##### 



U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2003                                
|     |  |                                                                                  
|[  ] |  | Transition report under Section 13 or 15(d) of the Exchange Act                  
|     |  | For the transition period from _______________ to                                

Commission file number 333-07914

CITIZENS EFFINGHAM BANCSHARES, INC.

---

(Exact Name of Small Business Issuer as Specified in Its Charter)


|                                |  |                    
|------------------------------- |  | -------------------
|GEORGIA                         |  | 58-2357619         
|                                |  |                    
|(State or Other Jurisdiction of |  | (I.R.S. Employer   
|Incorporation or Organization)  |  | Identification No.)

802 South Laurel Street
Post Office Box 379
Springfield, Georgia 31329

---

(Address of Principal Executive Offices)


(912) 754-0754

---

(Issuers Telephone Number, Including Area Code)


Not Applicable

---

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)


Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes x No o

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date: Common Stock $1 par
value, 512,000 shares outstanding at September 30, 2003

Transitional Small Business Disclosure Format (check one):

Yes o No x





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary

INDEX

|                                                                                                                                            |  |                                                                                                                                                                  |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|PART I:                                                                                                                                     |  | FINANCIAL INFORMATION                                                                                                                                           
|ITEM 1.                                                                                                                                     |  | FINANCIAL STATEMENTS                                                                                                                                             |  | PAGE
|                                                                                                                                            |  |                                                                                                                                                                 
|The following financial statements are provided for Citizens Effingham
Bancshares, Inc. and the subsidiary bank, Citizens Bank of Effingham |  |                                                                                                                                                                  |  |     
|                                                                                                                                            |  |                                                                                                                                                                 
|                                                                                                                                            |  | Consolidated Balance Sheets (unaudited) -September 30, 2003 and
December 31, 2002                                                                                |  |      | 2  | 
|                                                                                                                                            |  |                                                                                                                                                                 
|                                                                                                                                            |  | Consolidated Statements of Income (unaudited)  For the Three Months
Ended September 30, 2003 and 2002 and For the Nine Months Ended
September 30, 2003 and 2002 |  |      | 3  | 
|                                                                                                                                            |  |                                                                                                                                                                 
|                                                                                                                                            |  | Consolidated Statements of Cash Flows (unaudited)  For the Nine Months
Ended September 30, 2003 and 2002                                                        |  |      | 4  | 
|                                                                                                                                            |  |                                                                                                                                                                 
|                                                                                                                                            |  | Notes to Consolidated Financial Statements (unaudited)                                                                                                           |  |      | 5  | 
|                                                                                                                                            |  |                                                                                                                                                                 
|ITEM 2.                                                                                                                                     |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                                                                            |  |      | 6  | 
|                                                                                                                                            |  |                                                                                                                                                                 
|ITEM 3.                                                                                                                                     |  | Controls and Procedures                                                                                                                                          |  |      | 9  | 
|                                                                                                                                            |  |                                                                                                                                                                 
|PART II:                                                                                                                                    |  | OTHER INFORMATION                                                                                                                                                |  |      | 10 | 

The consolidated financial statements furnished have not been examined by
independent certified public accountants, but reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the results of
operations for the periods presented.

The results of operations for the nine-month period ended September 30, 2003 are
not necessarily indicative of the results to be expected for the full year.





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
(Unaudited)

