UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 000-25221 CITIZENS HOLDING COMPANY (Exact Name of Registrant as Specified in Its Charter) MISSISSIPPI 64-0666512 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 521 Main Street, Philadelphia, MS 39350 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: 601-656-4692 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------- ---------------- Common Stock, $.20 par value American Stock Exchange Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES [_] NO [X] As of June 30, 2002, the aggregate market value of the registrant's common stock, $.20 par value, held by non-affiliates of the registrant was $61,085,221. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding at March 14, 2003 Common stock, $.20 par value 4,974,578 Shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference to Part II and III of the Form 10-K: 2002 Annual Report to Shareholders (Part II) and the Definitive Proxy Statement dated March 21, 2003 for the registrant's Annual Meeting of Stockholders to be held April 22, 2003 (Part III).

CITIZENS HOLDING COMPANY FORM 10-K INDEX PAGE ---- PART I ITEM 1. BUSINESS ................................................................ 1 ITEM 2. PROPERTIES .............................................................. 7 ITEM 3. LEGAL PROCEEDINGS ....................................................... 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..................... 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ... 9 ITEM 6. SELECTED FINANCIAL DATA ................................................. 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........................................................... 11 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............. 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................. 11 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE .............................................................. 12 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ...................... 12 ITEM 11. EXECUTIVE COMPENSATION .................................................. 12 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ............................................. 12 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................... 12 ITEM 14. CONTROLS AND PROCEDURES ................................................. 12 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ......... 13 SIGNATURES ........................................................................... 15

CITIZENS HOLDING COMPANY FORM 10-K PART I 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 Corporation 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 Corporation's and the Bank's business include, but are not limited to, the following: (a) the risk of adverse changes in business conditions in the banking industry generally and in the specific markets in which the Corporation operates; (b) changes in the legislative and regulatory environment that negatively impact the Corporation and Bank through increased operating expenses; (c) increased competition from other financial institutions; (d) the impact of technological advances; (e) expectations about the movement of interest rates, including actions that may be taken by the Federal Reserve Board in response to changing economic conditions; (f) changes in asset quality and loan demand; (g) expectations about overall economic strength and the performance of the economy in the Corporation's market area; and (h) other risks detailed from time to time in the Corporation's filings with the Securities and Exchange Commission. The Corporation does not undertake any obligation to update or revise any forward-looking statements subsequent to the date on which they are made. ITEM 1. BUSINESS BACKGROUND Citizens Holding Company (the "Corporation") is a one-bank holding company that holds 97.52% of the outstanding shares of The Citizens Bank of Philadelphia, Mississippi (the "Bank"). The Corporation was incorporated under Mississippi law on February 16, 1982, at the direction of the Board of Directors of the Bank in order to facilitate the Bank's adoption of a one-bank holding company structure. The Bank was opened on February 8, 1908 as The First National Bank of Philadelphia. In 1917, the Bank surrendered its national charter and obtained a state charter at which time the name of the Bank was changed to The Citizens Bank of Philadelphia, Mississippi. At December 31, 2002, the Bank was the largest bank headquartered in Neshoba County with total assets of $517,895,749 and total deposits of $433,674,581. The principal executive offices of both the Corporation and the Bank are located at 521 Main Street, Philadelphia, Mississippi 39350 and its telephone number is (601) 656-4692. All 1`

references hereinafter to the activities or operations of the Corporation reflect the Corporation's activities or operations through the Bank. The Corporation acquired by merger CB&T Capital Corporation and Citizens Bank & Trust Company in Louisville, Mississippi in the second quarter of 2002. This acquisition added approximately $70 million in assets to the Corporation. The purchase price of the net assets totaled approximately $12.3 million cash and was based on a multiple of approximately 1.505 times the book value, subject to certain adjustments, of the acquired company. OPERATIONS The Corporation, through the Bank, engages in a wide range of commercial and personal banking activities, including accepting demand deposits, savings and time deposit accounts, making secured and unsecured loans, issuing letters of credit, originating mortgage loans, and providing personal and corporate trust services; and provides certain services that are closely related to commercial banking such as credit life insurance and title insurance for its loan customers. Revenues from the Corporation's lending activities constitute the largest component of the Corporation's operating revenues. Such lending activities include commercial, real estate, installment (direct and indirect) and credit card loans. The Corporation's primary lending area is East Central Mississippi, specifically Neshoba, Newton, Leake, Scott, Attala, Lauderdale, Winston and Kemper counties and contiguous counties. The Corporation extends out-of-area credit only to borrowers who are considered to be low risk, and only on a very limited basis. This eight county lending area is mainly rural with Meridian, at 41,036 in population, being the largest city. Agriculture and some light industry are a big part of the economy of this area. The largest employer in the Corporation's service area is the Mississippi Band of Choctaw Indians with their schools, manufacturing plants and their main source of income, The Pearl River Resort (the "Resort"). The Resort and its related services employs approximately 5,000 people from the Corporation's service area. The Corporation has in the past and intends to continue to make most types of real estate loans, including, but not limited to, single and multi-family housing, farm, residential and commercial construction and commercial real estate loans. Historically, approximately 32.6% of the Corporation's loan portfolio has been attributed to this category of lending. Another 48.2% of the Corporation's loan portfolio has been comprised of commercial, industrial and agricultural production loans, with consumer loans making up the remaining 19.2% of the total loan portfolio. The Corporation'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 loan committee for approval. The loan committee is composed of various Bank directors, including the Chairman. All aggregate credits that 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 Corporation's loan policy, but also provides valuable insight through the communication and pooling of knowledge, judgment and experience of its members. 2

Of course, all loans in the Corporation's portfolio are subject to risk based on the economy in the Corporation's area and also that of the nation. However, because the Corporation's local economy has been strong and unemployment has remained at historic lows, management continues to believe that general risk levels are low. In addition to lending services, the Corporation provides a wide range of personal and corporate trusts and trust-related services, which include its serving as executor of estates, as trustee under testamentary and inter vivos trusts and various pension and other employee benefit plans, as the guardian of the estates of minors and incompetents, and as escrow agent under various agreements. The Corporation also offers discount brokerage services through First Tennessee Bank. Through such innovations as its VISA Checkcard program, the 24 Hour Phone Teller and its Internet site (http://www.thecitizensbankphila.com), the Corporation's customers have the ability to have easy and convenient access to their funds and account balances 24 hours a day, 7 days a week. Additionally, the Internet site enables the Corporation's customers to review their accounts in detail, make transfers between their accounts and pay bills from anywhere in the world. EXECUTIVE OFFICERS OF THE REGISTRANT From 1982 until his retirement on December 31, 2002, Steve Webb, who is 70 years old, served as Chief Executive Officer and President of the Corporation. Mr. Webb had served as Chief Executive Officer of the Bank from 1978 until December 31, 2002 and President of the Bank from 1978 until January 2002. Mr. Webb has served as a member of the Board of Directors of the Corporation since 1982 and of the Bank since 1970. Mr. Webb has served as Chairman of the Board of both the Bank and Corporation since 1997. Greg L. McKee, who is 41 years old, was named President and Chief Executive Officer of the Corporation and Chief Executive Officer of the Bank in January 2003. He has served as President of the Bank since January 2002 and served as Chief Operating Office of the Bank from January 2002 until December 31, 2002. He has also been a member of the Board of Directors of both the Corporation and the Bank since 2001. Previous to this, he served as Executive Vice-President of the Bank from 2001 to 2002, Senior Vice-President of the Bank from 2000 to 2001, Vice-President of the Bank from 1992 to 2000, Assistant Vice-President of the Bank from 1989 to 1992, and Assistant Cashier of the Bank from 1984 to 1989. Robert T. Smith, who is 51 years old, has been employed by the Bank since 1986 and has been in his current position of Senior Vice-President and Chief Financial Officer since January 2001. Prior to January 2001, Mr. Smith held the title of Vice-President and Controller from 1987 until 2001 and Assistant Vice-President from 1986 to 1987. In addition to his position with the Bank, Mr. Smith has served as Treasurer of the Corporation since February 1996. EMPLOYEES The Corporation has no compensated employees. At December 31, 2002, the Bank employed 192 full-time employees and 28 part-time employees. The Bank is not a party to any collective bargaining agreements, and employee relations are considered to be good. 3

SUPERVISION AND REGULATION The Bank is chartered under the banking laws of the State of Mississippi and is subject to the supervision of, and is regularly examined by, the Department of Banking and Consumer Finance and the FDIC. The Corporation is a registered bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), and is subject to the supervision of the Federal Reserve Board ("FRB"). Certain legislation and regulations affecting the businesses of the Corporation and the Bank are discussed below. General. The FRB requires the Corporation to maintain certain levels of capital. The FRB also has the authority to take enforcement action against any bank holding company that engages in any unsafe or unsound practice or that violates certain laws, regulations, or conditions imposed in writing by the FRB. Capital Standards. The FRB, FDIC and other federal banking agencies have established risk-based capital adequacy guidelines intended to provide a measure of capital adequacy that reflects the degree of risk associated with a bank's operations. A banking organization's risk-based capital ratios are obtained by dividing its qualifying capital by its total risk-adjusted assets and off-balance sheet items. Since December 31, 1992, the federal banking agencies have required a minimum ratio of qualifying total capital to risk-adjusted assets and off-balance sheet items of 8%, and a minimum ratio of Tier 1 capital to risk-adjusted assets and off-balance sheet items of 4%. In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets is 3%. Prompt Corrective Action and Other Enforcement Mechanisms. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") requires each federal banking agency to take prompt corrective action to resolve the problems of insured depository institutions, including but not limited to those that fall below one or more of the prescribed minimum capital ratios. The law requires each federal banking agency to promulgate regulations defining the following five categories in which an insured depository institution will be placed, based on the level of its capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The Corporation and Bank are classified as well capitalized under these guidelines. Safety and Soundness Standards. FDICIA also implemented certain specific restrictions on transactions and required the regulators to adopt overall safety and soundness standards for depository institutions related to 4

internal control, loan underwriting and documentation, and asset growth. Among other things, FDICIA limits the interest rates paid on deposits by undercapitalized institutions, the use of brokered deposits and the aggregate extension of credit by a depository institution to an executive officer, director, principal shareholder or related interest, and reduces deposit insurance coverage for deposits offered by undercapitalized institutions for deposits by certain employee benefits accounts. Restrictions on Dividends and Other Distributions. The power of the board of directors of an insured depository institution to declare a cash dividend or other distribution with respect to capital is subject to statutory and regulatory restrictions which limit the amount available for such distribution depending upon the earnings, financial condition and cash needs of the institution, as well as general business conditions. The Corporation's ability to pay dividends depends in large part on the ability of the Bank to pay dividends to the Corporation. Certain provisions of state law restrict the payment of dividends by a Mississippi state bank. FDIC Insurance Assessments. The FDIC has established several mechanisms to increase funds to protect deposits insured by the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF"), both of which are administered by the FDIC. The Bank's deposits are insured through BIF except for those deposits the Bank acquired from the Resolution Trust Corporation in April, 1994. This acquisition consisted of one branch of the former Security Federal Savings and Loan in Kosciusko, Mississippi, and these deposits remain insured through SAIF. Interstate Banking and Branching. On September 29, 1994, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act") was signed into law. The Interstate Act effectively permits nationwide banking. Interstate branching by consolidation of banks was permitted beginning June 1, 1997, except in states that have passed legislation prior to that date "opting-out" of interstate branching. If a state opted-out prior to June 1, 1997, then banks located in that state may not participate in interstate branching. Effective May 1, 1997, Mississippi "opted in" to the interstate branching provision of the Interstate Act. Community Reinvestment Act. The revised Community Reinvestment Act ("CRA") regulations emphasize an assessment of actual performance rather than of the procedures followed by a bank, to evaluate compliance with the CRA. Overall CRA compliance continues to be rated across a four-point scale from "outstanding" to "substantial noncompliance," and continues to be a factor in review of applications to merge, to establish new branches or for the formation of bank holding companies. Different evaluation methods are used depending on the asset size of the bank. 5

The FDIC examined the Bank on June 1, 1999 and again most recently on August 21, 2001, for its performance under the CRA. The Bank was rated Satisfactory during both of these examinations. No discriminatory practices or illegal discouragement of applications were found. Impact of Monetary Policies. Banking is a business that depends on interest rate differentials. In general, the difference between the interest paid by a bank on its deposits and other borrowings, and the interest rate earned by banks on loans, securities and other interest-earning assets comprises the major source of banks' earnings. Thus, the earnings and growth of banks are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies. The nature and timing of any future changes in such policies and their impact on the Corporation cannot be predicted. COMPETITION The banking business is a highly competitive business. The Corporation's market area consists principally of Neshoba, Newton, Leake, Scott, Attala, Lauderdale, Winston and Kemper Counties in Mississippi, although the Corporation also competes with other financial institutions in those counties and in surrounding counties in Mississippi in obtaining deposits and providing many types of financial services. The Corporation competes with larger regional banks for the business of companies located in the Corporation's market area. A healthy economy, such as the Corporation's market area is experiencing, invites certain challenges, especially that of competition. All financial institutions today are faced with the challenge of competing for customers' deposits, and the Corporation is no exception. The Corporation competes with savings and loan associations, credit unions, production credit associations, federal land banks, finance companies, personal loan companies, money market funds and other non-depository financial intermediaries. Many of these financial institutions have resources many times greater than those of the Corporation. In addition, new financial intermediaries such as money-market mutual funds and large retailers are not subject to the same regulations and laws that govern the operation of traditional depository institutions. Recent changes in federal and state law have resulted in, and are expected to continue to result in, increased competition. The reductions in legal barriers to the acquisition of banks by out-of-state bank holding companies resulting from implementation of the Interstate Act and other recent and proposed changes are expected to continue to further stimulate competition in the markets in which the Corporation operates, although it is not possible to predict the extent or timing of such increased competition. Currently, there are approximately fourteen different financial institutions in the Corporation's market area competing for the same customer base. Despite these challenges, the Corporation has not only been able to maintain its market share, but has actually increased its share in recent years. 6

ITEM 2. PROPERTIES The Corporation, through the Bank, currently operates from its main office in downtown Philadelphia, and from 18 additional branches in Neshoba, Newton, Leake, Scott, Attala, Lauderdale, Winston and Kemper counties, all located in Mississippi. Information about these branches is set forth in the table below: BANKING LOCATION/ FUNCTIONS NAME OF OFFICE TELEPHONE NUMBER OFFERED Main Office 521 Main Street Full Service; Philadelphia, Mississippi Trust (601) 656-4692 Eastside Branch 585 East Main Street Drive-up Philadelphia, Mississippi (601) 656-4976 Westside Branch 912 West Beacon Street Full Service; Philadelphia, Mississippi 24 Hour Teller (601) 656-4978 Northside Branch 720 Pecan Avenue Deposits; Philadelphia, Mississippi 24 Hour Teller (601) 656-4977 Pearl River Branch 110 Choctaw Town Center Full Service; Philadelphia, Mississippi 24 Hour Teller (601) 656-4971 Union Branch Corner of Horne & Bank Full Service Union, Mississippi (601) 774-9231 Carthage Main Office 219 West Main Street Full Service Carthage, Mississippi (601) 267-4525 Crossroads Branch Highways 35 & 16 Drive-up Carthage, Mississippi (601) 267-4525 Madden Branch Highway 488 Deposits Madden, Mississippi (601) 267-7366 7

Sebastopol Branch 24 Pine Street Full Service; Sebastopol, Mississippi 24-Hour Teller (601) 625-7447 DeKalb Branch Corner of Main & Bell Full Service DeKalb, Mississippi (601) 743-2115 Kosciusko Branch 775 North Jackson Avenue Full Service; Kosciusko, Mississippi 24-hour Teller (662) 289-4356 Scooba Branch 1048 Johnston Street Full Service Scooba, Mississippi (662) 476-8431 Meridian Branch 1825 Highway 39 North Full Service; Meridian, Mississippi 24-Hour Teller (601) 693-8367 Decatur Branch 15520 Highway 15 South Full Service; Decatur, Mississippi 24-Hour Teller (601) 635-2321 Forest Branch 247 Woodland Drive North Full Service; Forest, Mississippi 24-Hour Teller (601) 469-3424 Louisville Main Branch 100 East Main Street Full Service Louisville, MS (662) 773-6261 Industrial Branch 803 South Church Street Drive-Up Louisville, MS (662) 773-6261 Noxapater Branch 45 Main Street Deposits Noxapater, MS (662) 724-4261 The Bank owns its main office and its branch offices, except for the Pearl River Branch Office, which is leased. The main office facility, originally occupied in 1966, is used solely by the Corporation and the Bank. This facility contains approximately 20,000 square feet and houses the executive offices and all operations related departments of the Corporation. The other branches range in size from nearly 4,000 square feet to 1,000 square feet. 8

ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than routine litigation incidental to their business, to which either the Corporation or the Bank is a party or to which any of their property is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to the Company's shareholders during the fourth quarter of 2002. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Price. The Corporation'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 by private transactions between parties. On December 31, 2002, the Common Stock's closing price was $16.00. Dividends Declared 2001 High Low (per common share) - -------------------------------------------------------------------------------- January - March 11.17 10.33 0.083 April - June 11.83 10.77 0.100 July - September 13.17 11.50 0.100 October - December 16.60 12.17 0.100 Dividends Declared 2002 High Low (per common share) - -------------------------------------------------------------------------------- January - March 16.26 14.25 0.120 April - June 16.00 14.65 0.120 July - September 16.85 15.75 0.140 October - December 17.35 15.70 0.140 Per share information included in the above table has been adjusted to reflect the three-for-two (3:2) common stock split effective January 2, 2002. On March 14, 2003, the shares of Common Stock were held of record by approximately 454 shareholders. 9

Dividends Dividends, retroactively adjusted to give effect to the three-for-two stock split, totaled $0.52 per share for 2002 compared to $0.383 in 2001 and $.283 in 2000. These dividends reflect a 36% increase in 2002 over 2001 and a 35% increase in 2001 over 2000. The Corporation 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 Corporation of cash dividends are obtained from dividends received by the Corporation from the Bank. Accordingly, the declaration and payment of dividends by the Corporation depend upon the Bank's earnings and financial condition, general economic conditions, compliance with regulatory requirements, and other factors. ITEM 6. SELECTED FINANCIAL DATA FIVE YEAR SUMMARY OF CONSOLIDATED STATEMENTS AND RELATED STATISTICS (amounts in Thousands, Except Percent and Per Share Data) (Per Share Data adjusted for 3:2 split of January 2, 2002) 2002 2001 2000 1999 1998 ---------- ---------- ---------- ---------- ---------- Summary of Earnings - ------------------- Total Interest Income $ 30,197 $ 29,119 $ 28,638 $ 25,476 $ 23,956 Total Interest Expense 9,746 13,399 14,064 10,974 10,860 Provision for loan losses 1,758 1,123 918 849 846 Non-interest income 4,435 3,980 3,285 3,122 2,2897 Non-interest expense 13,865 10,308 8,772 8,361 7,948 Income tax expense 2,965 2,558 2,635 2,793 2,487 Net Income 6,298 5,711 5,534 5,621 4,712 Per Share Data - -------------- Earnings-basic $ 1.27 $ 1.15 $ 1.12 $ 1.13 $ 0.95 Earnings-diluted 1.26 1.15 1.11 1.13 0.95 Cash dividends 0.520 0.383 0.283 0.213 0.160 Book value at year end 10.81 9.51 8.74 7.57 7.15 Selected Year End Actual Balances - --------------------------------- Loans, net of unearned income $ 308,175 $ 264,278 $ 252,022 $ 234,349 $ 211,349 Allowance for possible loan losses (4,222) (3,375) (3,325) (3,100) (2,900) Investment securities 162,276 122,567 103,533 102,451 91,539 Total assets 518,450 427,213 382,800 362,790 334,232 Deposits 432,768 359,309 289,908 284,462 282,242 Long term borrowings 24,606 14,629 10,000 10,000 10,000 Shareholder's equity 53,783 47,182 43,377 37,546 35,455 Selected Year End Average Balances - ---------------------------------- Loans, net of unearned income $ 289,407 $ 255,185 $ 244,307 $ 221,165 $ 202,228 10

