Edgar Filing: CITIZENS HOLDING CO /MS/

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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 incorporation or organization)		(I. R. S. Employer Identification Number)

521 Main Street, Philadelphia, MS		39350
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 601-656-4692

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

¨ Large accelerated Filer x Accelerated Filer ¨ Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Number of shares outstanding of each of the issuer’s classes of common stock, as of August 7, 2006:


Title		Outstanding
Common Stock, $.20 par value		5,018,228

CITIZENS HOLDING COMPANY

SECOND QUARTER 2006 INTERIM FINANCIAL STATEMENTS

TABLE OF CONTENTS


PART I.		FINANCIAL INFORMATION

Item 1.		Consolidated Financial Statements (Unaudited)

		Consolidated Statements of Condition June 30, 2006 and December 31, 2005

		Consolidated Statements of Income Three and six months ended June 30, 2006 and 2005

		Consolidated Statements of Comprehensive Income Three and six months ended June 30, 2006 and 2005

		Consolidated Statements of Cash Flows Three and six months ended June 30, 2006 and 2005

		Notes to Consolidated Financial Statements

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.		Quantitative and Qualitative Disclosures About Market Risk

Item 4.		Controls and Procedures

PART II.		OTHER INFORMATION

Item 1A.		Risk Factors

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

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

Item 6.		Exhibits

SIGNATURES

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

CITIZENS HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CONDITION

(Unaudited)


	June 30, 2006			December 31, 2005
ASSETS
Cash and due from banks	$	29,944,232		$	26,743,200
Interest bearing deposits with other banks		1,725			312,825
Investment securities available for sale, at fair value		160,270,050			162,203,117
Loans, net of allowance for loan losses of $4,245,126 in 2006 and $4,561,817 in 2005		368,925,508			374,964,316
Premises and equipment, net		11,579,104			9,894,215
Other real estate owned, net		2,770,915			2,975,047
Accrued interest receivable		4,767,515			4,695,147
Cash value of life insurance		16,368,714			16,045,673
Intangible assets (net)		5,021,325			5,290,076
Other assets		8,931,971			4,585,520

TOTAL ASSETS	$	608,581,059		$	607,709,136

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES
Deposits:
Noninterest-bearing demand		93,071,541		$	87,333,891
Interest-bearing NOW and money market accounts		143,113,820			148,434,618
Savings deposits		35,703,890			35,579,157
Certificates of deposit		201,413,709			202,464,568

Total deposits		473,302,960			473,812,234

Accrued interest payable		1,274,937			798,667
Federal Home Loan Bank advances		59,493,835			60,048,818
Federal funds purchased		4,000,000			1,600,000
Directors deferred compensation payable		2,534,253			2,366,592
Other liabilities		1,943,191			3,950,890

Total liabilities		542,549,176			542,577,201
Minority interest in consolidated subsidiary		1,373,788			1,357,830

STOCKHOLDERS’ EQUITY
Common stock; $.20 par value, 22,500,000 shares authorized, 5,018,228 shares outstanding at June 30, 2006 and 5,009,278 shares at December 31, 2005		1,003,646			1,001,856
Additional paid-in capital		3,733,243			3,386,248
Retained earnings		62,683,872			60,352,543
Accumulated other comprehensive income, net of taxes of $1,679,410 in 2006 and $587,555 in 2005		(2,762,666	)		(966,542	)

Total stockholders’ equity		64,658,095			63,774,105

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	608,581,059		$	607,709,136

See notes to consolidated financial statements.

CITIZENS HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2006			2005		2006			2005
INTEREST INCOME
Loan income including fees	$	7,282,033		$	6,472,604	$	14,089,004		$	12,894,955
Investment securities		1,777,906			1,559,166		3,543,991			3,115,369
Other interest		102,094			40,329		189,320			77,712

Total interest income		9,162,033			8,072,099		17,822,315			16,088,036

INTEREST EXPENSE
Deposits		2,585,456			1,713,526		4,846,914			3,323,533
Other borrowed funds		697,791			564,390		1,401,911			1,052,401

Total interest expense		3,283,247			2,277,916		6,248,825			4,375,934

NET INTEREST INCOME		5,878,786			5,794,183		11,573,490			11,712,102

PROVISION FOR LOAN LOSSES		(63,634	)		342,763		(192,174	)		505,757

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		5,942,420			5,451,420		11,765,664			11,206,345

OTHER INCOME
Service charges on deposit accounts		981,450			989,550		1,828,114			1,736,069
Other service charges and fees		149,250			118,989		275,794			276,872
Other income		533,268			467,877		959,948			884,951

