<PAGE>  1

                          UNITED STATES 
               SECURITIES AND EXCHANGE COMMISSION 
                     WASHINGTON, D.C.  20549 
                  -----------------------------
 
                            FORM 10-Q 
 
        Quarterly Report Pursuant to Section 13 or 15 (d) 
             of the Securities Exchange Act of 1934 
 
 
For the Quarterly Period Ended          Commission File Number 
     September 30, 1996                        0-20160 

                  -----------------------------
 
                    FIRSTFED BANCSHARES, INC. 
     (Exact name of registrant as specified in its charter) 
 
 
          Delaware                           36-3820609 
(State or other jurisdiction       (I.R.S. Employer Identification 
     of incorporation or                      Number) 
        organization) 
 
749 Lee Street, Des Plaines, Illinois               60016 
(Address of Principal Executive Offices)          (Zip Code) 

Registrant's telephone number, including area code: (847) 294-6500 
 
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  ----- 
 
As of November 14, 1996, there were 3,256,216 outstanding shares of the 
registrant's Common Stock, par value $.01 per share.  In addition, 
150,400 shares were being held as treasury stock. 

 
<PAGE>  2 
                     FIRSTFED BANCSHARES, INC. 
 
                        Table of Contents 
 
PART I.   FINANCIAL INFORMATION (UNAUDITED)              PAGE NO. 

 
          Item 1.   Financial Statements....................3 
 
          Item 2.   Management's Discussion and 
                    Analysis of Financial Condition and
                    Results of Operations..................13 
 
PART II.  OTHER INFORMATION 

          Item 1.   Legal Proceedings......................27 
          Item 2.   Changes in Securities..................27 
          Item 3.   Defaults upon Senior Securities........27 
          Item 4.   Submission of Matters to a Vote 
                    of Security Holders....................27 
          Item 5.   Other Information......................27 
          Item 6.   Exhibits and Reports of Form 8-K.......27 
 
 
          Form 10-Q Signatures.............................28 
 
 
<PAGE>  3
PART 1.   FINANCIAL INFORMATION
Item 1.   Condensed Consolidated Financial Statements 



FIRSTFED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited)                               SEPT. 30,     DEC. 31, 
(Dollars in thousands except                1996          1995   
   per share amounts)                     ---------    --------- 
 
ASSETS 
------ 
CASH AND CASH EQUIVALENTS
  Cash and Amounts Due from 
    Depository Institutions               $  1,656     $ 19,198   
                                          ---------    ---------  
TOTAL CASH AND CASH EQUIVALENTS              1,656       19,198   
 
INVESTMENTS: 
  Securities Available-for-Sale             80,480       46,414   
  Mortgage-Backed and Related
    Securities Available-for-Sale          132,817      204,169   
  Federal Home Loan Bank Stock               7,190        4,835   
                                          ---------    ---------  
TOTAL INVESTMENTS                          220,487      255,418   
 
LOANS RECEIVABLE: 
  First Mortgage Loans                     305,290      276,288   
  Commercial Real Estate Loans               5,143        2,200   
  Consumer Loans                            53,242       53,908   
                                          ---------    ---------  
    TOTAL LOANS RECEIVABLE                 363,675      332,396   
  Less Allowance for Possible Loan Loss   (  1,363)    (  1,379)  
                                          ---------    ---------  
LOANS RECEIVABLE, NET                      362,312      331,017   

ACCRUED INTEREST RECEIVABLE                  4,985        3,461   
PREMISES AND EQUIPMENT                       9,955       10,260   
OTHER ASSETS                                 3,519        3,146   
                                          ---------    ---------  
TOTAL ASSETS                              $602,914     $622,500   
                                          =========    =========  


<PAGE>  4
                                          SEPT. 30,     DEC. 31, 
                                            1996          1995   
                                          ---------    --------- 
LIABILITIES AND STOCKHOLDERS' EQUITY 
------------------------------------ 
LIABILITIES: 
  Deposits                                $405,790     $454,656   
  Short-Term Borrowings and Securities                            
    Sold under Agreement to Repurchase     105,748       70,435   
  Long-Term Advances from Federal
    Home Loan Bank                          27,400       27,400   
  Advances from Borrowers for
    Taxes and Insurance                      1,820        5,496   
  Accrued Expenses and Other Liabilities    10,523        6,836   
                                          ---------    ---------  
TOTAL LIABILITIES                          551,281      564,823   

STOCKHOLDERS' EQUITY:
  Common Stock, par value $.01 per share;
    5,000,000 authorized shares; 3,406,616
    and 4,214,427 shares issued at
    9/30/96 and 12/31/95, respectively          34           28   
  Additional Paid-in Capital                21,850       27,229   
  Retained Earnings                         33,710       39,373   
  Treasury Stock, at cost, 129,600 and
    729,485 shares held at 9/30/96
    and 12/31/95, respectively            (  2,190)    (  9,397)  
  ESOP Loan                               (  1,000)    (  1,198)  
  Unearned Stock Award                    (     93)    (     97)  
  Unrealized Gain (Loss) on Securities
    Available-for-Sale                    (    678)       1,739   
                                          ---------    ---------  
TOTAL STOCKHOLDERS' EQUITY                  51,633       57,677   
                                          ---------    ---------  
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                      $602,914     $622,500   
                                          =========    =========  

BOOK VALUE PER COMMON SHARE                 $15.76       $16.55   
                                            ======       ======   
BOOK VALUE PER COMMON SHARE (without
  effect of unrealized gain (loss) on
  securities.)                              $15.96       $16.05   
                                            ======       ======   


See notes to condensed consolidated financial statements (unaudited)


<PAGE>  5
<TABLE>
<CAPTION>
<S>
                                         <C>          <C>         <C>          <C>      
FIRSTFED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME            THREE MONTHS ENDED       NINE MONTHS ENDED   
(Unaudited)                                SEPT. 30,    SEPT. 30,   SEPT. 30,    SEPT. 30,
(Dollars in thousands except                 1996         1995        1996         1995   
   per share amounts)                      ---------    ---------   ---------    ---------

INTEREST INCOME
  Loans Receivable                          $ 6,900      $ 8,235    $19,818      $22,522 
  Mortgage-Backed and Related Securities      2,809        1,244      8,774        3,567 
  Securities                                  1,213          891      3,016        3,377 
  Other Interest and Dividend Income            112          127        611          612 
                                           ---------    ---------  ---------    ---------
                                             11,034       10,497     32,219       30,078 

INTEREST EXPENSE
  Deposits                                    5,887        6,254     18,039       17,386 
  Advances from Federal Home Loan Bank        1,515          703      4,031        1,909 
  Other Borrowed Money                          295            4        711            7 
                                           ---------    ---------  ---------    ---------
                                              7,697        6,961     22,781       19,302 

NET INTEREST INCOME                           3,337        3,536      9,438       10,776 

  Provision for Possible Loan Losses            300          150        832          450 
NET INTEREST INCOME AFTER PROVISION        ---------    ---------  ---------    ---------
  FOR POSSIBLE LOAN LOSSES                    3,037        3,386      8,606       10,326 

NON-INTEREST INCOME
  Loan Charges and Servicing Fees               183           95        568          329 
  Deposit Related Charges and Fees              156          148        415          368 
  Gain (Loss) on Sale of Securities              54          -0-      2,561       (   52)
  Gain on Sale of Loans                         -0-          -0-        -0-            1 
  Insurance and Annuity Commissions              81           35        163           84 
  Other                                          52           89         84          187 
                                           ---------    ---------  ---------    ---------
TOTAL NON-INTEREST INCOME                       526          367      3,791          917 

NON-INTEREST EXPENSE
  Compensation and Benefits                   1,203        1,174      3,572        3,955 
  Occupancy and Equipment                       314          348      1,041        1,002 
  Federal Deposit Insurance Premium           3,336          266      3,866          731 
  Data Processing                               186          178        591          532 
  Advertising                                   111           71        236          377 
  Other                                         423          431      1,674        1,400 
                                           ---------    ---------  ---------    ---------
TOTAL NON-INTEREST EXPENSE                    5,573        2,468     10,980        7,997 

INCOME BEFORE TAXES                        (  2,010)       1,285      1,417        3,246 
  Income Tax Provision                     (    753)         461        433        1,085 
                                           ---------    ---------  ---------    ---------

