Other fee income                        |                                 |                               
|Net gain on sale of securities          |                                 |                               
|Other income                            |                                 |                               
|                                        |                                 |                               
|Total noninterest income                |                                 |                               
|                                        |                                 |                               
|Noninterest expense                     |                                 |                               
|Compensation and benefits               |                                 |                               
|Occupancy and equipment                 |                                 |                               
|Data processing                         |                                 |                               
|Federal insurance premiums              |                                 |                               
|Advertising                             |                                 |                               
|Professional fees                       |                                 |                               
|Other noninterest expenses              |                                 |                               
|                                        |                                 |                               
|Total noninterest expense               |                                 |                               
|                                        |                                 |                               
|                                        |                                 |                               
|Income before income taxes              |                                 |                               
|                                        |                                 |                               
|Provision for income taxes              |                                 |                               
|                                        |                                 |                               
|                                        |                                 |                               
|Net income                              |                                 |                               
|                                        |                                 |                               
|                                        |                                 |                               
|Earnings per share                      |                                 |                               
|Basic                                   |                                 |                               
|Diluted                                 |                                 |                               
|                                        |                                 |                               
|Weighted average shares                 |                                 |                               
|                                        |                                 |                               
|Comprehensive income                    |                                 |                               
|                                        |                                 |                               

|See notes to
consolidated financial statements.


2
|---------------------------------------------------

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|First Federal
Bancshares, Inc. and Subsidiary
Consolidated Statements
of Shareholders Equity
Nine months ended September 30, 2001 and 2002 
(in thousands of dollars, except share data) 
(unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               | CommonStock | Additional
Paid-inCapital | Unearned
ESOPShares | Unearned
StockAwards | TreasuryStock | RetainedEarnings | AccumulatedOther
Compre-
hensiveIncome | Total
Stock-
holdersEquity
|---------------------------------------------- | ----------- | ------------------------- | ------------------- | -------------------- | ------------- | ---------------- | -------------------------------------- | ---------------------------
|Balance at December 31, 2000                   |             |                           | $                   | 22                   |               | $                | 21,315                                 |                            
|ESOP shares earned                             |             |                           |                     | --                   |               |                  | 75                                     |                            
|Dividends declared ($.21 per share)            |             |                           |                     | --                   |               |                  | --                                     |                            
|Comprehensive income                           |             |                          
|Net income                                     |             |                           |                     | --                   |               |                  | --                                     |                            
|Change in fair value of securities classified  |             |                          
|as available-for-sale, net of reclassification |             |                          
|and tax effects                                |             |                           |                     | --                   |               |                  | --                                     |                            
|                                               |             |                           |                     |                      |               |                  |                                        |                            
|Total comprehensive income                     |             |                           |                     |                      |               |                  |                                        |                            
|                                               |             |                           |                     |                      |               |                  |                                        |                            
|Balance at September 30, 2001                  |             |                           | $                   | 22                   |               | $                | 21,390                                 |                            
|                                               |             |                           |                     |                      |               |                  |                                        |                            
|                                              
|Balance at December 31, 2001                   |             |                           | $                   | 22                   |               | $                | 21,418                                 |                            
|Purchase of 300,110 shares of treasury stock   |             |                           |                     | --                   |               |                  | --                                     |                            
|ESOP shares earned                             |             |                           |                     | --                   |               |                  | 102                                    |                            
|Stock awards earned                            |             |                           |                     | --                   |               |                  | --                                     |                            
|Dividends declared ($.24 per share)            |             |                           |                     | --                   |               |                  | --                                     |                            
|Comprehensive income                           |             |                          
|Net income                                     |             |                           |                     | --                   |               |                  | --                                     |                            
|Change in fair value of securities classified  |             |                          
|as available-for-sale, net of reclassification |             |                          
|and tax effects                                |             |                           |                     | --                   |               |                  | --                                     |                            
|                                               |             |                           |                     |                      |               |                  |                                        |                            
|Total comprehensive income                     |             |                           |                     |                      |               |                  |                                        |                            
|                                               |             |                           |                     |                      |               |                  |                                        |                            
|Balance at September 30, 2002                  |             |                           | $                   | 22                   |               | $                | 21,520                                 |                            
|                                               |             |                           |                     |                      |               |                  |                                        |                            

|See notes to consolidated financial statements.