Total other income		1,663,968			1,576,416		3,063,856			2,897,892

OTHER EXPENSES
Salaries and employee benefits		2,585,470			2,380,117		5,117,408			4,801,620
Occupancy expense		724,507			736,521		1,530,259			1,456,535
Other operating expense		1,367,087			1,260,007		2,629,933			2,627,289
Earnings applicable to minority interest		47,053			23,111		89,406			71,002

Total other expenses		4,724,117			4,399,756		9,367,006			8,956,446

INCOME BEFORE PROVISION FOR INCOME TAXES		2,882,271			2,628,080		5,462,514			5,147,791

PROVISION FOR INCOME TAXES		771,205			601,619		1,426,756			1,201,576

NET INCOME	$	2,111,066		$	2,026,461	$	4,035,758		$	3,946,215

NET INCOME PER SHARE
- Basic	$	0.42		$	0.40	$	0.81		$	0.79

- Diluted	$	0.42		$	0.40	$	0.79		$	0.78

See notes to consolidated financial statements.

CITIZENS HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2006			2005		2006			2005
Net income	$	2,111,066		$	2,026,461	$	4,035,758		$	3,946,215
Other comprehensive income (loss), net of tax
Unrealized holding gains (losses)		(1,618,933	)		612,157		(1,796,124	)		(155,057	)
Reclassification adjustment for (gains) losses included in net income		—			—		—			—

Total other comprehensive income (loss)		(1,618,933	)		612,157		(1,796,124	)		(155,057	)

Comprehensive income	$	492,133		$	2,638,618	$	2,239,634		$	3,791,158

See notes to consolidated financial statements.

CITIZENS HOLDING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months Ended June 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES

Net Cash Provided by Operating Activities	$	189,669		$	5,320,209

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities available for sale		8,368,938			24,143,613
Purchases of investment securities available for sale		(9,754,068	)		(32,697,928	)
Purchases of bank premises and equipment		(2,138,208	)		(935,872	)
Decrease in interest bearing deposits with other banks		311,100			746,496
Net decrease in federal funds sold		—			11,000,000
Net (increase) decrease in loans		5,890,982			(5,842,840	)
Proceeds from sale of real estate acquired by foreclosure		544,132			—

Net Cash Used by Investing Activities		3,222,876			(3,586,531	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		(509,274	)		(24,233,797	)
Increase (decrease) in FHLB Advances		(554,983	)		14,471,719
Increase in federal funds purchased		2,400,000			12,600,000
Proceeds from exercise of stock options		157,173			223,152
Payment of dividends		(1,704,429	)		(1,601,528	)

Net Cash Provided by Financing Activities		(211,513	)		1,459,546

Net Increase (Decrease) in Cash and Due from Banks		3,201,032			3,193,224

Cash and Due From Banks, beginning of year		26,743,200			16,837,433

Cash and Due from Banks, end of period	$	29,944,232		$	20,030,657

See notes to consolidated financial statements.

CITIZENS HOLDING COMPANY AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of and for the six months ended June 30, 2006

These interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. However, these financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The interim consolidated financial statements are unaudited and reflect all adjustments and reclassifications which, in the opinion of management, are necessary for a fair presentation of the results of operations and financial condition for the interim periods presented. All adjustments and reclassifications are of a normal and recurring nature. Results for the period ending June 30, 2006 are not necessarily indicative of the results that may be expected for any other interim periods or for the year as a whole.

The interim consolidated financial statements of Citizens Holding Company include the accounts of its 97.86% owned subsidiary, The Citizens Bank of Philadelphia (collectively referred to as the “Corporation”). All significant intercompany transactions have been eliminated in consolidation.

2.	Summary of Significant Accounting Policies. See Note 1 of the Notes to Consolidated Financial Statements of Citizens Holding Company included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the Securities and Exchange Commission on March 13, 2006.

In the ordinary course of business, the Corporation enters into commitments to extend credit to its customers. The unused portion of these commitments is not reflected in the accompanying financial statements. As of June 30, 2006, the Corporation had entered into loan commitments with certain customers with an aggregate unused balance of $19,529,075 compared to an aggregate unused balance of $21,477,893 at December 31, 2005. There were $1,396,236 of letters of credit outstanding at June 30, 2006 and $1,261,236 at December 31, 2005. The fair value of such contracts is not considered material because letters of credit and loan commitments often are not used in their entirety, if at all, before they expire. The balances of such letters and commitments should not be used to project actual future liquidity requirements. However, the Corporation does incorporate expectations about the level of draws under its credit-related commitments into its asset and liability management program.

