** **

** SECURITIES AND EXCHANGECOMMISSION**

Washington, D.C. 20549

 **FORM 10 - Q**

**( X ) QUARTERLY REPORT UNDERSECTION 13 OR 15 (d) TO THE SECURITIES EXCHANGE ACT OF 1934**

For the quarterly period ended            **September 30, 2002**

** (  ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) TO THE EXCHANGEACT**

For the transition periodfrom  ____________ to  _____________

CommissionFile No:  0 - 14535

**                            CITIZENS BANCSHARES CORPORATION                                      **                                       (Name of small business issuer in its charter)

**             Georgia                                                                   58 - 1631302                      **(State or other jurisdiction of                                      (IRS Employer Identification No.)   incorporation or organization)

**175 John Wesley Dobbs Avenue,N.E., Atlanta, Georgia                   30303              **(Addressof principal executive office)                                                (Zip Code)

Registrant'stelephone number, including area code:           **(404) 659 - 5959**

Checkwhether the issuer (1) filed all reports required to be filed by Section 13 or15 (d) of the Exchange Act during the past 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the 90 days.   Yes  X       No       . 

Statethe number of shares outstanding for each of the issuer's classes of commonequity as of the latest practicable date: 1,989,069 shares of Common Stock,$1.00 par value and 90,000 shares of Non-Voting Common Stock, $1.00 par valueoutstanding on November 11, 2002.  

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Part1.   FINANCIAL INFORMATION

Item1.    Financial statements

| **CITIZENS BANCSHARES CORPORATION  AND SUBSIDIARIES**                           |                                                                                                                                                                                             |
|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                 |                                                                                                                                                                                             |  |
| **CONSOLIDATED BALANCE SHEETS**                                                 |                                                                                                                                                                                             |  |
| **SEPTEMBER 30, 2002 AND DECEMBER 31,  2001**                                   |                                                                                                                                                                                             |  |
| **(In thousands, except share data)**                                           |                                                                                                                                                                                             |  |
|                                                                                 |                                                                                                                                                                                             |  |
| **ASSETS**                                                                      | **2002**                                                                                                                                                                                    | **2001** |
|                                                                                 | ** (Unaudited)**                                                                                                                                                                       |   |
|    Cash and due from banks                                                 |    $             10,194                                                                                               |    $         12,877  |
|    Federal funds sold                                                      |                        -                        |                1,560  |
|    Interest-bearing deposits with banks                                    |                    5,240                                                                     |              37,258  |
|    Certificates of deposit                                                 |                    3,095                                                                     |                3,095  |
|    Investment securities available for sale, at fair value                 |                  73,504                                                                                |              61,579  |
|    Investment securities held to maturity, at cost                         |                    2,376                                                                     |                2,676  |
|    Other investments                                                       |                    1,706                                                                     |                1,511  |
|    Loans held for sale                                                     |                        -                        |                    422  |
|    Loans receivable, net                                                   |                154,587                                                                                           |            155,969  |
|    Premises and equipment, net                                             |                    6,168                                                                     |                6,111  |
|    Cash surrender value of life insurance                                  |                    6,795                                                                     |                7,017  |
|    Other assets                                                            |                    3,903                                                                     |                4,425  |
|                                                                                 |                                  |                             |
|       Total assets                                     |    $          267,568                                                                                                                |    $      294,500  |
|                                                                            |                                                                                                                                                                                             |  |
|                                                                                 |                                                                          |                      |
| **LIABILITIES AND STOCKHOLDERS'  EQUITY**                                       |                                                                                                                                                                                             |  |
|                                                                                 |                                  |                             |
| LIABILITIES:                                                                    |                                  |                             |
|    Noninterest-bearing deposits                                            |    $             49,626                                                                                               |    $         51,801  |
|    Interest-bearing deposits                                               |                175,640                                                                                           |            206,000  |
|                                                                                 |                                  |                             |
|       Total deposits                                   |                225,266                                                                                           |             257,801  |
|                                                                                 |                                                                                                                                                                                             |  |
|    Accrued expenses and other liabilities                                  |                    2,948                                                                     |                3,656  |
|    Notes payable                                                           |                        740                                               |                1,270  |
|    Trust preferred securities                                              |                    5,000                                                                     |                    -       |
|    Advances from Federal Home Loan Bank                                    |                  10,000                                                                                |              10,000  |
|                                                                                 |                                                                                                                                                                                             |  |
|      Total liabilities                                           |                243,954                                                                                           |            272,727  |
|                                                                                 |                                  |                             |
| COMMITMENTS AND CONTINGENCIES                                                   |                                  |                             |
|                                                                                 |                                  |                             |
| STOCKHOLDERS' EQUITY:                                                           |                                  |                             |
|    Common stock - $1 par value; 5,000,000 shares                           |                                  |  |
|      authorized; 2,230,065 shares issued and outstanding         |                    2,230                                                                     |                2,230  |
|    Nonvoting common stock - $1 par value; 5,000,000 shares                 |                                                                                                                                                                                             |  |
|      authorized; 90,000 issued and outstanding                   |                          90                                    |                      90  |
|    Additional paid-in capital                                              |                    7,445                                                                     |                7,445  |
|    Retained earnings                                                       |                  14,564                                                                                |              13,823  |
|    Treasury stock, 240,996 and 191,852 shares at cost at              |                                                                                                                                                                                             |  |
|      September 30, 2002 and December 31, 2001, respectively |                   (2,046)                                                                              |               (1,665) |
|    Accumulated other comprehensive income (loss), net of taxes             |                    1,331                                                                     |                  (150) |
|                                                                                 |                                  |                             |
|       Total stockholders' equity                       |                  23,614                                                                                |              21,773  |
|                                                                                 |                                                                          |                      |
| Total liabilities and stockholders'  equity                                     |    $          267,568                                                                                                                |    $      294,500  |
|                                                                            |                                                                                                                                                                                             |  |
|                                                                                 |                                                                                                                                                                                             |  |
| See notes to consolidated financial  statements.                                |                                                                                                                                                                                             |  |
|                                                                                 |                                                                                                                                                                                             |  |

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| **CITIZENS BANCSHARES CORPORATION  AND SUBSIDIARIES**            |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |
|------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|
|                                                                  |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
| **CONSOLIDATED STATEMENTS OF  OPERATIONS**                       |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
| **(Unaudited  - In thousands, except per share data)**      |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
|                                                                  |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
|                                                             | **Three Months Ended September 30,**                                                                                              | **Nine Months Ended September 30,**                                                                                       |
|                                                             | **2002**                                                                                                                               | **2001**                                                                                                                       | **2002**                                                                                                                             | **2001** |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Interest income:                                                 |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
|    Loans, including fees                                    |    $       3,178                                                                               |    $      3,675                                                                             |    $      9,389                                                                                   |    $    11,477  |
|    Investment securities:                                   |                                                                                                                                        |                                                                                                                                |                        |                          |
|      Taxable                                      |               785                                                |              564                                              |           2,331                                                                    |            1,868  |
|      Tax-exempt                                   |               247                                                |              153                                              |               702                                              |               429  |
|    Federal funds sold                                       |                -                   |                    9                 |                   7                        |                 27  |
|    Interest-bearing deposits                                |                  43                               |              116                                              |               285                                              |               472  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
|       Total interest income             |            4,253                                                                |           4,517                                                              |         12,714                                                                               |         14,273  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Interest expense:                                                |                                                                                                                                        |                                                                                                                                |                        |                        |
|    Deposits                                                 |               981                                                |           1,602                                                              |           3,473                                                                    |            5,293  |
|    Other borrowings                                         |               247                                                |              175                                              |               572                                              |               487  |
|       Total interest expense            |            1,228                                                                |           1,777                                                              |           4,045                                                                    |            5,780  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
|       Net interest income               |            3,025                                                                |           2,740                                                              |           8,669                                                                    |            8,493  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Provision for loan losses                                        |               190                                                |              670                                              |               590                                              |            1,730  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Net interest income after provision  for loan losses             |            2,835                                                                |           2,070                                                              |           8,079                                                                    |            6,763  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Noninterest income:                                              |                          |                       |                        |                        |
|      Service charges on deposit accounts          |               879                                                |              974                                              |           2,624                                                                    |            2,830  |
|      Gain on sales of securities                  |                  76                               |                 54                             |               319                                              |               978  |
|      Gain on sales of assets                      |                    2                    |               -                 |                   2                        |               390  |
|      Loan origination fees                        |                  59                               |              464                                              |                179                                             |            1,397  |
|      Other operating income                       |               276                                                |              242                                              |               982                                              |            1,135  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
|       Total noninterest income          |            1,292                                                                |           1,734                                                              |           4,106                                                                    |            6,730  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Noninterest expense:                                             |                          |                       |                        |                        |
|    Salaries and employee benefits                           |            1,902                                                                |           1,892                                                              |           5,412                                                                    |            5,752  |
|    Net occupancy and equipment                              |               545                                                |              603                                              |           1,652                                                                    |            1,932  |
|    Other operating expenses                                 |            1,322                                                                |           2,104                                                              |           3,949                                                                    |            4,899  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
|       Total noninterest expense         |            3,769                                                                |           4,599                                                              |         11,013                                                                               |         12,583  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
|       Income (loss) before income taxes |               358                                                |             (795)                                                       |           1,172                                                                    |               910  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Income tax expense                                               |                  27                               |             (324)                                                       |                 90                                   |               144  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
|       Net income (loss)                 |    $          331                                                               |    $       (471)                                                                            |    $      1,082                                                                                   |    $          766  |
|                                                             |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Net income (loss) per share - basic  and diluted                 |    $         0.16                                                                    |    $      (0.22)                                                                                 |    $        0.51                                                                        |    $         0.35  |
|                                                             |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
|                                                             |                                                                                                                                   |                                                                                                                           |                                                                                                                                 |   |
| Weighted average outstanding shares  - basic and diluted         |            2,092                                                                |           2,175                                                              |           2,109                                                                    |            2,183  |
|                                                             |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
|                                                                  |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
| See notes to consolidated financial  statements.                 |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |
|                                                                  |                                                                                                                                        |                                                                                                                                |                                                                                                                                      |  |

