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, 2000 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 Identification Number) incorporation of organization) 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 shorted 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 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 8, 2001 Common stock, $.20 par value 3,308,750 Shares The aggregate market value of the voting stock held by non-affiliates of the Registrant on March 8, 2001 was $41,529,127. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference to Part I, II, and III of the Form 10-K report: 2000 Annual Report to Shareholders (Part II) and the Definitive Proxy Statement dated March 29, 2001 for Registrant's Annual Meeting of Stockholders to be held May 1, 2001 (Part III).

CITIZENS HOLDING COMPANY FORM 10-K INDEX PAGE ---- PART I ITEM 1. BUSINESS...................................................... 1 ITEM 2. PROPERTIES.................................................... 16 ITEM 3. LEGAL PROCEEDINGS............................................. 18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 18 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS........................................... 18 ITEM 6. SELECTED FINANCIAL DATA....................................... 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................... 20 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................................... 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 20 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...................................... 21 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............. 21 ITEM 11. EXECUTIVE COMPENSATION......................................... 21 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 21 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 21 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K....................................................... 21 SIGNATURES................................................................ 23

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; changes in asset quality and loan demand; (g) expectations about overall economic strength and the performance of the economics 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 96.64% 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, 2000, the Bank was the largest bank headquartered in Neshoba County with total assets of $381,557,740 and total deposits of $290,268,948. The principal executive office for both the Corporation and the Bank is 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 Corporation reflect the Corporation's activities or operations through the Bank. OPERATIONS The Corporation, through the Bank, engages in a wide range of commercial and personal banking activities, including accepting demand, 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 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 seven 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 Silverstar Casino and Resort (the "Casino"). The Casino and its related services employs approximately 2,500 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 loans, residential and commercial construction loans and loans for commercial real estate. Historically, approximately 63.3% of the Corporation's loan portfolio has been attributed to this category of lending. Another 15.7% of the Corporation's loan portfolio has been comprised of commercial, industrial and agricultural production loans, with consumer loans making up the remaining 21.0% 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. 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 consider general risk levels to be low. In addition to lending services, the Corporation provides a wide range of personal and corporate trusts and trust-related services, which include it 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 offers discount brokerage services through First Tennessee Bank. In 1996 the Corporation opened the Westside building in Philadelphia, Mississippi, replacing a smaller drive-up only facility. In early 1998, the Corporation opened a new full service facility in Kosciusko, Mississippi. The Corporation also expanded its ability to offer its customers broader options with their mortgage loan needs in 1999 with the acquisition of the assets of Three D Mortgage Company, with locations in Philadelphia and Kosciusko, Mississippi. The Corporation's Mortgage Department originates mortgage loans that are sold to the secondary market. 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 From 1978 until the present, Steve Webb has served as President and Chief Executive Officer of the Corporation and the Bank. In addition, Mr. Webb has served as a member of the Board of Directors of the Corporation from 1982 until the present and of the Bank from 1970 until the present. Mr. Webb currently serves as Chairman for the Boards of both the Corporation and the Bank.

Robert T. Smith has been employed by the Bank since 1986 and has been in his current position of Vice-President and Controller since January of 1987. In addition to his position with the Bank, in February of 1996, Mr. Smith was elected to serve as Treasurer of the Corporation. EMPLOYEES The Corporation has no compensated employees. At December 31, 2000, the Bank employed 144 full-time employees and 27 part-time employees. The Bank is not a party to any collective bargaining agreements, and employee relations are considered to be good. 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 commits any unsafe or unsound practice, 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 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. In addition, the Bank must obtain the prior approval of the Mississippi Department of Banking and Consumer Finance for the payment of any dividend. 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 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 merger, establishment of new branches or formation of bank holding companies. Different evaluation methods are used depending on the asset size of the bank. The FDIC examined the Bank on March 12, 1997 and again most recently on June 1, 1999, 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 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 Bank is no exception. The Bank competes with savings and loan associations, credit unions, production credit associations and federal land banks and with 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. ITEM 2. PROPERTIES The Corporation, through the Bank, currently operates from its main office in downtown Philadelphia, and from 13 additional branches in Neshoba, Newton, Leake, Scott, Attala, Lauderdale 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 Intersection of Hwys 35 & 16 Drive-up Carthage, Mississippi (601) 267-4525 Madden Branch Highway 488 Deposits Madden, Mississippi (601) 267-7366 Sebastopol Branch Main Street Loans Sebastopol, Mississippi Deposits (601) 625-7447

BANKING LOCATION/ FUNCTIONS NAME OF OFFICE TELEPHONE NUMBER OFFERED 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 (601) 289-4356 Scooba Branch 1048 Johnston Street Full Service Scooba, Mississippi (601) 476-8431 Meridian Branch 2209 E Hwy 45 North Loans Meridian, Mississippi Deposits (601) 693-8367 The Bank owns its main office and its branch offices, except for the Pearl River Branch Office and the Meridian Branch Office, which are 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. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings, other than routine litigation incidental to their business, to which the Corporation or the Bank is a party or which any of its property is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to the Corporation's shareholders during the fourth quarter of 2000.

PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK 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. At December 31, 2000, the Common Stock's closing price was $17.00. Dividends Declared 1999 High Low (per common share) - --------------------------------------------------------------------------------------- January - March N/A N/A 0.00 April - June N/A N/A 0.15 July - September N/A N/A 0.00 October - December 29.25 21.00 0.17 Dividends Declared 2000 High Low (per common share) - --------------------------------------------------------------------------------------- January - March 20.50 16.75 0.10 April - June 16.75 15.19 0.10 July - September 18.00 16.13 0.10 October - December 17.38 16.38 0.125 On March 9, 2001, the shares of Common Stock were held of record by approximately 466 shareholders. DIVIDENDS Dividends for 2000 totaled $.425 per share compared to $.32 in 1999 and $.24 in 1998. These dividends reflect a 33% increase in 2000 over 1999 and a 33% increase in 1999 over 1998. 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) 2000 1999 1998 1997 1996 -------------------------------------------------------------------------------- SUMMARY OF EARNINGS - ---------------------------------------------- Total interest income $ 28,638 $ 25,476 $ 23,956 $ 21,588 $ 20,369 Total interest expense 14,064 10,974 10,860 9,659 8,684 Provision for loan losses 918 849 846 740 791 Non-interest income 3,285 3,122 2,897 2,990 2,686 Non-interest expense 8,772 8,360 7,948 7,046 6,665 Income tax expense 2,635 2,793 2,487 2,561 2,407 Net Income 5,534 5,621 4,712 4,490 4,394 Per Share Data Earnings-basic and diluted $ 1.67 $ 1.70 $ 1.42 $ 1.36 $ 1.33 Cash dividends 0.425 0.32 0.24 0.17 0.15 Book value at year end 13.11 11.35 10.72 9.44 8.09 SELECTED YEAR END ACTUAL BALANCES - ---------------------------------------------- Loans, net of unearned income $252,022 $234,349 $211,349 $194,304 $177,005 Allowance for possible loan losses -3,325 -3,100 -2,900 -2,700 -2,500 Investment securities 103,533 102,451 91,539 67,292 72,472 Total assets 382,800 362,790 334,232 286,634 270,679 Deposits 289,908 284,462 282,242 248,984 229,443 Long term borrowings 10,000 10,000 10,000 0 33 Shareholders' equity 43,377 37,546 35,455 31,220 26,758 SELECTED YEAR END AVERAGE BALANCES - ---------------------------------------------- Loans, net of unearned income $244,307 $221,165 $202,228 $186,843 $168,542 Allowance for possible loan losses -3,198 -2,974 -2,701 -2,523 -2,342 Investment securities 102,325 97,219 79,401 70,023 76,138 Total assets 374,439 347,613 314,896 279,961 271,241 Deposits 290,704 288,176 268,514 242,459 238,358 Long term borrowings 10,000 10,000 7,630 3 35 Shareholders' equity 40,701 37,603 33,513 28,920 24,610 SELECTED RATIOS - ---------------------------------------------- Return on average assets 1.48% 1.62% 1.50% 1.60% 1.62% Return on average equity 13.60% 14.95% 14.08% 15.24% 17.77% Dividend payout 25.41% 18.84% 16.85% 12.52% 11.29% Equity to year end assets 11.33% 10.35% 10.61% 10.89% 9.89% Total risk-based capital to risk-adjusted assets 18.88% 18.52% 18.13% 17.02% 15.84% Leverage capital ratio 11.61% 11.06% 10.61% 10.46% 9.43% Efficiency ratio 47.20% 45.48% 48.01% 45.56% 45.29%

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, 2000, 1999, and 1998, required by this Item 7 can be found under the headings "Management's Discussion and Analysis" and "Consolidated Financial Statements" in the 2000 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 2000 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", "Consolidated Financial Statements" and "Quarterly Financial Trends" in the 2000 Annual Report to Shareholders, a copy of which is filed as an Exhibit to this Annual Report of Form 10-K. Such information is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.

PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding the Directors and Executive Officers of the Registrant required by this Item 10 can be found under the headings "Section 16(a) Beneficial Ownership Reporting Compliance", "Board of Directors", and Executive Compensation" in the Corporation's Definitive Proxy Statement dated March 29, 2001, relating to its 2001 Annual Meeting of Shareholders. Such information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information regarding the Executive Compensation paid by the Registrant required by this Item 11 can be found under the headings "Executive Compensation" and "Compensation of the Board of Directors" in the Corporation's Definitive Proxy Statement dated March 29, 2001, relating to its 2001 Annual Meeting of Shareholders. Such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding Security Ownership of Certain Beneficial Owners and Management can be found under the headings "Stock Ownership of Directors and Executive Officers" and "Ownership of Certain Beneficial Owners" in the Corporation's Definitive Proxy Statement dated March 29, 2001, relating to its 2001 Annual Meeting of Shareholders. Such information is incorporated herein by reference. 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 dated March 29, 2001, relating to its 2001 Annual Meeting of Shareholders. Such information is incorporated herein by reference.

PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements Consolidated Financial Statements and Supplementary Information for years ended December 31, 1998, 1999 and 2000, 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. None. (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 Directors' Deferred Compensation Plan - Form of Agreement * 10(a) Citizens Holding Company 1999 Directors' Stock * Compensation Plan 10(b) Citizens Holding Company 1999 Employees' Long-Term * Incentive Plan 13 2000 Annual Report to Shareholders 21 Subsidiaries of Registrant * 27 Financial Data Schedule * 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.

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. By: /s/ Steve Webb --------------------- STEVE WEBB CHAIRMAN, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR By: /s/ Robert T. Smith --------------------- ROBERT T. SMITH TREASURER DATE: March 21, 2001 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/ Don L. Fulton Director March 21, 2001 /s/ William M. Mars Director March 21, 2001 /s/ W. W. Dungan Director March 21, 2001 /s/ George R. Mars Director March 21, 2001 /s/ Steve Webb Director, President and March 21, 2001 Chief Executive Officer /s/ David A. King Director March 21, 2001

EXHIBIT INDEX 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 Directors' Deferred Compensation Plan - Form of Agreement * 10(a) Citizens Holding Company 1999 Directors' Stock * Compensation Plan 10(b) Citizens Holding Company 1999 Employees' Long-Term * Incentive Plan 13 2000 Annual Report to Shareholders 21 Subsidiaries of Registrant * * 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.