4.	Net income per share - basic, has been computed based on the weighted average number of shares outstanding during each period. Net income per share - diluted, has been computed based on the weighted average number of shares outstanding

during each period plus the dilutive effect of outstanding granted options using the treasury stock method. Earnings per share were computed as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
Basic weighted average shares outstanding		5,014,460		5,006,981		5,012,762		5,003,784
Dilutive effect of granted options		69,137		57,893		71,098		56,700

Diluted weighted average shares outstanding		5,083,597		5,064,874		5,083,860		5,060,484

Net income	$	2,111,066	$	2,026,461	$	4,035,758	$	3,946,215
Net income per share-basic	$	0.42	$	0.40	$	0.81	$	0.79
Net income per share-diluted	$	0.42	$	0.40	$	0.79	$	0.78

The Corporation is a party to lawsuits and other claims that arise in the ordinary course of business, all of which 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 Corporation’s consolidated financial condition or results of operations.

At June 30, 2006, the Corporation had two stock-based compensation plans, which are the 1999 Employees’ Long-Term Incentive Plan and the 1999 Directors’ Stock Compensation Plan. Effective January 1, 2006, the Corporation accounts for these plans under the recognition and measurement principles of fair value recognition provisions of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” (“FASB 123R”) and the Securities and Exchange Commission Staff Accounting Bulletin 107 (“SAB 107”). SAB 107 provides guidance related to share-based payments transactions, including valuation methods (including assumptions such as expected volatility and expected term), the classification of compensation expense, non-GAAP financial measures, first time adoption of FASB 123R in an interim period and disclosure in Management’s Discussion and Analysis subsequent to the adoption of FASB 123R.

Prior to January 1, 2006, the Corporation accounted for options in accordance with Accounting Principles Board (APB) Opinion No. 25, which results in no compensation cost recognized for grants prior to December 31, 2005. The proforma impact of expensing options for the quarter and six-month period ended June 30, 2005 was as follows:


	For the Three Months Ended June 30, 2005		For the Six Months Ended June 30, 2005
Net income, as reported	$	2,026,461	$	3,946,215
Deduct: Stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects		11,173		55,340

Pro forma net income	$	2,015,288	$	3,890,875

Basic earnings per share: As reported	$	0.40	$	0.79
Pro forma	$	0.40	$	0.78

Diluted earnings per share: As reported	$	0.40	$	0.78
Pro forma	$	0.40	$	0.77

On March 29, 2006, the Board of Directors awarded 40,500 options to certain officers of the Bank as authorized by the 1999 Employees’ Long-Term Incentive Plan at an exercise price of $23.46, which was the closing price of Citizens Holding Company stock on that day. These options are first exercisable on October 30, 2006 and must be exercised not later than March 29, 2016.

To determine the expected term of the options granted, the Corporation has chosen to use the “simplified” method for “plain vanilla” options as detailed in SAB 107. The Corporation has determined that the options granted comply with the requirements under SAB 107 and will use this method for estimating the expected term of the options granted until the Corporation can gather more detailed information about the expected term of the options. SAB 107 discourages the application of the “simplified” method with respect to options granted after December 31, 2007. Volatility was determined by using the standard deviation of the differences of the closing stock price of the Corporation’s common stock as quoted on the American Stock Exchange on or about the 15^th of each month starting January 15, 2002. Stock prices prior to that date experienced volatility that is not representative of the volatility experienced since that time and therefore are not used in this calculation.

Although the option grants are not subject to an explicit vesting schedule, the Corporation recognizes that the restriction on exercising options before six months and one day after the grant date constitutes a de facto vesting schedule and must be considered when applying FASB 123R. FASB 123R states that a

requisite service period may be explicit, implicit or derived and that an implicit service period is one that may be inferred from an analysis of the award’s terms. Our analysis of the terms of the option awards made in March 2006 lead us to conclude that the restriction on exercising options until six months and one day have passed since the date of grant constitutes a service period under FASB123R and the compensation costs should be amortized over this six month period, beginning in March 2006.

The fair value of each option granted is estimated on the date of the grant using the Black-Sholes option-pricing model. The following assumptions were used in estimating the fair value of the options granted in the first quarter.


Assumption	2006
Dividend Yield		2.90	%
Risk-Free Interest Rate		4.55	%
Expected Life		5.25 years
Expected Volatility		28.85	%
Calculated Value per Option	$	5.87
Forfeitures		0.00	%

Using the Black-Scholes option-pricing model with the foregoing assumptions, it was determined that the total cost of options granted to employees in March 2006 was $237,552 and should be recognized as an expense of $39,592 per month over the six month requisite service period, beginning March 2006. This will be recorded as an expense to officer salary expense and a credit to paid-in capital. Since the options granted in the first quarter were incentive stock options, no deferred taxes will be recorded.