Allowance for possible loan losses (3,905) (3,335) (3,198) (2,974) (2,701) Investment securities 153,726 106,632 102,325 97,219 79,401 Total assets 491,833 403,881 374,439 347,613 314,896 Deposits 414,135 327,536 290,704 288,176 268,514 Long term borrowings 19,301 14,815 10,000 10,000 7,630 Shareholders' equity 51,304 47,664 40,701 37,603 33,513 Selected Ratios - --------------- Return on average assets 1.28% 1.41% 1.48% 1.62% 1.50% Return on average equity 12.28% 11.98% 13.60% 14.95% 14.08% Dividend payout ratio 40.98% 33.31% 25.41% 18.84% 16.85% Equity to year end assets 10.37% 11.04% 11.33% 10.35% 10.61% Total risk-based capital to risk-adjusted assets 15.57% 18.40% 18.88% 18.52% 18.13% Leverage capital ratio 8.53% 10.51% 11.61% 11.06% 10.61% Efficiency ratio 54.51% 51.32% 47.20% 45.48% 48.01% ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information on the Management's Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2002, 2001, and 2000 required by this Item 7 can be found under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2002, 2001 and 2000" and "Consolidated Financial Statements" in the 2002 Annual Report to Shareholders, a copy of which is filed as an Exhibit to this Annual Report on Form 10-K. Such information is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information on the Quantitative and Qualitative Disclosures about Market Risk, required by this Item 7A can be found under the headings "Quantitative and Qualitative Disclosures about Market Risk" in the 2002 Annual Report to Shareholders, a copy of which is filed as an Exhibit to this Annual Report on Form 10-K. Such information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information on Financial Statements and Supplementary Data required by this Item 8 can be found under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2002, 2001 and 2000", "Consolidated Financial Statements" and "Quarterly Financial Trends" in the 2002 Annual Report to Shareholders, a copy of which is filed as an Exhibit to this Annual Report on Form 10-K. Such information is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 11

PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding the Directors and Executive Officers of the Corporation required by this Item 10 can be found under the headings "Executive Officers of the Registrant" in Item 1 of this Annual Report on Form 10-K and "Section 16(a) Beneficial Ownership Reporting Compliance" and "Board of Directors" in the Corporation's Definitive Proxy Statement filed with the Securities and Exchange Commission on March 21, 2003, relating to its 2003 Annual Meeting of Shareholders. Such information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information regarding the Executive Compensation paid by the Corporation required by this Item 11 can be found under the headings "Executive Compensation", "Compensation of the Board of Directors", "Stock Performance Graph" and "Compensation Committee Interlocks and Insider Participation" in the Corporation's Definitive Proxy Statement filed with the Securities and Exchange Commission on March 21, 2003, relating to its 2003 Annual Meeting of Shareholders. Such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS In partial response to this Item, the Corporation incorporates by reference the information under the headings "Security Ownership of Directors, Nominees and Executive Officers" and "Security Ownership of Certain Beneficial Owners" in the Corporation's Definitive Proxy Statement filed with the Securities and Exchange Commission on March 21, 2003, relating to its 2003 Annual Meeting of Shareholders. The following table summarizes the Company's equity compensation plan information as of December 31, 2002. the underlying plans, which are more fully described in Note 16 to the consolidated financial statements included in Item 8, have been previously approved by a vote of the shareholders. 12

Equity Compensation Plan Information (c) (a) Number of securities Number of securities (b) remaining available for to be issued upon Weighted-average future issuance under equity exercise of exercise price of compensation plans outstanding options, outstanding options, (excluding securities Plan category warrants and rights warrants and rights in column (a)) ------------- ------------------- ------------------- -------------- Equity compensation plans $11.65 approved by security holders 124,700 315,970 /(1)(2)/ Equity compensation plans not _____ _____ _____ approved by security holders Total 124,700 $11.65 315,970 /(1)/ Includes 34,200 shares that remain available for future issuance under the 1999 Directors' Stock Compensation Plan. /(2)/ Includes 281,770 shares available for future issuance under the 1999 Employees' Long-Term Incentive Plan. Under the terms of this plan, the number of shares that may be issued cannot exceed 7% of the total number of shares issued and outstanding from time to time. In addition to stock options, restricted stock may be granted or awarded under the plan. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding Certain Relationships and Related Transactions can be found under the headings "Indebtedness of Related Parties" and "Interests of the Board of Directors" in the Corporation's Definitive Proxy Statement filed with the Securities and Exchange Commission on March 21, 2003, relating to its 2003 Annual Meeting of Shareholders. Such information is incorporated herein by reference. ITEM 14. CONTROLS AND PROCEDURES Within the 90 days prior to the date of this Annual Report on Form 10-K, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures as defined in Rule 13a-14(c) and Rule 15d-14(c) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the Corporation's principal executive officer and principal financial officer concluded that the Corporation's disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Corporation's SEC reports. There have been no significant changes in the Corporation's internal controls or in other factors that could significantly affect internal controls subsequent to the date the Corporation carried out its evaluation. 13

PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements Consolidated Financial Statements and Supplementary Information for years ended December 31, 2000, 2001 and 2002, which include the following: (i) Independent Auditor's Report (ii) Consolidated Statements of Financial Condition (iii) Consolidated Statements of Income (iv) Consolidated Statements of Comprehensive Income (v) Consolidated Statements of Changes in Shareholders' Equity (vi) Consolidated Statements of Cash Flows (vii) Notes to Consolidated Financial Statements (b) Reports on Form 8-K The following report on form 8-K was filed by the Corporation during the last quarter of the period covered by this Form 10-K: On December 30, 2002, the Corporation filed on Form 8-K under Item 7(a) and Item 9 a press release announcing the change in Chief Executive Officer upon the retirement of Steve Webb. (c) Exhibits required by Item 601 of Regulation S-K 3(i) Amended Articles of Incorporation of the Corporation 3(ii) Amended and Restated Bylaws of the Corporation * 4 Rights Agreement between Citizens Holding Company and The * Citizens Bank of Philadelphia, Mississippi 10(a) Directors' Deferred Compensation Plan - Form of Agreement * 10(b) Citizens Holding Company 1999 Directors' Stock Compensation * Plan 10(c) Citizens Holding Company 1999 Employees' Long-Term Incentive * Plan 10(d) Change in Control Agreement dated December 10, 2002 between the Company and Greg L. McKee 10(e) Summary of Consulting Agreement between the Company and Steve Webb 13 2002 Annual Report to Shareholders 21 Subsidiaries of Registrant * 23 Consent of Independent Auditors 99(a) Section 906 Certification of Chief Executive Officer 99(b) Section 906 Certification of Treasurer 14

* Filed as an exhibit to the Form 10 Registration Statement of the Corporation (File No. 000-25221) filed on December 30, 1998 and incorporated herein by reference, and also filed as an exhibit to Amendment No. 1 to Form 10 Registration Statement of the Corporation (File No. 000-25221) filed on June 21, 1999 and incorporated herein by reference. (d) Financial Statement Schedules. None. 15

SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CITIZENS HOLDING COMPANY Date: March 20, 2003 By: /s/ Greg L. McKee --------------------------------- Greg L. McKee President and Chief Executive Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: SIGNATURES CAPACITIES DATE /s/ Karl Brantley Director March 20, 2003 - --------------------------- /s/ W. W. Dungan Director March 20, 2003 - --------------------------- /s/ Don L. Fulton Director March 20, 2003 - --------------------------- /s/ David A. King Director March 20, 2003 - --------------------------- /s/ Herbert A. King Director March 20, 2003 - --------------------------- /s/ William M. Mars Director March 20, 2003 - --------------------------- /s/ Greg L. McKee Director, President and March 20, 2003 - --------------------------- Chief Executive Officer /s/ Robert T. Smith Treasurer March 20, 2003 - --------------------------- /s/ Steve Webb Chairman of the Board March 20, 2003 - --------------------------- 16

CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Greg L. McKee, certify that: 1. I have reviewed this annual report on Form 10-K of The Citizens Holding Company; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, 17

including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 20, 2003 By: /s/ Greg L. McKee ---------------------- Greg L. McKee Chief Executive Officer 18

CERTIFICATION OF TREASURER I, Robert T. Smith, certify that: 1. I have reviewed this annual report on Form 10-K of The Citizens Holding Company; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and (c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, 19

including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 20, 2003 By: /s/ Robert T. Smith ----------------------------- Robert T. Smith Treasurer 20

EXHIBIT 3(i) Articles of Incorporation, as amended

STATE OF MISSISSIPPI [SHIELD APPEARS HERE] OFFICE OF SECRETARY OF STATE JACKSON CERTIFICATE OF INCORPORATION OF CITIZENS HOLDING COMPANY The undersigned, as Secretary of State of the State of Mississippi, hereby certifies that duplicate originals of Articles of Incorporation for the above named corporation duly signed and verified pursuant to the provisions of the Mississippi Business Corporation Act, have been received in this office and are found to conform to law. ACCORDINGLY the undersigned, as such Secretary of State, and by virtue of the authority vested in him by law, hereby issues this CERTIFICATE OF INCORPORATION, and attaches hereto a duplicate original of the Articles of Incorporation. [SEAL Given under my hand and Seal of Office, APPEARS this the 16th day of February 1982. [HERE] /s/ EDWIN LLOYD PITTMAN ----------------------------------- SECRETARY OF STATE

ARTICLES OF INCORPORATION OF CITIZENS HOLDING COMPANY We, the undersigned persons of the age of twenty-one years or more, acting as incorporators of a corporation under the Mississippi Business Corporation Act, adopt the following Articles of Incorporation for such corporation: FIRST: The name of the corporation is Citizens Holding Company. SECOND: The period of its duration is ninety-nine (99) years. THIRD: The specific purpose or purposes for which the corporation is organized stated in general terms are: Primarily, to purchase, own and hold the stock of other corporations, and to do every act and thing covered generally by the denomination "holding corporation" or "holding company," and especially to direct the operations of other corporations through the ownership of stock therein; to purchase, subscribe for, acquire, own, hold, sell, exchange, assign, transfer, create security interest in, pledge or otherwise dispose of shares of the capital stock, or any bonds, notes, securities or evidences of indebtedness created by any other corporation or corporations organized under the laws of this state or any other state or district or country, nation or government and also bonds or evidences of indebtedness of the United States or any other state, district, territory, dependency or country or subdivision or municipality thereof; to issue in exchange therefor shares of the capital stock, bonds, notes or other obligations of the corporation and while the owner thereof to exercise all the rights, powers and privileges of ownership including the right to vote on any shares of stock; to promote, lend money to and guarantee the bonds, notes, evidences of indebtedness, contracts or other obligations of, and otherwise aid in any manner which shall be lawful, any corporation or association of which any bonds, stocks or other securities or evidences of indebtedness shall be held by or for this corporation, or in which, or in the welfare of which, this corporation shall have any interest, and to do any acts and things permitted by law and designed to protect, preserve, improve or enhance the value of any such bonds, stocks or other securities or evidences of indebtedness or the property of this corporation. And, to engage in such activities or businesses as may from time to time be permitted by State or Federal statutes, regulations or authorities, including, but not limited to, the business of acting as agent or broker for insurance companies in soliciting and receiving application for any and all types of insurance, collecting premiums and doing such other business as may be delegated to agents or brokers by such insurance companies and to conduct an insurance agency and insurance brokerage business. To do any and all things and exercise any and all powers, rights and privileges which the corporation may now or hereafter be authorized to do under the Mississippi Business Corporation Act. This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi

FOURTH: The aggregate number of shares which the corporation shall have authority to issue is 150,000 of the par value of Five Dollars ($5.00) each. FIFTH: The corporation will not commence business until consideration of the value of at least $1,000 has been received for the issuance of shares. SIXTH: The post office address of its initial registered office is 521 Main Street, P.O. Box 209, Philadelphia, Mississippi 39350, and the name of its initial registered agent at such address is Steve Webb. SEVENTH: The number of directors constituting the initial board of directors of the corporation, which must not be less than three (3), is nine (9) and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected and shall qualify are: NAME STREET AND POST OFFICE ADDRESS D. Allan King P.O. Box 209, 514 Rose, Philadelphia, MS 39350 Herman Alford P.O. Box 96, 313 West Beech, Philadelphia, MS 39350 W.W. Dungan P.O. Box 647, 502 Church, Philadelphia, MS 39350 Norman A. Johnson, Jr. P.O. Box 209, 506 Peebles Philadelphia, MS 39350 George R. Mars P.O. Box 184, Woodland Hills, Philadelphia, MS 39350 William M. Mars P.O. Box 96, 517 Holland Ave., Philadelphia, MS 39350 Willis R. McKee Route 1, Box 75, Philadelphia, MS 39350 Steve Webb P.O. Box 209, 534 Poplar Ave., Philadelphia, MS 39350 W.G. Yates, Sr. P.O. Box 54, 450 Pecan Ave., Philadelphia, MS 39350 EIGHTH: The name and post office address of each incorporator is: NAME STREET AND POST OFFICE ADDRESS D. Allan King P.O. Box 209, 514 Rose, Philadelphia, MS 39350 Steve Webb P.O. Box 209, 534 Poplar Ave., Philadelphia, MS 39350 DATED: February 15, 1982 /s/ D. ALLAN KING -------------------------------------- D. Allan King, Incorporator /s/ STEVE WEBB -------------------------------------- Steve Webb, Incorporator This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi 2

ACKNOWLEDGMENT STATE OF MISSISSIPPI COUNTY OF HINDS This day personally appeared before me, the undersigned authority within and for the aforesaid jurisdiction, D. Allan King and Steve Webb, incorporators of the corporation known as the Citizens Holding Company who acknowledged that they signed and executed the above and foregoing Articles of Incorporation as their act and deed on this the 15th day of February, 1982. /s/ DEBRA MITCHELL ------------------------------------ Notary Public My Commission Expires: My Commission Expires Jan. 18, 1984 - ----------------------------------- (NOTARY SEAL) This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi 3

STATE OF MISSISSIPPI NESHOBA COUNTY I, Bobby G. Posey, Chancery Clerk and Ex-officio Recorder in and for said State and County, hereby certify that the foregoing instrument was filed for record at 2:20 o'clock P.M. on the 18th day of February, 1982 and duly recorded in Charter of Incorporation Book A-130 Pages 281-284, each inclusive of the records of this office. Given under my hand and seal of office, this the 18th day of February, 1982. /s/ BOBBY G. POSEY Clerk ------------------ By: /s/ M. Croswell D.C. -------------------

STATE OF MISSISSIPPI [SHIELD APPEARS HERE] OFFICE OF SECRETARY OF STATE JACKSON CERTIFICATE OF AMENDMENT OF CITIZENS HOLDING COMPANY The undersigned, as Secretary of State of the State of Mississippi, hereby certifies that duplicate originals of Articles of Amendment to the Articles of Incorporation of the above corporation duly signed and verified pursuant to the provisions of the Mississippi Business Corporation Act, have been received in this office and are found to conform to law. ACCORDINGLY the undersigned, as such Secretary of State, and by virtue of the authority vested in him by law, hereby issues this Certificate of Amendment to the Articles of Incorporation and attaches hereto a duplicate original of the Articles of Amendment. [SEAL Given under my hand and Seal of Office, APPEARS this the 30th day of April 1982. [HERE] /s/ EDWIN LLOYD PITTMAN ----------------------------------- SECRETARY OF STATE.

ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF CITIZENS HOLDING COMPANY Pursuant to the provisions of Section 61 of the Mississippi Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of this corporation is Citizens Holding Company. SECOND: The following amendment of the Articles of Incorporation was adopted by the shareholders of the corporation on April 28, 1982, in the manner prescribed by the Mississippi Business Corporation Act: The Articles of Incorporation are amended to add the following ARTICLE NINTH: NINTH: If any person, firm, or corporation, (herein referred to as the Tender Offeror) or any person, firm, or corporation controlling the Tender Offeror, controlled by the Tender Offeror, or under common control with the Tender Offeror, or any group of which the Tender Offeror or any of the foregoing persons, firms, or corporations are members, or any other group controlling the Tender Offeror, controlled by the Tender Offeror, or under common control with the Tender Offeror owns of record, or owns beneficially, directly or indirectly, more than 10% of any class of equity voting security of this Corporation with the Tender Offeror, then any merger or consolidation of this corporation with the Tender Offeror, or any sale, lease, or exchange of substantially all of the assets of this Corporation or of the Tender Offeror to the other may not be effected under the laws of Mississippi unless a meeting of the shareholders of this Corporation is held to vote thereon and the votes of the holders of voting securities of this Company representing not less than 80% of the votes entitled to vote thereon, vote in favor thereof. As used herein, the term group includes persons, firms, and corporations acting in concert, whether or not as a formal group, and the term equity security means any share or similar security; or any security convertible, with or without consideration, into such a security, or carrying any warrant to subscribe to or purchase such a security; or any such warrant or right. The foregoing provision is to require a greater vote of shareholders than is required by Mississippi Code of 1972 Section 79-3-145 (dealing with mergers and consolidations) and Section 79-3-157 (dealing with sales, mortgages, etc. of assets outside the ordinary course of business) and the provisions of this Article NINTH shall not be amended, changed or repealed without a similar 80% vote of the voting securities in this Corporation, which is a greater vote than required by Mississippi Code of 1972 Section 79-3-117 (dealing with amendments to these Articles of Incorporation). This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi -1-

THIRD: The number of shares of the corporation outstanding at the time of such adoption was Two Hundred (200); and the number of shares entitled to vote thereon was Two Hundred (200). FOURTH: The designation and number of outstanding shares of each class entitled to vote thereon as a class were as follows: Class Number of Shares Common 200 FIFTH: The number of shares voted for such amendment was 200; and the number of shares voted against such amendment was -0-. SIXTH: The number of shares of each class entitled to vote thereon as a class voted for and against such amendment, respectively was: Number of Shares Voted Class For Against Common 200 -0- SEVENTH: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: No Change This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi -2-

EIGHTH: The manner in which such amendment effects a change in the amount of stated capital (expressed in dollars) as changed by such amendment, are as follows: No Change Dated April 28, 1982 CITIZENS HOLDING COMPANY By /s/ STEVE WEBB ------------------------------ Steve Webb, President By /s/ JEAN S. FULTON ------------------------------ Jean S. Fulton, Secretary STATE OF MISSISSIPPI COUNTY OF NESHOBA I, Lucille M. Myatt, a notary public, do hereby certify that on this 28th day of April, 1982, personally appeared before me Steve Webb and Jean S. Fulton, who, being by me first duly sworn, declared that they are the President and Secretary of Citizens Holding Company, that they executed the foregoing document as President and Secretary of the corporation, and that the statements therein contained are true. /s/ LUCILLE M. MYATT ----------------------------------- Notary Public [SEAL] My commission expires 9/13/84 --------- (Notary Seal) This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi -3-

THE STATE OF MISSISSIPPI NESHOBA COUNTY Personally appeared before me, the undersigned authority in and for the above state and county, Stanley Dearman, Publisher of The Neshoba Democrat, a newspaper published in the city of Philadelphia, in aforesaid county and state, and having a general circulation therein, AND HAVING BEEN ESTABLISHED FOR MORE THAN 12 MONTHS NEXT PRIOR TO THE FIRST PUBLICATION OF THE ATTACHED NOTICE AND BEING A LEGAL PUBLICATION AS DEFINED BY SENATE BILL NO. 318 OF THE LAWS OF 1936 OF THE STATE OF MISSISSIPPI, and who, being by me first duly sworn, says on oath that the notice, a copy of which is hereto attached, was published in said newspaper as follows, to-wit: In Volume 101 Number 20 dated 5-20 1982 In Volume ___ Number __ dated ____ 19__ In Volume ___ Number __ dated ____ 19__ In Volume ___ Number __ dated ____ 19__ In Volume ___ Number __ dated ____ 19__ In Volume ___ Number __ dated ____ 19__ /s/ STANLEY DEARMAN _____________________________________________ Affiant Sworn to and subscribed before me this the 20th day of May A.D. 1982 Notary Public _________________________________________ Title /s/ CAROLYN M. DEARMAN _________________________________________ Name My commission expires December 1, 1984 (Seal) 5-27-82, 9:30 A.M. Bill: Lawyer & Growlary Attorneys P.O. Box 12468 Jackson, MS 39211 STATE OF MISSISSIPPI NESHOBA COUNTY I, Bobby G. Posey, Chancery Clerk and Ex-Officio Recorder in and for said State and county, hereby certify that the foregoing instrument was filed for record at 9:30 o'clock A.M. on the 27th day of May 1982, and duly recorded in Book A-130 Page 355-359 of the records of this office. Given under my hand and seal of office, this the 27th day of May, 1982. /s/ BOBBY G. POSEY Clerk ------------------------------ /s/ M. CROSWELL D.C. ------------------------------

STATE OF MISSISSIPPI [SHIELD APPEARS HERE] OFFICE OF SECRETARY OF STATE JACKSON CERTIFICATE OF AMENDMENT OF CITIZENS HOLDING COMPANY The undersigned, as Secretary of State of the State of Mississippi, hereby certifies that duplicate originals of Articles of Incorporation for the above named corporation duly signed and verified pursuant to the provisions of the Mississippi Business Corporation Act, have been received in this office and are found to conform to law. ACCORDINGLY the undersigned, as such Secretary of State, and by virtue of the authority vested in him by law, hereby issues this CERTIFICATE OF INCORPORATION, and attaches hereto a duplicate original of the Articles of Incorporation. [SEAL Given under my hand and Seal of Office, APPEARS this the 26th day of January 1983. [HERE] /s/ EDWIN LLOYD PITTMAN ----------------------------------- SECRETARY OF STATE.

ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF CITIZENS HOLDING COMPANY Pursuant to the provisions of Section 61 of the Mississippi Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: FIRST: The name of the corporation is Citizens Holding Company. SECOND: The following amendment of the Articles of Incorporation was adopted by the shareholders of the corporation on January 11, 1983, in the manner prescribed by the Mississippi Business Corporation Act: The Articles of Incorporation are amended to add the following ARTICLE TENTH: TENTH: Citizens Holding Company shall have the right to purchase its own shares to the extent of its unreserved and unrestricted earned surplus and capital surplus available therefor. THIRD: The number of shares of the corporation outstanding at the time of such adoption was 99,825; and the number of shares entitled to vote thereon was 99,825. FOURTH: The designation and number of outstanding shares of each class entitled to vote thereon as a class were as follows: Class (If inapplicable insert Number of Shares "None".) Common FIFTH: The number of shares voted for such amendment was 74,494; and the number of shares voted against such amendment was -0-. This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi

SIXTH: The number of shares of each class entitled to vote thereon as a class voted for and against such amendment, respectively was: Number of Shares Voted Class (If inapplicable, For Against insert "None".) Common SEVENTH: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: (If inapplicable, insert "No Change".) No Change EIGHTH: The manner in which such amendment effects a change in the amount of stated capital (expressed in dollars) as changed by such amendment, are as follows: (if inapplicable, insert, "No Change".) No Change Dated: January 11, 1983 CITIZENS HOLDING COMPANY By /s/ STEVE WEBB -------------------------------------- Steve Webb, President By /s/ Jean S. Fulton -------------------------------------- Secretary This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi

STATE OF MISSISSIPPI COUNTY OF NESHOBA I, Lucille M. Myatt, a notary public, do hereby certify that on this 11th day of January, 1983, personally appeared before me Steve Webb and Jean S. Fulton, who, being by me first duly sworn, declared that they are the President and Secretary, respectively, of Citizens Holding Company, that they executed the foregoing document as duly authorized officers of the corporation, and that the statements therein contained are true. /s/ LUCILLE M. MYATT -------------------------- Notary Public My Commission Expires: My Commission Expires Sept. 13, 1984 - ------------------------------------ (NOTARY SEAL) This page conforms with the duplicate original filed with Secretary of State. /s/ EDWIN LLOYD PITTMAN Secretary of State State of Mississippi 3

STATE OF MISSISSIPPI NESHOBA COUNTY I, Bobby G. Posey, Chancery Clerk and Ex-Officio Recorder in and for said State and County, hereby certify that the foregoing instrument was filed for record at 10:00 o'clock A.M. on the 3rd day of February, 1983 and duly recorded in Charter of Inc. Book A-130 Page 671-675 of the records of this office. Given under my hand and seal of office, this the 3rd day of February, 1983. /s/ BOBBY G. POSEY Clerk ------------------ By: /s/ M. Croswell D.C. -------------------

ARTICLES OF AMENDMENT (Attach conformed copy) [X] PROFIT [ ] NONPROFIT (Mark appropriate box) The undersigned corporation pursuant to Section 79-4-10 06 (if a profit corporation) or Section 79-11-300 if a nonprofit corporation of the Mississippi Code of 1972 hereby executes the following document and sets forth 1. The name of the corporation is Citizens Holding Company ------------------------ 2. Set forth the text of each amendment adopted. (Attach page.) SEE ATTACHED 3. If a profit amendment provides for an exchange, reclassification, or cancellation of issued shares set forth the provisions for implementing the amendment if they are not contained in the amendment itself (Attach page) 4. The amendment(s) was (were) adopted September 18, 1991 ----------------------------------------- DATE(S) FOR PROFIT CORPORATION (a) adopted by [ ] the incorporators [X] directors without shareholder action and shareholder action was not required. (Check appropriate box) FOR NONPROFIT CORPORATION (b) adopted by [ ] board of directors [ ] incorporators without member action and member action was not required. (Check appropriate box) FOR PROFIT CORPORATIONS 5. If the amendment was approved by shareholders (a) The designation, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the amendment, and the number of votes of each voting group indisputably represented at the meeting was N/A No. outstanding No. of votes No. of votes Designation shares entitled to be cast indisputably represented ----------- --------------- ------------------- ------------------------ ----------- ------------ ------------- ---------------- ----------- ------------ ------------- ---------------- (b) Either the total number of votes cast for and against the amendment by each voting group entitled to vote separately on the amendment was N/A Total no. of Total no. of Voting group votes cast FOR votes cast AGAINST ------------ -------------- ------------------ --------- ---------- ---------- --------- ---------- ---------- or the total number of undisputed votes cast for the amendment by each voting group was Total no. of undisputed Voting group votes cast FOR the plan ------------ ----------------------- -------- ------------ -------- ------------ and the number cast for the amendment by each voting group was sufficient for approval by that voting group.

FOR NONPROFIT CORPORATIONS 6. If the amendment was approved by the members: (a) The designation, number of memberships outstanding, number of votes entitled to be cast by each class entitled to vote separately on the amendment, and number of votes of each class indisputably represented at the meeting N/A No. outstanding No. of votes No. of votes Designation shares entitled to be cast indisputably represented ----------- --------------- ------------------- ------------------------ ----------- ------------ ------------- ---------------- ----------- ------------ ------------- ---------------- (b) Either (i) the total number of votes cast for and against the amendment by each class entitled to vote separately on the amendment was Total no. of votes cast Total no. of votes cast Voting class FOR the amendment AGAINST the amendment ------------ ------------------------ ----------------------- -------- -------------- -------------- -------- -------------- -------------- or (ii) the total number of undisputed votes cast for the amendment by each class was: Total no. of undisputed Voting group votes cast FOR the amendment ------------ ----------------------------- -------- ------------ -------- ------------ and the number cast for the amendment by each class was sufficient for approval by that voting group. BY: JOE STEVE WEBB, PRESIDENT /s/ JOE STEVE WEBB, PRESIDENT ------------------------------------ ---------------------------------- Printed Name/Corporate Title Signature

ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION CITIZENS HOLDING COMPANY The following Amendment to the Articles of Incorporation for the above referenced Corporation were adopted by the Board of Directors on September 18, 1991. Article Four of the Articles of Incorporation is amended to read as follows: FOURTH: The aggregate number of shares which the corporation shall have the authority to issue is 750,000 of the par value of One Dollars ($1.00) each.

OFFICE OF THE MISSISSIPPI SECRETARY OF STATE P.O. BOX 136, JACKSON, MS 39205-0136 (601) 359-1333 ARTICLES OF AMENDMENT The undersigned persons, pursuant to Section 79-4-10.06 (if a profit corporation) or Section 79-11-305 (if a nonprofit corporation) of the Mississippi Code of 1972, hereby execute the following document and set forth: 1. TYPE OF CORPORATION [SEAL] [X] Profit Nonprofit FILED 11/20/1998 2. NAME OF CORPORATION Eric Clark Secretary of State Citizens Holding Company State of Mississippi 3. THE FUTURE EFFECTIVE DATE IS January 1, 1999 (COMPLETE IS APPLICABLE) 4. SET FORTH THE TEXT OF EACH AMENDMENT ADOPTED. (ATTACH PAGE) 5. IF AN AMENDMENT FOR A BUSINESS CORPORATION PROVIDES FOR AN EXCHANGE, RECLASSIFICATION, OR CANCELLATION OF ISSUED SHARES, SET FORTH THE PROVISIONS FOR IMPLEMENTING THE AMENDMENT IF THEY ARE NOT CONTAINED IN THE AMENDMENT ITSELF. (ATTACH PAGE) 6. THE AMENDMENT(S) WAS (WERE) ADOPTED ON October 27, 1998 Date(s) FOR PROFIT CORPORATION (Check the appropriate box) Adopted by the incorporators [X] directors without shareholder action and shareholder action was not required FOR NONPROFIT CORPORATION (Check the appropriate box) Adopted by the incorporators board of directors without member action and member action was not required FOR PROFIT CORPORATION 7. IF THE AMENDMENT WAS APPROVED BY SHAREHOLDERS (a) The designation, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the amendment, and the number of votes of each voting group indisputably represented at the meeting were

Designation No. of outstanding No. of votes entitled No. of votes shares to be cast indisputably represented F0012 - PAGE 2 OF 3 OFFICE OF THE MISSISSIPPI SECRETARY OF STATE P.O. BOX 136, JACKSON, MS 39205-0136 (601) 359-1333 ARTICLES OF AMENDMENT (B) EITHER (i) the total number of votes cast for and against the amendment by each voting group entitled to vote separately on the amendment was Voting group Total no. of votes Total no. of votes cast cast FOR AGAINST OR (ii) the total number of undistributed votes cast for the amendment by each voting group was Voting group Total no. of undisputed votes cast FOR the plan and the number of votes cast for the amendment by each voting group was sufficient for approval by that voting group. FOR NONPROFIT CORPORATION 8. IF THE AMENDMENT WAS APPROVED BY THE MEMBERS (a) The designation, number of memberships outstanding, number of votes entitled to be cast by each class entitled to vote separately on the amendment, and the number of votes of each class indisputably represented at the meeting were Designation No. of memberships No. of votes entitled No. of votes outstanding to be cast indisputably represented

F0012 - PAGE 3 OF 3 OFFICE OF THE MISSISSIPPI SECRETARY OF STATE P.O. BOX 136, JACKSON, MS 39205-0136 (601) 359-1333 ARTICLES OF AMENDMENT (B) EITHER (i) the total number of votes cast for and against the amendment by each class entitled to vote separately on the amendment was Voting class Total no. of votes To no. of votes cast cast FOR AGAINST OR (ii) the total number of undistributed votes cast for the amendment by each class was Voting class Total no. of undisputed votes cast FOR the amendment and the number of votes cast for the amendment by each voting group was sufficient for approval by that voting group. By: Signature (Please keep writing within blocks) /s/Joe Steve Webb Printed Name Joe Steve Webb Title President

ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION CITIZEN HOLDING COMPANY The above Amendment to the Articles of Incorporation for the above referenced Corporation were adopted by the Board of Directors on October 27, 1998, to be effective January 1, 1999. Article Four of the Articles of Incorporation is amended to read as follows: FOURTH: The aggregate number of shares which the corporation shall have the authority to issue is 3,750,000 of the par value of Twenty Cents ($.20) per share. CITIZENS HOLDING COMPANY By: /s/Joe Steve Webb ------------------------- JOE STEVE WEBB, President

ARTICLES OF AMENDMENT FOR CITIZENS HOLDING COMPANY Pursuant to paragraph (d) of Section 79-4-10.07 of the Mississippi Business Corporation Act (the "Act"), the undersigned, does hereby deliver to the Secretary of State of Mississippi these Articles of Amendment for Citizens Holding Company, a Mississippi profit corporation and sets forth the following: 1. That pursuant to paragraph (d)(1) of Section 79-4-10.07 of the Act, these Articles of Amendment contain various amendments to the Articles of Incorporation which require shareholder approval. 2. That pursuant to paragraph (d)(2) of Section 79-4-10.07 of the Act, the undersigned does further set forth the information required by Section 79-4-10.06 of the Act as follows: a. The name and type of corporation is: Citizens Holding Company, a Mississippi Profit Corporation. b. The text of the Amended Articles of Incorporation are attached hereto. c. The amendments to the Articles of Incorporation were adopted on April 13, 1999 at the Annual Meeting of the Shareholders. d. The amendments were voted on separately and approved by the shareholders of the Corporation and the designation, number of outstanding shares, number of votes entitled to be cast on the amendments, and the number of votes indisputably represented at the meeting were: No. of No. of Votes No. of Votes outstanding entitled to be indisputably Designation shares cast represented --------------------------------- - --------------------------------Common 3,353,750 3,353,750 3,000,112

And the total number of votes cast for and against each of the amendments was: AMENDMENT NUMBER 1 The following Article Ten will be added to the Articles of Incorporation: TENTH: The number of directors of the Corporation shall be not less than nine (9), nor more than twenty-five (25), and the stockholders shall establish by resolution at each annual meeting the number of directors to serve, subject to the provisions of this Article Ten. The Corporation shall have three classes of directors, each class to be as nearly equal in number as possible, the term of office of directors of the first class to expire at the first annual meeting of the shareholders after their election, that of the second class to expire at the second annual meeting after their election, and that of the third class to expire at the third annual meeting after their election. At each annual meeting after such initial classification, the number of directors equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office for a term of three (3) years. Total Total No. Of No. Of Votes Votes cast cast FOR AGAINST this this Designation Amendment Amendment - ------------------------------------------------ Common 2,934,817 47,145 - ------------------------------------------------ AMENDMENT NUMBER 2 The following Article Eleven will be added to the Articles of Incorporation: ELEVENTH: Directors shall be elected only at annual meetings of shareholders, and any vacancy in the Board of Directors, however created, shall be filled at the annual meeting succeeding the creation of such vacancy. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. Total Total No. Of No. Of Votes Votes cast cast FOR AGAINST this this Designation Amendment Amendment - ------------------------------------------------ Common 2,903,507 41,315 - ------------------------------------------------

AMENDMENT NUMBER 3 The following Article Twelve will be added to the Articles of Incorporation: TWELFTH: The Corporation hereby elects to be governed by the provisions of the Mississippi Control Share Act, (S)79-27-1 et. seq., and to be an "issuing public corporation" for all purposes thereof, effective May 1, 1999. Total Total No. Of No. Of Votes Votes cast cast FOR AGAINST this this Designation Amendment Amendment - ------------------------------------------------ Common 2,897,807 83,070 - ------------------------------------------------ AMENDMENT NUMBER 4 The following Article Thirteen will be added to the Articles of Incorporation: THIRTEENTH: No member of the Board of Directors may be removed, with or without cause, except at a meeting called in accordance with the Bylaws expressly for that purpose and except upon a vote in favor of such removal of the holders of seventy-five percent (75%) of the shares then entitled to vote at an election of directors; and in the event that less than the entire Board is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the class of directors of which he is a part. Total Total No. Of No. Of Votes Votes cast cast FOR AGAINST this this Designation Amendment Amendment - ------------------------------------------------ Common 2,845,597 137,830 - ------------------------------------------------

AMENDMENT NUMBER 5 The following Article Fourteen will be added to the Articles of Incorporation: FOURTEENTH: The vote of shareholders required to alter, amend or repeal Articles Ten, Eleven, Twelve or Thirteen, or to alter, amend or repeal any other Article of the Articles of Incorporation in any respect which would or might have the effect, direct or indirect, of modifying, permitting any action inconsistent with, or permitting circumvention of this Article Fourteen, shall be by the affirmative vote of at least seventy-five percent (75%) of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for purposes of this Article as one class. Total Total No. Of No. Of Votes Votes cast cast FOR AGAINST this this Designation Amendment Amendment - ------------------------------------------------ Common 2,768,867 230,380 - ------------------------------------------------ AMENDMENT NUMBER 6 Article Four of the Articles of Incorporation is amended to read as follows: FOURTH: The aggregate number of shares which the Corporation shall have the authority to issue is fifteen million (15,000,000) of the par value of twenty cents ($.20) each. Total Total No. Of No. Of Votes Votes cast cast FOR AGAINST this this Designation Amendment Amendment - ------------------------------------------------ Common 2,819,287 179,910 - ------------------------------------------------ and the number of votes cast for all of the above amendments was sufficient for approval. CITIZENS HOLDING COMPANY BY: /s/ STEVE WEBB ---------------------------- STEVE WEBB, President

ARTICLES OF AMENDMENT TO RESTATED ARTICLES OF INCORPORATION OF CITIZENS HOLDING COMPANY The above Amendment the Articles of Incorporation for the above referenced Corporation were adopted by the Board of Directors on October 23, 2001, to be effective December 31, 2001. Article Four of the Articles of Incorporation is amended to read as follows: FOURTH: The aggregate number of shares which the corporation shall have the authority to issue is Twenty-Two Million Five Hundred Thousand (22,500,000) of the par value of Twenty Cents ($0.20) per share. CITIZENS HOLDING COMPANY By:/s/ Joe Steve Webb ------------------------------- Joe Steve Webb, President

EXHIBIT 10(d) Change In Control Agreement dated December 10, 2002

CHANGE IN CONTROL AGREEMENT --------------------------- This Agreement, made this 10th day of December, 2002, by and between THE CITIZENS BANK OF PHILADELPHIA, MISSISSIPPI (referred to herein as "Employer") and GREG L. MCKEE (referred to herein as "Employee"). WITNESSETH: WHEREAS, the Employee will be employed by Employer as Chief Executive Officer and President effective January 1, 2003; WHEREAS, the Employer recognizes the valuable services hereto to be performed for it by Employee and wishes to entice Employee to continue said employment; WHEREAS, the Employee wishes to be assured that he will be entitled to a certain amount of additional compensation for some definite period of time from and after any Change in Control of the Employer; WHEREAS, the parties hereto wish to provide the terms and conditions upon which the Employer shall pay certain compensation to Employee after a Change in Control of the Employer; WHEREAS, the Employee and the Employer have entered into this Change in Control Agreement ("Agreement') which controls all issues relating to the compensation to be paid by Employer to Employee in the event of a Change in Control as herein described; and WHEREAS, the Employee and Employer acknowledge that this is not an employment agreement and that Employee's employment with the Corporation is on an at will basis only. NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, the parties hereto agree as follows: Article 1 Definitions Whenever used within this Agreement, the following terms shall have the meanings hereinafter set forth. 1.1 "Board of Directors" means board of directors of the Employer. 1.2 "Change in Control" means the earliest of the following events with respect to the Employer: (i) The acquisition by any entity, person, or group of beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, of more than fifty 2

percent (50%) of the outstanding capital stock of Employer entitled to vote for the election of directors ("Voting Stock"); (ii) The effective time of (1) a merger or consolidation of Employer with one or more other corporations as a result of which the holders of the outstanding Voting Stock of Employer immediately prior to such merger hold less than fifty percent (50%) of the Voting Stock of the surviving or resulting corporation, or (2) a transfer of substantially all of the property of Employer other than to an entity of which Employer owns at least fifty percent (50%) of the Voting Stock; or (iii) The election to the Board of Directors of Employer, without the recommendation or approval of a majority of the incumbent Board of Directors of Employer, of directors constituting a majority of the number of directors of Employer then in office. Article 2 Term of Agreement 2.1 The term of this Agreement shall commence on January 1, 2003 ("Effective Date") and end on the earlier of (i) the termination or resignation of Employee's employment with the Employer; or (ii) upon the payment of compensation by Employer to Employee in the event of a Change in Control pursuant to Article 4. Upon the termination of this Agreement, neither party shall have any further obligation hereunder. Article 3 Obligation of Employee 3.1 Employee's obligation under this Agreement shall be to perform the duties required of him as President and Chief Executive Officer of the Employer and such other duties as reasonably associated with such positions and as may be reasonably requested by the Board of Directors of the Employer. Article 4 Payment to Employee - Change in Control 4.1 Payment to Employee. In the event there is a Change in Control during the term of this Agreement, Employer shall make certain payments to the Employee as described below. (i) Amount of Payment. Employer shall commence payments to Employee equal to 2.99 times the Employee's average annual compensation for the five calendar years immediately proceeding the year in which the Change in Control occurs. For purposes of this provision average annual compensation shall have the same meeting as "base amount" which is provided in Section 280G of the Internal Revenue Code 3

and accompanying regulations and includes all compensation includable in the Employee's gross income during the applicable period. (ii) Internal Revenue Code of Limitations. Notwithstanding any provision of this Agreement to the contrary, if payments to Employee under this Agreement and/or any other payment or benefit from the Employer to Employee in connection with a Change in Control is subject (or would be subject to if Employee was considered as a "disqualified individual" under Code Section 280G(c)) to the excise tax imposed under Code Section 4999 or any similar excise or penalty tax payable under any United States federal, state, local or other law, such payments or benefits shall be reduced to the extent necessary to avoid the excise tax (or to avoid such tax if Employee was considered as a "disqualified individual"). The determination of whether a reduction is required under this Section shall be made by the Employer's independent accountants, and, to the extent practicable, Employee shall be entitled to reasonably select the payments or property that will remain payable after the application of this Section. Employee shall be deemed to have forfeited any right to any payment or property that is subject to reduction hereunder, without requirement of further notice. (iii) Timing of Payments. Such payments shall be payable in twelve (12) equal monthly installments commencing on the first business day of the month next following the date of a Change in Control. (iv) Mitigation of Payment. Employee shall not be required to terminate employment with the Employer in order to receive the benefits hereunder or to mitigate the amount of any payment provided for by this Agreement by seeking other employment or otherwise. In addition, any other amounts received by the Employee from the Employer or a successor company shall not mitigate the amount of any payment hereunder. (v) Death of Employee. If the Employee shall die while any amounts would still be payable to him on an installment basis as provided in (a) above if he had continued to live, as a result of a Change in Control which occurred prior to his death and during the term of this Agreement, such amounts shall be paid in accordance with the terms of this Agreement to the Employee's designees or beneficiaries or, if there is no such designee or beneficiary, to the Employee's estate. Article 5 Successors 5.1 Successors in Interest. This Agreement shall be binding upon any and all successors and assigns of the Employer. 4

