<PAGE>
<PAGE>

            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 December 31, 1998

[  ]  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      No x   
   ---     ---

       Number of shares outstanding of common stock 
                     as of December 31, 1998

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

<PAGE>
<PAGE>
             CFS BANCSHARES, INC. AND SUBSIDIARY



                    TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION:                        PAGE NO.
     

Consolidated Balance Sheets at December 31, 1998
and September 30, 1998 (unaudited)                       -3-     
  
Consolidated Statements of Operations for the 
Three Months Ended December 31, 1998 and
1997 (Unaudited)                                         -4-

Consolidated Statements of Cash Flows for the 
Three Months Ended December 31, 1998 and 1997
(unaudited)                                              -6-

Consolidated Statements of Comprehensive Income
for the Three Months ended December 31, 1998
and 1997 (unaudited)                                     -8-

Notes to Consolidated Financial Statements               -9-

Management's Discussion and Analysis of Financial 
Condition and Results of Operations                     -11-

PART II - OTHER INFORMATION                             -16-

SIGNATURES                                              -17-  
<PAGE>
<PAGE>
                   CFS BANCSHARES, INC. AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS
                             (Unaudited)
<TABLE>
<CAPTION>
                                                 December 31,   September 30,
                                                     1998           1998
                                                 ------------   ------------
<S>                                               <C>            <C>
   ASSETS
   ------
Cash and amounts due from depository
  institutions                                   $ 3,523,498      $ 3,392,435
Federal funds sold and overnight deposits          1,024,963        1,924,850
                                                 -----------      -----------
    Total cash and cash equivalents                4,548,461        5,317,285

Interest bearing deposits                            159,515          159,515
Investment securities held to maturity
  (fair value of $6,398,046 and $6,406,439,
  respectively)                                    6,350,852        6,338,130
Investment securities available for sale,
  at fair value (cost of $29,020,997 and
  $29,110,589, respectively)                      29,011,259       29,122,737
Federal Home Loan Bank stock                         670,000          670,000
Loans receivable, net of allowances               45,331,828       45,413,484
Premises and equipment, net                        3,997,984        4,030,996
Real estate acquired by foreclosure                  157,496           59,634
Accrued interest receivable on investment
  securities                                          16,277           71,252
Accrued interest receivable on mortgage-
  backed securities                                  196,324          217,817
Accrued interest receivable on loans                 373,751          352,244
Other assets                                         545,324          412,948 
                                                 -----------      -----------
    Total assets                                 $91,359,071       92,166,042
                                                 ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Interest-bearing deposits                        $72,491,986       73,892,189 
Advance payments by borrowers for taxes
  and insurance                                      163,663          300,648
Other liabilities                                    630,594          719,682 
Employee Stock Ownership Plan debt                   145,471          145,471
FHLB advances                                     10,050,000        9,200,000
                                                 -----------      -----------
    Total Liabilities                             83,481,714       84,257,990

Stockholders' Equity:
Common Stock                                         130,000          130,000
Additional paid-in capital                         1,179,608        1,167,160
Retained earnings                                  6,698,440        6,732,461
Accumulated other comprehensive income (loss)         (6,232)           7,602
Unearned common stock held by ESOP                  (124,459)        (129,171)
                                                 -----------      -----------
    Total Stockholders' Equity                     7,877,357        7,908,052
                                                 -----------      -----------
      Total liabilities and stockholders'
        equity                                   $91,359,071       92,166,042
                                                 ===========      ===========
</TABLE>
See accompanying notes to consolidated financial statements.
                                 3<PAGE>
<PAGE>

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

<TABLE>
<CAPTION>
                                                         Three Months
                                                      Ended December 31,
                                                 ----------------------------
                                                     1998            1997  
                                                 ------------    ------------   
<S>                                               <C>            <C>            
INTEREST INCOME:
Interest and fees on loans                       $1,036,410      $  955,533
Interest and dividend income on
  investment securities                              34,712         161,872
Interest income on mortgage-backed 
    securities                                      487,614         497,833
Other interest income                                33,350          31,791
                                                 ----------      ----------
Total interest income                             1,592,086       1,647,029

