Exhibit 10.2


PRESS RELEASE
October 26, 2006, 9:00 a.m.
For Immediate Release


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



           FIRST FEDERAL BANKSHARES, INC. DECLARES INCREASED DIVIDEND
                                       AND
                 ANNOUNCES EXTENSION OF STOCK REPURCHASE PROGRAM


Sioux City, Iowa. The Board of Directors of First Federal Bankshares,  Inc. (the
"Company") (Nasdaq Global Market - "FFSX") declared a quarterly cash dividend of
$0.105 per share for the first  quarter of the 2007  fiscal  year.  This is a 5%
increase  from  the  dividend  of $0.10  from the  previous  nine  quarters  and
represents an annualized  dividend  yield of 1.9% based on  yesterday's  closing
price of $22.04. The dividend is payable on November 30, 2006 to stockholders of
record on November 16, 2006.

The Board of Directors of the Company also announced a one-year extension of the
stock  repurchase  program  authorized in November  2005. Of the 346,000  shares
authorized, 120,505 shares have been repurchased.

The  Company's  common  stock is traded on the NASDAQ  Global  Market  under the
symbol FFSX. The Company is  headquartered in Sioux City, Iowa and is the parent
company of First  Federal  Bank.  The Bank  operates  eight offices in northwest
Iowa, an office in South Sioux City, Nebraska, and five offices in central Iowa.