 

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| **CITIZENS BANCSHARES CORPORATION AND  SUBSIDIARIES**                              |    |                                                                                                |    |                                          |
|------------------------------------------------------------------------------------|---------|-----------------------------------------------------------------------------------------------------|---------|-----------------------------------------------|
| **CONSOLIDATED STATEMENTS OF CASH  FLOWS**                                         |    |                                                                                                |    |                                          |
| **FOR THE NINE MONTHS ENDED SEPTEMBER  30, 2002 AND 2001**                         |         |                                                                                                     |         |                                               |
| **(Unaudited - In thousands)**                                                     |         | 2002                                                                                                |         | 2001                                          |
| **OPERATING ACTIVITIES:**                                                          |         |                                                                                                     |         |                                               |
|     Net income                                                           |  $ | 1,082                                                                                          |  $ |  766                                |
|     Adjustments to reconcile net income                                  |         |                                                                                                |    |                                          |
|      to net cash provided by (used in) operating activities:   |         |                                                                                                |    |                                          |
|        Provision for loan losses                     |         |      590                                                                   |    | 1,730                                    |
|        Depreciation and amortization                 |         |  706                                                                                      |    |   887                               |
|        Amortization (accretion), net                 |         |    12                                                                           |    |  65                                 |
|        Gain on sale of assets and securities         |         |  (319)                                                                                         |    |  (1,368)                                 |
|    Change in loans held for sale                                              |         |    422                                                                               |    |     (775)                      |
|    Change in other assets                                                     |         | (166)                                                                                               |    |       295  |
|    Change in accrued expenses and other liabilities                           |         | (707)                                                                                               |    |    (847)                            |
|                                                                                    |         |                                                                                                     |    |                                               |
|       Net cash provided by (used in) operating activities |         | 1,620                                                                                          |    |  753                                |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
| **INVESTING ACTIVITIES:**                                                          |         |                                                                                                |    |                                          |
|     Proceeds from maturities of investment securities held to maturity   |         |  300                                                                                      |    |  556                                |
|     Proceeds from maturities of investment securities available for sale |         | 10,813                                                                                         |    |  55,280                             |
|     Purchases of investment securities available for sale                |         | (38,359)                                                                                            |    |  (42,798)                                |
|     Proceeds from sale of investment securities available for sale       |         | 18,027                                                                                         |    |    -                 |
|     Purchases of certificates of deposits                                |         |  -                                                                                   |    |  (2,100)                                 |
|     Net increase in other investments                                    |         | (195)                                                                                               |    |  -                             |
|     Net change in loans                                                  |         |  861                                                                                      |    |  (1,589)                                 |
|     Increase (decrease) in cash surrender value of life insurance        |         |  222                                                                                      |    |     (857)                      |
|     Proceeds from sale of premises and equipment                         |         |  -                                                                                   |    | 346                                      |
|     Purchases of premises and equipment                                  |         | (763)                                                                                               |    |  (573)                                   |
|     Proceeds from sale of property held for sale                         |         |  -                                                                                   |    | 509                                      |
|     Net change in interest bearing deposits with banks                   |         |  32,018                                                                                   |    | 5,483                                    |
|     Net change in federal funds sold                                     |         |    1,560                                                                             |    |  (360)                                   |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
|      Net cash provided by investing activities                 |         |  24,484                                                                                   |    |  13,897                             |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
| **FINANCING ACTIVITIES:**                                                          |         |                                                                                                |    |                                          |
|     Net change in noninterest-bearing deposits                           |         |   (2,175)                                                                                      |    |  (4,509)                                 |
|     Net change in interest-bearing deposits                              |         |  (30,360)                                                                                      |    |  (10,854)                                |
|     Purchase of treasury stock                                           |         |       (381)                                                                |    |       (345)          |
|     Proceeds from issuance of trust preferred securities                 |         |      5,000                                                                 |    |  -                             |
|     Principal payment on debt                                            |         |      (530)                                                                      |    |  (200)                                   |
|     Borrowings from line of credit                                       |         |                 -   |    |  1,020                              |
|     Dividends paid                                                       |         |         (341)                                                    |    |  (375)                                   |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
|        Net cash used in financing activities         |         |    (28,787)                                                                               |    |  (15,263)                                |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
|        Net change in cash and due from banks         |         |      (2,683)                                                               |    |    (613)                            |
|                                                                                    |         |                                                                                                |    |                                          |
| Cash and due from banks at  beginning of period                                    |         |      12,877                                                                |    |  12,118                             |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
| Cash and due from banks at end of  period                                          |  $ |      10,194                                                                |  $ |  11,505                             |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
| **Supplemental disclosures of cash  paid during the period for:**                  |         |                                                                                                |    |                                          |
|     Interest                                                             |  $ |        4,714                                                |  $ |    6,402                       |
|                                                                                    |         |                                                                                                     |    |                                               |
|     Income taxes                                                         |  $ | 290                                                                                            |  $ |  595                                |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
| **Supplemental disclosures of noncash  transactions:**                             |         |                                                                                                |    |                                          |
| Change in unrealized gain (loss) on  investment securities available               |         |                                                                                                |    |                                          |
|     for sale, net of taxes                                          |  $ | 1,481                                                                                          |  $ |  266                                |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
| Securities held to maturity  transferred to available for sale                     |  $ |  -                                                                                   | $       |  1,199                              |
|                                                                                    |         |                                                                                                     |    |                                               |
|                                                                                    |         |                                                                                                |    |                                          |
| See notes to consolidated financial  statements.                                   |         |                                                                                                     |         |                                               |

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**CITIZENS BANCSHARES CORPORATIONAND SUBSIDIARIESNotes to the ConsolidatedFinancial StatementsSeptember 30, 2002**(Unaudited)

**SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES**

**Basis of Presentation**

CitizensBancshares Corporation (the "Company") is a holding company that provides a fullrange of commercial banking and mortgage brokerage services to individual andcorporate customers in metropolitan Atlanta and Columbus, Georgia through itswholly owned subsidiaries, Citizens Trust Bank (the "Bank") and Citizens TrustBank Mortgage Services, Inc. ("Mortgage Services").   The Bank operates under a state charter and serves its customersthrough 11 full-service branches in metropolitan Atlanta and one full-servicebranch in Columbus, Georgia.

Theaccompanying unaudited consolidated financial statements have been preparedpursuant to the rules and regulations for reporting on Form 10-Q.  Accordingly, certain disclosures required bygenerally accepted accounting principles are not included herein. These interimstatements should be read in conjunction with the financial statements andnotes thereto included in the Company's latest Annual Report on Form 10-KSBfiled with the Securities and Exchange Commission for the year ended December31, 2001.  The results of operations forthe interim periods reported herein are not necessarily representative of theresults expected for the full 2002 fiscal year.

Theconsolidated financial statements of the Company as of September 30, 2002 andfor the three and nine month periods ended September 30, 2002 and 2001 areunaudited.  In the opinion ofmanagement, all adjustments necessary for a fair presentation of the financialposition and results of operations and cash flows for the three month and ninemonth periods have been included.  Alladjustments are of a normal recurring nature. All significant intercompany accounts and transactions have beeneliminated in consolidation.

**ACCOUNTING POLICIES**

TheCompany's consolidated financial statements have been prepared in accordancewith accounting principles generally accepted in the United States of America("GAAP"), which often require the judgment of management in the selection andapplication of certain accounting principles and methods.  Reference is made to the accounting policiesof the Company described in the notes to the consolidated financial statementscontained in the Company's Annual Report on Form 10-KSB for the year endedDecember 31, 2001.  The Company hasfollowed those policies in preparing this report.  Management believes that the quality and reasonableness of itsmost critical policies enable the fair presentation of its financial positionand of its results of operations.