Interest on deposits                                703,857         755,448
Interest on FHLB advances                           132,625         142,010
                                                 ----------      ----------
Total interest expense                              836,482         897,458

    Net interest income                             755,604         749,571

Provision for loan losses                                --              --
                                                 ----------      ----------
  Net interest income after provision 
    for loan losses                                 755,604         749,571

OTHER INCOME:

Service charges on deposits                         110,416         100,390
Gain (loss) on sale of assets                         6,347          10,285
Gain on sale of securities                               --          10,528
Other                                                 6,581           7,101
                                                 ----------      ----------
    Total Other Income                              123,344         128,304 

EXPENSES:
Salaries and employee benefits                      353,211         296,844
Net occupancy expense                                28,286          30,470
Federal insurance premium                            24,029          24,747
Data processing expenses                             65,041          40,383
Professional services                                67,111          78,078
Depreciation and amortization                        72,943          67,102
Advertizing expense                                  51,635          41,206
Office supplies                                      13,807          16,696
Insurance expense                                    14,858          15,524
Other                                                75,084         113,880
                                                 ----------      ----------
    Total other expense                             766,005         724,930
                                                 ----------      ----------

Income before income taxes                          112,943         152,945
Income tax expense                                   49,464          55,060
                                                 ----------      ----------
Net income                                       $   63,479      $   97,885
                                                 ==========      ==========
Basic earnings per common share                  $     0.53      $     0.75
                                                 ==========      ==========
</TABLE>

See accompanying notes to consolidated financial statements

                               4<PAGE>
<PAGE>

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


<TABLE>
<CAPTION>
                                                         Three Months
                                                      Ended December 31,
                                                 ----------------------------
                                                     1998            1997  
                                                 ------------    ------------   
<S>                                               <C>            <C>            

Basic average shares outstanding                   119,695         130,000
                                                  ========        ========
Diluted earnings per common share                 $   0.48        $   0.70
                                                  ========        ========
Diluted average shares outstanding                 131,695         142,000
                                                  ========        ========
Dividends declared and paid per common share      $   0.75        $   0.75
                                                  ========        ========
</TABLE>

See accompanying notes to consolidated financial statements

                               5<PAGE>
<PAGE>

                   CFS BANCSHARES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Unaudited)
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                        December 31,
                                                     1998           1997
                                                 ------------   ------------
<S>                                               <C>            <C>
Cash flows from operating activities:
Net income                                       $     63,479    $    97,885
Adjustments to reconcile net income to
 net cash provided by operating activities
  Depreciation and amortization                        72,943         67,102
  Compensation expense recognized on ESOP
     allocation                                        17,160             --
  Net amortization of premium on investment
    securities                                         38,157          8,291
  Gain on sale or call of investment securities
    available for sale                                 (1,636)       (10,528)
  Gain on sale of real estate acquired by 
    foreclosure                                        (4,101)            --
  Charge off of investment securities held to 
    maturity                                               --         25,000
  Decrease in deferred gain on sale of REO               (610)       (10,285)
  Decrease in accrued interest receivable              54,961         71,880
  Decrease (increase) in other assets                (124,594)        38,231 
  Increase (decrease) in accrued interest
    on deposits                                        (4,748)         9,137
  Decrease in other liabilities                       (88,478)      (265,169)
                                                  -----------    -----------
Net cash provided by operating activities              22,533         31,544 

Cash flows from investing activities:
Purchase of investment securities held to 
  maturity                                           (502,656)            -- 
Purchase of investment securities available
  for sale                                         (4,637,064)    (5,011,589)
Maturity or call of investment securities
  available for sale                                1,000,000             --
Proceeds from sale of investment securities
  available for sale                                       --      1,993,000
Net change in loans                                   (25,965)      (990,994)
Proceeds from principal collected on 
  investment securities held to maturity              484,199        532,956
Proceeds from principal collected on investment
  securities available for sale                     3,696,140        799,781
Purchase of premises and equipment                    (39,931)       (15,991)
Purchase of real estate acquired by foreclosure            --           (924)
Proceeds from sale of real estate acquired
  by foreclosure                                       13,860             --
                                                  -----------    -----------
    Net cash used in investing activities             (11,417)    (2,693,761)