|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |              |            |           |             | 
|------------------------------------------------- | ------------------------------- | ----------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------- | ------------- | ----------- | ------------ | ---------- | --------- | ----------- | 
|                                                  |                                 |                                                                                                 |                            |                                            |             | September 30, |             | December 31,
|Assets                                            |                                 | 2003                                                                                            |                            | 2002                                      
|                                                  |                                 |                                                                                                 |                            |                                           
|Cash and due from banks                           |                                 | $                                                                                               | 4,485,774                  |                                            |             | $             | 5,186,453   |             
|Federal funds sold                                |                                 |                                                                                                 | 6,524,000                  |                                            |             |               | 1,922,000   |             
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  | Total cash and cash equivalents |                                                                                                 |                            | 11,009,774                                 |             |               |             | 7,108,453    |           
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|Securities available for sale, at fair value      |                                 |                                                                                                 | 8,829,996                  |                                            |             |               | 8,181,159   |             
|Federal Home Loan Bank stock, restricted, at cost |                                 |                                                                                                 | 198,800                    |                                            |             |               | 167,200     |             
|Loans, net of unearned income                     |                                 |                                                                                                 | 87,171,536                 |                                            |             |               | 83,155,277  |             
|Less: allowance for loan losses                   |                                 |                                                                                                 | (1,184,325                 | )                                          |             |               | (922,716    | )           
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  | Loans, net                      |                                                                                                 |                            | 85,987,211                                 |             |               |             | 82,232,561   |           
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|Bank premises and equipment, net                  |                                 |                                                                                                 | 1,902,973                  |                                            |             |               | 1,898,931   |             
|Accrued Interest Receivable                       |                                 |                                                                                                 | 627,887                    |                                            |             |               | 661,036     |             
|Other assets and accrued income                   |                                 |                                                                                                 | 558,132                    |                                            |             |               | 363,899     |             
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  | Total Assets                    |                                                                                                 | $                          | 109,114,773                                |             |               | $           | 100,613,239  |           
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|Liabilities and Shareholders Equity              |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|Deposits:                                         |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 | Non-interest bearing                                                                            |                            | $                                          | 12,607,210  |               |             | $            | 11,479,250 |          
|                                                  |                                 | Interest bearing                                                                                |                            |                                            | 85,646,348  |               |             |              | 78,810,612 |          
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 | Total deposits                                                                                  |                            |                                            | 98,253,558  |               |             |              | 90,289,862 |          
|Accrued interest payable                          |                                 |                                                                                                 | 281,424                    |                                            |             |               | 302,478     |             
|Other borrowed funds                              |                                 |                                                                                                 | 2,383,333                  |                                            |             |               | 2,500,000   |             
|Other liabilities and accrued expenses            |                                 |                                                                                                 | 77,086                     |                                            |             |               | 57,581      |             
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 | Total liabilities                                                                               |                            |                                            | 100,995,401 |               |             |              | 93,149,921 |          
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|Stockholders Equity:                             |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 | Common stock, $1 par value, authorized 20,000,000 shares,
issued and outstanding 512,000 shares |                            |                                            | 512,000     |               |             |              | 512,000    |          
|                                                  |                                 | Paid-in capital surplus                                                                         |                            |                                            | 4,608,000   |               |             |              | 4,608,000  |          
|                                                  |                                 | Retained earnings                                                                               |                            |                                            | 2,914,521   |               |             |              | 2,147,179  |          
|                                                  |                                 | Accumulated other comprehensive income                                                          |                            |                                            | 84,851      |               |             |              | 196,139    |          
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 |                                                                                                 | Total stockholders equity |                                            |             | 8,119,372     |             |              |            | 7,463,318 |            
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             
|                                                  |                                 |                                                                                                 |                            | Total Liabilities and Stockholders Equity |             | $             | 109,114,773 |              |            | $         | 100,613,239 | 
|                                                  |                                 |                                                                                                 |                            |                                            |             |               |             |             





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Consolidated Statements of Income
For the Three and Nine Months Ended September 30, 2003 and December 31, 2002
(Unaudited)