Inresponse to the Securities and Exchange Commission's ("SEC") Release No.33-8040, Cautionary Advice Regarding Disclosure About Critical AccountingPolicies, the Company has identified the following as the most criticalaccounting policies upon which its financial status depends.  The critical policies were determined byconsidering accounting policies that involve the most complex or subjectivedecisions or assessments.  The Company'smost critical accounting policies relate to:

 

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> 
**InvestmentSecurities**- TheCompany classifies investments in one of three categories based on management'sintent upon purchase: held to maturity securities which are reported atamortized cost, trading securities which are reported at fair value withunrealized holding gains and losses included in earnings, and available forsale securities which are recorded at fair value with unrealized holding gainsand losses included as a component of accumulated other comprehensiveincome.  The Company had no investmentsecurities classified as trading securities during 2002 or 2001.

Premiums and discounts on available for sale andheld to maturity securities are amortized or accreted using a method whichapproximates a level yield. 

Gains and losses on sales of investment securitiesare recognized upon disposition, based on the adjusted cost of the specificsecurity.  A decline in market value ofany security below cost that is deemed other than temporary is charged toearnings resulting in the establishment of a new cost basis for the security.

**Loans**  -Loans are reported at principal amounts outstanding less unearned income andthe allowance for loan losses.  Interestincome on loans is recognized on a level‐yield basis. Loan fees andcertain direct origination costs are deferred and amortized over the estimatedterms of the loans using the level-yield method.  Discounts on loans purchased are accreted using the level-yieldmethod over the estimated remaining life of the loan purchased.

**Allowancefor Loan Losses** - The Company provides for estimated losses on loansreceivable when any significant and permanent decline in value occurs.  These estimates for losses are based on notonly on individual assets and their related cash flow forecasts, sales values,independent appraisals, but also the volatility of certain real estate markets,and the concern for disposing of real estate in distressed markets.  For loans that are pooled for purposes ofdetermining necessary provisions, estimates are based on loan types, history ofcharge-offs, and other delinquency analyses. Therefore, the value used to determine the provision for losses issubject to the reasonableness of these estimates.  The adequacy of the allowance for loan losses is reviewed on amonthly basis by management and the Board of Directors.  On a quarterly basis a comprehensive reviewof the adequacy of the allowance for loan losses is performed.  This assessment is made in the context ofhistorical losses as well as existing economic conditions, performance trendswithin specific portfolio segments, and individual concentrations of credit.  Loans are charged against the allowancewhen, in the opinion of management, such loans are deemed uncollectible andsubsequent recoveries are added to the allowance.

Adescription of other accounting policies are summarized in Note 1, Summary ofSignificant Accounting Policies in the Notes to Consolidated FinancialStatements of the Company's Annual Report on Form 10-KSB for the year endedDecember 31, 2001.  The Company hasfollowed those policies in preparing this report.

**TRUST PREFERREDSECURITIES**

During the second quarter of 2002, Citizens Bancshares Corporationissued $5 million of pooled trust preferred securities ("Preferred Securities")through one issuance by a wholly-owned subsidiary grantor trust, Citizens (GA)Statutory Trust I (the "Trust").  ThePreferred Securities accrue and pay distributions periodically at specifiedannual rates as provided in the indentures, Libor plus 3.45%.  The Trust used the net proceeds from theoffering to purchase a like amount of Junior Subordinated Debentures (the"Debentures") of the Company.  TheDebentures are the sole assets of the Trust and are eliminated, along with therelated income statement effects, in the consolidated financialstatements.  The Company's obligationsunder the Debentures and related documents, taken together, constitute a fulland unconditional guarantee by the Company of the obligations of theTrust.  The Preferred Securities aremandatorily redeemable upon the maturity of the Debentures, or upon earlierredemption as provided in the indentures. The Company has the right to redeem the Debentures in whole or in parton or after specific dates, at a redemption price specified in the indenturesplus any accrued but unpaid interest to the redemption date.  At September 30, 2002, the interest rate onthe Preferred Securities was 5.34%

 

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**PENDING ACQUISITION**

On May 30, 2002, the Company signed adefinitive agreement to purchase CFS Bancshares, Inc., the parent company ofCitizens Federal Savings Bank of Birmingham, Alabama.  At September 30, 2002, Citizens Federal Savings Bank had totalassets of $106,827,000.  The completionof the purchase agreement is pending regulatory approval.

**COMMON STOCK**

Basicnet income per share (EPS) is computed based on net income divided by theweighted average number of common share equivalents outstanding.  Diluted EPS is computed based on net incomedivided by the weighted average number of common and potential common shares.The Company's potential common shares are due to outstanding stock options,which were not dilutive during the nine months ended September 30, 2002 and2001.

**RECENT ACCOUNTINGPRONOUNCEMENTS**

In July 2001, theFinancial accounting Standards Board ("FASB") issued Statement of FinancialAccounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No.142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires the purchase method of accounting to be used forall business combinations initiated after September 30, 2001 and establishescriteria for recognizing intangible assets. The adoption of SFAS No. 141 did not have a material impact on theCompany's financial statements.  SFASNo. 142 addresses the financial accounting and reporting standards for theacquisition of intangible assets outside a business combination and forgoodwill and other intangible assets subsequent to their acquisition.  The adoption of SFAS No. 142 on January 1,2002 did not have a material impact on the Company's consolidated financialstatements.

In August 2001, theFASB issued SFAS No. 144, "Accounting for the Impairment or Disposal ofLong-Lived Assets," which addresses accounting for and reporting of theimpairment or disposal of long-lived assets. The Company adopted the provisions of SFAS No. 144 on January 1,2002.  The adoption of SFAS No. 144 didnot have a significant impact on the Company's results of operations, financialposition, or cash flows; however, SFAS No. 144 may modify the presentation ofthe operating results from abandoned or disposed businesses and the Company'sconsolidated statement of operations in the future.

**SEGMENTS**

During the year ended December31, 2001, the Company maintained two segments: the Bank and MortgageServices.  In December 2001, the Companyrealigned Mortgage Services to become a department of the Bank.  As a result, in 2002 Mortgage Services is nolonger managed as a separate segment of the Company. 

**RECLASSIFICATIONS**

Certain 2001 amountshave been reclassified to conform to the 2002 presentation.

----

** **

**Item 2.                           MANAGEMENT'S DISCUSSION AND ANALYSIS**

**INTRODUCTION**

** **CitizensBancshares Corporation (the "Company") is a holding company that provides afull range of commercial banking and mortgage brokerage services to individualsand corporate customers in its primary market areas, metropolitan Atlanta andColumbus, Georgia through its wholly owned subsidiaries, Citizens Trust Bank(the "Bank") and Citizens Trust Bank Mortgage Services, Inc. ("MortgageServices").  The Bank is a member of theFederal Reserve System and operates under a state charter.  The Company serves its customers through 11full-service branches in metropolitan Atlanta and one full-service branch inColumbus, Georgia.

**Forward Looking Statements**

Thisreport contains forward-looking statements which are subject to numerousassumptions, risks and uncertainties. In preparing this report, management is required to make estimates andassumptions that affect the reported amounts in the consolidated financialstatements such as the allowance for loan losses and valuation allowancesassociated with the recognition of deferred tax assets.  Statements pertaining to future periods aresubject to uncertainty because of the possibility of changes in underlyingfactors and assumptions. Actual results could differ materially from thosecontained in or implied by such forward-looking statements for a variety offactors including: sharp and/or rapid changes in interest rates; significantchanges in the economic scenario from the current anticipated scenario whichcould materially change anticipated credit quality trends and the ability togenerate loans; significant delay in or inability to execute strategicinitiatives designed to grow revenues and/or control expenses; unanticipatedissues during the integration of acquisitions; and significant changes inaccounting, tax or regulatory policies or requirements.  The Company disclaims any obligations toupdate any such forward-looking statements.

Thefollowing discussion is of the Company's financial condition as of September30, 2002 and the changes in the financial condition and results of operationsfor the three and nine month periods ended September 30, 2002 and 2001. 

**FINANCIAL CONDITION**

CitizensBancshares Corporation's total assets at September 30, 2002 increased by$15,367,000 from $252,201,000 - an increase of 6.09% compared to the sameperiod a year ago.  The Companycontinues to focus on growth and expansion opportunities.  In January 2002, the Company opened itsnewest branch in the Stonecrest Mall located in Conyers, Georgia.  The Company's total assets at September 30,2002 decreased by $26,932,000 or 9.14% compared to $267,568,000 at December 31,2001.  The decrease is primarily due tocorporate and governmental customers that make significant monthly deposits andwithdrawals. These funds fluctuate monthly due to the operating needs of thecorporate and public entities. Additionally, to lower its interest expense on deposits and improve itsnet interest margin, the Company did not renew maturing time deposits requiringnegotiated rates above current market rates. 

Accordingly,the Company's federal funds sold and interest-bearing deposits at other banksdecreased by $1,560,000 or 100% and $32,018,000 or 85.94%, respectively, forthe nine months ended September 30, 2002. These decreases were partially offset by an $11,925,000 increase inavailable for sale securities. 