On April 26, 2006, the members of the Board of Directors were granted a total of 12,000 options as specified in the 1999 Directors’ Stock Compensation Plan. These options were granted at an exercise price of $23.70 per option, which was the closing price of Citizens Holding Company stock on that day. These options are first exercisable on October 27, 2006 and must be exercised not later than April 26, 2016.

Since the options granted to directors are similar to the options granted to officers of the Corporation, the Corporation has chosen to use the same methods for calculating the term, volatility and vesting schedule of these options that were used in the calculation of the value per option for the options granted to officers. The fair value of each option is estimated on the date of the grant using the Black-Sholes option-pricing model.

The following assumptions were used in estimating the fair value of the options granted to the directors in the second quarter.


Assumption	2006
Dividend Yield		2.90	%
Risk-Free Interest Rate		4.99	%
Expected Life		5.25 years
Expected Volatility		28.86	%
Calculated Value per Option	$	6.10
Forfeitures		0.00	%

Using the Black-Scholes option-pricing model with the foregoing assumptions, it was determined that the cost of options granted to directors in April 2006 was $73,258 and should be recognized as an expense of $12,210 per month over the six month requisite service period, beginning in April 2006. This will be recorded as an expense to salary expense and a credit to paid-in capital. A deferred tax on these options will be recorded in the aggregate of $27,106 or $4,518 per month over the six month requisite service period, beginning in April 2006.

The following table below is a summary of the stock option activity for the six months ended June 30, 2006.


	Directors’ Plan				Employees’ Plan
	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Outstanding at December 31, 2005	83,850		$	14.77	172,200		$	17.60
Granted	12,000			23.70	40,500			23.46
Exercised	(4,500	)		17.88	(4,450	)		17.24
Forfeited	—			—	(6,450	)		18.54

Outstanding at June 30, 2006	91,350		$	15.79	201,800		$	18.75

In July 2006, the Financial Standards Board (“FASB”) issued Financial Accounting Standards Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a

recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on the de-recognition, classification, interest and penalties, interim accounting for income taxes, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006 and the Corporation is currently analyzing the effect of FIN 48.

CITIZENS HOLDING COMPANY AND SUBSIDIARY

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis is written to provide greater insight into the results of operations and the financial condition of Citizens Holding Company and its 97.86% owned subsidiary, The Citizens Bank of Philadelphia (the “Bank,” and collectively with Citizens Holding Company, the “Corporation”).

LIQUIDITY

The Corporation has an asset and liability management program that assists management in maintaining net interest margins during times of both rising and falling interest rates and in maintaining sufficient liquidity. Liquidity is the ratio of net deposits and short-term liabilities divided by net cash, short-term investments and marketable assets. Liquidity of the Corporation at June 30, 2006 was 57.02%, at December 31, 2005 was 55.79% and at June 30, 2005 was 53.02%. Management believes it maintains adequate liquidity for the Corporation’s current needs.

The Corporation’s chief source of liquidity is customer deposits, which were $473,302,960 at June 30, 2006 and $473,812,234 at December 31, 2005. Other sources of liquidity include investment securities, the Corporation’s line of credit with the Federal Home Loan Bank (“FHLB”) and federal funds lines with correspondent banks. The Corporation had $160,270,050 invested in investment securities at June 30, 2006 and $162,203,117 at December 31, 2005. The Corporation had secured and unsecured federal funds lines with correspondent banks in the amount of $27,500,000 at June 30, 2006 and $37,500,000 at December 31, 2005. In addition, the Corporation has the ability to draw on its line of credit with the FHLB. At June 30, 2006, the Corporation had unused and available $50,043,908 of its line of credit with the FHLB and at December 31, 2005, the Corporation had unused and available $115,873,280 of its line of credit with the FHLB. The decrease in the amount available under the Corporation’s line of credit with the FHLB from the end of 2005 to June 30, 2006 resulted from a reduction in the line of credit with the FHLB. The FHLB decreased the line of credit by $68,242,187 due to an increase in the exception rate on the collateral securing the advances under the line. In the past, the Bank had performed the collateral review and determined the exception rate. In 2006, The FHLB performed this review itself and used different criteria to determine what constituted an exception, resulting in a higher exception rate and a decrease in the Corporation’s FHLB line of credit. Management does not believe that the reduction in its line of credit with the FHLB will have a material adverse effect on the Corporation.

At June 30, 2006, the Corporation had $4,000,000 in federal funds purchased compared to $1,600,000 federal funds purchased at December 31, 2005.