EXHIBIT 13 Dreams Dreams do come true Citizens Holding Company 2000 Annual Report

THREE DIFFERENT COUPLES THREE STAGES OF LIFE THREE DIFFERENT DREAMS

JON AND JAMIE OUT OF COLLEGE DREAMS OF MARRIAGE LOW ON FUNDS YOU PROVIDE THE DREAMS WE PROVIDE THE FUNDS

MAX AND KAREN RAISING TWO KIDS DREAMS OF A NEW HOME LOW ON FUNDS YOU PROVIDE THE DREAMS WE PROVIDE THE FUNDS

BILL AND IRENE ENTREPRENEURS DREAMS OF A BUSINESS LOW ON FUNDS YOU PROVIDE THE DREAMS WE PROVIDE THE FUNDS

Dear Stockholder: The year 2000 was a challenging year for financial institutions and we are fortunate that our earnings remained strong in an environment of rising interest rates and increased competition for deposits. If you have examined the earnings statement, you can see that net interest income increased slightly and non- interest earnings increased by $162,598. Non-interest expense only increased by a small amount but the increase in interest expense was significant due to the rapid increase in interest rates during the year. We could not re-price our loans and investments as rapidly as the rise in the cost of funding. This was the case with the entire industry and the effect has been decreased profits for most banks in the year 2000. Due in large part to our above average efficiency rating, we held up well with a 1.48% return on assets. Dividends paid to you in 2000, increased by 33% from the previous year, to $.42 1/2 per share. This increase reflects a positive trend during which your dividends have increased 300% since 1994. Although our dividend payout ratio of 25.4% of earnings in 2000 is conservative, it is more than double the ratio in 1996. This earnings retention has allowed us to build equity needed to cover our normal asset growth and strategic acquisitions. Total assets in 2000 grew $20,010,707 or 5.5% to $382,800,409 from $362,789,702 in 1999. Total deposits for the year advanced $5,446,118 or 1.9% for the year to $289,907,757. Net loans increased $17,448,204 or 7.5% to end the year at $248,696,755. Although loan demand continued to be strong due to the favorable economic conditions of our area, deposit growth was basically flat, consistent with an industry trend that reflects increased competition for deposits. Book value per share rose to $13.11 at year-end from $11.35 the previous year. During 2001 we will complete or have already completed several projects designed to enhance and expand our Bank operations. We expect to complete the acquisition of the Forest and Decatur branches of Union Planters Bank by the second quarter of this year. We are in the process of constructing a new building in Sebastopol to replace our existing Branch building. We have opened our new branch in Meridian and are expanding our services in that area. During the past year bank stocks in general have not performed well. In fact, many bank stocks are at their lowest levels in recent times. Our efforts to promote our stock were hampered by the overall financial stock environment and therefore we elected to conserve our promotional funds during this period and utilize them when economic conditions became more favorable for financial institutions. During 2000, management made presentations to brokerage firms and instituted a Dividend Reinvestment Plan. We are continuing to explore every opportunity to bring your company to the attention of the investing public. By second quarter 2001, we will have a Citizens Holding Company website that have financial statements, links to SEC filings, press releases, the Bank website and other information about the Company. As I review our past stock transaction activity, it was interesting to note that our stock sold for $7.00 to $9.00 per share during 1997. Recently our stock has been selling for approximately double that amount. Even though our stock price has doubled in this three-year period, we continue to believe that our stock at the current price is a bargain.

I would like to discuss what I see in the future for the Bank as this to me is of the utmost importance and your incentive to continue to own stock in this company. We are investing in technology and smart people, most of them smarter than I, you will be happy to hear. We offer banking on the Internet, which has no physical boundaries and this has been a learning experience. When we first established Internet banking, there were less than two hundred banks in the country that had Internet banking available to their customers. The last count I am aware of indicated there were over 1600 banks on the Internet and over 60 million people using Internet banking services. We have kept a strong capital base in order to take advantage of acquisitions as they present themselves and to allow for growth. I mentioned the acquisition of the two branches from Union Planters. We have done this with hardly a blip to our capital structure. We will continue to do this not just to get larger but when we see that we can prosper from it. I see abundant opportunity for this organization because we have a growing economy in which we can participate and an outstanding and loyal group of employees. I have attempted to write a little about where we have been, where we are now and where we are going. To quote someone, "The greatest thing in this world is not so much where we are, but in what direction we are going". Sincerely,

MANAGEMENT'S DISCUSSION AND ANALYSIS Operations as of 31, December 2000, 1999 & 1998 13 Overview 15 Net Interest Income 18 Provision for Loan Losses and Assets Quality 22 Non-Interest Income and Expense 23 Income Taxes 23 Securities 25 Loans 27 Deposits 28 Borrowings 29 Liquidity and Rate Sensitivity 32 Capital Resources 34 Inflation 35 Forward Looking Statements

Management's Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2000, 1999 and 1998 BACKGROUND Citizens Holding Company (the "Company") is a one-bank holding company that holds 96.64% 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, 2000, the Bank was the largest bank headquartered in Neshoba County with total assets of $381,557,740 and total deposits of $290,268,948. The principal executive office for both the Company and the Bank is 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 The Company continued in 2000 to show good growth for the period in assets and loans. Total assets at the end of 2000 were $382,800,409, an increase of 5.5% over 1999; net loans were $248,696,755, an increase of 7.5% and deposits increased to $289,907,757, an increase of 1.9%. Net income after taxes of the Company for 2000 decreased by 1.6% from 1999 to $5,534,365. Net income was affected in 2000 by an increase in interest paid on deposits and other borrowed money. Net income for 1999 and 1998 was up 19.3% and 4.9%, respectively, both years' net income being the result of a favorable interest rate environment and asset and loan growth. Net income for 2000 produced, on a fully diluted basis, earnings per share of $1.67 compared to $1.70 for 1999 and $1.42 for 1998. The Company's Return on Average Assets (ROA) was 1.48% in 2000 compared to 1.62% in 1999 and 1.50% in 1998 and our Return on Average Equity (ROE) was 13.60% in 2000, 14.95% in 1999 and 14.08% in 1998. ROA and ROE decreased in 2000 due mainly to the increase in interest costs. In 1999, ROE and ROA increased due to an increase in net interest income that was the result of a larger growth in interest earning assets than interest bearing liabilities and a larger decrease in the rates paid on interest bearing liabilities than interest earning assets. ROE has 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 9.43% in 1996 to 11.61% in 2000. 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. All dollar references in the following tables are in thousands except for per share data.

TABLE 1 - FIVE YEAR SUMMARY OF CONSOLIDATED STATEMENTS AND RELATED STATISTICS (amounts in thousands, except percent and per share data) 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------------ SUMMARY OF EARNINGS - ------------------------------------------ Total interest income $ 28,638 $ 25,476 $ 23,956 $ 21,588 $ 20,369 Total interest expense 14,064 10,974 10,860 9,659 8,684 Provision for loan losses 918 849 846 740 791 Non-interest income 3,285 3,122 2,897 2,990 2,686 Non-interest expense 8,772 8,360 7,948 7,046 6,665 Income tax expense 2,635 2,793 2,487 2,561 2,407 Net Income 5,534 5,621 4,712 4,490 4,394 Per Share Data Earnings-basic and diluted $ 1.67 $ 1.70 $ 1.42 $ 1.36 $ 1.33 Cash dividends 0.425 0.32 0.24 0.17 0.15 Book value at year end 13.11 11.35 10.72 9.44 8.09 SELECTED YEAR END ACTUAL BALANCES - ------------------------------------------ Loans, net of unearned income $252,022 $234,349 $211,349 $194,304 $177,005 Allowance for possible loan losses -3,325 -3,100 -2,900 -2,700 -2,500 Investment securities 103,533 102,451 91,539 67,292 72,472 Total assets 382,800 362,790 334,232 286,634 270,679 Deposits 289,908 284,462 282,242 248,984 229,443 Long term borrowings 10,000 10,000 10,000 0 33 Shareholders' equity 43,377 37,546 35,455 31,220 26,758 SELECTED YEAR END AVERAGE BALANCES - ------------------------------------------ Loans, net of unearned income $244,307 $221,165 $202,228 $186,843 $168,542 Allowance for possible loan losses -3,198 -2,974 -2,701 -2,523 -2,342 Investment securities 102,325 97,219 79,401 70,023 76,138 Total assets 374,439 347,613 314,896 279,961 271,241 Deposits 290,704 288,176 268,514 242,459 238,358 Long term borrowings 10,000 10,000 7,630 3 35 Shareholders' equity 40,701 37,603 33,513 28,920 24,610 SELECTED RATIOS - ------------------------------------------ Return on average assets 1.48% 1.62% 1.50% 1.60% 1.62% Return on average equity 13.60% 14.95% 14.08% 15.24% 17.77% Dividend payout 25.41% 18.84% 16.85% 12.52% 11.29% Equity to year end assets 11.33% 10.35% 10.61% 10.89% 9.89% Total risk-based capital to risk-adjusted assets 18.88% 18.52% 18.13% 17.02% 15.84% Leverage capital ratio 11.61% 11.06% 10.61% 10.46% 9.43% Efficiency ratio 47.20% 45.48% 48.01% 45.56% 45.29% 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 $14,403,000, $14,455,000 and $12,839,000 and the net interest margin percentage was 4.16%, 4.52% and 4.38% for the years 2000, 1999 and 1998, respectively. In 2000, the yield on earnings assets increased to 8.20% from 7.94% and the rate on interest-bearing liabilities increased to 4.82% from 4.11%. Earnings assets increased 8.2% while interest-bearing liabilities increased 8.8% in 2000. The larger increases in both volume and rate of interest-bearing liabilities combined to cause lower net interest income in 2000. In 1999, the yield on earning assets declined 15 basis points from 1998 but was overcome by a 38 basis point decline in the rate on interest-bearing liabilities. This combination was the main reason that the net interest margin increased to 4.52% in 1999. The net interest margin in 1998 declined from 1997 to 4.38% from 4.67% in 1997. The yield on earnings assets decreased to 8.09% from 8.41% and the rate on interest bearing liabilities declined to 4.49% from 4.57%. Again, the main reason for the change in the net interest margin was the change in interest rates. 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. Since deposit growth has been relatively flat during this same period, a large part of this growth was funded by the use of wholesale funding such as Federal Home loan Bank advances and Federal Funds Purchased.