NET INCOME                                 ($ 1,257)     $   824    $   984      $ 2,161 
                                           =========    =========  =========    =========

EARNINGS PER COMMON SHARE
  Primary                                  (  $0.35)       $0.20      $0.27        $0.50 
  Fully Diluted                            (  $0.35)       $0.20      $0.27        $0.50 


WEIGHTED AVG. PRIMARY SHARES OUTSTANDING     3,574,373    4,144,983  3,585,786    4,293,933
WGHTD. AVG. FULLY DILUTED SHARES OUTSTANDING 3,570,965    4,124,606  3,611,015    4,253,538


See notes to condensed consolidated financial statements (unaudited)
</TABLE>


<PAGE>  6
FIRSTFED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS         NINE MONTHS ENDED   
(Unaudited)                                SEPT. 30,    SEPT. 30,
(Dollars in thousands)                        1996         1995
                                           ---------    ---------
OPERATING ACTIVITIES
  Net Income                                $   984      $ 2,161 
  Adjustments to Reconcile Net Income to                         
   Cash Provided by Operating Activities                         
    Depreciation and Amortization of                             
      Premises and Equipment                    495          429 
    Deferred Loan Origination Fees               60     (     80)
    Amortization of Premiums and Discounts
      on Mortgage-Backed and Investment
      Securities, Net                         1,035           95
    Proceeds from Sale of Loans                 -0-           74
    Provision for Possible Loan Losses          832          450
    Net (Gain) Loss on Sale of Securities  (  2,556)          63
    Stock Award Earned                            4           25
    Change In:
      Prepaid Expenses and Other Assets         845          835
      Accrued Interest Receivable          (  1,524)    (    253)
      Accrued Expenses and Other Liabilities  3,687          951
                                           ---------    ---------
NET CASH FROM OPERATING ACTIVITIES            3,862        4,750

CASH FLOWS FROM INVESTING ACTIVITIES
  Loan Originations, Net of Principal
    Payments                               ( 32,187)    ( 85,260)
  Principal Payments on Mortgage-Backed
    and Related Securities                   37,874       10,984
  Purchases of Mortgage-Backed and
    Related Securities                     (112,444)    ( 10,995)
  Purchases of Securities                  ( 47,948)    ( 17,473)
  Proceeds from Sales and Maturities
    of Securities                           157,690       61,915
  Change in Federal Home Loan Bank Stock   (  2,355)         -0-
  Purchase of Office Properties and 
    Equipment                              (    190)    (   1,394)
                                           ---------    ---------
NET CASH FROM INVESTING ACTIVITIES              440      ( 42,223)


<PAGE>  7
                                              NINE MONTHS ENDED  
                                           SEPT. 30,    SEPT. 30,
                                              1996         1995  
                                           ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net Decrease in Deposits                 ( 48,866)      45,219 
  Repayments of Federal Home Loan Bank                           
    Advances                               ( 41,900)    ( 61,400)
  Proceeds from Federal Home Loan Bank                       
    Advances                                 61,000       55,000 
  Proceeds from Other Borrowings             16,213          448 
  Net Change in Mortgage Escrow Funds      (  3,676)       2,438 
  Purchase of Common Stock for Treasury    (  4,405)    (  4,591)
  Proceeds from Exercise of Stock Options,
    Net of Treasury Shares issued               488          161
  Payment Received on Loan to ESOP              198          278
  Dividend Paid, Net of Dividend
    Reinvestment Program                   (    896)    (    665)
                                           ---------    ---------
NET CASH FROM FINANCING ACTIVITIES         ( 21,844)      36,888
                                           ---------    ---------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                         ( 17,542)    (    585)

CASH AND CASH EQUIVALENTS, BEGINNING         19,198        6,776 
                                           ---------    ---------
CASH AND CASH EQUIVALENTS, ENDING           $ 1,656      $ 6,191 
                                           =========    =========
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest Paid                             $22,785      $17,252
  Income Taxes Paid                           1,250          865







See notes to condensed consolidated financial statements (unaudited)


<PAGE>  8
<TABLE>
<CAPTION>
FIRSTFED BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)
Nine months ended Sept. 30, 1996 and Sept. 30, 1995
<S>                               <C>    <C>         <C>        <C>            <C>      <C>      <C>            <C>   
                                                                                                   UNREALIZED
                                                                                                   GAIN (LOSS)         
                                            ADDITIONAL                                    UNEARNED  ON ASSETS          
                                    COMMON   PAID-IN    RETAINED   TREASURY      ESOP       STOCK   AVAILABLE          
                                     STOCK   CAPITAL    EARNINGS    STOCK        LOAN       AWARD   FOR SALE      TOTAL
-----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994          $28    $26,851    $38,051    ($5,197)    ($1,630)    ($129)    ($1,127)  $56,847 
                                                                                                                       
Net Income                                                2,161                                                  2,161 
                                                                                                                       
Cash Dividends ($.20 per share)                         (   741)                                               (   741)
                                                                                                                       
Purchase of Treasury Stock                                         ( 4,969)                                    ( 4,969)
                                                                                                                       
Treasury Stock Reissued as Part of                                                                                     
  Dividend Reinvestment Program                    3                    73                                          76 
                                                                                                                       
Principal Payment on ESOP Loan                                                     278                             278 
                                                                                                                       
Proceeds from Stock Option Exercises             161                                                               161 
                                                                                                                       
Treasury Stock reissued in conjunction                                                                                 
  with stock option exercises                (     3)   (   315)       696                                         378 
                                                                                                                       
Amortization of Stock Award                                                                   25                    25 
                                                                                                                       
Change in Unrealized Gain/Loss on Securities                                                                           
  Available-for-Sale                                                                                      871      871 
-----------------------------------------------------------------------------------------------------------------------
                                                                                                                       
Balance at Sept. 30, 1995             $28    $27,012    $39,156    ($9,397)    ($1,352)    ($104)    ($  256)  $55,087 
=======================================================================================================================
                                                                                                                       
Balance at December 31, 1995          $28    $27,229    $39,373    ($9,397)    ($1,198)    ($ 97)     $1,739   $57,677 
                                                                                                                       
Net Income                                                  984                                                    984 
                                                                                                                       
Cash Dividends ($.084 per share)                        (   896)                                               (   896)
                                                                                                                       
Purchase of Treasury Stock                                         ( 4,405)                                    ( 4,405)
                                                                                                                       
Principal Payment on ESOP Loan                                                     198                             198 
                                                                                                                       
Shares issued in conjunction with                                                                                      
  three-for-two stock split, and                                                                                       
  cash paid on fractional shares       11    ( 5,379)   (    12)                                               ( 5,380)
                                                                                                                       
Treasury Stock reissued in conjunction                                                                                 
  with stock option exercises                           (   542)     1,030                                         488 
                                                                                                                       
Retirement of 538,503 shares                                                                                           
  of common stock                   (   5)              ( 5,197)    10,582                                       5,380 
                                                                                                                       
Amortization of Stock Award                                                                    4                     4 
                                                                                                                       
Change in Unrealized Gain/Loss on Securities                                                                           
  Available-for-Sale                                                                                 ( 2,417)  ( 2,417)
-----------------------------------------------------------------------------------------------------------------------
                                                                                                                       
Balance at Sept. 30, 1996            $34    $21,850    $33,710     ($2,190)   ($1,000)    ($ 93)    ($   678)  $51,633 
=======================================================================================================================
</TABLE>
See notes to condensed consolidated financial statements (unaudited)


