SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 - Q

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

> For the quarterly period ended       June 30, 2002

(   ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) TO THE EXCHANGE ACT

For the transition period from  ____________ to  _____________

Commission File 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(Address of principal executive office)
(Zip Code)Registrant's telephone number, including area code:
(404) 659 - 5959


Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the 90 days.   Yes  X     No  .

State the number of shares outstanding for each of the issuer's classes of common equity as of the latest practicable date: 2,099,969 shares of Common Stock, $1.00 par value and 90,000 shares of Non-Voting Common Stock, $1.00 par value outstanding on July 31, 2002.



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Part 1.  FINANCIAL INFORMATION
Item 1.  Financial Statements



CITIZENS BANCSHARES CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJUNE 30, 2002 AND DECEMBER 31, 2001(In thousands, except share data)ASSETS
2002
2001(Unaudited)Cash and due from banks
$       10,218
$     12,877Federal funds sold
-
1,560Interest-bearing deposits with banks
2,744
37,258Certificates of deposit
3,095
3,095Investment securities available for sale, at fair value
81,126
61,579Investment securities held to maturity, at cost
2,376
2,676Other investments
1,511
1,511Loans held for sale
-
422Loans receivable, net
151,665
155,969Premises and equipment, net
6,396
6,111Cash surrender value of life insurance
7,054
7,017Other assets
4,381
4,425Total Assets
$    270,566
$    294,500LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES:Noninterest-bearing deposits
$      53,498
$      51,801Interest-bearing deposits
175,864
206,000Total deposits
229,362
257,801Accrued expenses and other liabilities
2,806
3,656Notes payable
740
1,270Trust preferred securities
5,000
-Advances from Federal Home Loan Bank
10,000
10,000Total liabilities
247,908
272,727COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' EQUITY:Common stock - $1 par value; 5,000,000 sharesauthorized; 2,230,065 shares issued and outstanding
2,230
2,230Nonvoting common stock - $1 par value; 5,000,000 sharesauthorized; 90,000 issued and outstanding
90
90Additional paid-in capital
7,445
7,445Retained earnings
14,233
13,823Treasury stock, at cost (220,096 and 191,852 shares, respectively)
(1,890)
(1,665)Accumulated other comprehensive income (loss), net of taxes
550
(150)Total stockholders' equity
22,658
21,773$     270,566
$     294,500See notes to consolidated financial statements.






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CITIZENS BANCSHARES CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Unaudited - in thousands, except per share data)Three Months
Ended June 30,
Six Months
Ended June 30,2002
2001
2002
2001Interest income:Loans, including fees
$   3,094
$   3,865
$   6,212
$   7,802Investment securities:Taxable
837
601
1,546
1,304Tax-exempt
241
150
454
276Federal funds sold
2
4
12
18Interest-bearing deposits
107
195
238
355Total interest income
4,281
4,815
8,462
9,755Interest expense:Deposits
1,157
1,779
2,493
3,689Other borrowings
160
171
324
313Total interest expense
1,317
1,950
2,817
4,002Net interest income
2,964
2,865
5,645
5,753Provision for loan losses
225
940
400
1,060Net interest income after provision for loan losses
2,739
1,925
5,245
4,693Noninterest income:Service charges on deposits
887
973
1,745
1,855Gain on sales of securities
212
604
242
924Gain on sales of assets
-
269
-
390Origination fees from mortgage company
9
376
120
933Other operating income
354
409
707
894Total noninterest income
1,462
2,631
2,814
4,996Noninterest expense:Salaries and employee benefits
1,794
1,854
3,511
3,861Net occupancy and equipment
551
648
1,107
1,328Other operating expenses
1,388
1,432
2,627
2,795Total noninterest expense
3,733
3,934
7,245
7,984Income before income taxes
468
622
814
1,705Income tax expense
39
143
64
468Net income
$      429
$     479
$     750
$    1,237Net income per share - basic and diluted
$     0.20
$    0.22
$    0.35
$     0.56Weighted average outstanding shares - basic and diluted
2,109
2,187
2,118
2,187See notes to consolidated financial statements.