FromDecember 31, 2001 to September 30, 2002, net total loans decreased by  $1,382,000 or 0.89% due to the unstableeconomy which has slowed loan demand. The Company has also tightened its lending standards to reduce theoverall default risk in its loan portfolio. 

 

----

 

Loansheld for sale decreased $422,000 as these loans were sold during 2002.  Cash value of life insurance, acomprehensive compensation program for senior management and the directors ofthe Company, decreased $222,000 or 3.16%. The decrease is due to the redemption of policies for several seniormanagers who were no longer with the Company. Additionally in 2002, the Company collected on a policy and paidbenefits to the surviving spouse. 

Totalliabilities decreased $28,773,000 to $243,954,000 at September 30, 2002 fromDecember 31, 2001.  This decrease isprimarily due to the $30,360,000 or 14.74% decrease in corporate andgovernmental interest-bearing deposits mentioned previously. During the ninemonths ended September 30, 2002, the Company repaid $530,000 of its outstandingnotes payable.  On June 26, 2002, theCompany issued debt of $5,000,000 in a pooled trust preferred securitiestransaction with an interest rate of LIBOR plus 3.45% which is callable afterfive years at the Company's discretion. At September 30, 2002, the interest rate for the trust preferredsecurities was 5.34%.

**INVESTMENT SECURITIES**

TheCompany invests a portion of its assets in U.S. treasury bills and notes, U.S.government sponsored agency securities, mortgage backed bonds, as well ascertain equity securities.  Otherinvestments includes Federal Home Loan Bank stock and Federal Reserve Bankstock.  At September 30, 2002 andDecember 31, 2001, the Company's investment securities portfolio representedapproximately 28.36% and 21.82% of total assets, respectively.

Investmentsecurities available for sale are summarized as follows (in thousands):

| **At September 30, 2002**                |        | **Amortized Cost**                               |        | **Gross Unrealized Gains**                                                                                     |        | **Gross Unrealized Losses**                                                                        |        | **Fair Value**                             |
|------------------------------------------|--------|--------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|--------------------------------------------|
|                                          |        |                                                  |        |                                                                                                                |        |                                                                                                    |        |                                            |
|                                          |        |                                                  |        |                                                                                                                |        |                                                                                                    |        |                                            |
| U.S. Treasury and                        |        |                                                  |        |                                                                                                                |        |                                                                                                    |        |                                            |
| U.S. Government agencies                 |        |  $    15,535                 |        |  $            245                                  |        |  $            -              |        |  $   15,780                 |
| State, county, and municipal  securities |        |       18,905            |        |             1,054                                       |        |                -   |        |       19,959      |
| Mortgage-backed Securities               |        |       35,649            |        |                766                       |        |                25            |        |       36,390      |
| Equity securities                        |        |         1,400 |        |                  -   |        |                25            |        |        1,375 |
|                                     |   |                                                  |   |                                                                                                                |   |                                                                                                    |   |                                            |
| Totals                                   |   |  $    71,489                 |        |  $         2,065                                                  |        |  $            50                       |        |  $   73,504                 |
|                                     |   |                                                  |   |                                                                                                                |   |                                                                                                    |   |                                            |
|                                          |        |                                                  |        |                                                                                                                |        |                                                                                                    |        |                                            |

| **At December 31, 2001**                 |        | **Amortized Cost**                               |        | **Gross Unrealized Gains**                                                                          |        | **Gross Unrealized Losses**                                                             |        | **Fair Value**                             |
|------------------------------------------|--------|--------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|--------------------------------------------|
|                                          |        |                                                  |        |                                                                                                     |        |                                                                                         |        |                                            |
|                                          |        |                                                  |        |                                                                                                     |        |                                                                                         |        |                                            |
| U.S. Treasury and                        |        |                                                  |        |                                                                                                     |        |                                                                                         |        |                                            |
| U.S. Government agencies                 |        |  $    20,057                 |        |  $            126                       |        |  $            65            |        |  $   20,118                 |
| State, county, and municipal  securities |        |       14,740            |        |                  38 |        |              293            |        |       14,485      |
| Mortgage-backed Securities               |        |       25,607            |        |                  71 |        |              189            |        |       25,489      |
| Equity securities                        |        |         1,400 |        |                112            |        |                25 |        |        1,487 |
|                                     |   |                                                  |   |                                                                                                     |   |                                                                                         |   |                                            |
| Totals                                   |   |  $    61,804                 |        |  $            347                       |        |  $          572                       |        |  $   61,579                 |
|                                     |   |                                                  |   |                                                                                                     |   |                                                                                         |   |                                            |
|                                          |        |                                                  |        |                                                                                                     |        |                                                                                         |        |                                            |

 

----

 

 

 

Investmentsecurities held to maturity are summarized as follows (in thousands):

| **At September 30, 2002**                |  | **Amortized Cost**                                |  | **Gross Unrealized Gains**                                              |  | **Gross Unrealized Losses**                                                 |  | **Fair Value**                                                      |  |
|------------------------------------------|--|---------------------------------------------------|--|-------------------------------------------------------------------------|--|-----------------------------------------------------------------------------|--|---------------------------------------------------------------------|--|
|                                          |  |                                                   |  |                                                                         |  |                                                                             |  |                                                                     |  |
| State, county, and municipal  securities |  |  $       2,376 |  |  $           172 |  |  $          -   |  |  $          2,548 |  |
|                                          |  |                                                   |  |                                                                         |  |                                                                             |  |                                                                     |  |
| Totals                                   |  |  $       2,376 |  |  $           172 |  |  $          -   |  |  $          2,548 |  |
|                                          |  |                                                   |  |                                                                         |  |                                                                             |  |                                                                     |  |
|                                          |  |                                                   |  |                                                                         |  |                                                                             |  |                                                                     |  |
|                                          |  |                                                   |  |                                                                         |  |                                                                             |  |                                                                     |  |

| **December 31, 2001**                    |  | **Amortized Cost**                                |  | **Gross Unrealized Gains**                                                         |  | **Gross Unrealized Losses**                                           |  | **Fair Value**                                                      |
|------------------------------------------|--|---------------------------------------------------|--|------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------|--|---------------------------------------------------------------------|
|                                          |  |                                                   |  |                                                                                    |  |                                                                       |  |                                                                     |
| State, county, and municipal  securities |  |  $       2,676 |  |  $             70 |  |  $           2 |  |  $          2,744 |
|                                          |  |                                                   |  |                                                                                    |  |                                                                       |  |                                                                     |
| Totals                                   |  |  $       2,676 |  |  $             70 |  |  $           2 |  |  $          2,744 |
|                                          |  |                                                   |  |                                                                                    |  |                                                                       |  |                                                                     |  |
|                                          |  |                                                   |  |                                                                                    |  |                                                                       |  |                                                                     |
|                                          |  |                                                   |  |                                                                                    |  |                                                                       |  |                                                                     |
|                                          |  |                                                   |  |                                                                                    |  |                                                                       |  |                                                                     |

**LOANS**

Loansoutstanding by classification, are summarized as follows (in thousands):

|                                                                                                                                 | September  30,                                  |   | December 31,                                                                       |
|---------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|--------|------------------------------------------------------------------------------------|
|                                                                                                                                 | 2002                             |   | 2001                                                           |
|                                                                                                                                 |                                                      |        |                                                                                    |
|     Commercial, financial, and agricultural                                                                      |  $  53,120                                 |        |  $       49,336                                 |
|     Installment                                                                                                  |        6,551           |        |            8,154                 |
|     Real estate - mortgage                                                                                       |      74,260                      |        |           78,291                      |
|     Real estate - construction                                                                                   |      13,450                      |        |           10,817                      |
|     Other                                                                                                        |      10,343                      |        |           12,603                      |
|                                                                                                                            |                                                      |   |                                                                                    |
|                                                                                                                                 |     157,724                                |        |         159,201                                 |
|     Less:  Net deferred  loan fees                                                                          |          228 |        |               190 |
|                 Allowance for loan losses            |        2,020           |        |            2,003                 |
|                 Discount on loans acquired from FDIC |          889 |        |            1,039                 |
|                                                                                                                            |                                                      |   |                                                                                    |
|                                                                                                                                 |                                                      |        |                                                                                    |
|         Total Loans                                                                          |  $154,587                                       |        |  $     155,969                                            |
|                                                                                                                            |                                                      |   |                                                                                    |
|                                                                                                                                 |                                                      |        |                                                                                    |

**IMPAIRED LOANS**

Managementconsiders a loan to be impaired when, based on current information and events,it is probable that all amounts due according to the contractual terms of theloan will not be collected.  Impairedloans are measured based on the present value of expected future cash flowsdiscounted at the loan's effective interest rate, the loan's observable marketprice, or the fair value of the collateral if the loan is collateral dependent.

Loansare generally placed on nonaccrual status when the full and timely collectionof principal or interest becomes uncertain or the loan becomes contractually indefault for 90 days or more in either principal or interest unless the loan iswell collateralized and in the process of collection.  When a loan is placed on nonaccrual status, current period accruedand uncollected interest is charged to interest income on loans unlessmanagement feels the accrued interest is recoverable through the liquidation ofcollateral.  Interest income, if any, onimpaired loans is recognized on the cash basis.

