SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549
--------------------------------------------------------------------------------

                                   Form 10-QSB


[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
      SECURITIES AND EXCHANGE ACT OF 1934

      For the quarterly period ended March 31, 2001

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
       THE EXCHANGE ACT

For the transition period from ____________ to ___________________.


Commission File Number: 0-24625


                              CFS Bancshares, Inc.
  ----------------------------------------------------------------------------
               (Exact name of registrant as specified in charter)

        Delaware                                     63-1207881
----------------------------                    ---------------------
(State or other jurisdiction of                     IRS Employer
incorporation or organization)                  Identification Number


  1700 3rd Avenue North
  Birmingham, Alabama                                 35203
---------------------------                         ----------
  (Address of principal                              Zip Code
    executive office)

      Registrant's telephone number, including area code: (205) 328 - 2041


Indicate  by check mark  whether  the  registrant  (1) has filed all the reports
required to be filed by section 13 or 15 (d) of the  Securities  Exchange Act of
1934 during the preceding 12 months (or such shorter  period that the registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                                Yes   x           No
                                      --             --


                  Number of shares outstanding of common stock
                              as of March 31, 2001

$0.01 par value common stock                           130,000 shares
----------------------------                      --------------------------
         Class                                          Outstanding

<PAGE>

                       CFS BANCSHARES, INC. AND SUBSIDIARY



                                TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION:                                         PAGE NO.


Consolidated Balance Sheets at March 31, 2001
  and September 30, 2000 (unaudited)                                    -3-


Consolidated Statements of Operations for the
  Three Months and Six Months Ended March 31, 2001
  and 2000 (unaudited)                                                  -4-


Consolidated Statements of Cash Flows for the
  Three Months and Six Months Ended March 31,
  2001 and 2000 (unaudited)                                             -6-

Consolidated Statements of Comprehensive Income
  for the Three Months and Six Months Ended March
  31, 2001 and 2000 (unaudited)                                         -8-

Notes to Consolidated Financial Statements                              -9-


Management's Discussion and Analysis of Financial
Condition and Results of Operations                                     -10-

Market Risk                                                             -13-

PART II - OTHER INFORMATION                                             -14-

SIGNATURES                                                              -15-

<PAGE>
                       CFS BANCSHARES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                     March 31,      September 30,
                                                                       2001             2000
   ASSETS
   ------
<S>                                                                <C>                  <C>
Cash and amounts due from depository
 institutions                                                      $   2,118,607        2,918,542
Federal funds sold and overnight deposits                              3,714,568          675,813
                                                                   -------------    -------------
   Total cash and cash equivalents                                     5,833,175        3,594,355

Interest bearing deposits                                                163,142          163,142
Investment securities held to maturity, at cost (fair value of
  $1,809,920 and $3,506,924, respectively)                             1,786,565        3,527,879
Investment securities available for sale, at fair value (cost of
  $44,955,166 and $40,099,815, respectively)                          45,488,283       39,376,161
Federal Home Loan Bank stock                                             747,500          747,500
Loans receivable (net of allowance for loan loss
  of $354,322 and $342,156, respectively)                             44,859,837       48,238,040
Premises and equipment, net                                            3,549,105        3,644,836
Real estate acquired by foreclosure                                       99,986           86,237
Accrued interest receivable on investment securities                     318,121          335,656
Accrued interest receivable on loans                                     354,961          324,482
Other assets                                                             696,352          525,440
                                                                   -------------    -------------

          Total assets                                             $ 103,897,027      100,563,728
                                                                   =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Interest-bearing deposits                                          $  78,631,351       76,334,441
Advance payments by borrowers for
 taxes and insurance                                                     157,447          267,533
Other liabilities                                                        889,574          725,003
Employee Stock Ownership Plan debt                                        56,000           64,000
FHLB advances                                                         14,950,000       14,950,000
                                                                   -------------    -------------
   Total Liabilities                                                  94,684,372       92,340,977

Stockholders' Equity:
Common stock                                                             130,000          130,000
Additional paid-in-capital                                             1,189,157        1,184,758
Retained earnings                                                      7,591,939        7,422,368
Accumulated other comprehensive income (loss)                            341,195         (463,139)
Unearned common stock held by ESOP                                       (39,636)         (51,236)
                                                                   -------------    -------------
   Total Stockholders' Equity                                          9,212,655        8,222,751
                                                                   -------------    -------------