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CITIZENS BANCSHARES CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001(In thousands)2002

2001(Unaudited)OPERATING ACTIVITIES:Net income




$
750
$
1,237Adjustments to reconcile net incometo net cash provided
by (used in) operating activities:Provision for loan losses




400

1,060Depreciation and amortization




478

624Amortization (accretion), net




(4)

24Gain on investments





(242)

(1,314)Change in mortgage loans held for sale



422

(1,789)Change in other assets





99

(159)Change in accrued expenses and other liabilities


(850)

(209)Net cash provided
by (used in) operating activities


1,053

(526)INVESTING ACTIVITIES:Proceeds from maturities of investment securities held to maturity
300

255Proceeds from maturities of investment securities available for sale
8,418

40,375Purchases of investment securities available for sale


(35,360)

(27,415)Proceeds from sale of investment securities available for sale

8,604

-Purchases of certificates of deposits



-

(2,100)Net change in loans





3,587

(3,855)Increase in cash surrender value
of life insurance




(37)

(670)Proceeds from sale of premises and equipment



-

346Purchases of premises and equipment



(763)

(486)Proceeds from sale of property held for sale



-

509Net change in interest bearing deposits with banks


34,514

2,958Net change in federal funds sold




1,560

(55)Net cash provided by investing activities


20,823

9,862FINANCING ACTIVITIES:Net change in noninterest-bearing deposits




1,697

1,222Net change in interest-bearing deposits



(30,136)

(14,133)Purchase of treasury stock




(225)

(185)Proceeds from issuance of trust preferred
securities




5,000

-Principal payment on debt




(530)

(200)Borrowings from line of credit




-

2,044Dividends paid





(341)

(375)Net cash used in financing activities


(24,535)

(11,627)Net change in cash and due from banks



(2,659)

(2,291)Cash and due from banks at beginning of period



12,877

12,118Cash and due from banks at end of period


$
10,218
$
9,827Supplemental disclosures of cash paid during the period for:Interest





$
3,191
$
2,033Income taxes




$
290
$
595Supplemental disclosures of noncash transactions:Change in unrealized gain (loss) on investment securities availablefor sale, net of taxes




$
700
$
148Real estate acquired through foreclosure


$
392
$
-See notes to consolidated financial statements.






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CITIZENS BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2002 and 2001
(unaudited)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q.  Accordingly, certain disclosures required by generally accepted accounting principles are not included herein. These interim statements should be read in conjunction with the financial statements and notes thereto included in the Company's latest Annual Report on Form 10-KSB filed with the Securities and Exchange Commission for the year ended December 31, 2001.  The results of operations for the interim periods reported herein are not necessarily representative of the results expected for the full 2002 fiscal year.

The consolidated financial statements of the Company as of June 30, 2002 and for the three and six month periods ended June 30, 2002 and 2001 are unaudited.  In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations and cash flows for the three month and six month periods have been included.  All adjustments are of a normal recurring nature.  All significant intercompany accounts and transactions have been eliminated in consolidation.

ACCOUNTING POLICIES

The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which often require the judgment of management in the selection and application of certain accounting principles and methods.  Reference is made to the accounting policies of the Company described in the notes to the consolidated financial statements contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001.  The Company has followed those policies in preparing this report.  Management believes that the quality and reasonableness of its most critical policies enable the fair presentation of its financial position and of its results of operations.

In response to the Securities and Exchange Commission's ("SEC") Release No. 33-8040, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, the Company has identified the following as the most critical accounting policies upon which its financial status depends.  The critical policies were determined by considering accounting policies that involve the most complex or subjective decisions or assessments.  The Company's most critical accounting policies
relate to :

> Investment Securities
> The Company classifies investments in
> one of three categories based on management's intent upon purchase: held to
> maturity securities which are reported at amortized cost, trading securities
> which are reported at fair value with unrealized holding gains and losses
> included in earnings, and available for sale securities which are recorded at
> fair value with unrealized holding gains and losses included as a component of
> accumulated other comprehensive income.  The Company had no investment
> securities classified as trading securities during 2001 or 2002.
> Premiums and discounts on
> available for sale and held to maturity securities are amortized or accreted
> using a method which approximates a level yield.
> Gains and losses on sales
> of investment securities are recognized upon disposition, based on the adjusted
> cost of the specific security.  A decline in market value of any security below
> cost that is deemed other than temporary is charged to earnings resulting in the
> establishment of a new cost basis for the security.
> Loans  Loans are reported at
> principal amounts outstanding less unearned income and the allowance for loan
> losses.  Interest income on loans is recognized on a level-yield basis. Loan
> fees and certain direct origination costs are deferred and amortized over the
> estimated terms of the loans using the level-yield method.  Discounts on loans
> purchased are accreted using the level-yield method over the estimated remaining
> life of the loan purchased.



