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

                                   FORM 10-QSB

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

                For the quarterly period ended SEPTEMBER 30, 2001
                         COMMISSION FILE NUMBER 0-37053

                         FIRST FEDERAL BANCSHARES, INC.
        (Exact name of small business issuer as specified in its charter)

DELAWARE                                                              37-1397683
(State of incorporation)                       (IRS Employer Identification No.)



                109 EAST DEPOT STREET, COLCHESTER, ILLINOIS 62326
                    (Address of Principal Executive Offices)


                                 (309) 776-3225
                (Issuer's telephone number, including area code)


Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) or the Exchange Act during the past 12 months (or 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 ___

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 7, 2001 the Registrant had outstanding 2,107,950 shares of common
stock.

Transitional Small Business Disclosure format (Check one): Yes [ ]   No [ X ]

<PAGE>


                         FIRST FEDERAL BANCSHARES, INC.

                          Form 10-QSB 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

PART II - Other Information

   Item 1   Legal Proceedings                                                12
   Item 2   Changes in Securities and Use of Proceeds                        12
   Item 3   Defaults Upon Senior Securities                                  12
   Item 4   Submission of Matters to a Vote of Securities Holders            12
   Item 5   Other Information                                                12
   Item 6   Exhibits and Reports on Form 8-K                                 12

SIGNATURES                                                                   13

<PAGE>



FIRST FEDERAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                    SEPTEMBER 30,    DECEMBER 31,
                                                                        2001             2000
                                                                        ----             ----
                                     ASSETS
<S>                                                                  <C>              <C>
Cash and cash equivalents                                            $   25,113       $   11,244
Time deposits in other financial institutions                             1,184            2,562
Securities available-for-sale                                            94,210           42,592
Securities held-to-maturity (fair value: September 30 - $12,373
     December 31 - $60,991)                                              12,270           61,619
Loans receivable, net                                                   114,064          115,619
Real estate owned, net                                                       89               --
Premises and equipment                                                    1,523            1,547
Accrued interest receivable                                               1,617            2,041
Other assets                                                                358              378
                                                                     ----------       ----------

TOTAL ASSETS                                                         $  250,428       $  237,602
                                                                     ==========       ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits                                                             $  198,466       $  184,878
Advances from borrowers for taxes and insurance                              63              189
Federal Home Loan Bank advances                                           2,000            5,000
Accrued interest payable                                                    690              669
Other liabilities                                                         1,448              999
                                                                     ----------       ----------
     Total liabilities                                                  202,667          191,735

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                                                    22               22
Additional paid-in capital                                               21,390           21,315
Retained earnings                                                        26,619           25,483
Unearned ESOP shares                                                     (1,614)          (1,749)
Accumulated other comprehensive income                                    1,344              796
                                                                     ----------       ----------
     Total shareholders' equity                                          47,761           45,867
                                                                     ----------       ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $  250,428       $  237,602
                                                                     ==========       ==========
</TABLE>


                 See notes to consolidated financial statements.

                                        1
<PAGE>


FIRST FEDERAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                 THREE MONTHS                NINE MONTHS
                                              ENDED SEPTEMBER 30,        ENDED SEPTEMBER 30,
                                           ------------------------    ------------------------
                                              2001          2000          2001          2000
                                              ----          ----          ----          ----
<S>                                        <C>           <C>           <C>           <C>
Interest income
     Loans                                 $    2,222    $    2,292    $    6,815    $    6,658
     Securities                                 1,532         1,357         4,721         4,106
     Other interest income                        129           242           481           399
                                           ----------    ----------    ----------    ----------
         Total interest income                  3,883         3,891        12,017        11,163

Interest expense
     Deposits                                   2,284         2,379         6,960         6,836
     Federal Home Loan Bank advances               27            91            92           284
                                           ----------    ----------    ----------    ----------
         Total interest expense                 2,311         2,470         7,052         7,120
                                           ----------    ----------    ----------    ----------

Net interest income                             1,572         1,421         4,965         4,043

Provision for loan losses                          48            --            48            75
                                           ----------    ----------    ----------    ----------

Net interest income after provision for
  loan losses                                   1,524         1,421         4,917         3,968

Noninterest income
     Service charges                               35            36           102           107
     Other fee income                              35            31           104            92
     Gain on sale of securities                    28            --           169            --
     Other income                                  41            26            74            68
                                           ----------    ----------    ----------    ----------
         Total noninterest income                 139            93           449           267

