Citizens Holding (CIZN) 10-K 2005 FY Annual report

Exhibit 13

Exhibit 13 – 2005 Annual Report to Shareholders

Dear Stockholder:

As we look back at 2005, it is obvious that many of our neighbors and colleagues within our markets and across our state suffered grievously this year. A natural disaster such as Hurricane Katrina affects many facets of many lives. I am thankful that as a company we were fortunate to be able to offer assistance to many of these individuals and financial institutions. I am glad we were able to consider positive changes and remodeling instead of replacing destroyed properties. I would like to mention a few of the things that have been done to better employ our capital and further maximize the value of your investment.

We are in the process of remodeling the Main Office in order to make our facility more up-to-date in regard to customer service. The Eastside Branch has been remodeled and enlarged to be a full-service branch. This branch will now have a lender, ATM and other services available as we attempt to provide service to the prevailing traffic flows in our markets. We have the architect’s renderings of our new branch in Starkville, Ms. This project will soon be underway. We are anxious to offer our type of full-service banking in this dynamic, growing market.

The past year brought about changes, not only in buildings but in personnel and their functions. We continue to realign employees and functions that make for a stronger, more efficient organization.

During the year, the composition of your Board of Directors changed. Two long-time, devoted directors retired from their positions. Steve Webb served many years as a Director, CEO and finally as Chairman of the Board. W. W. Dungan also served many years as a Director and an active participant on various board committees. I personally thank these men for their time and efforts that have helped make this company what it is today.

The Board’s newest member, A. T. (Tommy) Williams, has a background of bank accounting that will provide sound, prudent advice in the years to come. We thank Tommy for his willingness to serve.

The attached financials show net income increased by 5.6% over 2004. This equates to a basic per share earnings of $1.59 compared to $1.51 for 2004. The assets of The Citizens Bank grew approximately 3.5%. We are very pleased to report these positive trends.

It is obvious we are pleased with the Company’s accomplishments for the year 2005. With your continued interest and support, we will attempt to maximize your investment in this great company with every decision made and every action taken.

/s/ Greg L. McKee

Greg L. McKee

President and Chief Executive Officer

CITIZENS HOLDING COMPANY

AND SUBSIDIARY

Philadelphia, Mississippi

Consolidated Financial Statements

Years Ended December 31, 2005, 2004 and 2003

CONTENTS

Report of Independent Registered Public Accounting Firm (Financial Statements)	1
Report of Independent Registered Public Accounting Firm (Internal Control)	2 – 3
Management’s Assessment of Internal Control over Financial Reporting	4
Consolidated Financial Statements
Consolidated Balance Sheets	5
Consolidated Statements of Income	6
Consolidated Statements of Comprehensive Income	7
Consolidated Statements of Changes in Stockholders’ Equity	8
Consolidated Statements of Cash Flows	9 – 10
Notes to Consolidated Financial Statements	11 –42

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors & Stockholders

Citizens Holding Company

Philadelphia, Mississippi

We have audited the consolidated balance sheets of Citizens Holding Company and Subsidiary (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citizens Holding Company and Subsidiary as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Citizens Holding Company and Subsidiary’s internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 2,2006 expressed an unqualified opinion on management’s assessment of the effectiveness of Citizens Holding Company and Subsidiary’s internal control over financial reporting and an unqualified opinion on the effectiveness of Citizens Holding Company and Subsidiary’s internal control over financial reporting.

/s/ Horne LLP

Jackson, Mississippi

March 2, 2006

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors & Stockholders

Citizens Holding Company

Philadelphia, Mississippi

We have audited management’s assessment, included in the accompanying Management’s Assessment of Internal Control over Financial Reporting, that Citizens Holding Company and Subsidiary (the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those polices and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

2

To the Board of Directors

Citizens Holding Company

Page Two

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Citizens Holding Company and Subsidiary maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established inInternal Control – Integrated Frameworkissued by COSO. Also in our opinion, Citizens Holding Company and Subsidiary maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control - Integrated Framework issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Citizens Holding Company and Subsidiary and our report dated March 2, 2006 expressed an unqualified opinion.

/s/ Horne LLP

Jackson, Mississippi

March 2, 2006

3

Citizens Holding Company

Philadelphia, MS 39350

MANAGEMENT’S ASSESSMEMT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Citizens Holding Company (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed under the supervision of the Company’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Management assessed the Company’s internal control over financial reporting as of December 31, 2004 based on the criteria for effective internal control over financial reporting established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2005, the Company maintained effective internal control over financial reporting.

The Company’s internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

HORNE LLP, the Company’s Independent Registered Public Accounting Firm, has audited management’s assessment of the Company’s internal control over financial reporting as of December 31, 2005, as stated in their report, appearing on pages 2 and 3, which expresses unqualified opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005.

/s/ Greg L. McKee	/s/ Robert T. Smith
Greg L. McKee	Robert T. Smith
President and Chief Executive Officer	Treasurer and Chief Financial Officer

March 2, 2006

4

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 2005 and 2004

	2005			2004
ASSETS
Cash and due from banks	$	26,743,200		$	16,837,433
Interest bearing deposits with other banks		312,825			818,716
Federal funds sold		—			11,000,000
Securities available for sale, at fair value (amortized cost of $163,778,332 in 2005 and $151,095,249 in 2004)		162,203,117			151,716,083
Loans, net of allowance for loan losses of $4,561,817 in 2005 and $4,720,875 in 2004		374,964,316			364,868,117
Bank premises, furniture, fixtures and equipment, net		9,894,215			9,772,213
Real estate acquired by foreclosure		2,975,047			2,786,716
Accrued interest receivable		4,695,147			4,385,892
Cash value of life insurance		16,045,673			15,504,829
Intangible assets		5,290,076			5,827,579
Other assets		4,585,520			3,721,413
Total assets	$	607,709,136		$	587,238,991
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Non-interest bearing demand deposits	$	87,333,891		$	78,070,820
Interest bearing NOW and money market accounts		148,434,618			148,617,480
Interest bearing savings deposits		35,579,157			38,151,914
Interest bearing time deposits		202,464,568			209,623,530
Total deposits		473,812,234			474,463,744
Federal funds purchased		1,600,000			—
Federal Home Loan Bank advances		60,048,818			46,118,566
Accrued interest payable		798,667			620,590
Deferred compensation payable		2,366,592			2,157,041
Other liabilities		3,950,890			2,221,390
Total liabilities		542,577,201			525,581,331
Commitments and contingencies		—			—
Minority interest		1,357,830			1,466,435
Stockholders’ equity
Common stock, $.20 par value, authorized 22,500,000 shares; 5,009,278 shares issued at 2005 and 5,000,278 at 2004		1,001,856			1,000,056
Additional paid-in capital		3,386,248			3,150,246
Accumulated other comprehensive income (loss), net of taxes of ($587,555) in 2005 and $211,084 in 2004		(966,542	)		399,921
Retained earnings		60,352,543			55,641,002
Total stockholders’ equity		63,774,105			60,191,225
Total liabilities and stockholders’ equity	$	607,709,136		$	587,238,991

The accompanying notes are an integral part of these financial statements.

5

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Income

Years Ended December 31, 2005, 2004 and 2003

	2005			2004			2003
Interest income
Interest and fees on loans	$	26,435,191		$	24,159,391		$	23,693,234
Interest on securities
Taxable		3,022,520			2,846,951			3,760,630
Non-taxable		3,406,130			2,882,402			2,237,257
Other		179,863			82,967			33,814
Total interest income		33,043,704			29,971,711			29,724,935
Interest expense
Deposits		7,431,479			5,772,547			6,605,373
Other borrowed funds		2,415,801			1,764,422			1,583,075
Total interest expense		9,847,280			7,536,969			8,188,448
Net interest income		23,196,424			22,434,742			21,536,487
Provision for loan losses		(1,084,326	)		(1,067,443	)		(2,002,570	)
Net interest income after provision for loan losses		22,112,098			21,367,299			19,533,917
Non-interest income
Service charges on deposit accounts		3,556,824			3,391,188			3,235,400
Other service charges and fees		585,288			670,582			895,375
Net gains on investment securities sales		—			7,020			467,210
Other income		1,594,811			1,505,841			725,713
Total non-interest income		5,736,923			5,574,631			5,323,698
Non-interest expense
Salaries and employee benefits		9,523,367			8,607,066			7,925,908
Occupancy expense		1,163,219			1,199,437			1,177,346
Equipment expense		1,739,751			1,738,348			1,567,289
Earnings applicable to minority interest		198,872			189,395			167,730
Other expense		4,891,696			4,978,710			4,203,714
Total non-interest expense		17,516,905			16,712,956			15,041,987
Income before income taxes		10,332,116			10,228,974			9,815,628
Income tax expense		2,365,984			2,682,889			2,844,699
Net income	$	7,966,132		$	7,546,085		$	6,970,929
Net income per share – basic	$	1.59		$	1.51		$	1.40
Net income per share – diluted	$	1.57		$	1.49		$	1.39
Average shares outstanding
Basic		5,006,493			4,992,792			4,974,910
Diluted		5,066,165			5,056,637			5,019,759

The accompanying notes are an integral part of these financial statements.

6

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2005, 2004 and 2003

	2005			2004			2003
Net income	$	7,966,132		$	7,546,085		$	6,970,929
Other comprehensive income (loss)
Unrealized holding gains (losses) during year		(2,196,048	)		(1,661,064	)		(1,808,269	)
Income tax effect		798,637			562,385			624,185
Net unrealized gains (losses)		(1,397,411	)		(1,098,679	)		(1,184,084	)
Reclassification adjustment for gains included in net income		—			(7,020	)		(467,210	)
Income tax effect		—			2,377			161,273
Net gains included in net income		—			(4,643	)		(305,937	)
Change in minority interest in net unrealized gains		30,948			33,205			28,385
Total other comprehensive loss		(1,366,463	)		(1,070,117	)		(1,461,636	)
Comprehensive income	$	6,599,669		$	6,475,968		$	5,509,293

The accompanying notes are an integral part of these financial statements.

7

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended December 31, 2005, 2004 and 2003

	Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balance, December 31, 2002	4,974,578	$	994,916	$	2,899,331	$	2,931,674		$	46,956,638		$	53,782,559
Net income	—		—		—		—			6,970,929			6,970,929
Dividends paid ($0.57 per share)	—		—		—		—			(2,835,769	)		(2,835,769	)
Options exercised	5,050		1,010		44,983		—			—			45,993
Other comprehensive (loss), net	—		—		—		(1,461,636	)		—			(1,461,636	)
Balance, December 31, 2003	4,979,628		995,926		2,944,314		1,470,038			51,091,798			56,502,076
Net income	—		—		—		—			7,546,085			7,546,085
Dividends paid ($0.60 per share)	—		—		—		—			(2,996,881	)		(2,996,881	)
Options exercised	20,650		4,130		205,932		—			—			210,062
Other comprehensive (loss), net	—		—		—		(1,070,117	)		—			(1,070,117	)
Balance, December 31, 2004	5,000,278		1,000,056		3,150,246		399,921			55,641,002			60,191,225
Net income	—		—		—		—			7,966,132			7,966,132
Dividends paid ($0.65 per share)	—		—		—		—			(3,254,591	)		(3,254,591	)
Options exercised, including tax benefit of $106,192	9,000		1,800		236,002		—			—			237,802
Other comprehensive (loss), net	—		—		—		(1,366,463	)		—			(1,366,463	)
Balance, December 31, 2005	5,009,278	$	1,001,856	$	3,386,248	$	(966,542	)	$	60,352,543		$	63,774,105

The accompanying notes are an integral part of these financial statements.

8

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years Ended December 31, 2005, 2004 and 2003

	2005			2004			2003
Cash flows from operating activities
Net income	$	7,966,132		$	7,546,085		$	6,970,929
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		1,024,320			1,056,647			1,020,645
Amortization of intangibles		537,503			537,503			537,503
Amortization of premiums and accretion of discounts on investment securities		1,182,298			1,387,598			(55,128	)
Provision for loan losses		1,084,326			1,067,443			2,002,570
Realized investment securities gains		—			(7,020	)		(467,210	)
Deferred income tax expense (benefit)		(310,432	)		11,432			(472,691	)
Net earnings applicable to minority interest		198,872			189,395			167,730
Earnings from equity method of investment		(131,664	)		(188,911	)		(78,389	)
Write downs of real estate acquired by foreclosure		—			233,610			149,605
Increase in accrued interest receivable		(309,255	)		(179,788	)		(94,905	)
Increase in cash value life insurance		(540,844	)		(624,211	)		(313,618	)
Increase (decrease) in accrued interest payable		178,077			(47,948	)		(287,182	)
Increase in deferred compensation liability		209,551			324,830			649,805
Net change in other operating assets and liabilities		2,212,319			973,112			(161,766	)
Net cash provided by operating activities		13,301,203			12,279,777			9,567,898
Cash flows from investing activities
Proceeds from maturities of securities available-for-sale		37,496,514			38,276,877			62,778,307
Proceeds from sales of securities available-for-sale		—			22,515,102			58,103,673
Purchases of securities available-for-sale		(51,638,423	)		(72,448,447	)		(103,672,153	)
Purchases of bank premises, furniture, fixtures and equipment		(1,146,322	)		(829,887	)		(1,619,676	)
Proceeds from sale of real estate acquired by foreclosure		2,043,687			1,381,344			733,274
Net (increase) decrease in interest bearing deposits with other banks		505,891			(720,680	)		1,267,613
Net increase in loans		(13,412,543	)		(17,705,207	)		(50,278,536	)
Net (increase) decrease in federal funds sold		11,000,000			(11,000,000	)		2,300,000
Cash paid for acquisitions, net		—			25,398			(114,209	)
Purchase of company owned life insurance		—			—			(11,404,152	)
Net cash used by investing activities		(15,151,196	)		(40,505,500	)		(41,905,859	)

9

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years Ended December 31, 2005, 2004 and 2003

Page 2 of 2

	2005			2004			2003
Cash flows from financing activities
Net increase in deposits	$	(651,511	)	$	35,766,446		$	5,929,123
Net increase (decrease) in federal funds purchased		1,600,000			(1,500,000	)		1,500,000
Proceeds from exercise of stock options		131,610			210,062			45,993
Dividends paid to stockholders		(3,254,591	)		(2,996,881	)		(2,835,769	)
Federal Home Loan Bank advance proceeds		25,000,000			13,500,000			24,000,000
Federal Home Loan Bank advance payments		(11,069,748	)		(15,018,281	)		(969,288	)
Net cash provided by financing activities		11,755,760			29,961,346			27,670,059
Net increase (decrease) in cash and due from banks		9,905,767			1,735,623			(4,667,902	)
Cash and due from banks, beginning of year		16,837,433			15,101,810			19,769,712
Cash and due from banks, end of year	$	26,743,200		$	16,837,433		$	15,101,810
Supplemental disclosures of cash flow information
Cash paid for Interest	$	9,669,203		$	7,584,917		$	8,475,630
Income taxes	$	786,026		$	2,762,059		$	2,478,332
Non-cash disclosures
Real estate acquired by foreclosure	$	2,232,018		$	3,706,652		$	291,488
Unrealized loss on investments	$	(2,196,048	)	$	(1,661,064	)	$	(1,808,269	)

The accompanying notes are an integral part of these financial statements.

10

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Basis of Financial Statement Presentation

The accounting policies of Citizens Holding Company and Subsidiary conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The consolidated financial statements of Citizens Holding Company include the accounts of its 97.86 percent-owned subsidiary, The Citizens Bank of Philadelphia, Mississippi (collectively referred to as the “Company”). All significant intercompany transactions have been eliminated in consolidation.