Article 6 Miscellaneous 6.1 Waiver. The waiver by the Employer of a breach by Employee of any provision of this Agreement shall not be construed as a waiver of any subsequent breach by Employee. 6.2 Severability. If any clause, phrase, provision or portion of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable under any applicable law, such event shall not effect or render invalid or unenforceable the remainder of this Agreement and shall not affect the application of any clause, provision, or portion hereof to other persons or circumstances. 6.3 Relevant Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Mississippi. 6.4 Attorneys' Fees. Should either the Employer or Employee bring an action under this Agreement, the prevailing party will be entitled to reimbursement from the non-prevailing party as to attorney fees, filing fees and other such costs related to the enforcement of the terms of this Agreement. 6.5 Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch United States Post Office, by registered or certified mail, postage prepaid, addressed as follows, or to such other address as shall have been designated in writing by the addressee: (i) If to the Employer: The Citizens Bank of Philadelphia, Mississippi P. O. Box 209 Philadelphia, Mississippi 39350 Attention: Mr. Steve Webb (ii) If to the Employee: Greg L. McKee -------------------------- Philadelphia, Mississippi 39350 6.6 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration. Such arbitration shall be conducted in the City of Jackson, Mississippi, in accordance with the Rules of American Arbitration Association. 5

6.7 Entire Agreement. This Agreement sets forth the entire understanding of the parties and supersedes all prior agreements, arrangements, and communications, whether oral or written, pertaining to the subject matter hereof; and this Agreement shall not be modified or amended except by written Agreement of the Employer and Employee. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above. EMPLOYER: THE CITIZENS BANK OF PHILADELPHIA, MISSISSIPPI By: /s/ Steve Webb ------------------------------------------ Title: Chief Executive Officer --------------------------------------- EMPLOYEE: /s/ Greg L. McKee ---------------------------------------------- GREG L. MCKEE EMPLOYEE'S DESIGNATED BENEFICIARY: Linda L. McKee ---------------------------------------------- 6

EXHIBIT 10(e) SUMMARY OF CONSULTING AGREEMENT

The Citizens Holding Company has entered into an oral agreement with Steve Webb, Chairman of the Board of Directors, pursuant to which Mr. Webb will provide general consulting services to the Citizens Holding Company. The term of the agreement is one year and it will expire on December 31, 2003. In consideration for providing these general consulting services, Mr. Webb is paid $2,000 per month and provided with the use of a company automobile.

EXHIBIT 13 CITIZENS HOLDING COMPANY 2002 ANNUAL REPORT INTEGRITY

Dear Stockholder: Let me begin by thanking you for the opportunity to serve as the Chief Executive Officer of this great company. I recently stated that, "To have a great bank, you must have great stockholders, great customers and great employees." We certainly enjoy all three of these within our company. Your management team is excited about the opportunities available to us in the future. We are operational in our new branch in Sebastopol and are expecting good returns on our investment in that community. We are extremely pleased with the results thus far from our new Meridian Branch. The Lauderdale County market is very active, and we intend to pursue our share of this activity. After ten months of operation in the Winston County market, we are beginning to establish a strong presence in this market. This acquisition continues our growth strategy into contiguous markets which have historically proven successful. Across the nation, many companies are suffering from deteriorating confidence in their abilities and integrity. Sadly much of this deterioration has been caused by their own actions. I take great comfort in the confidence I have in the integrity of our company and the abilities of our employees. I feel very honored to have been chosen to lead our company into the future. I am very much aware of my responsibility to serve our communities while maximizing the value of your investment. I assure you this responsibility will never be taken lightly. Thank you for your support. Greg L. McKee President and Chief Executive Officer

Dear Stockholder: My journey as your Chief Executive Officer ended December 31, 2002 as I passed the title of Chief Executive Officer to Greg McKee. I am confident that he will continue the growth of your company and take us to new highs in the future. Even though I have retired from the day-to-day operations, I will remain on the Board as Chairman and will be available for consultation when needed. The past year presented us with the continued decline of the stock market, a drop in interest rates to a level not seen for many years and the lack of integrity in a few public companies. These factors along with the fear of terrorism and the possibility of war have caused some uncertainty in our economy. I am most troubled by the apparent lack of integrity in some publicly traded companies. Although when you look at The Wall Street Journal and see the numerous pages of publicly traded companies, you realize that the percentage of companies that have allegedly misstated their financials is very small. In the past, some stocks were overpriced without real fundamentals to provide a basis for being as highly priced as they were. The recent adjustment in stock prices was going to happen at some point and hopefully that is now behind us. I am pleased that with all of the negative factors affecting our economy, we were able to increase our 2002 earnings 10.3% over 2001, increasing basic per share earnings from $1.15 in 2001 to $1.27 in 2002. Our assets grew 21.4%, deposits grew 20.4% and loans increased 16.6%. In 2002 we continued a long tradition of improving performance every year. During the past year, we acquired Citizens Bank & Trust Company in Louisville and expanded our Meridian presence with the completion of our new branch building. This rapid growth had some impact on our earnings this year but we expect these investments to have a positive impact on earnings in the future. Loan losses in 2002 were higher than last year, a reflection of the national economy. There is continuing growth at the Pearl River Resort and the Nissan Plant in Madison County will begin operation in 2003. We have increased our presence in this area and I believe this will present a great opportunity for the growth of our Bank. Thank you for allowing me to serve in this great organization. Steve Webb Chairman of the Board

Management's Discussion and Analysis of Financial Condition and Results of - -------------------------------------------------------------------------- Operations as of December 31, 2002, 2001 and 2000 - ------------------------------------------------- BACKGROUND Citizens Holding Company (the "Company") is a one-bank holding company that holds 97.52% of the outstanding shares of The Citizens Bank of Philadelphia, Mississippi (the "Bank"). The Company was incorporated under Mississippi law on February 16, 1982. The Bank was opened on February 8, 1908 as The First National Bank of Philadelphia. In 1917, the Bank surrendered its national charter and obtained a state charter at which time the name of the Bank was changed to The Citizens Bank of Philadelphia, Mississippi. At December 31, 2002, the Bank was the largest bank headquartered in Neshoba County with total assets of $517,895,699 and total deposits of $433,674,581. The principal executive offices of both the Company and the Bank are located at 521 Main Street, Philadelphia, Mississippi 39350 and its telephone number is (601) 656-4692. All references hereinafter to the activities or operations of the Company reflect the Company's acting or operating through the Bank. OVERVIEW In 2002, the Company had significant growth in assets, loans and deposits in large part due to the acquisition of CB&T Capital Corporation and it's subsidiary, Citizens Bank and Trust Company ("CB&T") in Louisville, Mississippi for a net purchase price of $4,300,300. Assets increased $91,237,244 or 21.4%, net loans increased $43,049,436 or 16.5% and deposits increased $73,459,168 or 20.4% over 2001 with $71.7 million of the increase in assets, including $15.0 million in net loans and $57.9 million of the increase in deposits attributable to the Louisville purchase. The Company also showed good growth in assets and loans for 2001. Total assets at the end of 2001 were $427,212,874, an increase of 11.6% over 2000; net loans were $260,903,091, an increase of 4.9% over 2000; and deposits increased to $359,309,007, an increase of 24.9% over 2000. This increase was aided by the acquisition in July 2001 of the two Union Planters branches in Forest and Decatur for a net purchase price of $2,453,390; which added $30,506,745 in assets, including $11,703,517 in loans and $30,284,185 in deposits. Net income after taxes of the Company for 2002 increased by 10.3% from 2001 to $6,297,500. Net income was affected in 2002 by a decrease in interest paid on deposits and other borrowed money. Net income for 2001 and 2000 was up 3.2% and down 1.6%, respectively, both years' changes in net income being influenced greatly by the fluctuating interest rate environment and asset and loan growth. Net income for 2002 produced, on a fully diluted basis, earnings per share of $1.26 compared to $1.15 for 2001 and $1.11 for 2000. The Company's Return on Average Assets (ROA) was 1.28% in 2002, compared to 1.41% in 2001 and 1.48% in 2000, and our Return on Average Equity (ROE) was 12.28% in 2002, 11.98% in 2001 and 13.60% in 2000. Although net income increased in each year, ROA decreased because net income increased at a lower rate than average assets and average equity. In 2000, ROE and ROA also decreased due to a larger growth in assets and equity at the same time when earnings were relatively flat. Although ROE increased somewhat in 2002, ROE has generally declined over the last five years due to the retention of retained earnings that caused

our capital percentages to rise. During this period, leverage capital ratios increased from 10.61% in 1998 to 10.51% in 2001 but declined to 8.83% in 2002. The decline in leverage capital in 2002 relates to the significant increase in assets related to the acquisition of CB&T and an increase in the Company's dividend payout ratio from approximately 33% to 41%. SELECTED DATA The following selected data has been taken from the Company's consolidated financial statements and should be read in conjunction with the consolidated financial statements and related notes included elsewhere. 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. All dollar references in 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 of January 2, 2002. TABLE 1 - FIVE YEAR SUMMARY OF CONSOLIDATED STATEMENTS AND RELATED STATISTICS (amounts in thousands, except percent and per share data) 2002 2001 2000 1999 1998 ----------------------------------------------------------------- Summary of Earnings - ------------------- Total Interest Income $ 30,197 $ 29,119 $ 28,638 $ 25,476 $ 23,956 Total Interest Expense 9,746 13,399 14,064 10,974 10,860 Provision for loan losses 1,758 1,123 918 849 846 Non-interest income 4,435 3,980 3,285 3,122 2,897 Non-interest expense 13,865 10,308 8,772 8,361 7,948 Income tax expense 2,965 2,558 2,635 2,793 2,487 Net Income 6,298 5,711 5,534 5,621 4,712 Per Share Data - -------------- Earnings-basic $ 1.27 $ 1.15 $ 1.12 $ 1.13 $ 0.95 Earnings-diluted 1.26 1.15 1.11 1.13 0.95 Cash dividends 0.520 0.383 0.283 0.213 0.160 Book value at year end 10.81 9.51 8.74 7.57 7.15 Selected Year End Actual Balances - --------------------------------- Loans, net of unearned income $ 308,175 $ 264,278 $ 252,022 $ 234,349 $ 211,349 Allowance for possible loan losses (4,222) (3,375) (3,325) (3,100) (2,900) Investment securities 162,276 122,567 103,533 102,451 91,539 Total assets 518,450 427,213 382,800 362,790 334,232 Deposits 432,768 359,309 289,908 284,462 282,242 Long term borrowings 24,606 14,629 10,000 10,000 10,000

Shareholders' equity 53,783 47,182 43,377 37,546 35,455 Selected Year End Average Balances - ---------------------------------- Loans, net of unearned income $ 289,407 $ 255,185 $ 244,307 $ 221,165 $ 202,228 Allowance for possible loan losses (3,905) (3,335) (3,198) (2,974) (2,701) Investment securities 153,726 106,632 102,325 97,219 79,401 Total assets 491,833 403,881 374,439 347,613 314,896 Deposits 414,135 327,536 290,704 288,176 268,514 Long term borrowings 19,301 14,815 10,000 10,000 7,630 Shareholders' equity 51,304 47,664 40,701 37,603 33,513 Selected Ratios - --------------- Return on average assets 1.28% 1.41% 1.48% 1.62% 1.50% Return on average equity 12.28% 11.98% 13.60% 14.95% 14.08% Dividend payout ratio 40.98% 33.31% 25.41% 18.84% 16.85% Equity to year end assets 10.37% 11.04% 11.33% 10.35% 10.61% Total risk-based capital to risk-adjusted assets 15.57% 18.40% 18.88% 18.52% 18.13% Leverage capital ratio 8.83% 10.51% 11.61% 11.06% 10.61% Efficiency ratio 54.51% 51.32% 47.20% 45.48% 48.01% 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 determined by several factors, including the volume of earning assets and liabilities, the mix of earning assets and liabilities and interest rates. Net interest income on a tax equivalent basis was $21,014,000, $16,047,000 and $14,403,000 and the net interest margin percentage was 4.67%, 4.32% and 4.16% for the years 2002, 2001, and 2000, respectively. In 2002, the yield on earnings assets decreased to 6.83% from 7.91% in 2001 while the rate on interest-bearing liabilities decreased to 2.59% from 4.35% in 2001. Earning assets volume increased 21.0% while interest-bearing liabilities volume increased 21.8% in 2002. The increases in volume of interest-bearing assets combined with a smaller interest rate reduction on loans than deposits combined to cause the rise in net interest income in 2002. For 2001, the yield on earning assets decreased to 7.91% from 8.22% in 2000 while the earning asset volume increased 7.4%. The rate on interest bearing liabilities decreased to 4.35% in 2001 from 4.85% in 2000 and the interest bearing volume increased 6.2% in 2001.

In 2000, the yield on earning assets increased to 8.22% from 7.94% in 1999 and the rate on interest-bearing liabilities increased to 4.85% from 4.11% in 1999. Total volume of earning assets increased 8.2% while interest-bearing liabilities increased 8.8% in 2000. During this three-year period, loan demand has remained strong and has allowed the Company to continue to invest its available funds in loans that provide the Company with yields that are greater than the yields on investment securities. The volume increases in both interest bearing assets and liabilities was aided by the acquisitions of CB&T in May 2002 and the Union Planters branch acquisitions in July 2001.

TABLE 2 - AVERAGE BALANCE SHEETS AND INTEREST RATES Average Balance Income/Expense Average Yield/Rate 2002 2001 2000 2002 2001 2000 2002 2001 2000 =============================================================================== Loans: Commercial Loans $265,178 $232,424 $221,671 $20,130 $20,275 $19,568 7.59% 8.72% 8.83% Installment Loans (Net) 22,747 21,521 21,572 2,506 2,503 2,319 11.02% 11.63% 10.75% ------------------------------------------------------------------------------- Total Loans 287,925 253,945 243,243 22,636 22,778 21,887 7.86% 8.97% 9.00% Investment Securities Taxable 115,510 78,423 79,533 5,772 4,671 5,067 5.00% 5.96% 6.37% Tax-exempt 34,166 23,952 22,370 2,143 1,498 1,438 6.27% 6.25% 6.43% ------------------------------------------------------------------------------- Total Investment Securities 149,676 102,375 101,903 7,915 6,169 6,505 5.29% 6.03% 6.38% Federal Funds Sold and Other 12,428 15,681 1,181 198 487 75 1.59% 3.11% 6.35% ------------------------------------------------------------------------------- Total Interest Earning Assets 450,029 372,001 346,327 30,749 29,434 28,467 6.83% 7.91% 8.22% ------------------------------------------------------------------------------- Non-Earning Assets 41,804 31,880 28,112 ---------------------------- Total Assets $491,833 $403,881 $374,439 ============================ Deposits: Interest-bearing Demand Dep $117,989 $ 82,127 $ 75,810 $ 1,499 $ 1,930 $ 2,333 1.27% 2.35% 3.08% Savings 27,653 19,828 19,271 483 521 672 1.75% 2.63% 3.49% Time 209,610 183,883 158,185 6,702 9,727 8,747 3.20% 5.29% 5.53% ------------------------------------------------------------------------------- Total Deposits 355,252 285,838 253,266 8,684 12,178 11,752 2.44% 4.26% 4.64% Borrowed Funds Short-term Borrowings 659 9,721 26,696 12 544 1,748 1.82% 5.60% 6.55% Long-term Borrowings 19,301 12,407 10,000 1,039 665 564 5.38% 5.36% 5.64% ------------------------------------------------------------------------------- Total Borrowed Funds 19,960 22,128 36,696 1,051 1,209 2,312 5.27% 5.46% 6.30% ------------------------------------------------------------------------------- Total Interest-Bearing Liabilities 375,212 307,966 289,962 9,735 13,387 14,064 2.59% 4.35% 4.85% Non-Interest Bearing Liabilities Demand Deposits 58,883 41,368 37,439 Other Liabilities 6,434 6,883 6,334 Shareholders' Equity 51,304 47,664 40,704 ---------------------------- Total Liabilities and Shareholders' Equity $491,833 $403,881 $374,439 ============================ Interest Rate Spread 4.24% 3.56% 3.37% ======================= Net Interest Income $21,014 $16,047 $14,403 ======================== Net Interest Margin 4.67% 4.32% 4.16% =======================

Table 3 - Net Average Interest Earning Assets illustrates net interest earning assets and liabilities for 2002, 2001, and 2000. TABLE 3 - NET AVERAGE INTEREST EARNING ASSETS 2002 2001 2000 ---------------------------------- Average interest earning assets $450,029 $372,001 $346,327 Average interest bearing liabilities 375,212 307,966 289,962 ---------------------------------- Net average interest earning assets $ 74,817 $ 64,035 $ 56,365 ================================== Table 4 - Volume/Rate Analysis depicts the dollar effect of volume and rate changes from 2000 through 2002. Variances which were not specifically attributable to volume or rate were allocated proportionately between rate and volume using the absolute values of each for a basis for the allocation. Non-accruing loans were 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 marginal federal income tax rate of 34%. TABLE 4 - VOLUME/RATE ANALYSIS 2002 change from 2001 2001 change from 2000 Volume Rate Total Volume Rate Total ------------------------------------------------------------------ INTEREST INCOME Loans 2,671 -2,813 -142 960 -69 891 Taxable Securities 1,854 -753 1,101 -66 -330 -396 Non-Taxable Securities 640 5 645 99 -39 60 Federal Funds Sold and Other -51 -238 -289 450 -38 412 ------------------------------------------------------------------ TOTAL INTEREST INCOME $ 5,114 -$3,799 $ 1,315 $ 1,443 -$476 $ 967 ------------------------------------------------------------------ INTEREST EXPENSE Interest-bearing demand deposits 456 -887 -431 148 -551 -403 Savings Deposits 137 -175 -38 15 -166 -151 Time Deposits 823 -3,848 -3,025 1,359 -379 980 Short-term borrowings -165 -367 -532 -950 -254 -1,204 Long-term borrowings 371 3 374 129 -28 101 ------------------------------------------------------------------ TOTAL INTEREST EXPENSE 1,622 -5,274 -3,652 701 -1,378 -677 ------------------------------------------------------------------ NET INTEREST INCOME $ 3,492 $ 1,475 $ 4,967 $ 742 $ 902 $ 1,644 ==================================================================

PROVISION FOR LOAN LOSSES AND ASSET QUALITY The provision for loan losses represents charges 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. The ratio of net loans charged off to average loans was .61% in 2002, .42% in 2001, .28% in 2000, .29% in 1999 and .32% in 1998. These percentages are representative of normal loan charge-offs and are not the result of an economic downturn in any particular segment of our economy. Management evaluates the adequacy of the allowance for loan loss on a quarterly basis and makes provisions to the allowance based on this analysis. The provision was $1,757,516 in 2002, $1,123,166 in 2001, $917,519 in 2000, $849,344 in 1999 and $846,466 in 1998. At the end of 2002, the allowance for loan losses was $4,222,342, an amount that management believes to be sufficient to protect against future loan losses. Activity in the allowance for loan losses is reflected in Table 5 - Analysis of Allowance for Loan Losses. The Company's policy is to charge-off loans, when, in management's opinion, the loan is deemed uncollectable, although concerted efforts are made to maximize recovery of the loan after it is charged off.