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> Allowance for Loan Losses - The Company provides for estimated losses on loans receivable when any significant and permanent decline in value occurs.  These estimates for losses are based on not only 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 of determining necessary provisions, estimates are based on loan types, history of charge-offs, and other delinquency analyses.  Therefore, the value used to determine the provision for losses is subject to the reasonableness of these estimates.  The adequacy of the allowance for loan losses is reviewed on a monthly basis by management and the Board of Directors.  On a quarterly basis a comprehensive review of the adequacy of the allowance for loan losses is performed.  This assessment is made in the context of historical losses as well as existing economic conditions, performance trends within specific portfolio segments, and individual concentrations of credit.  Loans are charged against the allowance when, in the opinion of management, such loans are deemed uncollectible and subsequent recoveries are added to the allowance.

A description of other accounting policies are summarized in Note 1, Summary of
Significant Accounting Policies in the Notes to Consolidated Financial Statements of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. 
The Company has followed those policies in preparing this report.

TRUST PREFERRED SECURITIES

During the second quarter
of 2002, Citizens Bancshares Corporation issued $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").  The Preferred Securities accrue and pay distributions periodically at specified annual rates as provided in the indentures, Libor plus 3.45%.  The Trust used the net proceeds from the offering to purchase a like amount of Junior Subordinated Debentures (the
"Debentures") of the Company.  The Debentures are the sole assets of the Trust and are eliminated, along with the related income statement effects, in the consolidated financial statements.  The Company's obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the Trust.  The Preferred Securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures.  The Company has the right to redeem the Debentures in whole or in part on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. 
At June 30, 2002, the interest rate for the Preferred Securities was 5.34%.

ACQUISITION

On May 30, 2002, the Company signed a definitive agreement to purchase CFS Bancshares, Inc., the parent company of Citizens Federal Savings Bank of Birmingham, Alabama.  At May 30, 2002, Citizens Federal Savings Bank had total assets of $107,526,000.  The completion of the purchase agreement is pending regulatory approval.

COMMON STOCK

Basic net income per share (EPS) is computed based on net
income divided by the weighted average number of common share equivalents
outstanding. Diluted EPS is computed based on net income divided by the weighted
average number of common and potential common shares.  The Company's
potential common shares are due to outstanding stock options.

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial accounting Standards Board ("FASB") issued Statement of Financial Accounting 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 for all business combinations initiated after June 30, 2001 and establishes criteria for recognizing intangible assets.  The adoption of SFAS No. 141 did not have a material impact on the Company's financial statements.  SFAS No. 142 addresses the financial accounting and reporting standards for the acquisition of intangible assets outside a business combination and for goodwill 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 financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses accounting for and reporting of the impairment 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 did not have a significant impact on the Company's results of operations, financial position, or cash flows;  however, SFAS No. 144 may modify the presentation of the operating results from abandoned or disposed businesses and the Company's consolidated statement of operations in the future.



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RECLASSIFICATIONS

Certain 2001 amounts have been reclassified to conform to the 2002 presentation.

Item 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS

INTRODUCTION

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

Forward Looking Statements

This report contains forward-looking statements which are subject to numerous assumptions, risks and uncertainties.  In preparing this report, management is required to make estimates and assumptions that affect the reported amounts in the consolidated financial statements such as the allowance for loan losses and valuation allowances associated with the recognition of deferred tax assets.  Statements pertaining to future periods are subject to uncertainty because of the possibility of changes in underlying factors and assumptions. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: sharp and/or rapid changes in interest rates; significant changes in the economic scenario from the current anticipated scenario which could materially change anticipated credit quality trends and the ability to generate loans; significant delay in or inability to execute strategic initiatives designed to grow revenues and/or control expenses; unanticipated issues during the integration of acquisitions; and significant changes in accounting, tax or regulatory policies or requirements.  The Company disclaims any obligations to update any such forward-looking statements.

The following discussion is of the Company's financial condition as of June 30, 2002 and the changes in the financial condition and results of operations for the
three and six month periods ended June 30, 2002 and 2001.

FINANCIAL CONDITION

Citizens Bancshares Corporation's total assets at June 30, 2002, increased by $14,035,000 to $270,566,000  - an increase of 5.47% compared to the same period a year ago. The Company continues to focus on growth and expansion opportunities.  In January 2002, the Company opened its newest branch in the Stonecrest Mall located in Conyers, Georgia.  For the six month period ended June 30, 2002, total assets decreased $23,934,000, or 8.13%.  This decrease is primarily due to
corporate and governmental customers which make significant monthly deposits and withdrawals.  These deposits are typically interest-bearing deposits. 
During the six month period ended June 30, 2002, interest-bearing deposits decreased $30,136,000 or 14.63%.  Also, in an effort to lower its interest expense on deposits and improve its net interest margin, the Company did not renew maturing time deposits requiring negotiated rates above current market rates.