Nature of Business

The Citizens Bank of Philadelphia, Mississippi (the “Bank”) operates under a state bank charter and provides general banking services. As a state bank, the Bank is subject to regulations of the Mississippi Department of Banking and Consumer Finance and the Federal Deposit Insurance Corporation. Citizens Holding Company is subject to the regulations of the Federal Reserve. The area served by the Bank is Neshoba County, Mississippi and the immediately surrounding areas. Services are provided at several branch offices.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with the determination of the allowance for loan losses and valuation of foreclosed real estate, management obtains independent appraisals for significant properties.

While management uses available information to recognize losses on loans and foreclosed real estate, future additions to the allowance may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowances for loan losses and foreclosed real estate. Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the allowance for loan losses and valuation of foreclosed real estate may change materially in the near term.

11

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

Cash and Due from Banks

For the purpose of reporting cash flows, cash and due from banks include cash on hand and demand deposits. Cash flows from loans originated by the Company, deposits, and federal funds purchased and sold are reported net in the statement of cash flows. The Company is required to maintain average reserve balances with the Federal Reserve Bank based on a percentage of deposits. The average reserve required by the Federal Reserve Bank at December 31, 2005 and 2004 was $837,000 and $911,000, respectively.

Interest-bearing deposits in banks mature within one year and are carried at cost.

At December 31, 2005 and 2004, the Company had deposits in financial institutions in excess of federally insured limits. Management monitors the soundness of the financial institutions and believes there is minimal risk.

Investment Securities

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” securities are classified as “available-for-sale,” “held-to-maturity” or “trading”. Fair values for securities are based on quoted market prices where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Gains or losses on the sale of securities are determined using the specific identification method. Currently, the Company has no held-to-maturity or trading securities.

Securities Available-for-Sale

Securities available-for-sale are reported at fair value with unrealized gains and losses reported as a separate component of stockholders’ equity. Securities that are held for indefinite periods of time or used as part of the Company’s asset/liability management strategy and that may be sold in response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as available-for-sale.

Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. The amortization of premiums and accretion of discounts are recognized in interest income.

12

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

Loans and Allowance for Loan Losses

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of unearned discounts and unearned finance charges. The Company has no loans held-for-sale.

Loan origination and commitment fees and direct loan origination costs attributable to loans held with a maturity of more than one year are not significant and are, therefore, recognized as income or expense, as applicable in the period received or incurred.

Unearned discounts on installment loans are recognized as income over the terms of the loans by a method that approximates the interest method. Unearned finance charges and interest on commercial loans are recognized based on the principal amount outstanding. For all other loans, interest is accrued daily on the outstanding balances. For impaired loans, interest is discontinued on a loan when management believes, after considering collection efforts and other factors, that the borrower’s financial condition is such that collection of interest is doubtful. Cash collections on impaired loans are credited to the loan receivable balance, and no interest income is recognized on those loans until the principal balance has been collected. The Company generally discontinues the accrual of interest income when a loan becomes 90 days past due as to principal or interest; however, management may elect to continue the accrual when the estimated net realizable value of collateral is sufficient to cover the principal balance and the accrued interest. Interest income on other nonaccrual loans is recognized only to the extent of interest payments. Upon discontinuance of the accrual of interest on a loan, any previously accrued but unpaid interest is reversed against interest income.

A loan is impaired when management determines that it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for loan losses.

13

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

The allowance for loan losses is established through a provision for loan losses charged against net income. Loans determined to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. The allowance represents an amount, which in management’s judgment, will be adequate to absorb estimated probable losses on existing loans that may become uncollectible. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectibility of loans and prior loss experience. These evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, review of specific problem loans, the Company’s past loan loss experience, adverse situations that may affect the borrowers’ ability to pay, the estimated value of any underlying collateral, current economic conditions, and other relevant factors.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard or special mention as well as loans considered impaired. For such loans that are also classified as impaired, a specific allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative and other factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Large groups of small-balance homogenous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

14

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

Bank Premises, Furniture, Fixtures and Equipment

The Company’s premises, furniture, fixtures and equipment are stated at cost less accumulated depreciation computed primarily by straight-line methods over the estimated useful lives of the assets. Costs of major additions and improvements are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

Real Estate Acquired by Foreclosure

Real estate acquired by foreclosure consists of properties repossessed by the Company on foreclosed loans. These assets are stated at the lower of the outstanding loan amount (including accrued interest, if any) or fair value at the date acquired less estimated costs to sell. Losses arising from the acquisition of such property are charged against the allowance for loan losses. Declines in value resulting from subsequent revaluation of the property or losses resulting from disposition of such property are expensed. Revenue and expenses from operations of other real estate owned are reflected as other income (expense).

Cash Value of Life Insurance

The Company has purchased life insurance contracts on certain employees and directors. Certain of such policies were acquired pursuant to “split-dollar” arrangements with employees. During 2004 and 2003, several of these policies were converted to bank owned policies and the remainder of each policy was surrendered for cash. The cash surrender value of the remaining “split-dollar” policies as well as other Company owned policies is carried at the actual cash surrender value of the policy at the balance sheet date.

Intangible Assets

Intangible assets include core deposits purchased and goodwill. Core deposits intangibles are amortized on a straight-line basis over their estimated economic lives ranging from 5 to 10 years. Prior to 2002, goodwill was amortized over 40 years. Goodwill and other intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Fair values are determined based on market valuation multiples for the Company and comparable businesses based on the assets and cash flow of the Bank, the Company’s only reportable segment. If impairment has occurred, the goodwill or other intangible asset is reduced to its estimated fair value through a charge to expense.

15

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

Investment – Insurance Company

The Company accounts for its investment in New South Life Insurance Company (“New South”), a 33 percent owned affiliate, by the equity method of accounting. The Company’s share of the net income of New South is recognized as income in the Company’s income statement and added to the investment account, and dividends received from New South would be treated as a reduction of the investment account. New South has not paid dividends.

The fiscal year of New South ends on November 30, and the Company follows the practice of recognizing the net income of New South on that basis.

The investment in New South, which is included in other assets, totaled $1,898,643 and $1,766,979 at December 31, 2005 and 2004, respectively. Income from the investment for the years ended December 31, 2005, 2004, and 2003 included in other income totaled $131,664, $188,911 and $78,389, respectively.

Trust Assets

Assets held by the Trust Department of the Company in fiduciary or agency capacities are not assets of the Company and are not included in the consolidated financial statements.

Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as described in SFAS No. 109, “Accounting for Income Taxes.” As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

16

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

Comprehensive Income

Comprehensive income includes net earnings reported in the statements of income and changes in unrealized gain (loss) on securities available-for-sale reported as a component of stockholders’ equity. Unrealized gain (loss) on securities available-for-sale, net of related income taxes, is the only component of accumulated other comprehensive income for the Company.

Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted net income per share is based on the weighted average number of shares of common stock outstanding for the periods, including the dilutive effect of the Company’s outstanding stock options. The effect of the dilutive shares for the years 2005, 2004 and 2003 is illustrated in the following table.

	2005		2004		2003
Basic weighted average shares outstanding		5,006,493		4,992,792		4,974,910
Dilutive effect of stock options		59,672		63,845		44,849
Dilutive weighted average shares outstanding		5,066,165		5,056,637		5,019,759
Net income	$	7,966,132	$	7,546,085	$	6,970,929
Net income per share-basic	$	1.59	$	1.51	$	1.40
Net income per share-diluted	$	1.57	$	1.49	$	1.39

Stock Based Compensation

Stock option grants are accounted for in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, no compensation expense is recognized for stock options granted if the option price is not less than the fair market value of the underlying stock at the grant date. For each of the years ended December 31, 2005, 2004 and 2003, no stock based compensation expense was included in the determination of net income as all options granted during the years had an exercise price equal to the market value of the stock on the date of grant.

17

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

Had compensation expense been determined on the basis of fair value pursuant to SFAS No. 123, “Accounting for Stock-Based Compensation,” net income and earnings per share would have been reduced as follows:

	2005			2004			2003
Net income
As reported	$	7,966,132		$	7,546,085		$	6,970,929
Stock based employee compensation expense included in reported net income		—			—			—
Less stock based compensation expense determined under fair value method for all stock options, net of related income tax benefit		(55,340	)		(201,610	)		(143,654	)
Pro forma net income	$	7,910,792		$	7,344,475		$	6,827,275
	2005			2004			2003
Basic earnings per share
As reported	$	1.59		$	1.51		$	1.40
Pro forma	$	1.58		$	1.47		$	1.37
Diluted earnings per share
As reported	$	1.57		$	1.49		$	1.39
Pro forma	$	1.56		$	1.45		$	1.36

The fair value of each option is estimated on the grant date using the Black-Scholes option pricing model. The following weighted average assumptions were made in estimating fair values in 2005, 2004 and 2003:

Assumption	2005		2004		2003
Dividend yield	3.0	%	3.0	%	1.5	%
Risk-free interest rate	4.0	%	4.0	%	4.0	%
Expected life	7 years		7 years		7 years
Expected volatility	5.36	%	20.40	%	15.00	%

18

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

Advertising Costs

Advertising costs are charged to expense when incurred. Advertising expense was $495,579, $440,538 and $379,319 for the years ended December 31, 2005, 2004 and 2003, respectively.

Fair Value of Financial Instruments

SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of financial instruments’ fair values, as well as the methodology and significant assumptions used in estimating fair values. These requirements have been incorporated in Note 15. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. SFAS No. 107 excludes certain financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company and may not be indicative of amounts that might ultimately be realized upon disposition or settlement of those assets and liabilities.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R), “Share Based Payment,” or SFAS No. 123(R). SFAS No. 123(R) is effective for public companies at the beginning of the first interim or annual period after December 15, 2005. This statement prohibits the use of the intrinsic value-based method under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for share-based compensation. SFAS No. 123(R) requires the Company to calculate equity-based compensation expense for stock options and employee stock purchase plan rights granted to employees based on the fair value of the equity instrument at the time of grant. Currently, the Company discloses the pro forma net income (loss) and the related pro forma income (loss) per share information in accordance with SFAS No. 123 and SFAS No. 148, “Accounting for Stock-Based Compensation Costs-Transition and Disclosure.” The Company will record compensation expense for stock options granted to employees after January 1, 2006 as all outstanding options of the Company at December 31, 2005 are fully vested. SFAS No. 123(R) is not expected to have a material impact on the Company’s results of operations or financial condition. Additionally, on March 29, 2005, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment”. SAB No. 107 provides companies implementation guidance for the adoption of SFAS No. 123(R), including valuation methodologies to determine the fair value of stock based grants.

19

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

FASB Staff Position No. FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” the (“FSP”), was issued in November 2005 and addresses the determination of when an investment is considered impaired; whether the impairment is other than temporary; and to measure an impairment loss. The FSP also addresses accounting considerations subsequent to the recognition of an other-than-temporary impairment on a debt security, and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The FSP replaces the impairment guidance in Emerging Issues Task Force Issue No. 03-1 with references to existing authoritative literature concerning other-than-temporary determinations (principally SFAS No. 115 and SEC Staff Accounting Bulletin 59). Under the FSP, impairment losses must be recognized in earnings in an amount equal to the entire difference between the security’s cost and its fair value at the financial statement date, without considering partial recoveries subsequent to that date. The FSP also requires that an investor recognize an other-than-temporary impairment loss when a decision to sell a security has been made and the investor does not expect the fair value of the security to fully recover prior to the expected time of sale. The FSP is effective for reporting periods beginning after December 15, 2005. The Company does not expect that the adoption of the FSP will have a material impact on its financial condition, results of operations or financial statement disclosures.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” or SFAS No. 154, which replaces APB Opinion No. 20, “Accounting Changes” or APB No. 20, and SFAS No. 3, “Reporting Account Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement when the pronouncement does not include specific transition provisions. SFAS No. 154 requires retrospective application of changes in accounting principle to prior periods’ financial statements unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. APB No. 20 previously required that most voluntary changes in accounting principles be recognized by including the cumulative effect of the change in net income for the period of the change in accounting principle. SFAS No. 154 carries forward without change the guidance contained in APB No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. SFAS No. 154 also carries forward the guidance in APB No. 20 requiring justification of a change in accounting principle on the basis of preferability. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, with early adoption permitted. The adoption of this statement is not expected to have an impact on the Company’s financial conditions or results of operations.

20

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Continued

In December 2003, the Accounting Standards Executive Committee issued Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer.” The SOP is effective for loans acquired in fiscal years beginning after December 15, 2004. The SOP addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. The SOP applies to loans acquired in business combinations but does not apply to loans originated by the Company. Management does not believe the provisions of this standard will have a material impact on the Company’s results of operations or financial condition.

On March 9, 2004, the SEC issued Staff Accounting Bulletin (“SAB”) No. 105, Application of Accounting Principles to Loan Commitments. SAB No. 105 requires that when a company is recognizing and valuing a loan commitment at fair value, only differences between the guaranteed interest rate in the loan commitment and a market interest rate should be included. Any expected future cash flows related to the customer relationships or loan servicing should be excluded from the fair value measurement. The expected future cash flows that are excluded from the fair-value determination include anticipated fees for servicing the funded loan, late-payment charges, other ancillary fees, or other cash flows form the servicing rights. The guidance in SAB No. 105 is effective for mortgage-loan commitments that are accounted for as derivatives and are entered into after March 31, 2004. The adoption of the provisions of this standard did not have any impact on the Company’s results of operations or financial condition.

Reclassifications

Certain information for 2004 and 2003 have been reclassified to conform to the financial presentation for 2005. Such reclassifications are not considered material and had no effect on net income or stockholders’ equity.

21

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Intangible Assets

In 2002, the Company acquired CB&T Capital Corporation, a one-bank holding company, whose wholly-owned subsidiary was Citizens Bank & Trust Company in Louisville, Mississippi. In addition to the intangible assets related to the purchase of CB&T Capital Corporation, the Company recorded intangible assets from the purchase of branches located in Kosciusko, Scooba, Forest and Decatur, Mississippi along with the purchase of Three D Mortgage Company. The following table details the goodwill associated with each purchase which is no longer being amortized.

Purchase	Total		Life to Date Amortization		Unamortized
Kosciusko Branch	$	605,122	$	309,285	$	295,837
Scooba Branch		400,000		180,000		220,000
Three D Mortgage Company		76,408		10,188		66,220
CB&T Capital Corporation		2,567,600		—		2,567,600
Total goodwill	$	3,649,130	$	499,473	$	3,149,657

The Company has also allocated intangible assets to be recognized as core deposit intangibles on the acquisition of the Forest and Decatur branches and the CB&T Capital Corporation acquisition. These transactions are detailed in the following table.

Purchase	Total		Current Amortization Per Year		Life to Date Amortization		Unamortized
Decatur and Forest branches	$	2,487,574	$	352,812	$	1,532,255	$	955,319
CB&T Capital Corporation		1,846,909		184,691		661,809		1,185,100
Total core deposit intangible	$	4,334,483	$	537,503	$	2,194,064	$	2,140,419

Total amortization expense related to all intangible assets for the years ended December 31, 2005, 2004 and 2003 was $537,503, $537,503 and $537,503, respectively. Estimated amortization expense attributable to core deposit intangible assets for the next five years is detailed in the table below.

Year Ending December 31,	Amount
2006	$	537,503
2007		537,503
2008		434,386
2009		184,691
2010		184,691

22

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Investment Securities

The amortized cost and fair value of investment securities at December 31, 2005 is as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale Obligations of U.S.
Government agencies	$	12,200,149	$	27,462	$	255,547	$	11,972,064
U.S. Treasuries		2,000,836		1,664		—		2,002,500
Mortgage-backed securities		58,096,368		122,317		948,220		57,270,465
Other investments		91,480,979		1,054,497		1,577,388		90,958,088
Total	$	163,778,332	$	1,205,940	$	2,781,155	$	162,203,117

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2005.