TABLE 2 - AVERAGE BALANCE SHEETS AND INTEREST RATES Average Balance Income/Expense Average Yield/Rate 2000 1999 1998 2000 1999 1998 2000 1999 1998 ========================================================================================= Loans: Commercial Loans $221,671 $199,537 $181,931 $19,568 $17,138 $16,122 8.83% 8.59% 8.86% Installment Loans (Net) 21,572 20,751 20,297 2,319 2,199 2,185 10.75% 10.60% 10.77% ----------------------------------------------------------------------------------------- Total Loans 243,243 220,288 202,228 21,887 19,337 18,307 9.00% 8.78% 9.05% Investment Securities Taxable 79,533 80,075 70,801 5,067 4,729 4,213 6.37% 5.91% 5.95% Tax-exempt 22,370 16,143 8,600 1,438 1,191 565 6.43% 7.38% 6.57% ----------------------------------------------------------------------------------------- Total Investment Securities 101,903 96,218 79,401 6,505 5,920 4,778 6.38% 6.15% 6.02% Federal Funds Sold and Other 1,181 3,541 11,380 75 172 614 6.31% 4.78% 5.32% ----------------------------------------------------------------------------------------- Total Interest Earning Assets 346,327 320,047 293,009 28,467 25,429 23,699 8.20% 7.94% 8.09% ----------------------------------------------------------------------------------------- Non-Earning Assets 28,112 27,566 21,887 --------------------------------- Total Assets $374,439 $347,613 $314,896 ================================= Deposits: Interest-bearing Demand Dep $ 75,810 $ 77,820 $ 68,330 $ 2,333 $ 2,099 $ 1,958 3.08% 2.70% 2.87% Savings 19,271 19,481 18,201 672 603 678 3.44% 3.10% 3.72% Time 158,185 153,497 147,074 8,747 7,385 7,761 5.53% 4.81% 5.28% ----------------------------------------------------------------------------------------- Total Deposits 253,266 250,799 233,605 11,752 10,087 10,397 4.63% 4.02% 4.45% Borrowed Funds Short-term Borrowings 26,696 5,805 635 1,748 323 33 6.55% 5.49% 5.20% Long-term Borrowings 10,000 10,000 7,630 564 564 430 5.56% 5.56% 5.64% ----------------------------------------------------------------------------------------- Total Borrowed Funds 36,696 15,805 8,265 2,312 887 463 6.30% 5.53% 5.60% ----------------------------------------------------------------------------------------- Total Interest-Bearing Liabilities 289,962 266,604 241,870 14,064 10,974 10,860 4.82% 4.11% 4.49% Non-Interest Bearing Liabilities Demand Deposits 37,439 37,377 34,909 Other Liabilities 6,334 6,029 4,604 Shareholders' Equity 40,704 37,603 33,513 --------------------------------- Total Liabilities and Shareholders' Equity $374,439 $347,613 $314,896 ================================= INTEREST RATE SPREAD 3.38% 3.83% 3.60% ========================== NET INTEREST INCOME $14,403 $14,455 $12,839 ============================== NET INTEREST MARGIN 4.16% 4.52% 4.38% ========================== Table 3 - Net Interest Earning Assets illustrates net interest earning assets and liabilities for 2000, 1999, and 1998.

TABLE 3 - NET AVERAGE INTEREST EARNING ASSETS 2000 1999 1998 ------------------------------------------------------ Average interest earning assets $346,327 $320,047 $293,009 Average interest bearing liabilities 289,962 266,604 241,870 ------------------------------------------------------ Net average interest earning assets $ 56,365 $ 53,443 $ 51,139 ====================================================== Table 4 - Volume and Rate Analysis depicts the dollar effect of volume and rate changes from 1998 through 2000. 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 2000 change from 1999 1999 change from 1998 Volume Rate Total Volume Rate Total ------------------------------------------------------------------------------------------ INTEREST INCOME Loans 2,066 484 2,550 1,576 -546 1,030 Taxable Securities -34 372 338 546 -30 516 Non-Taxable Securities 400 -153 247 556 70 626 FHLB Account 4 9 13 -42 -14 -56 Federal Funds Sold -161 51 -110 -333 -53 -386 ------------------------------------------------------------------------------------------ TOTAL INTEREST INCOME $2,275 $ 763 $3,038 $2,303 -$573 $1,730 ------------------------------------------------------------------------------------------ INTEREST EXPENSE Interest-bearing demand deposits -62 296 234 256 -115 141 Savings Deposits -7 76 69 39 -114 -75 Time Deposits 259 1,103 1,362 309 -685 -376 Short-term borrowings 1,368 57 1,425 179 10 189 Long-term borrowings 0 0 0 230 5 235 ------------------------------------------------------------------------------------------ TOTAL INTEREST EXPENSE 1,558 1,532 3,090 1,013 -899 114 ------------------------------------------------------------------------------------------ NET INTEREST INCOME $ 717 -$769 -$52 $1,290 $ 326 $1,616 ========================================================================================== 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 .28% in 2000, .29% in 1999, .32% in 1998, .29% in 1997 and .35% in 1996. 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 $917,519 in 2000, $849,344 in 1999, $846,466 in 1998, $740,309 in 1997 and $790,761 in 1996. At the end of 2000, the allowance for loan losses was $3,325,000, an amount that management considers 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 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------------ BALANCE AT BEGINNING OF YEAR $ 3,100 $ 2,900 $ 2,700 $ 2,500 $ 2,300 LOANS CHARGED-OFF Commercial, financial and agricultural 186 320 364 326 287 Real estate - construction 0 0 0 0 0 Real estate - mortgage 26 74 10 13 41 Consumer 801 522 505 449 428 ------------------------------------------------------------------------------------ TOTAL CHARGE-OFFS 1,013 916 879 788 756 ------------------------------------------------------------------------------------ CHARGE-OFFS RECOVERED Commercial, financial and agricultural 121 122 55 89 41 Real estate - construction 0 0 0 0 0 Real estate - mortgage 24 0 3 0 0 Consumer 175 145 175 159 124 ------------------------------------------------------------------------------------ TOTAL RECOVERIES 320 267 233 248 165 ------------------------------------------------------------------------------------ Net loans charged-off 693 649 646 540 591 Current year provision 918 849 846 740 791 ------------------------------------------------------------------------------------ BALANCE AT END OF YEAR $ 3,325 $ 3,100 $ 2,900 $ 2,700 $ 2,500 ==================================================================================== Loans at year end $252,022 $234,349 $211,349 $191,605 $177,005 Ratio of allowance to loans at year end 1.32% 1.32% 1.37% 1.41% 1.41% Average loans - net of unearned $244,307 $221,165 $202,228 $186,843 $168,542 Ratio of net loans charged-off to average loans 0.28% 0.29% 0.32% 0.29% 0.35%

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31, 2000 1999 1998 1997 1996 -------------------------------------------------------------------------------- Commercial, financial and agricultural $1,000 $ 900 $ 850 $ 800 $ 700 Real estate - construction 250 225 225 225 200 Real estate - mortgage 650 600 575 550 525 Consumer 1075 1050 950 850 825 Unallocated 350 325 300 275 250 -------------------------------------------------------------------------------- Total $3,325 $3,100 $2,900 $2,700 $2,500 ================================================================================ COMPOSITION OF LOAN PORTFOLIO BY TYPE AT DECEMBER 31, 2000 1999 1998 1997 1996 ------------------------------------------------------------------------------------ Commercial, financial and agricultural 48.02% 47.52% 46.25% 46.08% 44.59% Real estate - construction 2.08% 3.02% 3.11% 2.30% 3.20% Real estate - mortgage 29.35% 28.43% 27.40% 27.50% 28.00% Consumer 20.55% 21.03% 23.24% 24.12% 24.21% ------------------------------------------------------------------------------------ 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 $589,788 in 2000 and the effect of such loan classification was to reduce interest income by $146,797. 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, 2000 1999 1998 1997 1996 ------------------------------------------------------ PRINCIPAL BALANCE - DOMESTIC Non-accrual $ 590 $ 390 $ 649 $ 344 $ 171 90 days or more past due 1,746 1,643 1,641 1,862 1,731 Troubled debt restructuring 0 0 0 0 0 ------------------------------------------------------ TOTAL DOMESTIC LOANS $ 2,336 $ 2,033 $ 2,290 $ 2,206 $ 1,902 ------------------------------------------------------ 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 $ 2,336 $ 2,033 $ 2,290 $ 2,206 $ 1,902 ====================================================== Income on non-accrual loans not recorded $ 147 $ 110 $ 135 $ 32 $ 21 Non-performing as a percent of loans 0.93% 0.87% 1.08% 1.15% 1.07% Other real estate owned $ 133 $ 292 $ 57 $ 10 $ 132 OREO as a percent of loans 0.05% 0.15% 0.03% 0.01% 0.07% Allowance as a percent of non-performing loans 142.34% 152.48% 126.64% 122.39% 131.44% 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 2000, 1999, 1998, 1997 and 1996. 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 1998 through 2000 and percentage changes between years is included in Table 7 - Non-interest Income and Expense. TABLE 7 - NON-INTEREST INCOME & EXPENSE % CHANGE % CHANGE 2000 FROM '99 1999 FROM '98 1998 ---------------------------------------------------------------------------------- NON-INTEREST INCOME Income from fiduciary activities $ 2 50.00% $ 2 100.00% $ 1 Service charges on deposit accounts 2,470 4.13% 2,372 8.91% 2,178 Other operating income 813 8.69% 748 4.18% 718 ---------------------------------------------------------------------------------- TOTAL NON-INTEREST INCOME $3,285 5.22% $3,122 7.77% $2,897 ================================================================================== NON-INTEREST EXPENSE Salaries and employee benefits $4,902 5.28% $4,656 -0.17% $4,664 Occupancy expense 1,386 1.54% 1,365 11.34% 1,226 Other operating expense 2,484 6.20% 2,339 13.65% 2,058 ---------------------------------------------------------------------------------- TOTAL NON-INTEREST EXPENSE $8,772 4.93% $8,360 5.18% $7,948 ================================================================================== Non-interest income typically consists of service charges on checking accounts and other financial services. With continued pressure on net interest income, 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 2000 was $3,284,820, an increase of $162,598 or 5.2% over 1999. 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. Similarly, non-interest income rose by $225,649 or 7.8% in 1999 over 1998. This increase was also due to increased fees from the addition of more deposit accounts and good earnings growth from the credit life subsidiary. 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 $411,663 or 4.9% in 2000 over 1999 and increased $412,736 in 1999 over 1998. The increases in both years were from normal growth activity in the Company. In 2000 the Company's efficiency ratio was 47.20% compared to 45.48% in 1999 and 48.01% in 1998. 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. INCOME TAXES The Corporation 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 Corporation's financial statement income and the federal statutory rate of 34% is interest on tax-exempt securities and loans. The Corporation's effective tax rate was 32.26%, 33.19%, and 34.54% in 2000, 1999 and 1998, respectively. Further tax information regarding the Corporation is disclosed in Note 5 to the consolidated financial statements. SECURITIES At December 2000, the Corporation 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 Corporation does not classify any securities as held to maturity or held for trading purposes. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and hedging activities and requires companies to recognize all derivatives as either assets or liabilities in the statement of financial position and measures those instruments at fair value. In 1999, SFAS No. 133 was amended to extend its effective date such that it is applicable to financial statements for all fiscal quarters beginning after June 15, 1999. Management does not believe that the implementation of SFAS No. 133 will have any impact on the financial statements of the Company because the Company does not engage in derivative or hedging activities.

Table 8 - Securities and Security Maturity Schedule summarizes the carrying value of securities from 1998 through 2000 and the maturity distribution at December 31, 2000, by classification. TABLE 8 - SECURITIES 2000 1999 1998 ------------------------------------------------ SECURITIES AVAILABLE FOR SALE U. S. Treasuries $ 41,341 $ 41,428 $37,879 U. S. Agencies 20,147 18,670 15,757 Mortgage Backed 15,925 19,466 23,556 States, Municipals and Other 26,120 22,887 14,347 ------------------------------------------------ TOTAL SECURITIES AVAILABLE FOR SALE $103,533 $102,451 $91,539 ------------------------------------------------ SECURITIES HELD TO MATURITY TOTAL SECURITIES HELD TO MATURITY $ 0 $ 0 $ 0 ------------------------------------------------ TOTAL SECURITIES $103,533 $102,451 $91,539 ================================================

SECURITIES MATURITY SCHEDULE 1 year and 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. Treasuries $27,622 6.04% $13,719 6.16% $ 0 0.00% $ 0 0.00% U. S. Agencies 0 0.00% 9,248 6.62% 8,999 6.83% 1,913 7.35% Mortgage Backed 0 0.00% 1,464 6.41% 2,319 7.18% 12,129 6.88% States, Municipal and Other (1) 1,020 6.54% 6,878 6.67% 4,082 7.24% 14,140 7.48% ----------------------------------------------------------------------------------- TOTAL AVAILABLE-FOR-SALE $28,642 6.06% $31,309 6.42% $15,400 6.99% $28,182 7.21% =================================================================================== 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 2000 and 1999 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.

