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, 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 June 30, 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.

Item 1 - Financial Statements
Consolidated Balance Sheets at June 30, 2001
and September 30, 2000 (unaudited)                                        -3-

Consolidated Statements of Operations for the
 Three Months and Nine Months Ended
 June 30, 2001 and 2000 (unaudited)                                       -4-

Consolidated Statements of Cash Flows for the
 Nine Months Ended June 30, 2001 and 2000 (unaudited)                     -6-

Consolidated Statements of Comprehensive Income for
 the Three Months and Nine Months Ended June 30, 2001
 and 2000 (unaudited)                                                     -8-

Notes to Consolidated Financial Statements                                -9-

Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations                                      -11-

PART II - OTHER INFORMATION                                              -15-

SIGNATURES                                                               -16-
<PAGE>
                       CFS BANCSHARES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                             June 30,             September 30,
                                                                              2001                     2000
<S>                                                                        <C>                        <C>
   ASSETS
   ------
Cash and amounts due from depository
 institutions                                                              $ 3,976,863                2,918,542
Federal funds sold and overnight deposits                                    2,251,311                  675,813
                                                                          ------------              -----------
   Total cash and cash equivalents                                           6,228,174                3,594,355

Interest bearing deposits                                                      163,142                  163,142
Investment securities held to maturity, at cost (fair value of
  $1,532,668 and $3,506,924, respectively)                                   1,507,167                3,527,879
Investment securities available for sale, at fair value (cost of
  $47,538,431 and $40,099,815, respectively)                                47,922,114               39,376,161
Federal Home Loan Bank stock                                                   747,500                  747,500
Loans receivable (net of allowance for loan loss
  of $378,936 and $342,156, respectively)                                   42,212,765               48,238,040
Premises and equipment, net                                                  3,502,508                3,644,836
Real estate acquired by foreclosure                                            302,114                   86,237
Accrued interest receivable on investment securities                           298,372                  335,656
Accrued interest receivable on loans                                           327,313                  324,482
Other assets                                                                   627,127                  525,440
                                                                          ------------              -----------
          Total assets                                                    $103,838,296              100,563,728
                                                                          ============              ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Interest-bearing deposits                                                  $78,263,027               76,334,441
Advance payments by borrowers for
 taxes and insurance                                                           199,828                  267,533
Other liabilities                                                            1,100,875                  725,003
Employee Stock Ownership Plan debt                                              56,000                   64,000
FHLB advances                                                               14,950,000               14,950,000
                                                                          ------------              -----------
   Total liabilities                                                        94,569,730               92,340,977

Stockholders' Equity:
Common stock                                                                   130,000                  130,000
Additional paid-in-capital                                                   1,189,158                1,184,758
Retained earnings                                                            7,743,487                7,422,368
Accumulated other comprehensive income (loss)                                  245,557                 (463,139)
Unearned common stock held by ESOP                                             (39,636)                 (51,236)
                                                                          ------------              -----------
   Total stockholders' equity                                                9,268,566                8,222,751
                                                                          ------------              -----------
          Total liabilities and stockholders' equity                      $103,838,296              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                   Nine Months Ended
                                                               June 30,                             June 30,
                                                         2001            2000                2001             2000
<S>                                                       <C>               <C>               <C>              <C>
INTEREST INCOME:
Interest and fees on loans                               $  976,610         967,548           3,146,365        2,879,649
Interest and dividend income
 on investment securities                                   165,088         149,652             488,116          392,795
Interest income on
 mortgage-backed securities                                 544,236         577,725           1,692,376        1,527,007
Other interest income                                        22,422          18,944             111,068          116,647
                                                         ----------      ----------          ----------       ----------
    Total interest income                                 1,708,356       1,713,869           5,437,925        4,916,098

INTEREST EXPENSE:
Interest on deposits                                        676,370         710,390           2,231,010        2,039,137
Interest on FHLB advances                                   204,067         180,867             639,031          501,128
                                                         ----------      ----------          ----------       ----------
Total interest expense                                      880,437         891,257           2,870,041        2,540,265

         Net interest income                                827,919         822,612           2,567,884        2,375,833
Provision for (recovery of) loan losses                           -               -                   -         (100,000)
                                                         ----------      ----------          ----------       ----------
         Net interest income after
          provision for loan losses                         827,919         822,612           2,567,884        2,475,833