3
|---------------------------------------------------

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|First Federal
Bancshares, Inc. and Subsidiary 
Consolidated Statements of Cash Flows 
(in thousands of dollars) 
(unaudited)
|----------------------------------------------------------------------------------------------------------------------------

|                                                              | Nine Months EndedSeptember 30,
|------------------------------------------------------------- | ------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES                          |                               
|Net income                                                    |                               
|Adjustments to reconcile net income to net cash provided by   |                               
|operating activities                                          |                               
|Provision for depreciation                                    |                               
|Loss (gain) on sale of real estate owned                      |                               
|Net amortization of premiums and discounts                    |                               
|ESOP compensation expense                                     |                               
|Stock award compensation expense                              |                               
|Provision for loan losses                                     |                               
|Deferred Income Tax                                           |                               
|Dividend reinvestments                                        |                               
|Federal Home Loan Bank stock dividends                        |                               
|Gain on sale of securities                                    |                               
|Net changes in                                                |                               
|Accrued interest receivable and other assets                  |                               
|Deferred loan costs                                           |                               
|Accrued interest payable and other liabilities                |                               
|                                                              |                               
|Net cash provided by operating activities                     |                               
|CASH FLOWS FROM INVESTING ACTIVITIES                          |                               
|Net change in time deposits in other financial institutions   |                               
|Purchase of securities available-for-sale                     |                               
|Purchase of securities held-to-maturity                       |                               
|Principal paydowns on mortgage-backed securities              |                               
|available-for-sale                                            |                               
|Principal paydowns on mortgage-backed securities              |                               
|held-to-maturity                                              |                               
|Purchase of Federal Home Loan Bank stock                      |                               
|Proceeds from maturities of securities available-for-sale     |                               
|Proceeds from maturities of securities held-to-maturity       |                               
|Proceeds from sale of securities available-for-sale           |                               
|Purchase of loans                                             |                               
|Capital expenditures of real estate owned                     |                               
|Net decrease in loans receivable                              |                               
|Proceeds from sale of real estate owned                       |                               
|Purchase of property and equipment                            |                               
|                                                              |                               
|Net cash provided by investing activities                     |                               
|CASH FLOWS FROM FINANCING ACTIVITIES                          |                               
|Net increase in deposits                                      |                               
|Net change in advances from borrowers for taxes and insurance |                               
|Purchase of treasury stock                                    |                               
|Dividends paid                                                |                               
|Repayment of Federal Home Loan Bank advances                  |                               
|                                                              |                               
|Net cash provided by (used in) financing activities           |                               
|                                                              |                               
|                                                             
|Net change in cash and cash equivalents                       |                               
|Cash and cash equivalents                                     |                               
|Beginning of period                                           |                               
|                                                              |                               
|End of period                                                 |                               
|                                                              |                               
|Supplemental disclosures of cash flow information             |                               
|Cash paid during the period for                               |                               
|Interest                                                      |                               
|Taxes, net of refunds                                         |                               
|Transfers to real estate owned                                |                               

|See notes to consolidated financial statements.


4
|---------------------------------------------------

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|FIRST FEDERAL
BANCSHARES, INC. 
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
September 30, 2002
(table amounts in thousands of dollars, except share data)


Note 1  Basis of Presentation


The accompanying interim consolidated
financial statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles
generally accepted in the United States of America are not included herein. These interim
statements should be read in conjunction with the Companys Annual Report on Form
10-KSB. The December 31, 2001 balance sheet presented herein has been derived from the
audited financial statements included in the Companys Annual Report on Form 10-KSB,
but does not include all disclosures required by accounting principles generally accepted
in the United States of America.