TABLE 5 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES 2002 2001 2000 1999 1998 -------------------------------------------------------- BALANCE AT BEGINNING OF YEAR $ 3,375 $ 3,325 $ 3,100 $ 2,900 $ 2,700 LOANS CHARGED-OFF Commercial, financial and agricultural 935 612 186 320 364 Real estate - construction 23 0 0 0 0 Real estate - mortgage 122 36 26 74 10 Consumer 957 675 801 522 505 -------------------------------------------------------- TOTAL CHARGE-OFFS 2,037 1,323 1,013 916 879 -------------------------------------------------------- CHARGE-OFFS RECOVERED Commercial, financial and agricultural 54 22 121 122 55 Real estate - construction 0 0 0 0 0 Real estate - mortgage 4 26 24 0 3 Consumer 221 202 175 145 175 -------------------------------------------------------- TOTAL RECOVERIES 279 250 320 267 233 -------------------------------------------------------- Net loans charged-off 1,758 1,073 693 649 646 Current year provision 1,758 1,123 918 849 846 Other increases attributed to acquisition 847 0 0 0 0 -------------------------------------------------------- BALANCE AT END OF YEAR $ 4,222 $ 3,375 $ 3,325 $ 3,100 $ 2,900 ======================================================== Loans at year end $308,175 $264,278 $252,022 $234,349 $211,349 Ratio of allowance to loans at year end 1.37% 1.28% 1.32% 1.32% 1.37% Average loans - net of unearned $289,407 $255,185 $244,307 $221,165 $202,228 Ratio of net loans charged-off to average loans 0.61% 0.42% 0.28% 0.29% 0.32%

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31, 2002 2001 2000 1999 1998 ---------------------------------------------- Commercial, financial and agricultural $1,700 $1,200 $1,000 $ 900 $ 850 Real estate - construction 200 250 250 225 225 Real estate - mortgage 800 700 650 600 575 Consumer 1,475 1,175 1,075 1,050 950 Unallocated 47 50 350 325 300 ---------------------------------------------- Total $4,222 $3,375 $3,325 $3,100 $2,900 ============================================== COMPOSITION OF LOAN PORTFOLIO BY TYPE AT DECEMBER 31, 2002 2001 2000 1999 1998 ---------------------------------------------- Commercial, financial and agricultural 48.22% 47.25% 48.02% 47.52% 46.25% Real estate - construction 3.77% 2.26% 2.08% 3.02% 3.11% Real estate - mortgage 28.80% 30.18% 29.35% 28.43% 27.40% Consumer 19.21% 20.31% 20.55% 21.03% 23.24% ---------------------------------------------- 100.00% 100.00% 100.00% 100.00% 100.00% ============================================== Non-performing assets and relative percentages to loan balances are presented in Table 6 - Non-performing Assets. Non-performing loans include non-accrual loans, restructured loans, and loans delinquent 90 days or more. Loans are classified as non-accrual when management believes that collection of interest is doubtful, typically when payments are past due over 90 days, unless well secured and in the process of collection. Another element associated with asset quality is other real estate owned (OREO), which represents properties acquired by the Company through loan defaults by customers. Loans on non-accrual status amounted to $357,640 in 2002. Interest income forgone on loans classified as non-accrual is $69,888. All interest accrued on these loans at the time they are classified as non-accrual is reversed and interest accruals are suspended until such time that the loan is in compliance with its terms.

TABLE 6 - NON-PERFORMING ASSETS As of December 31, 2002 2001 2000 1999 1998 ---------------------------------------------- PRINCIPAL BALANCE - DOMESTIC Non-accrual $ 358 $ 419 $ 590 $ 390 $ 649 90 days or more past due 5,117 2,918 1,746 1,643 1,641 Troubled debt restructuring 0 0 0 0 0 ---------------------------------------------- TOTAL DOMESTIC LOANS $5,475 $3,337 $2,336 $2,033 $2,290 ---------------------------------------------- PRINCIPAL BALANCE - FOREIGN Non-accrual $ 0 $ 0 $ 0 $ 0 $ 0 90 days or more past due 0 0 0 0 0 Troubled debt restructuring 0 0 0 0 0 ---------------------------------------------- TOTAL FOREIGN LOANS $ 0 $ 0 $ 0 $ 0 $ 0 ---------------------------------------------- TOTAL NON-PERFORMING LOANS $5,475 $3,337 $2,336 $2,033 $2,290 ============================================== Income on non-accrual loans not recorded $ 69 $ 31 $ 147 $ 110 $ 135 Non-performing as a percent of loans 1.78% 1.27% 0.93% 0.87% 1.08% Other real estate owned $1,286 $ 340 $ 133 $ 292 $ 57 OREO as a percent of loans 0.42% 0.13% 0.05% 0.15% 0.03% Allowance as a percent of non-performing loans 77.11% 101.14% 142.34% 152.48% 126.64% Statements of Financial Accounting Standard No. 114 and 118, "Accounting by Creditors for Impairment of a Loan," became effective January 1, 1995. These statements changed the way loan loss allowance estimates were to be made for problem loans. In general, when it is determined 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 has not recognized any loans as being impaired in conformity with FASB 114 and 118 for the years 2002, 2001, 2000, 1999 and 1998. Management believes loans classified for regulatory purposes as loss, doubtful or substandard that are not included in non-performing or impaired loans do not represent or result from trends or uncertainties which will have a material impact on future operating results,

liquidity, or capital resources. 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, concern about the borrower's financial condition or the value of the collateral securing the loan, 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 with loss potential that are still performing and accruing interest and may be current under the terms of the loan agreement; however, management may have a significant degree of concern about the borrowers' ability to continue to perform according to the terms of the loan. Loss exposure on these loans is typically evaluated based primarily upon the estimated liquidation value of the collateral securing the loan. Also, watch category loans may include credits which, although adequately secured and performing, reflect a past delinquency problem or unfavorable financial trends exhibited by the borrower. NON-INTEREST INCOME AND EXPENSE A listing of non-interest income and expense from 2000 through 2002 and percentage changes between years is included in Table 7 - Non-interest Income and Expense. TABLE 7 - NON-INTEREST INCOME & EXPENSE % CHANGE % CHANGE 2002 FROM '01 2001 FROM '00 2000 --------------------------------------------- NON-INTEREST INCOME Income from fiduciary activities $ 3 50.00% $ 2 0.00% $ 2 Service charges on deposit accounts 3,027 7.72% 2,810 13.77% 2,470 Other operating income 1,405 20.29% 1,168 43.79% 813 --------------------------------------------- TOTAL NON-INTEREST INCOME $ 4,435 11.43% $ 3,980 21.19% $ 3,285 ============================================= NON-INTEREST EXPENSE Salaries and employee benefits $ 7,103 26.91% $ 5,597 14.18% $ 4,902 Occupancy expense 2,312 41.75% 1,631 17.68% 1,386 Other operating expense 4,450 44.48% 3,080 23.99% 2,484 --------------------------------------------- TOTAL NON-INTEREST EXPENSE $13,865 34.51% $10,308 17.51% $ 8,772 ============================================= 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, safe deposit box rentals, credit life insurance premiums, title insurance service fees and income contributions from the Company's credit life insurance subsidiary. Non-interest income for 2002 increased 11.43% over 2001. The increase in the customer base and the resulting fee income was the main reason for the increase. The acquisition of

CB&T in May 2002 and the effect of a full year's income from the Decatur and Forest branches acquired in July 2001 are responsible for this increase. Non-interest income for 2001 was $3,980,612, an increase of $695,792 or 21.2% over 2000. This increase was attributable to increases in checking account service charges related to volume increases, an increase in the number of safe deposit boxes rented, and another year of increased income from its credit life and title insurance subsidiaries and fees from its mortgage origination department. Non-interest expenses consist of salaries and benefits, occupancy expense and other overhead expenses incurred by the Company in the transaction of its business. Non-interest expense increased $3,556,715 or 34.51% in 2002 and $1,536,558 or 17.5% in 2001 over 2000. The increases in both years were mainly from normal growth activity in the Company although the purchase of the Decatur and Forest branches acquired in July 20001 contributed significantly to the increase in 2001 and the acquisition of CB&T in May 2002 contributed to the increase in 2002. In 2002, the Company's efficiency ratio was 54.51% compared to 51.32% in 2001 and 47.20% in 2000. 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 the increases in non-interest expense required to manage the growth in assets during the period and the additional personnel costs associated with the CB&T and Union Planters branch acquisitions. 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 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. The Company's effective tax rate was 32.01%, 30.93% and 32.26% in 2002, 2001, and 2000, respectively. Further tax information is disclosed in Note 5 to the consolidated financial statements. SECURITIES At December 2002, 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 classify any securities as held to maturity or held for trading purposes.

Table 8 - Securities and Securities Maturity Schedule summarizes the carrying value of securities from 2000 through 2002 and the maturity distribution at December 31, 2002, by classification. TABLE 8 - SECURITIES 2002 2001 2000 ------------------------------ SECURITIES AVAILABLE FOR SALE U. S. Treasury $ 19,093 $ 31,014 $ 41,341 U. S. Agencies 11,921 10,676 20,147 Mortgage Backed 87,687 52,362 15,925 State, Municipal and Other 43,575 28,515 26,120 ------------------------------ TOTAL SECURITIES AVAILABLE FOR SALE $162,276 $122,567 $103,533 ------------------------------ SECURITIES HELD TO MATURITY TOTAL SECURITIES HELD TO MATURITY $ 0 $ 0 $ 0 ------------------------------ TOTAL SECURITIES $162,276 $122,567 $103,533 ==============================

SECURITIES MATURITY SCHEDULE 1 year or less 1 to 5 years 5 to 10 years over 10 years Actual Average Actual Average Actual Average Actual Average Balance Yield Balance Yield Balance Yield Balance Yield ------------------------------------------------------------------- AVAILABLE-FOR-SALE U. S. Treasury $3,083 4.98% $16,010 4.36% $ 0 0.00% $ 0 0.00% U. S. Agencies 37 9.56% 1,631 6.00% 9,691 6.16% 562 5.39% Mortgage Backed 17 5.91% 800 7.14% 2,897 5.03% 83,973 5.29% State, Municipal and Other (1) 3,408 4.02% 5,917 5.99% 10,392 6.62% 23,858 7.38% ------------------------------------------------------------------- TOTAL AVAILABLE-FOR-SALE $6,545 4.51% $24,358 4.96% $22,980 6.23% $108,393 5.75% =================================================================== TOTAL HELD-TO-MATURITY $ 0 0.00% $ 0 0.00% $ 0 0.00% $ 0 0.00% =================================================================== (1) Average rates were calculated on tax equivalent basis using a marginal federal income tax rate of 34% and a state tax rate of 5%. Although the change in equity due to market value fluctuations in the available-for-sale portfolio is not used in the Tier 1 capital calculation, the change which occurred in the unrealized gain/loss on securities between 2002 and 2001 was a result of the changing in the interest rate environment during that period, in conjunction with the change in the portfolio mix. 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 has 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 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: (a) to make loans on sound and thorough credit analysis, (b) proper documentation of all loans, (c) to eliminate loans from the portfolio that are under-priced, high risk or difficult and costly to administer, (d) to seek good relationships with the customer, (e) to avoid undue concentrations of loans, and (f) 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 2002 and 2001 was due to a continuation of the overall growth in the area that is served by the Company. However, the acquisitions of CB&T in 2002 and the Decatur and Forest branches in 2001 added approximately $15.0 million and $11.7 million in loans, respectively. The continued success of the casino on the nearby Choctaw Indian Reservation caused an increase in the number of businesses to serve the visitors drawn by the casino. The increase of jobs in the area also helped to tighten the housing market in the area and caused a large number of new houses to be built. This is evidenced by the fact that real estate mortgage loans grew by $8,904,468 or 11.1% in 2002, $5,724,725 or 7.7% in 2001 and $7,447,552 or 11.1% in 2000. Commercial and agricultural loans also showed large growth during this period. These loans grew $23,630,697 or 18.7% in 2002, $3,718,912 or 3.0% in 2001, and $9,777,317 or 8.7% in 2000. This increase was not caused solely by the influence of the casino in the area, but was due in part to an increase in the number of loans to poultry producers originated during this period. Consumer loans have shown moderate growth during the period. This category increased $5,441,264 or 10.0% in 2002, $1,824,679 or 3.5% in 2001 and $2,554,094 or 5.1% in 2000. Changes in consumer purchasing habits and the increase in loan sources have affected the growth of this segment of loans. Low unemployment has insured that more people have jobs and that some people have improved their employment and in turn has lessened the dependence on consumer loans for some purchases. Commercial and agricultural loans are the largest segment of the loan portfolio and, by nature, bear a higher degree of risk. Management is aware of the growth of loans in this category and believes the lending practices, policies, and procedures surrounding this loan category are adequate to manage this risk. Table 9 - Loans Outstanding reflects outstanding balances by loan type for the past five years. Additional loan information is presented in Note 4 to the consolidated financial statements. TABLE 9 - LOANS OUTSTANDING AT DECEMBER 31, 2002 2001 2000 1999 1998 --------------------------------------------------------- Commercial, financial and agricultural $149,762 $126,131 $122,412 $112,634 $ 98,956 Real estate - construction 11,708 6,036 5,310 7,157 6,645 Real estate - mortgage 89,452 80,548 74,824 67,376 58,637 Consumer 59,660 54,218 52,394 49,840 49,734 --------------------------------------------------------- TOTAL LOANS $310,582 $266,933 $254,940 $237,007 $213,972 =========================================================

Table 10 - Loan Liquidity and Sensitivity to Changes in Interest Rates reflects the maturity schedule or repricing frequency of all loans. Also indicated are fixed and variable rate loans maturing after one year for all loans. TABLE 10 - LOAN LIQUIDITY LOAN MATURITIES AT DECEMBER 31, 2002 1 YEAR 1 - 5 OVER 5 OR LESS YEARS YEARS Total ----------------------------------------- Commercial, financial and agricultural $ 47,712 $ 77,191 $ 24,859 $149,762 Real estate - construction 11,102 565 41 $ 11,708 Real estate - mortgage 9,427 58,889 21,136 $ 89,452 Consumer 25,128 32,192 2,340 $ 59,660 ----------------------------------------- Total loans $ 93,369 $168,837 $ 48,376 $310,582 ========================================= SENSITIVITY TO CHANGES IN INTEREST RATES 1 - 5 OVER 5 YEARS YEARS ------------------- Fixed rates $164,970 $ 35,244 Variable rates 3,867 13,132 ------------------- Total loans $168,837 $ 48,376 =================== 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 provides the major funding source for earning assets. Time deposits continue to be the largest single source of the Company's deposit base. A three-year schedule of deposits by type and maturities of time deposits greater than $100,000 is presented in Table 11 - Deposit Information.

TABLE 11 - DEPOSIT INFORMATION 2002 2001 2000 -------------------------------------------------------------------- Average Average Average Average Average Average Balance Rate Balance Rate Balance Rate -------------------------------------------------------------------- Noninterest-bearing $ 58,883 $ 41,698 $ 37,438 Interest-bearing demand 117,989 1.27% 82,127 2.35% 75,810 3.08% Savings 27,653 1.75% 19,828 2.63% 19,271 3.43% Certificates of deposit 209,610 3.20% 183,883 5.29% 158,185 5.53% -------------------------------------------------------------------- $414,135 2.10% $327,536 3.72% $290,704 4.04% ==================================================================== MATURITY RANGES OF TIME DEPOSITS OF $100,000 OR MORE AT DECEMBER 31, 2002 -------- 3 months or less $36,644 3 through 6 months 15,152 6 through 12 months 19,055 over 12 months 6,548 -------- $77,399 ======== The Company in its normal course of business will acquire large certificates of deposit, generally from public entities, for 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 include short-term and long-term borrowings. Short-term borrowings consist of federal funds purchased from other financial institutions on an overnight basis, short-term and long-term borrowings from the Federal Home Loan Bank of Dallas (FHLB), and U.S. Treasury demand notes for treasury, tax and loan (TT&L).

TABLE 12 - SHORT-TERM BORROWINGS As of December 31, 2002 2001 2000 ----------------------------- Federal Home Loan Bank borrowings Year-end balance $ 0 $ 0 $32,000 Weighted average rate 0.00% 0.00% 6.39% Maximum month-end balance $ 0 $34,300 $32,000 Year to date average balance $ 0 $ 7,862 $14,389 Weighted average rate 0.00% 5.38% 6.61% The Company foresees short-term borrowings to be a continued source of liquidity and will continue to use these borrowings as a method to fund short-term needs. The Company has the capacity to borrow up to $176,959,051 from the FHLB and other financial institutions in the form of federal funds purchased and will use these borrowings if circumstances warrant such action. The Company, at the end of 2002, had long-term debt in the amount of $24,606,135 to the Federal Home Loan Bank for advances and $2,319,558 payable to the State of Mississippi for advances under the Agribusiness Enterprise Loan Program. This program provides monies to banks to be extended to qualifying farmers at no interest. Farmers that qualify for the program receive 20% of their loan at zero interest. When the loan is repaid, the State receives its pro-rata share of 20% of the principal payment. The remaining maturity schedule of the long-term debt at December 31, 2002 is listed below. 2002 ------- Less than one year $ 969 One year to three years 2,132 Over three years 23,825 ------- Total Long-term borrowings $26,926 ======= LIQUIDITY AND RATE SENSITIVITY Liquidity management is the process by which the Company ensures that adequate liquid funds are available to meet 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. 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. Managing and measuring the interest rate risk is the process that ranges from reducing the exposure of the Company's interest margin to swings in interest rates to assuring that there is sufficient capital and liquidity to support future balance sheet growth. The Bank's source of funding is predominantly 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. The growth of core deposits has been at a lower growth rate than that of loans. As a result, the Company is increasingly dependent upon non-core sources of funding such as federal funds purchased and short and long term borrowings from the FHLB. The deposit base is diversified between individual and commercial accounts which help 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. All of the investment securities portfolio are classified in the available-for-sale category, and are available to be sold, should liquidity needs arise. Table 13 - Funding Uses and Sources details the main components of cash flows for 2002 and 2001.