In general, the loan growth experienced in 2000 was due to a continuation of the overall growth in the area that is served by the Company. 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 $7,447,552 or 11.1% in 2000, $8,738,416 or 14.90% in 1999, and $4,518,516 or 8.35% in 1998. Commercial and agricultural loans also showed large growth during this period. These loans grew $9,777,317 or 8.7% in 2000, $13,678,304 or 13.8% in 1999, and $8,265,632 or 9.1% in 1998. 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 $2,554,094 or 5.1% in 2000, $106,008 or .2% in 1999 and $2,268,148 or 4.78% in 1998. 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, 2000 1999 1998 1997 1996 --------------------------------------------------------------------------- Commercial, financial and agricultural $122,412 $112,634 $ 98,956 $ 90,690 $ 81,089 Real estate - construction 5,310 7,157 6,645 4,533 5,826 Real estate - mortgage 74,824 67,376 58,637 54,119 50,916 Consumer 52,394 49,840 49,734 47,466 44,015 --------------------------------------------------------------------------- TOTAL LOANS $254,940 $237,007 $213,972 $196,808 $181,846 ===========================================================================

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, 2000 1 YEAR 1 - 5 OVER 5 AND LESS YEARS YEARS Total ---------------------------------------------------------------- Commercial, financial and agricultural $40,936 $ 50,845 $30,631 $122,412 Real estate - construction 4,434 716 161 5,311 Real estate - mortgage 8,999 58,354 7,471 74,824 Consumer 22,844 28,785 764 52,393 ---------------------------------------------------------------- Total loans $77,213 $138,700 $39,027 $254,940 ================================================================ SENSITIVITY TO CHANGES IN INTEREST RATES 1 - 5 OVER 5 YEARS YEARS -------------------------------- Fixed rates $136,622 $24,000 Variable rates 2,078 15,027 -------------------------------- Total loans $138,700 $39,027 ================================ 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 2000 1999 1998 ----------------------------------------------------------------------------------------- Average Average Average Average Average Average Balance Rate Balance Rate Balance Rate ----------------------------------------------------------------------------------------- Noninterest-bearing $ 37,438 $ 37,378 $ 34,909 Interest-bearing demand 75,810 3.08% 77,820 2.69% 68,330 2.87% Savings 19,271 3.43% 19,481 3.09% 18,201 3.73% Certificates of deposit 158,185 5.53% 153,497 4.81% 147,074 5.28% ----------------------------------------------------------------------------------------- $290,704 3.50% $288,176 3.50% $268,514 3.88% ========================================================================================= MATURITY RANGES OF TIME DEPOSITS OF $100,000 OR MORE AT DECEMBER 31, 2000 ------------- 3 months or less $23,754 3 through 6 months 33,101 6 through 12 months 6,542 over 12 months 615 ------------- $64,012 ============= 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, 2000 1999 1998 --------------------------------------------------- Federal Home Loan Bank borrowings Year-end balance $32,000 $13,100 $ 0 Weighted average rate 6.39% 5.93% 0.00% Maximum month-end balance $32,000 $13,100 $ 0 Year to date average balance $14,389 $ 1,762 $ 0 Weighted average rate 6.61% 5.58% 0.00% 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 $92,171,500 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 2000, had long-term debt in the amount of $10,000,000 to the Federal Home Loan Bank for advances and $2,520,290 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, 2000 is listed below. 2000 ---------------- Less than one year $ 0 One year to three years 20 Over three years 12,500 ---------------- Total Long-term borrowings $12,520 ================ 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 are 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 2000 and 1999.

TABLE 13 - FUNDING USES AND SOURCES 2000 1999 -------------------------------------------------------------------------------------- Average Increase/(decrease) Average Increase/(decrease) Balance Amount Percent Balance Amount Percent -------------------------------------------------------------------------------------- FUNDING USES - ------------------------------------ Loans, net of unearned $244,307 $23,142 10.46% $221,165 $18,937 9.36% Taxable securities 79,533 -541 0.68% 80,074 9,273 13.10% Tax-exempt securities 22,370 6,227 38.57% 16,143 7,543 87.71% Federal funds sold and other 1,181 -2,360 -66.60% 3,541 -6,263 -63.88% -------------------------------------------------------------------------------------- TOTAL USES $347,391 $26,468 8.49% $320,923 $29,490 10.03% ====================================================================================== FUNDING SOURCES - ------------------------------------ Noninterest-bearing deposits $ 37,439 $ 62 0.17% $ 37,377 $ 2,468 7.07% Interest-bearing demand and savings deposits 95,081 -2,220 -2.28% 97,301 10,770 12.45% Time Deposits 158,185 4,688 3.05% 153,497 6,423 4.37% Short-term borrowings 26,696 20,891 359.88% 5,805 5,170 814.17% Long-term debt 12,671 -5 -0.04% 12,676 5,046 66.13% -------------------------------------------------------------------------------------- TOTAL SOURCES $330,072 $23,416 7.64% $306,656 $29,877 10.79% ====================================================================================== 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, 2000. 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, 2000 1 - 90 91 - 365 1 - 5 Over Days Days Years 5 years Total ---------------------------------------------------------------------------- INTEREST EARNING ASSETS - --------------------------------------------- Loans $ 59,062 $ 63,896 $112,450 $13,288 $248,696 Investment securities 5,548 24,644 28,076 42,766 101,034 Federal Home Loan Bank Account 863 0 0 0 863 Federal Funds Sold 3,100 0 0 0 3,100 ---------------------------------------------------------------------------- TOTAL INTEREST BEARING ASSETS $ 68,573 $ 88,540 $140,526 $56,054 $353,693 ============================================================================ INTEREST BEARING LIABILITIES - --------------------------------------------- Interest bearing demand deposits $ 68,499 $ 0 $ 0 $ 0 $ 68,499 Savings deposits 19,054 0 0 0 19,054 Time deposits 61,520 90,628 13,245 0 165,393 Short term borrowings 32,700 0 0 0 32,700 Long term borrowings 0 20 12,500 0 12,520 ---------------------------------------------------------------------------- TOTAL INTEREST BEARING LIABILITIES $ 181,773 $ 90,648 $ 25,745 $ 0 $298,166 ============================================================================ Rate sensitive gap -$113,200 -$2,108 $114,781 $56,054 $ 55,527 Rate sensitive cumulative gap -113,200 -115,308 -527 55,527 Cumulative gap as a percentage of total earning assets -32.01% -32.60% -0.15% 15.70% 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 time period as of December 31, 2000 was mainly due to: (1) the interest-bearing and savings deposits being classified in the 1-90 day category; (2) approximately 92% 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 (AFDICIA@) 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%, and a total capital ratio of at least 10.00%, and 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, in addition to the institution being 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, 2000, 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. Although the Company has not made an acquisition since 1995, we remain committed to acquire banks or branches that fit into our banking plan. 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, 2000 1999 1998 ------------------------------------------- Tier 1 capital Shareholders' equity $ 43,377 $ 37,546 $ 35,456 Less: Intangibles -654 -650 -717 Add/less: Unrealized loss/(gain) on -161 1,542 -930 securities Add: Minority interest in equity accounts of unconsolidated subsidiaries 1,452 1,261 1,200 ------------------------------------------ TOTAL TIER 1 CAPITAL $ 44,014 $ 39,699 $ 35,009 ========================================== Total capital Tier 1 capital $ 44,014 $ 39,699 $ 35,009 Allowable allowance for loan losses 3,124 2,876 2,597 ------------------------------------------ TOTAL CAPITAL $ 47,138 $ 42,575 $ 37,606 ========================================== RISK WEIGHTED ASSETS $249,683 $229,898 $207,437 ========================================== AVERAGE ASSETS (FOURTH QUARTER) $379,130 $358,995 $330,079 ========================================== RISK BASED RATIOS TIER 1 17.63% 17.27% 16.88% ========================================== TOTAL CAPITAL 18.88% 18.52% 18.13% ========================================== LEVERAGE RATIOS 11.61% 11.06% 10.61% ========================================== 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. FORWARD LOOKING STATEMENTS The discussion in this Management's Discussion and Analysis of Financial Condition and Results of Operations may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to such matters as (a) assumptions concerning future economic and business conditions and their effect on the economy in general and on the markets in which the Company and the Bank do business, and (b) expectations for increased revenues and earnings for the Company and Bank through growth resulting from acquisitions, attraction of new deposit and loan customers and the introduction of new products and services. Such forward-looking statements are based on assumptions rather than historical or current facts and, therefore, are inherently uncertain and subject to risk. 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 Bank's business include, but are 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; changes in asset quality and loan demand; (g) expectations about overall economic strength and the performance of the economics 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 forwarding-looking statements subsequent to the date on which they are made.

CITIZENS HOLDING COMPANY AND SUBSIDIARY Philadelphia, Mississippi Audited Consolidated Financial Statements Years Ended December 31, 2000, 1999, and 1998

CONTENTS - ----------------------------------------------------------------------------- Independent Auditor's Report 37 - ----------------------------------------------------------------------------- Consolidated Financial Statements Consolidated Balance Sheets 38 Consolidated Statements of Income 39 Consolidated Statements of Comprehensive Income 40 Consolidated Statements of Changes in Stockholders' Equity 41 Consolidated Statements of Cash Flows 42 Notes to Consolidated Financial Statements 44 - -----------------------------------------------------------------------------

[HORNE CPA GROUP - LOGO] INDEPENDENT AUDITOR'S REPORT Board of Directors Citizens Holding Company Philadelphia, Mississippi We have audited the accompanying consolidated balance sheets of Citizens Holding Company and Subsidiary as of December 31, 2000 and 1999, 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, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Citizens Holding Company and Subsidiary and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2000, in conformity with generally accepted accounting principles. /s/ Horne CPA Group - ------------------------------ Horne CPA Group Jackson, Mississippi January 18, 2001