</TABLE>

See accompanying notes to consolidated financial statements

                              6<PAGE>
<PAGE>
                   CFS BANCSHARES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Unaudited)
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                        December 31,
                                                 -------------------------
                                                     1998           1997
                                                 ------------   ----------
<S>                                               <C>            <C>
Cash flows from financing activities:

Net decrease in interest bearing deposits         (1,395,455)      (141,590)
Increase in FHLB advances                            850,000             --
Increase (decrease) in advance payments by 
  borrowers for taxes and insurance                 (136,985)        20,699 
Cash dividends                                       (97,500)       (97,500)
                                                  ----------     ---------- 
   Net cash used in financing activities            (779,940)      (218,391)

Net decrease in cash and cash equivalents           (768,824)    (2,880,608)

Cash and cash equivalents at beginning of 
  period                                           5,317,285      6,485,115
                                                  ----------     ---------- 
Cash and cash equivalents at end of period       $ 4,548,461      3,604,507
                                                 ===========     ==========

Supplemental information on cash payments

   Interest paid on deposits                      $  708,605        751,379
   Taxes paid                                             --             --

Supplemental information on noncash transactions:
  Loans transferred to real estate acquired
    by foreclosure                                $  107,621         58,334

</TABLE>

See accompanying notes to consolidated financial statements

                              7<PAGE>
<PAGE>

                   CFS BANCSHARES, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             (Unaudited)
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                        December 31,
                                                 --------------------------
                                                     1998           1997
                                                 ------------   -----------
<S>                                               <C>            <C>
Net income                                        $ 63,479       $ 97,885

Other comprehensive income, before tax:
  Unrealized holding (losses) gains arising
     during the period                             (21,959)        15,941
  Less reclassification adjustment for gains
     (losses) on securities available for
     sale                                               --         10,528
                                                  --------       --------
       Total other comprehensive income,
         before tax                                (21,959)         5,413

Income tax expense (benefit) related to 
  other comprehensive income:
  Unrealized holding gain (loss) on available
    for sale securities                             (8,125)         5,898
  Less reclassification adjustment for gains
    (losses) on securities available for sale           --          3,895
                                                  --------       --------
       Total income tax expense (benefit) 
         related to other comprehensive income      (8,125)         2,003
                                                  --------       --------
       Total other comprehensive (loss) income,
         net of tax                                (13,834)         3,410
                                                  --------       --------
       Total comprehensive income                 $ 49,645       $101,295
                                                  ========       ========
</TABLE>

See accompanying notes to consolidated financial statements

                              8<PAGE>
<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
    periods ended December 31, 1997 and 1998.  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, 1998.

2.  RECLASSIFICATIONS
    
    Certain items in the 1997 consolidated financial statements
    have been reclassified to conform to current year
    classifications.
    
3.  NET INCOME PER SHARE 
    
    During 1996, the Financial Accounting Standards Board
    ("FASB") issued Financial Accounting Standard No. 128,
    Earnings per Share, ("FAS128").  FAS128 specifies the
    computation, presentation and disclosure requirements for
    earning per share, replacing the presentation of primary
    earnings per share with the presentation of basic earnings
    per share.  For entities with complex capital structures,
    the presentation of fully diluted earning per share is
    replaced with diluted earning per share.  FAS 128 is
    effective for both interim and annual financial statements
    issued for periods ending after December 15, 1998. 
    The Company adopted FAS128 in 1998.
    
    Presented below is a summary of the components used to
    calculate diluted earnings per share for the three months
    ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                        December 31,
                                                     1998           1997
                                                 ------------   ------------
<S>                                               <C>            <C>
Diluted earnings per share:

Weighted average common shares outstanding        120,407         120,407
Net effect of the assumed exercise of stock
  options based on the treasury stock method
  using average market price for the quarter       12,000          12,000
                                                  -------         -------
Total weighted average common shares and
  potential common stock outstanding              132,407         132,407
                                                  =======         =======
</TABLE>
                              9<PAGE>
<PAGE>
    