	Less than 12 months				12 months or more				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U. S. Government agencies	$	10,806	$	256	$	—	$	—	$	10,806	$	256
U. S. Treasuries		—		—		—		—		—		—
Mortgage-backed securities		25,877		507		25,420		441		51,297		948
Other investments		24,260		822		20,499		755		44,759		1,577
Total	$	60,943	$	1,585	$	45,919	$	1,196	$	106,862	$	2,781

Mortgage-backed Securities. The unrealized losses on the Company’s investment in mortgage-backed securities were caused by interest rate increases. The contractual cash flows of these investments are guaranteed either by the full faith and credit of the United States or by an agency of the United States Government and it is not expected that the securities would be settled at a price less than the amortized cost of the Company’s investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality and because the Company

23

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Continued

has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2005.

Other investments. The Company’s unrealized loss on other investments relates to state, county and municipal bonds that have seen a decline in value due to changes in interest rates. It is not expected that these securities would be settled at a price less than amortized cost of the Company’s investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality and because the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2005.

The amortized cost and fair value of investment securities at December 31, 2004 is as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale Obligations of U.S.
Government agencies	$	17,981,545	$	120,640	$	—	$	18,102,185
U.S. Treasuries		4,031,294		71,826		—		4,103,120
Mortgage-backed securities		49,420,029		299,317		315,176		49,404,170
Other investments		79,662,381		1,345,248		901,021		80,106,608
Total	$	151,095,249	$	1,837,031	$	1,216,197	$	151,716,083

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2004.

24

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Continued

	Less than 12 months				12 months or more				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U. S. Government Agencies	$	—	$	—	$	—	$	—	$	—	$	—
U. S. Treasuries		—		—		—		—		—		—
Mortgage-backed securities		36,000		315		—		—		36,000		315
Other Investments		33,680		850		661		51		34,341		901
Total	$	69,680	$	1,165	$	661	$	51	$	70,341	$	1,216

The Company, as a member of the Federal Home Loan Bank of Dallas (“FHLB”) system, owns stock in such organization. No ready market exists for the stock, and it has no quoted market value. The Company’s investment in the FHLB is carried at cost of $3,497,400 and $3,227,300 at December 31, 2005 and 2004, respectively, and is included in other investments.

The amortized cost and estimated fair value of securities at December 31, 2005, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
Securities available-for-sale
Due in one year or less	$	7,258,741	$	7,261,706
Due after one year through five years		8,915,058		8,958,974
Due after five years through ten years		20,149,428		20,318,487
Due after ten years		127,455,105		125,663,950
Total	$	163,778,332	$	162,203,117

25

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Continued

Investment securities with carrying values of $98,540,046 and $74,620,615 at December 31, 2005 and 2004, respectively, were pledged as collateral for public deposits.

Gross realized gains and losses are included in other income. Total gross realized gains and gross realized losses from the sale of investment securities for each of the years ended December 31 were:

	2005		2004			2003
Gross realized gains	$	—	$	10,141		$	780,705
Gross realized losses		—		(3,121	)		(313,495	)
	$	—	$	7,020		$	467,210

Note 4. Loans

The composition of net loans at December 31, 2005 and 2004 is as follows:

	2005			2004
	(In Thousands)
Commercial, financial and agricultural loans	$	213,444		$	201,424
Real estate – construction loans		8,779			10,706
Real estate – mortgage loans		90,952			92,503
Consumer loans		67,712			66,666
		380,887			371,299
Unearned discount		(1,361	)		(1,710	)
Allowance for loan losses		(4,562	)		(4,721	)
Loans, net	$	374,964		$	364,868

Loans are made principally to customers in the Company’s trade area. The Company’s lending policy provides that loans collateralized by real estate are normally made with loan-to-loan value ratios of 80 percent or less. Commercial loans are typically collateralized by property, equipment, inventories and/or receivables with loan-to-value ratios from 50 percent to 80 percent. Real estate mortgage loans are collateralized by personal residences with loan-to-value ratios of 80 percent or less. Consumer loans are typically collateralized by real estate, vehicles and other consumer durable goods. Approximately $87,198,406 and $87,127,000 of the loans outstanding at December 31, 2005 and 2004, respectively, were variable rate loans.

26

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Continued

Changes in the allowance for loan losses at December 31, 2005, 2004 and 2003 are as follows:

	2005			2004			2003
Balance, beginning	$	4,720,875		$	5,126,735		$	4,222,341
Provision for loan losses		1,084,326			1,067,443			2,002,570
Loans charged off		(1,567,186	)		(1,799,687	)		(1,399,947	)
Recoveries of loans previously charged off		323,802			326,384			301,771
Balance, end of year	$	4,561,817		$	4,720,875		$	5,126,735

Loans on nonaccrual (impaired) status were $4,346,512, $3,146,041 and $1,502,971 at December 31, 2005, 2004 and 2003, respectively. Allowance for loan losses attributable to the entire balance of nonaccrual (impaired) loans totaled $883,041 and $1,451,357 at December 31, 2005 and 2004, respectively. Interest income forgone on loans classified as nonaccrual (impaired) during the years ended December 31, 2005, 2004 and 2003 was $348,804, $229,286 and $169,135, respectively.

Note 5. Bank Premises, Furniture, Fixtures and Equipment

Bank premises, furniture, fixtures and equipment consist of the following at December 31, 2005 and 2004:

	2005		2004
Land and buildings	$	11,357,801	$	10,545,802
Furniture, fixtures and equipment		8,901,348		8,626,549
		20,259,149		19,172,351
Less accumulated depreciation		10,364,934		9,400,138
Total	$	9,894,215	$	9,772,213

Depreciation expense for the years ended December 31, 2005, 2004 and 2003 was $1,024,320, $1,056,647 and $1,020,645, respectively.

27

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Deposits

The composition of deposits is as follows:

	2005		2004
Non-interest bearing	$	87,333,891	$	78,070,820
NOW and money market accounts		148,434,618		148,617,480
Savings deposits		35,579,157		38,151,914
Time certificates, $100,000 or more		79,393,146		82,016,625
Other time certificates		123,071,422		127,606,905
Total	$	473,812,234	$	474,463,744

The scheduled maturities of certificates of deposit at December 31, 2005 are as follows:

Year Ending December 31,	Amount
2006	$	157,037,228
2007		36,987,203
2008		8,080,136
2009		165,258
2010		194,743
	$	202,464,568

Interest expense for certificates of deposit over $100,000 was approximately $2,074,000, $1,691,000 and $1,997,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

28

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Federal Home Loan Bank Advances

Pursuant to collateral agreements with the FHLB, advances are collateralized by all the Company’s stock, FHLB securities ($3,497,400 included in securities available-for-sale at December 31, 2005) and qualifying first mortgage and other loans. As of December 31, 2005, the balance in qualifying first mortgage loans was $88,653,972. At December 31, 2005, advances from the FHLB, along with their rate and maturity date, consist of the following:

Advance Amount at December 31,				Interest Rate	Final Maturity
2005		2004
$	10,000,000	$	10,000,000	3.76	May 24, 2006
	648,818		1,718,566	4.94	July 3, 2006
	5,000,000		5,000,000	5.46	February 26, 2008
	5,000,000		5,000,000	5.66	April 28, 2008
	15,000,000		—	4.50	June 23, 2008
	3,000,000		3,000,000	5.24	April 20, 2009
	2,000,000		2,000,000	5.29	April 20, 2009
	2,000,000		2,000,000	4.47	September 7, 2010
	2,000,000		2,000,000	4.88	August 22, 2011
	1,000,000		1,000,000	4.76	August 29, 2011
	900,000		900,000	4.43	September 19, 2011
	10,000,000		10,000,000	3.66	June 17, 2013
	3,500,000		3,500,000	4.67	December 16, 2014
$	60,048,818	$	46,118,566

The scheduled payments for the next five years are as follows:

Year Due	Payment
2006	$	10,648,818
2007		—
2008		25,000,000
2009		5,000,000
2010		2,000,000
Thereafter		17,400,000
	$	60,048,818

29

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Other Income and Other Expense

The following is a detail of the major income classifications that are included in Other Income under Non-Interest income on the income statement.

Other Income	2005		2004		2003
BOLI Insurance	$	485,890	$	410,436	$	—
Mortgage Loan Origination Fees		380,049		328,295		324,791
Other Income		728,872		767,110		400,922
Total Other Income	$	1,594,811	$	1,505,841	$	725,713

The following is a detail of the major expense classifications that make up the Other Expense line item in the income statement.

Other Expense	2005		2004		2003
Intangible Amortization	$	537,503	$	537,503	$	537,503
Advertising		495,579		440,538		379,319
Office Supplies		559,442		535,628		581,673
Legal and Audit Fees		404,183		454,131		231,675
Telephone Expense		398,435		394,270		343,165
Other Expenses		2,496,554		2,616,640		2,130,379
Total Other Expense	$	4,891,696	$	4,978,710	$	4,203,714

Note 9. Income Taxes

The consolidated provision for income taxes consists of the following:

	2005			2004		2003
Currently payable
Federal	$	2,250,896		$	2,297,257	$	2,939,498
State		425,520			374,200		377,892
		2,676,416			2,671,457		3,317,390
Deferred tax expense (benefit)		(310,432	)		11,432		(472,691	)
Income tax expense	$	2,365,984		$	2,682,889	$	2,844,699

30

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Continued

The differences between income taxes calculated at the federal statutory rate and income tax expense were as follows:

	2005			2004			2003
Federal taxes based on statutory rate	$	3,512,919		$	3,477,851		$	3,337,314
State income taxes, net of federal benefit		280,843			246,972			249,409
Tax-exempt investment interest		(1,067,853	)		(922,520	)		(714,510	)
Other, net		(359,925	)		(119,414	)		(27,514	)
Income tax expense	$	2,365,984		$	2,682,889		$	2,844,699

At December 31, 2005 and 2004, net deferred tax assets consist of the following:

	2005		2004
Deferred tax assets
Allowance for loan losses	$	1,511,038	$	1,427,477
Deferred compensation liability		882,739		804,577
Unrealized loss on available-for-sale securities		587,555		—
Other		86,123		102,271
Total		3,067,455		2,334,325
Deferred tax liabilities
Unrealized gain on available-for-sale securities		—		211,084
Premises and equipment		553,955		650,656
Intangible assets		151,712		280,238
Other		400,354		339,984
Total		1,106,021		1,478,242
Net deferred tax asset	$	1,961,434	$	852,363

The net deferred tax asset of $1,961,434 and $852,363 at December 31, 2005 and 2004, respectively, is included in other assets. The Company has evaluated the need for a valuation allowance related to the above deferred tax assets and, based on the weight of the available evidence, has determined that it is more likely than not that all deferred tax assets will be realized.

31

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Summarized Financial Information of Citizens Holding Company

Summarized financial information of Citizens Holding Company, parent company only, at December 31, 2005 and 2004, and for the years ended December 31, 2005, 2004 and 2003, is as follows:

Balance Sheets

December 31, 2005 and 2004

	2005		2004
Assets
Cash (a)	$	1,514,327	$	1,110,270
Securities available-for-sale, at fair value		—		510,940
Investment in bank subsidiary (a)		62,144,841		58,584,644
Other assets (a)		117,338		25,091
Total assets	$	63,776,506	$	60,230,945
Liabilities
Other liabilities	$	2,401	$	39,720
Stockholders’ equity		63,774,105		60,191,225
Total liabilities and stockholders’ equity	$	63,776,506	$	60,230,945

(a) Eliminates in consolidation.

32

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Continued

Income Statements

Years Ended December 31, 2005, 2004 and 2003

	2005			2004			2003
Interest income	$	30,359		$	38,994		$	38,706
Other income
Other		—			—			14,426
Dividends from bank subsidiary (a)		3,265,783			3,017,969			2,918,280
Equity in undistributed earnings of bank subsidiary (a)		4,717,327			4,540,676			4,066,482
Total other income		7,983,110			7,558,645			6,999,188
Other expense		58,468			60,605			76,771
Income before income taxes		7,955,001			7,537,034			6,961,123
Income tax expense (benefit)		(11,131	)		(9,051	)		(9,806	)
Net income	$	7,966,132		$	7,546,085		$	6,970,929

Statements of Cash Flows

Years Ended December 31, 2005, 2004 and 2003

	2005			2004			2003
Cash flows from operating activities
Net income	$	7,966,132		$	7,546,085		$	6,970,929
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed earnings of Bank		(4,717,327	)		(4,540,676	)		(4,066,482	)
(Increase) decrease in other assets		13,961			(9,051	)		—
Increase (decrease) in other liabilities		(36,603	)		(10,075	)		851
Net cash provided by operating activities		3,226,163			2,986,283			2,905,298
Cash flows from investing activities
Other		300,890			4,259			(115,378	)
Net cash provided by (used by) investing activities		300,890			4,259			(115,378	)

33

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Continued

	2005			2004			2003
Cash flows from financing activities
Dividends paid to stockholders	$	(3,254,591	)	$	(2,996,881	)	$	(2,835,769	)
Proceeds from exercise of stock options		131,595			210,062			45,993
Net cash used by financing activities		(3,122,996	)		(2,786,819	)		(2,789,776	)
Net increase in cash		404,057			203,723			144
Cash, beginning of year		1,110,270			906,547			906,403
Cash, end of year	$	1,514,327		$	1,110,270		$	906,547

The Bank is required to obtain approval from state regulators before paying dividends. The Bank paid dividends of $3,265,783, $3,017,969 and $2,918,280 to the Citizens Holding Company during the years ended December 31, 2005, 2004 and 2003, respectively.

Note 11. Related Party Transactions

The Company has had, and may be expected to have in the future, banking transactions in the ordinary course of business with directors, significant stockholders, principal officers, their immediate families, and affiliated companies in which they are principal stockholders (commonly referred to as related parties). In management’s opinion, such loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties, and do not involve more than the normal risk of collectibility at the time of the transaction.

The balance of loans made to related parties at December 31, 2005 and 2004 was $355,698 and $1,133,660, respectively. Advances to related parties during the year ended December 31, 2005 totaled $2,342,859. Payments received from related parties during the year ended December 31, 2005 totaled $2,562,619.

Deposits from related parties at December 31, 2005 and 2004 approximated $2,469,000 and $3,026,000, respectively.

34

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12. Off-Balance Sheet Financial Instruments, Commitments and Contingencies and Concentrations of Risks

Commitments to Extend Credit

In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing needs of its customers. These commitments and contingent liabilities include commitments to extend credit and issue standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. At December 31, 2005 and 2004, commitments related to unused lines of credit were $21,477,893 and $19,832,752 and standby letters of credit were $1,261,236 and $4,250,996, respectively. The fair value of such commitments is not material. As some of these commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company applies the same credit policies and standards as it does in the lending process when making these commitments. The collateral obtained is based upon the assessed credit worthiness of the borrower. Collateral held varies, but may include accounts receivable, crops, livestock, inventory, property and equipment, residential real estate and income-producing commercial properties.

Interest Rate Risk

The Company is principally engaged in providing short-term and medium-term installment, commercial and agricultural loans with interest rates that are fixed or fluctuate with the prime lending rate. These assets are primarily funded through short-term demand deposits and long-term certificates of deposit with variable and fixed rates. Accordingly, the Company is exposed to interest rate risk because, in changing interest rate environments, interest rate adjustments on assets and liabilities may not occur at the same time or in the same amount. The Company manages the overall rate sensitivity and mix of its asset and liability portfolio and attempts to minimize the effects that interest rate fluctuations will have on its net interest margin.

Legal Proceedings

The Company is party to lawsuits and other claims that arise in the ordinary course of business. The lawsuits assert claims related to the general business activities of the Company. The cases are being vigorously contested. In the regular course of business, management evaluates estimated losses or costs related to litigation, and provision is made for anticipated losses whenever management believes that such losses are probable and can be reasonably estimated. While management believes that the final resolution of pending legal proceedings will not have a material impact on the Company’s financial position or results of operations, the final resolution of such proceedings could have such a material adverse effect.