<PAGE>  9
<TABLE>
<CAPTION>
FIRSTFED BANCSHARES, INC.
AVERAGE BALANCE SHEET
(Dollars in thousands)
See notes to condensed consolidated financial statements (unaudited)
The following table sets forth certain information related to the Company's  
average balance sheet.  It reflects the average yield on assets and average
cost of liabilities for the periods indicated, as derived by dividing income
or expense by the average daily balance of assets or liabilities, 
respectively, for the periods indicated.
<S>                             <C>        <C>    <C>          <C>  <C>          <C>          <C>  <C>           <C>        
                                                                    THREE MONTHS ENDED
                                ----------------------------------------------------------------------------------------  
                                             SEPT. 30, 1996                                   SEPT. 30, 1995              
                                -----------------------------------------        ---------------------------------------  
                                                                AVERAGE                                          AVERAGE  
                                   AVERAGE                       YIELD/             AVERAGE                       YIELD/  
                                   BALANCE        INTEREST        COST              BALANCE        INTEREST        COST   
INTEREST-EARNING ASSETS:        -----------------------------------------        ---------------------------------------  
  Mortgage Loans                  $292,612        $ 5,537         7.57%            $363,700        $ 6,935         7.63%  
  Commercial Real Estate Loans       5,056            110         8.59                  -0-            -0-          -0-   
  Consumer Loans                    53,382          1,253         9.39               53,974          1,300         9.63   
  Mortgage-Backed and                                                                                                     
    Related Securities             183,970          2,809         6.11               76,961          1,244         6.47   
  Investment Securities             71,985          1,183         6.57               48,354            904         7.26   
  Other Investments                  8,949            142         6.32                7,160            114         6.35   
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
Total Interest-Earning Assets     $615,954        $11,034         7.15%            $550,149        $10,497         7.60%  
                                                                                                                          
Non-Interest Earning Assets         13,480                                           20,990                               
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
TOTAL ASSETS                      $629,434                                         $571,139                               
                                  ========                                         ========                               
                                                                                                                          
INTEREST-BEARING LIABILITIES:                                                                                             
  Interest-Bearing Checking       $ 21,653        $    98         1.78%            $ 22,334        $   101         1.79%  
  Money Market Accounts             20,081            215         4.27               11,256             87         3.06   
  Savings                           69,233            434         2.50               70,528            444         2.50   
  Certificates of Deposit          325,664          5,140         6.30              350,517          5,622         6.36   
  FHLB Advances                    101,345          1,515         5.85               43,133            703         6.46   
  Other Borrowed Funds              21,908            295         5.39                  345              4         5.60   
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
Total Interest-Bearing                                                                                                    
  Liabilities                     $559,884        $ 7,697         5.45%            $498,113        $ 6,961         5.54%  
                                                                                                                          
Non-Interest Bearing                                                                                                      
  Deposits                           4,748                                            5,240                               
                                                                                                                          
Other Liabilities                   11,580                                           10,593                               
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
TOTAL LIABILITIES                 $576,212                                         $513,946                               
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
Stockholders' Equity                53,222                                           57,193                               
                                -----------------------------------------        ---------------------------------------  
TOTAL LIABILITIES AND                                                                                                     
  STOCKHOLDERS' EQUITY            $629,434                                         $571,139                               
                                  ========                                         ========                               
                                                                                                                          
NET INTEREST INCOME                               $ 3,337                                          $ 3,536                
                                -----------------------------------------        ---------------------------------------  
NET INTEREST RATE SPREAD (1)                                      1.70%                                            2.06%  
                                -----------------------------------------        ---------------------------------------  
NET INTEREST MARGIN (2)                                           2.16%                                            2.55%  
                                -----------------------------------------        ---------------------------------------  
AVERAGE INTEREST-EARNINGS ASSETS TO AVERAGE                                                                               
  INTEREST-BEARING LIABILITIES       1.11 x                                           1.11 x                              
                                -----------------------------------------        ---------------------------------------  
</TABLE>
(1) Interest Rate Spread is calculated by subtracting the average cost of
    interest-bearing liabilities from the average rate on interest-earning
    assets.
(2) Net Interest Margin is calculated by dividing net interest income by
    average interest-earning assets.

<PAGE> 10
<TABLE>
<CAPTION>
FIRSTFED BANCSHARES, INC.
AVERAGE BALANCE SHEET
(Dollars in thousands)
See notes to condensed consolidated financial statements (unaudited)
The following table sets forth certain information related to the Company's
average balance sheet.  It reflects the average yield on assets and average
cost of liabilities for the periods indicated, as derived by dividing income
or expense by the average daily balance of assets or liabilities,
respectively, for the periods indicated.
<S>                            <C>          <C>  <C>          <C>  <C>           <C>          <C>  <C>           <C> 
                                                                     NINE MONTHS ENDED                          
                                ----------------------------------------------------------------------------------------  
                                             SEPT. 30, 1996                                   SEPT. 30, 1995              
                                -----------------------------------------        ---------------------------------------  
                                                                AVERAGE                                          AVERAGE  
                                   AVERAGE                       YIELD/             AVERAGE                       YIELD/  
                                   BALANCE        INTEREST        COST              BALANCE        INTEREST        COST   
INTEREST-EARNING ASSETS:        -----------------------------------------        ---------------------------------------  
  Mortgage Loans                  $281,924        $15,793         7.47%            $327,377        $18,729         7.63%  
  Commercial Real Estate Loans       3,753            246         8.76                  -0-            -0-          -0-   
  Consumer Loans                    53,374          3,779         9.44               52,958          3,793         9.55   
  Mortgage-Backed and                                                                                                     
    Related Securities             192,663          8,774         6.07               73,419          3,567         6.48   
  Investment Securities             66,164          3,219         6.49               73,331          3,582         6.51   
  Other Investments                  8,692            408         6.26                8,960            407         6.06   
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
Total Interest-Earning Assets     $606,570        $32,219         7.08%            $536,045        $30,078         7.43%  
                                                                                                                          
Non-Interest Earning Assets         14,557                                           19,061                               
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
TOTAL ASSETS                      $621,127                                         $555,106                               
                                  ========                                         ========                               
                                                                                                                          
INTEREST-BEARING LIABILITIES:                                                                                             
  Interest-Bearing Checking       $ 22,029        $   295         1.79%            $ 24,434        $   314         1.72%  
  Money Market Accounts             14,163            395         3.72               11,198            243         2.91   
  Savings                           69,412          1,299         2.50               71,307          1,334         2.50   
  Certificates of Deposit          338,068         16,050         6.16              337,394         15,495         6.14   
  FHLB Advances                     89,672          4,031         5.91               39,918          1,909         6.39   
  Other Borrowed Funds              17,904            711         5.29                  248              7         5.39   
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
Total Interest-Bearing                                                                                                    
  Liabilities                     $551,248        $22,781         5.50%            $484,499        $19,302         5.33%  
                                                                                                                          
Non-Interest Bearing                                                                                                      
  Deposits                           7,703                                            4,127                               
                                                                                                                          
Other Liabilities                    7,075                                            9,181                               
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
TOTAL LIABILITIES                 $566,026                                         $497,807                               
                                -----------------------------------------        ---------------------------------------  
                                                                                                                          
Stockholders' Equity                55,101                                           57,299                               
                                -----------------------------------------        ---------------------------------------  
TOTAL LIABILITIES AND                                                                                                     
  STOCKHOLDERS' EQUITY            $621,127                                         $555,106                               
                                  ========                                         ========                               
                                                                                                                          
NET INTEREST INCOME                               $ 9,438                                          $10,776                
                                -----------------------------------------        ---------------------------------------  
NET INTEREST RATE SPREAD (1)                                      1.58%                                            2.11%  
                                -----------------------------------------        ---------------------------------------  
NET INTEREST MARGIN (2)                                           2.07%                                            2.67%  
                                -----------------------------------------        ---------------------------------------  
AVERAGE INTEREST-EARNINGS ASSETS TO AVERAGE                                                                               
  INTEREST-BEARING LIABILITIES       1.10 x                                           1.11 x                              
                                -----------------------------------------        ---------------------------------------  
</TABLE>
(1) Interest Rate Spread is calculated by subtracting the average cost of
    interest-bearing liabilities from the average rate on interest-earning
    assets.
(2) Net Interest Margin is calculated by dividing net interest income by
    average interest-earning assets.
<PAGE> 11  
                     FIRSTFED BANCSHARES, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                              (Unaudited)

(1)          Basis of Presentation

The accompanying unaudited condensed consolidated financial statements 
have been prepared in accordance with generally accepted accounting 
principles for interim financial information and with the instructions 
to Form 10-Q and Regulation S-X.  Accordingly, they do not include all 
the information and footnotes required by generally accepted accounting 
principles for complete financial statements.

The results of operations and other data for the quarter and nine months 
ended September 30, 1996 are not necessarily indicative of results that 
may be expected for the entire year ended December 31, 1996.