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The decreases in federal funds of $1,560,000 and interest bearing deposits
with banks of $34,514,000 since December 31, 2001, are in part
related  to a $19,547,000 or 31.74% increase in investment securities available for sale.  Due to the slowdown in the economy and low loan demand, the Company reallocated its excess liquidity into higher yielding investments products to improve its net interest margin.  Also, as previously mentioned, several of the Company's large
corporate and governmental customers made significant withdrawals during the second quarter period and
several large time deposits were not renewed due to interest rates that were above market conditions.  From December 31, 2001 to June 30, 2002, net total loans decreased approximately $4,304,000 or 2.76%.  The decrease in loans is due to the unstable economy as loans demand
has slowed, combined with the Company tightening its lending standards.

Premises and equipment, net of accumulated depreciation increased $285,000 or 4.67%.  A substantial portion of the increase in premises and equipment is due to a new branch that was opened January 2002 in the Stonecrest
Mall located in Conyers, Georgia. Loans held for sale decreased $422,000 as
these loans were sold during the year.  Cash value of life insurance, a comprehensive compensation program for senior management and the directors of the Company, increased $37,000 or 0.53% as a result of the net additional premiums paid during the first six months of 2002.

Total liabilities decreased $24,819,000 to $247,908,000 at June 30, 2002 from December 31, 2001.  This decrease is primarily due to the $30,136,000 or 14.63% decrease in interest-bearing deposits mentioned
previously.  As a result of this decrease in interest-bearing deposits and lower deposit rates, accrued interest payable decreased $374,000.  During the six months ended June 30, 2002, the Company repaid $530,000 of its outstanding notes payable.  On June 26, 2002, the Company issued
debt of $5,000,000 in a pooled trust preferred securities transaction with an interest rate of LIBOR
plus 3.45% which is callable after five years at the Company's discretion. 
At June 30, 2002, the interest rate for the trust preferred securities was
5.34%.

INVESTMENT SECURITIES

The Company invests a portion of its assets in U.S. treasury bills and notes, U.S. government sponsored agency securities, mortgage backed bonds, as well as, some equity securities.  Other investments includes Federal Home Loan Bank stock and Federal Reserve Bank stock.  At June 30, 2002 and December 31, 2001, the Company's investment securities portfolio represented approximately 30.86% and 21.82% of total assets, respectively.

Investment Securities available for sale at June 30, 2002 are summarized as follows
(in thousands):

Amortized
Cost
Gross
Unrealized 
Gains
Gross
Unrealized 
Losses
Estimated 
Fair ValueU.S. Treasury andU.S. Government agencies
$   20,517

$    217

$     (18)

$   20,716State, county, and municipal securities
18,910

326

(24)

19,212Mortgage-backed Securities
39,466

443

(66)

39,843Equity securities
1,400

-

(45)

1,355Totals
$   80,293

$   986

$  (153)

$   81,126






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Investment Securities held to maturity at June 30, 2002 are summarized as follows
(in thousands):

Amortized
Cost
Gross
Unrealized 
Gains
Gross
Unrealized
Losses
Estimated Fair
 ValueState, county, and municipal securities
$    2,376

$    123

$     -

$     2,499Totals

$    2,376

$    123

$     -

$     2,499


LOANS

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

June 30,

December 31,2002

2001Commercial, financial, and agricultural
$      49,582

$     49,336Installment
6,907

8,154Real estate - mortgage
75,508

78,291Real estate - construction
11,778

10,817Other
11,042

12,603154,817

159,201Less:  Net deferred loan fees
220

190Allowance for loan losses
1,993

2,003Discount on loans acquired from FDIC
939

1,039Total Loans
$    151,665

$    155,969


IMPAIRED LOANS

Management considers 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 the loan will not be collected.  Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent.

Loans are generally placed on nonaccrual status when the full and timely collection of principal or interest becomes uncertain or the loan becomes contractually in default for 90 days or more in either principal or interest unless the loan is well collateralized and in the process of collection.  When a loan is placed on nonaccrual status, current period accrued and uncollected interest is charged to interest income on loans unless management feels the accrued interest is recoverable through the liquidation of collateral.  Interest income, if any, on impaired loans is recognized on the cash basis.

At June 30, 2002, the recorded investment in loans that are considered impaired was approximately $2,752,000, a decrease of $565,000 from $3,317,000 at December 31, 2001.