          Total liabilities and stockholders' equity               $ 103,897,027      100,563,728
                                                                   =============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                       CFS BANCSHARES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                           Three Months Ended          Six Months Ended
                                                 March 31,                  March 31,
                                            2001          2000          2001        2000

<S>                                        <C>            <C>         <C>          <C>
INTEREST INCOME:
Interest and fees on loans                 1,131,512      950,775     2,169,755    1,912,101
Interest and dividend income
 on investment securities                    162,150      123,754       323,028      243,143
Interest income on
 mortgage-backed securities                  573,384      474,722     1,148,140      949,282
Other interest income                         51,528       44,140        88,646       97,703
                                          ----------   ----------    ----------   ----------
Total interest income                      1,918,574    1,593,391     3,729,569    3,202,229

Interest on deposits                         770,907      669,116     1,554,640    1,328,747
Interest on FHLB advances                    203,954      157,748       434,964      320,261
                                          ----------   ----------    ----------   ----------
Total interest expense                       974,861      826,864     1,989,604    1,649,008

         Net interest income                 943,713      766,527     1,739,965    1,553,221
Provision for (recovery of) loan losses           --     (100,000)           --     (100,000)
                                          ----------   ----------    ----------   ----------
         Net interest income after
          provision for loan losses          943,713      866,527     1,739,965    1,653,221

OTHER INCOME:
Service charges on deposits                  109,553      107,313       198,145      224,018
Gain (loss) on sale of assets                    743       (2,721)        2,723       (1,787)
Gain (loss) on sale of securities              1,401       (6,125)       14,214       (6,125)
Other                                          7,437        7,303        12,920       14,597
                                          ----------   ----------    ----------   ----------
  Total Other Income                         119,134      105,770       228,002      230,703

EXPENSES:
Salaries and employee benefits               376,724      334,668       734,103      655,573
Net occupancy expense                         38,222       30,857        73,184       58,161
Federal insurance premium                     11,322       10,084        22,431       33,673
Data processing expenses                      56,139       52,690       109,433      103,592
Professional services                         26,723       55,865       114,145      148,196
Depreciation and amortization                 64,437       70,734       129,698      148,864
Advertising expense                            9,255       16,067        31,905       35,162
Office supplies                                7,427       16,113        28,796       36,449
Insurance expense                             16,960       13,569        33,601       29,368
Other                                        137,059      113,832       271,629      223,652
                                          ----------   ----------    ----------   ----------
 Total other expense                         744,268      714,479     1,548,925    1,472,690
                                          ----------   ----------    ----------   ----------
Income before income taxes                   318,579      257,818       419,042      411,234
Income tax expense                           115,564       95,690       152,017      153,859
                                          ----------   ----------    ----------   ----------
Net Income                                $  203,015      162,128       267,025      257,375
                                          ==========   ==========    ==========   ==========
Basic earnings per common share           $     1.60         1.28          2.11         2.03
                                          ==========   ==========    ==========   ==========

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4


<PAGE>
                       CFS BANCSHARES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                     Three Months Ended     Six Months Ended
                                          March 31,             March 31,
                                       2001       2000      2001       2000



Basic average shares outstanding       126,771   126,545   126,721      126,495
                                     =========   =======   =======   ==========

Diluted earnings per common share    $    1.51      1.24      1.99         1.96
                                     =========   =======   =======   ==========

Diluted average shares outstanding     134,571   130,745   134,521      130,975
                                     =========   =======   =======   ==========

Dividends declared and paid
 per common share                    $      --        --      0.75         0.75
                                     =========   =======   =======   ==========

          See accompanying notes to consolidated financial statements.

                                       5

<PAGE>
                       CFS BANCSHARES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                  Six Months Ended
                                                                                       March 31,
                                                                                  2001            2000
<S>                                                                         <C>                  <C>
Cash flows from operating activities:
Net income                                                                  $    267,025         257,375
Adjustments to reconcile net income to
 net cash provided by operating activities
  Loan loss provision                                                                 --          50,000
  Depreciation and amortization                                                  129,698         148,864
  Compensation expense recognized on ESOP allocation                               8,000           7,000
  Net amortization of premium on investment securities                            19,726          31,699
  Loss on sale of investment securities held to maturity                              --           2,042
  Loss (gain) on sale or call of investment securities available for sale        (14,214)          4,083
  Loss (gain) on sale of real estate acquired by foreclosure                      (2,723)          1,887
  Increase (decrease) in deferred gain on sale of REO                             (2,674)            935
  Increase in accrued interest receivable                                        (12,944)        (47,814)
  Decrease (increase) in other assets                                           (170,912)        487,623
  Increase (decrease) in accrued interest on deposits                           (113,651)          4,518
  Decrease in other liabilities                                                 (282,334)       (202,575)
                                                                            ------------    ------------
Net cash provided by operating activities                                       (175,003)        745,637