Interim statements are subject to
possible adjustment in connection with the annual audit of the Company for the year ending
December 31, 2002. In the opinion of management of the Company, the accompanying unaudited
interim consolidated financial statements reflect all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the consolidated financial
position and consolidated results of operations for the periods presented. The results of
operations for interim periods are not necessarily indicative of the results to be
expected for the full year.


Note 2  Earnings
Per Share


For purposes of per share
calculations, the Company had 1,807,840 and 2,242,500 shares of common stock outstanding
at September 30, 2002 and 2001. Basic earnings per share for the three months ended
September 30, 2002 and 2001 were computed by dividing net income by the weighted average
number of shares outstanding. Diluted earnings per share for the three and nine months
ended September 30, 2002 and 2001 were computed by dividing net income by the weighted
average number of shares outstanding, adjusted for the dilutive effect of the outstanding
stock options and stock awards. Computations for basic and diluted earnings per share are
provided below.


See notes to consolidated financial statements.


5.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|                                  | For the three months
ended September 30, | For the nine months
ended September 30,
|--------------------------------- | ---------------------------------------- | ---------------------------------------
|
|
|Basic                             |                                          |                                        
|Net income                        |                                          |                                        
|                                  |                                          |                                        
|Weighted average common shares    |                                          |                                        
|outstanding                       |                                          |                                        
|                                  |                                          |                                        
|Basic earnings per common share   |                                          |                                        
|                                  |                                          |                                        
|Diluted                           |                                          |                                        
|Net income                        |                                          |                                        
|                                  |                                          |                                        
|Weighted average common shares    |                                          |                                        
|outstanding                       |                                          |                                        
|Dilutive effect of stock options  |                                          |                                        
|Dilutive effect of stock awards   |                                          |                                        
|                                  |                                          |                                        
|Diluted average common shares     |                                          |                                        
|                                  |                                          |                                        
|Diluted earnings per common share |                                          |                                        
|                                  |                                          |                                        

|Note 3  Recent
Developments  New Accounting Pronouncements


Financial Accounting Standards Board
(FASB), in July 2001, issued SFAS 142, Goodwill and Other Intangible Assets,
which requires that goodwill no longer be amortized to earnings, but instead be reviewed
for impairment. The amortization of goodwill by the Company ceased upon adoption of the
Statement, which became effective at January 1, 2002. Adoption of SFAS 142 has not had a
material effect on the Companys financial statements.


Effective January 1, 2003, SFAS 143,
Accounting for Asset Retirement Obligations, will apply. The statement
requires that the fair value of a liability for an asset retirement obligation be
recognized in the period incurred. Adoption of SFAS 143 is not expected to have a material
effect on the financial position and operations of the Company.


The Company adopted SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets on January 1,
2002. The statement requires that the Company recognize an impairment loss on long-lived
assets when the carrying amount is not recoverable and the measurement of the impairment
loss is the difference between the carrying amount and the fair value of the asset.
Adoption of SFAS 144 did not have a material effect on the Companys financial
statements.


On October 1, 2002, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 147, Acquisitions of Certain Financial
Institutions. SFAS No. 147 is effective October 1, 2002, and may be early applied.
SFAS No. 147 supersedes SFAS No. 72, Accounting for Certain Acquisitions of Banking
or Thrift Institutions. SFAS No. 147 provides guidance on the accounting for the
acquisition of a financial institution, and applies to all such acquisitions except those
between two or more mutual enterprises. Under SFAS No. 147, the excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable intangible assets
acquired in a financial institution


6.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|business combination represents goodwill that should
be accounted for under SFAS No. 142, Goodwill and Other Intangible Assets. If
certain criteria are met, the amount of the unidentifiable intangible asset resulting from
prior financial institutions acquisitions is to be reclassified to goodwill upon adoption
of this Statement. Financial institutions meeting conditions outlined in SFAS No. 147 are
required to restate previously issued financial statements. The objective of the
restatement is to present the balance sheet and income statement as if the amount
accounted for under SFAS No. 72 as an unidentifiable intangible asset had been
reclassified to goodwill as of the date the Company adopted SFAS No. 142. Adoption of SFAS
No. 147 on October 1, 2002 did not have a material effect on the Companys
consolidated financial position or results of operations.7.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995