NONPERFORMING ASSETS

Nonperforming assets include nonperforming loans, real estate acquired through foreclosure and repossessed assets.  Nonperforming loans consist of loans that are past due with respect to principal or interest more than 90 days or have been placed on nonaccrual status.





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

Nonperforming assets increased by $1,332,000 to $3,564,000 at June 30, 2002 from $2,232,000 at December 31, 2001.  This increase includes $940,000 of the guaranteed portion of SBA loans which is fully recoverable once the Company completes the loan liquidation process. Nonperforming assets represented 2.32% of loans, net of unearned income, discounts and real estate acquired through foreclosure at June 30, 2002 as compared to 1.41% at December 31, 2001.

The table below presents a summary of the Company's nonperforming assets at June 30, 2002 and December 31, 2001.

2002

2001(Amounts in thousands, exceptfinancial ratios)Nonperforming assets:Nonperforming loans:Nonaccrual loans
$
2,820
$
1,761Past-due loans

322

442Nonperforming loans

3,142

2,203Real estate acquired through foreclosure

422

29Total nonperforming assets
$
3,564
$
2,232Ratios:Nonperforming loans to loans, net of unearnedincome and discount on loans

2.04%

1.39%Nonperforming assets to loans, net of unearned income,discounts and real estate acquired through foreclosure
2.32%

1.41%Nonperforming assets to total assets

1.32%

0.76%Allowance for loan losses to nonperforming loans

63.43%

90.92%Allowance for loan losses to nonperforming assets

55.92%

89.74%


ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is primarily available to absorb losses inherent in the loan portfolio. Credit exposures deemed uncorrectable are charged against the allowance for loan losses. Recoveries of previously charged-off amounts are credited to the allowance for loan losses.



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The Company provides for estimated losses on loans receivable when any significant and permanent decline in value occurs.  These estimates for losses are based on individual assets and their cash flow forecasts, sales values, independent appraisals, the volatility of certain real estate markets, and concern for disposing of real estate in distressed markets.  For loans that are pooled for proposes of determining necessary provisions, estimates are based on loan types, history of charge-offs, and other delinquency analyses.  Therefore, the value used to determine the provision for losses is subject to the reasonableness of these estimates. The adequacy of the allowance for loan losses is reviewed on a monthly basis by management and the Board of Directors.  On a quarterly basis a comprehensive review of the adequacy of allowance for loan losses is performed.  This assessment is made in the context of historical losses as well as existing economic conditions, performance trends within specific portfolio segments, and individual concentrations of credit.

Loans are charged against the allowance when, in the opinion of management, such loans are deemed uncollectible and subsequent recoveries are added to the allowance.  For the six months ended June 30, 2002, provisions for loan losses totaled $400,000 compared to $1,060,000 for the same period in 2001.  For the period ended June 30, 2001, the Company added an additional $940,000 to the loan loss provision to cover the charge-off of a large factoring relationship.

The allowance for loan losses for the six month period ended June 30, 2002 was approximately $1,993,000, representing 1.30% of total loans, net of unearned 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 is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions, particularly in the metropolitan Atlanta area. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

A substantial portion of the Company's loan portfolio is secured by real estate in the metropolitan Atlanta market, including a concentration of church loans.  The Company's church loans were approximately $40.9 million at June 30, 2002 and $43.8 million at December 31, 2001.  Accordingly, the ultimate collectibility of the substantial portion of the Company's loan portfolio is susceptible to changes in market conditions in the metropolitan Atlanta area.



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The following table summarizes loans, changes in the allowance for loans losses arising from loans charged off, recoveries on loans previously charged off by loan category, and additions to the allowance which have been charged to operating expense as of and for the six month period ended June 30, 2002 and year ended December 31, 2001, respectively.

2002

2001(Amounts in thousands, exceptfinancial ratios)Loans, net of unearned income and discounts
$
153,658
$
157,972Average loans, net of unearned income, discountsand the allowance for loan losses
$
153,193
$
158,289Allowance for loans losses at thebeginning of period
$
2,003
$
2,673Loans charged off:Commercial, financial, and agricultural

427

2,510Real estate - loans

225

570Installment loans to individuals

387

276Total loans charged off

1,039

3,356Recoveries of loans previously charged off:Commercial, financial, and agricultural

483

359Real estate - loans

64

343Installment loans to individuals

82

174Total loans recovered

629

876Net loans charged off

410

2,480Additions to allowance for loan lossescharged to operating expense

400

1,810Allowance for loan losses at period end
$
1,993
$
2,003Ratio of net loans charged off to average loans, net ofunearned income,
discounts and the allowance for loan losses

0.27%

1.57%Allowance for loan losses to loans, net of unearned income
    and discounts

1.30%

1.27%






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DEPOSITS

Deposits remain the Company's primary source of funding loan growth.  Total deposits for the
six month period ended June 30, 2002 decreased by 11.03% or $28,438,000 to $229,362,000. Noninterest-bearing deposits increased by $1,697,000 or 3.28%, while interest-bearing deposits decreased by $30,136,000 or 14.63%. This decrease is primarily due to Corporate and Governmental customers which make significant monthly deposits and withdrawals based on their budgetary needs. Also, in an effort to lower interest expense on deposits and improve its net interest margin, the Company did not renew maturing time deposits requiring negotiated rates above current market rates.