TABLE 13 - FUNDING USES AND SOURCES 2002 2001 --------------------------------------------------------------- Average Increase/(decrease) Average Increase/(decrease) Balance Amount Percent Balance Amount Percent --------------------------------------------------------------- FUNDING USES - ------------ Loans, net of unearned income $289,407 $ 34,222 13.41% $255,185 $ 10,878 4.45% Taxable securities 115,510 $ 37,087 47.29% 78,423 -1,110 -1.40% Tax-exempt securities 34,166 $ 10,214 42.64% 23,952 1,582 7.07% Federal funds sold and other 12,428 -$3,253 -20.74% 15,681 14,500 1227.77% --------------------------------------------------------------- TOTAL USES $451,511 $ 78,270 20.97% $373,241 $ 25,850 7.44% =============================================================== FUNDING SOURCES - --------------- Noninterest-bearing deposits $ 58,452 $ 16,754 40.18% $ 41,698 $ 3,929 10.49% Interest-bearing demand and savings deposits 145,642 $ 43,687 42.85% 101,955 6,874 7.23% Time Deposits 209,610 $ 25,727 13.99% 183,883 25,698 16.25% Short-term borrowings 659 -$9,062 -93.22% 9,721 -16,975 -63.59% Long-term debt 19,301 $ 2,345 13.83% 16,956 4,285 33.82% --------------------------------------------------------------- TOTAL SOURCES $433,664 $ 79,451 22.43% $354,213 $ 23,811 7.21% =============================================================== Rate sensitivity gap is defined as 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 14 - Liquidity and Interest Rate Sensitivity reflects interest earning assets and interest-bearing liabilities by maturity distribution as of December 31, 2002. Product lines repricing in time periods predetermined by contractual agreements are included in the respective maturity categories.

TABLE 14 - LIQUIDITY AND INTEREST RATE SENSITIVITY AT DECEMBER 31, 2002 1 - 90 91 - 365 1 - 5 Over Days Days Years 5 years Total ------------------------------------------------------ INTEREST EARNING ASSETS - ----------------------- Loans $ 69,790 $ 75,635 $143,940 $ 10,692 $300,057 Investment securities 4,320 10,789 111,203 33,957 160,269 Federal Home Loan Bank Account 1,366 0 0 0 1,366 Federal Funds Sold 2,300 0 0 0 2,300 ------------------------------------------------------ TOTAL INTEREST BEARING ASSETS $ 77,776 $ 86,424 $255,143 $ 44,649 $463,992 ====================================================== INTEREST BEARING LIABILITIES - ---------------------------- Interest bearing demand deposits $107,439 $ 0 $ 0 $ 0 $107,439 Savings and Money Market deposits 48,351 0 0 0 48,351 Time deposits 89,018 108,859 19,195 0 217,072 Short term borrowings 0 Long term borrowings 238 731 17,737 5,900 24,606 ------------------------------------------------------ TOTAL INTEREST BEARING LIABILITIES $245,046 $109,590 $ 36,932 $ 5,900 $397,468 ====================================================== Rate sensitive gap -$167,270 -$23,166 $218,211 $ 38,749 $ 66,524 Rate sensitive cumulative gap -167,270 -190,436 27,775 66,524 Cumulative gap as a percentage of total earning assets -36.05% -41.04% 5.99% 14.34% 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 Company's large negative cumulative gap position in the one-year period ending December 31, 2002 was mainly due to: (1) the interest-bearing and savings deposits being classified in the 1-90 day category; (2) approximately 91% of certificates of deposit maturing during the next twelve months; and (3) a significant portion of the Company's loans maturing after one year. 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 effect would be mitigated by the fact that interest-bearing demand and savings deposits may not be immediately affected by changes in general interest rates. 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") requires federal regulatory agencies to define capital tiers. These are: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under these regulations, 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. Failure to meet capital requirements can initiate regulatory action that could have a direct material effect on the Company's financial statements. If adequately capitalized, regulatory approval is required to 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 the banking regulators as of December 31, 2002, as noted below in Table 15 - Capital Ratios. To be well-capitalized, the Company and Bank must maintain the prompt corrective action capital guidelines described above. Management has sought in the past to maintain a high level of capital to allow the Company to respond to growth and acquisition opportunities in our service area. This strategy has allowed us to purchase the Decatur and Forest branches from Union Planters in July 2001 and to purchase CB&T in May 2002 without having to raise additional capital. Because the Company has been able to increase capital through the retention of earnings, the Company has not implemented a plan to raise additional capital at this time nor does it have any plans to do so.

TABLE 15 - CAPITAL RATIOS At December 31, 2002 2001 2000 -------------------------------- Tier 1 capital Shareholders' equity $ 53,783 $ 47,182 $ 43,377 Less: Intangibles -6,814 -2,974 -654 Add/less: Unrealized loss/(gain) on securities -2,931 -157 -161 Add: Minority interest in equity accounts of unconsolidated subsidiaries 1,376 1,212 1,452 -------------------------------- TOTAL TIER 1 CAPITAL $ 45,414 $ 45,263 $ 44,014 ================================ Total capital Tier 1 capital $ 45,414 $ 45,263 $ 44,014 Allowable allowance for loan losses 3,849 3,299 3,124 -------------------------------- TOTAL CAPITAL $ 49,263 $ 48,562 $ 47,138 ================================ RISK WEIGHTED ASSETS $307,573 $263,901 $249,683 ================================ AVERAGE ASSETS (FOURTH QUARTER) $514,249 $430,607 $379,130 ================================ RISK BASED RATIOS TIER 1 14.77% 17.15% 17.63% ================================ TOTAL CAPITAL 16.02% 18.40% 18.88% ================================ LEVERAGE RATIOS 8.83% 10.51% 11.61% ================================

INFLATION For a financial institution, effects of price changes and inflation vary considerably from an industrial organization. Changes in the prices of goods and services are the primary determinant of the industrial company's profit, whereas changes in interest rates have a major impact on a financial institution's profitability. Inflation affects the growth of total assets, but it is difficult to assess its impact because neither the timing nor the magnitude of the changes in the consumer price index directly coincide with changes in interest rates. During periods of high inflation there are normally corresponding increases in the money supply. During such times financial institutions often experience above average growth in loans and deposits. Also, general increases in the price of goods and services will result in increased operating expenses. Over the past few years the rate of inflation has been relatively low, and its impact on the growth in the balance sheets and increased levels of income and expense has been nominal. RECENT PRONOUNCEMENTS In September 2001, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement No. 125)." SFAS No. 140 replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 revises the standard for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. SFAS No. 140 is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2001. The adoption of this statement did not have a material effect on the Company's financial position or results of operations. During 2001, the FASB issued SFAS No. 141 "Business Combinations" and SFAS No. 142, "Goodwill and other Intangible Assets". SFAS No. 141 requires that all business combinations entered into after June 30, 2001 be accounted for under the purchase method. SFAS No. 142 requires that all intangible assets, including goodwill, that result from business combinations be periodically (at least annually) evaluated for impairment, with any resulting impairment loss being charged against earnings. Also, under SFAS No. 142, goodwill resulting from any business combination accounted for according to SFAS No. 141 is not amortized, and the amortization of goodwill related to business combinations entered into prior to June 30, 2001 was discontinued effective, for the Company, January 1, 2002. The Company adopted the provisions of SFAS No. 141 immediately and the provisions of SFAS No. 142 related to discontinuation of goodwill amortization effective January 1, 2002. See Note 2 to the Company's consolidated financial statements for additional information concerning the Company's goodwill and other intangible assets.

Also during 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations." SFAS No. 143 requires estimated future asset retirement costs to be are recognized as a liability, recorded at their fair value and capitalized as part of the asset and depreciated. Under the new pronouncement, the resulting retirement obligation liability is discounted and accretion expense is recognized using the credit-adjusted risk- free interest rate. The pronouncement is effective for years beginning after June 15, 2002 although early application is permitted. The Company will adopt the provisions of SFAS No. 143 effective January 1, 2003. Management does not expect the adoption of this pronouncement to have a material effect on the Company's financial statements. SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was also issued by the FASB during 2001 and is effective for years beginning after December 31, 2001. The new pronouncement sets forth requirements for testing and accounting for impairment or disposal of assets to be held and used, assets to be disposed of other than by sale, and assets to be sold. The Company adopted SFAS No. 144 on January 1, 2002. Its adoption did not have a material impact on the Company's financial statements. In October 2002, the FASB issued Standard No. 147 related to Acquisitions of Certain Financial Institutions. The standard clarifies the requirements of Standards No. 141 and 142 as they relate to business combinations between financial institutions and makes the provisions of Standard No. 144 applicable to long-term customer relationship intangible assets. The standard is effective for transactions on or after October 1, 2002. Adopting the standard by the Company did not have a material effect on the Company's financial statements. 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. 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 Company's and the Bank's business include, but are not limited to, the following: (a) the risk of adverse changes in business conditions in the banking industry generally and in the specific markets in which the Company operates; (b) changes in the legislative and regulatory environment that negatively impact the Company and Bank through increased operating expenses; (c) increased competition from other financial institutions; (d) the impact of technological advances; (e) expectations about the movement of interest rates, including actions that may be taken by

the Federal Reserve Board in response to changing economic conditions; (f) changes in asset quality and loan demand; (g) expectations about overall economic strength and the performance of the economy in the Company's market area; and (h) 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.

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 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. Market/Interest Rate Risk Management The primary purpose in managing interest rate risk is to effectively invest capital and preserve the value created by the core banking business. The Company utilizes an investment portfolio to manage the interest rate risk naturally created through its business activities. The quarterly interest rate risk report is used to evaluate exposure to interest rate risk, project earnings and manage the composition of the balance sheet and its growth. This report utilizes a 200 basis point rate shock up and down and measures the effect on earnings and the value of equity. Static gap analysis is also used in measuring interest rate risk. 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, 2002 ($ in thousands): Interest Sensitive Within ------------------------ 90 days One year ------------------------ Total rate sensitive assets $ 77,776 $ 86,424 Total rate sensitive liabilities 245,046 109,590 ------------------------ Net gap ($167,270) ($ 23,166) ======================== The analysis indicates 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.

The static gap analysis does not fully capture the impact of interest rate movements on interest sensitive assets and liabilities. The interest rate sensitivity table that follows 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 as well as changes in management's expectations or intentions. 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, they certainly have the opportunity to do so. Weighted average floating rates are based on the rate for that product as of December 31, 2002 and 2001. INTEREST RATE SENSITIVITY December 31, 2002 Carrying Fair 2003 2004 2005 2006 2007 Thereafter Value Value ------------------------------------------------------------------------------------------------------- Loans Fixed Rate $ 111,290 $ 48,344 $ 34,487 $ 33,729 $ 31,801 $ 12,297 $271,948 $273,472 Average Int Rate 7.46% 7.97% 7.82% 7.49% 7.02% 7.31% 7.54% Floating Rate $ 15,325 $ 5,067 $ 3,570 $ 3,149 $ 2,955 $ 8,568 $ 38,634 $ 38,634 Average Int Rate 5.07% 5.15% 5.31% 5.31% 5.39% 5.12% 5.16% Investment securities Fixed Rate $ 6,545 $ 13,734 $ 4,816 $ 4,007 $ 1,801 $ 131,373 $162,276 $162,276 Average Int Rate 4.51% 4.54% 5.11% 5.61% 6.27% 5.84% 5.65% Floating Rate Average Int Rate Other earning assets Fixed Rate $ 2,300 $ 2,300 $ 2,300 Average Int Rate 1.13% 1.13% Floating Rate Average Int Rate Interest-bearing deposits Fixed Rate $ 324,420 $ 18,691 $ 8,092 $ 1,362 $ 1,235 $ 0 $353,800 $354,591 Average Int Rate 1.81% 3.10% 3.83% 5.39% 4.47% 0.00% 1.95% Floating Rate $ 4,991 $ 6,704 $ 7,475 $ 12 $ 22 $ 3 $ 19,207 $ 19,207 Average Int Rate 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% Other int-bearing liabilities Fixed Rate $ 10,969 $ 6,018 $ 1,070 $ 649 $ 0 $ 5,900 $ 24,606 $ 24,606 Average Int Rate 5.50% 5.21% 4.94% 4.94% 0.00% 4.65% 5.03% Floating Rate Average Int Rate

December 31, 2001 Carrying Fair 2003 2004 2005 2006 2007 Thereafter Value Value ------------------------------------------------------------------------------------------------------- Loans Fixed Rate $ 91,835 $ 35,445 $ 33,870 $ 23,071 $ 27,102 $ 27,820 $239,143 $237,451 Average Int Rate 8.30% 8.15% 7.95% 8.09% 7.66% 7.50% 8.04% Floating Rate $ 8,912 $ 4,222 $ 2,520 $ 2,649 $ 2,004 $ 4,828 $ 25,135 $ 24,957 Average Int Rate 5.34% 6.04% 6.15% 6.12% 6.16% 6.13% 5.84% Investment securities Fixed Rate $ 14,632 $ 10,709 $ 13,021 $ 6,008 $ 6,212 $ 71,985 $122,567 $122,567 Average Int Rate 6.35% 6.18% 4.41% 5.76% 5.66% 6.49% 6.15% Floating Rate Average Int Rate Other earning assets Fixed Rate $ 6,100 $ 6,100 $ 6,100 Average Int Rate 1.63% 1.63% Floating Rate Average Int Rate Interest-bearing deposits Fixed Rate $ 272,200 $ 19,298 $ 1,735 $ 181 $ 11 $293,425 $294,221 Average Int Rate 3.00% 4.65% 4.89% 5.85% 4.56% 3.12% Floating Rate $ 6,513 $ 5,414 $ 3,401 $ 9 $ 11 $ 15,348 $ 15,390 Average Int Rate 3.15% 3.15% 3.15% 3.15% 3.15% 3.15% Other int-bearing liabilities Fixed Rate $ 923 $ 10,969 $ 1,018 $ 1,070 $ 649 $ 14,629 $ 14,629 Average Int Rate 4.94% 5.51% 4.94% 4.94% 4.94% 5.36% Floating Rate Average Int Rate

QUARTERLY FINANCIAL TRENDS 2002 ----------------------------------------------- First Second Third Fourth Year Quarter Quarter Quarter Quarter to Date ----------------------------------------------- Interest Income $ 7,030 $ 7,574 $ 7,891 $ 7,702 $30,197 Interest Expense 2,465 2,380 2,507 2,394 9,746 ----------------------------------------------- Net Interest Income 4,565 5,194 5,384 5,308 20,451 Provision for Loan Losses 234 436 337 751 $ 1,758 Non-interest Income 1,006 1,043 1,154 1,232 $ 4,435 Non-interest Expense 3,043 3,364 3,721 3,737 $13,865 Income Taxes 749 775 800 641 $ 2,965 ----------------------------------------------- Net Income $ 1,545 $ 1,662 $ 1,680 $ 1,411 $ 6,298 =============================================== Per common share: Basic $ 0.31 $ 0.33 $ 0.34 $ 0.28 $ 1.27 Diluted $ 0.31 $ 0.33 $ 0.34 $ 0.28 $ 1.26 ----------------------------------------------- Cash Dividends $ 0.12 $ 0.12 $ 0.14 $ 0.14 $ 0.52 2001 ----------------------------------------------- First Second Third Fourth Year Quarter Quarter Quarter Quarter to Date ----------------------------------------------- Interest Income $ 7,259 $ 7,184 $ 7,399 $ 7,277 $29,119 Interest Expense 3,620 3,354 3,417 3,008 13,399 ----------------------------------------------- Net Interest Income 3,639 3,830 3,982 4,269 15,720 Provision for Loan Losses 120 449 174 380 $ 1,123 Non-interest Income 905 1,123 1,066 886 $ 3,980 Non-interest Expense 2,417 2,405 2,533 2,953 $10,308 Income Taxes 633 613 781 531 $ 2,558 ----------------------------------------------- Net Income $ 1,374 $ 1,486 $ 1,560 $ 1,291 $ 5,711 =============================================== Per common share: Basic $ 0.28 $ 0.30 $ 0.31 $ 0.26 $ 1.15 Diluted $ 0.28 $ 0.30 $ 0.31 $ 0.26 $ 1.15 ----------------------------------------------- Cash Dividends $ 0.083 $ 0.100 $ 0.100 $ 0.100 $ 0.383

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 by private transactions between parties. On December 31, 2002, the Common Stock's closing price was $16.00. Dividends Declared 2001 High Low (per common share) - ------------------------------------------------------------------------------- January - March 11.17 10.33 0.083 April - June 11.83 10.77 0.100 July - September 13.17 11.50 0.100 October - December 16.60 12.17 0.100 Dividends Declared 2002 High Low (per common share) - ------------------------------------------------------------------------------- January - March 16.26 14.25 0.120 April - June 16.00 14.65 0.120 July - September 16.85 15.75 0.140 October - December 17.35 15.70 0.140 Per share information included in the above table has been adjusted to reflect the three-for-two (3:2) common stock split effective January 2, 2002. On March 10, 2003, the shares of Common Stock were held of record by approximately 454 shareholders. Dividends Dividends, retroactively adjusted to give effect to the three-for-two stock split, totaled $0.52 per share for 2002 compared to $0.383 in 2001 and $.283 in 2000. These dividends reflect a 36% increase in 2002 over 2001 and a 35% increase in 2001 over 2000. The Company 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 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.

NOTES

CITIZENS HOLDING COMPANY AND SUBSIDIARY Philadelphia, Mississippi Consolidated Financial Statements Years Ended December 31, 2002, 2001 and 2000

CONTENTS - -------------------------------------------------------------------------------- Independent Auditor's Report 1 - -------------------------------------------------------------------------------- Consolidated Financial Statements Consolidated Balance Sheets 2 Consolidated Statements of Income 3 Consolidated Statements of Comprehensive Income 4 Consolidated Statements of Changes in Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 - 7 Notes to Consolidated Financial Statements 8 - 32 - --------------------------------------------------------------------------------

INDEPENDENT AUDITOR'S REPORT Board of Directors Citizens Holding Company and Subsidiary Philadelphia, Mississippi We have audited the accompanying consolidated balance sheets of Citizens Holding Company and Subsidiary as of December 31, 2002 and 2001 and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for each of the years in the three year period ended December 31, 2002. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide 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, 2002 and 2001 and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/ HOWE CPA GROUP Jackson, Mississippi January 31, 2003

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Balance Sheets December 31, 2002 and 2001 2002 2001 - ----------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 19,769,712 $ 12,713,482 Interest bearing deposits with other banks 1,365,649 5,421,241 Federal funds sold 2,300,000 6,100,000 Securities available for sale, at fair value (amortized cost of $157,718,929 in 2002 and $122,304,542 in 2001) 162,276,305 122,567,180 Loans, net of allowance for loan losses of $4,222,342 in 2002 and $3,375,000 in 2001 303,952,527 260,903,091 Bank premises, furniture, fixtures and equipment, net 9,399,942 5,143,535 Real estate acquired by foreclosure 1,286,409 340,657 Accrued interest receivable 4,111,199 4,121,922 Cash value of life insurance 3,162,848 2,809,410 Intangible assets, net of accumulated amortization of $1,081,027 in 2002 and $620,480 in 2001 6,813,774 2,974,023 Other assets 4,011,753 4,118,333 ------------ ------------ Total Assets $518,450,118 $427,212,874 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing demand deposits $ 59,761,550 $ 50,535,929 Interest bearing NOW and money market accounts 122,717,966 91,656,150 Interest bearing time deposits 217,072,653 194,635,343 Interest bearing savings deposits 33,216,006 22,481,585 ------------ ------------ Total Deposits 432,768,175 359,309,007 Federal Home Loan Bank advances 24,606,135 14,628,788

Accrued interest payable 955,720 1,415,513 Directors deferred compensation payable 1,182,406 1,079,191 Other liabilities 3,779,163 2,386,608 ------------ ------------ Total Liabilities 463,291,599 378,819,107 ------------ ------------ Commitments and Contingencies Minority interest 1,375,960 1,212,199 ------------ ------------ Stockholders' Equity Common stock, $.20 par value, authorized 22,500,000 shares; 4,974,578 shares issued at 2002 and 4,963,028 at 2001 994,916 992,606 Additional paid-in capital 2,899,331 2,791,871 Accumulated other comprehensive income, net of deferred tax liability of $1,549,508 in 2002 an $89,295 in 2001 2,931,674 157,074 Retained earnings 46,956,638 43,240,017 ------------ ------------ Total Stockholders' Equity 53,782,559 47,181,568 ------------ ------------ Total Liabilities and Stockholders' Equity $518,450,118 $427,212,874 ============ ============ The accompanying notes are an integral part of these statements. 2