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Balance Sheets December 31, 2000 and 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 10,415,155 $ 13,312,028 Interest bearing deposits with other banks 863,371 182,042 Federal funds sold 3,100,000 - Securities Available for Sale, at Fair Value (amortized cost of $103,281,306 in 2000, and $104,799,083 in 1999) 103,533,174 102,451,360 Loans, net of allowance for loan losses of $3,325,000 in 2000 and $3,100,000 in 1999 248,696,755 231,248,551 Bank premises, furniture, fixtures and equipment, net 4,362,206 4,410,976 Real estate acquired by foreclosure 133,325 291,508 Accrued interest receivable 4,726,113 3,683,849 Cash value of life insurance 3,019,454 2,828,265 Goodwill, net 654,160 649,854 Other assets 3,296,696 3,731,269 -------------------------------------------------------- Total Assets $ 382,800,409 $ 362,789,702 ======================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest bearing demand deposits $ 36,961,489 $ 37,090,779 Interest bearing NOW and money market accounts 68,499,167 74,616,711 Interest bearing time deposits 165,393,512 152,722,496 Interest bearing savings deposits 19,053,589 20,031,653 -------------------------------------------------------- Total deposits 289,907,757 284,461,639 Federal funds purchased - 10,600,000 Federal Home Loan Bank advances 42,000,000 23,100,000 Treasury tax and loan advances 700,000 700,000 Accrued interest payable 1,597,445 1,242,916 Directors deferred compensation payable 916,256 812,130 Other Liabilities 2,849,999 3,066,407 -------------------------------------------------------- Total Liabilities 337,971,457 323,983,092 -------------------------------------------------------- Commitments and Contingencies Minority interest 1,451,991 1,260,649 Stockholders' Equity Common stock, $.20 par value, authorized 15,000,000 shares; 3,353,750 shares issued at 2000 and 1999 670,750 670,750 Additional paid in capital 3,353,127 3,353,127 Accumulated other comprehensive income (loss), net of deferred tax asset (liability) of $(85,635) in 2000 and $821,577 in 1999 160,834 (1,542,020) Retained earnings 39,431,650 35,303,504 -------------------------------------------------------- 43,616,361 37,785,361 Less cost of treasury stock - 45,000 shares at 2000 and 1999 (239,400) (239,400) -------------------------------------------------------- Total Stockholders' Equity 43,376,961 37,545,961 -------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 382,800,409 $ 362,789,702 ======================================================== The accompanying notes are an integral part of these statements. 2

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Income Years Ended December 31, 2000, 1999, and 1998 2000 1999 1998 - ----------------------------------------------------------------------------------------------------- Interest Income Interest and fees on loans $ 22,280,018 $ 19,607,524 $ 18,472,801 Interest on securities Taxable 5,066,547 4,840,807 4,424,809 Non-taxable 1,073,142 799,867 444,566 Other interest 218,392 227,354 614,469 ----------------------------------------------------- Total Interest Income 28,638,099 25,475,552 23,956,645 ----------------------------------------------------- Interest Expense Deposits 11,751,889 10,087,438 10,397,077 Other borrowed funds 2,312,030 886,774 463,051 ----------------------------------------------------- Total Interest Expense 14,063,919 10,974,212 10,860,128 ----------------------------------------------------- Net Interest Income 14,574,180 14,501,340 13,096,517 Provision for loan losses (917,519) (849,344) (846,466) ----------------------------------------------------- Net Interest Income After Provision for Loan Losses 13,656,661 13,651,996 12,250,051 ----------------------------------------------------- Non-Interest Income Service charges on deposit accounts 2,470,018 2,371,809 2,177,631 Other service charges and fees 383,558 289,420 259,826 Other income 431,244 460,993 459,116 ----------------------------------------------------- Total Non-Interest Income 3,284,820 3,122,222 2,896,573 ----------------------------------------------------- Non-Interest Expense Salaries and employee benefits 4,901,589 4,656,363 4,663,908 Occupancy expense 654,037 552,348 533,091 Equipment expense 731,878 813,000 693,107 Earnings applicable to minority 190,393 196,475 163,662 Other expense 2,294,008 2,142,056 1,893,738 ----------------------------------------------------- Total Non-Interest Expense 8,771,905 8,360,242 7,947,506 ----------------------------------------------------- Income before income taxes 8,169,576 8,413,976 7,199,118 Income tax expense 2,635,211 2,792,620 2,486,682 Net Income $ 5,534,365 $ 5,621,356 $ 4,712,436 ===================================================== Net Income Per Share - Basic and Diluted $ 1.67 $ 1.70 $ 1.42 ===================================================== Average Shares Outstanding: Basic 3,308,750 3,308,750 3,308,750 ===================================================== Diluted 3,316,834 3,316,023 3,308,750 ===================================================== 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, 2000, 1999, and 1998 2000 1999 1998 - --------------------------------------------------------------------------------------------------- Net Income $ 5,534,365 $ 5,621,356 $ 4,712,436 -------------------------------------------------- Other Comprehensive Income (Loss), Net of Tax Unrealized holding gains (losses) during year 1,748,548 (2,471,959) 297,553 Less reclassification adjustment for gains (losses) included in net income 45,694 (54) (18,940) -------------------------------------------------- Total Other Comprehensive Income (Loss) 1,702,854 (2,471,905) 316,493 -------------------------------------------------- Comprehensive Income $ 7,237,219 $ 3,149,451 $ 5,028,929 ================================================== The accompanying notes are an integral part of these statements. 4

CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Changes in Stockholders' Equity Years Ended December 31, 2000, 1999, and 1998 Accumulated Number Additional Other of Shares Common Paid-In Comprehensive Retained Treasury Issued Stock Capital Income (Loss) Earnings Stock Total - --------------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 670,750 $ 670,750 $ 3,353,127 $ 613,39 $ 26,822,612 $ (239,400) 31,220,481 Net income - - - 4,712,436 - 4,712,436 Dividends paid - - - (794,100) - (794,100) Other comprehensive income, net - - - 316,49 - - 316,493 ------------------------------------------------------------------------------------------------------ Balance, December 31, 1998 670,750 670,750 3,353,127 929,88 30,740,948 (239,400) 35,455,310 Net income - - - 5,621,356 - 5,621,356 Dividends paid - - - (1,058,800) - (1,058,800) 5 for 1 stock split 2,683,000 - - - - - Other comprehensive loss, net - - - (2,471,90) - - (2,471,905) ------------------------------------------------------------------------------------------------------ Balance, December 31, 1999 3,353,750 670,750 3,353,127 (1,542,02 35,303,504 (239,400) 37,545,961 Net income - - - 5,534,365 - 5,534,365 Dividends paid - - - (1,406,219) - (1,406,219) Other comprehensive income, net - - - 1,702,85 - - 1,702,854 ------------------------------------------------------------------------------------------------------ Balance, December 31, 2000 3,353,750 $ 670,750 $ 3,353,127 $ 160,83 $ 39,431,650 $ (239,400) $ 43,376,961 ===================================================================================================== The accompanying notes are an integral part of these statements. 5

Page 1 of 2 CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31, 2000, 1999, and 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities Net income $ 5,534,365 $ 5,621,356 $ 4,712,436 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 476,585 526,778 450,039 Amortization of goodwill 72,110 67,008 67,008 Amortization of premiums and accretion of discounts on investment securities (108,863) (68,773) (46,683) Provision for loan losses 917,519 849,344 846,466 Investment securities (gains) losses (45,694) 54 18,940 Deferred income tax benefit (79,528) (49,041) (113,214) Net earnings applicable to minority interest 190,343 61,021 93,876 (Increase) decrease in real estate acquired by foreclosure 158,183 (234,414) (47,174) (Increase) decrease in accrued interest receivable (1,042,264) 13,260 (543,241) Increase in cash value of life insurance (191,189) (311,904) (298,748) Increase in other assets (302,250) (322,880) (439,529) Increase (decrease) in income taxes payable 30,577 - (34,029) Increase (decrease) in accrued interest payable 354,529 (31,143) (41,998) Increase in directors deferred compensation 104,126 93,262 88,557 Increase (decrease) in other liabilities (398,390) 424,692 (2,110) -------------------------------------------------------- Net Cash Provided by Operating Activities 5,670,159 6,638,620 4,710,596 -------------------------------------------------------- Cash Flows from Investing Activities Proceeds from maturities of securities available for sale 15,705,000 19,931,583 18,965,865 Proceeds from sales of securities available for sale 12,442,879 3,998,853 11,812,981 Purchases of investment securities (26,479,943) (38,580,853) (54,505,473) Purchases of bank premises, furniture, fixtures and equipment (427,815) (504,102) (632,872) Decrease (increase) in interest bearing deposits with other banks (681,329) 881,202 (915,803) Net (increase) decrease in federal funds sold (3,100,000) 4,500,000 1,000,000 Net increase in loans (18,365,723) (23,648,480) (17,691,166) -------------------------------------------------------- Net Cash Used by Investing Activities (20,906,931) (33,421,797) (41,966,468) -------------------------------------------------------- 6

Page 2 of 2 CITIZENS HOLDING COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31, 2000, 1999, and 1998 2000 1999 1998 - ----------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities Net increase (decrease) in federal funds purchased $ (10,600,000) $ 600,000 $ 10,000,000 Net increase in deposits 5,446,118 2,219,411 33,258,683 Dividends paid to stockholders (1,406,219) (1,058,800) (794,100) Net increase in Federal Home Loan Bank advances 18,900,000 23,100,000 - ------------------------------------------------------ Net Cash Provided by Financing Activities 12,339,899 24,860,611 42,464,583 ------------------------------------------------------ Net Increase (Decrease) in Cash and Due from Banks (2,896,873) (1,922,566) 5,208,711 Cash and due from banks, beginning of year 13,312,028 15,234,594 10,025,883 ------------------------------------------------------ Cash and due from banks, end of year $ 10,415,155 $ 13,312,028 $ 15,234,594 ====================================================== Supplemental Disclosures of Cash Flow Information Cash paid for Interest $ 13,717,444 $ 11,005,355 $ 10,902,126 ====================================================== Income taxes $ 2,744,590 $ 2,923,786 $ 2,647,655 ====================================================== Supplemental Schedule of Noncash Activities Unrealized gain (loss) on securities available for sale $ 2,594,194 $ (3,806,280) $ 494,841 ====================================================== Increase (decrease) in deferred income tax liability on unrealized gain (loss) on securities $ (891,340) $ 1,317,486 $ (168,246) ====================================================== Minority interest on unrealized gain (loss) on securities $ 87,113 $ (16,889) $ 10,102 ====================================================== The accompanying notes are an integral part of these statements. 7

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 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 generally accepted accounting principles 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. 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. 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. Estimates - --------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, 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. 8

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. CONTINUED 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 allowances for losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties. A portion of the Company's loan portfolio consists of loans secured by residential property in the east central Mississippi area. The regional economy depends heavily on light industry, agriculture, and the gaming industry. Accordingly, the ultimate collectibility of a substantial portion of the Company's loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions. 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 allowances for losses on loans and foreclosed real estate may change materially in the near term. Trust Assets - ------------ Assets held by the Trust Department of Citizens Bank in fiduciary or agency capacities are not assets of the Company and are not included in the financial statements. Cash and Due from Banks - ----------------------- Cash and due from banks consist of cash on hand and demand deposits with banks. Cash flows from loans originated by the Company, deposits, and federal funds purchased and sold are reported at net in the statements of cash flows. The Company is required to maintain average reserve balances with the Federal Reserve Bank based on a percentage of deposits. The average amount of those reserves for the year ended December 31, 2000 was $1,500,000. Securities Available for Sale - ----------------------------- Securities available for sale are reported at fair value with unrealized gains and losses net of income taxes reported as other comprehensive income. 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. The Company classifies all of its portfolio, which consists 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. 9

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. CONTINUED Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in other income. The amortization of premiums and accretion of discounts are recognized in interest income, using the interest method. Loans and Allowances for Loan Losses - ------------------------------------ Loans are reported at the principal amount outstanding, net of unearned discounts and unearned finance charges. Unearned discounts on installment loans are recognized as income over the terms of the loans by a method which approximates the interest method. Unearned finance charges and interest on commercial loans are recognized based on the principal amount outstanding. 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. These evaluations take into consideration such factors as the Company's past loan loss experience, composition of the loan portfolio, adverse situations that may affect the borrowers' ability to pay, the estimated value of any underlying collateral, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change. 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 on impaired loans is discontinued when, in management's opinion, the borrower may be unable to meet payments as they become due. Any unpaid interest previously accrued on nonaccrual loans is reversed from income to charges to the allowance for loan losses. Interest income, generally, is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. Bank Premises, Furniture, Fixtures, and Equipment - ------------------------------------------------- Bank premises and equipment are stated at cost less accumulated depreciation computed on the straight-line basis for buildings and on an accelerated method for fixtures and equipment. 10