This report contains certain
forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Company intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities Reform Act
of 1995 as amended, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions and
describe future plans, strategies and expectations of the Company, are generally
identifiable by use of the words such as believe, expect,
intend, anticipate, estimate, project, or
similar expressions. The Companys ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a material
adverse affect on the operations and future prospects of the Company and its wholly-owned
subsidiaries include, but are not limited to, changes in: interest rates; general economic
conditions; legislative/regulatory provisions; monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve Board; the
quality or composition of the loan or investment portfolios; demand for loan products;
deposit flows; competition; demand for financial services in the Companys market
area; and accounting principles, policies, and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and its
business, including additional factors that could materially affect the Companys
financial results, is included in the Companys filings with the Securities and
Exchange Commission.


The following discussion compares the
financial condition of First Federal Bancshares, Inc. (Company) and its wholly owned
subsidiary, First Federal Bank (Bank), at September 30, 2002 to its financial condition at
December 31, 2001 and the results of its operations for the three-month and
nine-month periods ended September 30, 2002 to the same period in 2001. This discussion
should be read in conjunction with the interim financial statements and footnotes included
herein.


FINANCIAL CONDITION


Total assets were $242.2 million at
September 30, 2002 and December 31, 2001. During the nine months ended September 30,
2002, cash and cash equivalents increased $7.2 million, which reflects excess operating
cash resulting from the timing of loan prepayments and an increase in customer deposits.
Loans decreased $5.7 million primarily as a result of portfolio loans refinancing into the
Federal Home Loan Bank Mortgage Partnership Finance fixed rate program and also to other
competitors due to the lower interest rate environment. Securities available-for-sale
decreased $16.5 million and securities held-to maturity increased $14.8 million. The
increase in held-to-maturity securities was primarily a result of proceeds from principal
paydowns and maturities of securities available-for-sale being reinvested in securities
held-to-maturity.


The allowance for loan losses was
$596,000 at September 30, 2002 and $534,000 at December 31, 2001. There were no
impaired loans at either date. The allowance for loan losses represented .56% of total
loans and 67.70% of nonperforming loans at September 30, 2002 compared to .47% of total
loans and 59.01% of nonperforming loans at December 31, 2001. Nonperforming assets totaled
$965,000 and $1,120,000 at September 30, 2002 and December 31, 2001, respectively. The
ratio of non-performing assets to total assets at September 30, 2002 was .41% compared to
..46% at December 31, 2001.


Total liabilities at September 30,
2002 were $201.4 million compared to $198.5 million at December 31, 2001, an increase
of $2.9 million, primarily due to an increase in customer deposits of $2.6 million. The
increased funds from customer deposits have been invested in interest-earning deposits at
other institutions until such time as the funds can be redeployed into loans receivable or
securities.8.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Shareholders equity at
September 30, 2002 was $40.8 million compared to $43.7 million at December 31, 2001,
a decrease of $2.9 million. The decrease primarily reflects the repurchase of treasury
stock totaling $5.6 million, offset by net income of $1.5 million and unrealized gains on
available-for-sale securities, net of tax, of $1.2 million.


RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001


Net income increased $30,000 to
$497,000 for the quarter ended September 30, 2002 compared to the same period in 2001. The
increase in net income was primarily a result of an increase in net interest income,
offset by a decrease in noninterest income and increases in noninterest expense and the
income tax provision.


Net interest income was $1.7 million
for the quarter ended September 30, 2002 compared to $1.6 million for the same prior year
period. The increase in net interest income was primarily a result of an increase in the
net interest spread and the net interest margin to 2.42% and 2.89%, respectively, for the
quarter ended September 30, 2002 from 1.71% and 2.61% for the same period in 2001. The
average yield on interest-earning assets decreased to 5.40% for the quarter ended
September 30, 2002 from 6.46% for the same quarter in 2001, while the average yield on
interest-bearing liabilities decreased to 2.98% for the quarter ended September 30, 2002
from 4.74% for the same period in 2001. These decreases reflect the overall decrease in
market rates from the prior year. The increase in the spread and the margin was due
largely to the decrease in the cost of funds exceeding the decrease in the yield on
interest-earning assets as interest-earning assets and interest-bearing liabilities
repriced downward in reaction to the continued decreasing interest rate environment.