35

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12. Continued

Concentration of Risk

The Company makes agricultural, agribusiness, commercial, residential and consumer loans primarily in the eastern region of Mississippi. A substantial portion of the Company’s customers’ abilities to honor their contracts is dependent on the business and agricultural economy in that area.

Although the Company’s loan portfolio is diversified, there is a relationship in this region between the agricultural economy and the economic performance of loans made to nonagricultural customers. The Company’s lending policies for agricultural and nonagricultural customers require loans to be well-collateralized and supported by cash flows. Collateral for agricultural loans includes equipment, crops, livestock, and land. Credit losses from loans related to the agricultural economy are consistent with credit losses experienced in the portfolio as a whole. The concentration of credit in the regional agricultural economy is taken into consideration by management in determining the allowance for loan losses.

See Note 4 for a summary of loans by type.

The nature of the Company’s business requires that it maintain amounts due from banks, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Note 13. Lease Commitment and Total Rental Expense

The Company has operating leases under noncancellable operating lease agreements for banking facilities and equipment. Future minimum rental payments due under the leases are as follows:

Years Ending December 31,	Amounts
2006	$	84,048
2007		80,335
2008		60,534
2009		58,531
2010		58,531
	$	341,979

The total rental expense included in the income statements for the years ended December 31, 2005, 2004 and 2003 is $63,398, $58,847, and $59,330, respectively.

36

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14. Benefit Plans

The Company provides its employees with a profit sharing and savings plan, which allows employees to direct a percentage of their compensation into a tax deferred retirement account, subject to statutory limitations. To encourage participation, the Company provides a 100 percent matching contribution for up to 6 percent of each participant’s compensation, plus discretionary non-matching contributions. Employees are eligible after one year of service. For 2005, 2004 and 2003, the Company’s contributions were $516,555, $448,334 and $407,577, respectively.

Deferred Compensation Plans

The Company provides a deferred compensation plan covering its directors. Participants in the deferred compensation plan can defer a portion of their compensation for payment after attaining age 70. Life insurance contracts have been purchased which may be used to fund payments under the plan. Net expenses related to this plan were $144,158, $131,120 and $137,364 for the plan years ended December 31, 2005, 2004 and 2003, respectively.

The Company has also entered into deferred compensation arrangements with certain officers that provide for payments to such officers or their survivors after retirement. Life insurance policies have been purchased which may be used to fund payments under these arrangements. The obligations of the Company under both the directors and officers deferred compensation arrangements are on a systematic basis over the remaining expected service period of the individual directors and officers.

During 2004 and 2003, the Company surrendered certain life insurance policies that were acquired pursuant to “split-dollar” arrangements with employees and settled the Company’s obligations to such employees under such arrangements. The impact of such transactions on the Company’s financial statements was not significant.

Also during 2003, one of the Company’s directors died and the Company received life insurance proceeds of approximately $600,000 in excess of the carrying amount of the related policy. In addition, as a result of the death, the Company’s liability for amounts due under the deferred compensation agreement increased by approximately the same amount. Accordingly, the Company did not realize a significant gain or loss. The Company did, however, realize an income tax benefit as the proceeds received from the life insurance policy was not subject to income taxes.

Note 15. Regulatory Matters

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet the minimum regulatory capital requirements can initiate certain mandatory, and possible additional discretionary actions by regulators that, if undertaken, could have a direct material affect on the Company.

37

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15. Continued

Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines involving quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total capital and Tier I capital to risk-weighted assets (as defined in the regulations) and Tier I capital to average assets (as defined in the regulations). Management believes, as of December 31, 2005, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2005 and 2004, the most recent regulatory notification categorized the Bank as well capitalized. There have been no conditions or events that would cause changes to the capital structure of the Company since this notification. To continue to be categorized as well capitalized under the regulatory framework for prompt corrective action, the Company would have to maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as disclosed below, in comparison with actual capital amounts and ratios:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount	Ratio
As of December 31, 2005
Total Capital
(to Risk-Weighted Assets)
Citizens Holding Company	$	65,370,218	16.20	%	$	32,279,732	8	%	$ N/A	—
Citizens Bank		63,762,072	15.80			32,279,732	8		40,349,665	10	%
Tier I Capital
(to Risk-Weighted Assets)
Citizens Holding Company		60,808,401	15.07			16,139,866	4		N/A	—
Citizens Bank		59,200,255	14.67			16,139,866	4		24,209,799	6
Tier I Capital
(to Average Assets)
Citizens Holding Company		60,808,401	10.11			24,064,264	4		N/A	—
Citizens Bank		59,200,255	9.84			24,066,894	4		30,083,618	5

38

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15. Continued

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount	Ratio
As of December 31, 2004
Total Capital
(to Risk-Weighted Assets)
Citizens Holding Company	$	60,327,088	15.39	%	$	31,354,423	8	%	$ N/A	—
Citizens Bank		58,716,354	14.99			31,344,415	8		39,180,519	10	%
Tier I Capital
(to Risk-Weighted Assets)
Citizens Holding Company		55,430,160	14.14			15,677,212	4		N/A	—
Citizens Bank		53,820,971	13.74			15,672,207	4		23,508,311	6
Tier I Capital
(to Average Assets)
Citizens Holding Company		55,430,160	9.72			22,813,669	4		N/A	—
Citizens Bank		53,820,971	9.46			22,745,381	4		28,431,727	5

Note 16. Fair Values of Financial Instruments

The following represents the carrying value and estimated fair value of the Company’s financial instruments at December 31, 2005 and 2004:

	2005				2004
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and due from banks	$	26,743,200	$	26,743,200	$	16,837,433	$	16,837,433
Interest bearing deposits with banks		312,825		312,825		818,716		818,716
Federal funds sold		—		—		11,000,000		11,000,000
Securities available-for-sale		162,203,117		162,203,117		151,716,083		151,716,083
Net loans		374,964,316		372,219,005		364,868,117		363,276,796
Accrued interest receivable		4,695,147		4,695,147		4,385,892		4,385,892
Financial liabilities
Deposits	$	473,812,234	$	473,587,831	$	474,463,744	$	474,627,262
Federal Home Loan Bank advances		60,048,818		59,344,446		46,118,566		46,711,095
Accrued interest payable		798,667		798,667		620,590		620,590
Federal funds purchased		1,600,000		1,600,000		—		—

The fair value estimates, methods and assumptions used by the Company in estimating its fair value disclosures for financial instruments were:

39

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16. Continued

Cash and Due from Banks and Interest Bearing Deposits with Banks

The carrying amounts reported in the balance sheet for these instruments approximate those assets’ fair values because of their immediate and shorter-term maturities.

Securities Available-for-Sale

Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Net Loans

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans (i.e., commercial real estate and rental property mortgage loans, commercial and industrial loans, financial institution loans, and agricultural loans) are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest receivable approximates its fair value.

Federal Funds Sold and Purchased

Due to the short term nature of these instruments, the carrying amount is equal to the fair value.

Deposits

The fair values for demand deposits, NOW and money market accounts and savings accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term money market accounts and time deposits approximate their fair values at the reporting date. Fair values for fixed-rate time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. The carrying amount of accrued interest payable approximates its fair value.

Federal Home Loan Bank Borrowings

The fair value of the portion of FHLB advances that matures within 90 days approximates its fair value. For longer term maturities, the fair value is based on discounted cash flow analysis.

Off-Balance Sheet Instruments

The fair value of commitments to extend credit and letters of credit are estimated using fees currently charged to enter into similar agreements. The fees associated with these financial instruments are not material.

40

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17. Stock Options

The Company has a directors’ stock compensation plan and employees’ long-term incentive plan. Under the directors’ plan, the Company may grant options for up to 210,000 shares of common stock. The price of each option is equal to the market price determined as of the option grant date. Options granted are exercisable after 6 months and expire after 10 years. Under the employees’ incentive plan the Company may grant options for up to 7 percent of the total number of shares of common stock, which may be issued and outstanding. Incentive options must be granted within 10 years of the adoption of the plan and expire no later than 10 years from the grant date. The exercise price is equal to the market price of the Company’s stock on the date of grant.

Following is a summary of the status of the plans for the years ending December 31, 2005, 2004 and 2003:

	Directors’ Plan				Employees’ Plan
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Outstanding at January 1, 2003	70,800		$	10.37	53,900		$	13.33
Granted	16,500			16.40	41,500			14.57
Exercised	(3,300	)		7.15	(1,750	)		12.80
Forfeited	—			—	—			—
Outstanding at December 31, 2003	84,000		$	11.68	93,650		$	13.89
Granted	13,500			22.25	43,500			21.85
Exercised	(19,650	)		9.94	(1,000	)		14.65
Forfeited	—			—	—			—
Outstanding at December 31, 2004	77,850		$	13.95	136,150		$	16.43
Granted	12,000			20.00	43,500			21.05
Exercised	(6,000	)		14.66	(3,000	)		14.55
Forfeited	—			—	(4,450	)		17.24
Outstanding at December 31, 2005	83,850		$	14.77	172,200		$	17.60
Options exercisable at:
December 31, 2005	83,850		$	14.77	172,200		$	17.60
Weighted average fair value of Options granted during years ended
December 31, 2003			$	4.21			$	3.74
December 31, 2004			$	5.69			$	5.59
December 31, 2005			$	1.48			$	1.56

41

CITIZENS HOLDING COMPANY AND SUBSIDIARY

Years Ended December 31, 2005, 2004 and 2003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17. Continued

The following table presents the outstanding stock options granted in relation to the option price and the weighted average maturity.

Range of Exercise Prices	Options Outstanding	Weighted Average Price		Weighted Average Life Remaining
$7.15 to $10.00	14,850	$	7.27	3 years, 2 months
$10.01 to $15.00	117,200		13.46	6 years, 1 month
$15.01 to $20.00	25,500		18.09	8 years, 3 months
$20.01 and above	98,500		21.56	8 years, 8 months
Total	256,050	$	16.68	7 years, 1 month

42

Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2005, 2004 and 2003

OVERVIEW

The following information discusses the financial condition and results of operations of Citizens Holding Company (the “Company”) as of December 31, 2005, 2004 and 2003. In this discussion, all references to the activities, operations or financial performance of the Company reflect the Company’s activities, operations and financial performance through its majority-owned subsidiary, The Citizens Bank of Philadelphia, Mississippi (the “Bank”), unless otherwise specifically noted.

Over the past three years, the Company has experienced growth in asset size and earnings as management has capitalized on opportunities for natural economic growth within our market area. Growth in 2004 and 2003 is attributable to steady loan demand fueled by continued low interest rates. Much of the loan growth in 2003 was funded by low interest rate borrowings from the Federal Home Loan Bank, while the loan growth in 2004 was funded in part by an increase in demand deposit accounts. In 2005, both an increase in demand deposits and an increase in Federal Home Loan Bank borrowings funded the growth in loans despite a decrease in certificate of deposit balances. Earnings have increased steadily over the three-year period as management utilized low cost funds to increase net interest income. At the same time, management believes it has made appropriate provisions for loan losses.

In 2005, the Company continued to grow although the growth rate was less than the two previous years. The Company’s assets grew to $607,709,136, or 3.5% from 2004, loans increased to $374,964,316, or 2.8% and deposits decreased $651,511, or .1%. The decrease in savings accounts and certificates of deposit were the primary reason for the decrease in deposits as they ended 2005 at $9,731,729, or 3.9% lower than 2004. Demand, NOW and money market accounts grew $9,080,209, or 4.0% to $235,768,509, at December 31, 2005.

In 2004, the Company grew through the expansion of its existing customer base within the Company’s market area. Total assets for the year increased 6.6% from 2003 to $587,238,991, and net loans increased 3.7% from 2003 to $364,868,117. The loan growth in 2004 was funded in part by an increase in demand deposit accounts. Deposits grew 8.2% in 2004 to $474,463,744 even though certificates of deposits declined by $12,135,472, or 5.5%.

In 2003, the Company experienced normal growth in assets without any acquisitions, relying on the continued growth of the Company’s market area. Total assets for the year increased 6.2% from 2002 to $550,761,143, and net loans increased 15.8% from 2002 to $351,937,005. Deposit growth for the year was 1.4% to $438,697,298.

The Company’s net income after taxes for 2005 increased 5.6% to $7,966,132 over 2004. Interest rates continued to rise in 2005 resulting in a higher cost of investible funds for the Company. This increase was offset by a corresponding increase in interest rates on loans and investments. Net income for 2005 produced, on a fully diluted basis, earnings per share of $1.57 compared to $1.49 in 2004 and $1.39 for 2003.

Net income after taxes of the Company for 2004 increased 8.3% over 2003 to $7,546,085. Net income after taxes of the Company for 2003 increased by 10.7% over 2002 to $6,970,929. Net income was positively affected in both 2004 and 2003 by a decrease in interest paid on deposits and other borrowed money.

The Company’s Return on Average Assets (ROA) was 1.35% in 2005, compared to 1.33% in 2004 and 1.27% in 2003. Its Return on Average Equity (ROE) was 12.63% in 2005, 12.84% in 2004 and 12.42% in 2003. During these periods, leverage capital ratios (the ratio of equity to average total assets) increased from 9.11% in 2003 to 9.72% in 2004 and to 10.11% in 2005. The increase in ROE indicates that the Company has been successful in using its capital to support growth in both assets and earnings. This growth has enabled the Company to increase the annual dividend payout rate to approximately 40.9% of 2005 earnings per share. Even though the dividend payout ratio has increased, the leverage capital ratio increased to 10.11% in 2005, which is well above the regulatory requirement of 5% to be considered “well capitalized” under applicable Federal Deposit Insurance Corporation (the “FDIC”) guidelines for the Bank.

CRITICAL ACCOUNTING POLICIES

The allowance for loan losses is established through a provision for loan losses charged against net income. The allowance represents an amount, which in management’s judgment will be adequate to absorb estimated probable losses within the existing loan portfolio. Loans that management determines to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. Management’s judgment in determining the adequacy of the allowance is based on evaluations of the collectibility of specific loans and prior loss experience. Other factors considered by management include specific economic events, general economic conditions and trends, and loan portfolio mix and growth. The allowance for loan losses is subject to close regulatory review from the FDIC and the Mississippi Department of Banking and Consumer Finance and is also a factor in their determination of capital adequacy. The estimation of losses in our loan portfolio is susceptible to changes resulting from changes in the financial condition of individual borrowers and economic conditions in the Company’s market area.

Prior to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share Based Payment” (“SFAS No. 123(R),” effective January 1, 2006), the Company accounted for stock options in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). APB No. 25 did not require the Company to recognize compensation expense for stock options granted to employees if the option price was not less than the fair market value of the underlying stock at the grant date. Accordingly, the Company did not recognize compensation expense for the 55,500, 57,000 and 58,000 options granted to employees and directors for 2005, 2004 and 2003, respectively. If the Company had applied the provisions of SFAS No. 123(R) for the options granted, the Company would have reported compensation expense of $55,340, $201,610 and $143,654 for 2005, 2004, and 2003, respectively.

Generally, all options granted to employees and directors have become fully vested at the date of grant rather than a vesting period. Since all options outstanding at December 31, 2005 are fully vested, no future compensation expense will be required upon the adoption of SFAS No. 123(R). Furthermore, no cumulative effect of the adoption will be recorded by the Company for options granted prior to December 31, 2005. The Company has not changed the amount or terms of any outstanding option arrangements in anticipation of the adoption of SFAS No. 123(R).

In future periods, the Company will be required to expense the fair value of options granted; the Company intends to use the Black-Scholes valuation model to determine the fair value. The Black-Scholes model requires the use of certain assumptions, including the volatility of the Company’s stock price (the Company has used the historical volatility in prior periods to determine the estimated compensation expense), the expected life of the option, the expected dividend rate and the discount rate. The Company does not expect to change the methods in determining the assumptions underlying the valuation of future stock option grants.