|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |           |           |           |  
|--------------------------------- | ---------------------------------------------------- | ---------------------- | -------------------------------- | --------- | ------------------ | ------- | ----------------- | --------- | ------------- | ------- | ------------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | -
|                                  |                                                      |                        |                                  |           | Three Months Ended |         | Nine Months Ended
|                                  |                                                      |                        |                                  |           |                    |         |                  
|                                  |                                                      |                        |                                  |           | September 30,      |         | September 30,     |           | September 30, |         | September 30,
|                                  |                                                      |                        |                                  |           | 2003               |         | 2002              |           | 2003          |         | 2002         
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |              
|Interest Income:                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  | Interest and fees on loans                           |                        | $                                | 1,377,892 |                    |         | $                 | 1,456,692 |               |         | $             | 4,190,710 |           |           | $         | 4,182,693 |          
|                                  | Income on federal funds sold                         |                        |                                  | 14,855    |                    |         |                   | 15,306    |               |         |               | 36,488    |           |           |           | 34,928    |          
|                                  | Interest on investment securities                    |                        |                                  | 98,989    |                    |         |                   | 87,014    |               |         |               | 293,838   |           |           |           | 261,684   |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  |                                                      | Total interest income  |                                  |           | 1,491,736          |         |                   |           | 1,559,012     |         |               |           | 4,521,036 |           |           |           | 4,479,305 |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Interest Expense:                 |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  | Interest on NOW and money market deposits            |                        |                                  | 122,224   |                    |         |                   | 133,276   |               |         |               | 363,489   |           |           |           | 357,916   |          
|                                  | Interest on savings deposits                         |                        |                                  | 3,327     |                    |         |                   | 3,239     |               |         |               | 9,280     |           |           |           | 9,305     |          
|                                  | Interest on time deposits                            |                        |                                  | 376,457   |                    |         |                   | 526,650   |               |         |               | 1,212,635 |           |           |           | 1,621,554 |          
|                                  | Other interest expense                               |                        |                                  | 21,017    |                    |         |                   | 19,895    |               |         |               | 62,796    |           |           |           | 51,438    |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  |                                                      | Total interest expense |                                  |           | 523,025            |         |                   |           | 683,060       |         |               |           | 1,648,200 |           |           |           | 2,040,213 |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  | Net interest income before provision for loan losses |                        |                                  | 968,711   |                    |         |                   | 875,952   |               |         |               | 2,872,836 |           |           |           | 2,439,092 |          
|                                  |                                                      |                        | Less  provision for loan losses |           |                    | (90,000 | )                 |           |               | (80,000 | )             |           |           | (270,000  | )         |           |           | (240,000  | )
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  | Net interest income after provision for loan losses  |                        |                                  | 878,711   |                    |         |                   | 795,952   |               |         |               | 2,602,836 |           |           |           | 2,199,092 |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Other Operating Income:           |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  | Service charges on deposit accounts                  |                        |                                  | 117,712   |                    |         |                   | 103,672   |               |         |               | 331,853   |           |           |           | 279,264   |          
|                                  | Other service charges, commissions and fees          |                        |                                  | 39,308    |                    |         |                   | 44,667    |               |         |               | 118,561   |           |           |           | 106,760   |          
|                                  | Other income                                         |                        |                                  | 5,439     |                    |         |                   | 5,289     |               |         |               | 8,950     |           |           |           | 11,233    |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  |                                                      |                        | Total other operating income     |           |                    | 162,459 |                   |           |               | 153,628 |               |           |           | 459,364   |           |           |           | 397,257   |  
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Other Operating Expense:          |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  | Salaries                                             |                        |                                  | 270,217   |                    |         |                   | 215,058   |               |         |               | 775,086   |           |           |           | 627,560   |          
|                                  | Employee Benefits                                    |                        |                                  | 54,993    |                    |         |                   | 38,873    |               |         |               | 156,811   |           |           |           | 115,872   |          
|                                  | Net occupancy expense                                |                        |                                  | 27,426    |                    |         |                   | 33,449    |               |         |               | 79,715    |           |           |           | 93,467    |          
|                                  | Equipment rental and depreciation of equipment       |                        |                                  | 55,627    |                    |         |                   | 46,752    |               |         |               | 161,161   |           |           |           | 139,789   |          
|                                  | Other expenses                                       |                        |                                  | 219,741   |                    |         |                   | 196,188   |               |         |               | 661,600   |           |           |           | 540,068   |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|                                  |                                                      |                        | Total other operating expenses   |           |                    | 628,004 |                   |           |               | 530,320 |               |           |           | 1,834,373 |           |           |           | 1,516,756 |  
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Income (Loss) Before Income Taxes |                                                      |                        | 413,166                          |           |                    |         | 419,260           |           |               |         | 1,227,827     |           |           |           | 1,079,593 |          
|                                  | Provision for income taxes                           |                        |                                  | (170,500  | )                  |         |                   | (153,691  | )             |         |               | (460,485  | )         |           |           | (388,887  | )        
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Net Income (Loss)                 |                                                      | $                      | 242,666                          |           |                    | $       | 265,569           |           |               | $       | 767,342       |           |           | $         | 690,706   |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Income (Loss) Per Share:          |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Basic                             |                                                      | $                      | 0.47                             |           |                    | $       | 0.52              |           |               | $       | 1.50          |           |           | $         | 1.35      |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          
|Diluted                           |                                                      | $                      | 0.47                             |           |                    | $       | 0.52              |           |               | $       | 1.50          |           |           | $         | 1.35      |          
|                                  |                                                      |                        |                                  |           |                    |         |                   |           |               |         |               |           |           |           |           |          

