SECURITIES AND EXCHANGE COMMISSION

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

                                   Form 10-QSB


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

      For the quarterly period ended June 30, 2000

[  ]  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 June 30, 2000

$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 June 30, 2000
and September 30, 1999 (unaudited)                                        -3-


Consolidated Statements of Operations for the Three Months and
 Nine Months Ended June 30, 2000 and 1999 (unaudited)                     -4-


Consolidated Statements of Cash Flows for the Nine Months Ended
June 30, 2000 and 1999 (unaudited)                                        -6-

Consolidated Statements of Comprehensive Income for the Three Months
 and Nine Months ended June 30, 2000 and 1999 (unaudited)                 -8-

Notes to Consolidated Financial Statements                                -9-


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


PART II - OTHER INFORMATION                                               -14-

SIGNATURES                                                                -15-

<PAGE>
<TABLE>
<CAPTION>


                       CFS BANCSHARES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                                                June 30,              September 30,
                                                                  2000                     1999
         ASSETS
         ------
<S>                                                           <C>                         <C>
Cash and amounts due from depository
 institutions                                                 $  3,009,496             $  4,811,709
Federal funds sold and overnight deposits                          361,394                2,877,742
                                                              ------------             ------------
   Total cash and cash equivalents                               3,370,890                7,689,451

Interest bearing deposits                                          163,142                  161,524
Investment securities held to maturity
  (fair value of $4,042,988 and $4,919,789,
   respectively)                                                 4,075,685                4,929,808
Investment securities available for sale,
  at fair value (cost of $40,576,543 and
  $34,389,879, respectively)                                    39,620,019               33,604,258
Federal Home Loan Bank stock                                       597,500                  592,500
Loans receivable (net of allowances of
 $321,383 and $310,157, respectively)                           45,806,052               43,521,160
Premises and equipment, net                                      3,715,156                3,871,433
Real estate acquired by foreclosure                                 49,530                   47,270
Accrued interest receivable on investment securities               144,321                  122,584
Accrued interest receivable on mortgage-backed securities          191,114                  169,254
Accrued interest receivable on loans                               369,678                  317,617
Other assets                                                       753,408                1,077,514
                                                              ------------             ------------

          Total assets                                        $ 98,856,495             $ 96,104,373
                                                              ============             ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Interest-bearing deposits                                     $ 77,077,495               75,180,323
Advance payments by borrowers for
 taxes and insurance                                               174,992                  257,724
Other liabilities                                                  904,873                  981,602
Employee Stock Ownership Plan debt                                  64,000                   72,000
FHLB advances and other borrowing                               12,660,000               11,850,000
                                                              ------------             ------------
   Total Liabilities                                            90,881,360               88,341,649

Stockholders' Equity:
Common stock                                                       130,000                  130,000
Additional paid-in-capital                                       1,184,757                1,180,060
Retained earnings                                                7,323,790                7,020,548
Accumulated other comprehensive loss                              (612,176)                (502,798)
Unearned common stock held by ESOP                                 (51,236)                 (65,086)
                                                              ------------             ------------
   Total Stockholders' Equity                                    7,975,135                7,762,724
                                                              ------------             ------------

          Total liabilities and stockholders' equity          $ 98,856,495             $ 96,104,373
                                                              ============             ============
</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          Nine Months Ended
                                                             June 30,                   June 30,
                                                       2000            1999               2000

<S>                                               <C>              <C>         <C>            <C>
INTEREST INCOME:
Interest and fees on loans                        $  967,548     $ 966,574    $2,879,649     $3,015,714
Interest and dividend income
 on investment securities                            149,652        94,631       392,795        193,111
Interest income on
 mortgage-backed securities                          577,725       459,541     1,527,007      1,415,473
Other interest income                                 18,944        23,212       116,647         71,191
                                                  ----------    ----------    ----------     ----------
Total interest income                              1,713,869     1,543,958     4,916,098      4,695,489

Interest on deposits                                 710,390       671,398     2,039,137      2,032,724
Interest on FHLB advances                            180,867       130,034       501,128        395,189
                                                  ----------    ----------    ----------     ----------
Total interest expense                               891,257       801,432     2,540,265      2,427,913

         Net interest income                         822,612       742,526     2,375,833      2,267,576
Provision for loan losses                                 --            --      (100,000)            --
                                                  ----------    ----------    ----------     ----------
         Net interest income after
          provision for loan losses                  822,612       742,526     2,475,833      2,267,576