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

|                                  | June 30       | December 31, 
|--------------------------------- | ------------- | -------------
|                                  | 2002          | 2001         
|                                  |               |              
|NOW and money market accounts     | $      40,271 | $      39,989
|Savings accounts                  | 51,973        | 65,556       
|Time deposits of $100,000 or more | 46,694        | 62,935       
|Other time deposits               | 38,568        | 39,339       
|Premium on purchased deposits     | (1,642)       | (1,819)      
|                                  |               |              
|                                  | $    175,864  | $   206,000  
|                                  |               |              

OTHER BORROWED FUNDS

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

During the second quarter of 2002, Citizens Bancshares Corporation issued $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").  The Preferred Securities accrue and pay distributions periodically at specified annual rates as provided in the indentures, Libor plus 3.45%.  The Trust used the net proceeds from the offering to purchase a like amount of Junior Subordinated Debentures (the
"Debentures") of the Company.  The Debentures are the sole assets of the Trust and are eliminated, along with the related income statement effects, in the consolidated financial statements.  The Company's obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the Trust.  The Preferred Securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures.  The Company has the right to redeem the Debentures in whole or in part on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.

The Company has an unsecured note payable of approximately $740,000 at June 30, 2002 and
$940,000 at December 31, 2001.  The note bears interest at the lender's prime rate minus 50 basis points.

At December 31, 2001, the Company's mortgage subsidiary had $330,000 outstanding under a secured warehouse line of credit.  The line was repaid and terminated during the first quarter of 2002.



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RESULTS OF OPERATIONS

Net Interest Income:

Net interest income is the principal component of a financial institution's income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds.  Fluctuations in interest rates as well as volume and mix changes in earning assets and interest bearing liabilities can materially impact net interest income.

During 2001 the Company's net interest income was affected by the Federal Reserve adjusting the federal funds target rate downward 11 times to its current target of 1.75% at June 30, 2002, as well as a slowdown in the economy.  Loan volume was down as net loans decreased $8,482,000 or
5.30% for the twelve month period ended June 30, 2002.  As a result, interest income on loans, including fees decreased $1,590,000 or 20.38% for the six month period in 2002.  Similarly, interest expense on deposits decreased $1,196,000 or 32.42% compared to June 30, 2001 as the Company was able to reprice it interest bearing deposits to offset lower loan yields and volume.  Investment securities income increased $420,000 or 26.58% as the Company reallocated excess liquidity to higher yielding investment assets during the second quarter of 2002.  As a result, net interest income for the six month period only decreased $108,000 to $5,645,000 compared to $5,753,000 for the same period in 2001.

For the three month period ending June 30, 2002, interest income on loans, including fees decreased $771,000 or 19.95% compared to last year
due to decreased loan volume and lower interest rates.  Similarly, interest expense on deposits decreased $622,000 or 34.96% compared to
the three month period ended June 30, 2001 as the Company did not renew several high price time deposits.  Investment securities income increased $327,000 or 43.54% as the Company reallocated excess liquidity to higher yielding investment assets during the second quarter of 2002.  As a result, net interest income for the three month period increased $99,000 to $2,964,000 compared to $2,865,000 for the same period in 2001.

Noninterest income:

Noninterest income consists of revenues generated from a broad range of financial services and activities, including fee-based services, origination fees from Mortgage Services, and profits and commissions earned through securities and insurance sales.  In addition, gains and losses realized from the sale of investment portfolio securities and sales of assets are included in noninterest income. Noninterest income totaled $2,814,000 for the six month period of 2002, a decrease of $2,182,000 or 43.67% compared to June 30, 2001.

Fee income from service charges on deposit accounts decreased slightly by $110,000 for
the second quarter of 2002 compared with the same period in 2001.  A large component of the Company's service charges on deposit accounts is related to insufficient funds, returned check charges and other customer service fees.