*  Net Income/weighted
average outstanding shares of 512,000.





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)

|                                                                                    |  |                   |            |               |  |   |             |  
|----------------------------------------------------------------------------------- |  | ----------------- | ---------- | ------------- |  | - | ----------- | -
|                                                                                    |  | Nine Months Ended
|                                                                                    |  |                  
|                                                                                    |  | September 30,     |            | September 30,
|                                                                                    |  | 2003              |            | 2002         
|                                                                                    |  |                   |            |              
|Cash Flows from Operating Activities:                                               |  |                   |            |               |  |   |             |  
|Net income/(loss)                                                                   |  | $                 | 767,342    |               |  | $ | 690,706     |  
|Adjustments to reconcile net loss to net
cash provided by operating
    activities: |  |                   |            |               |  |   |             |  
|Provision for loan losses                                                           |  |                   | 270,000    |               |  |   | 240,000     |  
|Depreciation                                                                        |  |                   | 76,921     |               |  |   | 102,987     |  
|Changes in accrued income and other assets                                          |  |                   | (161,084   | )             |  |   | (42,889     | )
|Changes in accrued expenses and other liabilities                                   |  |                   | 55,781     |               |  |   | (22,226     | )
|                                                                                    |  |                   |            |               |  |   |             |  
|Net cash provided by (used in) operating activities                                 |  |                   | 1,008,960  |               |  |   | 968,578     |  
|                                                                                    |  |                   |            |               |  |   |             |  
|Cash Flows from Investing Activities:                                               |  |                   |            |               |  |   |             |  
|Net change in loans to customers                                                    |  |                   | (4,024,650 | )             |  |   | (12,525,718 | )
|Purchase of available for sale securities                                           |  |                   | (6,900,167 | )             |  |   | (1,001,149  | )
|Proceeds from maturities, calls and paydowns of
available for sale
    securities   |  |                   | 6,082,712  |               |  |   | 260,949     |  
|Purchase of Federal Home Loan Bank stock                                            |  |                   | (31,600    | )             |  |   | (40,200     | )
|Property and equipment expenditures                                                 |  |                   | (80,963    | )             |  |   | (110,980    | )
|                                                                                    |  |                   |            |               |  |   |             |  
|Net cash provided by (used in) investing activities                                 |  |                   | (4,954,668 | )             |  |   | (13,417,098 | )
|                                                                                    |  |                   |            |               |  |   |             |  
|Cash Flows from Financing Activities:                                               |  |                   |            |               |  |   |             |  
|Net change in deposits                                                              |  |                   | 7,963,696  |               |  |   | 13,386,705  |  
|Net decrease in fed funds purchased                                                 |  |                   |           |               |  |   | (457,000    | )
|Proceeds from short-term borrowings                                                 |  |                   |           |               |  |   | 1,000,000   |  
|Proceeds (payments) on long-term borrowings                                         |  |                   | (116,667   | )             |  |   | 1,500,000   |  
|                                                                                    |  |                   |            |               |  |   |             |  
|Net cash provided by (used in) financing activities                                 |  |                   | 7,847,029  |               |  |   | 15,429,705  |  
|                                                                                    |  |                   |            |               |  |   |             |  
|Net Increase in Cash and Cash Equivalents                                           |  |                   | 3,901,321  |               |  |   | 2,981,185   |  
|Cash and Cash Equivalents, Beginning of Period                                      |  |                   | 7,108,453  |               |  |   | 2,204,384   |  
|                                                                                    |  |                   |            |               |  |   |             |  
|Cash and Cash Equivalents, End of Period                                            |  | $                 | 11,009,774 |               |  | $ | 5,185,569   |  
|                                                                                    |  |                   |            |               |  |   |             |  
|Supplement Cash Flow Information:                                                   |  |                   |            |               |  |   |             |  
|Cash paid for interest                                                              |  | $                 | 1,669,251  |               |  | $ | 2,095,589   |  
|                                                                                    |  |                   |            |               |  |   |             |  
|Cash paid for income taxes                                                          |  | $                 | 475,700    |               |  | $ | 341,535     |  
|                                                                                    |  |                   |            |               |  |   |             |  