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. CONTINUED 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 appraised 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 reappraisals or losses resulting from disposition of such property are expensed. 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 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. Citizens Holding Company files a consolidated Federal income tax return. Citizen Bank remits to Citizens Holding Company amounts determined to be currently payable. 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 3,308,750 for each of the years ended December 31, 2000, 1999 and 1998. Diluted net income per share is based on the weighted average number of shares of common stock outstanding for the periods, including dilutive potential common equivalent shares which reflect the dilutive effect of the Company's outstanding stock options. Dilutive common equivalent shares for the years ended December 31, 2000 and 1999 were 8,084 and 7,273, respectively, all attributable to stock options. There were no common equivalent shares outstanding in 1998. Off-Balance Sheet Financial Instruments - --------------------------------------- In the ordinary course of business the Company has entered into off-balance- sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the financial statements when they become payable. 11

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. CONTINUED Goodwill - -------- Goodwill is amortized over an estimated useful life of 15 years. 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. The investment, which is included in other assets, totaled $1,238,205 and $1,110,278 at December 31, 2000 and 1999, respectively. Income from the investment for the years ended December 31, 2000, 1999, and 1998 included in other income totaled $127,927, $214,835, and $190,011, respectively. Reclassifications - ----------------- Certain reclassifications were made to the financial statement amounts from the prior year in order to facilitate comparability. Recent Pronouncements - --------------------- In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. During 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133-an amendment of FASB Statement No. 133," which concluded that it was appropriate to defer the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. The Company does not expect that the adoption of this statement will have a material effect on its financial position or results of operations. 12

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1. CONTINUED In September 2000, 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, 2000. The adoption of this statement will not have a material effect on the Company's financial position or results of operations. NOTE 2. INVESTMENT SECURITIES The amortized cost of investment securities and their market values at December 31, 2000 and 1999, were as follows: 2000 ------------------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR AVAILABLE FOR SALE COST GAINS LOSSES VALUE - ---------------------------------------------------------------------------------------------------------- U.S. Treasury Direct $ 41,101,850 $ 271,274 $ 31,994 $ 41,341,130 U.S. Agency 20,068,853 149,635 71,523 20,146,965 Mortgage-backed securities 15,937,226 89,029 101,599 15,924,656 State, county and municipals 23,674,377 284,577 337,531 23,621,423 Federal Home Loan Bank stock 2,499,000 - - 2,499,000 ------------------------------------------------------------------- $ 103,281,306 $ 794,515 $ 542,647 $ 103,533,174 =================================================================== 1999 ------------------------------------------------------------------- GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED FAIR AVAILABLE FOR SALE COST GAINS LOSSES VALUE - ---------------------------------------------------------------------------------------------------------- U.S. Treasury Direct $ 41,601,900 $ 98,168 $ 271,728 $ 41,428,340 U.S. Agency 19,275,580 21,994 627,733 18,669,841 Mortgage-backed securities 19,940,076 40,789 515,006 19,465,859 State, county and municipals 22,697,527 29,515 1,123,722 21,603,320 Federal Home Loan Bank stock 1,284,000 - 1,284,000 ------------------------------------------------------------------- $ 104,799,083 $ 190,466 $ 2,538,189 $ 102,451,360 =================================================================== 13

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 2. CONTINUED U.S. Government and municipal securities with an amortized cost of $87,690,044 (market value $87,852,839) at December 31, 2000, and $83,889,814 (market value $82,166,708) at December 31, 1999, were pledged to secure public and trust deposits and for other purposes as required by law. 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: 2000 1999 1998 - --------------------------------------------------------------------------- Gross realized gains $ 64,880 $ 3,713 $ 3,409 Gross realized losses (19,186) (3,767) (22,349) ----------------------------------------- $ 45,694 $ (54) $ (18,940) ========================================= The amortized cost and fair values of the maturities of investment securities at December 31, 2000, were as follows: AMORTIZED Fair COST Value - -------------------------------------------------------------------------------- Due in one year or less $ 30,823,967 $ 30,876,353 Due in one to five years 43,166,286 43,371,792 Due from five to ten years 13,150,060 13,264,471 Due after ten years 16,140,993 16,020,558 $ 103,281,306 $ 103,533,174 ===================================== The amortized cost and fair value of mortgage-backed securities are presented by contractual maturity in the preceding table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations without call or prepayment penalties. 14

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 3. LOANS The components of loans in the consolidated balance sheets were as follows: 2000 1999 CARRYING CARRYING AMOUNT AMOUNT - ------------------------------------------------------------------------------ Commercial, financial and agricultural $ 122,411,768 $ 112,634,451 Real estate - construction 5,310,937 7,156,904 Real estate - mortgage 74,823,572 67,376,020 Consumer 52,393,799 49,839,705 --------------------------------- 254,940,076 237,007,080 Unearned discount (2,918,321) (2,658,529) Allowance for loan losses (3,325,000) (3,100,000) --------------------------------- Loans, Net $ 248,696,755 $ 231,248,551 ================================= Changes in the allowance for loan losses were summarized as follows: 2000 1999 1998 - ------------------------------------------------------------------------------------------------------ Balance at January 1 $ 3,100,000 $ 2,900,000 $ 2,700,000 Recoveries on loans previously charged-off 319,887 267,311 233,278 Loans charged-off (1,012,406) (916,656) (879,744) Provision charged to expense 917,519 849,345 846,466 ------------------------------------------------ Balance at December 31 $ 3,325,000 $ 3,100,000 $ 2,900,000 ================================================ Loans on nonaccrual status amounted to approximately $589,788, $389,876, and $649,353 at December 31, 2000, 1999, and 1998, respectively. The effect of such loans was to reduce net income by approximately $146,797, $109,970 and $135,049 in 2000, 1999, and 1998, respectively. No loans have been recognized as impaired in conformity with SFAS No. 114 for 2000 and 1999. NOTE 4. PREMISES, FURNITURE, FIXTURES AND EQUIPMENT Components of premises, furniture, fixtures and equipment included in the consolidated balance sheets at December 31, 2000 and 1999, were as follows: 15

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 4. CONTINUED 2000 1999 - ------------------------------------------------------------------------------- Cost Land $ 792,918 $ 792,918 Buildings 4,888,045 4,767,375 Furniture and equipment 4,633,693 4,326,548 ---------------------------------- Total Cost 10,314,656 9,886,841 Less accumulated depreciation 5,952,450 5,475,865 ---------------------------------- Bank Premises, Furniture, Fixtures and Equipment, Net $ 4,362,206 $ 4,410,976 ================================== Depreciation expense was $476,585, $526,778, and $450,039 for the years ended December 31, 2000, 1999, and 1998, respectively. The consolidated provision for income taxes consisted of the following: 2000 1999 1998 - ------------------------------------------------------------------------------- Currently payable Federal $ 2,491,383 $ 2,590,386 $ 2,370,478 State 223,356 251,275 229,418 ----------------------------------------------- 2,714,739 2,841,661 2,599,896 Deferred tax benefit (79,528) (49,041) (113,214) ----------------------------------------------- Income Tax Expense $ 2,635,211 $ 2,792,620 $ 2,486,682 =============================================== The differences between the federal statutory rate and the effective tax rates for 2000, 1999, and 1998, were as follows: 2000 1999 1998 - ------------------------------------------------------------------------------- Federal tax based on statutory rate $ 2,777,656 $ 2,860,752 $ 2,447,700 State income tax 147,415 165,841 151,416 Change due to Tax-exempt investment interest (303,191) (301,076) (146,507) Minority interest 64,734 66,801 46,424 Other, net (51,403) 302 (12,351) ----------------------------------------- Income Tax Expense $ 2,635,211 $ 2,792,620 $ 2,486,682 ========================================= 16

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 5. CONTINUED At December 31, 2000 and 1999, net deferred tax asset consisted of the following: 2000 1999 - ------------------------------------------------------------------------------- Allowance for loan losses $ 886,157 $ 823,642 Deferred compensation liability 311,527 276,124 Other real estate 13,447 18,650 Investment securities basis (209,303) (196,116) Unrealized gain or loss on available for sale securities (85,635) 821,577 --------------------------------- $ 916,193 $ 1,743,877 ================================= The net deferred tax assets are included in other assets. The Company has evaluated the need for a valuation allowance 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 6. DEPOSITS The aggregate amount of time deposits, each with a minimum denomination of $100,000, was approximately $64,012,405 and $55,921,436 at December 31, 2000 and 1999, respectively. The scheduled maturities of time deposits are as follows: YEAR ENDING DECEMBER 31, Amount - ----------------------------------------------------------------------------- 2001 $ 142,683,623 2002 15,510,910 2003 6,561,563 2004 20,178 2005 617,238 --------------- $ 165,393,512 =============== NOTE 7. FEDERAL HOME LOAN BANK ADVANCES Pursuant to collateral agreements with the Federal Home Loan Bank (FHLB), advances are collateralized by all the Company's stock in the FHLB and qualifying first mortgage loans. Advances at December 31, 2000 consist of $32,000,000 repayable in 90 days or less at an interest rate of 6.39 percent and $10,000,000 in long-term advances due in 2008, callable in 5 years at rates ranging from 5.457 percent to 5.66 percent. 17

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 8. INVESTMENT IN NEW SOUTH LIFE INSURANCE COMPANY Condensed unaudited financial information of New South Life Insurance Company as of December 31, 2000 and 1999, and for the years ended December 31, 2000, 1999, and 1998, was as follows: 2000 1999 (Unaudited) (Unaudited) - ------------------------------------------------------------------------------------- Assets Cash $ 464,910 $ 260,856 Investments 5,587,154 5,438,949 Deferred acquisition costs 636,205 700,460 Other assets 22,526 7,748 ------------------------------ Total Assets $ 6,710,795 $ 6,408,013 ============================== Liabilities and Stockholders' Equity Unearned premium reserves $ 1,533,364 $ 1,688,368 Claims liability 179,988 150,751 Income taxes payable 11,427 50,372 Other liabilities 34,098 6,080 ------------------------------ 1,758,877 1,895,571 ------------------------------ Common stock 250,000 250,000 Preferred stock 400,000 400,000 Paid-in capital 600,000 600,000 Retained earnings 3,701,918 3,262,442 ------------------------------ 4,951,918 4,512,442 ------------------------------ Total Liabilities and Stockholders' Equity $ 6,710,795 $ 6,408,013 ============================== 2000 1999 1998 (UNAUDITED) (UNAUDITED) (UNAUDITED) - ------------------------------------------------------------------------------------ Income Insurance premiums earned $ 1,143,990 $ 1,309,027 $ 1,446,975 Investment income 323,738 307,820 269,637 ------------------------------------------------- Total Income 1,467,728 1,616,847 1,716,612 ------------------------------------------------- Expenses Claims incurred 296,919 249,230 216,568 Commissions and service fees incurred 541,464 617,445 412,283 Other expenses 83,412 91,292 76,639 Income taxes 106,457 (74,742) 217,391 ------------------------------------------------- Total Expenses 1,028,252 883,225 922,881 ------------------------------------------------- Net Income $ 439,476 $ 733,622 $ 793,731 ================================================= 18