Gain on sale of assets and investment securities totaled $242,000 for the six month period ended June 30, 2002.  Gain on sale of assets and investment securities totaled $1,314,000 for the same period in 2001.  During the second quarter of 2001, the Company liquidated a large portion of its equity investment portfolio in anticipation of changes in market conditions and realized a pretax gain of $924,000.  The Company also realized a pretax gain of $390,000 on the sale two branch buildings for the six month period ended June 30, 2001.



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Origination fees from the mortgage subsidiary decreased $813,000 or 87.11% in the
six month period ended June 30, 2002.  Over the past two years, the mortgage subsidiary has been unfavorably impacted by decreased loan volume.  In December 2001, management implemented corrective actions to improve the mortgage subsidiary's financial performance by reducing excess staff and overhead cost to a level to match loan volume.  Additionally in December 2001, the Company realigned its mortgage subsidiary to become a department of the
Bank subsidiary.

Other operating income decreased $187,000 to $707,000 for the six month period ended June 30, 2002 compared to $894,000 for the same period in 2001.  This decrease is attributed to various immaterial components of other operating income including investment services and other recoveries.

Noninterest expense:

Noninterest expense totaled $7,245,000 for the six month
period ended June 30, 2002, a decrease of $739,000 or 9.26% compared to the same
period last year. The decrease, in large part, is due to management's efforts
taken last year to reduce overhead expenses by consolidating and closing several
under performing branches and restructuring the Company's mortgage subsidiary.
As a result, salaries and employee benefits expense decreased $350,000 or 9.06%
for the six month period compared to the same period in 2001.

Net occupancy and equipment expense decreased by $221,000 or 16.67% to $1,107,000 for the six month period in 2002 compared to the same period in 2001.  This decrease is primarily the results of the Company closing three branches during the fiscal year ended December 31, 2001. Two of the branches were closed during the six month period ended June 30, 2001, and one branch was closed in November 2001.

Similarly, other operating expenses, decreased $168,000 or 6.01% to $2,627,000 for the second quarter of 2002, compared to $2,795,000 for the same period in 2001.  This decrease is also due to the closure of several branches
in the previous year as discussed above.

INTEREST RATE SENSITIVITY MANAGEMENT

Interest rate sensitivity management involves managing the potential impact of interest rate movements on net interest income within acceptable levels of risk.  The Company seeks to accomplish this by structuring the balance sheet so that repricing opportunities exist for both assets and liabilities in equivalent amounts and time intervals.  Imbalances in these repricing opportunities at any point in time constitutes a financial institution's interest rate risk.  The Company's ability to reprice assets and liabilities in the same dollar amounts and at the same time minimizes interest rate risk.

One method of measuring the impact of interest rate sensitivity is the cumulative gap analysis.  The difference between interest rate sensitive assets and interest rate sensitive liabilities at various time intervals is referred to as the gap.  The Company is liability sensitive on a short-term basis as reflected in the following table.  Generally, a net liability sensitive position indicates that there would be a negative impact on net interest income in an increasing rate environment.  However, interest rate sensitivity gap does not necessarily indicate the impact of general interest rate movements on the net interest margin, since all interest rates and yields do not adjust at the same velocity and the repricing of various categories of assets and liabilities is subject to competitive pressures and the needs of the Company's customers.  In addition, various assets and liabilities indicated as repricing within the same period may in fact reprice at different times within such period and at different rates.  For conservative purposes, the Company has included demand deposits such as NOW, money market and savings accounts in the three month category.  However, the actual repricing of these accounts may lag beyond twelve months.  The interest rate sensitivity gap  is only a general indicator of potential effects of interest rate changes on net interest income.



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The following table sets forth the distribution of the repricing of the Company's interest rate sensitive assets and interest rate sensitive liabilities as of June 30, 2002.

Cumulative amounts as of June 30, 2002Maturing and repricing within3
3 to 12
1 to 5
OverMonths
Months
Years
5 Years
Total(amounts in thousands, except ratios)Interest-sensitive assets:Investments
$             -
$        336
$     9,996
$     73,170
$     83,502Certificates of deposit
95
-
3,000
-
3,095Loans
20,136
22,003
58,569
54,109
154,817Interest-bearing deposits with other banks
2,744
-
-
-
2,744Total interest-sensitive assets
$    22,975
$   22,339
$   71,565
$   127,279
$  244,158Investment-sensitive liabilities:Deposits  (a)
$   125,526
$   31,506
$13,238
$     5,594
$  175,864Trust preferred securities
-
-
5,000
-
5,000Other borrowings
10,000
740
-
-
10,740Total interest-sensitive liabilities
$   135,526
$   32,246
$   18,238
$     5,594
$  191,604Interest-sensitivity gap
$ (112,551)
$   (9,907)
$   53,327
$  121,685
$   52,554Cumulative interest-sensitivity gap tototal interest-sensitive assets
(46.10)%
(50.16)%
(28.31)%
21.52%
21.52%(a) Savings, Now and money market deposits totaling  $92,244 are included in the maturing in 3 months classification.