Noninterest expense
     Compensation and benefits                    520           407         1,547         1,164
     Occupancy and equipment                       87           109           272           279
     Data processing                              105           153           312           351
     Federal insurance premiums                    24            20            72            71
     Advertising                                   27            23            76            64
     Other noninterest expenses                   151           171           515           357
                                           ----------    ----------    ----------    ----------
         Total noninterest expense                914           883         2,794         2,286
                                           ----------    ----------    ----------    ----------

Income before income taxes                        749           631         2,572         1,949

Provision for income taxes                        282           221           988           728
                                           ----------    ----------    ----------    ----------

     Net income                            $      467    $      410    $    1,584    $    1,221
                                           ==========    ==========    ==========    ==========

Earnings per share
     Basic and diluted                     $      .23    $      N/A    $      .76    $      N/A

Weighted average shares                     2,078,798           N/A     2,074,313           N/A

Comprehensive income                       $      945    $      836    $    2,132    $    1,186
                                           ==========    ==========    ==========    ==========
</TABLE>


                 See notes to consolidated financial statements.

                                        2
<PAGE>


FIRST FEDERAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED
                                                                           SEPTEMBER 30,
                                                                     -------------------------
                                                                        2001           2000
                                                                        ----           ----
<S>                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                       $    1,584     $    1,221
    Adjustments to reconcile net income to net cash provided by
      operating activities
       Provision for depreciation                                            79            132
       Loss (gain) on sale of real estate owned                               4            (28)
       Net amortization of premiums and discounts                          (292)           (14)
       ESOP compensation expense                                            210             --
       Provision for loan losses                                             48             75
       Dividend reinvestments                                            (1,008)          (787)
       Gain on sale of securities                                          (169)            --
       Net changes in
           Accrued interest receivable and other assets                     444           (369)
           Accrued interest payable and other liabilities                  (327)           133
                                                                     ----------     ----------
               Net cash provided by operating activities                    573            363

CASH FLOWS FROM INVESTING ACTIVITIES
    Net change in time deposits in other financial institutions           1,378         (1,188)
    Purchase of securities available-for-sale                           (69,846)        (1,948)
    Purchase of securities held-to-maturity                              (8,192)          (458)
    Principal paydowns on mortgage-backed securities
      available-for-sale                                                  3,714          1,086
    Principal paydowns on mortgage-backed securities
      held-to-maturity                                                      660            879
    Proceeds from calls of securities available-for-sale                  4,917             --
    Proceeds from maturities of securities held-to-maturity              56,843             --
    Proceeds from sale of securities available-for-sale                  12,017             --
    Purchase of Federal Home Loan Bank stock                                (16)            --
    Net increase in loans receivable                                      1,363         (5,549)
    Proceeds from sale of real estate owned                                  51            108
    Purchase of property and equipment                                      (55)           (59)
                                                                     ----------     ----------
       Net cash provided by (used in) investing activities                2,834         (7,129)

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase in deposits                                             13,588          8,067
    Net change in advances from borrowers for taxes and insurance          (126)          (106)
    Federal Home Loan Bank advances                                          --          8,000
    Repayment of Federal Home Loan Bank advances                         (3,000)       (13,000)
    Net proceeds from stock issuance                                         --         19,530
                                                                     ----------     ----------
       Net cash provided by financing activities                         10,462         22,491
                                                                     ----------     ----------

Net change in cash and cash equivalents                                  13,869         15,725

Cash and cash equivalents
    Beginning of period                                                  11,244          8,703
                                                                     ----------     ----------

    End of period                                                    $   25,113     $   24,428
                                                                     ==========     ==========

Supplemental disclosures of cash flow information
    Cash paid during the period for
       Interest                                                      $    7,031     $    7,073
       Taxes, net of refunds                                                904            673
</TABLE>


                 See notes to consolidated financial statements.