 

----

 

 

At September 30,2002, the recorded investment in loans that are considered impaired wasapproximately $4,101,000, an increase of $784,000 from $3,317,000 at December31, 2001.

**NONPERFORMING ASSETS**

Nonperformingassets include nonperforming loans, real estate acquired through foreclosureand repossessed assets.  Nonperformingloans consist of loans that are past due with respect to principal or interestmore than 90 days or have been placed on nonaccrual status.

Withthe exception of the loans included within nonperforming assets in the tablebelow, management is not aware of any loans classified for regulatory purposesas loss, doubtful, substandard, or special mention that have not been disclosedwhich (1) represent or result from trends or uncertainties which managementreasonably expects will materially impact future operating results, liquidity,or capital resources, or (2) represent any information on material creditswhich management is aware that causes management to have serious doubts as tothe abilities of such borrowers to comply with the loan repayment terms.

Nonperformingassets increased by $2,014,000 to $4,246,000 at September 30, 2002 from$2,232,000 at December 31, 2001.  Thisincrease includes $1,076,000 of the guaranteed portion of Small BusinessAdministration loans, which is considered fully recoverable once the Companycompletes the loan liquidation process. Nonperforming assets represented 2.71%of loans, net of unearned income, discounts and real estate acquired throughforeclosure at September 30, 2002 as compared to 1.41% at December 31, 2001.

Thetable below presents a summary of the Company's nonperforming assets atSeptember 30, 2002 and December 31, 2001.

|                                                         |        | 2002                                          |   | 2001                                          |        |
|---------------------------------------------------------|--------|-----------------------------------------------|--------|-----------------------------------------------|--------|
|                                                         |        | (Amounts in thousands, except                 |
|                                                         |        |  financial ratios)                       |        |
| Nonperforming assets:                                   |        |                                               |        |                                               |        |
| Nonperforming loans:                                    |        |                                               |        |                                               |        |
| Nonaccrual loans                                        | $      | 3,935                                         | $      | 1,761                                         |        |
| Past-due loans                                          |        | 226                                           |        | 442                                           |        |
|                                                    |   |                                               |   |                                               |   |
| Nonperforming loans                                     |        | 4,161                                         |        | 2,203                                         |        |
|                                                         |        |                                               |        |                                               |        |
| Real estate acquired through  foreclosure               |        |         85 |        |         29 |        |
|                                                    |   |                                               |   |                                               |   |
| Total nonperforming assets                              | $      | 4,246                                         | $      | 2,232                                         |        |
|                                                    |   |                                               |   |                                               |   |
|                                                         |        |                                               |        |                                               |        |
| Ratios:                                                 |        |                                               |        |                                               |        |
| Nonperforming loans to loans, net  of unearned          |        |                                               |        |                                               |        |
| income and discount on loans                            |        | 2.66%                                         |        | 1.39%                                         |        |
|                                                    |   |                                               |   |                                               |   |
|                                                         |        |                                               |        |                                               |        |
| Nonperforming assets to loans, net  of unearned income, |        |                                               |        |                                               |
| discounts and real estate acquired  through foreclosure | 2.71%  |                                               | 1.41%  |                                               |
|                                                    |   |                                               |   |                                               |   |
|                                                         |        |                                               |        |                                               |        |
| Nonperforming assets to total  assets                   |        | 1.59%                                         |        | 0.76%                                         |        |
|                                                    |   |                                               |   |                                               |   |
|                                                         |        |                                               |        |                                               |        |
| Allowance for loan losses to  nonperforming loans       |        | 48.55%                                        |        | 90.92%                                        |        |
|                                                    |   |                                               |   |                                               |   |
|                                                         |        |                                               |        |                                               |        |
| Allowance for loan losses to  nonperforming assets      | 47.57% |                                               | 89.74% |                                               |
|                                                    |   |                                               |   |                                               |   |
|                                                         |        |                                               |        |                                               |        |

** **

----

 

 

 

**ALLOWANCE FOR LOANLOSSES**

Theallowance for loan losses is primarily available to absorb losses inherent inthe loan portfolio. Credit exposures deemed uncorrectable are charged againstthe allowance for loan losses. Recoveries of previously charged-off amounts arecredited to the allowance for loan losses.

TheCompany provides for estimated losses on loans receivable when any significantand permanent decline in value occurs. These estimates for losses are based on individual assets and their cashflow forecasts, sales values, independent appraisals, the volatility of certainreal estate markets, and concern for disposing of real estate in distressedmarkets.  For loans that are pooled forpurposes of determining necessary provisions, estimates are based on loantypes, history of charge-offs, and other delinquency analyses.  Therefore, the value used to determine theprovision for losses is subject to the reasonableness of these estimates. Theadequacy of the allowance for loan losses is reviewed on a monthly basis bymanagement and the Board of Directors. On a quarterly basis a comprehensive review of the adequacy of allowancefor loan losses is performed.  Thisassessment is made in the context of historical losses as well as existingeconomic conditions, performance trends within specific portfolio segments, andindividual concentrations of credit.

Loans are charged against the allowancewhen, in the opinion of management, such loans are deemed uncollectible andsubsequent recoveries are added to the allowance.  For the nine months ended September 30, 2002, provisions for loanlosses totaled $590,000 compared to $1,730,000 for the same period in2001.  During the third quarter of 2001,the Company increased its provision for loan losses by $670,000 compared to$190,000 for the same period in 2002. The Company realized a loss on a $2.2 million loan in default during2001 and as a result, recorded specific provisions of $1,370,000 and $550,000during the nine and three months ended September 30, 2001, respectively,related to this loan. 

Theallowance for loan losses for the nine month period ended September 30, 2002was approximately $2,020,000, representing 1.29% of total loans, net ofunearned income compared to approximately $2,003,000 at December 31, 2001,which represented 1.27% of total loans, net of unearned income.

Management believes the allowance for loan losses isadequate. While management uses available information to recognize losses onloans, future additions to the allowance may be necessary based on changes ineconomic conditions, particularly in the metropolitan Atlanta area. Inaddition, regulatory agencies, as an integral part of their examinationprocess, periodically review the Company's allowance for loan losses. Suchagencies may require the Company to recognize additions to the allowance basedon their judgments about information available to them at the time of theirexamination.

A substantialportion of the Company's loan portfolio is secured by real estate in themetropolitan Atlanta market, including a concentration of loans to area churches.  The Company's loans to area churches wereapproximately $41.0 million at September 30, 2002 and $43.8 million at December31, 2001.  Accordingly, the ultimatecollectability of the substantial portion of the Company's loan portfolio issusceptible to changes in market conditions in the metropolitan Atlanta area.

----

 

Thefollowing table summarizes loans, changes in the allowance for loan lossesarising from loans charged off, recoveries on loans previously charged off byloan category, and additions to the allowance which have been charged tooperating expense as of and for the nine month period ended September 30, 2002and year ended December 31, 2001, respectively.

|                                                                                  |   | 2002                                                                        |    | 2001                                                                         |
|----------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|---------|------------------------------------------------------------------------------|
|                                                                                  |        | (Amounts in thousands, except                                               |
|                                                                                  |        |  financial ratios)                                                     |
|                                                                                  |        |                                                                        |    |                                                                         |
| Loans, net of unearned income and  discounts                                     | $      | 156,607                                                                     | $       | 157,972                                                                      |
|                                                                                  |        |                                                                             |         |                                                                              |
| Average loans, net of unearned  income, discounts                                |        |                                                                             |         |                                                                              |
|     and the allowance for loan losses                             | $      |      152,861                                            | $       |        158,289                                 |
|                                                                                  |        |                                                                             |         |                                                                              |
| Allowance for loans losses at the                                                |        |                                                                             |         |                                                                              |
|     beginning of period                                           | $      |          2,003                      | $       |            2,673           |
|                                                                                  |        |                                                                             |         |                                                                              |
| Loans charged off:                                                               |        |                                                                             |         |                                                                              |
|     Commercial, financial, and agricultural                       |        |            489            |         |            2,510           |
|     Real estate - loans                                           |        |            309            |         |              570 |
|     Installment loans to individuals                              |        |            509            |         |              276 |
|                                                                             |   |                                                                             |    |                                                                              |
| Total loans charged off                                                          |        |          1,307                      |         |            3,356           |
|                                                                             |   |                                                                             |    |                                                                              |
|                                                                                  |        |                                                                             |         |                                                                              |
| Recoveries of loans previously  charged off:                                     |        |                                                                             |         |                                                                              |
|     Commercial, financial, and agricultural                       |        |            501            |         |              359 |
|     Real estate - loans                                           |        |            142            |         |              343 |
|     Installment loans to individuals                              |        |              91 |         |              174 |
|                                                                             |   |                                                                             |    |                                                                              |
| Total loans recovered                                                            |        |            734            |         |              876 |
|                                                                             |   |                                                                             |    |                                                                              |
|                                                                                  |        |                                                                             |         |                                                                              |
| Net loans charged off                                                            |        |            573            |         |            2,480           |
|                                                                                  |        |                                                                             |         |                                                                              |
| Additions to allowance for loan  losses                                          |        |                                                                             |         |                                                                              |
|      charged to operating expense                            |        |            590            |         |            1,810           |
|                                                                             |   |                                                                             |    |                                                                              |
|                                                                                  |        |                                                                             |         |                                                                              |
| Allowance for loan losses at  period end                                         | $      |          2,020                      |  $ |            2,003           |
|                                                                             |   |                                                                             |    |                                                                              |
|                                                                                  |        |                                                                             |         |                                                                              |
| Ratio of net loans charged off to  average loans, net of                         |        |                                                                             |         |                                                                              |
|     unearned income, discounts, and the allowance for loan losses |        | 0.37%                                                                       |         | 1.57%                                                                        |
|                                                                             |   |                                                                             |    |                                                                              |
|                                                                                  |        |                                                                             |         |                                                                              |
| Allowance for loan losses to  loans, net of unearned income                      |        |                                                                             |         |                                                                              |
|     and discounts                                                 |        | 1.29%                                                                       |         | 1.27%                                                                        |
|                                                                             |   |                                                                             |    |                                                                              |
|                                                                                  |        |                                                                             |         |                                                                              |
|                                                                                  |        |                                                                             |         |                                                                              |