LIQUIDITY

Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company's ability to meet the day-to-day cash flow requirements of its customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs.  Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities we serve.  Additionally, the parent holding company requires cash for various operating needs including: dividends to shareholders; business combinations; capital injections to its subsidiaries; the servicing of debt; and the payment of general corporate expenses.

The primary source of liquidity for the parent holding company is dividends from the Bank. The amount of dividends paid by the Bank to the Company is limited by various banking regulatory agencies.  The Georgia Department of Banking and Finance regulates the dividend payments and must approve dividend payments that would exceed 50% of the Bank's net income for the prior year. The total dividends that could be paid by the Bank to 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 Company does not anticipate any liquidity requirements in the near future that it will not be able to meet.  In February 2002, the Bank paid cash dividends totaling $941,000 to the Company.



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Asset and liability management functions not only serve to assure adequate liquidity in order to meet the needs of the Company's customers, but also to maintain an appropriate balance between interest-sensitive assets and interest-sensitive liabilities so that the Company can earn a return that meets the investment requirements of its shareholders.  Daily monitoring of the sources and uses of funds is necessary to maintain an acceptable cash position that meets both requirements.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities and, to a lesser extent, sales of investment securities available for sale and trading account securities. Other short-term investments such as federal funds sold, securities purchased under agreements to resell and maturing interest bearing deposits with other banks, are additional sources of liquidity funding.

The liability portion of the balance sheet provides liquidity through various customers' interest bearing and noninterest bearing deposit accounts. Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings are additional sources of liquidity and, basically, represent the Company's incremental borrowing capacity. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs.

CAPITAL RESOURCES

Shareholders' equity increased $885,000 for the six months ended June 30, 2002, due to the net change in retained earnings and an increase in accumulated other comprehensive gain.  On March 15, 2002, the Company paid a cash dividend of approximately $341,000 to stockholders of record as of March 1, 2002.  The annual dividend rate in 2002 was $0.16 per common share.  For the six month period ended June 30, 2002, accumulated other comprehensive gain increased $700,000 to $550,000, compared with an accumulated other comprehensive loss of $150,000 at December 31, 2001.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total and Tier 1 capital to risk weighted assets, and Tier 1 capital to average assets.  As of June 30, 2002, the Company's bank subsidiary's total and Tier 1 capital to risk weighted assets and Tier 1 to average assets were 18%, 16% and
9% respectively.  As of June 30, 2002, the Company meets all capital adequacy requirements to which it is subject.



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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative information about market risk is as follows (in thousands):



Carrying
Fair
% Increase (Decrease) inValue
Value
Fair Value due to Rate MovementDown 100bps
Up 100 bpsInvestments

$     
83,502
$         83,625
2.65
%
(4.59)
%Loans

154,817
153,956
1.36

(1.40)Interest-bearing deposits

175,864
168,457
1.14

(1.21)Other borrowings

10,740
11,246
6.53

(6.05)


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



PART II.  OTHER INFORMATION



ITEM 1.      LEGAL PROCEEDINGS

> The Company is not aware of any material pending legal proceedings to which the Company or its subsidiary 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

> On May 30, 2002, Citizens Bancshares Corporation filed a Current Report on Form 8-K, under Item 5 -- Other Events and Regulation FD Disclosure, Citizens Bancshares Corporation and its wholly-owned subsidiary, Citizens Trust Bank entered into an merger agreement with CFS Bancshares, Inc. and its wholly-owned subsidiary, Citizens Federal Savings Bank, both located in Birmingham, Alabama.

CERTIFICATION

Each of the undersigned hereby certifies in his capacity as an officer of Citizens Bancshares Corporation and subsidiaries (the "Company") that the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



CITIZENS BANCSHARES CORPORATION

Date:   August 13, 2002
By:
/s/ James E. YoungJames E. YoungPresident and Chief Executive OfficerDate:   August 13, 2002
By:
/s/ Willard C. LewisWillard C. LewisSenior Executive Vice President andChief Operating OfficerDate:   August 13, 2002
By:
/s/ Samuel J. CoxSamuel J. CoxSenior Vice President and Chief Financial