In the opinion of management, the unaudited condensed consolidated 
financial statements contain all adjustments (consisting only of 
normal recurring adjustments) necessary to present fairly the 
financial condition of FirstFed Bancshares, Inc. (the "Company"), 
including its wholly owned subsidiary, First Federal Bank, Des Plaines, 
Illinois (the "Bank"), as of September 30, 1996 and December 31, 1995; 
the results of the Company's operations for the three months ended 
September 30, 1996 and 1995 and the nine months ended September 30, 1996 
and 1995; its cash flows for the nine months ended September 30, 1996 
and 1995; its changes in stockholders' equity for the nine months ended 
September 30, 1996 and 1995; and its average balance sheet for the three 
months ended September 30, 1996 and 1995, and the nine months ended 
September 30, 1996 and 1995.

All references to number of shares issued, outstanding (primary and 
fully-diluted) and held in treasury, earnings per share, and book value 
per share, for periods prior to the second quarter of 1996, have been 
restated as if the three-for-two stock split which occurred on May 15, 
1996 had actually occurred on January 1, 1995.

Certain amounts in prior condensed consolidated financial statements 
have been reclassified to conform with the September, 1996 presentation. 

(2)          Regulatory Capital Requirements

Pursuant to the Financial Institutions Reform, Recovery and 
Enforcement Act of 1989 ("FIRREA"), as implemented by regulations 
promulgated by the Office of Thrift Supervision (the "OTS"), savings 
institutions must meet three separate minimum capital requirements.  
The following table summarizes, as of September 30, 1996, the Bank's 
capital requirements under FIRREA and its actual capital ratios.  As 
of September 30, 1996, the Bank exceeded all current minimum regulatory 
capital requirements. 


<PAGE> 12
                                     BANK ONLY
               ----------------------------------------------------
                    Actual         Regulatory        Excess Above 
                   Capital        Capital Req.       Capital Req. 
               Amount     %     Amount      %      Amount     %    
               -------  ------  -------   -----    -------   ------
                              (Dollars in Thousands)               

Risk-Based     $47,938  17.43%  $22,007   8.00%    $25,931    9.43 
Core Capital    46,576   7.76    18,012   3.00      28,564    4.76 
Tang. Capital   46,576   7.76     9,006   1.50      37,570    6.26 

(3)          Conversion and Earnings Per Share of Common Stock 
 
On June 30, 1992, the Bank converted from a federally chartered mutual 
savings bank to a federally chartered stock savings bank. The Bank 
issued all of its Common Stock to the Company and at the same time the 
Company issued 3,220,000 shares of Common Stock at $10 per share, all 
pursuant to a plan of conversion. 
 
Primary and fully diluted earnings per share for the quarter were 
computed by dividing net income by 3,574,373 and 3,570,965 respectively, 
and for the nine months ended September 30, 1996 by 3,585,786 and 
3,611,015 respectively, the weighted average number of shares of Common 
Stock and Common Stock Equivalents outstanding during the quarter.  
Stock options are regarded as Common Stock Equivalents and are computed 
using the treasury stock method.  

(4)          Stock Repurchase Program 
 
On October 24, 1995, the Company announced its intention to repurchase 
up to 225,000 shares of its outstanding Common Stock in the open market.  
On August 27, 1996, this program was completed, with a total of 225,000 
shares repurchased at an average price of $15.35.  

On August 27, 1996, the Company announced its intention to repurchase 
up to 100,000 shares of its outstanding Common Stock in the open market.  
As of November 14, 1996, 76,900 shares had been repurchased at an 
average price of $16.91.  

(5)          Stock Dividend
 
On May 15, 1996, the Company effectuated a three-for-two stock split 
payable in the form of a one-for-two stock dividend.  The regular 
quarterly dividend rate remained at $.10 per share post-split, 
representing a 50% increase in the dividend rate as a result of the 
split.  All references to number of shares issued, outstanding (primary 
and fully-diluted) and held in treasury, earnings per share, and book 
value per share, for periods prior to the second quarter of 1996, have 
been restated as if the three-for-two stock split which occurred on May 
15, 1996 had actually occurred on January 1, 1995.


<PAGE> 13
(6)          Balance Sheet Restructure

On January 2, 1996, the Company announced that it had accomplished the 
first step in its restructuring of the balance sheet of the Bank, to 
become more like that of a full service community bank.  The Bank, at 
that time, had 73% of its balance sheet in fixed rate assets, with 49% 
having a maturity of greater than five years.  Management believes that 
in time of interest rate volatility, a greater portion of the balance 
sheet should be in adjustable rate instruments.  It is management's goal 
to have no more than 50% of total assets in fixed rate instruments, with 
no more than 15% repricing in greater than five years by December 31, 
1997.  As of September 30, 1996, the Bank had 71% of its assets in fixed 
rate instruments, with 34% having a maturity of greater than five years.  
In January and February of 1996, the Company sold over $93 million in 15 
and 30-year fixed rate mortgage-backed securities, generating net gains 
of over $2.5 million, or approximately $1.5 million after related taxes.  
The proceeds were invested in adjustable rate mortgage-backed and 
related securities, and management intends that over time, these funds 
will be reinvested in higher yielding business and commercial real 
estate loans.  In the short-term, the Company may experience a decline 
in net interest margin until the proceeds are converted from securities 
to higher yielding loans.

(7)          Recapitalization of the Savings Association Insurance Fund 
             (the "SAIF").

On September 30, 1996, legislation was signed authorizing the 
recapitalization of the SAIF through a one-time special assessment of 
65.7 basis points.  The Bank recorded the estimated amount of 
$3,070,000, pre-tax, in the third quarter of 1996.  Management 
anticipates a reduction in deposit insurance premiums of approximately 
$750,000 annually, beginning in January, 1997.  See the "Recent 
Regulatory Developments" section of the Management's Discussion and 
Analysis.

(8)          New Director

On June 24, 1996, the number of directors on the Company's board was 
increased from eight to nine.  David Michael Miller was elected as a 
Class I director with a term expiring in 1999.  Mr. Miller is Vice-
President at Comdisco, Inc., a locally headquartered publicly-traded 
company which sells and leases new and used IBM computer equipment, 
including central processing units, printers, point-of-sale devices and 
satellite terminals.


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

OVERVIEW 
-------- 
The Company's business activities currently consist of ownership of the 
Bank, and investments in other equity securities.  The Bank's principal 
business consists of attracting deposits from the public and investing 
these deposits, together with funds generated from operations, primarily 

<PAGE> 14
in loans secured by mortgages on one-to-four family residences, consumer 
loans, commercial real estate loans and commercial loans.  The Bank has 
recently established a new Commercial Lending Department, and it is 
management's intention that commercial loans will become an increasingly 
larger portion of the total loan portfolio as the balance sheet is 
restructured to become more like that of a community bank.  The Bank's 
deposit accounts are insured to the maximum allowable by the Federal 
Deposit Insurance Corporation (the "FDIC"). 

The Bank's results of operations are dependent primarily on net interest 
income, which is the difference between the interest earned on its 
loans, mortgage-backed securities and investment securities portfolios, 
and the interest paid on deposits and borrowed funds.  The Bank's 
operating results are also affected, to a lesser extent, by loan 
commitment and servicing fees, customer service charges, fees from 
annuity and insurance products, and other income.  As the Bank's 
subsidiary, First Insurance Agency, begins offering complete brokerage 
and mutual fund services in the fourth quarter of 1996, management 
expects non-interest income to increase.  Operating expenses of the Bank 
include employee compensation and benefits, equipment and occupancy 
costs, federal deposit insurance premiums and other administrative 
expenses. 

The Bank's results of operations are further affected by economic 
and competitive conditions, particularly changes in market interest 
rates.  Results are also affected by monetary and fiscal policies of 
federal agencies, and actions of regulatory authorities.  Since 
September 30, 1995, the Treasury yield curve, (from maturities of 3 
months to 30 years), has steepened, with the short end of the curve 
decreasing 38 basis points, and the long end of the curve increasing 42 
basis points.  Should this trend continue, it would help improve the 
Bank's net interest margin which has been decreased somewhat in the 
short-term by the balance sheet restructure.  Also, as approximately $69 
million in certificates of deposit opened in March of 1995, which 
carried a rate of 7.8%, matured in September of 1996, the Bank's net 
interest margin should improve.