When the Corporation has more funds than it needs for its reserve requirements or short-term liquidity needs, the Corporation increases its investment portfolio or sells federal

funds. It is management’s policy to maintain an adequate portion of its portfolio of assets and liabilities on a short-term basis to insure rate flexibility and to meet loan funding and liquidity needs. When deposits decline or do not grow sufficiently to fund loan demand, management will seek funding either through federal funds purchased or advances from the FHLB.

CAPITAL RESOURCES

The Corporation’s equity capital was $64,658,095 at June 30, 2006 as compared to $63,774,105 at December 31, 2005. The main source of this increase in the capital of the Corporation was the retention of net income.

Certain employees and directors exercised stock options for 9,000 shares of stock in 2005. In the first six months of 2006, a retired director exercised options for an aggregate of 4,500 shares of stock and a former officer exercised 4,450 options. These option exercises brought the number of shares outstanding to 5,018,228 at June 30, 2006. Cash dividends in the amount of $1,704,429, or $0.34 per share, have been paid in 2006 as of the end of the second quarter.

Quantitative measures established by federal regulations to ensure capital adequacy require the Corporation to maintain minimum amounts and ratios of Total and Tier 1 capital (primarily common stock and retained earnings, less goodwill) to risk weighted assets, and of Tier 1 capital to average assets. Management believes that as of June 30, 2006 the Corporation meets all capital adequacy requirements to which it is subject.


	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Actions Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of June 30, 2006
Total Capital	$	68,018,350	17.33	%	$	31,407,633	>8.00	%	$	39,259,541	>10.00	%
(to Risk-Weighted Assets)
Tier 1 Capital		63,773,224	16.24	%		15,703,816	>4.00	%		23,555,724	>6.00	%
(to Risk-Weighted Assets)
Tier 1 Capital		63,773,224	10.63	%		24,005,576	>4.00	%		30,006,970	>5.00	%
( to Average Assets)

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, certain items in the consolidated statements of income of the Corporation and the related changes between those periods:


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2006			2005		2006			2005
Interest Income, including fees	$	9,162,033		$	8,072,099	$	17,822,315		$	16,088,036
Interest Expense		3,283,247			2,277,916		6,248,825			4,375,934

Net Interest Income		5,878,786			5,794,183		11,573,490			11,712,102
Provision for Loan Losses		(63,634	)		342,763		(192,174	)		505,757

Net Interest Income after Provision for Loan Losses		5,942,420			5,451,420		11,765,664			11,206,345
Other Income		1,663,968			1,576,416		3,063,856			2,897,892
Other Expense		4,724,117			4,399,756		9,367,006			8,956,446

Income before Provision For Income Taxes		2,882,271			2,628,080		5,462,514			5,147,791
Provision for Income Taxes		771,205			601,619		1,426,756			1,201,576

Net Income	$	2,111,066		$	2,026,461	$	4,035,758		$	3,946,215

Net Income Per share - Basic	$	0.42		$	0.40	$	0.81		$	0.79

Net Income Per Share-Diluted	$	0.42		$	0.40	$	0.79		$	0.78

See Note 4 to the Corporation’s Consolidated Financial Statements for an explanation regarding the Corporation’s calculation of Net Income Per Share - basic and - diluted.

Annualized return on average equity (“ROE”) was 12.82% for the three months ended June 30, 2006 and 12.93% for the corresponding period in 2005. For the six months ended June 30, 2006, ROE was 12.37% compared to 12.75% for the six months ended June 30, 2005.

The book value per share increased to $12.88 at June 30, 2006 compared to $12.73 at December 31, 2005 and $12.39 at June 30, 2005. These increases are due to earnings exceeding dividends paid during these periods. Average assets for the six months ended

June 30, 2006 were $607,927,010 compared to $591,872,059 for the year ended December 31, 2005 and $583,161,983 for the six months ended June 30, 2005. Average equity for the six months ended June 30, 2006 increased to $65,263,456 from $63,068,278 for the year ended December 31, 2005 and $61,880,715 for the six months ended June 30, 2005.

NET INTEREST INCOME / NET INTEREST MARGIN

One component of the Corporation’s earnings is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid for deposits and borrowed funds. The net interest margin is net interest income expressed as a percentage of average earning assets.

The annualized net interest margin was 4.58% for the second quarter of 2006 compared to 4.64% for the corresponding period of 2005. For the six months ended June 30, 2006, annualized net interest margin was 4.52% as compared to 4.73% for the six months ended June 30, 2005. The decrease in net interest margin from 2005 to 2006 is the result of slower growth in rates on earnings assets compared to the rates paid on deposits and borrowed funds. Earning assets averaged $538,563,049 for the three months ended June 30, 2006. This represents an increase of $35,709,523, or 6.8%, over average earning assets of $522,360,339 for the three month period ended June 30, 2005. Earning assets averaged $540,618,472 for the six months ended June 30, 2006. This represents an increase of $19,506,813, or 3.7%, over average earning assets of $521,111,659 for the six months ended June 30, 2005. The increase in earning assets is the result of the normal growth pattern of the Corporation and not due to any special investments or acquisitions.

