SecProbe.io

CORRESP
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September 22, 2005

Mr. Don Walker

Senior Assistant

Chief Accountant

Securities and Exchange
Commission

Washington, DC 20549

Re:          Citizens
Bancshares Corporation

Form 10-K
for the Fiscal Year Ended December 31, 2004

Forms 10-Q
for the Quarters Ended March 31, 2005 and June 30, 2005

File
No.:  000-14535

Dear Mr. Walker:

We are responding to the
additional comments received from your office by letter dated September 8,
with respect to the above-referenced periodic reports.  We have responded to each of your comments
below.

Form 10-K
for the Fiscal Year Ended December 31, 2004

Note 8 –
Income Taxes, page 61

Question:

“We note
your supplement response to comment 1 of our letter dated August 16,
2005.  Please provide us with a full
analysis comparing and explaining the differences between the information
contained in your Form 10-K for the fiscal year ended December 31,
2004 and what was uncovered by your auditors to demonstrate a valuation
allowance was not needed as of December 31, 2004.”

Response:

As discussed in our
initial response, management anticipated adjustments to the valuation allowance
for State tax loss carryforwards, but did not know the extent of the other necessary
deferred tax asset and liability adjustments as of the filing of our 10-K for December 31,
2004.  Therefore, management took a
conservative posture by not eliminating any of the valuation allowance of
$975,000 before determining the total impact of other potential deferred tax
adjustments.  Since the net effect of all
of the adjustments relating to the deferred tax components resulted in an
increase in reported income of only $84,000, management concluded that this
amount was immaterial to the consolidated financial statements as of December 31,
2004.

The following table
summarizes the differences between the information contained in our Form 10-K
for the fiscal year ended December 31, 2004 and the results of our
auditors’ analysis.

INCOME TAXES TABLE

The cumulative tax effects of temporary differences
that give rise to significant amounts of deferred tax assets and deferred tax
liabilities are presented below:

  2004 Restated

  2004 As Filed

  Deferred tax
  assets:

  Net operating
  losses and credits

  $

  790,081

  $

  896,196

  Loans,
  principally due to difference in allowance for loan losses and deferred loan
  fees

  271,403

  1,090,790

  Nonaccrual loan
  interest

  56,509

  56,509

  Postretirement
  benefit accrual

  415,245

  415,245

  Premises and
  equipment

  —

  66,079

  Loan origination
  fee income

  232,427

  —

  Net unrealized
  loss on securities available for sale

  17,326

  17,326

  Other

  241,462

  263,994

  Gross deferred
  tax asset

  2,024,453

  2,806,139

  Valuation
  allowance

  —

  (974,708

  )

  Total deferred
  tax assets

  2,024,453

  1,831,431

  Deferred tax
  liabilities:

  Purchased loan
  discount

  217,920

  480,000

  Premises and
  equipment

  350,259

  —

  Other

  480,116

  459,071

  Total deferred
  tax liabilities

  1,048,295

  939,071

  Net deferred tax
  assets

  $

  976,158

  $

  892,360

DESCRIPTION OF CHANGES

Deferred Tax Asset Items

•                  Net operating losses and credits –
This line item was adjusted to reflect the results of the amended tax returns
for the tax years ended 2001, 2002 and 2003 as filed on September 15,
2005.

•                  Loans – This deferred tax item was
adjusted primarily for the change in the allowance for loan losses method used in
the 2003 merger.  In 2003, Citizens
Bancshares Corporation’s wholly owed subsidiary acquired Citizens Federal
Savings Bank.

•                  Premises and equipment – Premises and
equipment was adjusted to reflect bonus depreciation (Code Section 168(k))
not taken on the original tax return for the tax years ended 2001, 2002 and
2003.  The bonus depreciation was taken
on amended tax returns filed on September 15, 2005.

•                  Loan origination fee income – There
was a discrepancy in the carryforward schedule of deferred tax assets
prepared by our prior accountants.  The
detailed carryforward amounts listed in their workpapers were not brought
forward to the summary deferred tax asset schedule in their
workpapers.   The resulting adjustment
was made in the amended tax returns filed on September 15, 2005.

•                  Other – Minor differences

Deferred Tax Liability Items

•                  Purchased loan discount –The deferred
tax liability associated with loans purchased at a discount was adjusted to reflect
the treatment as reported in the amended tax returns filed for 2000, 2001,
2002, and 2003.