The provision for loan losses was
zero for the quarter ended September 30, 2002 and $48,000 for the same period in 2001. The
decrease in the provision for loan losses can be attributed to the overall decrease in the
loan portfolio due to repayments and refinancings.


On a quarterly basis, management of
the Company meets to review the allowance for loan losses. Management classifies loans in
compliance with regulatory classifications. Classified loans are individually reviewed to
arrive at specific reserves for those loans. Once the specific portion of the allowance is
calculated, management calculates a historical portion for each loan category based on
loan loss history, peer data, current economic conditions and trends in the portfolio,
including delinquencies and impairments, as well as changes in the composition of the loan
portfolio. Although management believes that the allowance for loan losses reflected
probable incurred losses on existing loans at September 30, 2002, there can be no
assurance that such losses will not exceed estimated amounts. Future adjustments to the
allowance may be necessary due to economic, operating, regulatory and other conditions
that may be beyond the Companys control. The allowance for loan losses as of
September 30, 2002 was maintained at a level that represents managements best
estimate of losses in the loan portfolio and such losses were both probable and reasonably
estimatable.


Noninterest income was $97,000 for
the three-month period ended September 30, 2002 compared to $139,000 for the same period
in 2001. The decrease in noninterest income was primarily a result of a $36,000 decrease
in other income and a $13,000 decrease in net gains on the sale of securities partially
offset by a $7,000 increase in other fee income. Other income was increased during the
three-month period ended September 30, 2001 due to a refund from Nasdaq. The refund
inflated the prior year period, which explains the decrease during this three-month period
ended September 30, 2002.


Noninterest expense was $1.0 million
and $914,000 for the quarters ended September 30, 2002 and 2001. The increase in
noninterest expense primarily reflects an increase in compensation and benefits expense of
$120,000 associated with an increase in salaries of $20,000, an increase of $22,000 in
employee benefits including health insurance and retirement funds, and expense of $68,000
associated with the restricted stock awards granted in October of 2001. Occupancy and
equipment expense increased $23,000, along with small increases in data processing,
advertising and professional fees, offset by a decrease in other9.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|noninterest expense of
$62,000 as a result of lower real estate owned expense and decreases in the write off of
uncollectible deposits during the three months ended September 30, 2002 compared to the
same period in 2001.


The Companys federal income tax
expense increased $11,000 to $293,000 for the quarter ended September 30, 2002 compared to
the same period in 2001. Income tax expense was approximately 37% and 38% of pretax income
in both periods, respectively.


RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001


Net income decreased $85,000 to $1.5
million for the nine months ended September 30, 2002 compared to the same period in 2001.
Return on average assets was .83% for the nine months ended September 30, 2002 compared to
..84% for the nine months ended September 30, 2001.


Net interest income was $5.2 million
for the nine months ended September 30, 2002 compared to $5.0 million for the same period
in 2001. The increase in net interest income was primarily a result of an increase in the
net interest spread and the net interest margin to 2.41% and 2.92%, respectively, for the
nine months ended September 30, 2002 from 1.85% and 2.79% for the nine months ended
September 30, 2001. The average yield on interest-earning assets decreased to 5.46% for
the nine months ended September 30, 2002 from 6.75% for the same period in 2001 while the
average yield on interest-bearing liabilities decreased to 3.05% for the nine months ended
September 30, 2002 from 4.90% for the same period in 2001. These decreases reflect an
overall decrease in the market rates from 2001. The increase in the spread and the margin
was due largely to the decrease in the cost of funds exceeding the decrease in the yield
on earning assets as interest-earning assets and interest-bearing liabilities repriced
downward in reaction to the continued decreasing interest rate environment.