FINANCIAL CONDITION 
------------------- 
Total consolidated assets of the Company decreased by $19.6 million, or 
3.15% from $622.5 million at December 31, 1995, to $602.9 million at 
September 30, 1996.

Total loans receivable increased $31.3 million, or 9.41% from $332.4 
million at December 31, 1995, to $363.7 million at September 30, 1996.  
Loans originated during the nine month period ended September 30, 1996 
were $76.9 million, of which 59% were mortgages, 4% were commercial real 
estate loans, and 37% were consumer loans.  In addition, $13.7 million 
in adjustable rate first mortgage loans were purchased.  Loans 
originated for the nine months ended September 30, 1995 were $125.8 
million, of which 85% were mortgages and 15% were consumer loans.
 
Mortgage-backed and other mortgage-related securities decreased $71.4 
million or 35.00% from December 31, 1995.  During this nine month 

<PAGE> 15
period, proceeds from the sales of mortgage-backed securities of $140.6 
million, as well as principal payments and other securities maturities 
of $43.2 million, were used to purchase $112.4 million in predominantly 
adjustable rate mortgage-backed securities.  Non mortgage-backed 
securities increased $34.1 million or 73.40% from December 31, 1995.  
Most of the securities purchased were U.S. Treasury and Government 
Agency Obligations.  At September 30, 1996, mortgage-backed and non 
mortgage-backed securities comprised 35% of total assets.

Deposits decreased to $405.8 million at September 30, 1996, from $454.7 
million at December 31, 1995, a decrease of $48.9 million or 10.75%.  
This decrease was a direct result of $70 million in maturing 7.8% 
certificates of deposit, partially offset by increases in a new 
Preferred Money Market product, and growth in both non-interest bearing 
checking accounts and short-term certificates of deposit.
 
Short-term borrowings (due within one year) increased $35.3 million from 
the December 31, 1995 balance of $70.4 million to $105.7 million at 
September 30, 1996.  $12.5 million of this increase was directly 
attributable to an arbitrage transaction.  Approximately $20 million of 
this increase occurred as a result of the runoff of the maturing 7.8% 
certificates of deposit.  The balance of this increase was in the two 
new funding sources the Bank obtained during 1995.  One is a Treasury 
Tax and Loan Account, which enables the U.S. Treasury to retain tax 
dollars with the Company at a floating rate of interest, and the other 
is a Retail Repurchase Agreement, under which a customer can lend money 
to the Company which is then collateralized by a security the Company 
owns.  Long-term borrowings, all of which are Federal Home Loan Bank 
advances, have not changed since December 31, 1995.

Book value per common share decreased to $15.76 at September 30, 1996 
from $16.55 at December 31, 1995.  This was due to the one-time SAIF 
special assessment, and the change in the unrealized gain (loss) on 
securities available-for-sale, from a gain of $1.7 million at December 
31, 1995, to a loss of $.7 million at September 30, 1996.  Without the 
effect of the unrealized gain (loss), book value per common share 
decreased slightly from $16.05 at December 31, 1995 to $15.96 at 
September 30, 1996.
 
Total non-performing loans as of September 30, 1996 increased to 
$814,600 or 0.14% of total assets.  At December 31, 1995, non-performing 
loans were $681,000 or 0.11% of total assets.  Historically this number 
is at the high end of the range, but below the rate experienced by the 
Bank's peer group.  Management believes the allowances for possible loan 
losses to be adequate.  Furthermore, 72.6% of non-performing loans were 
single family mortgages, and the Bank has not incurred a loss on single 
family mortgages within the last five years.
 

<PAGE> 16
The following table sets forth the amounts and categories of non- 
performing loans. 

                                      Sept. 30, 1996   Dec. 31, 1995 
                                      --------------   ------------- 
                                          (Dollars in Thousands)     
Non-performing loans: 
  One-to-four family                    $    592       $     531     
  Consumer                                   223             150     
                                      -------------    ------------- 
   Total non-performing loans           $    815       $     681     
 
Total non-performing loans as 
  percentage of net loans                   .22%            .21% 
 
Total non-performing loans as 
  percentage of total assets                .14%            .11% 
 
 
LIQUIDITY AND CAPITAL RESOURCES 
------------------------------- 
The Company's primary sources of funds are deposits, principal and 
interest payments on loans and mortgage-backed securities, and funds 
provided by other operations.  While scheduled loan and mortgage-backed 
securities repayments and maturities of short-term investments are a 
relatively predictable source of funds, deposit flows and loan 
prepayments are greatly influenced by general interest rates, economic 
conditions, competition and the restructuring occurring in the banking 
industry. 
 
Current OTS regulations require the Bank to maintain cash and eligible 
investments in an amount equal to at least 5% of customers' accounts and 
short term borrowings to assure its ability to meet demands for 
withdrawals and repayments of short term borrowings.  As of September 
30, 1996 and December 31, 1995, the Bank's liquidity ratio was 7% and 
5%, respectively. 
 
The Company's cash flows are a result of three principal activities: 
operating activities, investing activities and financing activities.  
Net cash received in operating activities, primarily interest on loans 
and investments, less interest paid on deposits and borrowed funds, was 
$3.9 million for the nine months ended September 30, 1996.  Net cash 
received in investing activities was $.4 million for the nine months 
ended September 30, 1996.  Security sales and maturities generated 
$157.7 million while principal payments on mortgage-backed and related 
securities amounted to $37.9 million.  Purchases of investment 
securities and mortgage-backed securities were $160.4 million, and loan 
originations, net of principal payments, were $32.2 million for the nine 
month period.  Net cash used in financing activities amounted to $21.8 
million for the nine months ended September 30, 1996, and was accounted 
for mostly by the decrease in deposits, partially offset by net 
increases in Federal Home Loan Bank ("FHLB") advances and other 
borrowings.  

The Company uses its liquidity to meet its ongoing commitments to fund 

<PAGE> 17
maturing certificates of deposit and deposit withdrawals, repay 
borrowings, fund existing and continuing loan commitments, and pay 
operating expenses.  At September 30, 1996, the Company had commitments 
to originate loans totaling $14.3 million, and its customers had 
approved but unused lines of credit totaling $64.2 million.  The Company 
considers its liquidity and capital resources to be adequate to meet its 
foreseeable short and long-term needs.  The Company expects to be able 
to fund or refinance, on a timely basis, its material commitments and 
long-term liabilities. 

At September 30, 1996, the Bank had core and tangible capital of $46.6 
million or 7.8% of adjusted total assets, which was approximately $28.6 
million and $37.6 million above the minimum capital requirements in 
effect on that date of 3.0% and 1.5%, respectively, of adjusted total 
assets.  On September 30, 1996, the Bank had total risk-based capital of 
$47.9 million (including $46.6 million in core capital), or 17.4% of 
risk-weighted assets of $275.1 million.  This amount was approximately 
$25.9 million above the 8.0% total risk-based capital requirement in 
effect on that date.  
 
SELECTED RATIOS 
--------------- 
(unaudited)                       THREE MONTHS ENDED  NINE MONTHS ENDED
                                  SEPT 30,  SEPT 30,  SEPT 30,  SEPT 30,
                                    1996      1995      1996      1995  
                                  --------------------------------------

Annualized Return on Avg. Equity   -9.45%     7.13%     2.38%    5.03% 
Annualized ROE before SAIF                                             
   special assessment               5.49%     7.13%     7.19%    5.03% 
Annualized Return on Avg. Assets   -0.80%     0.71%     0.21%    0.52% 
Annualized ROA before SAIF                                             
   special assessment               0.46%     0.71%     0.64%    0.52% 

Book Value per Share              $15.76    $15.81    $15.76   $15.81  
Tangible Book Value per Share     $15.23    $15.13    $15.23   $15.13  
Closing Market Price per Share    $16.50    $13.75    $16.50   $13.75  

Earnings per Primary Share       ($  .35)   $  .20    $  .27   $  .50  
EPS before SAIF special                                                
   assessment                     $  .20    $  .20    $  .83   $  .50  