Accordingly, the Company does not expect the adoption of SFAS No. 123(R) to have a material impact on the Company’s income or financial position. For more information on the Company’s stock options, please refer to Notes 1 and 17 to the Company’s Consolidated Financial Statements included in this Annual Report.

Please refer to Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements of the Company included in this Annual Report for a detailed discussion of recent account pronouncements affecting the Company.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this report contains statements which constitute forward-looking statements and information which are based on management’s beliefs, plans, expectations, assumptions and on information currently available to management. The words “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “estimate,” and similar expressions used in this report that do not relate to historical facts are intended to identify forward-looking statements. These statements appear in a number of places in this report, including, but not limited to, statements found in Item 1, “Business,” and in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Company notes that a variety of factors could cause the actual results or experience to differ materially from the anticipated results or other expectations described or implied by such forward-looking statements. The risks and uncertainties that may affect the operation, performance, development and results of the business of the Company and the Bank, include, but are not limited to, the following:

• the risk of adverse changes in business conditions in the banking industry generally and in the specific markets in which the Company operates;

• changes in the legislative and regulatory environment that negatively impact the Company and the Bank through increased operating expenses;

• increased competition from other financial institutions;

• the impact of technological advances;

• expectations about the movement of interest rates, including actions that may be taken by the Federal Reserve Board in response to changing economic conditions;

• changes in asset quality and loan demand;

• expectations about overall economic strength and the performance of the economy in the Company’s market area; and

• other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

The Company does not undertake any obligation to update or revise any forward-looking statements subsequent to the date on which they are made.

SELECTED FINANCIAL DATA

The following selected financial data has been taken from the Company’s Consolidated Financial Statements and related notes included in this Annual Report and should be read in conjunction with such consolidated financial statements and related notes. Dollar references in all of the following tables are in thousands except for per share data. All per share data has been adjusted to give effect to the three-for-two stock split effected January 2, 2002.

The major components of the Company’s operating results for the past five years are summarized in Table 1—Five Year Financial Summary of Consolidated Statements and Related Statistics.

TABLE 1 - FIVE YEAR SUMMARY OF CONSOLIDATED STATEMENTS AND RELATED STATISTICS

(in 000’s except for per share data)

	2005		2004		2003		2002		2001
Summary of Earnings
Total interest income	$	33,043	$	29,972	$	29,725	$	30,197	$	29,119
Total interest expense		9,847		7,537		8,188		9,746		13,399
Provision for loan losses		1,084		1,067		2,003		1,758		1,123
Non-interest income		5,737		5,574		5,324		4,435		3,980
Non-interest expense		17,517		16,713		15,042		13,865		10,308
Income tax expense		2,366		2,683		2,845		2,965		2,558
Net income		7,966		7,546		6,971		6,298		5,711
Per Share Data
Earnings-basic	$	1.59	$	1.51	$	1.40	$	1.27	$	1.15
Earnings-diluted		1.57		1.49		1.39		1.26		1.15
Cash dividends		0.65		0.60		0.57		0.52		0.38
Book value at year end		12.73		12.04		11.35		10.81		9.51
Selected Year End Actual Balances
Loans, net of unearned income	$	379,526	$	369,589	$	357,064	$	308,175	$	264,278
Allowance for loan losses		4,562		4,721		5,127		4,222		3,375
Securities available for sale		162,203		151,716		143,181		162,276		122,567

Earning assets		535,322			525,155			493,209			468,592			394,315
Total assets		607,709			587,239			550,761			518,450			427,213
Deposits		473,812			474,464			438,697			432,768			359,309
Long term borrowings		60,049			46,119			47,637			24,606			14,629
Shareholders’ equity		63,774			60,191			56,502			53,783			47,182
Selected Year End Average Balances
Loans, net of unearned income	$	371,925		$	364,922		$	337,763		$	289,407		$	255,185
Allowance for loan losses		4,646			5,532			4,495			3,905			3,335
Securities available for sale		156,333			142,994			164,371			153,726			106,632
Earning assets		528,562			506,898			499,726			450,174			372,923
Total assets		591,872			565,892			549,520			491,833			403,881
Deposits		464,629			457,510			447,188			414,135			327,536
Long term borrowings		54,823			41,607			35,314			19,301			14,815
Shareholders’ equity		63,068			58,750			56,121			51,304			47,664
Selected Ratios
Return on average assets		1.35	%		1.33	%		1.27	%		1.28	%		1.41	%
Return on average equity		12.63	%		12.84	%		12.42	%		12.28	%		11.98	%
Dividend payout ratio		40.86	%		39.71	%		40.71	%		40.98	%		33.31	%
Equity to year end assets		10.49	%		10.25	%		10.26	%		10.37	%		11.04	%
Total risk-based capital to risk-adjusted assets		16.20	%		15.35	%		14.94	%		15.57	%		18.40	%
Leverage capital ratio		10.11	%		9.72	%		9.11	%		8.83	%		10.51	%
Efficiency ratio		58.14	%		57.65	%		54.45	%		54.51	%		51.32	%

The year-end and average balances for 2002 reflect the increase in loans, assets and deposits that resulted from the May 2002 acquisition of CB&T Capital Corporation and its bank subsidiary, Citizens Bank and Trust Company of Louisville. Similarly, the balances in 2001 increased in part by the acquisition of two Union Planters branches located in Forest and Decatur, Mississippi in July 2001.

NET INTEREST INCOME

Net interest income is the most significant component of the Company’s earnings. Net interest income is the difference between interest and fees realized on earning assets, primarily loans and securities, and interest paid on deposits and other borrowed funds. The net interest margin is this difference expressed as a percentage of average earning assets. Net interest income is affected by several factors, including the volume of earning assets and liabilities, the mix of earning assets and liabilities, and interest rates. The discussion below is presented on a tax equivalent basis which management believes to be the best way to analyze net interest income.

Net interest income on a tax equivalent basis was $24,373,000, $23,435,000 and $22,317,000 for the years 2005, 2004 and 2003, respectively. Net interest margin was 4.61%, 4.61% and 4.49% for the same periods. During 2005, the rates on interest earning assets and interest bearing liabilities both rose to the extent that the net interest margin in 2005 was unchanged from 2004. Both volume and rates increased on both interest bearing assets and liabilities.

The increase in net interest income in 2004 was due to the increases in the volume and yield of interest-bearing assets exceeding the increases in the volume of and rates paid on deposits. For the year ended December 31, 2004, the average yield on earnings assets decreased 4 basis points to 6.09% from 2003 and the average rate paid on interest-bearing liabilities decreased 18 basis points to 1.76% from 2003. The volume of earning assets increased 2.1% while the volume of interest-bearing liabilities increased 1.7% in 2004.

In 2003, the increase in the volume of interest-bearing assets, partially offset by the slightly larger decrease in the interest rate charged on loans than the decrease in the interest rate paid on deposits, caused the rise in net interest income in 2003. The average yield on earnings assets in 2003 decreased to 6.13% from 6.83% in 2002, while the average rate on interest-bearing liabilities decreased to 1.94% from 2.59% in 2002. Earning assets volume increased 10.6% while interest-bearing liabilities volume increased 12.0% in 2003.

During this three-year period, loan demand has remained strong and has allowed the Company to continue to invest its available funds in loans. Loans generally provide the Company with yields that are greater than the yields on typical investment securities.

During 2003, the Company purchased $11.4 million of additional bank-owned life insurance, increasing the Company’s investment in such insurance to $14.9 million at December 31, 2003. The income received by the Company on these policies increased the Company’s total investment from $14.9 million at December 31, 2003 to approximately $15.5 million at December 31, 2004 and $16.0 million at December 31, 2005. The additional purchases were made to provide a future funding source for certain of the Company’s deferred compensation arrangements. Such insurance also offers more attractive yields than other investment securities.

Table 2 – Average Balance Sheets and Interest Rates sets forth average balance sheet data, including all major categories of interest-earning assets and interest-bearing liabilities, together with the interest earned or interest paid and the average yield or average rate paid on each such category for the fiscal years ended December 31, 2005, 2004 and 2003.

TABLE 2 - AVERAGE BALANCE SHEETS AND INTEREST RATES

	Average Balance						Income/Expense						Average Yield/Rate
	2005		2004		2003		2005		2004		2003		2005		2004		2003
Loans:
Loans, net of unearned	$	370,982	$	363,405	$	336,275	$	25,435	$	24,162	$	23,697	7.13	%	6.65	%	7.05	%
Investment Securities
Taxable		71,916		72,023		108,695		3,023		2,847		3,761	4.20	%	3.95	%	3.39	%
Tax-exempt		80,728		66,542		49,183		4,564		3,863		2,998	5.65	%	5.80	%	6.10	%
Total Investment Securities		152,644		138,565		157,878		7,587		6,710		6,759	4.97	%	4.84	%	4.28	%
Federal Funds Sold and Other		5,891		6,031		3,575		180		83		34	3.06	%	1.38	%	0.95	%
Total Interest Earning Assets		529,517		508,001		497,728		34,202		30,955		30,490	6.46	%	6.09	%	6.13	%
Non-Earning Assets		62,355		57,891		51,792
Total Assets	$	591,872	$	565,892	$	549,520
Deposits:
Interest-bearing Demand Deposits	$	144,134	$	127,902	$	123,338	$	2,098	$	1,372	$	1,212	1.46	%	1.07	%	0.98	%
Savings		35,494		37,591		34,696		301		319		354	0.89	%	0.85	%	1.02	%
Time		204,265		219,150		222,695		5,014		4,065		5,024	2.45	%	1.85	%	2.26	%
Total Deposits		383,893		384,643		380,729		7,413		5,756		6,590	1.93	%	1.50	%	1.73	%
Borrowed Funds
Short-term Borrowings		2,344		1,113		4,065		84		18		56	3.58	%	1.62	%	1.37	%
Long-term Borrowings		54,823		41,607		35,314		2,332		1,746		1,527	4.25	%	4.20	%	4.32	%
Total Borrowed Funds		57,167		42,720		39,379		2,416		1,764		1,583	4.23	%	3.70	%	4.02	%
Total Interest-Bearing Liabilities		441,060		427,363		420,108		9,829		7,520		8,173	2.22	%	1.76	%	1.94	%
Non-Interest Bearing Liabilities
Demand Deposits		80,737		72,867		65,985
Other Liabilities		7,007		6,912		7,306
Shareholders’ Equity		63,068		58,750		56,121
Total Liabilities and Shareholders’ Equity	$	591,872	$	565,892	$	549,520
Interest Rate Spread													4.24	%	4.33	%	4.19	%
Net Interest Margin							$	24,373	$	23,435	$	22,317	4.61	%	4.61	%	4.49	%
Less
Tax Equivalent Adjustment								1,177		1,000		781
Reported Net Interest Income							$	23,196	$	22,435	$	21,536

Table 3 - Net Average Interest Earning Assets illustrates net interest earning assets and liabilities for 2005, 2004, and 2003.

TABLE 3 - NET AVERAGE INTEREST EARNING ASSETS

	2005		2004		2003
Average interest earning assets	$	529,517	$	508,001	$	497,728
Average interest bearing liabilities		441,614		427,363		420,108
Net average interest earning assets	$	87,903	$	80,638	$	77,620

Table 4 – Volume/Rate Analysis depicts the dollar effect on interest income and interest expense of changes in volume and changes in rate from 2003 through 2005. Variances which were attributable to both volume and rate are allocated proportionately between rate and volume using the absolute values of each for a basis for the allocation. Non-accruing loans are included in the average loan balances used in determining the yields. Interest income on tax-exempt securities and loans has been adjusted to a tax equivalent basis using a federal income tax rate of 34%.

TABLE 4 - VOLUME/RATE ANALYSIS

	2005 Change from 2004									2004 Change from 2003
	Volume			Rate			Total			Volume			Rate			Total
INTEREST INCOME
Loans	$	540		$	1,733		$	2,273		$	1,804		$	(1,339	)	$	465
Taxable Securities		(4	)		180			176			(1,449	)		536			(913	)
Non-Taxable Securities		801			(100	)		701			1,007			(143	)		864
Federal Funds Sold and Other		(4	)		101			97			34			15			49
TOTAL INTEREST INCOME	$	1,333		$	1,914		$	3,247		$	626		$	(161	)	$	465
INTEREST EXPENSE
Interest-bearing demand deposits	$	237		$	489			726		$	49		$	111		$	160
Savings Deposits		(18	)		—			(18	)		25			(60	)		(35	)
Time Deposits		(365	)		1,314			949			(66	)		(893	)		(959	)
Short-term borrowings		44			22			66			(48	)		10			(38	)
Long-term borrowings		562			24			586			264			(45	)		219
TOTAL INTEREST EXPENSE	$	460		$	1,849			2,309		$	224		$	(877	)	$	(653	)
NET INTEREST INCOME	$	873		$	65		$	938		$	402		$	716		$	1,118

LOANS

The loan portfolio constitutes the major earning asset of the Company and, in the opinion of management, offers the best alternative for maximizing interest spread above the cost of funds. The Company’s loan personnel have the authority to extend credit under guidelines established and approved by the Board of Directors. Any aggregate credit that exceeds the authority of the loan officer is forwarded to the Board’s loan committee for approval. The loan committee is composed of various directors, including the Chairman. All aggregate credits which exceed the loan committee’s lending authority are presented to the full Board of Directors for ultimate approval or denial. The loan committee not only acts as an approval body to ensure consistent application of the Company’s loan policy but also provides valuable insight through communication and pooling of knowledge, judgment, and experience of its members.

The Company has stated in its Loan Policy the following objectives for its loan portfolio:

• to make loans on sound and thorough credit analysis;

• to properly document all loans;

• to eliminate loans from the portfolio that are under-priced, high risk or difficult and costly to administer;

• to seek good relationships with the customer;

• to avoid undue concentrations of loans; and

• to keep non-accrual loans to a minimum by aggressive collection policies.

Loan demand has remained strong in the Company’s market area over the past three years. In general, the loan growth experienced in 2005, 2004 and 2003 was due to a continuation of the overall growth in the market area served by the Company. The impact on housing caused by the opening of a casino on the nearby Choctaw Indian Reservation in 1995 is beginning to show less of an impact on the housing market in the area. Real estate mortgage loans originated by the Company declined by 1.7%, or $1,550,809, in 2005, after having increased by .5%, or $500,699, in 2004 and 3.3%, or $2,959,217, in 2003.

Commercial and agricultural loans showed significant growth during this period. These loans grew $12,019,676, or 6.0%, in 2005, $14,317,978, or 7.7%, in 2004 and $37,188,745, or 24.8%, in 2003. This increase was caused by the influence of the casino in the area and by an increase in the number of loans originated during these years to poultry producers. Commercial and agricultural loans are the largest segment of the loan portfolio and, by nature, bear a higher degree of risk. Management believes the lending practices, policies, and procedures surrounding this loan category are adequate to manage any risk represented by the growth of the loans in this category.

Consumer loans have shown moderate growth during the period. This category increased $1,046,248, or 1.6%, in 2005, $1,919,155, or 3.2%, in 2004 and $4,649,580, or 7.8%, in 2003. The Company believes that changes in consumer purchasing habits and the increase in loan sources have affected the growth of this segment of loans. Sustained low unemployment may also have lessened the dependence on consumer loans for some purchases.

Table 5 - Loans Outstanding reflects outstanding balances by loan type for the past five years. Additional loan information is presented in Note 4 to the Company’s Consolidated Financial Statements included in this Annual Report.

TABLE 5 - LOANS OUTSTANDING

	AT DECEMBER 31,
	2005		2004		2003		2002		2001
Commercial, financial and agricultural	$	213,444	$	201,424	$	186,950	$	149,762	$	126,131
Real estate – construction		8,779		10,706		15,409		11,708		6,036
Real estate – mortgage		90,952		92,503		92,412		89,452		80,548
Consumer		67,712		66,666		64,309		59,660		54,218
TOTAL LOANS	$	380,887	$	371,299	$	359,080	$	310,582	$	266,933

Table 6 - Loan Liquidity and Sensitivity to Changes in Interest Rates reflects the maturity schedule or repricing frequency of all loans. Also presented are fixed and variable rate loans maturing after one year for all loans.