4.  RECENT ACCOUNTING PRONOUNCEMENTS
    
    
In June 1997, the FASB issued Financial Accounting Standard No.
130, Reporting Comprehensive Income, ("FAS130").  This standard
establishes standards for reporting and displaying comprehensive
income and its components in a full set of general purpose
financial statements.  FAS130 requires all items that are
required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statements that is displayed in equal prominence with the other
financial statements.  The term "comprehensive income" refers to
revenues, expenses, gains, and losses that are included in
comprehensive income but excluded from earnings under current
accounting standards.  Currently, "other comprehensive income"
for the Company consists of items recorded in equity under
Financial Accounting Standard No. 115, Accounting for Certain
Investments in Debt and Equity Securities.  FAS130 is effective
for financial statements for years beginning after December 15,
1997.
    
In June 1997, the FASB issued Financial Accounting Standard No.
131, Disclosures about Segments of an Enterprise and Related
Information, ("FAS131").  FAS131 establishes new standards for
the disclosures made by public business enterprises to report
information about operating segments in annual financial
statements and requires those enterprises to report selected
information about operating segments in interim financial
reports to shareholders.  It also establishes standards for
related disclosures about products and services, geographic
areas, and major customers.  FAS131 is effective for financial
statements for years beginning after December 15, 1997.  The
Company does not have separate segments and thus has not
segmented reporting in the accompanying financial statements.
    
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 becomes
effective for financial statements for the first quarter of
fiscal years beginning after June 15, 1999.  The Company has no
derivative financial instruments that would be accounted for at
fair value under FAS133.

                           10<PAGE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
----------------------------------

REVIEW OF RESULTS OF OPERATIONS
      
OVERVIEW
--------

Net income for the three months ended December 31, 1998 was
$80,639 a decrease of $17,246 or 17.62% when compared to the
three months ended December 31, 1997.  The decline in net
earnings resulted primarily from an increase in general and
administrative expense of $23,915.
    
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 decreased 16 basis points from 4.20% for the three
month period ended December 31, 1997 to 4.04% during the three
month period ended December 31, 1998 while the yield on interest
earning assets increased 16 basis points from 7.49% for the
three month period ended December 31, 1997 to 7.65% for the
comparable period in the current fiscal year.
    
The increase in the average yield on interest earning assets
along with a decline in the average cost of interest bearing
liabilities led to a slight increase in net interest income
despite a decline in the average balances of interest earning
assets and interest bearing liabilities.  The Bank's net
interest income increased by $6,033 or .80% from $749,571 for
the three month period ended December 31, 1997 to $755,604 for
the three month period in the current fiscal year. 
      
OTHER INCOME
------------

During the three month period ended December 31, 1998 other
income decreased from $128,304 for the three month period ended
December 31, 1997 to $123,344 for the comparable period in the
current fiscal year.  The decrease resulted from declines in
gains on sale of assets and securities of $14,466 which was
partially offset by an increase in service charges on deposits
of $10,116 when comparing the three months ended December 31,
1998 to the comparable period in the prior fiscal year.  
   

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

During the three month period ended December 31, 1998 the Bank's
other expense increased by 3.29% or $23,915 from $724,930 for
the three month period ended December 31, 1997 to $748,845 for
the comparable period in the current year. Salaries and employee
benefits, data processing expense and advertising expense
increased by $39,207, $24,658 and $10,429 respectively when
comparing the three months ended December 31, 1997 to the three
month period ended December 31, 1998.  The increase in salaries
and employee benefits resulted from a changes in recording
expense associated with the Citizens Federal Savings Bank ESOP
in

                              11<PAGE>
<PAGE>
accordance with the AICPA's SOP 96-3, in the way payments and
accruals for the Bank's biweekly payroll and employee benefits
are recorded and from the hiring of one additional staff person
when comparing the three months ended December 31, 1998 to the
same period in the prior fiscal year. Effective June 16, 1998
the Bank began using the services of a third party processor to
handle the item processing and statement rendering for all of
the Bank's checking accounts.  The expense associated with that
service is the primary reason for the increase in data
processing expense between the three month period ended December
31, 1997 when compared to the three month period in the current
fiscal year. The increases described above were partially offset
by a decline in other expense of $38,796 from $113,880 for the
three months ended December 31, 1997 to $75,084 for the three
month period in the current fiscal year.  During December 1997
the Bank charged off a $25,000 investment in a small business
investment corporation.  There was no such charge during the
current fiscal period.
    