OTHER INCOME:
Service charges on deposits                           96,047       111,923       320,065        294,609
Net gain on sale of assets                            17,191         5,616        15,404         10,140
Gain (loss) on sale of securities                         --            --        (6,125)        27,486
Other                                                  8,421         7,101        23,018         24,859
                                                  ----------    ----------    ----------     ----------
  Total Other Income                                 121,659       124,640       352,362        357,094

EXPENSES:
Salaries and employee benefits                       345,153       329,673     1,000,726      1,011,545
Net occupancy expense                                 32,866        27,390        91,027         86,185
Federal insurance premium                             12,042        24,859        45,715         74,028
Data processing expenses                              52,466        53,483       156,058        184,851
Professional services                                 40,044        20,344       188,240        138,951
Depreciation and amortization                         66,278        76,311       215,142        223,557
Advertising expense                                   23,808        55,395        58,970        138,972
Office supplies                                        7,913        21,434        44,362         56,510
Insurance expense                                     19,804        14,963        49,172         44,680
Other                                                120,971        84,062       344,623        252,056
                                                  ----------    ----------    ----------     ----------
 Total other expense                                 721,345       707,914     2,194,035      2,211,335
                                                  ----------    ----------    ----------     ----------
Income before income taxes                           222,926       159,252       634,160        413,335
Income tax expense                                    79,304        54,304       233,163        148,801
                                                  ----------    ----------    ----------     ----------
Net Income                                        $  143,622    $  104,948    $  400,997     $  264,534
                                                  ==========    ==========    ==========     ==========

Basic earnings per common share                   $     1.13    $     0.85    $     3.17     $     2.13
                                                  ==========    ==========    ==========     ==========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       4

<PAGE>


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

<TABLE>
<CAPTION>
                                                        Three Months Ended          Nine Months Ended
                                                             June 30,                   June 30,
                                                       2000            1999               2000

<S>                                               <C>              <C>         <C>            <C>

Basic average shares outstanding                     126,645       124,055       126,545        123,955
                                                  ==========    ==========    ==========     ==========

Diluted earnings per common share                 $     1.07    $     0.82    $     2.99     $     2.01
                                                  ==========    ==========    ==========     ==========

Diluted average shares outstanding                   134,445       127,607       134,163        131,455
                                                  ==========    ==========    ==========     ==========

Dividends declared and paid
 per common share                                 $       --    $       --    $     0.75     $     0.75
                                                  ==========    ==========    ==========     ==========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       5

<PAGE>

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

                                                                                     Nine Months Ended
                                                                                          June 30,
                                                                              2000                       1999
<S>                                                                       <C>                       <C>
Cash flows from operating activities:
Net income                                                                $    400,997            $    264,534
Adjustments to reconcile net income to
 net cash provided by operating activities
  Loan loss provision                                                           50,000                      --
  Depreciation and amortization                                                215,142                 223,557
  Compensation expense recognized on ESOP allocation                            11,000                   1,062
  Net amortization of premium on investment securities                          38,861                 103,968
  Loss on sale of investment securities held to maturity                         2,042                      --
  Loss (gain) on sale or call of investment securities
   available for sale                                                            4,083                 (27,486)
  Loss recognized on foreclosed loans                                            5,155                      --
  Gain on sale of real estate acquired by foreclosure                          (14,333)                 (9,070)
  Decrease in deferred gain on sale of REO                                      (1,907)                 (1,876)
  Decrease (increase) in accrued interest receivable                           (95,658)                 31,904
  Decrease (increase) in other assets                                          324,106                  (4,418)
  Increase in accrued interest on deposits                                      19,890                  48,711
  Decrease in other liabilities                                                (64,005)               (220,012)
                                                                          ------------            ------------
Net cash provided by operating activities                                      895,373                 410,874

Cash flows from investing activities:
Purchase of interest-bearing deposits                                           (1,618)                 (1,139)
Purchase of investment securities held to maturity                                  --              (1,456,542)
Purchase of investment securities available for sale                       (10,493,881)            (14,725,949)
Proceeds from sale of investment securities held to maturity                    81,232                      --
Maturity or call of investment securities available for sale                        --               1,000,000
Proceeds from sale of investment securities available for sale               1,309,941               1,550,760
Proceeds from principal collected on
 investment securities held to maturity                                        760,170               1,391,669
Proceeds from principal collected on
 investment securities available for sale                                    2,965,011               9,279,940
Net change in loans                                                         (2,327,304)              1,609,547
Redemptions (purchase) of FHLB stock                                            (5,000)                145,300
Purchase of premises and equipment                                             (58,865)               (127,431)
Proceeds from sale of real estate acquired by foreclosure                       49,330                 121,100
                                                                          ------------            ------------
  Net cash used in investing activities                                     (7,720,984)             (1,212,745)