TABLE 6 - LOAN LIQUIDITY

LOAN MATURITIES AT DECEMBER 31, 2005

	1 YEAR OR LESS		1 - 5 YEARS		OVER 5 YEARS		Total
Commercial, financial and agricultural	$	62,910	$	126,327	$	24,207	$	213,444
Real estate - construction		8,595		184		—	$	8,779
Real estate - mortgage		12,165		55,031		23,756	$	90,952
Consumer		25,722		37,147		4,843	$	67,712
Total loans	$	109,392	$	218,689	$	52,806	$	380,887

SENSITIVITY TO CHANGES IN INTEREST RATES

	1 - 5 YEARS		OVER 5 YEARS
Fixed rates	$	193,965	$	36,446
Variable rates		24,724		16,360
Total loans	$	218,689	$	52,806

Each loan either has a stated maturity as to when the loan is to be repaid or is subject to an agreement between the Company and the customer governing its progressive reduction. The Company’s policy is that every loan is to be repaid by its stated maturity and not carried as a continuing debt. Generally, the Company requires that principal reductions on a loan must have begun prior to the second renewal date of the loan.

PROVISION FOR LOAN LOSSES AND ASSET QUALITY

The provision for loan losses represents a charge against operations to establish reserves for probable loan losses inherent in the Company’s loan portfolio. This expense is determined by a number of factors, including historical loan losses, assessment of specific credit weaknesses within the portfolio, assessment of the prevailing economic climate, and other factors that may affect the overall condition of the loan portfolio. Management utilized these factors to determine the provision for loan losses for each of 2003, 2004 and 2005. The ratio of net loans charged off to average loans was .33% in 2005, .40% in 2004 and .33% in 2003. These percentages are representative of normal loan charge-offs and are not the result of an economic downturn in any particular segment of the Company’s market. Management evaluates the adequacy of the allowance for loan loss on a monthly basis and makes adjustments to the allowance based on this analysis.

The provision for loan losses was $1,084,326 in 2005, $1,067,443 in 2004 and $2,002,570 in 2003. At the end of 2005, the total allowance for loan losses was $4,561,817, an amount that management believes to be sufficient to cover estimated probable losses in the loan portfolio.

Activity in the allowance for loan losses is reflected in Table 7 - Analysis of Allowance for Loan Losses. The Company’s policy is to charge-off loans when in management’s opinion the loan is deemed uncollectible. Even after it is charged off, however, the Company makes concerted efforts to maximize recovery of such loan.

TABLE 7 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES

	2005			2004			2003			2002			2001
BALANCE AT BEGINNING OF YEAR	$	4,721		$	5,127		$	4,222		$	3,375		$	3,325
LOANS CHARGED-OFF
Commercial, financial and agricultural		861			1,394			700			935			612
Real estate – construction		—			—			—			23			—
Real estate – mortgage		64			15			145			122			36
Consumer		642			390			555			957			675
TOTAL CHARGE-OFFS		1,567			1,799			1,400			2,037			1,323
CHARGE-OFFS RECOVERED
Commercial, financial and agricultural		189			144			65			54			22
Real estate – construction		—			—			—			—			—
Real estate – mortgage		2			11			2			4			26
Consumer		133			171			235			221			202
TOTAL RECOVERIES		324			326			302			279			250
Net loans charged-off		1,243			1,473			1,098			1,758			1,073
Additions charged to operating expense		1,084			1,067			2,003			1,758			1,123
Other increases attributed to acquisition		—			—			—			847			—
BALANCE AT END OF YEAR	$	4,562		$	4,721		$	5,127		$	4,222		$	3,375
Loans, net of unearned interest, at year end	$	379,526		$	369,589		$	357,064		$	308,175		$	264,278
Ratio of allowance to loans at year end		1.20	%		1.28	%		1.44	%		1.37	%		1.28	%
Average loans - net of unearned interest	$	371,925		$	364,922		$	337,763		$	289,407		$	255,185
Ratio of net loans charged-off to average loans		0.33	%		0.40	%		0.33	%		0.61	%		0.42	%

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

	AT DECEMBER 31,
	2005		2004		2003		2002		2001
Commercial, financial and agricultural	$	1,713	$	1,872	$	2,300	$	1,700	$	1,200
Real estate – construction		300		300		300		200		250
Real estate – mortgage		900		900		900		800		700
Consumer		1,550		1,550		1,550		1,475		1,175
Other		99		99		77		47		50
Total	$	4,562	$	4,721	$	5,127	$	4,222	$	3,375

COMPOSITION OF LOAN PORTFOLIO BY TYPE

	AT DECEMBER 31,
	2005		2004		2003		2002		2001
Commercial, financial and agricultural	56.04	%	54.25	%	52.06	%	48.22	%	47.25	%
Real estate – construction	2.30	%	2.88	%	4.29	%	3.77	%	2.26	%
Real estate – mortgage	23.88	%	24.91	%	25.74	%	28.80	%	30.18	%
Consumer	17.78	%	17.96	%	17.91	%	19.21	%	20.31	%
	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

The loan portfolio has increased steadily in the past three years, with the most significant portion of the growth occurring in the commercial, financial and agricultural loan category, as reflected in the above table. A larger portion of the allowance for loan losses is allocated to commercial, financial and agricultural loans and consumer loans. This reflects the higher risks associated with commercial and consumer lending as compared to real estate mortgages and construction loans.

Non-performing assets and the relative percentages of such assets to loan balances are presented in Table 8 - Non-performing Assets. Non-performing loans include non-accrual loans, troubled debt restructurings, and loans delinquent 90 days or more based on contractual terms. Management classifies loans as non-accrual when it believes that collection of interest is doubtful. This typically occurs when payments are past due over 90 days, unless the loans are well secured and in the process of collection. Another measurement of asset quality is other real estate owned (OREO), which represents properties acquired by the Company through foreclosure following loan defaults by customers; the percentage of OREO to total loans is ..78% in 2005. OREO increased in 2005 due to the foreclosure on several loans that were collateralized by real estate. These loans were reported in the 90 days or more past due category in 2004.

Loans on non-accrual status amounted to $4,346,512 in 2005 as compared to $3,146,041 in 2004 and $1,502,971 in 2003. Non-accrual loans increased in the fourth quarter of 2005 as management reclassified certain performing loans as non-accrual loans. Included in these reclassified loans was a single loan in the amount of $2.33 million, to a single borrower that filed for bankruptcy protection. Although management believes that this loan is adequately

collateralized, the Company has allocated a loan loss reserve equal to 5% of the outstanding balance of this loan. These loans were reclassified based on management’s uncertainty as to whether the Company would fully collect all principal and accrued interest due on these loans. Interest income forgone on loans classified as non-accrual in 2005 was $348,804 as compared to $229,286 in 2004 and $169,135 in 2003. Upon the classification of a loan as non-accrual, all interest accrued on the loan prior to the time it is classified as non-accrual is reversed and interest accruals are suspended until such time that the loan is in compliance with its terms and/or deemed collectable.

TABLE 8 - NON-PERFORMING ASSETS

	AS OF DECEMBER 31,
	2005			2004			2003			2002			2001
PRINCIPAL BALANCE - DOMESTIC
Non-accrual	$	4,347		$	3,146		$	1,503		$	358		$	419
Accruing loans 90 days or more past due		911			904			4,396			5,117			2,918
Troubled debt restructuring		—			—			—			—			—
TOTAL DOMESTIC LOANS	$	5,258		$	4,050		$	5,899		$	5,475		$	3,337
TOTAL NON-PERFORMING LOANS	$	5,258		$	4,050		$	5,899		$	5,475		$	3,337
Income on non-accrual loans not recorded	$	349		$	229		$	169		$	69		$	31
Non-performing as a percent of loans		1.39	%		1.10	%		1.65	%		1.78	%		1.27	%
Other real estate owned	$	2,975		$	2,787		$	695		$	1,286		$	340
OREO as a percent of loans		0.78	%		0.75	%		0.19	%		0.42	%		0.13	%
Allowance as a percent of non-performing loans		86.76	%		116.57	%		86.91	%		77.11	%		101.14	%

SFAS Nos. 114 and 118, “Accounting by Creditors for Impairment of a Loan,” was effective January 1, 1995. These statements changed the methods of estimating the loan loss allowance for problem loans. In general, when management determines that principal and interest due under the contractual terms of a loan are not fully collectible, management must value the loan using discounted future expected cash flows. Management considers the Company’s nonaccrual loans as being impaired under FASB 114 and 118. The balances of nonaccrual (impaired) loans for the years 2005, 2004, 2003 were $4,346,512, $3,146,041 and $1,502,971, respectively.

Management monitors any loans which are classified under FDIC regulations as loss, doubtful or substandard, even if management has not classified the loans as non-performing or impaired. In addition to loans classified for regulatory purposes, management also designates certain loans for internal monitoring purposes in a “watch” category. Loans may be placed on

management’s watch list as a result of delinquent status, management’s concern about the borrower’s financial condition or the value of the collateral securing the loan, a substandard classification during regulatory examinations, or simply as a result of management’s desire to monitor more closely a borrower’s financial condition and performance. Watch category loans may include loans that are still performing and accruing interest and may be current under the terms of the loan agreement but about which management has a significant degree of concern about the borrowers’ ability to continue to perform according to the terms of the loan agreement. Watch category loans may also include credits which, although adequately secured and performing, reflect a past delinquency problem or unfavorable financial trends exhibited by the borrower. Loss exposure on these loans is typically evaluated based primarily upon the estimated liquidation value of the collateral securing the loan.

At December 31, 2005, loans totaling $18,431,504 were included on the watch list of the Company compared to $16,291,783 at December 31, 2004. The majority of these loans are real estate loans that, although adequately collateralized, have experienced frequent delinquencies in scheduled payments. The inclusion of loans on this list does not indicate a greater risk of loss; rather it indicates that the loan possesses one of the several characteristics described above warranting increased oversight by management.

SECURITIES

At December 31, 2005, the Company classified all of its securities as available-for-sale. Securities available-for-sale are reported at fair value, with unrealized gains and losses included as a separate component of equity, net of tax. The Company does not hold any securities classified as held to maturity or held for trading purposes.

Table 9 - Securities and Securities Maturity Schedule summarizes the carrying value of securities from 2003 through 2005 and the maturity distribution at December 31, 2005, by classification.

TABLE 9 – SECURITIES

	2005		2004		2003
SECURITIES AVAILABLE FOR SALE
U. S. Treasury	$	2,003	$	4,103	$	15,528
U. S. Agencies		11,972		18,102		5,679
Mortgage Backed		57,270		49,404		59,368
State, Municipal and Other		90,958		80,107		62,606
TOTAL SECURITIES AVAILABLE FOR SALE	$	162,203	$	151,716	$	143,181

SECURITIES MATURITY SCHEDULE

	1 year or less				1 to 5 years				5 to 10 years				over 10 years
	Actual Balance		Average Yield		Actual Balance		Average Yield		Actual Balance		Average Yield		Actual Balance		Average Yield
AVAILABLE-FOR-SALE
U. S. Treasury	$	2,003	4.49	%	$	0	0.00	%	$	0	0.00	%	$	0	0.00	%
U. S. Agencies		0	0.00	%		0	0.00	%		2,181	4.63	%		9,791	4.76	%
Mortgage Backed (1)		0	0.00	%		288	5.67	%		67	8.06	%		56,915	5.28	%
State, Municipal and Other (2)		5,259	5.48	%		8,671	5.43	%		18,070	6.34	%		58,958	6.22	%
TOTAL AVAILABLE-FOR-SALE	$	7,262	5.21	%	$	8,959	5.44	%	$	20,318	6.16	%	$	125,664	5.68	%

(1) The maturities for mortgage backed securities in the above table are based on final maturity.

(2) Average rates were calculated on tax equivalent basis using a marginal federal income tax rate of 34% and a state tax rate of 5%.

The change in the carrying value of the available-for-sale portfolio is due to market value fluctuations resulting from the changing interest rate environment during 2005. This change is not used in the Tier 1 capital calculation.

DEPOSITS

The Company offers a wide variety of deposit services to individual and commercial customers, such as non-interest-bearing and interest-bearing checking accounts, savings accounts, money market deposit accounts, and certificates of deposit. The deposit base is the Company’s major funding source for earning assets. Although time deposits declined in 2005, they continue to be the largest single segment of the Company’s total deposits. Time deposits declined because management did not aggressively price time deposits in the Company’s markets, as management believed the Company had sufficient funds to meet loan demand.

A three-year schedule of deposits by type and maturities of time deposits greater than $100,000 is presented in Table 10—Deposit Information.

TABLE 10 - DEPOSIT INFORMATION

	2005				2004				2003
	Average Balance		Average Rate		Average Balance		Average Rate		Average Balance		Average Rate
Noninterest-bearing	$	80,183			$	72,867			$	65,985
Interest-bearing demand		144,134	1.46	%		127,902	1.07	%		123,338	0.98	%
Savings		36,048	0.83	%		37,591	0.85	%		34,696	1.02	%
Certificates of deposit		204,265	2.45	%		219,150	1.85	%		222,695	2.26	%
	$	464,630	1.59	%	$	457,510	1.44	%	$	446,714	1.48	%

MATURITY RANGES OF TIME CERTIFICATES OF DEPOSIT

OF $100,000 OR MORE,

	as of December 31, 2005
3 months or less	$	21,293
3 through 6 months		10,500
6 through 12 months		33,894
over 12 months		13,706
	$	79,393

The Company in its normal course of business will acquire large certificates of deposit, generally from public entities, with a variety of maturities. These funds are acquired on a bid basis and are considered to be part of the deposit base of the Company.

BORROWINGS

Aside from the core deposit base and large denomination certificates of deposit mentioned above, the remaining funding sources utilized by the Company include short-term and long-term borrowings. Short-term borrowings consist of federal funds purchased from other financial institutions on an overnight basis and short-term advances from the Federal Home Loan Bank of Dallas (“FHLB”). Long-term borrowings are advances from the FHLB with an initial maturity of greater than one year.

TABLE 11 - SHORT-TERM BORROWINGS

	As of December 31,
	2005			2004			2003
Short-term borrowings
Year-end balance	$	1,600		$	0		$	14,000
Weighted average rate		4.20	%		0.00	%		1.11	%
Maximum month-end balance	$	12,600		$	12,000		$	15,000
Year to date average balance	$	2,344		$	2,907		$	1,229
Weighted average rate		3.54	%		1.05	%		1.15	%

The Company borrows funds for short periods from the FHLB as an alternative to Federal Funds Purchased. The Company foresees short-term borrowings to be a continued source of liquidity and likely will continue to use these borrowings as a method to fund short-term needs. At December 31, 2005, the Company had the capacity to borrow up to $151,773,280 from the FHLB and other financial institutions in the form of federal funds purchased. The Company generally will use these types of borrowings if loan demand is greater than the growth in deposits.

The Company, at the end of 2005, had long-term debt in the amount of $60,048,818 to the FHLB for advances and $1,521,521 payable to the State of Mississippi for advances under the Mississippi Agribusiness Enterprise Loan Program. This program provides interest-free loans to banks to fund loans to qualifying farmers. Farmers that qualify for the program receive 20% of their loan at zero interest. When the loan is repaid, the State of Mississippi receives 20% of the principal payment. The remaining maturity schedule of the long-term debt at December 31, 2005 is listed below.

	2005
Less than one year	$	10,655
One year to three years		25,044
Over three years		25,871
Total Long-term borrowings	$	61,570

NON-INTEREST INCOME AND EXPENSE

Table 12 - Non-interest Income and Expense illustrates the Company’s non-interest income and expense from 2003 through 2005 and percentage changes between such years.