Cash flows from investing activities:
Purchase of interest-bearing deposits                                                 --          (1,618)
Purchase of investment securities available for sale                         (10,077,554)     (6,835,969)
Proceeds from sale of investment securities held to maturity                          --         118,111
Proceeds from sale of investment securities available for sale                 3,871,940         453,861
Proceeds from call of investment securities held to maturity                     500,000              --
Proceeds from principal collected on
 investment securities held to maturity                                        1,239,351         465,142
Proceeds from principal collected on
 investment securities available for sale                                      1,346,714       2,214,293
Net change in loans                                                            3,339,947        (535,226)
Purchase of premises and equipment                                               (33,967)        (49,033)
Proceeds from sale of real estate acquired by foreclosure                         24,417          18,097
                                                                            ------------    ------------
  Net cash used in investing activities                                          210,848      (4,152,342)
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6

<PAGE>
                       CFS BANCSHARES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                  Six Months Ended
                                                                       March 31,
                                                                 2001            2000
<S>                                                           <C>            <C>

Cash flows from financing activities:

Net increase (decrease) in interest bearing deposits           2,410,561       (588,068)
Decrease in advance payments by
 borrowers for taxes and insurance                              (110,086)      (157,946)
Net proceeds from FHLB advances                                       --        100,000
Cash dividends                                                   (97,500)       (97,500)
                                                             -----------    -----------
   Net cash provided by (used in) financing activities         2,202,975       (743,514)

Net increase (decrease) in cash and cash equivalents           2,238,820     (4,150,219)

Cash and cash equivalents at beginning of period               3,594,355      7,689,451
                                                             -----------    -----------

Cash and cash equivalents at end of period                   $ 5,833,175      3,539,232
                                                             ===========    ===========

Supplemental information on cash payments:
  Interest paid                                              $ 2,103,255      1,653,526
  Income taxes paid                                              206,000        275,500

Supplemental information on noncash transactions:
  Loans transferred to real estate acquired by foreclosure   $    38,256             --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       7


<PAGE>
                       CFS BANCSHARES, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       Three months ended         Six months ended
                                                                            March 31,                March 31,
                                                                         2001        2000         2001       2000
<S>                                                                   <C>           <C>          <C>         <C>
Net income                                                            $ 203,015     162,128      267,025     257,375

Other comprehensive income, before tax:
    Unrealized holding (losses) gains arising
      during the period                                                 526,049     (68,224)   1,270,985    (159,878)
    Less reclassification adjustment for gains (losses) on
      securities available for sale                                       1,401      (6,125)      14,214      (6,125)
                                                                      ---------   ---------    ---------   ---------

          Total other comprehensive income, before tax                  524,648     (62,099)   1,256,771    (153,753)

Income tax expense (benefit) related to other comprehensive income:
   Unrealized holding gain (loss) on available
     for sale securities                                                189,378     (24,482)     457,554     (60,754)
   Less reclassification adjustment for gains (losses) on
     securities available for sale                                          505      (2,328)       5,117      (2,328)
                                                                      ---------   ---------    ---------   ---------
          Total income tax expense (benefit) related to
            other comprehensive income                                  188,873     (22,154)     452,437     (58,426)
                                                                      ---------   ---------    ---------   ---------

          Total other comprehensive income (loss), net of tax           335,775     (39,945)     804,334     (95,327)
                                                                      ---------   ---------    ---------   ---------

          Total comprehensive income                                  $ 538,790     122,183    1,071,359     162,048
                                                                      =========   =========    =========   =========

</TABLE>

          See accompanying notes to consolidated financial statements.

                                       8

<PAGE>

                       CFS BANCSHARES, INC. AND SUBSIDIARY


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION

In the opinion of management,  the accompanying unaudited consolidated financial
statements  contain  all  adjustments  (none  of which  are  other  than  normal
recurring  accruals) necessary for a fair statement of financial position of the
Company and the results of operations  for the three month and six month periods
ended March 31, 2000 and 2001. The results contained in these statements are not
necessarily  indicative of the results that may be expected for the entire year.
For further  information,  refer to the  consolidated  financial  statements and
notes included in the Company's  annual report on Form 10-KSB for the year ended
September 30, 2000.