</TABLE>

          See accompanying notes to consolidated financial statements.
                                       6

<PAGE>

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

                                                                                     Nine Months Ended
                                                                                          June 30,
                                                                              2000                       1999
<S>                                                                       <C>                       <C>
Cash flows from financing activities:

Net increase in interest bearing deposits                                    1,877,282               1,014,660
Decrease in advance payments by
 borrowers for taxes and insurance                                             (82,732)                (85,507)
Net proceeds from FHLB advances                                                100,000                      --
Net proceeds from other borrowing                                              710,000                      --
Cash dividends                                                                 (97,500)                (97,500)
                                                                          ------------            ------------
   Net cash provided by financing activities                                 2,507,050                 831,653

Net increase (decrease) in cash and cash equivalents                        (4,318,561)                 29,782

Cash and cash equivalents at beginning of period                             7,689,451               5,317,285
                                                                          ------------            ------------

Cash and cash equivalents at end of period                                $  3,370,890            $  5,347,067
                                                                          ============            ============

Supplemental information on cash payments

  Interest paid                                                           $  2,520,375               2,476,624
  Income taxes paid                                                       $    337,500            $         --

Supplemental information on noncash transactions:
  Loans transferred to real estate acquired by foreclosure                $     42,412             $   123,394
</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        Nine months ended
                                                                              June 30,                 June 30,
                                                                          2000         1999        2000         1999

<S>                                                                     <C>             <C>           <C>           <C>
Net income                                                              $ 143,622     $ 104,948     $ 400,997     $ 264,534

Other comprehensive income, before tax:
    Unrealized holding loss arising during the period                     (22,403)     (567,894)     (179,069)     (770,700)
    Less reclassification adjustment for gains (losses) on
      securities available for sale                                            --            --        (4,083)       27,486
                                                                        ---------     ---------     ---------     ---------

          Total other comprehensive loss before tax                       (22,403)     (567,894)     (174,986)     (798,186)

Income tax expense (benefit) related to other comprehensive income:
   Unrealized holding loss on available
     for sale securities                                                   (8,352)     (193,648)      (66,996)     (277,543)
   Less reclassification adjustment for gains (losses) on
     securities available for sale                                             --            --        (1,388)       10,170
                                                                        ---------     ---------     ---------     ---------
          Total income tax benefit related to
            other comprehensive income                                     (8,352)     (374,246)      (65,608)     (267,283)
                                                                        ---------     ---------     ---------     ---------

          Total other comprehensive loss net of tax                       (14,051)     (269,298)     (109,378)     (530,903)
                                                                        ---------     ---------     ---------     ---------

          Total comprehensive income (loss)                             $ 129,571     $ (42,337)    $ 291,619     $(266,369)
                                                                        =========     =========     =========     =========

</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 nine month periods
ended June 30, 1999 and 2000. 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, 1999.

2.  RECLASSIFICATIONS

Certain  items  in  the  1999  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  calculate  diluted
earnings  per share for the three months and nine months ended June 30, 2000 and
1999.
<TABLE>
<CAPTION>

                                                     Three months ended              Nine months ended
                                                          June 30,                          June 30,
                                                   2000            1999             2000             1999
                                                 ----------------------------------------------------------
<S>                                              <C>              <C>              <C>              <C>
Weighted average common shares outstanding       126,645          124,055          126,545          123,955
Net effect of the assumed exercise of stock
  options based on the treasury stock method
  using average market price for the quarter       7,800            7,200            7,618            7,500
                                                 ----------------------------------------------------------
Total weighted average common shares and
  potential common stock outstanding             134,445          127,607          134,163          131,455
                                                 ==========================================================
</TABLE>