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Income Years Ended December 31, 2002, 2001, and 2000 2002 2001 2000 - ---------------------------------------------------------------------------------------- Interest Income Interest and fees on loans $ 22,628,364 $ 22,770,622 $ 22,280,018 Interest on securities Taxable 5,771,707 4,670,987 5,066,547 Non-taxable 1,598,983 1,117,874 1,073,142 Other interest 197,476 558,961 218,392 ------------ ------------ ------------ Total Interest Income 30,196,530 29,118,444 28,638,099 ------------ ------------ ------------ Interest Expense Deposits 8,696,134 12,189,194 11,751,889 Other borrowed funds 1,050,209 1,209,409 2,312,030 ------------ ------------ ------------ Total Interest Expense 9,746,343 13,398,603 14,063,919 ------------ ------------ ------------ Net Interest Income 20,450,187 15,719,841 14,574,180 Provision for loan losses (1,757,516) (1,123,166) (917,519) ------------ ------------ ------------ Net Interest Income After Provision for Loan Losses 18,692,671 14,596,675 13,656,661 ------------ ------------ ------------ Non-Interest Income Service charges on deposit accounts 3,026,976 2,810,403 2,470,018 Other service charges and fees 749,786 572,187 383,558 Other income 658,400 598,022 431,244 ------------ ------------ ------------ Total Non-Interest Income 4,435,162 3,980,612 3,284,820 ------------ ------------ ------------ Non-Interest Expense Salaries and employee benefits 7,102,641 5,597,105 4,901,589 Occupancy expense 1,014,510 741,912 654,037

Equipment expense 1,297,232 888,648 731,878 Earnings applicable to minority interest 172,196 166,196 190,393 Other expense 4,278,599 2,914,602 2,294,008 ------------ ------------ ------------ Total Non-Interest Expense 13,865,178 10,308,463 8,771,905 ------------ ------------ ------------ Income before income taxes 9,262,655 8,268,824 8,169,576 Income tax expense 2,965,155 2,557,926 2,635,211 ------------ ------------ ------------ Net Income $ 6,297,500 $ 5,710,898 $ 5,534,365 ============ ============ ============ Net Income Per Share - Basic $ 1.27 $ 1.15 $ 1.12 ============ ============ ============ Net Income Per Share - Diluted $ 1.26 $ 1.15 $ 1.11 ============ ============ ============ Average Shares Outstanding Basic 4,963,448 4,963,028 4,963,028 ============ ============ ============ Diluted 4,999,168 4,980,568 4,975,232 ============ ============ ============ The accompanying notes are an integral part of these statements. 3

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Comprehensive Income Years Ended December 31, 2002, 2001, and 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------- Net Income $ 6,297,500 $ 5,710,898 $ 5,534,365 ----------- ----------- ----------- Other Comprehensive Income (Loss), Net of Tax Unrealized holding gains (losses) 1,748,548 during year 2,933,318 (3,760) Reclassification adjustment for (gains) -- losses included in net income (158,718) (45,694) ----------- ----------- ----------- Total Other Comprehensive Income (Loss) 2,774,600 (3,760) 1,702,854 ----------- ----------- ----------- Comprehensive Income $ 9,072,100 $ 5,707,138 $ 7,237,219 =========== =========== =========== 4

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 2002, 2001, and 2000 Accumulated Number Additional Other of Shares Common Paid-In Comprehensive Retained Issued Stock Capital Income (Loss) Earnings Total - --------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1999 3,353,750 $ 670,750 $ 3,113,727 $ (1,542,020) $ 35,303,504 $ 37,545,961 Net income -- -- -- -- 5,534,365 5,534,365 Dividends paid -- -- -- -- (1,406,219) (1,406,219) Other comprehensive income, net -- -- -- 1,702,854 -- 1,702,854 ------------ ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2000 3,353,750 670,750 3,113,727 160,834 39,431,650 43,376,961 Net income -- -- -- -- 5,710,898 5,710,898 -- -- -- -- (1,902,531) (1,902,531) Dividends paid 3 for 2 stock split 1,609,278 321,856 (321,856) -- -- -- Other comprehensive (loss), net -- -- -- (3,760) -- (3,760) ------------ ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2001 4,963,028 992,606 2,791,871 157,074 43,240,017 47,181,568 Net income -- -- -- -- 6,297,500 6,297,500

Dividends paid -- -- -- -- (2,580,879) (2,580,879) Options exercised 11,550 2,310 107,460 -- -- 109,770 Other comprehensive income, net -- 2,774,600 -- 2,774,600 ------------ ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2002 4,974,578 $ 994,916 $ 2,899,331 $ 2,931,674 $ 46,956,638 $ 53,782,559 ============ ============ ============ ============ ============ ============ The accompanying notes are an integral part of these financial statements. 5

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31, 2002, 2001, and 2000 1 of 2 2002 2001 2000 - ---------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income $ 6,297,500 $ 5,710,898 $ 5,534,365 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 851,977 546,479 476,585 Amortization of intangibles 460,548 193,109 72,110 Amortization of premiums and accretion of discounts on investment securities (119,776) (131,470) (108,863) Provision for loan losses 1,757,516 1,123,166 917,519 Investment securities (gains) losses (158,718) -- (45,694) Deferred income tax benefit (99,596) 23,188 (79,528) Net earnings applicable to minority interest 172,196 166,196 190,393 (Increase) decrease in real estate acquired by foreclosure (945,752) (207,332) 158,183 (Increase) decrease in accrued interest receivable 505,876 604,191 (1,042,264) (Increase) decrease in cash value of life insurance (353,438) 210,044 (191,189) (Increase) decrease in other assets 129,726 (577,722) (302,300) Increase (decrease) in income taxes payable (568,552) (224,387) 30,577 Increase (decrease) in accrued interest payable (582,954) (181,932) 354,529 Increase in directors deferred compensation 103,215 162,935 104,126 Increase (decrease) in other liabilities 433,132 (463,391) (398,390) ------------- ------------- ------------- Net Cash Provided by Operating Activities 7,882,900 6,953,972 5,670,159 ------------- ------------- ------------- Cash Flows from Investing Activities Proceeds from maturities of securities available-for-sale 75,936,011 56,903,832 15,705,000 Proceeds from sales of securities available-for-sale 38,131,901 -- 12,442,879 Purchases of investment securities available-for-sale (100,225,119) (75,852,844) (26,479,943) Purchases of bank premises, furniture, fixtures and equipment (3,458,384) (1,327,808) (427,815) Net decrease (increase) in interest bearing deposits with other banks 4,055,592 (4,557,870) (681,329) Net (increase) decrease in federal funds sold 5,900,000 (3,000,000) (3,100,000) Net increase in loans (29,787,550) (13,329,502) (18,365,723) Cash acquired in CB&T acquisition 2,879,581 -- -- Cash paid for acquisitions (12,284,319) (2,918,960) -- Proceeds from exercise of stock options 109,770 -- -- ------------- ------------- ------------- Net Cash Used by Investing Activities (18,742,517) (44,083,152) (20,906,931) ------------- ------------- ------------- 6

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31, 2002, 2001, and 2000 2 of 2 2002 2001 2000 - ---------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Net increase (decrease) in federal funds purchased $ -- $ -- $(10,600,000) Net increase in deposits 15,519,379 69,401,250 5,446,118 Net decrease in Treasury tax and loan advances -- (700,000) -- Dividends paid to stockholders (2,580,879) (1,902,531) (1,406,219) Net increase in Federal Home Loan Bank advances 4,977,347 (27,371,212) 18,900,000 ------------ ------------ ------------ Net Cash Provided by Financing Activities 17,915,847 39,427,507 12,339,899 ------------ ------------ ------------ Net Increase (Decrease) in Cash and Due from Banks 7,056,230 2,298,327 (2,896,873) Cash and due from banks, beginning of year 12,713,482 10,415,155 13,312,028 ------------ ------------ ------------ Cash and due from banks, end of year $ 19,769,712 $ 12,713,482 $ 10,415,155 ============ ============ ============ Supplemental Disclosures of Cash Flow Information Cash paid for Interest $ 10,206,139 $ 13,580,534 $ 13,717,444 ============ ============ ============ Income taxes $ 3,390,278 $ 2,805,550 $ 2,744,590 ============ ============ ============ Supplemental Schedule of Noncash Activities Unrealized gain (loss) on securities available-for-sale $ 4,294,738 $ (46,476) $ 2,594,191 ============ ============ ============ Increase (decrease) in deferred income tax liability on unrealized gain (loss) on securities $ (1,462,213) $ 42,716 $ (891,340) ============ ============ ============ Minority interest in unrealized gain (loss) on securities $ 114,670 $ (1,194) $ 87,113 ============ ============ ============ The accompanying notes are an integral part of these financial statements. 7

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 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 approximately 97 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 ("Citizens 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 Citizens 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 losses on loans 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 losses on loans 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 allowances 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 losses on loans 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 losses on loans and valuation of foreclosed real estate may change materially in the near term. 8

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 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, demand deposits and interest bearing deposits with banks. Cash flows from loans originated by the Company, deposits, and federal funds purchased and sold are reported at 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 total of those reserves for the years ended December 31, 2002 and 2001 was $616,000 and $227,000, respectively. At December 31, 2002, 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 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. 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. The Company classifies its portfolio of U.S. Treasury notes, U.S. Government and Agency securities, taxable state and municipal obligations, and mortgage-backed securities as securities 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. Securities Held-to-Maturity The Company has no held-to-maturity securities. Trading Securities - ------------------ The Company has no trading securities. 9

CITIZENS HOLDING COMPANYAND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 1. Continued Loans Held-for-Sale - ------------------- Loans held-for-sale are those loans the Company has the intent to sell in the foreseeable future. They are carried at the lower of aggregate cost or market value. Gains and losses on sales of loans are recognized at settlement dates and are determined by the difference between the sales proceeds and the carrying value of the loans. All sales are made without recourse. Effective for reporting periods beginning with the quarter ending September 30, 2002, commitments to originate or acquire mortgage loans that will be held-for-sale must be accounted for as derivative financial instruments under FAS No. 133. Therefore, the fair value of the commitments must be determined and recorded in the Company's financial statements at the end of each reporting period. As of December 31, 2002, the Company had no loans held-for-sale. 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. 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 received. A loan is impaired when 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. 10

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 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 declared 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. While management uses the best information available to make its evaluation, this evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant change. As a result, future adjustments may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses, and may require additions to the allowance based on their judgment about information available to them at the time of their examinations. Premises and Equipment - ---------------------- The Company's premises 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 based on the 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). At December 31, 2002 and 2001, real estate acquired by foreclosure totaled $1,286,409 and $340,657, respectively. Intangibles Intangibles 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. Effective in 2002, pursuant to Statement of Financial Accounting Standards No. 142, goodwill and other intangible assets with indefinite 11

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 1. Continued lives are not amortized, but are tested at least annually for impairment. If impairment has occurred, the goodwill or other intangible asset is reduced to its estimated fair value through a charge to expense. 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 (after exclusion of nontaxable income such as interest on state and municipal securities) 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. Advertising Costs - ----------------- Advertising costs are charged to expense when incurred. Advertising expense was $331,239, $228,078 and $211,011 for the years ended December 31, 2002, 2001 and 2000, respectively. 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 on securities available-for-sale, net of related deferred 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. The weighted average number of shares outstanding was 4,963,448 for the year ended December 31, 2002 and 4,963,028 for each of the years ended December 31, 2001 and 2000. 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. Dilutive common equivalent shares 12

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 1. Continued for the years ended December 31, 2002, 2001 and 2000 were 35,720, 17,540 and 12,204, respectively, all attributable to stock options. Stock Split - ----------- In October 2001, the Board of Directors of the Company declared a three-for-two stock split for all shareholders of record as of December 14, 2001, and increased the number of authorized shares of common stock to 22,500,000. Accordingly, all share and per share information in these financial statements and related footnotes has been restated to give effect to the three-for-two split. 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," and, accordingly, no compensation expense is recognized for stock options granted. See Note 16. Fair Value of Financial Instruments - ----------------------------------- Statement of Financial Accounting Standards (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. Investment - Insurance Company - ------------------------------ The Company is accounting for its investment in New South Life Insurance Company ("New South"), a 20 percent owned affiliate, by the equity method of accounting. The Company's share of the net income of the affiliate 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. 13

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 1. Continued The investment, which is included in other assets, totaled $1,499,679 and $1,389,795 at December 31, 2002 and 2001, respectively. Income from the investment for the years ended December 31, 2002, 2001, and 2000 included in other income totaled $109,884, $151,590 and $127,927, respectively. Reclassifications - ----------------- Certain reclassifications were made to the financial statement amounts from the prior year in order to facilitate comparability. Recent Pronouncements - --------------------- In September 2000 the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (A Replacement of SFAS No. 125)." SFAS No. 140 replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 revises the standard for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. The Company adopted this statement effective January 1, 2001. The adoption had no effect on the Company's financial statements. During 2001, the FASB issued SFAS No. 141 "Business Combinations" and Statement No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that all business combinations entered into after June 30, 2001 be accounted for under the purchase method. SFAS No. 142 requires that all intangible assets, including goodwill, that result from business combinations be periodically (at least annually) evaluated for impairment, with any resulting impairment loss being charged against earnings. Also, under SFAS No. 142, goodwill resulting from any business combination accounted for according to SFAS No. 141 will not be amortized, and the amortization of goodwill related to business combinations entered into prior to June 30, 2001 will be discontinued effective, for the Company, January 1, 2002. The Company adopted the provisions of SFAS No. 141 immediately and the provisions of SFAS No. 142 related to discontinuation of goodwill amortization effective January 1, 2002. Amortization of goodwill for the years ended December 31, 2001 and 2000 was not material to the Company's financial statements. Therefore, the effect on previously reported net income for those periods was not material. Also during 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations", SFAS No. 143 requires estimated future asset retirement costs to be recognized as a liability, recorded at their fair value and capitalized as part of the asset and depreciated. Under the new statement, the resulting retirement obligation liability is discounted and accretion expense is recognized using the credit-adjusted risk-free interest rate. The statement is effective for years beginning after June 15, 2001 although early application is permitted. The Company adopted the provisions of SFAS No. 143 effective January 1, 2002. The adoption of this statement did not have a material effect on the Company's financial statements. 14

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 1. Continued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was also issued by the FASB during 2001 and is effective for years beginning after December 31, 2001. The new statement sets forth requirements for testing and accounting for impairment or disposal of assets to be held and used, assets to be disposed of other than by sale, and assets to be sold. The Company adopted SFAS No. 144 on January 1, 2002. Its adoption did not have a material impact on the Company's financial statements. In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions", which clarifies the requirements of SFAS No. 141 and 142 as they relate to business combinations between financial institutions and makes the provisions of SFAS No. 144 applicable to long-term customer relationship intangible assets. The standard is effective for transactions on or after October 1, 2002. The Company's adoption of this statement did not have a material effect on the Company's financial statements. Note 2. Acquisitions In May 2002, the Company acquired CB&T Capital Corporation, a one-bank holding company, whose wholly-owned subsidiary was Citizens Bank & Trust Company in Louisville, MS. The acquisition was undertaken by the Company in order to gain entry into a geographic section of the State of Mississippi that is contiguous to the Company's current markets and in which the Company had very little market presence. The purchase price of the net assets totaled approximately $12.3 million cash and was based on a multiple of approximately 1.505 times the book value, subject to certain adjustments, of the acquired company. The Company based its purchase price on several factors, including comparable transactions and management's estimate of the value of entry into a strategically targeted geographic area. The following is a summary of the assets and liabilities acquired: In Thousands - -------------------------------------------------------------------------------- Cash $ 2,880 Investments 50,620 Loans 15,019 Bank premises and other assets 3,137 Deposits (57,939) Other liabilities (5,814) ---------- Net assets acquired 7,903 Goodwill and other intangible assets 4,381 ---------- Purchase price $ 12,284 ========== 15

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 2. Continued The Company has completed its evaluation of the assets and liabilities acquired and has allocated $1,846,909 of the $4,380,869 total intangible asset to core deposit intangibles and the remaining $2,533,960 to goodwill. The core deposit intangible is to be amortized at the rate of $15,391 per month until fully amortized, representing an estimated economic life of 10 years. The amount of core deposit amortization expense related to the Louisville purchase was $107,736 through December 31, 2002. The operations of CB&T Capital Corporation are included in the consolidated financial statements since the acquisition date. The pro forma effect, had the acquisition occurred on January 1, 2001, is not significant to the operation of the Company. In July 2001, the Company completed the acquisition of two bank branches located in Forest and Decatur, Mississippi from Union Planters Bank. The Company acquired approximately $30.3 million in deposits, $11.7 million in loans, and $15.4 million in cash and short-term investments. The $2.5 million purchase price was allocated primarily to a core deposit intangible asset. Total amortization expense related to intangible assets for the years ended December 31, 2002, 2001 and 2000 was $460,548, $193,109 and $72,110, respectively. Amortization expense attributable to core deposit intangible assets is estimated to be approximately $537,000 for each of the next five years. Note 3. Investment Securities The amortized cost and estimated fair value of investment securities at December 31, 2002 is as follows: Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value - ------------------------------------------------------------------------------------------ Securities Available-for-Sale Obligations of U.S. Government agencies $ 11,261,352 $ 660,005 $ -- $ 11,921,357 U.S. Treasuries 18,280,614 812,656 -- 19,093,270 Mortgage-backed securities 85,828,126 1,871,959 13,223 87,686,862 Other investments 42,348,837 1,299,090 73,111 43,574,816 ------------ ------------ ------------ ------------ Total $157,718,929 $ 4,643,710 $ 86,334 $162,276,305 ============ ============ ============ ============ 16

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 3. Continued The amortized cost and estimated fair value of investment securities at December 31, 2001 is as follows: Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value - ------------------------------------------------------------------------------------------ Securities Available-for-Sale Obligations of U.S. Government agencies $ 10,397,698 $ 290,959 $ 12,131 $ 10,676,526 U.S. Treasuries 30,438,629 575,151 -- 31,013,780 Mortgage-backed securities 52,741,929 204,137 583,891 52,362,175 Other investments 28,726,286 332,578 544,165 28,514,699 ------------ ------------ ------------ ------------ Total $122,304,542 $ 1,402,825 $ 1,140,187 $122,567,180 ============ ============ ============ ============ The amortized cost and estimated fair value of securities at December 31, 2002, 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 Estimated Cost Fair Value - -------------------------------------------------------------------------------- Securities Available-for-Sale Due in one year or less $ 6,450,167 $ 6,544,985 Due after one year through five years 23,183,733 24,357,914 Due after five years through ten years 21,953,333 22,980,407 Due after ten years 106,131,696 108,392,999 ------------ ------------ Total $157,718,929 $162,276,305 ============ ============ Investment securities with carrying values of $95,774,053 and $84,485,282 at December 31, 2002 and 2001, 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: 2002 2001 2000 - -------------------------------------------------------------------------------- Gross realized gains $ 164,364 $ -- $ 64,880 Gross realized losses (5,646) -- (19,186) --------- --------- --------- $ 158,718 $ -- $ 45,694 ========= ========= ========= 17

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 4. Loans The composition of net loans at December 31, 2002 and 2001 is as follows: 2002 2001 (In Thousands) (In Thousands) - -------------------------------------------------------------------------------- Commercial, financial and agricultural loans $ 149,762 $ 126,131 Real estate - construction loans 11,708 6,036 Real estate - mortgage loans 89,452 80,548 Consumer loans 59,660 54,218 ----------- ----------- 310,582 266,933 Unearned discount (2,407) (2,655) Allowance for loan losses (4,222) (3,375) ----------- ----------- Loans, net $ 303,953 $ 260,903 =========== =========== Changes in the allowance for loan losses at December 31, 2002, 2001 and 2000 is as follows: 2002 2001 2000 - ------------------------------------------------------------------------------------------ Balance, beginning of year $ 3,375,000 $ 3,325,000 $ 3,100,000 Provision for loan losses 1,757,516 1,123,166 917,519 Loans charged off (2,036,933) (1,322,714) (1,012,406) Recoveries of loans previously charged off 279,417 249,548 319,887 Other increases attributed to Bank acquisition 847,341 -- -- ----------- ----------- ----------- Balance, end of year $ 4,222,341 $ 3,375,000 $ 3,325,000 =========== =========== =========== Loans on nonaccrual status were $357,640, $418,413 and $589,788 at December 31, 2002, 2001 and 2000, respectively. Interest income forgone on loans classified as non-accrued during the years ended December 31, 2002, 2001 and 2000 was $69,888, $123,804 and $146,797, respectively. 18