OTHER INCOME:
Service charges on deposits                                  80,983          96,047             279,128          320,065
Gain (loss) on sale of assets                                (1,924)         17,191                 799           15,404
Gain (loss) on sale or call of securities                    55,288               -              69,502           (6,125)
Other                                                         8,289           8,421              21,209           23,018
                                                         ----------      ----------          ----------       ----------
  Total other income                                        142,636         121,659             370,638          352,362

EXPENSES:
Salaries and employee benefits                              370,637         345,153           1,104,740        1,000,726
Net occupancy expense                                        29,329          32,866             102,513           91,027
Federal insurance premium                                    11,400          12,042              33,831           45,715
Data processing expenses                                     53,293          52,466             162,726          156,058
Professional services                                        46,006          40,044             160,151          188,240
Depreciation and amortization                                59,535          66,278             189,233          215,142
Advertising expense                                          13,110          23,808              45,015           58,970
Office supplies                                              24,000           7,913              52,796           44,362
Insurance expense                                            17,596          19,804              51,197           49,172
Other                                                       110,897         120,971             382,526          344,623
                                                         ----------      ----------          ----------       ----------
 Total other expense                                        735,803         721,345           2,284,728        2,194,035
                                                         ----------      ----------          ----------       ----------
Income before income taxes                                  234,752         222,926             653,794          634,160
Income tax expense                                           80,788          79,304             232,805          233,163
                                                         ----------      ----------          ----------       ----------
Net Income                                                $ 153,964         143,622             420,989          400,997
                                                         ==========      ==========          ==========       ==========

</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,
                                                         2001            2000                2001             2000
<S>                                                       <C>               <C>               <C>              <C>

Basic earnings per common share                          $     1.21            1.13                3.32             3.17
                                                         ==========      ==========          ==========       ==========
Basic average shares outstanding                            126,871         126,645             126,771          126,545
                                                         ==========      ==========          ==========       ==========
Diluted earnings per common share                        $     1.14            1.07                3.13             2.99
                                                         ==========      ==========          ==========       ==========
Diluted average shares outstanding                          134,671         134,445             134,571          134,163
                                                         ==========      ==========          ==========       ==========
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,
                                                                                         2001             2000
<S>                                                                                   <C>                <C>
Cash flows from operating activities:
Net income                                                                            $ 420,989          400,997
Adjustments to reconcile net income to
 net cash provided by operating activities
  Loan loss provision                                                                        --           50,000
  Depreciation and amortization                                                         189,233          215,142
  Compensation expense recognized on ESOP allocation                                     12,000           11,000
  Net amortization of premium on investment securities                                   76,576           38,861
  Loss on sale of investment securities held to maturity                                     --            2,042
  Loss (gain) on sale or call of investment securities available for sale               (69,502)           4,083
  Loss recognized on foreclosed loans                                                        --            5,155
  Loss (gain) on sale of real estate acquired by foreclosure                              1,875          (14,333)
  Decrease in deferred gain on sale of REO                                               (2,674)          (1,907)
  Decrease (increase) in accrued interest receivable                                     34,453          (95,658)
  Decrease (increase) in other assets                                                  (101,687)         324,106
  Increase (decrease) in accrued interest on deposits                                  (127,885)          19,890
  Decrease in other liabilities                                                         (25,965)         (64,005)
                                                                                   ------------     ------------
Net cash provided by operating activities                                               407,413          895,373

Cash flows from investing activities:
Purchase of interest-bearing deposits                                                        --           (1,618)
Purchase of investment securities available for sale                                (17,065,225)     (10,493,881)
Proceeds from sale of investment securities held to maturity                                 --           81,232
Proceeds from sale of investment securities available for sale                        3,871,940        1,309,941
Proceeds from call of investment security available for sale                          3,000,000               --
Proceeds from call of investment securities held to maturity                            500,000               --
Proceeds from principal collected on
 investment securities held to maturity                                               1,517,807          760,170
Proceeds from principal collected on
 investment securities available for sale                                             2,750,000        2,965,011
Net change in loans                                                                   5,781,606       (2,327,304)
Purchase of FHLB stock                                                                       --           (5,000)
Purchase of premises and equipment                                                      (46,905)         (58,865)
Proceeds from sale of real estate acquired by foreclosure                                25,917           49,330
                                                                                   ------------     ------------
  Net cash used in investing activities                                                 335,140       (7,720,984)

</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,
                                                                                         2001             2000
<S>                                                                                   <C>                <C>
Cash flows from financing activities:

Net increase in interest bearing deposits                                             2,056,471        1,877,282
Decrease in advance payments by
 borrowers for taxes and insurance                                                      (67,705)         (82,732)
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                                          1,891,266        2,507,050

Net increase (decrease) in cash and cash equivalents                                  2,633,819       (4,318,561)

Cash and cash equivalents at beginning of period                                      3,594,355        7,689,451
                                                                                   ------------     ------------
Cash and cash equivalents at end of period                                         $  6,228,174        3,370,890
                                                                                   ============     ============
Supplemental information on cash payments:
  Interest paid                                                                    $  2,997,926        2,520,375
  Income taxes paid                                                                     266,000          313,500

Supplemental information on noncash transactions:
  Loans transferred to real estate acquired by foreclosure                         $    243,669           42,412
</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,
                                                                       2001         2000         2001         2000

<S>                                                                    <C>           <C>           <C>        <C>
Net income                                                             $153,964      143,622       420,989    400,997

Other comprehensive income, before tax:
    Unrealized holding (losses) gains arising
      during the period                                                 (94,132)     (22,403)    1,176,853    (177,028)
    Less reclassification adjustment for gains (losses) on
      securities available for sale                                      55,302            -        69,516      (6,125)
                                                                      ---------     --------     ---------    --------
          Total other comprehensive income, before tax                 (149,434)     (22,403)    1,107,337    (170,903)

Income tax expense (benefit) related to other
 comprehensive income:
   Unrealized holding gain (loss) on available
     for sale securities                                                (33,887)      (8,352)      423,667     (63,730)
   Less reclassification adjustment for gains (losses) on
     securities available for sale                                       19,909            -        25,026      (2,205)
                                                                      ---------     --------     ---------    --------
          Total income tax expense (benefit) related to
            other comprehensive income                                  (53,796)      (8,352)      398,641     (61,525)
                                                                      ---------     --------     ---------    --------
          Total other comprehensive income (loss), net of tax           (95,638)     (14,051)      708,696    (109,378)
                                                                      ---------     --------     ---------    --------
          Total comprehensive income                                  $  58,326      129,571     1,129,685     291,619
                                                                      =========     ========     =========    ========
</TABLE>


                                       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, 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 nine months ended June 30, 2001 and
2000.
<TABLE>
<CAPTION>
                                                         Three months ended        Nine months ended
                                                              June 30,                  June 30,
                                                        2001          2000         2001          2000
                                                      -------------------------------------------------

<S>                                                    <C>           <C>          <C>           <C>
Weighted average common shares outstanding             126,871       126,645      126,771       126,545
Net effect of the assumed exercise of stock
  options based on the treasury stock method
  using average market price for the quarter             7,800         7,800        7,800         7,618
                                                      -------------------------------------------------
Total weighted average common shares and
  potential common stock outstanding                   134,671       134,445      134,571       134,163
                                                      =================================================
</TABLE>

4.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998 the FASB issued  Statement  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  Statement No. 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.
Statement No. 133, as amended,  was effective for financial  statements  for the
first  quarter of fiscal  years  beginning  after  June 15,  2000.  Adoption  of
Statement  No.  133 did not have an impact on the  financial  statements  of the
Company.

                                       9
<PAGE>

In September 2000, FASB issued  Statement No. 140,  Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.  Statement No.
140 is  effective  for all  transfers  and  servicing  of  financial  assets and
extinguishments  of liabilities after March 31, 2001. The Statement is effective
for recognition and  reclassification of collateral and disclosures  relating to
securitization  transactions  and  collateral  for  fiscal  years  ending  after
December 15,  2000.  Due to the nature of its  activities,  the Company does not
expect a material  change to its results of  operations  as a result of adopting
Statement No. 140.

In July 2001,  the FASB issued  Statement No. 141,  Business  Combinations,  and
Statement  No. 142,  Goodwill and Other  Intangible  Assets.  Statement  No. 141
requires  that the  purchase  method  of  accounting  be used  for all  business
combinations  initiated  after June 30, 2001.  Statement No. 141 also  specifies
criteria  intangible  assets acquired in a purchase method business  combination
must meet to be recognized and reported  apart from goodwill.  Statement No. 142
will require that goodwill and intangible assets with indefinite useful lives no
longer be amortized,  but instead be tested for  impairment at least annually in
accordance with the provisions of Statement No. 142. Statement No. 142 will also
require that  intangible  assets with  estimable  useful lives be amortized over
their respective  estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance  with FASB  Statement No. 121,  Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of.  The  Company  is  required  to adopt the  provision  of  Statement  No. 141
effective  immediately and Statement 142 effective  January 1, 2002. To date the
Company  has not  been  involved  in any  business  combinations  and  does  not
currently  have any goodwill  capitalized  on its balance  sheet.  As such,  the
Company  does not expect the adoption of  Statements  No. 141 and 142 to have an
impact on the financial statements of the Company.