Net Interest Margin                 2.16%     2.55%     2.07%    2.67% 
Non-Performing Assets to Total
   Assets at End of Period          0.14%     0.08%     0.14%    0.08% 
Ratio of Operating Exp. to Avg.
   Total Assets, Annualized         3.54%     1.64%     2.65%    1.91% 
Ratio of Oprtng. Exp. to Avg. Total
   Assets before SAIF assessment    1.59%     1.64%     1.70%    1.91% 
Ratio of Net Int. Inc. to Non-Int.
   Expense, Annualized               .60x     1.59x      .86x    1.35x 
Ratio of Net Int. Inc. to Non-Int.
   Expense before SAIF assessment   1.33x     1.59x     1.19x    1.35x 


<PAGE> 18
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 
------------------------------------------------------------------------
1995
----

GENERAL.  For the three months ended September 30, 1996, the Company 
recorded a net loss of $1,257,000 compared to net income of $824,000 for 
the three months ended September 30, 1995.  During the third quarter of 
1996, the special assessment to recapitalize the SAIF was recorded in 
the amount of $3,070,000, pre tax.  Without the effect of this item, net 
income for the three months ended September 30, 1996 would have been 
$731,000, a decrease of $93,000, or 11% compared to the same quarter of 
1995.  This was primarily the result of a decrease in net interest 
income after provision for possible loan losses of $349,000, partially 
offset by an increase in non-interest income of $159,000, and a decrease 
in taxes of $132,000 (prior to the tax effect on the non-recurring 
item).  Earnings for the period were reduced as a result of the 
restructuring of the balance sheet, which resulted in a yield reduction 
as 15 and 30-year fixed rate investments were replaced by adjustable 
rate securities.  Management intends to move into higher yielding loan 
products over time, with the goal of increasing net interest margin.  
The average net interest rate spread for the three month period ended 
September 30, 1996 was 1.70% compared to 2.06% for the same period in 
1995.
 
INTEREST INCOME.  Interest income increased by $.5 million or 5.1% to 
$11,034,000 for the three month period ended September 30, 1996 as 
compared to $10,497,000 for the same period in 1995, even though the 
yield on average earning assets decreased 45 basis points to 7.15% for 
the quarter ended September 30, 1996 as compared to a 7.60% yield for 
the same period in 1995.  Contributing to the decrease in yield was the 
restructuring of the balance sheet, which resulted in a greater amount 
of adjustable rate mortgage-backed securities, that carried a lower 
yield when purchased, as compared to last year.  These securities will 
gradually be converted to higher yielding loans.  As discussed above, 
the Bank has started a new Commercial Lending Department, and it is 
expected that these types of loans will become an increasing portion of 
the total loan portfolio.
 
INTEREST EXPENSE.  Interest expense increased by $.7 million or 10.6% to 
$7,697,000 for the three month period ended September 30, 1996 as 
compared to $6,961,000 for the same period in 1995.  This was primarily 
the result of an increase in the average amount of FHLB advances and 
borrowed funds, from $43.5 million for the third quarter of 1995, to 
$123.3 for the third quarter of 1996.  The cost of total interest-
bearing liabilities for the three months ended September 30, 1996 was 
5.45% compared to 5.54% for the three months ended September 30, 1995, a 
decrease of 9 basis points.

Interest on deposits decreased $.4 million, from $6.3 million for the 
third quarter of 1995, to $5.9 million for the same quarter of 1996.  
Most of this decrease in cost resulted from a lower average deposit 
balance, particularly in long-term certificates of deposit.  

<PAGE> 19
Interest expense on FHLB advances and borrowed funds was $707,000 for 
the third quarter of 1995, compared to $1.8 million for the third 
quarter of 1996, an increase of $1.1 million.  While the rates paid on 
borrowed funds have declined since last year, average balances were 
higher due to management's reliance on non-deposit borrowings until the 
SAIF insurance fund recapitalization issue was resolved by Congress.
 
PROVISION FOR POSSIBLE LOAN LOSSES.  The provision for possible loan 
losses totaled $300,000 for the three months ended September 30, 1996 
compared to $150,000 for the three months ended September 30, 1995.  
This increase resulted from a decision by management to increase the 
loan loss allowance in light of recent higher write-off experience, 
particularly on credit cards.  The Company, and the banking industry as 
a whole, is beginning to see more credit card charge-offs resulting from 
personal bankruptcies.  For the quarter ended September 30, 1996, 52% of 
all of the Company's charge-offs were related to personal bankruptcies.  
Management regularly conducts a review of its loan portfolio, write-off 
experience and adequacy of allowance. 
 
LOAN LOSS ALLOWANCE ANALYSIS.  The following table sets forth an 
analysis of the Company's allowance for possible loan losses for the 
periods indicated.                          Three Months Ended 
                                         Sept. 30,     Sept. 30, 
                                           1996           1995 
                                         ---------     --------- 
                                          (Dollars in Thousands) 
Balance at beginning of period           $   1,254     $   1,354 
Charge-offs:                                                     
  One-to-four family                           -0-           -0- 
  Consumer                                     251           161 
                                         ---------     --------- 
    Total                                      251           161 
                                         ---------     --------- 

Recoveries:                                                      
  One-to-four family                           -0-           -0- 
  Consumer                                      60            37 
                                         ---------     --------- 
    Total                                       60            37 
                                         ---------     --------- 
 
Net charge-offs                                191           124 
Additions charged to                                             
  operations                                   300           150 
                                         ---------     --------- 
Balance at end of period                 $   1,363     $   1,380 
 
Ratio of net charge-offs during 
  the period to average loans 
  outstanding during the period              0.05%         0.04% 
 
Ratio of allowance to non- 
  performing loans                           1.67x         2.90x 


<PAGE> 20 
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES.  Net 
interest income after provision for possible loan losses decreased 
by $349,000 or 10.3% to $3,037,000 for the three month period ended 
September 30, 1996 as compared to $3,386,000 for the three month period 
ended September 30, 1995.
 
NON-INTEREST INCOME.  Non-interest income increased by $159,000 or 43.3% 
to $526,000 for the three month period ended September 30, 1996 as 
compared to $367,000 for the same period in 1995.  Most of this increase 
was attributable to recognition of loan servicing fees, which increased 
$88,000 or 92.6%, and insurance and annuity commissions which increased 
$46,000 or 131.4% from the same period in 1995.  In addition, gain on 
the sale of securities for the third quarter of 1996 was $54,000, and 
there were no sales in the third quarter of 1995.
 
NON-INTEREST EXPENSE.  Non-interest expense was $5,573,000 for the 
quarter ended September 30, 1996, compared to $2,468,000 for the same 
period in 1995, an increase of $3,105,000 or 125.8%.  In the current 
quarter, a non-recurring expense was recorded for $3,070,000, pre-tax, 
for the estimated amount due for the one-time assessment to recapitalize 
the SAIF insurance fund.  Without giving consideration to this item, 
non-interest expense increased slightly, by $35,000 or 1.4% from the 
third quarter of 1995.  Management expects a reduction in the annual 
deposit insurance premiums of approximately $750,000 beginning in 1997.

INCOME TAX EXPENSE.  Income tax expense decreased $1,214,000 or 263.3%, 
to ($753,000) for the quarter ended September 30, 1996, compared to 
$461,000 for the same period in 1995, due to the effects of the SAIF 
special assessment.
 
 
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
----------------------------------------------------------------------
1995
----

GENERAL.  Net income for the nine months ended September 30, 1996 was 
$984,000 compared to $2,161,000 for the nine months ended September 30, 
1995, a decrease of $1,177,000 or 54.5%.  This decrease included the 
one-time special assessment to recapitalize the SAIF insurance fund 
which was recorded in the third quarter of 1996 in the amount of 
$3,070,000, pre-tax, and a non-recurring expense recorded in the second 
quarter of 1996 in the amount of $148,331, less related taxes.  This 
latter amount represented the final unfunded liability as a result of 
the termination of the Defined Benefit Plan.  These non-recurring 
charges were offset by net gains on the sales of securities of 
approximately $2.5 million, or $1.5 million after related taxes, 
recorded during the first quarter of 1996.  

In the second quarter of 1995, there were two non-recurring items 
recorded.  They were $271,174 for the estimated unfunded liability of 
the Defined Benefit Plan, and $123,540 for compensation to former 
officers, less related taxes.  The amount recorded in 1996 for the 
Defined Benefit Plan was significantly higher than anticipated due to a 
decrease in interest rates between the termination announcement date of 

<PAGE> 21
January 5, 1995, and the date the final distribution was made on May 29, 
1996.  