4.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued Financial  Accounting Standard No. 133, Accounting
for Derivative  Instruments  and Hedging  Activities,  ("FAS133").  The standard
establishes  comprehensive  accounting  and reporting  standards for  derivative
instruments  and  hedging  activities.   FAS133  requires  that  all  derivative
instruments  be recorded in the  statement of financial  position at fair value;
the  accounting  for  gains  or  losses  due to  changes  in fair  value  of the
derivative  instruments depends on whether the derivative instruments qualify as
hedging instruments. If a derivative instrument does not qualify as a hedge, the
gain or loss is reported in earnings when it occurs.  However, if the derivative
qualifies as a hedging  instrument,  the accounting  varies based on the type of
risk being hedged, and includes either recognizing  earnings for changes in fair
value each reporting  period,  or  accumulating  changes in other  comprehensive
income and  recognizing  earnings  during the period that the hedged  forecasted
item impacts  earnings.  FAS133,  as amended,  becomes  effective  for financial
statements for the first quarter of fiscal years  beginning after June 15, 2000.
Management is evaluating the impact of FAS133 on the financial  condition of the
Company.
                                       9
<PAGE>


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

REVIEW OF RESULTS OF OPERATIONS

OVERVIEW
--------

Net income for the nine months  ended June 30, 2000 was  $400,997 an increase of
$136,463 or 51.59% when  compared to the nine months  ended June 30,  1999.  The
increase in net earnings  resulted  primarily from the recovery in February 2000
of  $150,000  from a $220,000  loan that was  charged off during the fiscal year
ended  September 30, 1998 and from a $112,352  increase in net interest  income.
The  positive  impact  of the loan loss  recovery  was  partially  offset by the
addition  of  $50,000 to the Bank's  loan loss  provision  during the nine month
period ended June 30, 2000.  There were no loan loss provisions added during the
nine month  period  ended June 30,  1999.  Net income for the three months ended
June 30,  2000 was  $143,622 an increase of $38,674 or 36.85% as compared to net
income during the three months ended June 30, 1999 of $104,948.

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 two basis
points from 3.91% for the nine month  period ended June 30, 1999 to 3.93% during
the nine month  period  ended June 30, 2000 while the yield on interest  earning
assets  increased  five basis  points from 7.54% for the nine month period ended
June 30, 1999 to 7.59% for the comparable period in the current fiscal year.

The Bank's net interest  income  increased by $108,257 or 4.77% from  $2,427,913
for the nine month period ended June 30, 1999 to  $2,540,265  for the nine month
period in the current  fiscal  year.  Net  interest  income for the three months
ended June 30, 2000  increased by $80,086 or 10.78% from  $742,526 for the three
months ended June 30, 1999 to $822,612 for the three months ended June 30, 2000.
Net interest income  increased for the three month and nine months periods ended
June 30, 2000 as compared  to the same  periods in the prior  fiscal year as the
result of in an  increase in the amount of  interest  earning  assets and from a
slight increase in the Bank's net interest margin.

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

Other income  decreased  slightly  from $357,094 for the nine month period ended
June 30, 1999 to $352,362 for the comparable  period in the current fiscal year.
Decreases in gains on sale of  securities  of $33,611 were offset by an increase
in service  charges on deposits of $25,456 when  comparing the nine months ended
June 30, 2000 to the  comparable  period in the prior  fiscal  year.  During the
three months ended June 30, 2000 other income  declined by $2,981 as a result of
a decrease in service  charges on deposits  for the period when  compared to the
three month period ended June 30, 2000.

                                       10
<PAGE>

OTHER EXPENSE
-------------

During  the nine month  period  ended June 30,  2000 the  Bank's  other  expense
decreased  by .78% or $17,300  from  $2,211,335  for the nine month period ended
June 30, 1999 to  $2,194,035  for the  comparable  period in the  current  year.
Salaries and employee  benefits,  federal  insurance  premiums,  data processing
expense and  advertising  expense  decreased  by $10,819,  $28,313,  $28,793 and
$80,002  respectively  when comparing the nine months ended June 30, 1999 to the
nine month  period  ended June 30,  2000.  The decrease in salaries and employee
benefits  resulted  from a decline  in the  expense  associated  with the Bank's
Employee Stock  Ownership Plan due to the completion of the allocation of shares
related to a $412,750 ten year loan made in 1989.

The decrease in federal insurance  premiums resulted from an upgrade in the FDIC
classification  of the Bank. The decrease in data  processing  expense  resulted
from declines in Year 2000 related expenses. The decline in advertising resulted
from  decreases  in the  amount of media  purchases  compared  to the nine month
period  ended June 30, 1999 during  which the Bank was  conducting  an extensive
advertising campaign.