The provision for loan losses was
$7,000 for the nine months ended September 30, 2002 and $48,000 for the same period in
2001. The decrease in the provision for loan losses can be attributed to the overall
decrease in the loan portfolio due to the repayments and refinancings.


Noninterest income was $306,000 for
the nine-month period ended September 30, 2002 compared to $449,000 for the prior period.
The decrease in noninterest income was primarily a result of a decrease in net gain on the
sale of securities in the amount of $101,000 and a $39,000 decrease in other income due to
a refund from Nasdaq in 2001, which inflated other income during the nine-months ended
September 30, 2001.


Noninterest expense was $3.1 million
and $2.8 million for the nine months ended September 30, 2002 and 2001. The increase in
noninterest expense primarily reflects an increase in compensation and benefits expense of
$394,000 associated with an increase in salaries of $105,000, an increase of $56,000 in
employee benefits including health insurance and retirement funds, and expense of $203,000
associated with the restricted stock awards granted in October of 2001. Data processing
expense increased $58,000 due to the implementation of new products such as internet
banking. Other noninterest expenses decreased $157,000 as a result of decreases in real
estate owned expense and repossessed asset expense, a decrease in Illinois franchise tax
expense, a decrease in amortization of goodwill due to the fact that goodwill was fully
amortized in 2001, and small decreases in other miscellaneous expenses.


The companys federal income tax
expense decreased $83,000 to $905,000 for the nine months ended September 30, 2002
compared to the same period in 2001. Income tax expense was approximately 38% of pretax
income in both periods.


LIQUIDITY


The Company must maintain an
adequate level of liquidity to ensure the availability of sufficient funds to fund loan
originations and deposit withdrawals, to satisfy other financial commitments, and to take
advantage of investment opportunities. The Company invests excess funds in overnight
deposits and


10.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|other short-term interest-bearing
assets to provide liquidity to meet these needs. At September 30, 2002, cash and cash
equivalents totaled $25.5 million. At September 30, 2002, the Company had commitments to
fund loans of $742,000. At the same time, certificates of deposit which are scheduled to
mature in one year or less totaled $90.3 million. Management believes, based on past
experience, that a significant portion of those deposits will remain with the Company.
Based on the foregoing, in addition to the Companys high level of core deposits and
capital, the Company considers its liquidity and capital resources sufficient to meet its
outstanding short-term and long-term needs.


CAPITAL RESOURCES


The Bank is subject to
capital-to-asset requirements in accordance with bank regulations. The following table
summarizes the Banks regulatory capital requirements versus actual capital as of
September 30, 2002:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           | ACTUALAMOUNT | % | REQUIREDAMOUNT | %      | EXCESSAMOUNT | %
|-------------------------- | ------------ | - | -------------- | ------ | ------------ | -
|Core capital               |              |   | $              | 29,755 |              |  
|(to adjusted total assets) |              |  
|Risk-based capital         |              |   |                | 30,903 |              |  
|(to risk-weighted assets)  |              |  

|ADDITION


The Company is in the process of
building a two-story addition to its office building located at 101 N. 36thStreet in Quincy, Illinois. The projected cost is estimated at $725,000. The
addition will house the commercial loan department and corporate offices plus add needed
storage space and area for projected growth of the Quincy loan departments.


MERGER


On June 4, 2002, the Company, and
PFSB Bancorp, Inc. (PFSB Bancorp), the parent company of Palmyra Savings,
entered into an Agreement and Plan of Merger pursuant to which PFSB Bancorp will merge
with and into First Federal Bancshares. Concurrently with the merger, Palmyra Savings will
merge with and into the Bank. The merger, which is valued at approximately $9.2 million,
is expected to close in the fourth quarter of 2002 pending the necessary regulatory and
shareholder approvals. The transaction will increase the Companys assets to
approximately $305 million and increase its number of banking offices from six to nine.
Under the terms of the transaction, shareholders of PFSB Bancorp will be entitled to
receive either $21.00 in cash, shares of the Company common stock, or a combination of
both in exchange for their shares of PFSB Bancorp common stock.




ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Qualitative Aspects of Market
Risk.The Companys most significant form of market risk is interest
rate risk. The principal objectives of the Companys interest rate risk management
are to evaluate the interest rate risk inherent in certain balance sheet accounts,
determine the level of risk appropriate given the Companys business strategy,
operating environment, capital and liquidity requirements and performance objectives, and
manage the risk consistent with the Board of Directors approved guidelines. The
Company has an Asset/Liability Committee, responsible for reviewing its asset/liability
policies and interest rate risk position, which meets monthly and reports trends and
interest rate risk position to the Board of Directors quarterly. The extent of the
movement of interest rates is uncertainty that could have a negative impact on the
earnings of the Company.




11.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|The Company has used the following
strategies to manage interest rate risk: (1) emphasizing the origination of
adjustable-rate and balloon loans and not originating long-term, fixed-rate loans for
retention in its portfolio; (2) emphasizing shorter term consumer loans; (3) introducing
floating-rate commercial business loans tied to the prime rate; (4) maintaining a high
quality securities portfolio that provides adequate liquidity and flexibility to take
advantage of opportunities that may arise from fluctuations in market interest rates, the
overall maturity of which is monitored in relation to the repricing of its loan portfolio;
and (5) using Federal Home Loan Bank advances to better structure maturities of its
interest rate sensitive liabilities. The Company currently does not participate in hedging
programs, interest rate swaps or other activities involving the use of off-balance sheet
derivative financial instruments.


Quantitative Aspects of Market
Risk.The Company primarily utilizes an interest sensitivity analysis
prepared by the Office of Thrift Supervision to review the level of interest rate risk of
the Bank. This analysis measures interest rate risk by computing changes in the net
portfolio value of the Banks cash flows from assets, liabilities and off-balance
sheet items in the event of a range of assumed changes in market interest rates. Net
portfolio value represents the market value of portfolio equity and is equal to the market
value of assets minus the market value of liabilities, with adjustments made for
off-balance sheet items. This analysis assesses the risk of loss in market risk sensitive
instruments in the event of a sudden and sustained 100 to 300 basis point increase or
decrease in market interest rates with no effect given to any steps that management might
take to counter the effect of that interest rate movement. The following table, which is
based on information provided to the Bank by the Office of Thrift Supervision, presents
the change in the Banks net portfolio value at June 30, 2002, that would occur upon
an immediate change in interest rates based on Office of Thrift Supervision assumptions,
but without giving effect to any steps that management might take to counteract that
change. All model outputs associated with the 300 and 200 bp scenarios are not
applicable because of the abnormally low prevailing interest rate environment.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | Net Portfolio Value    | NPV as % ofPortfolio Value of Assets
|---------------------------------------------------- | ---------------------- | ------------------------------------
|Change in
Interest Rates
in Basis Points(Rate Shock) | Amount                 | $ Change                            
|                                                     | (Dollars in thousands) |                                     
|                                                     | 300                    |                                     
|                                                     | 200                    |                                     
|                                                     | 100                    |                                     
|                                                     | Static                 |                                     
|                                                     | (100                   | )                                   
|                                                     | (200                   | )                                   
|                                                     | (300                   | )                                   

|The Office of Thrift Supervision uses
certain assumptions in assessing the interest rate risk of savings associations. These
assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the
market values of certain assets under differing interest rate scenarios, among others.


As with any method of measuring
interest rate risk, certain shortcomings are inherent in the method of analysis presented
in the foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees to changes
in market interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while interest
rates on other types may lag behind changes in market rates. Additionally, certain assets,
such as adjustable rate mortgage loans, have features which restrict changes in interest
rates on a short-term basis and over the life of the asset. Further, if interest rates
change, expected rates of prepayments on loans and early withdrawals from certificates
could deviate significantly from those assumed in calculating the table.12.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|ITEM 4. CONTROLS AND
PROCEDURES
|-------------------------------

| |  | (a) |  | Evaluation
of disclosure controls and procedures. The Company maintains                controls
and procedures designed to ensure that information required to be
               disclosed in the reports that the Company files or submits under the
Securities                Exchange Act of 1934 is recorded, processed, summarized and
reported within the                time period specified in the rules and forms of the
Securities and Exchange                Commission. Based upon their evaluation of those
controls and procedures                performed within 90 days of the filing date of
this report, the chief executive                officer and the chief financial officer
of the Company concluded that the                Companys disclosure controls and
procedures were adequate.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | Changes
in internal controls. The Company made no significant changes in                its
internal controls or in other factors that could significantly affect these
               controls subsequent to the date of the evaluation of those controls by the
chief                executive officer and chief financial officer.
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13.
|---