Net interest income was $5,878,786 and $5,794,183 for the three month periods ended June 30, 2006 and 2005, respectively, due to changes in both volume and rate. Net interest income was $11,573,490 for the six months ended June 30, 2006, a decrease of $138,612 from the $11,712,102 in the same period in 2005, primarily due to changes in rate. In the three month period ended June 30, 2006, the rates paid on deposits and borrowed funds rose faster than the yield on earning assets as compared to the changes in yields and rates in the same period in 2005. The yield on all interest bearing assets increased sixty-two basis points to 7.00% in the second quarter of 2006 compared to 6.38% for the same period in 2005. At the same time, the rate paid on all interest bearing liabilities for the second quarter of 2006 increased eighty-one basis points to 2.90% from 2.09% in the same period of 2005. In the six month period ended June 30, 2006, the rates paid on deposits and borrowed funds increased more than the yields on earnings assets when compared to the same period in 2005. The yield on all interest bearing assets increased forty two basis points to 6.83% in the first six months of 2006 compared to 6.41% for the same period in 2005. At the same time, the rate paid on all interest bearing liabilities for the first six months of 2006 increased seventy six basis points to 2.78% from 2.02% in the same period of 2005. As longer term interest bearing assets and liabilities mature and reprice, management believes that the yields on interest bearing assets and rate on interest bearing liabilities will both increase.

The following table shows the interest and fees and corresponding yields for loans only.


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2005			2005			2006			2005
Interest and Fees	$	7,282,033		$	6,472,604		$	14,089,004		$	12,894,955
Average Loans		375,230,793			365,382,776			376,501,718			364,227,747
Annualized Yield		7.76	%		7.09	%		7.48	%		7.08	%

The increase in interest rates in the three and six-month periods ended June 30, 2006 reflects the increase in all loan interest rates for both new and refinanced loans in the period.

CREDIT LOSS EXPERIENCE

As a natural corollary to the Corporation’s lending activities, some loan losses are to be expected. The risk of loss varies with the type of loan being made and the creditworthiness of the borrower over the term of the loan. The degree of perceived risk is taken into account in establishing the structure of, and interest rates and security for, specific loans and for various types of loans. The Corporation attempts to minimize its credit risk exposure by use of thorough loan application and approval procedures.

The Corporation maintains a program of systematic review of its existing loans. Loans are graded for their overall quality. Those loans which the Corporation’s management determines require further monitoring and supervision are segregated and reviewed on a periodic basis. Significant problem loans are reviewed on a monthly basis by the Corporation’s Board of Directors.

The Corporation charges off that portion of any loan which management has determined to be a loss. A loan is generally considered by management to represent a loss in whole or in part when an exposure beyond the collateral value is apparent, servicing of the unsecured portion has been discontinued or collection is not anticipated based on the borrower’s financial condition. The general economic conditions in the borrower’s industry influence this determination. The principal amount of any loan which is declared a loss is charged against the Corporation’s allowance for loan losses.

The Corporation’s allowance for loan losses is designed to provide for loan losses which can be reasonably anticipated. The allowance for loan losses is established through charges to operating expenses in the form of provisions for loan losses. Actual loan losses or recoveries are charged or credited to the allowance for loan losses. Management of the Corporation determines the amount of the allowance. Among the factors considered in determining the allowance for loan losses are the current financial condition of the Corporation’s borrowers and the value of security, if any, for their loans. Estimates of future economic conditions and their impact on various industries and individual borrowers are also taken into consideration, as are the Corporation’s historical loan loss

experience and reports of banking regulatory authorities. Because these estimates, factors and evaluations are primarily judgmental, no assurance can be given as to whether or not the Corporation will sustain loan losses in excess or below its allowance or that subsequent evaluation of the loan portfolio may not require material increases or decreases in such allowance.

The Corporation has a loan to a customer in the amount of $2.3 million that was included in non-accrual loans at June 30, 2006 due to past payment performance and a bankruptcy filing by the customer. The bankruptcy has since been dismissed and payments on this loan are sporadic. The Corporation intends to continue to carry this loan on non-accrual status until such time as management believes that the customer will make payments on this loan in a regular and timely manner. Management has specifically reserved 5% of the outstanding balance of this loan to cover any inherent loss, but no additional loss is expected.