Without the effect of these non-recurring items, net income for the nine 
months ended September 30, 1996 would be $3,063,000, compared to 
$2,418,000 for the same period of 1995, an increase of $645,000, or 
26.7%.  This is primarily the result of gains on the sales of securities 
and increases in other non-interest income of $2,874,000, offset by a 
decrease in net interest income after provision for possible loan losses 
of $1,720,000, an increase in non-interest expenses of $160,000 (prior 
to the non-recurring items in both years as discussed above,) and an 
increase in taxes of $349,000 (prior to the tax effect on the non-
recurring items).  

Earnings for the period were reduced as a result of the restructuring of 
the balance sheet, which resulted in a yield reduction as 15 and 30-year 
fixed rate investments were replaced by adjustable rate products.  
Management intends to move into higher yielding loan products over time, 
thereby increasing net interest margin.
 
INTEREST INCOME.  Interest income increased by $2.1 million or 7.1% to 
$32,219,000 for the nine month period ended September 30, 1996 as 
compared to $30,078,000 for the same period in 1995, even though the 
yield on average earning assets decreased 35 basis points to 7.08% for 
the first nine months of 1996, as compared to a 7.43% yield for the same 
period in 1995.  Contributing to the decrease in yield was the 
restructuring of the balance sheet, which resulted in a greater amount 
of adjustable rate mortgage-backed securities as compared to last year.  
These securities will gradually be converted to higher yielding loans.  
As discussed previously, the Bank has started a new Commercial Lending 
Department, and it is expected that these types of loans will become an 
increasing portion of the total loan portfolio.
 
INTEREST EXPENSE.  Interest expense increased by $3.5 million or 18.0% 
to $22,781,000 for the nine month period ended September 30, 1996 as 
compared to $19,302,000 for the same period in 1995.  This increase can 
be attributed to two factors.  The first factor is the special 7.8% 
Certificate of Deposit promotion, which was held in March of 1995 and 
affected the second and third quarters of 1995, but only a small portion 
of the first quarter of 1995.  The other factor was an increase in the 
average amount of borrowed money, from $40.2 million for the first nine 
months of 1995, to $107.6 for the same period of 1996.  The cost of 
total interest-bearing liabilities for the nine months ended September 
30, 1996 was 5.50% compared to 5.33% for the nine months ended September 
30, 1995, an increase of 17 basis points.

Interest on deposits increased $.6 million, from $17.4 million for the 
first nine months of 1995, to $18.0 million for the first nine months of 
1996.  This increase was primarily the result of the March of 1995 
certificate of deposit promotion.  

Interest expense on FHLB advances and borrowed funds was $1.9 million 
for the nine months ended September 30, 1995 compared to $4.7 million 
for the same period in 1996, an increase of $2.8 million or 147.4%.  
While the rates paid on borrowed funds have declined since last year, 

<PAGE> 22
the volume of borrowed money increased due to management's reliance on 
non-deposit borrowings until the SAIF insurance fund recapitalization 
issue was resolved by Congress.

PROVISION FOR POSSIBLE LOAN LOSSES.  The provision for possible loan 
losses totaled $832,000 for the nine months ended September 30, 1996 
compared to $450,000 for the nine months ended September 30, 1995.  Of 
this $382,000, or 84.9% increase, $52,000 was related to new commercial 
real estate loans, for which the Company establishes a provision for 
possible losses at the time the loans are recorded.  The balance of this 
increase resulted from a decision by management to increase the loan 
loss allowance in light of recent higher write-off experience, 
particularly on credit cards.  The Bank, and the banking industry as a 
whole, is beginning to see more credit card charge-offs resulting from 
personal bankruptcies.  For the nine months ended September 30, 1996, 
41% of all of the charge-offs experienced by the Company  were related 
to personal bankruptcies.  Management regularly conducts a review of 
its loan portfolio, write-off experience and adequacy of allowance. 
 
LOAN LOSS ALLOWANCE ANALYSIS.  The following table sets forth an 
analysis of the Company's allowance for possible loan losses for the 
periods indicated.                           Nine Months Ended   
                                         Sept. 30,     Sept. 30, 
                                           1996           1995 
                                         ---------     --------- 
                                          (Dollars in Thousands) 
Balance at beginning of period           $   1,379     $   1,520 
Charge-offs:                                                     
  One-to-four family                           -0-           -0- 
  Consumer                                     976           672 
                                         ---------     --------- 
    Total                                      976           672 
                                         ---------     --------- 

Recoveries:                                                      
  One-to-four family                           -0-           -0- 
  Consumer                                     128            81 
                                         ---------     --------- 
    Total                                      128            81 
                                         ---------     --------- 
 
Net charge-offs                                848           591 
Additions charged to                                             
  operations                                   832           450 
                                         ---------     --------- 
Balance at end of period                 $   1,363     $   1,379 
 
Ratio of net charge-offs during 
  the period to average loans 
  outstanding during the period              0.25%         0.16% 
 
Ratio of allowance to non- 
  performing loans                           1.67x         2.90x 
 
<PAGE> 23
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES.  Net 
interest income after provision for possible loan losses decreased by 
$1,720,000 or 16.7% to $8,606,000 for the nine month period ended 
September 30, 1996 as compared to $10,326,000 for the nine month period 
ended September 30, 1995.  The average net interest rate spread for the 
nine months ended September 30, 1996 was 1.58% compared to 2.11% for the 
same period in 1995. 
 
NON-INTEREST INCOME.  Non-interest income increased by $374,000 or 40.8% 
to $1,291,000 for the nine month period ended September 30, 1996 as 
compared to $917,000 for the same period in 1995, prior to net gains on 
the sale of securities from the first quarter of 1996 of $2,500,000.  
The six months ended June 30, 1995 produced a net loss on the sale of 
securities of $52,000.  Most of the balance of the increase in non-
interest income was attributable to recognition of loan servicing fees, 
which increased $239,000 or 72.6%, and insurance and annuity 
commissions, which increased $79,000 or 94.1% from the same period in 
1995.  Deposit related fees and charges also increased $47,000 or 12.8%, 
as there has been a general increase in fees charged for various Bank 
services since last year.

NON-INTEREST EXPENSE.  Non-interest expense was $10,980,000 for the nine 
months ended September 30, 1996, compared to $7,997,000 for the same 
period in 1995, an increase of $2,983,000 or 37.3%.  In 1995, there were 
two non-recurring items recorded.  They were $271,174 for the estimated 
unfunded liability of the Defined Benefit Plan, and $123,540 for 
compensation to former officers, less related taxes.  During the second 
quarter of 1996, a non-recurring expense was recorded for $148,331, 
representing the final unfunded liability as a result of the termination 
of the Defined Benefit Plan.  The final determination was significantly 
higher than anticipated due to a decrease in interest rates between the 
termination announcement date of January 5, 1995, and the date the final 
distribution was made on May 29, 1996.  In the third quarter of 1996, 
$3,070,000 was recorded for the estimated one-time assessment to 
recapitalize the SAIF insurance fund, at 65.7 basis points.  Without 
giving consideration to these items, non-interest expense increased 
$160,000 or 2.1%, from $7,602,000 for the first nine months of 1995, to 
$7,762,000 for the same period of 1996.  Most of this increase can be 
attributed to the operation of the Schaumburg location, opened in March 
of 1995.

INCOME TAX EXPENSE.  Income tax expense decreased $652,000 or 60.1%, to 
$433,000 for the nine months ended September 30, 1996, compared to 
$1,085,000 for the same period in 1995, due to the decrease in income as 
a result of the SAIF special assessment.


<PAGE> 24
CHANGE IN ACCOUNTING PRINCIPLES AND OTHER REGULATORY ISSUES 
----------------------------------------------------------- 

SFAS No. 122 
 
On May 12, 1995, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standard No. 122 ("SFAS 122"), 
"Accounting for Mortgage Servicing Rights."  This statement provides 
for capitalization of Mortgage Servicing Rights ("MSRs") when mortgage 
loans (whether originated or purchased) are subsequently sold with 
the MSRs retained.  The statement applies to MSRs resulting from 
mortgage loans only, and is effective for fiscal years which began 
after December 15, 1995.  Management anticipates that this statement 
will not have a material impact on the Company's earnings or financial 
condition. 
 