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 9. SUMMARIZED FINANCIAL INFORMATION OF CITIZENS HOLDING COMPANY Summarized financial information of Citizens Holding Company, parent company only, at December 31, 2000 and 1999, and for the years ended December 31, 2000, 1999, and 1998, was as follows: Balance Sheets December 31, 2000 and 1999 2000 1999 - ---------------------------------------------------------------------------------------------- Assets Cash $ 361,191 $ 245,872 Securities available for sale, at fair value 1,308,357 1,253,316 Investment in bank subsidiary 41,783,101 36,077,743 Other assets 18,901 34,775 -------------------------------------- Total Assets $ 43,471,550 $ 37,611,706 ====================================== Liabilities Income taxes payable - current $ 81,747 $ 60,745 Other liabilities 12,842 5,000 -------------------------------------- 94,589 65,745 Stockholders' equity 43,376,961 37,545,961 -------------------------------------- Total Liabilities and Stockholders' Equity $ 43,471,550 $ 37,611,706 ====================================== Income Statements Years Ended December 31, 2000, 1999, and 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------ > Interest income $ 86,053 $ 81,743 $ 88,827 Interest expense - - 1,151 --------------------------------------------------- Net Interest Income 86,053 81,743 87,676 --------------------------------------------------- Other Income Other 46,062 54,701 114,201 Dividends from bank subsidiary 1,406,219 1,058,800 794,100 Equity in undistributed earnings of bank subsidiary 4,069,658 4,533,999 3,840,019 --------------------------------------------------- Total Other Income 5,521,939 5,647,500 4,748,320 --------------------------------------------------- Other expense 42,625 93,566 77,138 --------------------------------------------------- Income before Income Taxes 5,565,367 5,635,677 4,758,858 Income tax expense 31,002 14,321 46,422 --------------------------------------------------- Net Income $ 5,534,365 $ 5,621,356 $ 4,712,436 =================================================== 19

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 9. CONTINUED Statements of Cash Flows Years Ended December 31, 2000, 1999, and 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------ Cash Flows from Operating Activities Net income $ 5,534,365 $ 5,621,356 $ 4,712,436 Adjustments to reconcile net income to net cash provided by operating activities (Increase) decrease in other assets 15,874 (13,540) 3,501 Increase (decrease) in income taxes payable 21,002 10,321 (16,396) Increase (decrease) in other liabilities 7,842 (73,126) 57,605 -------------------------------------------------- Net Cash Provided by Operating Activities 5,579,083 5,545,011 4,757,146 -------------------------------------------------- Cash Flows from Investing Activities Change in investment securities available for sale (55,041) (2,416,615) 209,138 Increase in investment in bank subsidiary (4,002,504) (2,101,880) (4,093,057) -------------------------------------------------- Net Cash Used by Operating Activities (4,057,545) (4,518,495) (3,883,919) -------------------------------------------------- Cash Flows from Financing Activities Dividends paid to stockholders (1,406,219) (1,058,800) (794,100) -------------------------------------------------- Net Increase (Decrease) in Cash 115,319 (32,284) 79,127 Cash, beginning of year 245,872 278,156 199,029 -------------------------------------------------- Cash, end of year $ 361,191 $ 245,872 $ 278,156 ================================================== 20

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 10. LEASES The Company leases computer equipment and some branch facilities under operating leases. Rent expense was $30,120, $48,000, and $43,767 for 2000, 1999, and 1998, respectively. At December 31, 2000, the future minimum lease commitments for leases which have terms in excess of one year are: YEAR ENDING DECEMBER 31, AMOUNT - ----------------------------------------------------------------------- 2001 $ 107,100 2002 107,100 2003 107,100 2004 67,100 2005 53,100 ------------ $ 441,500 ============ NOTE 11. RELATED PARTY TRANSACTIONS During the ordinary course of business, the Company has made loans to its directors and significant stockholders and their 10 percent or more owned businesses. As of December 31, 2000 and 1999, these loans totaled $1,196,032 and $1,177,156, respectively. During 2000, new loans to such related parties amounted to $1,908,104, and repayments amounted to $1,889,228. The Company has received commissions related to credit life insurance for the years ended December 31, 2000, 1999, and 1998, totaling $84,364, $107,331, and $108,382, respectively. NOTE 12. BENEFIT PLANS Profit Sharing Plan - ------------------- The Company has a profit sharing and savings plan in effect for substantially all full-time employees. Under the profit sharing and savings plan, the Company automatically contributes an amount equal to 2.7 percent of each participant's base salary to the plan. A participant may elect to make contributions to the plan. The Company matches 100 percent of employee contributions up to a limit of 6 percent of each employee's salary. The Company's contributions to the profit sharing plan and savings plan in 2000, 1999, and 1998, totaled $261,153, $251,875, and $238,104, respectively. 21

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 12. CONTINUED 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 $74,972 in 2000, $42,096 in 1999 and $36,697 in 1998. NOTE 13. CONCENTRATIONS OF CREDIT RISK All of the Company's loans, commitments, and letters of credit have been granted to customers in the Company's market area. All such customers are depositors of the Company. Investments in state and municipal securities also involve governmental entities within the Company's market area. The concentrations of credit by type of loan are set forth in Note 3. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Letters of credit were granted primarily to commercial borrowers. At times the Company has balances in due from bank accounts in excess of federal deposit insurance limits. At December 31, 2000, 9.7% of the Company's deposits were from one entity. NOTE 14. COMMITMENTS AND CONTINGENCIES In the normal course of business, various commitments and contingent liabilities are outstanding, such as guarantees and commitments to extend credit that are not reflected in the accompanying consolidated financial statements. At December 31, 2000 and 1999, a summary of such commitments and contingent liabilities is as follows: 2000 1999 - ----------------------------------------------------------------------------- Commitments to extend credit $ 13,745,594 $ 19,964,616 Letters of credit 452,825 334,025 ------------------------------ Total $ 14,198,419 $ 20,298,641 ============================== Commitments to extend credit, and letters of credit all include exposure to some credit loss in the event of nonperformance of the customer. The Company's credit policies and procedures for credit commitments and financial guarantees are the same as those for extension of credit that are recorded in the consolidated balance sheets. Because these instruments have fixed maturity 22

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 14. CONTINUED dates, and because many of them expire without being drawn upon, they do not generally present any significant liquidity risk to the Company. The Company's experience has been that approximately 54 percent of loan commitments are drawn upon by customers. When letters of credit are utilized, a significant portion of such utilization is on an immediate payment basis. The Company has not been required to perform on any financial guarantees during the past two years. The Company has not incurred any losses on its commitments in 2000, 1999, or 1998. 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. At the present time, management believes, based on the advice of legal counsel, that the final resolution of pending legal proceedings will not have a material impact on the Company's financial position or results of operations. NOTE 15. REGULATORY MATTERS The Company is subject to the various regulatory capital requirements of the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory--and possibly additional discretionary--actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve 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 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 (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2000, that the Company meets all capital adequacy requirements to which it is subject. At its most recent notification from the Federal Deposit Insurance Corporation, the Company was categorized as "well capitalized" under the regulatory framework for prompt corrective action. To be categorized as "adequately capitalized," the Company must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since the notification that management believes have changed the Company's prompt corrective action category. 23

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 15. CONTINUED TO BE WELL FOR CAPITAL CAPITALIZED UNDER PROMPT ACTUAL ADEQUACY PURPOSES CORRECTIVE ACTION PROVISIONS ---------------------------------------------------------------------------------------- AMOUNT RATIO AMOUNT RATIO AMOUNT Ratio - ------------------------------------------------------------------------------------------------------------------- As of December 31, 2000 Total Capital (to Risk-Weighted Assets) Citizens Holding $ 47,137,511 18.88% $ 19,974,622 8.00% $ N/A - % Company Citizens Bank 45,541,318 18.25 19,958,747 8.00 24,948,434 10.00 Tier I Capital (to Risk-Weighted Assets) Citizens Holding 44,013,958 17.63 9,987,311 4.00% N/A - Company Citizens Bank 42,420,215 17.00 9,979,374 4.00 14,969,060 6.00 Tier I Capital (to average Assets) Citizens Holding 44,013,958 11.61 15,165,218 4.00% N/A - Company Citizens Bank 42,420,215 11.24 15,092,240 4.00 18,865,300 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, 1999 Total Capital (to Risk-Weighted Assets) Citizens Holding $ 42,575,291 18.52% $ 18,391,823 8.00% $ N/A - % Company Citizens Bank 41,125,499 17.91 18,368,702 8.00 22,960,878 10.00 Tier I Capital (to Risk-Weighted Assets) Citizens Holding 39,698,775 17.27 9,195,911 4.00% N/A - Company Citizens Bank 38,252,551 16.66 9,184,351 4.00 13,776,527 6.00 Tier I Capital (to average Assets) Citizens Holding 39,698,775 11.06 14,359,801 4.00% N/A - Company Citizens Bank 38,252,551 10.70 14,300,800 4.00 17,876,000 5.00 - -------------------------------------------------------------------------------- 24

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 16. FAIR VALUES OF FINANCIAL INSTRUMENTS The fair value estimates, methods and assumptions used by the Company in estimating its fair value disclosures for financial instruments were: 2000 1999 -------------------------------- -------------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------ Financial Assets Cash and due from banks $ 10,415,155 $ 10,415,155 $ 13,312,028 $ 13,312,028 Interest bearing deposits with banks 863,371 863,371 182,042 182,042 Federal funds sold 3,100,000 3,100,000 - - Securities available for sale 103,533,174 103,533,174 102,451,360 102,451,360 Net loans 248,696,755 247,046,384 231,248,551 228,248,614 Financial Liabilities Deposits $ 290,268,948 $ 289,481,457 $ 284,461,639 $ 284,461,639 Federal funds purchased - - 10,600,000 10,600,000 Federal Home Loan Bank advances 42,000,000 42,000,000 23,100,000 23,100,000 Cash and due from banks, Interest bearing deposits with banks and Federal funds sold: 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 (e.g., 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 approximates its fair value. Deposits: The fair values for demand deposits, NOW and money market accounts and savings accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term money market accounts and time deposits approximate their fair values at the reporting date. Fair values for fixed-rate time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits. 25

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 16. CONTINUED Federal funds purchased: The carrying amounts of Federal funds purchased approximate their fair values because of their short term maturities. Federal Home Loan Bank advances: 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 17. COMMON STOCK SPLIT On January 1, 1999, the Company reduced the par value of its common stock from $1 per share to $.20 per share and issued the 2,683,000 additional shares necessary to effect a 5-for-1 common stock split. The earnings per common share for the years ended December 31, 1998 and 1997, have been retroactively adjusted for this split as if it occurred on January 1, 1997. NOTE 18. 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 70,000 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. 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 year ending December 31, 2000 and compensation cost related to options granted during the year ended December 31, 1999 was immaterial. 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: 26

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 18. CONTINUED 2000 1999 - -------------------------------------------------------------------------------- Net Income As reported $ 5,534,365 $ 5,621,356 Proforma 5,451,393 $ 5,482,356 Basic Earnings Per Share As reported $ 1.67 $ 1.70 Proforma $ 1.65 $ 1.60 Diluted Earnings Per Share As reported $ 1.67 $ 1.70 Proforma $ 1.64 $ 1.65 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 2000 and 1999: ASSUMPTION 2000 1999 - -------------------------------------------------------------------------------- Dividend yield 1.5 % 1.5 % Risk-free interest rate 6.25% 6.25% Expected life 10 years 5 years Expected volatility 22.80% 20.43% 27