The following table summarizes the Corporation’s allowance for loan losses for the dates indicated:


	Quarter Ended June 30, 2006			Year to Date December 31, 2005			Amount of Increase (Decrease)			Percent of Increase (Decrease)
BALANCES:
Gross Loans	$	374,597,598		$	380,887,181		$	(6,289,583	)	-1.65	%
Allowance for Loan Losses		4,245,126			4,561,817			(316,691	)	-6.94	%
Nonaccrual Loans		3,829,253			4,346,512			(517,259	)	-11.90	%
Ratios:
Allowance for loan losses to gross loans		1.13	%		1.20	%
Net loans charged off to allowance for loan losses		2.90	%		27.25	%

The provision for loan losses for the three months ended June 30, 2006 was a negative provision of $63,634, a decrease of $406,397 over the $342,763 positive provision for the same period in 2005. The provision for loan loss was a negative provision of $192,174 for the six months ended June 30, 2006 compared to a positive provision of $505,757 for the same period in 2005. The decrease in the provision in the three and six-month periods ended June 30, 2006as compared to the corresponding periods in 2005, was the result of the upgrading of certain loans by management, recoveries of previously charged-off loans that exceeded management’s expectations and a decrease in loan volume. The loans upgraded by management were the result of an extensive review of each individual loan in the portfolio.

For the three months ended June 30, 2006, net loan losses charged to the allowance for loan losses totaled $67,326, a decrease of $420,808 over the $488,134 charged off in the same period in 2005. For the six months ended June 30, 2006, net loan losses charged to the allowance totaled $123,209, a decrease of $476,805 over the $600,014 charged off in the same period in 2005.

Management of the Corporation reviews with the Board of Directors the adequacy of the allowance for possible loan losses on a quarterly basis. The loan loss provision is adjusted when specific items reflect a need for such an adjustment. Management believes that there were no material loan losses during the last quarter that have not been charged off. Management also believes that the Corporation’s allowance will be adequate to absorb probable losses inherent in the Corporation’s loan portfolio. However, in light of overall economic conditions in the Corporation’s geographic area and the nation as a whole, it is possible that additional provisions for loan loss may be required.

NON-INTEREST INCOME

Non-interest income includes service charges on deposit accounts, wire transfer fees, safe deposit box rentals and other revenue not derived from interest on earning assets.

Non-interest income for the three months ended June 30, 2006 was $1,663,968, an increase of $87,552, or 5.6%, over the same period in 2005. Service charges on deposit accounts increased $8,100, or .8%, to $981,450 in the three months ended June 30, 2006 compared to $989,550 for the same period in 2005. Other service charges and fees increased $30,261, or 25.4%, in the three months ended June 30, 2006 compared to the same period in 2005.

Non-interest income for the six months ended June 30, 2006 was $3,063,856, an increase of $165,964, or 5.7%, over the same period in 2005. Service charges on deposit accounts decreased $1,078, or .4%, to $275,794 in the six months ended June 30, 2006 compared to $276,872 for the same period in 2005. Other service charges and fees increased $74,997, or 8.5%, in the six months ended June 30, 2006 compared to the same period in 2005.

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


	Three months ended June 30,				Six months ended June 30,
Other Income	2006		2005		2006		2005
BOLI Insurance	$	134,383	$	136,812	$	270,835	$	303,624
Mortgage Loan Origination Income		89,520		103,366		179,664		199,319
Other Income		309,365		227,699		509,449		382,008

Total Other Income	$	533,268	$	467,877	$	959,948	$	884,951

NON-INTEREST EXPENSE

Non-interest expenses include salaries and employee benefits, occupancy and equipment, and other operating expenses. Aggregate non-interest expenses for the three month periods ended June 30, 2006 and 2005 were $4,724,117 and $4,399,756, respectively, an increase of $324,361, or 7.4%, from 2005 to 2006. Salaries and benefits increased to $2,585,470 for the three months ended June 30, 2006 from $2,380,117 for the same period in 2005. This represents an increase of $205,353, or 8.6%. Occupancy expense decreased $12,014, or 1.6%, to $724,507 in the three months ended June 30, 2006 when compared to the same period of 2005.

Total non-interest expenses for the six month periods ended June 30, 2006 and 2005 were $9,367,006 and $8,956,446, respectively, an increase of $410,560, or 4.6%, from 2005 to 2006. Salaries and benefits increased to $5,117,408 for the six months ended June 30, 2006 from $4,801,620 for the same period in 2005. This represents an increase of $315,708, or 6.6%. Occupancy expense increased $73,724, or 5.1%, to $1,530,259 in the six months ended June 30, 2006 when compared to the same period of 2005.