SFAS No. 123 
 
In October of 1995, the Financial Accounting Standards Board 
issued Statement of Financial Accounting Standard No. 123 (SFAS 123) 
"Accounting for Stock Based Compensation."  SFAS 123 encourages 
entities to use a fair value based method to account for stock based 
compensation plans.  If such a fair value method is not adopted, 
entities must disclose the proforma effect on net income and on 
earnings per share had the accounting been adopted.  The statement 
applies to years beginning after December 15, 1995, and management 
anticipates that it will not have a material effect on the Company.

SFAS No. 125

In June of 1996, the Financial Accounting Standards Board released 
Statement of Financial Accounting Standard No. 125 (SFAS 125) 
"Accounting for Transfers and Extinguishments of Liabilities."  SFAS 125 
provides accounting and reporting standards for transfers and servicing 
of financial assets and extinguishmment of liabilities.  SFAS applies 
after December 31, 1996 and early or retroactive application is not 
permitted.  Management anticipates that this statement will not have a 
material effect on the Company.


RECENT REGULATORY DEVELOPMENTS
------------------------------

On September 30, 1996, President Clinton signed into law the "Economic 
Growth and Regulatory Paperwork Reduction Act of 1996" (the "Regulatory 
Reduction Act").  Subtitle G of the Regulatory Reduction Act consists of 
the "Deposit Insurance Funds Act of 1996" (the "DIFA").  The DIFA 
provides for a one-time special assessment on each depository 
institution holding deposits as of March 31, 1995, which are subject to 
assessment by the FDIC for the Savings Association Insurance Fund (the 
"SAIF") in an amount which, in the aggregate, will increase the 
designated reserve ratio of the SAIF (i.e., the ratio of the insurance 
reserves of the SAIF to total SAIF-insured deposits) to 1.25% on October 
1, 1996.  Subject to certain exceptions, the special assessment is 

<PAGE> 25
payable in full on November 27, 1996.  As a SAIF member, the Bank is 
subject to the special assessment.

On October 8, 1996, the FDIC adopted a final regulation implementing the 
SAIF special assessment.  In that regulation, the FDIC set the special 
assessment rate at .657% of SAIF-assessable deposits held on March 31, 
1995.  The FDIC has notified the Bank that the dollar amount of the 
special assessment payable by the Bank is estimated to be $3,070,000.  
As a result, the Bank has taken a charge against earnings for the 
quarter ended September 30, 1996, in the amount of $3,070,000.  As 
discussed below, however, the recapitalization of the SAIF resulting 
from the special assessment should significantly reduce the Bank's 
ongoing deposit insurance expense.

In light of the recapitalization of the SAIF pursuant to the special 
assessment authorized by the DIFA, the FDIC, on October 8, 1996, issued 
a proposed rule that would reduce regular semi-annual SAIF assessments 
from the current range of .23% - .31% of deposits to a range of 0% - 
 .27% of deposits.  Under the proposal, the new rates would be effective 
for the Bank on January 1, 1997.  From October 1, 1996 through December 
31, 1996, SAIF-assessable institutions, such as the Bank would, under 
the proposal, be assessed at rates ranging from .18% - .27% of deposits 
which represents the amount the FDIC calculates as necessary to cover 
the interest due for that period on outstanding obligations of the 
Financing Corporation (the "FICO"), discussed below.  Because SAIF-
assessable institutions have already been assessed at current rates 
(i.e., .23% - .31% of deposits) for the semi-annual period ending 
December 31, 1996, the proposal contemplates that the FDIC will refund 
the amount collected from such institutions for the period from October 
1, 1996 through December 31, 1996 which exceeds the amount due for that 
period under the reduced assessment schedule.  Assuming the proposal is 
adopted as proposed, and assuming the Bank retains its current risk 
classification under the FDIC's risk-based assessment system, the 
deposit insurance assessments payable by the Bank will be reduced 
significantly effective January 1, 1997, to the same level currently 
paid by the Bank's BIF-member competitors.  

The DIFA also provides for a merger of the BIF and SAIF on January 1, 
1999.  To facilitate the merger of the BIF and SAIF, the DIFA directs 
the Treasury Department to conduct a study on the development of a 
common charter and to submit a report, along with appropriate 
legislative recommendations, to the Congress by March 31, 1997.  

In addition to the DIFA, the Regulatory Reduction Act includes a number 
of statutory changes designed to eliminate duplicative, redundant or 
unnecessary regulatory requirements.  Further, the Regulatory Reduction 
Act removes the percentage of assets limitations on the aggregate amount 
of credit card and education loans that may be made by a savings 
association, such as the Bank; increases from 10% to 20% of total assets 
the aggregate amount of commercial loans that a savings association may 
make, provided that any amount in excess of 10% of total assets 
represents small business loans; allows education, small business and 
credit card loans to be counted in full in determining a savings 
association's compliance with the qualified thrift lender ("QTL") 
test; and provides that a savings association may be deemed to meet the 

<PAGE> 26
QTL test if is qualifies as a domestic building and loan association 
under the Internal Revenue Code.  The Regulatory Reduction Act also 
clarifies the liability of a financial institution when acting as a 
lender or in a fiduciary capacity, under the federal environmental 
clean-up laws.  Although the full impact of the Regulatory Reduction Act 
on the operations of the Company and the Bank cannot be determined at 
this time, management believes that the legislation will reduce 
compliance costs to some extent and allow the Company and the Bank 
somewhat greater operating flexibility.  

On August 10, 1996, President Clinton signed into law the Small Business 
Job Protection Act of 1996 (the "Job Protection Act").  Among other 
things, the Job Protection Act eliminates the percent-of-taxable-income 
("PTI") method for computing additions to a savings association's tax 
bad debt reserves for tax years beginning after December 31, 1995, and 
requires all savings associations that have used the PTI method to 
recapture, over a six year period, all or a portion of their tax bad 
debt reserves added since the last taxable year beginning before 
January 1, 1988.  The Job Protection Act allows a savings association 
to postpone the recapture of bad debt reserves for up to two years if 
the institution meets a minimum level of mortgage lending activity 
during those years.  The Bank believes that it will engage in sufficient 
mortgage lending activity during 1996 and 1997 to be able to postpone 
any recapture of its bad debt reserves until 1998.  As a result of these 
provisions of the Job Protection Act, the Bank will determine additions 
to its tax bad debt reserves using the same method as a commercial bank 
of comparable size, and, if the Bank were to decide to convert to a 
commercial bank charter, the changes in the tax bad debt recapture rules 
enacted in the Job Protection Act should make such conversion less 
costly.



<PAGE> 27
                        PART II - OTHER INFORMATION 
 
                         FIRSTFED BANCSHARES, INC. 
 
ITEM 1.  LEGAL PROCEEDINGS 
 
         There are no material pending legal proceedings to which 
         the Company or any of its subsidiaries is a party other 
         than ordinary routine litigation incidental to their 
         respective businesses. 
 
ITEM 2.  CHANGES IN SECURITIES 
 
         None 
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES 
 
         None 
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  
 
         None 
 
ITEM 5.  OTHER INFORMATION 
 
         None 
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K 

         EXHIBITS 
         27.1 Financial Date Schedule

         REPORTS ON FORM 8-K
             A report on Form 8-K was filed on August 27, 1996, to 
             report under Item 5 that the Company completed a stock 
             repurchase program, announced a new stock repurchase 
             program, and declared a regular quarterly dividend to the 
             stockholders of FirstFed Bancshares, Inc. Common Stock.
 
 
<PAGE>  28 
                                 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. 
 
                                          FIRSTFED BANCSHARES, INC. 
 
 
Date: November 14, 1996              By: /s/ Larry G. Gillie
      -----------------                 --------------------------- 
                                             Larry G. Gillie 
                                             President and 
                                             Chief Executive Officer 
                                                                      
                                                                     
Date: November 14, 1996              By: /s/ Paul A. Larsen
      -----------------                 --------------------------- 
                                             Paul A. Larsen 
                                             Senior Vice President, 
                                             Treasurer and 
                                             Chief Financial Officer