In his first two and a half months as the chief executive of First Federal Bankshares Inc. in Sioux City, Iowa, Levon Mathews has cut expenses by trimming jobs and selling a branch.

Now he needs to improve the capital position of his company's Vantus Bank. Unrealized losses on trust-preferred securities and problems with construction loans have led to an agreement with regulators to fortify the thrift's balance sheet. Mathews is considering shrinking the thrift to help it comply.

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