TABLE 12 - NON-INTEREST INCOME & EXPENSE

	2005		% CHANGE FROM 2004		2004		% CHANGE FROM 2003		2003
NON-INTEREST INCOME
Service charges on deposit accounts	$	3,557	4.90	%	$	3,391	4.82	%	$	3,235
Other operating income		2,180	-0.18	%		2,184	4.55	%		2,089
TOTAL NON-INTEREST INCOME	$	5,737	2.91	%	$	5,575	4.71	%	$	5,324
NON-INTEREST EXPENSE
Salaries and employee benefits	$	9,523	10.64	%	$	8,607	8.59	%	$	7,926
Occupancy expense, including equipment		2,903	-1.19	%		2,938	7.03	%		2,745
Other operating expense		5,091	-1.49	%		5,168	18.23	%		4,371
TOTAL NON-INTEREST EXPENSE	$	17,517	4.81	%	$	16,713	11.11	%	$	15,042

Non-interest income typically consists of service charges on checking accounts and other financial services. With continued pressure on interest rates, the Company has sought to increase its non-interest income through the expansion of fee income and the development of new services. Currently, the Company’s main sources of non-interest income are service charges on checking accounts, safe deposit box rentals, credit life insurance premiums, title insurance service fees and income contributions from the Company’s credit life insurance subsidiary.

During the year of 2005, non-interest income increased $162,292, or 2.91% when compared to the year of 2004. The majority of this increase came from service charge income from checking accounts.

For the year 2004, non-interest income increased $250,933, or 4.71%, when compared to the same period in 2003. This increase was due mainly to an increase in income derived from the purchase of $11.4 million in bank-owned life insurance in November, 2003.

Non-interest expenses consist of salaries and benefits, occupancy expense and other overhead expenses incurred by the Company in the transaction of its business. In 2005, non-interest expenses increased $803,949, or 4.81%, to $17,516,905. The main reason for this increase was a $916,301 increase in salaries and benefits. At the same time, the Company was able to decrease the amount of other operating expenses.

For 2004, non-interest expenses increased $1,670,969, or 11.1%, to $16,712,956. This increase was caused mainly by increases in salaries and benefits and normal growth in other operating expenses. Legal, audit and accounting expenses increased $222,456, or 96%, in large part to efforts undertaken by the Company to comply with the Sarbanes-Oxley Act of 2002.

In 2005, the Company’s efficiency ratio was 58.14%, compared to 57.65% in 2004 and 54.45% in 2003. The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income, on a fully tax equivalent basis, and non-interest income. The increase in the efficiency ratio over the past three years reflects increases in non-interest expense associated with managing the growth in assets during the period and incorporating the personnel added in connection with the CB&T acquisition.

INCOME TAXES

The Company records a provision for income taxes currently payable, along with a provision for deferred taxes to be realized in the future. Such deferred taxes arise from differences in timing of certain items for financial statement reporting rather than income tax reporting. The deferred tax amount of $1,961,434 is considered realizable without the use of extraordinary tax planning strategies.

The Company’s effective tax rate was 22.90%, 26.23% and 28.98% in 2005, 2004 and 2003, respectively. The major difference between the effective tax rate applied to the Company’s financial statement income and the federal statutory rate of 34% is interest on tax-exempt securities and loans. Further tax information is disclosed in Note 9 to the Company’s Consolidated Financial Statements included in this Annual Report.

LIQUIDITY AND RATE SENSITIVITY

Liquidity management is the process by which the Company ensures that adequate liquid funds are available to meet its financial commitments on a timely basis. These commitments include honoring withdrawals by depositors, funding credit obligations to borrowers, servicing long-term obligations, making shareholder dividend payments, paying operating expenses, funding capital expenditures and maintaining reserve requirements.

The Company’s predominant sources of funding include: core deposits (consisting of both commercial and individual deposits), proceeds from maturities of securities, repayments of loan principal and interest, federal funds purchased, and short-term and long-term borrowing from the FHLB. In 2005, the Company’s growth in deposits, on average, was less than the growth in loans and securities and the Company was required to use long and short term borrowings to fund loan and security growth. The Company relies upon non-core sources of funding, such as federal funds purchased and short and long term borrowings from the FHLB, when deposit growth is not adequate to meet its short term needs. While the strategy of using these wholesale funding sources is adequate to cover liquidity deficiencies in the short term, the Company’s goal is to increase core deposits as a source of long term funding. Management does not intend to rely on borrowings from the FHLB as the first choice as a source of funds but prefers to increase core deposits through increased competition for available deposits. Management believes that core deposits can be increased by offering more competitive rates and superior service to our customers.

The deposit base is diversified between individual and commercial accounts, which the Company believes helps it avoid dependence on large concentrations of funds. The Company does not solicit certificates of deposit from brokers. The primary sources of liquidity on the asset side of the balance sheet are federal funds sold and securities classified as available-for-sale. The entire investment securities portfolio is classified in the available-for-sale category, and is available to be sold, should liquidity needs arise. Management, through its Asset Liability Committee (ALCO), and the Board review the Company’s liquidity position on a monthly basis. At December 31, 2005, both the ALCO and the Board determined that the Company’s liquidity position was adequate.

Table 13 - Funding Uses and Sources details the main components of cash flows for 2005 and 2004.

TABLE 13 - FUNDING USES AND SOURCES

	2005							2004
	Average Balance		Increase/(decrease)					Average Balance		Increase/(decrease)
			Amount			Percent				Amount			Percent
FUNDING USES
Loans, net of unearned income	$	371,925	$	7,003		1.92	%	$	364,922	$	27,159		8.04	%
Taxable securities		71,608		(415	)	-0.58	%		72,023		(36,672	)	-33.74	%
Tax-exempt securities		81,134		14,592		21.93	%		66,542		17,359		35.29	%
Federal funds sold and other		5,891		(140	)	-2.32	%		6,031		2,456		68.70	%
TOTAL USES	$	530,558	$	21,040		4.13	%	$	509,518	$	10,302		2.06	%
FUNDING SOURCES
Noninterest-bearing deposits	$	80,183	$	7,316		10.04	%	$	72,867	$	6,882		10.43	%
Interest-bearing demand and savings deposits		180,181		14,688		8.88	%		165,493		7,459		4.72	%
Time Deposits		204,265		(14,885	)	-6.79	%		219,150		(3,545	)	-1.59	%
Short-term borrowings		2,344		1,231		110.60	%		1,113		(2,952	)	-72.62	%
Long-term debt		54,823		13,216		31.76	%		41,607		6,293		17.82	%
TOTAL SOURCES	$	521,796	$	21,566		4.31	%	$	500,230	$	14,137		2.91	%

The Company’s liquidity depends substantially on the ability of the Bank to transfer funds to the Company in the form of dividends. The information under the heading “Market Price and Dividend Information” in this Annual Report discusses federal and state statutory and regulatory restrictions on the ability of the Bank to transfer funds to the Company in the form of dividends.

CAPITAL RESOURCES

The Company and Bank are subject to various regulatory capital guidelines as required by federal and state banking agencies. These guidelines define the various components of core capital and assign risk weights to various categories of assets.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required federal regulatory agencies to define capital tiers. These tiers are: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under FDICIA, a “well-capitalized” institution must achieve a Tier 1 risk-based capital ratio of at least 6.00%, a total capital ratio of at least 10.00%, a leverage ratio of at least 5.00% and not be under a capital directive order. These ratios generally measure the percentage of a bank’s capital to all or certain categories of assets. Failure to meet capital requirements can initiate regulatory action that could have a direct material effect on the Company’s financial statements. If a bank is only adequately capitalized, regulatory approval is required before the bank may accept brokered deposits. If undercapitalized, capital distributions, asset growth, and expansion are limited, and the institution is required to submit a capital restoration plan.

Management believes the Company and the Bank meet all the capital requirements to be well-capitalized under the guidelines established by FDICIA as of December 31, 2005, as noted below in Table 14 - Capital Ratios. To be classified as well-capitalized, the Company and Bank must maintain the ratios described above.

TABLE 14 - CAPITAL RATIOS

	At December 31,
	2005			2004			2003
Tier 1 capital
Shareholders’ equity	$	63,774		$	60,191		$	56,502
Less: Intangibles		(5,290	)		(5,827	)		(6,390	)
Add/less: Unrealized loss/(gain) on securities		966			(400	)		(1,470	)
Add: Minority interest in equity accounts of unconsolidated subsidiaries		1,358			1,466			1,383
TOTAL TIER 1 CAPITAL	$	60,808		$	55,430		$	50,025
Total capital
Tier 1 capital	$	60,808		$	55,430		$	50,025
Allowable allowance for loan losses		4,562			4,721			4,577
TOTAL CAPITAL	$	65,370		$	60,151		$	54,602
RISK WEIGHTED ASSETS	$	403,497		$	391,754		$	365,589
AVERAGE ASSETS (FOURTH QUARTER)	$	601,607		$	570,342		$	549,314
RISK BASED RATIOS
TIER 1		15.07	%		14.14	%		13.68	%
TOTAL CAPITAL		16.20	%		15.39	%		14.94	%
LEVERAGE RATIOS		10.11	%		9.72	%		9.11	%

Management’s strategy with respect to capital levels is to maintain a sufficient amount of capital to allow the Company to respond to growth and acquisition opportunities in our service area. Over the past three years, the Company has been able to increase the amount of its capital, through retention of earnings, while still increasing the dividend payout ratio to approximately 40.9% of earnings per share. The Company does not currently have any commitments for capital expenditures that would require the Company to raise additional capital by means other than retained earnings. The Company does not plan to change this strategy unless needed to support future acquisition activity.

OFF-BALANCE SHEET ARRANGEMENTS

In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing needs of its customers. These commitments and contingent liabilities include commitments to extend credit and issue standby letters of credit. These off-balance sheet arrangements are further detailed in Note 12, “Off-Balance Sheet Financial Instruments, Commitments and Contingencies and Concentration of Risks,” in the notes to the Company’s Consolidated Financial Statements included in this Annual Report.

CONTRACTUAL OBLIGATIONS

The following table summarizes the contractual obligations of the Company as of December 31, 2005.

	Payments Due by Period
	(amounts in thousands)
Contractual Obligations	Total		Less than 1 year		1-3 Years		3 - 5 Years		Over 5 Years
Long Term Debt	$	60,049	$	10,649	$	25,000	$	7,000	$	17,400
Operating Leases		344,697		84,048		140,871		117,062		2,716
Other Long-term Liabilities		1,472		6		44		643		779
Total	$	406,218	$	94,703	$	165,915	$	124,705	$	20,895

Long-term debt obligations represent borrowings from the FHLB that have an original maturity in excess of one (1) year. Operating leases are primarily for a lease on a branch and other leases for mailing equipment. The branch lease is for 60 months and the equipment leases are for various terms. The other long-term liabilities are those obligations of the Company under the Agribusiness Enterprise Loan Program of the State of Mississippi.

Quantitative and Qualitative Disclosures about Market Risk

OVERVIEW

The definition of market risk is the possibility of loss that could result from adverse changes in market prices and/or interest rates. The Company has taken steps to assess the amount of risk that is associated with its asset and liability structure. The Company measures the potential risk on a regular basis and makes changes to its strategies to manage these risks. The Board of Directors reviews important policy limits each month, with a more detailed risk analysis completed on a quarterly basis. These measurement tools are important in allowing the Company to manage market risk and to plan effective strategies to respond to any adverse changes in risk. The Company does not participate in some of the financial instruments that are inherently subject to substantial market risk. All of the financial instruments entered into by the Company are for purposes other than trading.

MARKET/INTEREST RATE RISK MANAGEMENT

Interest rate risk is the primary market risk that management must address. Interest rate risk is the exposure of Company earnings and capital to changes in interest rates. All financial institutions assume interest rate risk as an integral part of normal operations.

The primary purpose in managing interest rate risk is to effectively invest capital and preserve the value created by the core banking business of the Company. The Company utilizes an investment portfolio to manage the interest rate risk naturally created through its business activities. The process of managing interest rate risk generally involves both reducing the exposure of the Company’s net interest margin to swings in interest rates and concurrently ensuring that there is sufficient capital and liquidity to support balance sheet growth. The Company uses a quarterly interest rate risk report to evaluate its exposure to interest rate risk, project earnings and manage the composition of the balance sheet and its growth. This report utilizes an immediate 200 basis point rate movement up and down and measures the effect this change has on earnings and the value of equity.

In addition to the quarterly interest rate risk report, the Company employs a number of tools to measure interest rate risk. One tool is static gap analysis, which matches assets with specified maturities to liabilities with corresponding maturities. Although management believes that this does not provide a complete picture of the Company’s exposure to interest rate risk, it does highlight significant short-term repricing volume mismatches. The following table presents the Company’s rate sensitivity static gap analysis at December 31, 2005 ($ in thousands):

	Interest Sensitive Within
	90 days			One year
Total rate sensitive assets	$	93,996		$	61,679
Total rate sensitive liabilities		238,835			114,291
Net gap	($	144,839	)	($	52,612	)

The analysis shows a negative gap position over the next three- and twelve –month periods which indicates that the Company would benefit somewhat from a decrease in market interest rates. Although rate increases would be detrimental to the interest rate risk of the Company, management believes there is adequate flexibility to alter the overall rate sensitivity structure as necessary to minimize exposure to these changes.

Management believes that static gap analysis does not fully capture the impact of interest rate movements on interest sensitive assets and liabilities. Thus, the Company also measures interest rate risk by analyzing interest rate sensitivity and the rate sensitivity gap. Table 15 - Interest Rate Sensitivity provides additional information about the financial instruments that are sensitive to changes in interest rates. This tabular disclosure is limited by its failure to depict accurately the effect on assumptions of significant changes in the economy or interest rates or changes in management’s expectations or intentions relating to the Company’s financial statements. The information in the interest rate sensitivity table below reflects contractual

interest rate pricing dates and contractual maturity dates. For indeterminate maturity deposit products (money market, NOW and savings accounts), the tables present principal cash flows in the shortest term. Although these deposits may not reprice within this time frame, the depositors of such funds have the ability to reprice. Weighted average floating rates are based on the rate for that product as of December 31, 2005 and 2004.