In July 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement
Obligations.  That  standard  requires  entities  to record  the fair value of a
liability  for an  asset  retirement  obligation  in the  period  in which it is
incurred. When the liability is initially recorded, the entity should capitalize
the cost by increasing the carrying amount of the related long-lived asset. Over
time,  the  liability  is  accreted to its present  value each  period,  and the
capitalized cost is depreciated over the useful life of the related asset.  Upon
settlement of the  liability,  an entity either  settles the  obligation for its
recorded  amount  or  incurs a gain or loss  upon  settlement.  The  Company  is
required to adopt the provision of Statement  No. 143 for fiscal year  beginning
after June 15, 2002. The Company is currently  assessing  whether  Statement No.
143 will have an impact on its financial statements.

In July 2001, the Office of the Chief Accountant and the Division of Corporation
Finance of the  Securities and Exchange  Commission  (the  Commission)  released
Staff  Accounting  Bulletin No. 102,  (SAB 102),  Selected  Loan Loss  Allowance
Methodology and Documentation  Issues, which provides certain views of the staff
on the  development,  documentation,  and  application of a systematic loan loss
allowance methodology.

SAB 102 does not change any of the  accounting  profession's  existing  rules on
accounting  for loan loss provision or  allowances.  Rather,  SAB 102 draws upon
existing guidance,  in Commission rules and interpretations,  generally accepted
accounting principles,  and generally accepted auditing standards,  and explains
certain views of the staff in applying  existing  guidance  related to loan loss
allowance  methodologies  and  supporting  documentation.  SAB 102 is  effective
immediately. The Company does not expect SAB 102 to have a significant impact on
its financial statements.


                                       10
<PAGE>

ITEM 2.   MANAGEMENT DISCUSSION AND ANALYSIS
          ----------------------------------

REVIEW OF RESULTS OF OPERATIONS

OVERVIEW
--------

Net income for the nine months  ended June 30, 2001 was  $420,989 an increase of
$19,992 or 4.99% when compared to the nine months ended June 30, 2000.  Earnings
per  diluted  share  were $3.13 for the  current  period  compared  to $2.94 per
diluted share for the prior year. The increase in net income resulted  primarily
from  increases  in net  interest  income and other  income that were  partially
offset by an increase in operating  expenses.  During the nine months ended June
30, 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 June 30,  2001 was  $153,964  an  increase  of $10,342 or 7.20% as
compared to net income  during the three months ended June 30, 2000 of $143,622.
Earnings per diluted share for the quarter  improved to $1.14  compared to $1.07
for the prior year.

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 21 basis
points from 3.93% for the nine month  period ended June 30, 2000 to 4.14% during
the nine month  period  ended June 30, 2001 while the yield on interest  earning
assets increased 10 basis points from 7.59% for the nine month period ended June
30, 2000 to 7.69% for the comparable period in the current fiscal year.

The Bank's net interest  income  increased by $192,051 or 8.08% from  $2,375,833
for the nine month period ended June 30, 2000 to  $2,567,884  for the nine month
period in the current  fiscal  year.  Net  interest  income for the three months
ended June 30,  2001  increased  by $5,307 or .65% from  $822,612  for the three
months ended June 30, 2000 to $827,919 for the three months ended June 30, 2001.
The  increase in net interest  income is primarily  the result of an increase in
interest  bearing assets of  approximately  $4.2 million which occurred  between
June 30, 2000 and June 30, 2001.