•                  Other – Minor differences

Form 10-Q for the Fiscal Quarter Ended June 30,
2005

Management’s
Discussion and Analysis – Investment Securities, page 13

Question:

“We
note your supplemental response to comment 2 of our letter dated August 16,
2005.  In view of the continuing decline
of your agency preferred securities and fact they have no maturity date, please
tell us your expected period of time sufficient for a recovery of fair value
and how you determined your projections as of December 31, 2002, 2003 and
2004.”

Response:

The agency preferred
securities are obligations issued by U.S. Government Sponsored Enterprises,
Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac).
While government agency preferred securities are not backed by the full
faith and credit of the U.S. Government, they have credit lines with the U.S. Treasury
and are afforded the highest credit ratings.
The characteristics of the agency preferred securities the Company
purchased are similar to a floating rate municipal bond in that:

•                  They are callable.

•                  The interest income (dividends)
earned is paid quarterly and is 70 percent deductible from taxable income.  As a result, this investment is evaluated on
a tax-equivalent basis.

•                  The interest rates float based on the
two year treasury (CMT).  Therefore, its
fair value is directly correlated to the movement of interest rates.

INTEREST RATE RISK

When management evaluated the decline in
the fair value of the agency preferred securities as of December 31, 2002,
2003 and 2004, it considered the decline in fair value to be interest rate
related and temporary.  (Please refer to
the graphs provided in our initial response which support our conclusion).  Since the purchase of the preferred
securities in 2000 and 2001, short-term rates have fallen significantly and
were at historically low levels.  As a
result, the yield of the agency preferred securities repriced to reflect the
lower rate environment, negatively impacting their fair value.

Given that the fair value of the agency
preferred securities are directly correlated to the movement of interest rates,
management felt that the fair value of the agency preferred securities would
recover during a normal interest rate cycle.
Management considered a normal interest rate cycle to be between five
and seven years.  Historically, in a
rising rate environment, floating rate debt outperforms fixed rate investments
because as interest rates rise, interest income increases resulting in a higher
fair value.

The Federal Reserve Bank has boosted
interest rates 10 times since June 2004, lifting the benchmark short-term
rate from a historical low of 1 percent to 3.5 percent, the highest level in
four years.  However, at June 20,
2005, one year after interest rates started to rise and approximately five
years after their purchase, the expected recovery in our agency preferred
securities did not occur to the extent management anticipated.

CREDIT RISK

Management is now of the opinion that the
agency preferred securities will not recover its fair value even if interest
rates continue to increase for the next two years because of the negative
financial concerns regarding Fannie Mae and its business operations which has
affected the credit quality of the agency preferred securities.  On August 9, 2005, Fannie Mae advised
that it will miss another Securities and Exchange Commission’s (SEC) filing
deadline, and advised that it is unlikely to be in compliance with the New York
Stock Exchanges’ listing rules for failing to file its 2004 Annual Report
by December 16, 2005.  Also,
Standard & Poor’s has indicated that it may lower Fannie Mae’s credit
rating due to the ongoing filing delays. These key developments occurred prior
to the filing of our June 30, 2005 10-Q.  After consideration of these developments, management
concluded that the decline in fair value of the agency preferred securities was
no longer an interest rate issue but a credit quality issue as of June 30,
2005.

CONCLUSION

Management
followed the official guidance of SFAS No. 115 and the SEC Staff
Accounting Bulletin #59 in its accounting treatment of the equity preferred
securities.  Accordingly, management
concluded that an other-than-temporary impairment has occurred in its agency
preferred securities, and that a write-down of the securities to market value
as of June 30, 2005 was appropriate.

The Citizens Bancshares Corporation, hereby,
acknowledges the following:

•                  the
Company is responsible for the adequacy and accuracy of the disclosure in the
filing;

•                  staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and

•                  the
Company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United
States.

Thank you for your
consideration of our responses to your comments.  If you have any questions, please call us at
(404) 653-2800.

Sincerely,

  /s/ James E.
  Young

  Chief Executive
  Officer

  Citizens Bancshares Corporation

  /s/ Samuel J.
  Cox

  Chief Financial Officer

  Citizens Bancshares Corporation