2.   RECLASSIFICATIONS

Certain  items  in  the  2000  consolidated   financial   statements  have  been
reclassified to conform to current year classifications.

3.   NET INCOME PER SHARE

Presented  below is a  summary  of the  components  used to  calculated  diluted
earnings  per share for the three months and six months ended March 31, 2001 and
2000.
<TABLE>
<CAPTION>

                                               Three months ended        Six months ended
                                                    March 31,                 March 31,
                                                2001         2000          2001        2000
                                               ----------------------------------------------
<S>                                            <C>          <C>          <C>          <C>
Weighted average common shares outstanding     126,771      126,545      126,721      126,495
Net effect of the assumed exercise of stock
  options based on the treasury stock method
  using average market price for the quarter     7,800        4,200        7,800        4,480
                                               ----------------------------------------------
Total weighted average common shares and
  potential common stock outstanding           134,571      130,745      134,521      130,975
                                               ==============================================
</TABLE>


4.   RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998 the FASB issued SFAS 133,  "Accounting  for Derivative  Instruments
and Hedging Activities." SFAS 133 established accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other  contracts,  and for  hedging  activities.  It  requires  that  an  entity
recognize all  derivatives  as either assets or  liabilities in the statement of
financial  position and measure those  instruments  at fair value.  SFAS 133, as
amended,  was effective for financial statements for the first quarter of fiscal
years beginning after June 15, 2000. Adoption of SFAS 133 did not have an impact
on the financial statements of the Company.

                                       9
<PAGE>

MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------

REVIEW OF RESULTS OF OPERATIONS

OVERVIEW
--------

Net income for the six months  ended March 31, 2001 was  $267,025 an increase of
$9,650 or 3.75%  when  compared  to the six months  ended  March 31,  2000.  The
increase in net income  resulted  primarily  from an  increase  in net  interest
income that was partially  offset by an increase in operating  expenses.  During
the six months  ended  March 31,  2000 the Bank  benefited  from a net loan loss
recovery of $100,000 while there was no such recovery during the current period.
Net income for the three months ended March 31, 2001 was $203,015 an increase of
$40,887 or 25.22% as compared to net income  during the three months ended March
31, 2000 of $162,128.

NET INTEREST INCOME
-------------------

Net interest  income is the  difference  between the interest and fees earned on
loans,  securities and other interest earning assets  (interest  income) and the
interest  paid on deposits  and FHLB  advances  (interest  expense).  The Bank's
deposits and FHLB advances are primarily short term in nature and reprice faster
than the Bank's interest earning assets, consisting mainly of loans and mortgage
backed securities, which generally have longer maturities. The mix of the Bank's
interest  earning  assets and deposits and FHLB advances along with the trend of
market  interest  rates have a substantial  impact on the change in net interest
margin. The cost of the Bank's interest bearing  liabilities  increased 28 basis
points from 4.04% for the six month  period ended March 31, 2000 to 4.32% during
the six month  period  ended March 31, 2001 while the yield on interest  earning
assets increased 31 basis points from 7.65% for the six month period ended March
31, 2000 to 7.96% for the comparable period in the current fiscal year.

The Bank's net interest  income  increased by $186,744 or 12.02% from $1,553,221
for the six month  period ended March 31, 2000 to  $1,739,965  for the six month
period in the current  fiscal  year.  Net  interest  income for the three months
ended March 31, 2001 increased by $177,186 or 23.11% from $766,527 for the three
months  ended March 31, 2000 to $943,713  for the three  months  ended March 31,
2001. The increase in net interest income is primarily the result of an increase
in interest  bearing assets of  approximately  $9,000,000 which occurred between
March 31, 2000 and March 31, 2001.

OTHER INCOME
------------

Other income  decreased  from  $230,703 for the six month period ended March 31,
2000 to $228,002 for the comparable period in the current fiscal year. A decline
in service  charges on deposits of $25,873 when  comparing  the six months ended
March 31, 2001 to the  comparable  period in the prior fiscal year was offset by
increases in gains on sale of securities and gains on sale of assets (foreclosed
or  repossessed  assets).  During the three  months  ended  March 31, 2001 other
income  increased  by  $13,364  as all  components  of  other  income  increased
moderately when compared to the three month period ended March 31, 2000.