 

----

 

 

**DEPOSITS**

Depositsremain the Company's primary source of funding loan growth.  Total deposits for the nine month periodended September 30, 2002 decreased by 12.62% or $32,535,000 to$225,265,000.  Noninterest-bearingdeposits decreased $2,176,000 or 4.20%, while interest-bearing depositsdecreased by $30,360,000 or 14.74%. These decreases are primarily due to corporate and governmentalcustomers who make significant monthly deposits and withdrawals based on theirbudgetary needs.  Also, to lower itsinterest expense on deposits, match funding with loan demand and to improve itsnet interest margin, the Company did not renew maturing time deposits requiringnegotiated rates above current market rates.

The following is a summary of interest-bearing deposits (inthousands):

|                                    | **September 30**                                                                                                                                 | **December 31,**                                                                                                                                 |
|------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    | **2002  **                                                                                                                             | **2001  **                                                                                                                             |
|                                    |                          |                          |
| NOW and money market  accounts     |   $           40,262                                                                      |   $           39,989                                                                      |
| Savings accounts                   |               50,925                                                       |               65,556                                                       |
| Time deposits of  $100,000 or more |               47,723                                                       |               62,935                                                       |
| Other time deposits                |               38,284                                                       |               39,339                                                       |
| Premium on purchased  deposits     |               (1,554)                                                           |               (1,819)                                                           |
|                                    |                          |                          |
|                                    |   $         175,640                                                                                 |   $         206,000                                                                                 |
|                                    |                                                                                                                                                  |                                                                                                                                                  |
|                                    |                                                                                                                                                  |                                                                                                                                                  |
|                                    |                                                                                                                                                  |                                                                                                                                                  |

** **

**OTHER BORROWED FUNDS**

While the Company continues to emphasize funding earningasset growth through deposits, the Company has relied on other borrowings as asupplemental funding source.  Otherborrowings consist of Federal Home Loan Bank (the "FHLB") advancesand short-term borrowings.  TheCompany's bank subsidiary had outstanding advances from the FHLB of $10,000,000at September 30, 2002 and December 31, 2001. The outstanding advances bear interest at a fixed rate of 5.82%.  The advances are collateralized by a blanketlien on the Company's 1-4 family mortgage loans.

During the second quarter of 2002, Citizens BancsharesCorporation issued $5 million of pooled trust preferred securities ("PreferredSecurities") through one issuance by a wholly-owned subsidiary grantor trust,Citizens (GA) Statutory Trust I (the "Trust"). The Preferred Securities accrue and pay distributions periodically at specifiedannual rates as provided in the indentures, Libor plus 3.45%.  The Trust used the net proceeds from theoffering to purchase a like amount of Junior Subordinated Debentures (the"Debentures") of the Company.  TheDebentures are the sole assets of the Trust and are eliminated, along with therelated income statement effects, in the consolidated financialstatements.  The Company's obligationsunder the Debentures and related documents, taken together, constitute a fulland unconditional guarantee by the Company of the obligations of theTrust.  The Preferred Securities aremandatorily redeemable upon the maturity of the Debentures, or upon earlierredemption as provided in the indentures. The Company has the right to redeem the Debentures in whole or in parton or after specific dates, at a redemption price specified in the indenturesplus any accrued but unpaid interest to the redemption date.  At September 30, 2002, the interest rate onthe Preferred Securities was 5.34%.

TheCompany has an unsecured note payable of approximately $740,000 at September30, 2002 and $940,000 at December 31, 2001. The note bears interest at the lender's prime rate minus 50 basispoints. 

AtDecember 31, 2001, the Mortgage Services had $330,000 outstanding under a securedwarehouse line of credit.  The line wasrepaid and terminated during the first quarter of 2002. 

 

----

 

**RESULTS OF OPERATIONS**

**Net Interest Income:**

Net interest incomeis the principal component of a financial institution's income stream andrepresents the difference, or spread, between interest and fee income generatedfrom earning assets and the interest expense paid on deposits and borrowedfunds.  Fluctuations in interest ratesas well as volume and mix changes in earning assets and interest bearingliabilities can materially impact net interest income.

During 2001 theCompany's net interest income was affected by the Federal Reserve adjusting thefederal funds target rate downward 11 times to its current target of 1.75% atSeptember 30, 2002, as well as a slowdown in the economy.  Loan volume also slowed as net loansdecreased $1,382,000 or 0.89% for the nine month period ended September 30,2002.  As a result, interest income onloans, including fees decreased $2,088,000 or 18.19% for the nine month periodin 2002.  Similarly, interest expense ondeposits decreased $1,819,000 or 34.37% compared to September 30, 2001 as theCompany was able to reprice a significant portion of its interest bearingdeposits to offset lower loan yields and volume.  Investment securities income increased $736,000 or 32.04% whilefederal funds and interest-bearing deposits with banks decreased $206,000 or41.28%.   The Company reallocated itsexcess liquidity to higher yielding investment assets during the second quarterof 2002.  As a result, net interestincome for the nine month period increased slightly by $176,000 to $8,669,000compared to $8,493,000 for the same period in 2001.

For the three monthperiod ended September 30, 2002, interest income on loans, including feesdecreased $498,000 or 13.55% compared to the same period of the previous yeardue to decreased loan volume and interest rates.  Interest expense on deposits also decreased $621,000 or 38.77%compared to the three month period ended September 30, 2001 as the Company didnot renew several high price time deposits. Investment securities income increased $315,000 or 43.93% compared tothe three month period ended September 30, 2001 due to the Company reallocatingexcess liquidity to higher yielding investment assets during the second quarterof 2002.  Net interest income for thethree month period increased $285,000 to $3,025,000 compared to $2,740,000 forthe same period in 2001.

**Noninterest income:**

Noninterestincome consists of revenues generated from a broad range of financial servicesand activities, including fee-based services, loan origination fees, andprofits and commissions earned through securities and insurance sales.  In addition, gains and losses realized fromthe sale of investment portfolio securities and sales of assets are included innoninterest income.  Noninterest incomedecreased $441,000 to $1,292,000 for the third quarter of 2002 compared to thethird quarter of 2001. For the nine month period ended September 30, 2002,noninterest income totaled $4,106,000, a decrease of $2,623,000 or 38.96%compared to the same period ended September 30, 2001.  

Feeincome from service charges on deposit accounts decreased slightly by $95,000for the third quarter of 2002 compared with the same period in 2001.  It decreased $206,000 for the nine monthperiod ended September 30, 2002 compared to the same period in 2001.  A large component of the Company's servicecharges on deposit accounts is related to insufficient funds, returned checkcharges, and other customer service fees. These fees fluctuate from month to month. 

Gain on sales of assets and investment securities totaled$321,000 for the nine month period ended September 30, 2002 compared to$1,368,000 for the same period in 2001. During the second quarter of 2001, the Company liquidated a largeportion of its equity investment portfolio in anticipation of changes in marketconditions and realized a pretax gain of $924,000.  The Company also realized a pretax gain of $390,000 on the saletwo branch buildings for the nine month period ended September 30, 2001.  

 

----

 

 

Loan origination fees decreased$1,218,000 or 87.18% for the nine month period ended September 30, 2002.  Over the past two years, Mortgage Serviceshave been unfavorably impacted by decreased loan volume.  In December 2001, management implementedcorrective actions to improve the mortgage subsidiary's financial performanceby reducing excess staff and overhead cost to a level to match loan volume.  Additionally in December 2001, the Companyrealigned the operations of Mortgage Services to become a department of theBank.  For the same reason, originationfees decreased $405,000 for the three month period ended September 30, 2002 ascompared to the same period last year. 