The decreases described above were partially offset by increases in professional
services and other expense of $49,289 and $92,567, respectively. The increase in
professional  services resulted from an unsuccessful bid by the Bank for another
institution  offered by the FDIC. The increase in other expense  included higher
expenses  for property  tax and state  franchise  tax, as well as an increase in
charitable contributions and travel expense.

During the three month  period  ended June 30, 2000 other  expense  increased by
$13,431  or 1.90%.  Increases  in  professional  services  and other  expense of
$36,909 and $19,700 when  comparing  the three month period ended June 30 in the
current  fiscal to the same  period  in the prior  fiscal  year.  The  increases
described  above were partially  offset by decreases in advertising  expense and
federal  insurance  premiums  of  $31,587  and  $12,817,  respectively.  See the
discussion  of other  expense for the nine month  period ended June 30, 2000 and
1999 for explanations concerning the changes.

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

Significant  factors affecting the Bank's financial condition from September 30,
1999 to June 30, 2000 are detailed below:

ASSETS
------

Total assets  increased  $2,752,122 or 2.86% from  $96,104,373  at September 30,
1999 to $98,856,495  at June 30, 2000.  Significant  changes in assets  balances
include an increase in investment  securities available for sale and loans which
increased by $6,015,761 or 17.90% and  $2,284,892  or 5.25%,  respectively  from
$33,604,258 and  $43,521,160,  respectively at September 30, 1999 to $39,620,019
and  $45,806,052,  respectively  at June 30, 2000.  The increase was funded from
decreases in cash and cash  equivalents  which were  maintained at a higher than
normal  level at  September  30,  1999 in  anticipation  of  possible  Year 2000
liquidity  demands and from an increase in deposits.  Other assets declined from
$1,077,514  at September  30, 1999 to $753,408 at June 30, 2000 as the result of
approximately  $470,000 of short term  receivables  at September  30, 1999 being
collected during the current fiscal year.

                                       11
<PAGE>

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

Total liabilities  increased  $2,539,711 or 2.87% between September 30, 1999 and
June 30, 2000.  The increase  resulted  from an increase in the Bank's  interest
bearing  deposits  of  $1,897,172  from  $75,180,323  at  September  30, 1999 to
$77,077,495 at June 30, 2000.


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  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 June 30, 2000 the Bank had  $650,436  in assets  classified  as  substandard,
including  assets acquired by foreclosure or repossession of $49,530,  no assets
classified as doubtful and $54,572 in assets classified as loss. A specific loan
loss  reserve  has been  established  for all  loans  classified  as a loss.  At
September  30, 1999 the Bank had $848,537 in assets  classified  as  substandard
including real estate acquired by foreclosure of $47,270,  no assets  classified
as doubtful and $54,589 in assets classified as loss.

The allowance for loan losses was $321,383 at June 30, 2000. 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 specified
levels of cash and "liquid"  investments  in  qualifying  types of United States
Treasury and federal agency securities and other  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.  The Bank maintains liquidity levels,  which significantly exceed
the  minimum  regulatory  requirements.  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

                                       12
<PAGE>

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  this 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.

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 June 30, 2000 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)    $8,624,455      17.55%     $3,932,240      8.00%     $4,915,300    10.00%
Tier I capital
(to risk weighted assets)    $8,476,026      17.24%     $1,966,120      4.00%     $2,949,180     6.00%
Tier I capital
(to average assets)          $8,476,026       8.70%     $3,895,610      4.00%     $4,869,513     5.00%
</TABLE>


Reconciliation of capital:
                                     Risk Weighted    Tier I Capital
                                         Capital

Total bank equity (GAAP)              $ 7,863,850       $ 7,863,850
Unrealized loss on securities - AFS       612,176           612,176
Allowance for loan losses                 266,811                --
Equity investments                       (118,282)               --
         Total                        $ 8,624,455       $ 8,476,026


                                       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: August 14, 2000                 By: /s/ Bunny Stokes, Jr.
     --------------------------           ---------------------------------
                                          Bunny Stokes, Jr.
                                          Chairman/CEO
                                          (principal executive officer)


Date: August 14, 2000                 By: /s/ W. Kent McGriff
     --------------------------           ---------------------------------
                                          W. Kent McGriff
                                          Executive Vice President
                                          (principal financial and accounting
                                             officer)