CITIZENS HOLDING COMPANY AND SUBSIDIARY Years Ended December 31, 2000, 1999, and 1998 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 18. CONTINUED Following is a summary of the status of the plans for the year ending December 31, 2000 and 1999: Directors' Plan Employees' Plan ------------------------------------ ---------------------------------------- Weighted Weighted Number Average Number Average Of Exercise Of Exercise Shares Price Shares Price - ------------------------------------------------------------------------------------------------------------------------------- Outstanding at January 1, 1999 - $ - - $ - Granted 15,400 10.90 3,900 10.80 Exercised - - - - Forfeited - - - - ---------------------------------------------------------------------------------- Outstanding at December 31, 1999 15,400 10.90 3,900 10.80 Granted 10,000 16.50 9,900 15.50 Exercised - - - - Forfeited - - - - ---------------------------------------------------------------------------------- Outstanding at December 31, 2000 25,400 $ 13.10 13,800 $ 14.17 ================================================================================== Options exercisable at: December 31, 1999 15,400 $ 10.90 3,000 $ 10.80 ================================================================================== December 31, 2000 25,400 $ 13.10 13,800 $ 14.17 ================================================================================== Weighted average fair value of options granted during year ended: December 31, 1999 $ 11.22 $ 11.22 ================ ======================= December 31, 2000 $ 6.51 $ 6.12 ================ ======================= 28

INFORMATION 66 Citizens Holding Company Officers and Directors 67 The Citizens Bank Officers 68 Locations 69 Financial Information

CITIZENS HOLDING COMPANY OFFICERS AND DIRECTORS Officers: Steve Webb - Chairman & President Carolyn K. McKee - Secretary Robert T. Smith - Treasurer Directors: M. G. Bond Retired Mississippi State Senator Karl Brantley Plant Manager U. S. Electric Motors W. W. Dungan Partner McDaniel Timber Company Don L. Fulton President and General Manager Nemanco, Inc. 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 and Mars P. A. David P. Webb Attorney Phelps Dunbar LLP Steve Webb Chairman, President and CEO Citizens Holding Company and The Citizens Bank of Philadelphia

THE CITIZENS BANK OFFICERS Steve Webb Mark Majure KOSCIUSKO OFFICE Chairman & President Asst. Cashier Steve Cain Danny Hicks Beth Branning President Sr. Vice-President Asst. Cashier SCOOBA OFFICE Greg McKee Adriana Burt Sr. Vice-President Asst. Cashier Fran Knight Vice-President Robert T. Smith Mitch Peden Vice-President & Controller Asst. Cashier MERIDIAN OFFICE Erdis Chaney CARTHAGE OFFICE Charles Young Vice-President & Cashier Vice-President Mike Brooks Tim Lofton President MORTGAGE LOAN DEPARTMENT Vice-President & CIO Billie Nell Dowdle David Blair, Jr. Randy Cheatham Vice-President Vice-President & Manager Vice-President Byron Hines Mike Guthrie Vice-President Vice-President Mike Ellis Joe Foster Vice-President Vice-President & Trust Officer Margaret Thompson Murray Johnson Asst. Cashier Vice-President Judy Kuntz Jackie Hester Asst. Cashier Vice-President & Marketing Carol Wright Kaye Johnson Asst. Cashier Vice-President SEBASTOPOL OFFICE Darrell Bates Asst. Vice-President Linda Bennett President David Sharp Asst. Vice-President UNION OFFICE Gayle Sharp Robert C. Palmer, Jr. Asst. Vice-President President Jean T. Fulton Karen Foster Asst. Cashier Asst. Vice-President Lucille M. Myatt DEKALB OFFICE Asst. to President Steven Lockley Carolyn K. McKee Vice-President Student Loan Officer

CITIZENS HOLDING COMPANY - 2000 ANNUAL REPORT LOCATIONS The Citizens Bank Crossroads Office Main Office 501 Highway 35 South 521 Main Street Carthage, MS 39051 Philadelphia, MS 39350 601.267.4525 601.656.4692 Madden Office Westside Office 53 Dr. Brantley Road 912 West Beacon Street Madden, MS 39109 Philadelphia, MS 39350 601.267.7366 601.656.4978 Sebastopol Office Northside Office 17651 Highway 21 802 Pecan Avenue Sebastopol, MS 39359 Philadelphia, MS 39350 601.625.7447 601.656.4977 DeKalb Office Corner of Main & Bell Street Eastside Office DeKalb, MS 39328 599 East Main Street 601.743.2115 Philadelphia, MS 39350 601.656.4976 Kosciusko Office 775 North Jackson Street Kosciusko, MS 39090 Pearl River Office 662.289.4356 110 Choctaw Town Center Highway 16 West Scooba Office Philadelphia, MS 39350 1048 Johnson Street 601.656.4971 Scooba, MS 39358 662.476.8431 Union Office Meridian Office 502 Bank Street 2209 Highway 45 North Union, MS 39365 Suite E 601.656.4879 Meridian, MS 39301 601.774.9231 601.693.8367 Carthage Main Office Internet Banking 219 West Main Street http://www.thecitizensbankphila.com Carthage, MS 39051 ----------------------------------- 601.267.4525 PhoneTeller 1.800.397.0344

FINANCIAL INFORMATION CORPORATE HEADQUARTERS STOCK REGISTRAR AND TRANSFER 521 Main Street AGENT P. O. Box 209 American Stock Transfer & Trust Philadelphia, MS 39350 40 Wall Street - 46th Floor 601.656.4692 New York, NY 10005 ANNUAL STOCKHOLDERS MEETING Form 10-K The Annual Stockholder Meeting of The Corporation's most recent Annual Report The Citizens Holding Company, Inc. on Form 10-K, as filed with the Securities and will be held Tuesday, May 1, 2001 at Exchange Commission, is available to 3:30 P.M. at the main office of The stockholders upon request to the Citizens Bank, 521 Main Street, Treasurer of the Citizens Holding Philadelphia, Mississippi. Company. FINANCIAL CONTACT Robert T. Smith Treasurer P. O. Box 209 Philadelphia, Mississippi 39350 601.656.4692

MARKET PRICE AND DIVDEND INFORMATION 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. At December 31, 2000, the Common Stock's closing price was $17.00. Dividends Declared 1999 High Low (per common share) - ------------------------------------------------------------------------------------------------ January - March N/A N/A 0.00 April - June N/A N/A 0.15 July - September N/A N/A 0.00 October - December 29.25 21.00 0.17 Dividends Declared 2000 High Low (per common share) - ------------------------------------------------------------------------------------------------ January - March 20.50 16.75 0.10 April - June 16.75 15.19 0.10 July - September 18.00 16.13 0.10 October - December 17.38 16.38 0.125 On March 9, 2001, Shares of Common Stock were held of record by approximately 466 shareholders. DIVIDENDS Dividends for 2000 totaled $.425 per share compared to $.32 in 1999 and $.24 in 1998. These dividends reflect a 33% increase in 2000 over 1999 and a 33% increase in 1999 over 1998. The Corporation declares dividends on a quarterly basis in March, June, September and December with payment following at the end of that month. 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.

QUARTERLY FINANCIAL TRENDS 2000 -------------------------------------------------------------------------------- First Second Third Fourth Year Quarter Quarter Quarter Quarter to Date -------------------------------------------------------------------------------- Interest Income $6,792 $7,010 $7,353 $7,483 $28,638 Interest Expense 3,131 3,437 3,627 3,869 14,064 -------------------------------------------------------------------------------- Net Interest Income 3,661 3,573 3,726 3,614 14,574 Provision for Loan Losses 86 197 316 319 $ 918 Non-interest Income 762 855 796 872 $ 3,285 Non-interest Expense 2,226 2,131 2,178 2,237 $ 8,772 Income Taxes 739 723 680 493 $ 2,635 -------------------------------------------------------------------------------- Net Income $1,372 $1,377 $1,348 $1,437 $ 5,534 ================================================================================ Per common share: Basic $ 0.41 $ 0.42 $ 0.41 $ 0.43 $ 1.67 Diluted $ 0.41 $ 0.42 $ 0.41 $ 0.43 $ 1.67 -------------------------------------------------------------------------------- Cash Dividends $ 0.10 $ 0.10 $ 0.10 $0.125 $ 0.425 1999 -------------------------------------------------------------------------------- First Second Third Fourth Year Quarter Quarter Quarter Quarter to Date -------------------------------------------------------------------------------- Interest Income $6,007 $6,121 $6,718 $6,629 $25,475 Interest Expense 2,639 2,648 2,729 2,958 10,974 -------------------------------------------------------------------------------- Net Interest Income 3,368 3,473 3,989 3,671 14,501 Provision for Loan Losses 146 237 156 310 849 Non-interest Income 848 919 554 801 3,122 Non-interest Expense 2,007 1,851 2,247 2,255 8,360 Income Taxes 740 747 723 583 2,793 -------------------------------------------------------------------------------- Net Income $1,323 $1,557 $1,417 $1,324 $ 5,621 ================================================================================ Per common share: Basic $ 0.40 $ 0.47 $ 0.43 $ 0.40 $ 1.70 Diluted $ 0.40 $ 0.47 $ 0.43 $ 0.40 $ 1.70 -------------------------------------------------------------------------------- Cash Dividends $ 0.00 $ 0.15 $ 0.00 $ 0.17 $ 0.32 --------------------------------------------------------------------------------

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, 2000 ($ in thousands): Interest Sensitive Within -------------------------------------- 90 days One year -------------------------------------- Total rate sensitive assets $ 68,573 $ 88,540 Total rate sensitive liabilities 181,773 90,648 -------------------------------------- Net gap ($113,200) ($2,108) ====================================== 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, 2000. INTEREST RATE SENSITIVITY DECEMBER 31, 2000 Carrying Fair 2001 2002 2003 2004 2005 Thereafter Value Value --------------------------------------------------------------------------------------------- Loans Fixed Rate $ 63,476 $19,973 $30,894 $48,129 $37,626 $24,000 $224,098 $217,675 Average Int Rate 9.81% 10.14% 8.94% 8.43% 8.94% 7.83% 9.06% Floating Rate $ 12,602 $ 589 $ 610 $ 234 $ 645 $15,027 $ 29,707 $ 29,371 Average Int Rate 9.88% 10.00% 10.23% 9.74% 10.42% 10.49% 10.21% Investment securities Fixed Rate $ 28,642 $17,123 $ 7,091 $ 1,498 $ 5,597 $43,582 $103,533 $103,533 Average Int Rate 6.06% 6.31% 6.49% 6.16% 6.75% 7.13% 6.62% Floating Rate Average Int Rate Other earning assets Fixed Rate $ 3,100 $ 3,100 $ 3,100 Average Int Rate 6.06% 6.06% Floating Rate Average Int Rate Interest-bearing deposits Fixed Rate $225,978 $ 8,412 $ 4,218 $ 616 $239,224 $238,575 Average Int Rate 4.82% 6.56% 6.72% 6.00% 6.09% Floating Rate $ 4,258 $ 7,099 $ 2,344 $ 20 $ 2 $ 13,723 $ 13,686 Average Int Rate 6.11% 6.11% 6.11% 6.11% 6.11% 6.11% Other int-bearing liabilities Fixed Rate $ 32,700 $10,000 $ 42,700 $ 42,700 Average Int Rate 6.39% 5.56% 6.20% Floating Rate Average Int Rate