Forthe third quarter of 2002, other operating income increased slightly by $34,000compared to the third quarter of 2001. Other operating income decreased $153,000 to $982,000 for the nine monthperiod ended September 30, 2002 compared to $1,135,000 for the same period in2001.  This decrease is attributed tovarious immaterial components of other operating income including investmentservices and other recoveries.  

**Noninterest expense**:

Noninterestexpense totaled $3,769,000 for the three month period ended September 30, 2002,a decrease of $830,000 or 18.05% compared to the same period last year.  For the nine month period ended September30, 2002, noninterest expense decreased $1,569,000 or 12.47% compared to thesame period last year.  These decreases,in large part, are due to management's efforts taken last year to reduceoverhead expenses by consolidating and closing several under performingbranches and restructuring the Company's mortgage subsidiary.  Accordingly, salaries and employee benefitsexpense decreased $340,000 or 5.91% for the nine month period ended September30, 2002 compared to the same period in 2001. During the third quarter of 2002, salaries and employee benefits expensewas similar to the third quarter of 2001, increasing slightly by $10,000 to$1,902,000.

Net occupancy and equipment expensedecreased by $58,000 or 9.55% for the third quarter of 2002 compared to2001.  Year to date, net occupancy andequipment expense decreased $279,000 or 14.45% to $1,653,000 for the ninemonth period in 2002 compared to the same period in 2001.  This decrease is primarily the result of theCompany consolidating three branches during the fiscal year ended December 31,2001.  Two of the branches wereconsolidated during the six month period ended June 30, 2001, the third branchwas consolidated in November 2001. 

Similarly,other operating expenses decreased $782,000 or 37.17% to $1,322,000 for thethird quarter of 2002, compared to $2,104,000 for the same period in 2001.  This decrease was due to a $247,000 write-offin the third quarter of 2001 of miscellaneous assets determined to have nofuture value.  Additionally, during thethird quarter of 2001, the Company experienced $180,000 in check losses and  $130,000 in legal costs associated withlegal action taken against a borrower who was in default of a loanagreement.  For the first nine months of2002, other operating expenses decreased $950,000 compared to the same periodlast year.  

 

----

**INTERESTRATE SENSITIVITY MANAGEMENT**

 

Interestrate sensitivity management involves managing the potential impact of interestrate movements on net interest income within acceptable levels of risk.  The Company seeks to accomplish this bystructuring the balance sheet so that repricing opportunities exist for bothassets and liabilities in equivalent amounts and time intervals.  Imbalances in these repricing opportunitiesat any point in time constitutes a financial institution's interest raterisk.  The Company's ability to repriceassets and liabilities in the same dollar amounts and at the same timeminimizes interest rate risk.

One method ofmeasuring the impact of interest rate sensitivity is the cumulative gapanalysis.  The difference betweeninterest rate sensitive assets and interest rate sensitive liabilities at varioustime intervals is referred to as the gap. The Company is liability sensitive on a short-term basis as reflected inthe following table.  Generally, a netliability sensitive position indicates that there would be a negative impact onnet interest income in an increasing rate environment.  However, interest rate sensitivity gap doesnot necessarily indicate the impact of general interest rate movements on thenet interest margin, since all interest rates and yields do not adjust at thesame velocity and the repricing of various categories of assets and liabilitiesis subject to competitive pressures and the needs of the Company'scustomers.  In addition, various assetsand liabilities indicated as repricing within the same period may in factreprice at different times within such period and at different rates.  For conservative purposes, the Company hasincluded demand deposits such as NOW, money market and savings accounts in thethree month category.  However, theactual repricing of these accounts may lag beyond twelve months.  The interest rate sensitivity gap  is only a general indicator of potentialeffects of interest rate changes on net interest income. 

The followingtable sets forth the distribution of the repricing of the Company's interestrate sensitive assets and interest rate sensitive liabilities as of September30, 2002.

|                                                                                                                         | Cumulative amounts as  of September 30, 2002                                                 |
|-------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                                                                                                         | Maturing and repricing  within                                                               |
|                                                                                                                         | 3                                                                   | 3 to 12 | 1 to 5 | Over   |   |
|                                                                                                                         | Months                                                                                       | Months | Years | 5 Years | Total |
|                                                                                                                         |                                                                                              |   (amounts in thousands, except ratios)  |
| Interest-sensitive  assets:                                                                                             |                                                                                              |  |  |  |  |
| Investments                                                                                                             | $               -           |  $         441 |  $   9,057 |  $   66,382 |  $   75,880 |
| Certificates of  deposit                                                                                                |               -   |              95 |       3,000 |             -   |        3,095 |
| Loans                                                                                                                   |        22,598                                                  |        24,727 |     55,480 |       54,919 |     157,724 |
| Interest-bearing  deposits with other banks                                                                             |          5,240                                       |               -   |            -   |             -   |        5,240 |
| Total  interest-sensitive assets                                                                                        |  $     27,838                                                       |  $    25,263 |  $ 67,537 |  $ 121,301 |  $ 241,939 |
|                                                                                                                         |                                                                                              |  |  |  |  |
| Investment-sensitive  liabilities:                                                                                      |                                                                                              |  |  |  |  |
| Deposits  (a)                                                                                                      |  $   117,095                                                                  |  $    44,171 |  $ 14,280 |  $         94 |  $ 175,640 |
| Trust preferred  securities                                                                                             |               -   |               -   |       5,000 |             -   |        5,000 |
| Other borrowings                                                                                                        |        10,000                                                  |            740 |            -   |             -   |       10,740 |
| Total  interest-sensitive liabilities                                                                                   |  $   127,095                                                                  |  $    44,911 |  $ 19,280 |  $         94 |  $ 191,380 |
|                                                                                                                         |                                                                                              |  |  |  |  |
|                                                                                                                         |                                                                                              |  |  |  |  |
| Interest-sensitivity  gap                                                                                               |  $    (99,257)                                                           |  $   (19,648) |  $ 48,257 |  $ 121,207 |  $   50,559 |
|                                                                                                                         |                                                                                              |  |  |  |  |
|                                                                                                                         |                                                                                              |  |  |  |  |
| Cumulative  interest-sensitivity gap to                                                                                 |                                                                                              |  |  |  |  |
| total  interest-sensitive assets                                                                                        | (41.03)%                                                                                     | (49.15)% | (29.20)% | 20.90% | 20.90% |
|                                                                                                                    |                                                                                              |  |  |  |  |
| (a) Savings, Now, and  money market deposits totaling $91,187 are included in the maturing in 3  months classification. |
|                                                                                                                         |                                                                                              |  |  |  |  |
|                                                                                                                    |                                                                                         |   |   |   |   |

**LIQUIDITY**

Liquidityis the ability of the Company to convert assets into cash or cash equivalentswithout significant loss and to raise additional funds by increasingliabilities. Liquidity management involves maintaining the Company's ability tomeet the day-to-day cash flow requirements of its customers, whether they aredepositors wishing to withdraw funds or borrowers requiring funds to meet theircredit needs.  Without proper liquiditymanagement, the Company would not be able to perform the primary function of afinancial intermediary and would, therefore, not be able to meet the needs ofthe communities we serve.  Additionally,the parent holding company requires cash for various operating needs including:dividends to shareholders; business combinations; capital injections to itssubsidiaries; the servicing of debt; and the payment of general corporateexpenses.

Theprimary source of liquidity for the parent holding company is dividends fromthe Bank. The amount of dividends paid by the Bank to the Company is limited byvarious banking regulatory agencies. The Georgia Department of Banking and Finance regulates dividendpayments and must approve dividend payments that exceed 50% of the Bank's netincome for the prior year. The total dividends that could be paid by the Bankto the Company in 2002 without prior regulatory approval is approximately$1,022,000, while continuing to meet the capital requirements for"well-capitalized" banks. Also, the Company has access to various capital markets. The Companydoes not anticipate any liquidity requirements in the near future that it willnot be able to meet.  In February 2002,the Bank paid cash dividends totaling $941,000 to the Company.

Assetand liability management functions not only serve to assure adequate liquidityin order to meet the needs of the Company's customers, but also to maintain anappropriate balance between interest-sensitive assets and interest-sensitiveliabilities so that the Company can earn a return that meets the investmentrequirements of its shareholders.  Dailymonitoring of the sources and uses of funds is necessary to maintain anacceptable cash position that meets both requirements.

Theasset portion of the balance sheet provides liquidity primarily through loanprincipal repayments, maturities of investment securities and, to a lesserextent, sales of investment securities available for sale and trading accountsecurities. Other short-term investments such as federal funds sold, securitiespurchased under agreements to resell, and maturing interest-bearing depositswith other banks, are additional sources of liquidity funding.

Theliability portion of the balance sheet provides liquidity through variouscustomers' interest bearing and noninterest bearing deposit accounts. Federalfunds purchased, securities sold under agreements to repurchase, and othershort-term borrowings are additional sources of liquidity and represent theCompany's incremental borrowing capacity. These sources of liquidity areshort-term in nature and are used as necessary to fund asset growth and meetshort-term liquidity needs.