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 5. Premises and Equipment Premises and equipment consists of the following at December 31, 2002 and 2001: 2002 2001 - -------------------------------------------------------------------------------- Land and buildings $ 9,643,349 $ 6,246,477 Furniture, fixtures and equipment 7,107,499 5,395,987 ----------- ----------- 16,750,848 11,642,464 Less accumulated depreciation 7,350,906 6,498,929 ----------- ----------- Total $ 9,399,942 $ 5,143,535 =========== =========== Depreciation expense for the years ended December 31, 2002, 2001 and 2000 was $851,977, $546,479 and $476,585, respectively. Note 6. Deposits The composition of deposits is as follows: 2002 2001 - -------------------------------------------------------------------------------- Non-interest bearing $ 59,761,550 $ 50,535,929 NOW and money market accounts 122,717,966 91,656,150 Savings deposits 33,216,006 22,481,585 Time certificates, $100,000 or more 77,399,749 73,246,704 Other time certificates 139,672,904 121,388,939 ------------ ------------ Total $432,768,175 $359,309,307 ============ ============ The scheduled maturities of certificates of deposit at December 31, 2002 are as follows: Year Ending Amount December 31, (In Thousands) - -------------------------------------------------------------------------------- 2003 $ 184,215 2004 16,938 2005 13,300 2006 1,369 2007 1,251 ------------ $ 217,073 ============ Interest expense for certificates of deposit over $100,000 was $2,346,000, $4,094,000 and $3,453,000 for the years ended December 31, 2002, 2001 and 2000, respectively. 19

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 7. Federal Home Loan Bank Borrowings Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB), advances are collateralized by all the Company's stock, FHLB Securities ($7,726,135 included in securities available-for-sale at December 31, 2002) and qualifying first mortgage loans. As of December 31, 2002 the balance in qualifying first mortgage loans was $124,241,623. Advances at December 31, 2002 consist of the following: Interest Amount Rate Maturity - ------------------------------------------------------------------------------- $ 5,000,000 5.457% February 26, 2008 5,000,000 6.600% April 28, 2008 6,706,135 4.941% July 3, 2006 3,000,000 5.240% April 20, 2009 2,000,000 5.290% April 20, 2009 2,000,000 4.880% August 22, 2011 1,000,000 4.759% August 29, 2011 2,000,000 4.470% September 7, 2010 900,000 4.430% September 19, 2011 The scheduled payments for the next five years are as follows: Year Due Payment - -------------------------------------------------------------------------------- 2003 $ 969,288 2004 1,018,280 2005 1,069,749 2006 648,818 2007 -- Thereafter 20,900,000 ----------- $24,606,135 =========== 21

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 8. Income Taxes The consolidated provision for income taxes consists of the following: 2002 2001 2000 - -------------------------------------------------------------------------------- Currently payable Federal $ 2,556,030 $ 2,356,645 $ 2,491,383 State 309,529 224,469 223,356 ----------- ----------- ----------- 2,865,559 2,581,114 2,714,739 Deferred tax expense (benefit) 99,596 (23,188) (79,528) ----------- ----------- ----------- Income Tax Expense $ 2,965,155 $ 2,557,926 $ 2,635,211 =========== =========== =========== The differences between the federal statutory rate and the effective tax rates were as follows: 2002 2001 2000 - -------------------------------------------------------------------------------- Federal tax based on statutory rate $ 3,149,303 $ 2,811,400 $ 2,777,656 State income tax 204,690 157,142 147,415 Change due to Tax-exempt investment interest (495,872) (321,389) (303,191) Other, net 107,034 (89,227) 13,331 ----------- ----------- ----------- Income Tax Expense $ 2,965,155 $ 2,557,926 $ 2,635,211 =========== =========== =========== At December 31, 2002 and 2001, net deferred tax asset consists of the following: 2002 2001 - -------------------------------------------------------------------------------- Deferred Tax Assets Allowance for loan losses $ 992,501 $ 863,225 Deferred compensation liability 402,018 366,925 Other real estate 181,270 11,735 Other 46,824 -- ----------- ----------- Total $ 1,622,613 $ 1,241,885 ----------- ----------- 21

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 8. Continued 2002 2001 - -------------------------------------------------------------------------------- Deferred Tax Liabilities Investment securities basis $ 32,118 $ 216,869 Unrealized gain on available for sale securities 1,549,508 89,295 Premises and equipment 396,988 -- Intangible assets 591,319 -- ----------- ----------- Total 2,569,933 306,164 ----------- ----------- Net Deferred Tax Asset (Liability) $ (947,320) $ 935,721 =========== =========== The net deferred tax liability at December 31, 2002 of $947,320 is included in other liabilities. At December 31, 2001, the net deferred tax asset of $935,721 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. Note 9. Summarized Financial Information of Citizens Holding Company Summarized financial information of Citizens Holding Company, parent company only, at December 31, 2002 and 2001, and for the years ended December 31, 2002, 2001 and 2000, is as follows: Balance Sheets December 31, 2002 and 2001 2002 2001 - -------------------------------------------------------------------------------- Assets Cash $ 906,403 $ 756,159 Securities available-for-sale, at fair value 548,750 524,530 Investment in bank subsidiary 52,360,312 45,907,322 Other assets 10,417 11,897 ----------- ----------- Total Assets $53,825,882 $47,199,908 =========== =========== Liabilities $ 43,323 $ 18,340 Stockholders' equity 53,782,559 47,181,568 ----------- ----------- Total Liabilities and Stockholders' Equity $53,825,882 $47,199,908 =========== =========== 22

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 9. Continued Income Statements Years Ended December 31, 2002, 2001 and 2000 2002 2001 2000 - -------------------------------------------------------------------------------- Interest income $ 42,465 $ 74,085 $ 86,053 ----------- ----------- ----------- Other Income Other 35,843 34,815 46,062 Dividends from bank subsidiary 2,592,317 1,986,540 1,406,219 Equity in undistributed earnings of bank subsidiary 3,693,570 3,721,802 4,069,658 ----------- ----------- ----------- Total Other Income 6,321,730 5,743,157 5,521,939 ----------- ----------- ----------- Other expense 61,030 107,824 42,625 ----------- ----------- ----------- Income before Income Taxes 6,303,165 5,709,418 5,565,367 Income tax expense (benefit) 5,665 (1,480) 31,002 ----------- ----------- ----------- Net Income $ 6,297,500 $ 5,710,898 $ 5,534,365 =========== =========== =========== Statements of Cash Flows Years Ended December 31, 2002, 2001 and 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income $ 6,297,500 $ 5,710,898 $ 5,534,365 Adjustments to reconcile net income to net cash provided by operating activities Equity in undistributed earnings of Bank (3,693,570) (3,721,802) (4,069,658) Decrease in other assets 1,480 7,004 15,874 Increase (decrease) in other liabilities 24,983 (76,249) (28,844) ----------- ----------- ----------- Net Cash Provided by Operating Activities 2,630,393 1,919,851 1,451,737 ----------- ----------- ----------- Cash Flows from Investing Activities Proceeds from sale of investments -- 800,000 -- Other (9,040) (422,352) 69,801 ----------- ----------- ----------- Net Cash Provided (Used) by Investing Activities $ (9,040) $ 377,648 $ 69,801 ----------- ----------- ----------- 23

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 9. Continued 2002 2001 2000 - ----------------------------------------------------------------------------------- Cash Flows from Financing Activities Dividends paid to stockholders $(2,580,879) $(1,902,531) $(1,406,219) Exercise of stock options 109,770 -- -- ----------- ----------- ----------- Net Cash Used by Financing Activities (2,471,109) (1,902,531) (1,406,219) ----------- ----------- ----------- Net Increase in Cash 150,244 394,968 115,319 ----------- ----------- ----------- Cash, beginning of year 756,159 361,191 245,872 ----------- ----------- ----------- Cash, end of year $ 906,403 $ 756,159 $ 361,191 =========== =========== =========== The Company is required to obtain approval from state regulators before paying dividends. The Citizens Bank paid dividends of $2,592,317, $1,986,540 and $1,406,219 to the Company during the years ended December 31, 2002, 2001 and 2000, respectively. Note 10. 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 does 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, 2002 and 2001 was $1,740,496 and $2,068,168, respectively. Advances to related parties during the year ended December 31, 2002 totaled $3,168,658. Payments received from related parties during the year ended December 31, 2002 totaled $3,496,330. 24

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 11. 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, 2002 and 2001, commitments related to unused lines of credit were $29,079,857 and standby letters of credit were $479,850 and $444,500, respectively. 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 a material adverse effect on the Company's financial position or results of operations. 25

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 11. 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 3 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 12. 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 - -------------------------------------------------------------------------------- 2003 $ 62,604 2004 62,604 2005 62,604 2006 62,604 2007 58,644 ----------- $ 309,060 =========== The total rental expense included in the income statements for the years ended December 31, 2002, 2001 and 2000 is $64,281, and $66,962 and $26,913, respectively. 26

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 13. Benefit Plan 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 2002, 2001 and 2000, the Company's contributions were $358,520, $288,283 and $261,153, respectively. Deferred Compensation Plan - -------------------------- 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 retirement. Life insurance contracts have been purchased which may be used to fund payments under the plan. Net expenses related to this plan were $103,570, $81,456 and $74,972 for the plan years ended December 31, 2002, 2001 and 2000, respectively. Note 14. Regulatory Matters The Company is subject to various regulatory capital requirements administered by its primary federal regulator, the Federal Deposit Insurance Corporation (FDIC). 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. 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 Tier I capital to risk-weighted assets (as defined in the regulations) and Tier I capital to average assets (as defined in the regulations). 27

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 14. Continued 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: To Be Well For Capital Capitalized under Prompt Actual Adequacy Purposes Corrective Action Provisions ----------------------------------------------------------------------------------- Amount Ratio Amount Ratio Amount Ratio - ------------------------------------------------------------------------------------------------------------------ As of December 31, 2002 Total Capital (to Risk-Weighted Assets) Citizens Holding Company $ 49,262,962 16.02% $ 24,605,856 8.00% $ N/A --% Citizens Bank 47,794,683 15.55 24,596,462 8.00 30,745,577 10.00 Tier I Capital (to Risk-Weighted Assets) Citizens Holding Company 45,413,634 14.77 12,302,928 4.00 N/A -- Citizens Bank 43,946,805 14.29 12,298,231 4.00 18,447,346 6.00 Tier I Capital (to average Assets) Citizens Holding Company 45,413,634 8.83 20,569,960 4.00 N/A -- Citizens Bank 43,946,805 8.59 20,474,027 4.00 25,592,534 5.00 To Be Well For Capital Capitalized under Prompt Actual Adequacy Purposes Corrective Action Provisions ----------------------------------------------------------------------------------- Amount Ratio Amount Ratio Amount Ratio - ------------------------------------------------------------------------------------------------------------------ As of December 31, 2001 Total Capital (to Risk-Weighted Assets) Citizens Holding Company $ 48,562,374 18.40% $ 21,112,077 8.00% $ N/A --% Citizens Bank 47,286,697 17.93 21,103,291 8.00 26,379,114 10.00 Tier I Capital (to Risk-Weighted Assets) Citizens Holding Company 45,262,671 17.15 10,556,038 4.00 N/A -- Citizens Bank 43,988,350 16.68 10,551,646 4.00 15,827,468 6.00 Tier I Capital (to average Assets) Citizens Holding Company 45,262,671 10.51 17,224,286 4.00 N/A -- Citizens Bank 43,988,350 10.33 17,028,839 4.00 21,286,049 5.00 28

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 15. Fair Values of Financial Instruments The following represents the carrying value and estimated fair market value of the Company's financial instruments at December 31, 2002 and 2001: 2002 2001 --------------------------- --------------------------- Carrying Fair Carrying Fair Amount Value Amount Value - ------------------------------------------------------------------------------------------- Financial Assets Cash and due from banks $ 19,769,712 $ 19,769,712 $ 12,713,482 $ 12,713,482 Interest bearing deposits with banks 1,365,649 1,365,649 5,421,241 5,421,241 Securities available-for-sale 162,276,305 162,276,305 122,567,180 122,567,180 Net loans 303,952,527 305,656,861 260,903,091 262,408,345 Federal funds sold 2,300,000 2,300,000 6,100,000 6,100,000 Financial Liabilities Deposits $432,768,175 $433,735,968 $359,309,007 $360,147,682 Federal Home Loan Bank borrowings 24,606,135 24,606,135 14,628,788 14,628,788 The fair value estimates, methods and assumptions used by the Company in estimating its fair value disclosures for financial instruments were: Cash and Due from 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. 29

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 15. Continued 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 Federal Home Loan Bank 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. Note 16. 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 up to 105,000 shares of common stock. The price of each option shall be equal to the market price determined as of the option grant date. Options granted are exercisable after 6 months and shall expire after 10 years. Under the employees' incentive plan the Company may grant options 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 shall expire no later than 10 years from the grant date. The exercise price shall be equal to the market price of the Company's stock on the date of grant. 30

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 16. Continued The Company applies APB Opinion 25 in accounting for the compensation and long-term incentive plan. Accordingly, there was no compensation cost related to options granted during the years ending December 31, 2002, 2001 and 2000. Had compensation cost been determined on the basis of fair value pursuant to FASB Statement No. 123 using publicly traded share prices as a basis of determining fair values, net income and earnings per share would have been reduced as follows: 2002 2001 - -------------------------------------------------------------------------------- Net Income As reported $ 6,298,064 $ 5,710,898 Pro forma $ 6,187,674 $ 5,657,245 Basic Earnings Per Share As reported $ 1.27 $ 1.15 Pro forma $ 1.25 $ 1.14 Diluted Earnings Per Share As reported $ 1.26 $ 1.15 Pro forma $ 1.24 $ 1.14 The fair value of each option is estimated on the grant date using the Black-Scholes option pricing model. The following assumptions were made in estimating fair values in 2002 and 2001: Assumption 2002 2001 - -------------------------------------------------------------------------------- Dividend yield 1.5% 1.5% Risk-free interest rate 4% 6.25% Expected life 7 years 10 years Expected volatility 15.00% 16.05%

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2002, 2001 and 2000 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Note 16. Continued Following is a summary of the status of the plans for the years ending December 31, 2002 and 2001: Directors' Plan Employees' Plan --------------------------- ---------------------------- Weighted Weighted Number Average Number Average of Exercise of Exercise Shares Price Shares Price - -------------------------------------------------------------------------------------------------- Outstanding at January 1, 2001 40,800 $ 8.49 22,950 $ 9.51 Granted 15,000 10.83 6,000 11.25 Exercised -- -- -- -- Forfeited -- -- (1,500) 10.33 ------------ ------------ ------------ ------------ Outstanding at December 31, 2001 55,800 $ 9.12 27,450 $ 9.85 Granted 15,000 15.00 38,000 14.68 Exercised -- -- (11,550) 9.51 Forfeited -- -- -- ------------ ------------ ------------ ------------ Outstanding at December 31, 2002 70,800 $ 10.37 53,900 $ 13.33 Options exercisable at: December 31, 2001 55,800 $ 9.12 26,700 $ 9.85 ============ ============ ============ ============ December 31, 2002 70,800 $ 10.37 53,900 $ 13.33 ============ ============ ============ ============ Weighted average fair value of options granted during years ended: December 31, 2001 $ 3.83 $ 4.13 ============ ============ December 31, 2002 $ 5.22 $ 5.10 ============ ============

Financial Information: Corporate Headquarters 521 Main Street P. O. Box 209 Philadelphia, MS 39350 601-656-4692 Annual Stockholders Meeting The Annual Stockholder meeting of the Citizens Holding Company, Inc. will be held Tuesday, April 23, 2002 at 3:30 P.M. at the main office of The Citizens Bank, 521 Main Street, Philadelphia, Mississippi. Stock Registrar and Transfer Agent American Stock Transfer & Trust Company 40 Wall Street - 46th Floor New York, NY 10005 Form l0-K The Corporation's most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission, is available to stockholders upon request to the Treasurer of the Citizens Holding Company. Financial Contact Robert T. Smith Treasurer P.O. Box 209 Philadelphia, MS 39350 601-656-4692

Bank Officers Greg McKee President & CEO Danny Hicks Sr. Vice President Robert T. Smith Sr.Vice President & CFO Erdis Chaney Vice President & Cashier Tim Lofton Vice President & CIO Randy Cheatham Vice President Mike Guthrie Vice President Joe Foster Vice President & Trust Murray Johnson Vice President Jackie Hester Vice President & Marketing Kaye Johnson Vice President Stanley Salter Vice President Darrell Bates Vice President David Sharp Vice President Jean T. Fulton Vice President Gayle Sharp Vice President Lucille M. Myatt Assistant to the President Carolyn K. McKee Student Loan Officer Mark Majure Assistant Cashier Beth Branning Assistant Cashier

Pat Stokes Assistant Cashier Adriana Burt Assistant Cashier Mitch Peden Data Processing Officer Brad Copeland Assistant Cashier Sommer Vick Accounting Officer Mark Flake Data Processing Officer Barbara Lewis Assistant Cashier Carthage Branch Mike Brooks President J. Michael Ellis Vice President Billie Nell Dowdle Vice President Byron Hines Vice President Margaret Thompson Assistant Cashier Carol Wright Assistant Cashier Sebastopol Branch Linda Bennett President Union Branch Robert C. Palmer, Jr. President Karen Foster Assistant Vice President DeKalb Branch Steven Lockley Vice President

Kosciusko Branch Charlie Hudson President Joanne Sanders Assistant Cashier Scooba Branch Fran Knight Vice President Meridian Branch Charles Young President Mac Hodges Vice President Forest Branch Richard Latham Vice President Dymple Winstead Assistant Vice President Decatur Branch Ken Jones Vice President Louisville Branch Terry Woods President Edna Bell Vice President Marion Gardner Assistant Cashier Danny Parker Assistant Cashier Bruce Lee Assistant Cashier Mortgage Loan Department David Blair, Jr. Vice President Citizens Holding Company Officers: Steve Webb Chairman

Greg McKee President & CEO Carolyn K. McKee Secretary Robert T. Smith Treasurer Directors: M. G. Bond Retired Mississippi State Senator Karl Brantley Plant Manager U. S. Electrical Motors W. W. Dungan Partner McDaniel Timber Company Don Fulton President & General Manager Nemanco, Inc. Don L. Kilgore Attorney Alford, Thomas & Kilgore, P.A. David A. King Proprietor Philadelphia Motor Company Herbert A. King Civil Engineer King Engineering Associates, Inc. George R. Mars Retired Proprietor Mars Department Store William M. Mars Attorney Mars, Mars, Mars & Chalmers, P.A. Greg McKee President & CEO Citizens Holding Company and The Citizens Bank David P. Webb Attorney Phelps Dunbar, LLP

Steve Webb Chairman Citizens Holding Company and The Citizens Bank

EXHIBIT 23 Consent of Independent Auditors

CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Citizens Holding Company of our report dated January 31, 2003, included in the 2002 Annual Report to Shareholders of Citizens Holding Company. We also consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-89680) previously filed Citizens Holding Company of our report dated January 31, 2003, included in the 2002 Annual Report to Shareholders of Citizens Holding Company. /s/ Horne CPA Group Jackson, Mississippi March 28, 2003

EXHIBIT 99(a) Section 906 Certification of Chief Executive Officer

Certification of Chief Executive Officer Pursuant to 18 U.S.C. ss. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) In connection with the Annual Report on Form 10-K for the year ended December 31, 2002 of the Citizens Holding Company (the "Company"), as filed with the Securities Exchange Commission on the date hereof (the "Annual Report"), I, Greg L. McKee, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Greg L. McKee ----------------------------- Greg L. McKee, Chief Executive Officer

EXHIBIT 99(b) Section 906 Certification of Treasurer

Certification of Treasurer Pursuant to 18 U.S.C. ss. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) In connection with the Annual Report on Form 10-K for the year ended December 31, 2002 of the Citizens Holding Company (the "Company"), as filed with the Securities Exchange Commission on the date hereof (the "Annual Report"), I, Robert T. Smith, Treasurer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert T. Smith ---------------------------------------- Robert T. Smith, Treasurer