                                        3
<PAGE>


FIRST FEDERAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                           Accumulated
                                                                                                               Other       Total
                                                                   Additional                  Unearned       Compre-      Stock-
                                                        Common      Paid-in      Retained        ESOP         hensive     holders'
                                                        Stock       Capital      Earnings       Shares        Income       Equity
                                                      ----------   ----------   ----------    ----------    ----------   ----------
<S>                                                   <C>          <C>          <C>           <C>           <C>          <C>
Balance at December 31, 2000                          $       22   $   21,315   $   25,483    $   (1,749)   $      796   $   45,867
ESOP shares earned                                            --           75           --           135            --          210
Dividends declared ($.21 per share)                           --           --         (448)           --            --         (448)
Comprehensive income
    Net income                                                --           --        1,584            --            --        1,584
    Change in fair value of securities classified
      as available-for-sale, net of reclassification
      and tax effects                                         --           --           --            --           548          548
                                                                                                                         ----------
       Total comprehensive income                                                                                             2,092
                                                      ----------   ----------   ----------    ----------    ----------   ----------


Balance at September 30, 2001                         $       22   $   21,390   $   26,619    $   (1,614)   $    1,344   $   47,761
                                                      ==========   ==========   ==========    ==========    ==========   ==========
</TABLE>


                 See notes to consolidated financial statements.

                                        4
<PAGE>


                         FIRST FEDERAL BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2001
           (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-QSB. Accordingly,
certain disclosures required by generally accepted accounting principles 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, 2000 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 generally accepted accounting principles.

Interim statements are subject to possible adjustment in connection with the
annual audit of the Company for the year ending December 31, 2001. 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 - Conversion to Stock Form of Ownership

On December 8, 1999, the Board of Directors of First Federal Bank (the "Bank")
adopted a Plan of Conversion to convert from a federally chartered mutual
savings bank to a federally chartered stock savings bank with the concurrent
formation of a holding company. The conversion was accomplished through the sale
of all of the Bank's stock to the Company and the sale of the Company's stock to
the public on September 27, 2000.

In connection with the conversion, the Company issued 2,242,500 shares of common
stock for gross proceeds of $22.4 million. The aggregate purchase price was
determined by an independent appraisal. The Bank issued all of its outstanding
capital stock to the Company in exchange for one-half of the net proceeds of the
offering. The Company accounted for the purchase in a manner similar to a
pooling of interests whereby assets and liabilities of the Bank maintain their
historical cost basis in the consolidated company.


                                       5
<PAGE>


Note 3 - Employee Stock Ownership Plan

In connection with the conversion, the Bank established an Employee Stock
Ownership Plan ("ESOP") for the benefit of its employees. The Company issued
179,400 shares of common stock to the ESOP in exchange for a 10 year note in the
amount of approximately $1.8 million. The $1.8 million for the ESOP purchase was
borrowed from the Company.

Shares issued to the ESOP are allocated to ESOP participants based on principal
repayments made by the ESOP on the loan from the Company. The loan is secured by
shares purchased with the loan proceeds and will be repaid by the ESOP with
funds from the Company's discretionary contributions to the ESOP and earnings on
ESOP assets. Principal payments are scheduled to occur over a ten-year period.
However, in the event the Company's contributions exceed the minimum debt
service requirements, additional principal payments will be made.


Note 4 - Earnings Per Share

Amounts reported as earnings per common share reflect earnings available to
common shareholders for the period divided by the weighted average number of
common shares outstanding during the period. Earnings per share is calculated
beginning with the date of conversion and, therefore, no earnings per share is
reported for periods prior to the conversion.


Note 5 - Recent Developments - New Accounting Pronouncements

In 2001, new accounting guidance was issued that will, beginning in 2002, revise
the accounting for goodwill and intangible assets. Intangible assets with
indefinite lives and goodwill will no longer be amortized, but will periodically
be reviewed for impairment and written down if impaired. Additional disclosures
about intangible assets and goodwill may be required. An initial goodwill
impairment test is required during the first six months of 2002. The Company
does not expect this new guidance to have a material effect on its financial
statements.

Note 6 - Subsequent Events

On October 15, 2001, the Company announced that its board of directors had
authorized the repurchase of 224,250 shares of the Company's common stock.
Repurchased shares will be held in treasury and will be available to fund the
Company's stock-based benefits. As of October 31, 2001, the Company had
repurchased 224,250 shares of its common stock at an average price of $16.40 per
share.