---

|PART II 
OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.
|---------------------------------------------------------

| | Periodically,
there have been various claims and lawsuits involving the Company, such as claims to
enforce liens, condemnation proceedings on properties in which the Company holds security
interest, claims involving the making and servicing of real property loans and other
issues incident to the Companys business. In the opinion of management, after
consultation with the Companys legal counsel, no significant loss is expected from
any of such pending claims or lawsuits. The Company is not a party to any material pending
legal proceedings.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 2.  CHANGES IN SECURITIES.

| |  | None |  | 
| |  | ---- |  | 

ITEM 3.  DEFAULTS UPON SENIOR
SECURITIES.

| |  | None |  | 
| |  | ---- |  | 

ITEM 4.  SUBMISSION OF MATTERS TO A
VOTE OF SECURITIES HOLDERS.

| |  | None |  | 
| |  | ---- |  | 

ITEM 5.  OTHER INFORMATION.

| |  | None |  | 
| |  | ---- |  | 

ITEM 6.  EXHIBITS AND REPORTS ON
FORM 8-K.

| | (a) |  | Exhibits
| | --- |  | --------

| |  | None |  | 
| |  | ---- |  | 

| | (b) |  | Reports
on Form 8-K
| | --- |  | -------------------

| |  | None |  | 
| |  | ---- |  | 

|14.
|---

---

|SIGNATURES


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

|                        | FIRST FEDERAL BANCSHARES, INC.                                          
|----------------------- | ------------------------------------------------------------------------
|                       
|Date: November 12, 2002 | /s/ James J. SteborJames J. Stebor
President and Chief Executive Officer
|                       
|Date: November 12, 2002 | /s/ Cathy D. Pendell
Cathy D. Pendell
Treasurer                         

|15.
|---

---

|CERTIFICATIONSI, James J. Stebor, certify that:
|-----------------------------------------------

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

|2) |  | Based
on my knowledge, this quarterly report does not contain any untrue           statement of
a material fact or omit to state a material fact necessary to make           the
statements made, in light of the circumstances under which such statements           were
made, not misleading with respect to the period covered by this quarterly
          report;
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3) |  | Based
on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

|5) |  | The
registrants other certifying officers and I have disclosed, based on           our
most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|6) |  | The
registrants other certifying officers and I have indicated in this
          quarterly report whether or not there were significant changes in internal
          controls or in other factors that could significantly affect internal controls
          subsequent to the date of our most recent evaluation, including any corrective
          actions with regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: November 12, 2002


/s/ James J. Stebor James J. SteborPresident and Chief Executive Officer
|--------------------------------------------------------------------------------------------------

---

|CERTIFICATIONS


I, Cathy D. Pendell, certify that:
|---------------------------------------------------

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

|2) |  | Based
on my knowledge, this quarterly report does not contain any untrue           statement of
a material fact or omit to state a material fact necessary to make           the
statements made, in light of the circumstances under which such statements           were
made, not misleading with respect to the period covered by this quarterly
          report;
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3) |  | Based
on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

|5) |  | The
registrants other certifying officers and I have disclosed, based on           our
most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

|6) |  | The
registrants other certifying officers and I have indicated in this
          quarterly report whether or not there were significant changes in internal
          controls or in other factors that could significantly affect internal controls
          subsequent to the date of our most recent evaluation, including any corrective
          actions with regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 12, 2002

/s/ Cathy D. Pendell Cathy D. PendellTreasurer