REVIEW OF FINANCIAL CONDITION
-----------------------------

Significant factors affecting the Bank's financial condition
from September 30, 1998 to December 31, 1998 detailed below:
    
ASSETS
------    

Total assets decreased $806,971 or .88% from $92,166,042 at
September 30, 1998 to $91,359,071 at December 31, 1998.  The
decline is primarily attributable to a decline in the Bank's
deposits and other liabilities and was funded primarily by a
decrease in federal funds sold and overnight deposits which
declined by $899,887 from $1,924,850 at September 30, 1998 to
$1,024,963 at December 31, 1998.
    
LIABILITIES
-----------
      
Total liabilities decreased $776,276 or .92% between September
30, 1998 and December 31, 1998.  The decrease resulted from a
decline in the Bank's interest bearing deposits of $1,400,203
from $73,892,189 at September 30, 1998 to $72,491,986 at
December 31, 1998.  The decline in deposits is attributable to a
large withdrawal by an institutional customer of the Bank and by
seasonal withdrawals of transaction 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 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 December 31, 1998 the Bank had $1,022,781 in assets
classified as substandard including real estate acquired by
foreclosure of  $157,496, no assets classified as doubtful and
$256,094 in assets classified as loss.  A specific loan loss
reserve has been established for all loans classified as a loss. 
At September 30, 1998 the Bank had $733,881 in assets classified
as substandard including real estate acquired by foreclosure of
$59,634, no assets classified as doubtful and $225,439 in assets
classified as loss.
    
The allowance for loan losses was $501,711 at December 31, 1998. 
Management believes that the current allowance for loan losses
is adequate to cover any potential future loan losses which

                               12<PAGE>
<PAGE>
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.
    
YEAR 2000 (Y2K) READINESS DISCLOSURE
------------------------------------
    
The Bank is a user of computers, computer software and equipment
utilizing embedded microprocessors that are affected by the year
2000 issue.  The year 2000 issue exists because many computer
systems and applications use two digit date fields to designate
a year.  As the century date change occurs, date sensitive
systems may recognize the year 2000 as 1900, or not at all.  The
inability to recognize or properly treat the year 2000 may cause
erroneous results, ranging from system malfunctions to incorrect
or incomplete processing.
    
Citizens Federal Savings Bank has prepared an action plan to
evaluate our computer systems, software products and vendor
services for year 2000 compliance.  The Bank's plan consists of
the following:
    
         PROBLEM AWARENESS - The Bank is aware of the problems
         that could potentially arise from year 2000 problems
         and has analyzed internal systems as well as services
         provided by third parties.  Educational initiatives
         with regard to customer awareness will continue into
         1999.
         
         ASSESSMENT PHASE - The Bank has inventoried technology
         assets and contacted third party vendors and service
         providers to assess exposure to year 2000 problems. 
         The Bank's third party data processing arrangement has
         been identified as the primary mission critical system
         for Citizens Federal.
         
         RENOVATION PHASE - Hardware and software which was
         identified during the assessment phase as not being
         year 2000 compliant has been upgraded, replaced or
         scheduled for replacement during the early part of
         1999.  A third party processor provides the Bank's data
         processing and one set of testing was done between the
         Bank and the processor during September 1998.  Based on
         the results from testing which has already been
         conducted the mission critical third party data
         processing system will be ready for year 2000
         processing.         

                            13<PAGE>
<PAGE>
         VALIDATION - The Bank's internal systems as well as the
         third party processor which provides the Bank's primary
         data processing requirements have been tested for year
         2000 compliance.  Additional testing of those critical
         applications is scheduled for the early part of 1999. 
         In addition to the testing conducted by Citizens
         Federal with the third party processor, over 100 other
         users of the system have also conducted tests and will
         be doing additional testing for year 2000 readiness. 
         The Bank has received certifications from non-critical
         vendors and service providers and will rely on those
         where complete testing is not possible.
         