The Company received notification from the Office of Thrift Supervision on
October 29, 2001 that the Securities and Exchange Commission filed suit against
Robert L. Bentley, Entrust Group and Bentley Financial Services, Inc. alleging
fraud in connection with the sale of what the defendants claimed to be
bank-issued, federally insured certificates of deposit. The Commission has
obtained a temporary restraining order against the defendants prohibiting
further securities laws violations and an order freezing the defendants' assets
and appointing a receiver. The Company purchased six investment certificates of
deposit totaling $594,000 at September 30, 2001 through Entrust Group. Until
announcement of the enforcement action, these investments had been performing in
accordance with their terms. At this time, the Company is unable to determine
the status of its


                                       6
<PAGE>


certificates of deposit or what effect the enforcement action may have.
Accordingly, the Company has not provided for any loss as of September 30, 2001.
The Company believes its risk of loss is limited to the total $594,000 of
investment certificates of deposit recorded on the Company's books at September
30, 2001.


                                       7
<PAGE>


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 "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, 2001 to its financial condition at December 31, 2000
and the results of operations for the three-month and nine-month periods ended
September 30, 2001 to the same periods in 2000. This discussion should be read
in conjunction with the interim financial statements and footnotes included
herein.

FINANCIAL CONDITION

Total assets at September 30, 2001 were $250.4 million compared to $237.6
million at December 31, 2000, an increase of $12.8 million. The growth in total
assets was primarily funded by an increase in deposits of $13.6 million. The mix
of total assets has also shifted significantly since December 31, 2000 as a
result of a changing rate environment. Cash and cash equivalents have increased
from $11.2 million at December 31, 2000 to $25.1 million at September 30, 2001.
This increase is largely a result of the decreasing rate environment and the
lack of investments with desirable interest rates for investment purposes. In
addition, securities held-to-maturity decreased $49.3 million while securities
available-for-sale increased $51.6 million. This reflects calls and maturities
of various held-to-maturity securities that were reinvested in securities
available-for-sale throughout the year in order to maintain liquid investments
due to the declining rate environment.

The allowance for loan losses was $515,000 at September 30, 2001 compared to
$572,000 at December 31, 2000. The decrease in the allowance primarily reflects
net charge-offs of $105,000 as a result of an increase in delinquencies on
consumer loans throughout the year. The Company charges off consumer loans when
they become 120 days delinquent. The allowance as a percentage of gross loans
was .45% and .49% at September 30, 2001 and December 31, 2000, respectively.

Total liabilities at September 30, 2001 were $202.7 million compared to $191.7
million at December 31, 2000, an increase of $11.0 million, primarily due to an
increase in deposits of $13.6 million partially offset by a $3.0 million
decrease in Federal Home Loan Bank advances. The increase in deposits was used
to pay down the Federal Home Loan Bank advances.


                                       8
<PAGE>


Shareholders' equity at September 30, 2001 was $47.8 million compared to $45.9
million at December 31, 2000, an increase of $1.9 million. The increase
primarily reflects net income of $1.6 million and an increase in the fair value
of securities available-for-sale, net of tax, of $548,000, partially offset by
dividends declared of $448,000.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND
SEPTEMBER 30, 2000

Net income increased $57,000 to $467,000 for the quarter ended September 30,
2001 compared to the same period in 2000. Return on average assets was .76% for
the quarter ended September 30, 2001 compared to .73% for the same quarter in
the prior year.

Net interest income was $1.6 million for the quarter ended September 30, 2001
compared to $1.4 million for the same period in 2000. The net interest margin
increased to 2.61% for the three months ended September 30, 2001 from 2.58% for
the three months ended September 30, 2000. The increase in net interest margin
is a result of the increase in the ratio of interest-earning assets to
interest-bearing liabilities to 123.41% for the quarter ended September 30, 2001
from 110.24% for the similar quarter of the prior year as a result of the
investment of proceeds from the initial public offering. This was partially
offset by a decrease in the net interest spread of 41 basis points.

The provision for loan losses was $48,000 for the quarter ended September 30,
2001 and zero for the same period in 2000. The increase in the provision for
loan losses was a direct result of increased charge-offs of consumer loans as a
result of management charging off all consumer loans greater than 120 days
delinquent. Charge-offs for the quarter ended September 30, 2001, totaled
$100,000 compared to zero charge-offs for the same period in 2000.

On a quarterly basis, management of the Bank meets to review the adequacy of 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 was at a level adequate to absorb probable incurred
losses on existing loans at September 30, 2001, there can be no assurance that
such losses will not exceed estimated amounts.