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

Other income  increased  from  $352,362 for the nine month period ended June 30,
2000 to $370,638 for the comparable period in the current fiscal year. A decline
in service  charges on deposits of $40,937 when  comparing the nine months ended
June 30, 2001 to the comparable period in the prior fiscal year was offset by an
increase  in gains on sale or call of  securities  of  $75,641.  The  decline in
service charges resulted from a charge-off of checking  accounts  overdrawn from
insufficient  funds charges and from a decline in the overall volume of accounts
incurring  service  charges  compared to the prior fiscal year.  The increase in
gains on the sale or call of investment  securities  increased  primarily as the
result of a call of a  $1,000,000  par  security  during June 2001 that the Bank
purchased  at a discount.  During the nine month period in the prior fiscal year
the Bank had losses from the sale of securities of $6,125. During the three


                                       11
<PAGE>
months  ended June 30, 2001 other  income  increased by $20,977 as the result of
increases in the gain on sale or call of securities as described above that were
partially offset by decreases in service charges on deposit accounts as noted in
the discussion for the nine month periods.

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

During  the nine month  period  ended June 30,  2001 the  Bank's  other  expense
increased  by 4.13% or $90,693 from  $2,194,035  for the nine month period ended
June 30, 2000 to  $2,284,728  for the  comparable  period in the  current  year.
Salaries  and  employee  benefits  and other  expense  increased by $104,014 and
$37,903,  respectively when comparing the nine months ended June 30, 2001 to the
nine month  period  ended June 30,  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 and depreciation and amortization of $28,089 and $25,909,  respectively
when  comparing  the nine  months  ended June 30, 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 June 30, 2001 are detailed below:

ASSETS
------

Total assets  increased  $3,274,568 or 3.26% from  $100,563,728 at September 30,
2000 to $103,838,296 at June 30, 2001. This increase can be attributed primarily
to an  increase  of  $1,107,337  in the fair value  over cost of the  investment
securities  available  for sale and general asset growth caused by $1,928,586 of
new  deposits.  Significant  changes in assets  balances  include an increase in
investment securities available for sale which increased by $8,545,953 or 21.70%
from  $39,376,161  at September 30, 2000 to  $47,922,114 at June 30, 2001 and an
increase  in federal  funds  sold and  overnight  deposits  which  increased  by
$1,575,498 between September 30, 2000 and June 30, 2001. The increases described
above were funded from decreases in investment  securities  held to maturity and
net loans receivable of $2,020,712 and $6,025,275,  respectively  when comparing
June 30, 2001 balances to those of September 30, 2000. The decrease in net loans
receivable  resulted  from an  increase  in the  amount  of  prepayments  on the
existing  portfolio due to the decline in interest  rates and from  decreases in
the amount of loans originated. During the two fiscal years prior to the current
period the Bank originated a significant  number of  non-residential  mortgages.
The  opportunities for making such loans during the past 12 months has decreased
significantly.

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

Total liabilities  increased  $2,228,753 or 2.41% between September 30, 2000 and
June 30, 2001.  The increase  resulted  from an increase in the Bank's  interest
bearing  deposits  of  $1,928,586  from  $76,334,441  at  September  30, 2000 to
$78,263,027  at June 30, 2001.  The increase in deposits  occurred in the Bank's
transaction (checking and savings) accounts.


                                       12
<PAGE>

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,  2001 the Bank had  $809,933  in assets  classified  as  substandard
including assets acquired by foreclosure or repossession of $302,114,  no assets
classified  as doubtful  and $155,475 in assets  classified  as loss. A specific
loan loss allowance 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 $378,936 at June 30, 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 specified
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.

                                       13
<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 June 30, 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)  $9,085,177   19.62%     3,705,040   8.00%     4,631,300  10.00%
Tier I capital
(to risk weighted assets)  $8,974,595   19.38%     1,852,520   4.00%     2,778,780   6.00%
Tier I capital
(to average assets)        $8,974,595    8.78%     4,088,040   4.00%     5,110,051   5.00%


Reconciliation of  Bank capital:      Risk Weighted    Tier I Capital
                                        Capital

Total stockholders' equity (GAAP)      $9,268,566      $9,268,566
Holding company equity                    (48,414)        (48,414)
Unrealized gain on securities - AFS      (245,557)       (245,557)
Allowance for loan losses                 223,461             --
Equity investments                       (112,879)
         Total                         $9,085,177      $8,974,595

</TABLE>


                                       14
<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

                                       15
<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 13, 2001            By:/s/ Bunny Stokes, Jr.
      ---------------               ----------------------------------
                                    Bunny Stokes, Jr.
                                    Chairman/CEO
                                    (principal executive officer)


Date: August 13, 2001            By:/s/ Bunny Stokes, Jr.
      ---------------               ----------------------------------
                                    W. Kent McGriff
                                    Executive Vice President
                                    (principal financial and accounting officer)