**CAPITAL RESOURCES**

Shareholders'equity increased $1,841,000 for the nine months ended September 30, 2002, dueto the net change in retained earnings and an increase in accumulated othercomprehensive gain.  On March 15, 2002,the Company paid a cash dividend of approximately $341,000 to stockholders of record as of March 1, 2002.  Theannual dividend rate in 2002 was $0.16 per common share.  For the nine month period ended September30, 2002, accumulated other comprehensive gain increased $1,480,000 to$1,331,000, compared with an accumulated other comprehensive loss of $150,000at December 31, 2001.

 

----

 

 

Quantitativemeasures established by regulation to ensure capital adequacy require theCompany to maintain minimum amounts and ratios of total and Tier 1 capital torisk weighted assets, and Tier 1 capital to average assets.  As of September 30, 2002, the Company's banksubsidiary's total and Tier 1 capital to risk weighted assets and Tier 1 toaverage assets were 18%, 16% and 10% respectively.  As of September 30, 2002, the Company meets all capital adequacyrequirements to which it is subject.

**ITEM 3.            QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

** **

Quantitative information about market risk is as follows (inthousands):

|                           |                                        | **   Carrying**                         | **   Fair**                                                                     | **% Increase (Decrease) in**                                                               |                                                                     |
|---------------------------|----------------------------------------|---------------------------------------------------|-------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------|
|                           |                                        | **   Value**                            | **   Value**                                                                    | **Fair Value due to Rate Movement**                                                        |                                                                     |
|                           |                                        |                                                   |                                                                                           | **Down 100bps**                                                                            | ** **                                                          | **Up 100 bps** |  |
|                           |                                        |                                                   |
| Investments               |                                        |  $     75,880            |  $    76,052                                                          |                2.65  | %                                                                   |            (4.59) | % |
| Loans                     |                                        |       156,607            |      155,736                                                          |                 1.36 |                                                                     |            (1.40) |  |
| Interest-bearing deposits |       175,640 |      168,242                  |                1.14 |                                                                                            |            (1.21) |  |
| Other borrowings          |                                        |         15,740 |        16,483                                               |                6.53  |                                                                     |            (6.05) |  |

The Company hasadopted an asset/liability management program to monitor the Company's interestrate sensitivity and to ensure that the Company is competitive in the loans anddeposit markets.  Management seeks tomanage the relationship between interest-sensitive assets and liabilities inorder to protect against wide interest rate fluctuations, including thoseresulting from inflation.  The Companyhas not entered into any derivative financial instruments such as futures,forwards, swaps or options. Additionally, refer to our interest sensitive management and liquiditydisclosures within Part 1, Item 2, of this Form 10-Q.

**ITEM 4.            CONTROLS AND PROCEDURES**

Within 90 days priorto the date of this report, the Company carried out an evaluation, under thesupervision and with the participation of the Company's management, includingthe Company's Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of the Company's disclosure controlsand procedures pursuant to Exchange Act Rule 13a-14.  Based upon that evaluation, the Company's Chief Executive Officerand Chief Financial Officer concluded that the Company's disclosure controlsand procedures are effective in timely alerting them to material informationrelating to the Company (including its consolidated subsidiaries) that isrequired to be included in the Company's periodic filings with the Securitiesand Exchange Commission.  There havebeen no significant changes in the Company's internal controls or, to theCompany's knowledge, in other factors that could significantly affect thoseinternal controls subsequent to the date the Company carried out itsevaluation, and there have been no corrective actions with respect tosignificant deficiencies and material weaknesses

----

**PART II.  OTHER INFORMATION**

**ITEM 1.**      **LEGAL PROCEEDINGS**

The Company isnot aware of any material pending legal proceedings to which the Company or itssubsidiary is a party or to which any of their property is subject.

**ITEM 2.      CHANGES IN SECURITIES**

      None.

**ITEM 3.      DEFAULTS UPON SENIOR SECURITIES**

      None

**ITEM 4.      SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS**

      None

**ITEM 5.      OTHER INFORMATION**

      None

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

      None

                  

**CERTIFICATION**

Each of the undersigned hereby certifies in his capacity as an officer ofCitizens Bancshares Corporation and subsidiaries (the "Company") thatthe Quarterly Report of the Company on Form 10-Q for the period ended September30, 2002 fully complies with the requirements of Section 13(a) of theSecurities Exchange Act of 1934 and that the information contained in suchreport fairly presents, in all material respects, the financial condition ofthe Company at the end of such period and the results of operations of theCompany for such period.

----

**SIGNATURES**

Inaccordance with the requirements of the Exchange Act, the registrant causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

                                                        **CITIZENSBANCSHARES CORPORATION**

| Date:   November 13, 2002  | By: /s/ James E. Young                                                                                                                                                                                                                |
|-------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                      | James E. Young                                                                                                                                                                                                                                                                                                                                                               |
|                                      | President and Chief Executive Officer                                                                                                                                                                                                                                                                                                                                        |
|                                      |                                                                                                                                                                                                                                                                                                                                                                         |
| Date: November 13,    2002                | By:  /s/ Willard C. Lewis                                                                                                                                                                                              |
|                                      | Willard C. Lewis                                                                                                                                                                                                                                                                                                                                                             |
|                                      | Senior Executive VicePresident and                                                                                                                                                                                                                                                                                                                                           |
|                                      | Chief OperatingOfficer                                                          |
|                                      |                                                                                                                                                                                                                                                                                                                                                                         |
| Date: November 13,    2002                | By:  /s/ Samuel J. Cox                                                                                                                                                                                                 |
|                                      | Samuel J. Cox                                                                                                                                                                                                                                                                                                                                                                |
|                                      | Senior Vice President and ChiefFinancial Officer                                                                                                                                                                                                                                                                                                                             |

----

**Certification Pursuant to 18U.S.C. Section 1350 as AdoptedPursuant to Section 302 of theSarbanes-Oxley Act of 2002**

I,James E. Young, Chief Executive Officer, certify that:

1.                 I have reviewed thisquarterly report on Form 10‐Q of September 30, 2002; 

2.                 Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

3.                 Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

4.                 The registrant'sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

a)     designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

b)     evaluated theeffectiveness of the registrant's disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the"Evaluation Date"); and

c)     presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

5.                 The registrant'sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant's auditors and the audit committee ofregistrant's board of directors (or persons performing the equivalentfunction):

a)     all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant's ability to record, process, summarize andreport financial data and have identified for the registrant's auditors anymaterial weaknesses in internal controls; and

b)     any fraud, whether ornot material, that involves management or other employees who have asignificant role in the registrant's internal controls; and

6.                 The registrant'sother certifying officers and I have indicated in this quarterly report ifthere were significant changes in internal controls or in other factors thatcould significantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

Date: November 13, 2002

            /s/ JamesE. Young              ChiefExecutive Officer

----

**Certification Pursuant to 18U.S.C. Section 1350 as AdoptedPursuant to Section 302 of theSarbanes-Oxley Act of 2002**

I,Willard C. Lewis, Chief Operating Officer, certify that:

1.                 I have reviewed thisquarterly report on Form 10‐Q of September 30, 2002; 

2.                 Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

3.                 Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

4.                 The registrant'sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

d)     designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

e)     evaluated theeffectiveness of the registrant's disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the"Evaluation Date"); and

f)       presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

5.                 The registrant'sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant's auditors and the audit committee ofregistrant's board of directors (or persons performing the equivalentfunction):

c)     all significant deficienciesin the design or operation of internal controls which could adversely affectthe registrant's ability to record, process, summarize and report financialdata and have identified for the registrant's auditors any material weaknessesin internal controls; and

d)     any fraud, whether ornot material, that involves management or other employees who have asignificant role in the registrant's internal controls; and

6.                 The registrant'sother certifying officers and I have indicated in this quarterly report ifthere were significant changes in internal controls or in other factors thatcould significantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

Date: November 13, 2002

            /s/Willard C. Lewis              ChiefOperating Officer

----

**Certification Pursuant to 18U.S.C. Section 1350 as AdoptedPursuant to Section 302 of theSarbanes-Oxley Act of 2002**

I,Samuel J. Cox, Chief Financial Officer, certify that:

1.                 I have reviewed thisquarterly report on Form 10‐Q of September 30, 2002; 

2.                 Based on myknowledge, this quarterly report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

3.                 Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

4.                 The registrant'sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

a)     designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

b)     evaluated theeffectiveness of the registrant's disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the"Evaluation Date"); and

c)     presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

5.                 The registrant'sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant's auditors and the audit committee ofregistrant's board of directors (or persons performing the equivalentfunction):

a)     all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant's ability to record, process, summarize andreport financial data and have identified for the registrant's auditors anymaterial weaknesses in internal controls; and

b)     any fraud, whether ornot material, that involves management or other employees who have asignificant role in the registrant's internal controls; and

6.                 The registrant'sother certifying officers and I have indicated in this quarterly report ifthere were significant changes in internal controls or in other factors thatcould significantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

Date: November 13, 2002

            /s/Samuel J. Cox                       ChiefFinancial Officer