         IMPLEMENTATION - Replacement of non-compliant
         technology at the institution is essentially complete. 
         Results from additional tests, which are scheduled for
         early 1999, will be thoroughly reviewed and remedial
         actions, which are determined to be necessary for year
         2000 compliance, will be taken.  

    
Based on the results of tests, reviews and analysis done to date
the Bank expects to be able to operate in a normal fashion
before, during and through the year 2000 period.  While working
to ensure that the Bank's primary objective of conducting
business as usual there can be no guarantee that there will not
be disruptions related to the year 2000.  
    
A failure of the Bank's data processing system would be a likely
worst case year 2000 scenario.  Under such conditions the Bank
would operate in a manual mode relying on printed trial balance
reports from December 30, 1999 and/or December 31, 1999 as a
base record during the time the problems with the system were
being corrected.  The Bank's management is in the process of
reviewing appropriate cash and liquidity levels as the year 2000
approaches. 
    
The Bank has incurred approximately $48,000 in capital
expenditures to upgrade and/or replace computer equipment and
approximately $5,000 in operating expenses associated with year
2000 compliance since the beginning of 1998.  Additional
expenditures to attain year 2000 readiness are not expected to
exceed $25,000 and will not have a material financial impact on
the Bank.
         
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 1996. 
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
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.

                           14<PAGE>
<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 December 31, 1998 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)        $8,002,280   17.27%    3,706,320     8.00%   4,632,900  10.00%
Tier I capital                  
(to risk weighted assets)        $7,883,589   17.02%    1,853,160     4.00%   2,779,740   6.00%
Tier I capital
(to average assets)              $7,883,589    8.59%    3,670,502     4.00%   4,588,128   5.00%


Reconciliation of capital:              Risk Weighted          Tier I Capital
                                           Capital

Total stockholders' equity (GAAP)       $7,877,357             $7,877,357
Unrealized gain on securities - AFS          6,232                  6,232 
Allowance for loan losses                  245,618                      -
Equity investments                        (126,387)            
 Total                                  $8,002,820             $7,883,589

</TABLE>

                               15<PAGE>
<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 matter
will not have a significant effect on the financial position of
the Bank.

ITEM 2: CHANGE IN SECURITIES

None

ITEM 3: DEFAULT UPON SENIOR SECURITIES

Not Applicable

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

    The annual meeting of stockholders of CFS Bancshares, Inc.
    was held on January 27, 1999 for the purpose of considering
    and acting upon the election of one director to serve a
    three year term.  The result of the election in which
    100,632 out of 130,000 possible votes were cast as follows:
    
                                     Votes For   Votes Against
                                                  or Withheld

    Bunny Stokes, Jr. as Director     100,632        none

ITEM 5: OTHER INFORMATION:

    As of October 18, 1996 and July 23, 1998, the Bank entered
    into Agreements with the Office of Thrift Supervision (OTS)
    intended to correct certain deficiencies, about which the
    OTS expressed supervisory concern.  Pursuant to the
    Agreement, the Bank agreed to adopt certain guidelines,
    procedures and policies.  The Bank also agreed to adopt a
    business plan covering such matters as lending activities,
    operating expenses, operating results and other matters.
    
    The Bank believes it is in substantial compliance with or
    will be in compliance with the terms of the Agreement within
    the time periods stated within the agreement.  If the Bank
    were not to comply with the Agreement, the OTS would have
    certain enforcement rights, possibly including the right to
    commence an action to remove directors and/or officers or to
    appoint a conservator or a receiver for the Bank.  Although
    compliance with the Agreement has not had and is not
    expected to have a material impact on the operations of the
    Bank, there can be no assurance that the Agreement will not
    have an adverse impact on the Bank's future operations.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit 27 - Financial Data Schedule


                             16<PAGE>
<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: February 11, 1999  /s/ Bunny Stokes, Jr.
                         -------------------------------------
                         Bunny Stokes, Jr.
                         Chairman/CEO
                         (principal executive officer)


Date: February 11, 1999  /s/ W. Kent McGriff
                         ------------------------------------
                         W. Kent McGriff
                         Executive Vice President
                         (principal financial and accounting
                         officer)
                                   

                           17