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements(Unaudited)



|(1) |  | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information, and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine-month period ended
September 30, 2003, are not necessarily indicative of the results that may
be expected for the year ended December 31, 2003. For further information
refer to the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-KSB for the year ended
December 31, 2002.
|   
|(2) |  | Other Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | During the nine months ended September 30, 2003, the Company had unrealized
holding gains on investment securities which were reported as comprehensive
income. An analysis of accumulated other comprehensive income since
December 31, 2002 follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                                                    |                                                                                                          |   |         |          |  
|------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | - | ------- | -------- | -
|Accumulated other comprehensive income (loss) at December 31, 2002  |                                                                                                          |   | 196,139 |         
|Other comprehensive income, net of tax:                             |                                                                                                          |   |         |         
|                                                                    | Change in unrealized loss on securities available for sale
net of deferred income tax expense of $57,330 |   |         | (111,288 | )
|                                                                    | Less: Reclassification adjustment for gains realized in net income                                       |   |         |         |  
|                                                                    |                                                                                                          |   |         |         
|Accumulated other comprehensive income (loss) at September 30, 2003 |                                                                                                          | $ | 84,851  |         
|                                                                    |                                                                                                          |   |         |         



|(3) |  | Supplemental Financial Data                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Components of other operating expenses greater than 1% of total interest
income and other income for the periods ended September 30, 2003 and 2002
are:

|                  |  |                    |        |                   |  |               |        |               |  |   |         |  |  |   |         | 
|----------------- |  | ------------------ | ------ | ----------------- |  | ------------- | ------ | ------------- |  | - | ------- |  |  | - | ------- | 
|                  |  | Three Months Ended |        | Nine Months Ended
|                  |  |                    |        |                  
|                  |  | September 30,      |        | September 30,     |  | September 30, |        | September 30,
|                  |  | 2003               |        | 2002              |  | 2003          |        | 2002         
|                  |  |                    |        |                   |  |               |        |              
|Directors fees   |  | $                  | 18,900 |                   |  | $             | 17,400 |               |  | $ | 57,440  |  |  | $ | 43,400  | 
|Supplies/printing |  |                    | 21,312 |                   |  |               | 19,631 |               |  |   | 56,978  |  |  |   | 60,193  | 
|Data processing   |  |                    | 37,401 |                   |  |               | 38,859 |               |  |   | 115,996 |  |  |   | 107,418 | 
|ATM expense       |  |                    | 21,318 |                   |  |               | 18,355 |               |  |   | 61,681  |  |  |   | 48,589  | 





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2003 and 2002

Interim Financial Condition

Citizens Effingham Bancshares, Inc. (the Company) reported total assets of
$109,114,773 as of September 30, 2003, compared to $100,613,239 at December 31,
2002. The most significant change in the composition of assets was an increase
in loans from $83,155,277 to $87,171,536. Also, additional Federal Home Loan
Bank stock was purchased during the first quarter at a cost of $31,600.

Liquidity

The Banks liquid assets as a percentage of total deposits were 11.2% at
September 30, 2003, compared to 7.9% at December 31, 2002. The Company has
approximately $3,500,000 in available federal fund lines of credit with
correspondent banks, no advances were outstanding on these lines as of September
30, 2003 and December 31, 2002. The Company also has approximately $10,800,000
in an available line of credit with the Federal Home Loan Bank. The Company had
$2,383,333 and $2,500,000 advanced on these lines as of September 30, 2003 and
December 31, 2002, respectively. At least monthly, management analyzes the level
of off-balance sheet commitments such as unfunded loan equivalents, loan
repayments, maturity of investment securities, liquid investment and available
fund lines in an attempt to minimize the possibility that a potential shortfall
will exist.