Noninterest income increased $46,000 to $139,000 for the three-month period
ended September 30, 2001 compared to the same period in 2000. The increase was
primarily a result of the gain on sales of securities of $28,000 and an increase
in other income.

Noninterest expense was $914,000 and $883,000 for the quarters ended September
30, 2001 and 2000. Compensation and benefits increased $113,000 due to normal
salary increases and compensation expense of $77,000 associated with the ESOP
established as part of the stock conversion.

The Company's federal income tax expense increased $61,000 to $282,000 for the
quarter ended September 30, 2001 compared to the same period in 2000 primarily
as a result of an increase in pre-tax income. Income tax expense was
approximately 38% of pre-tax income for the quarter ended September 30, 2001 and
35% for the same period in 2000.


                                       9
<PAGE>


RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER
30, 2000

Net income increased $363,000 to $1.6 million for the nine months ended
September 30, 2001 compared to the same period in 2000. Return on average assets
was .87% for the nine months ended September 30, 2001 compared to .74% for the
nine months ended September 30, 2000.

Net interest income was $5.0 million for the nine months ended September 30,
2001 compared to $4.0 million for the same period in 2000. The net interest
margin increased to 2.79% for the nine months ended September 30, 2001 from
2.52% for the nine months ended September 30, 2000. The increased net interest
margin reflects an increase in the ratio of average interest-earning assets to
average interest-bearing liabilities to 123.63% from 110.99% for the nine-month
periods as discussed above. This increase was partially offset by a decrease in
the net interest spread of 18 basis points.

The provision for loan losses was $48,000 for the nine months ended September
30, 2001 and $75,000 for the same period in 2000. The decrease in the provision
for loan losses was a direct result of a decrease in non-performing loans and a
slight overall decrease in the loan portfolio due to repayments and refinancings
throughout the year.

Noninterest income was $449,000 for the nine months ended September 30, 2001
compared to $267,000 for the prior year period. The increase reflects a gain on
the sale of securities of $169,000.

Noninterest expense was $2.8 million and $2.3 million for the nine months ended
September 30, 2001 and 2000. Compensation and benefits increased $383,000 due to
normal salary increases and compensation expense of $210,000 associated with the
ESOP established as part of the stock conversion. In addition, other expenses
increased approximately $158,000 primarily due to increased fees associated with
being a public company, including printing costs and fees related to the annual
meeting as well as increased professional fees, franchise taxes and filing fees.

The Company's federal income tax expense increased $260,000 to $988,000 for the
nine months ended September 30, 2001 compared to the same period in 2000
primarily as a result of an increase in pre-tax income. Income tax expense was
approximately 38% of pre-tax income for the nine months ended September 30, 2001
and 37% for the same period in 2000.

LIQUIDITY

The Bank 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 Bank invests excess funds in overnight deposits and other
short-term interest-bearing assets to provide liquidity to meet these needs. At
September 30, 2001, cash and cash equivalents totaled $25.1 million. At
September 30, 2001, the Bank had commitments to fund loans of $736,000. At the
same time, certificates of deposit which are scheduled to mature in one year or
less totaled $109.6 million. Management believes, based on past experience, that
a significant portion of those deposits will remain with the Bank. Based on the
foregoing, in addition to the Bank's high level of core deposits and capital,
the Bank considers its liquidity and capital resources sufficient to meet its
outstanding short-term and long-term needs.


                                       10
<PAGE>


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, 2001:

<TABLE>
<CAPTION>
                                 ACTUAL                 REQUIRED                EXCESS
                                 ------                 --------                ------
                                 AMOUNT       %          AMOUNT       %         AMOUNT       %
                                 ------       -          ------       -         ------       -

<S>                            <C>          <C>        <C>           <C>      <C>          <C>
Core capital                   $  35,999    15.06%     $   9,559     4.0%     $  26,440    11.06%
(to adjusted total assets)
Risk-based capital                37,197    33.94          8,766     8.0         28,431    25.94
(to risk-weighted assets)
</TABLE>


                                       11
<PAGE>


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 AND USE OF PROCEEDS.

            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


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<PAGE>


                                   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 7, 2001                  /s/ James J. Stebor
                                        ----------------------------------------
                                        James J. Stebor
                                        President and Chief Executive Officer


Date: November 7, 2001                  /s/ Cathy D. Pendell
                                        ----------------------------------------
                                        Cathy D. Pendell
                                        Treasurer


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