                                       10

<PAGE>
OTHER EXPENSE
-------------

During  the six month  period  ended  March 31,  2001 the Bank's  other  expense
increased  by 5.18% or $76,235  from  $1,472,690  for the six month period ended
March 31, 2000 to  $1,548,925  for the  comparable  period in the current  year.
Salaries  and  employee  benefits,  net  occupancy  expense  and  other  expense
increased by $78,530,  $15,023 and $47,977,  respectively when comparing the six
months ended March 31, 2001 to the six month  period  ended March 31, 2000.  The
increase in salaries and employee benefits resulted from an increase in security
guard  expense at the Bank's branch  locations  and from  moderate  increases in
salary expense for the Bank's employees.  The increase in other expense resulted
from  expensing  insurance  deductibles  related  to  a  legal  issue  and  from
additional   expenses   associated  with  maintaining  assets  acquired  through
foreclosure or repossession.

The increases  described above were partially offset by declines in professional
services,  depreciation  and  amortization  and  federal  insurance  premiums of
$34,051,  $19,166 and 11,242,  respectively  when comparing the six months ended
March 31, 2001 to the same period in the prior fiscal year.

REVIEW OF FINANCIAL CONDITION
-----------------------------

Significant  factors affecting the Bank's financial condition from September 30,
2000 to March 31, 2001 are detailed below:

ASSETS
------

Total assets  increased  $3,333,299 or 3.31% from  $100,563,728 at September 30,
2000 to $103,897,027 at March 31, 2001.  Significant  changes in assets balances
include an increase in investment  securities available for sale which increased
by $6,112,122 or 15.52% from $39,376,161 at September 30, 2000 to $45,488,283 at
March 31,  2001 and an  increase in federal  funds sold and  overnight  deposits
which increased by $3,038,755 between September 30, 2000 and March 31, 2001. The
increases  described  above were funded from  decreases  in cash and amounts due
from  depository  institutions,  investment  securities held to maturity and net
loans  receivable of $799,935,  $1,741,314  and  $3,378,203,  respectively  when
comparing March 31, 2001 balances to those of September 30, 2000.

LIABILITIES
-----------

Total liabilities  increased  $2,343,395 or 2.54% between September 30, 2000 and
March 31, 2001.  The increase  resulted from an increase in the Bank's  interest
bearing  deposits  of  $2,296,910  from  $76,334,441  at  September  30, 2000 to
$78,631,351 at March 31, 2001.  The increase in deposits  occurred in the Bank's
transaction (checking and savings) accounts.

LOAN QUALITY
------------

A key to  long  term  earnings  growth  for  Citizens  Federal  Savings  Bank is
maintenance  of a high  quality  loan  portfolio.  The Bank's  directive in this
regard is carried out through its policies and

                                       11

<PAGE>

procedures  for review of loans.  The goals and  results of these  policies  and
procedures  are to provide a sound basis for new credit  extensions and an early
recognition  of problem  assets to allow the most  flexibility  in their  timely
disposition.

At March 31, 2001 the Bank had  $640,682  in assets  classified  as  substandard
including  assets acquired by foreclosure or repossession of $99,986,  no assets
classified as doubtful and $62,364 in assets classified as loss. A specific loan
loss  reserve  has been  established  for all  loans  classified  as a loss.  At
September  30, 2000 the Bank had $748,261 in assets  classified  as  substandard
including real estate acquired by foreclosure of $86,237,  no assets  classified
as doubtful, and $54,572 in assets classified as loss.

The  allowance  for loan  losses  was  $354,322  at March 31,  2001.  Management
believes  that the  current  allowance  for loan losses is adequate to cover any
potential  future loan losses which exist in the loan portfolio,  although there
can be no assurance  that further  increases in the loan loss allowance will not
be made as circumstances warrant.

LIQUIDITY AND INTEREST SENSITIVITY
----------------------------------

The Bank is required under applicable  federal  regulations to maintain adequate
levels of cash and "liquid"  investments.  Such investments serve as a source of
funds upon which the Bank may rely to meet deposit  withdrawals  and other short
term  needs.  The Bank  monitors  its cash  flow  position  to  assure  adequate
liquidity  levels  and to take  advantage  of market  opportunities.  Management
believes  that  the  Bank's  liquidity  is  adequate  to  fund  all  outstanding
commitments and other cash needs.

Changes in  interest  rates  will  necessarily  lead to changes in net  interest
margin. The Bank's goal is to minimize  volatility in the net interest margin by
taking an active  role in  managing  the level,  mix and  maturity of assets and
liabilities.  The Bank's primary  emphasis in reducing its interest rate risk is
to focus on reducing the weighted  average maturity of the loan portfolio and by
purchasing adjustable rate securities.

INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
--------------------------------------------

Any statement  contained in this report which is not a historical fact, or which
might  otherwise be considered an opinion or projection  concerning  the Bank or
its business, whether expressed or implied, is meant as and should be considered
a  forward-looking  statement as that term is defined in the Private  Securities
Litigation  Reform  Act  of  1995.   Forward-looking  statements  are  based  on
assumptions  and  opinions  concerning  a variety  of known and  unknown  risks,
including but not necessarily limited to, changes in market conditions,  natural
disasters  and other  catastrophic  events,  increased  competition,  changes in
availability and cost of reinsurance,  changes in governmental regulations,  and
general economic conditions, as well as other risks more completely described in
the Bank's filings with the Securities  and Exchange  Commission,  including the
Annual  Report on Form 10-KSB.  If any of these  assumptions  or opinions  prove
incorrect,  any forward-looking  statement made on the basis of such assumptions
or opinions may also prove materially incorrect in one or more respects.


                                       12

<PAGE>

CAPITAL ADEQUACY AND RESOURCES
------------------------------

Management is committed to maintaining  capital at a level sufficient to protect
stockholders  and depositors,  provide for reasonable  growth,  and fully comply
with all regulatory requirements. Management's strategy to maintain this goal is
to  retain   sufficient   earnings  while  providing  a  reasonable   return  to
stockholders in the form of dividends and return on equity.

The Office of Thrift  Supervision  has  issued  guidelines  identifying  minimum
regulatory "tangible" capital equal to 1.50% of adjusted total assets, a minimum
3.00%  core  capital  ratio and a minimum  risk  based  capital of 8.00% of risk
weighted assets. The Bank has provided the majority of its capital  requirements
through the retention of earnings.

At March 31, 2001 the Bank  satisfied all  regulatory  requirements.  The Bank's
compliance with the current standards is as follows:

<TABLE>
<CAPTION>

                                                             For  capital                Well
                                       Actual              adequacy purposes          capitalized
                                       -------             -----------------          ----------
                                 Amount       Ratio       Amount       Ratio      Amount       Ratio
                                ------        -----       ------       -----      ------       -----

<S>                            <C>             <C>       <C>            <C>      <C>            <C>
Total capital
(to risk weighted assets)      $9,004,327      18.43%    3,908,320      8.00%    4,885,400      10.00%
Tier I capital
(to risk weighted assets)      $8,819,557      18.05%    1,954,160      4.00%    2,931,240       6.00%
Tier I capital
(to average assets)            $8,819,557       8.63%    4,089,215      4.00%    5,111,519       5.00%

<CAPTION>


Reconciliation of  Bank capital:      Risk Weighted     Tier I Capital
                                         Capital

<S>                                     <C>              <C>
Total stockholders' equity (GAAP)       $ 9,212,655      $ 9,212,655
Holding company equity
Unrealized gain on securities -             (51,903)         (51,903)
AFS                                        (341,195)        (341,195)
Allowance for loan losses                   299,000               --
Equity investments                         (114,230)
         Total                          $ 9,004,327      $ 8,819,557

</TABLE>

MARKET RISK
-----------

Quantitative and qualitative  disclosures about market risk were included in the
2000 annual report,  which was  incorporated  by reference in the Company's Form
10-KSB.  There have been no significant changes in the contractual  balances and
the  estimated  fair  value  of  the  Company's   on-balance   sheet   financial
instruments,  the  notional  amount and  estimated  fair value of the  Company's
off-balance sheet instruments or weighted-average interest rates.

                                       13

<PAGE>



                       CFS BANCSHARES, INC. AND SUBSIDIARY

                            PART II OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The Bank is defending  various lawsuits and claims. In the opinion of management
the ultimate  disposition of these matters will not have a significant effect on
the financial position of the Bank.

ITEM 2: CHANGE IN SECURITIES

Not Applicable

ITEM 3: DEFAULT UPON SENIOR SECURITIES

Not Applicable

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5: OTHER INFORMATION:

None

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

None

                                       14
<PAGE>


                       CFS BANCSHARES INC. AND SUBSIDIARY


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                              CFS BANCSHARES, INC.
                              (Registrant)



Date: May 11, 2001            By: /s/ Bunny Stokes, Jr.
      --------------------        --------------------------------------
                                  Bunny Stokes, Jr.
                                  Chairman/CEO
                                  (principal executive officer)


Date: May 11, 2001            By: /s/ W. Kent McGriff
      --------------------        --------------------------------------
                                  W. Kent McGriff
                                  Executive Vice President
                                  (principal financial and accounting officer)







                                       15