Capital

The capital of the Company totaled $8,119,372 as of September 30, 2003. The
capital of the Company and the Bank exceeded all prescribed regulatory capital
guidelines. Regulations require that the most highly rated banks maintain a Tier
1 leverage ratio of 3% plus an additional cushion of at least 1 to 2 percentage
points. Tier 1 capital consists of common shareholders equity, less certain
intangibles. The Banks Tier 1 leverage ratio was 7.30% at September 30, 2003,
compared to 7.27% at December 31, 2002. Regulations require that the Bank
maintain a minimum total risk weighted capital ratio of 8%, with one-half of
this amount, or 4%, made up of Tier 1 capital. Risk-weighted assets consist of
balance sheet assets adjusted by risk category, and off-balance sheet assets or
equivalents similarly adjusted. At September 30, 2003, the Bank had a
risk-weighted total capital ratio of 10.27% compared to 9.7% at December 31,
2002, and a Tier I risk-weighted capital ratio of 9.02%, compared to 8.6% at
December 31, 2002. The decrease is primarily caused by the continued growth in
the loans.

Asset Quality

Nonperforming assets which includes non-accruing loans, repossessed collateral
and loans for which payments are more than 90 days past due totaled $553,500 at
September 30, 2003, an increase of $537,500 from December 31, 2002. There were
no related party loans which were considered nonperforming at September 30,
2003. The composition of the nonperforming assets is presented in the following
table:





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2003 and 2002

|                                                                                        |  |               |         |              |  |   |        |  
|--------------------------------------------------------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------ | -
|                                                                                        |  | SEPTEMBER 30, |         | DECEMBER 31,
|                                                                                        |  | 2003          |         | 2002        
|                                                                                        |  |               |         |             
|Loans on nonaccrual                                                                     |  | $             | 291,000 |              |  | $ | 16,000 |  
|Loans greater than 90 days past due                                                     |  |               | 39,000  |              |  |   |       |  
|Other real estate owned                                                                 |  |               | 218,000 |              |  |   |       |  
|Other repossessed collateral                                                            |  |               | 5,500   |              |  |   |       |  
|                                                                                        |  |               |         |              |  |   |        |  
|Total nonperforming assets                                                              |  | $             | 553,500 |              |  | $ | 16,000 |  
|                                                                                        |  |               |         |              |  |   |        |  
|Total nonperforming assets as a percentage
of total loans (gross) and other real estate |  |               | 0.63    | %            |  |   | 0.10   | %
|                                                                                        |  |               |         |              |  |   |        |  

The allowance for loan losses totaled $1,184,325 at September 30, 2003, a net
increase of $261,609 from December 31, 2002. The allowance for loan losses
represented 1.4% and 1.1% of total loans at September 30, 2003 and December 31,
2002, respectively. An analysis of the allowance for loan losses since December
31, 2002 follows:

|                                                |  |   |           | 
|----------------------------------------------- |  | - | --------- | 
|Allowance for loan losses at December 31, 2002  |  | $ | 922,716   | 
|Charge-offs:                                    |  |   |           | 
|Commercial                                      |  |   | 8,396     | 
|Real Estate                                     |  |   | 36,385    | 
|Installment                                     |  |   | 27,103    | 
|                                                |  |   |           | 
|Total                                           |  |   | 71,884    | 
|Recoveries:                                     |  |   |           | 
|Commercial                                      |  |   | 27,016    | 
|Real Estate                                     |  |   | 980       | 
|Installment                                     |  |   | 35,497    | 
|                                                |  |   |           | 
|Total                                           |  |   | 63,493    | 
|Provision charged to income                     |  |   | 270,000   | 
|                                                |  |   |           | 
|Allowance for loan losses at September 30, 2003 |  | $ | 1,184,325 | 
|                                                |  |   |           | 

The loan portfolio is reviewed periodically to evaluate the outstanding loans
and to measure the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses, and internal credit ratings. Managements judgment as
to the adequacy of the allowance is based upon a number of assumptions about
future events which it believes to be reasonable, but which may or may not be
reasonable. However, because of the inherent uncertainty of assumptions made
during the evaluation process, there can be no assurance that loan losses in
future periods will not exceed the allowance for loan losses of that additional
allocations to the allowance will not be required.