TABLE 15 - INTEREST RATE SENSITIVITY

As of December 31, 2005

	2006			2007			2008			2009			2010			Thereafter			Carrying Value			Fair Value
Loans
Fixed Rate	$	73,937		$	41,158		$	48,459		$	54,767		$	49,607		$	36,446		$	304,374		$	301,629
Average Int Rate		7.29	%		7.46	%		7.00	%		6.89	%		7.23	%		7.12	%		7.16	%
Floating Rate	$	29,506		$	864		$	17,464		$	3,331		$	3,065		$	16,360		$	70,590		$	70,590
Average Int Rate		7.58	%		6.99	%		6.92	%		7.36	%		7.00	%		7.66	%		7.39	%
Investment securities
Fixed Rate	$	3,514		$	2,920		$	2,537		$	4,824		$	11,911		$	132,750		$	158,456		$	158,456
Average Int Rate		4.91	%		4.52	%		5.10	%		5.37	%		5.57	%		5.79	%		5.71	%
Floating Rate
Average Int Rate
Other earning assets
Fixed Rate
Average Int Rate
Floating Rate
Average Int Rate
Interest-bearing deposits
Fixed Rate	$	333,954		$	27,508		$	3,870		$	114		$	168					$	365,614		$	365,390
Average Int Rate					3.73	%		2.88	%		4.00	%		5.00	%
Floating Rate	$	7,097		$	13,689		$	78											$	20,864		$	20,864
Average Int Rate		3.30	%		3.30	%		3.30	%											3.30	%
Other int-bearing liabilities
Fixed Rate	$	12,249					$	25,000		$	5,000		$	2,000		$	17,400		$	61,649		$	60,944
Average Int Rate		3.88	%					4.92	%		5.26	%		4.47	%		4.11	%		4.50	%
Floating Rate
Average Int Rate

As of December 31, 2004

	2005			2006			2007			2008			2009			Thereafter			Carrying Value			Fair Value
Loans
Fixed Rate	$	25,404		$	19,812		$	42,054		$	72,809		$	62,573		$	55,089		$	277,741		$	276,150
Average Int Rate		9.21	%		8.63	%		7.68	%		6.40	%		6.59	%		6.69	%		7.09	%
Floating Rate	$	71,933		$	6,454		$	4,302		$	2,160		$	1,296		$	982		$	87,127		$	87,127
Average Int Rate		5.65	%		5.55	%		5.32	%		5.41	%		5.30	%		5.35	%		5.61	%
Investment securities
Fixed Rate	$	7,723		$	3,606		$	8,153		$	25,418		$	17,178		$	89,638		$	151,716		$	151,716
Average Int Rate		5.17	%		4.91	%		5.26	%		4.95	%		4.94	%		6.05	%		5.63	%
Floating Rate
Average Int Rate
Other earning assets
Fixed Rate	$	11,000																	$	11,000		$	11,000
Average Int Rate		2.06	%																	2.06	%
Floating Rate
Average Int Rate
Interest-bearing deposits
Fixed Rate	$	338,117		$	34,271		$	1,663		$	10								$	374,061		$	374,224
Average Int Rate		1.37	%		2.38	%		3.97	%		2.65	%
Floating Rate	$	10,691		$	7,606		$	3,810		$	171		$	54					$	22,332		$	22,332
Average Int Rate		2.45	%		2.45	%		2.45	%		2.45	%		2.45	%					2.45	%
Other int-bearing liabilities
Fixed Rate	$	11,070		$	649					$	10,000		$	5,000		$	19,400		$	46,119		$	46,711
Average Int Rate		2.40	%		4.94	%					5.56	%		5.26	%		4.14	%		4.16	%
Floating Rate
Average Int Rate

Rate sensitivity gap analysis is another tool management uses to measure interest rate risk. The rate sensitivity gap is the difference between the repricing of interest earning assets and the repricing of interest bearing liabilities within certain defined time frames. The Company’s interest rate sensitivity position is influenced by the distribution of interest earning assets and interest-bearing liabilities among the maturity categories. Table 16 - Rate Sensitivity Gap reflects interest earning assets and interest-bearing liabilities by maturity distribution as of December 31, 2005. Product lines repricing in time periods predetermined by contractual agreements are included in the respective maturity categories.

TABLE 16 - RATE SENSITIVITY GAP

	AT DECEMBER 31, 2005
	1 - 90 Days			91 - 365 Days			1 – 5 Years			Over 5 years			Total
INTEREST EARNING ASSETS
Loans	$	92,389		$	47,021		$	193,321		$	35,829		$	368,560
Investment securities		1,294			14,658			47,839			94,665			158,456
Federal Home Loan Bank Account		313			—			—			—			313
Federal Funds Sold		—			—			—			—			—
TOTAL INTEREST BEARING ASSETS	$	93,996		$	61,679		$	241,160		$	130,494		$	527,329
INTEREST BEARING LIABILITIES
Interest bearing demand deposits	$	130,939		$	—		$	—		$	—		$	130,939
Savings and Money Market deposits		52,902			—			—			—			52,902
Time deposits		53,118			103,918			45,428			—			202,464
Federal Funds Purchased		1,600			—			—			—			1,600
Short term borrowings		—			—			—			—			—
Long term borrowings		276			10,373			32,000			17,400			60,049
TOTAL INTEREST BEARING LIABILITIES	$	238,835		$	114,291		$	77,428		$	17,400		$	447,954
Rate sensitive gap	$	(144,839	)	$	(52,612	)	$	163,732		$	113,094		$	79,375
Rate sensitive cumulative gap		(144,839	)		(197,451	)		(33,719	)		79,375
Cumulative gap as a percentage of total earning assets		-27.47	%		-37.44	%		-6.39	%		15.05	%

The purpose of the above table is to measure interest rate risk utilizing the repricing intervals of interest sensitive assets and liabilities. Rate sensitive gaps constantly change as funds are acquired and invested and as rates change. Rising interest rates are likely to increase net interest income in a positive gap position while falling interest rates are beneficial in a negative gap position.

The above rate sensitivity analysis places interest-bearing demand and savings deposits in the shortest maturity category because these liabilities do not have defined maturities. If these deposits were placed in a maturity distribution representative of the Company’s deposit base history, the shortfall of the negative rate sensitive gap position would be reduced in the 1-to-90 day time frame.

The rate sensitivity gap table illustrates that the Company had a large negative cumulative gap position for the one-year period ending December 31, 2005. This negative gap position was mainly due to: (1) the interest-bearing and savings deposits being classified in the 1-90 day category; (2) approximately 78% of certificates of deposit maturing during the next twelve months; and (3) a significant portion of the Company’s loans maturing after one year.

The interest rate sensitivity and rate sensitivity gap tables, taken together, indicate that the Company continues to be in a liability sensitive position when evaluating the maturities of interest bearing items. Thus a decline in the interest rate environment would enhance earnings, while an increase in interest rates would have the opposite effect on corporate earnings. The Company has attempted to mitigate the impact of its interest rate position by increasing the amount of its variable rate loans and also by increasing the amount of its transaction accounts by paying a competitive rate on those accounts. At the same time, it has not participated in the higher yielding certificates of deposit. The effect of any changes in interest rates on the Company would be mitigated by the fact that interest-bearing demand and savings deposits may not be immediately affected by changes in general interest rates.

Although short and medium term interest rates increased again in 2005 in connection with increases in the target Federal Funds rate by the Federal Reserve Bank, the effect on the Company was marginal. The Company’s net interest margin in 2005 and 2004 was 4.61%. Even as rates were rising, the Company lessened the impact of higher rates because of a shift in deposits from certificates of deposit to interest bearing transaction accounts.

Quarterly Financial Trends

	2005
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year to Date
Interest Income	$	8,016	$	8,072	$	8,449	$	8,506	$	33,043
Interest Expense		2,098		2,278		2,588		2,883	$	9,847
Net Interest Income		5,918		5,794		5,861		5,623	$	23,196
Provision for Loan Losses		163		343		541		38	$	1,084
Non-interest Income		1,321		1,577		1,554		1,285	$	5,737
Non-interest Expense		4,556		4,400		4,370		4,191	$	17,517
Income Taxes		600		602		572		592	$	2,366
Net Income	$	1,920	$	2,026	$	1,932	$	2,087	$	7,966
Per common share:
Basic	$	0.38	$	0.40	$	0.39	$	0.42	$	1.59
Diluted	$	0.38	$	0.40	$	0.38	$	0.41	$	1.57
Cash Dividends	$	0.16	$	0.16	$	0.16	$	0.17	$	0.65
	2004
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year to Date
Interest Income	$	7,233	$	7,366	$	7,502	$	7,871	$	29,972
Interest Expense		1,824		1,807		1,908		1,998	$	7,537
Net Interest Income		5,409		5,559		5,594		5,873	$	22,435
Provision for Loan Losses		450		450		122		45	$	1,067
Non-interest Income		1,261		1,531		1,365		1,418	$	5,575
Non-interest Expense		3,977		4,145		4,190		4,402	$	16,714
Income Taxes		570		693		709		712	$	2,683
Net Income	$	1,673	$	1,802	$	1,938	$	2,132	$	7,546
Per common share:
Basic	$	0.34	$	0.36	$	0.39	$	0.43	$	1.51
Diluted	$	0.33	$	0.36	$	0.38	$	0.42	$	1.49
Cash Dividends	$	0.15	$	0.15	$	0.15	$	0.15	$	0.60

Market Price and Dividend Information

MARKET PRICE

The Company’s common stock is traded on the American Stock Exchange (“AMEX”) under the symbol “CIZ”. The stock began trading on the AMEX on October 19, 1999 and prior to that date was sold in private transactions between parties. On December 31, 2005, the common stock’s closing price was $22.55. The following table sets forth the high and low sales prices for the common stock, as well as the dividends declared, in each quarter in the past two fiscal years.

2004	High		Low		Dividends Declared (per common share)
January - March	$	22.95	$	21.12	$	0.15
April - June		23.45		20.80		0.15
July - September		21.65		20.05		0.15
October - December		21.75		19.90		0.15
2005	High		Low		Dividends Declared (per common share)
January - March	$	21.40	$	19.70	$	0.16
April - June		23.05		20.00		0.16
July - September		23.75		21.47		0.16
October - December		22.85		21.30		0.17

On March 3, 2006, shares of our common stock were held of record by approximately 475 shareholders.

DIVIDENDS

Dividends totaled $0.65 per share for 2005 compared to $0.60 per share for 2004. These dividends reflect an 8.3% increase in 2005 over 2004.

If funds are available, the Company typically declares dividends on a quarterly basis in March, June, September and December with payment following at the end of the month in which the dividend was declared. Funds for the payment by the Company of cash dividends are obtained from dividends, loans or advances received by the Company from the Bank. Accordingly, the declaration and payment of dividends by the Company depend upon the Bank’s earnings and financial condition, general economic conditions, compliance with regulatory requirements, and other factors. The Bank must also receive the approval of the Mississippi Department of Banking and Consumer Finance prior to the payment of a dividends; the amount of any dividend is limited to earned surplus in excess of three times its capital stock. At December 31, 2005, the maximum amount available for transfer from the Bank in the form of cash dividends 10% of its consolidated net assets.

Federal Reserve regulations also limit the amount the Bank may loan to the Company unless such loans are collateralized by specific obligations. At December 31, 2005, the maximum amount available for transfer from the Bank in the form of cash dividends and loans was 20% of its consolidated net assets.

THE CITIZENS BANK OFFICERS

Greg McKee	Adriana Burt	Kosciusko Branch
President & CEO	Assistant Cashier
		Charlie Hudson
Danny Hicks	Mitch Peden	President
Sr. Vice President	Data Processing Officer
		David Blair
Robert T. Smith	Sommer Vick	Vice President
Sr.Vice President & CFO	Accounting Officer
		Joanne Sanders
Erdis Chaney	Mark Flake	Assistant Cashier
Vice President & Cashier	Data Processing Officer
Tim Lofton	Barbara Lewis	Scooba Branch
Vice President & CIO	Assistant Cashier
		Fran Knight
Randy Cheatham	Greg Jackson	Vice President
Vice President	Accounting Officer
Mike Guthrie	Patsy Smith	Meridian Branch
Vice President & Senior Credit Officer	Assistant Cashier
		Charles Young
Joe Foster	Camp Keith	President
Vice President & Trust	Assistant Cashier
		Mac Hodges
Murray Johnson	Vicki Brown	Vice President
Vice President	Assistant Cashier
Jackie Hester		Forest Branch
Vice President & Marketing	Carthage Branch
		Richard Latham
Kaye Johnson	Mike Brooks	Vice President
Vice President	President
		Dymple Winstead
Stanley Salter	J. Michael Ellis	Assistant Vice President
Vice President	Vice President
Darrell Bates	Billie Nell Dowdle	Decatur Branch
Vice President	Vice President
		Ken Jones
David Sharp	Byron Hines	Vice President
Vice President	Vice President
Jean T. Fulton	Margaret Thompson	Louisville Branch
Vice President	Assistant Cashier
		Terry Woods
Gayle Sharp	Carol Wright	President
Vice President	Assistant Cashier
		Edna Bell
Brad Copeland		Vice President
Vice President	Sebastopol Branch
		Stan Acy
Mark Majure	Linda Bennett	Vice President
Assistant Vice President	President
		Marion Gardner
Carolyn K. McKee	Union Branch	Assistant Cashier
Student Loan Officer
	Robert C. Palmer, Jr.	Danny Parker
Beth Branning	President	Assistant Cashier
Assistant Vice President
	Karen Foster	Bruce Lee
Tommie Jackson	Assistant Vice President	Assistant Vice President
Assistant Vice President
	Deborah Rigdon	Mortgage Loan Department
Pat Stokes	Assistant Cashier
Assistant Cashier		Linda Stribling
		Mortgage Loan Officer

BOARD OF DIRECTORS
Karl Brantley	William M. Mars
Retired Plant Manager	Retired Attorney
U. S. Electrical Motors	Mars, Mars, Mars & Chalmers
Don Fulton	Greg L. McKee
President & General Manager	President & CEO
Nemanco, Inc.	Citizens Holding Company and
	The Citizens Bank
Donald L. Kilgore
Attorney General	David P. Webb
Mississippi Band of Choctaw Indians	Attorney
	Phelps Dunbar, LLP
David A. King
Proprietor	A. T. Williams
Philadelphia Motor Company	Certified Public Accountant
	A. T. Williams, CPA
Herbert A. King
Civil Engineer
King Engineering Associates, Inc.

CITIZENS HOLDING COMPANY OFFICERS

William M. Mars

Chairman

Greg L. McKee

President and CEO

Carolyn K. McKee

Secretary

Robert T. Smith

Treasurer and Chief Financial Officer

BANKING LOCATIONS

The Citizens Bank	Crossroads Branch	Decatur Branch
Main Office	501 Hwy 35 south	15330 Hwy 15 South
521 Main Street	Carthage, MS 39051	Decatur, MS 39327
Philadelphia, MS 39350	601.267.4525	601.635.2321
601.656.4692
Westside Branch	Madden Branch	Forest Branch
912 West Beacon Street	Highway 488	247 Woodland Drive North
Philadelphia, MS 39350	Madden, MS 39109	Forest, MS 39074
601.656.4978	601.267.7366	601.469.3424
Northside Branch	Sebastopol Branch	Louisville Branch
802 Pecan Avenue	24 Pine Street	l00 East Main Street
Philadelphia, MS 39350	Sebastopol, MS 39359	Louisville, MS 39339
601.656.4977	601.625.7447	662.773.6261
Eastside Branch	DeKalb Branch	Noxapater Branch
585 East Main Street	Corner of Main & Bell St.	45 East Main Street
Philadelphia, MS 39350	DeKalb, MS 39328	Noxapater, MS 39346
601.656.4976	601.743.2115	662.724.4261
Pearl River Branch	Kosciusko Branch	Industrial Branch
110 Choctaw Town Center	775 North Jackson Street	803 South Church Street
Philadelphia, MS 39350	Kosciusko, MS 39090	Louisville, MS 39339
601.656.4971	662.289.4356	662.773.6261
Union Branch	Scooba Branch
502 Bank Street	1048 Johnson Street
Union, MS 39365	Scooba, MS 39358
601.656.4879	662.476-8431
601.774.9231
Carthage Main Office	Meridian Branch
219 West Main Street	1825 Hwy 39 North
Carthage, MS 39051	Meridian, MS 39301
601.257.4525	601.693.8367
Phone Teller	Internet Banking
1.800.397.0344	http://www.thecitizensbankphila.com

FINANCIAL INFORMATION

CORPORATE HEADQUARTERS

521 Main Street

P.O. Box 209

Philadelphia, MS 39350

601.656.4692

ANNUAL STOCKHOLDER MEETING

The Annual Stockholder meeting of the Citizens Holding Company, Inc. will be held Tuesday, April 25, 2006, at 4:30P.M. at the main office of The Citizens Bank, 521 Main Street, Philadelphia, Mississippi.

STOCK REGISTRAR AND TRANSFER AGENT

American Stock Transfer & Trust Company

59 Maiden Lane

New York, NY 10038

FORM 10-K

The Corporation’s most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission, is available without charge to stockholder’s upon request to the Treasurer of the Citizens Holding Company.

FINANCIAL CONTACT

Robert T. Smith

Treasurer and Chief Financial Officer

P.O. 209

Philadelphia, Mississippi 39350

601.656.4692

www.thecitizensbankphila.com