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2003 and 2002

The Bank was most recently examined by its primary regulatory authority in
September, 2003. There were no recommendations by the regulatory authority
that in managements opinion will have material effects on the Banks
liquidity, capital resources or operations.

Investment Securities

At September 30, 2003, the Bank had $8,829,996 in investment securities
available-for-sale. The net unrealized gain on available for sale securities,
net of deferred taxes, was $84,851 on September 30, 2003. During the period
ended September 30, 2003, the bank purchased $6,900,167 in investment securities
available for sale. Also, as of September 30, 2003, the maturities and calls of
investment securities totaled $4,900,000, resulting in neither a gain nor a
loss. The bank invests primarily in obligations of the United States or
obligations guaranteed as to principal and interest by the United States and
other taxable and tax-exempt securities.

Results of Operations

Net interest income for the third quarter of 2003 was $977,182, an increase of
$101,230 (11.6%) compared to the same period for 2002. Interest income for the
third quarter of 2003 was $1,500,207 representing a decrease of $58,805 (3.8%)
over the same period in 2002. The decrease in interest income was due to
decreased interest rates on loans. Interest expense for the third quarter of
2003 decreased $160,035 (23.4%) compared to the same period in 2002. The
decrease in interest expense is primarily due to a decrease in average interest
rates charged to interest bearing deposits.

Amounts charged to expense related to the allowance for loan losses for the
three months ended September 30, 2003 and 2002 were $90,000 and $80,000,
respectively.

Other operating income for the third quarter of 2003 was $162,459, an increase
of $8,831 compared to the same period in 2002.

Other operating expenses for the third quarter of 2003 were $628,004, an
increase of $97,684 (18.4%) compared to the same period for 2002. The increase
is primarily attributable to an increase of employee salaries and benefits of
$71,279 (28.0%).





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2003 and 2002

The Corporations management, including the Chief Executive Officer and
Chief Financial Officer, supervised and participated in an evaluation of the
effectiveness of its disclosure controls and procedures (as defined in federal
securities rules) as of the end of the period covered by this report. Based on,
and as of the date of, that evaluation, the Corporations Chief Executive
Officer and Chief Financial Officer have concluded that the Corporations
disclosure controls and procedures were effective in accumulating and
communicating information to management, including the Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosures of that information under the Securities and Exchange
Commissions rules and forms and that the Corporations disclosure controls and
procedures are designed to ensure that the information required to be disclosed
in reports that are filed or submitted by the Corporation under the Securities
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms.

There were no significant changes in the Corporations internal controls
or in other factors that could significantly affect these controls subsequent
to the date of their evaluation.





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##### 



Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2003 and 2002

PART II: OTHER INFORMATION:

Item 1. Legal Proceedings



| |  | There are no material legal proceedings to which the Company is a party or of
which their property is the subject.
| |  | ------------------------------------------------------------------------------------------------------------------

Item 2. Changes in Securities



| | (a) |  | Not Applicable
| | --- |  | --------------
|
| | (b) |  | Not Applicable

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Submission of Matters to a Vote of Security-Holders



| |  | There were no matters submitted to security holders for a vote during the
three months ended September 30, 2003.
| |  | ----------------------------------------------------------------------------------------------------------------

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K.



| | A. |  | There have been no reports filed on form 8-K for the three months ended September 30, 2003.
| | -- |  | -------------------------------------------------------------------------------------------
|
| | B. |  | Exhibit 31.1                                                                               
|
| | C. |  | Exhibit 32.1                                                                               

SIGNATURES

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

|                                                         |  | 
|-------------------------------------------------------- |  | 
|Citizens Effingham Bancshares, Inc.                      |  | 
|                                                        
|                                                         |  | 
|                                                        
|/s/  Harry H. Shearouse                                  |  | 
|Harry H. Shearouse
President and Chief Executive Officer |  | 
|                                                        
|                                                         |  | 
|                                                        
|Date: November 4, 2003                                   |  |