Normal growth in the Corporation along with annual increases in salaries and increased cost of employee benefits were the main reasons for the increase in non-interest expenses in 2006. The following is a detail of the major expense classifications that make up the other operating expense line item in the income statement.


	Three months ended June 30,				Six months ended June 30,
Other operating expense	2006		2005		2006		2005
Intangible Amortization	$	134,376	$	134,376	$	268,751	$	268,751
Advertising		129,305		121,511		239,613		235,219
Office Supplies		112,183		123,734		243,209		274,075
Legal and Audit Fees		152,999		104,453		265,743		269,861
Telephone expense		94,567		104,936		184,610		205,138
Other expenses		743,657		670,997		1,428,007		1,374,245

Total Other Expense	$	1,367,087	$	1,260,007	$	2,629,933	$	2,627,289

The Corporation’s efficiency ratio for the three months ended June 30, 2006 was 60.13% compared to the 57.50% for the same period in 2005. For the six months ended June 30, 2006 and 2005, the Corporation’s efficiency ratio was 61.37% and 59.06%, respectively.

BALANCE SHEET ANALYSIS


	June 30, 2006		December 31, 2005		Amount of Increase (Decrease)			Percent of Increase (Decrease)
Cash and Cash Equivalents	$	29,944,232	$	26,743,200	$	3,201,032		11.97	%
Investment Securities		160,270,050		162,203,117		(1,933,067	)	-1.19	%
Loans, net		368,925,508		374,964,316		(6,038,808	)	-1.61	%
Total Assets		608,581,059		607,709,136		871,923		0.14	%

Total Deposits		473,302,960		473,812,234		(509,274	)	-0.11	%

Total Stockholders’ Equity		64,658,095		63,774,105		883,990		1.39	%

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are made up of cash, balances at correspondent banks and items in process of collection. The balance at June 30, 2006 increased $3,201,032 from $26,743,200 at December 31, 2005 due to large cash letters on the last day of the quarter that had not been fully collected.

PREMISES AND EQUIPMENT

During the six month period ended June 30, 2006, premises and equipment increased $1,684,889, or 17.0%, to $11,579,104, when compared to $9,894,215 at June 30, 2005. This increase was due in large part to the $1,203,392 paid during the six months ended June 30, 2006 for the renovation of the Corporation’s main office building in Philadelphia.

INVESTMENT SECURITIES

The investment securities portfolio is made up of U. S. Treasury Notes, U. S. Agency debentures, mortgage-backed securities, obligations of states, counties and municipal governments and FHLB stock. Investments at June 30, 2006 decreased $1,933,067, or 1.2%, to $160,270,050 from the balance at December 31, 2005. The decrease in investment securities in the six month period ended June 30, 2006 was the result of an adjustment in market value of the portfolio caused by rising interest rates required by FASB 115.

LOANS

Although the loan balances decreased by $6,038,808 during the six month period ended June 30, 2006 to $368,925,508 from $374,964,316 at December 31, 2005, management believes that loan demand in the Corporation’s service area has been good. Several loan customers of the Corporation borrowed money in the fourth quarter of 2005 to supply materials for the rebuilding of the Gulf Coast area after Hurricane Katrina, resulting in greater than anticipated growth in the loan balance in that quarter. These contracts have been completed and the related loans paid off. Residential housing loans continue to be in demand along with commercial and industrial loans and management believes that loan growth will remain steady for the remainder of 2006. No material changes were made to the loan products offered by the Corporation during this period.

DEPOSITS

The following table shows the balance and percentage change in the various deposits:


	June 30, 2005		December 31, 2005		Amount of Increase (Decrease)			Percent of Increase (Decrease)
Noninterest-bearing Deposits	$	93,071,541	$	87,333,891	$	5,737,650		6.57	%
Interest-bearing Deposits		143,113,820		148,434,618		(5,320,798	)	-3.58	%
Savings		35,703,890		35,579,157		124,733		0.35	%
Certificates of Deposit		201,413,709		202,464,568		(1,050,859	)	-0.52	%

Total Deposits	$	473,302,960	$	473,812,234	$	(509,274	)	-0.11	%

Non-interest bearing deposits and savings increased during the six months ended June 30, 2006 while interest bearing deposits and certificates of deposit decreased. The Corporation has increased its rates paid on interest bearing deposits to compete more aggressively with the other banks in its market area. Higher rates paid on deposits could further compress future net interest rate margins if market pressures do not allow the Corporation to increase loan rates at the same pace. Management continually monitors the interest rates on loan and deposit products to ensure that the Corporation is in line with the rates dictated by the market.

OFF-BALANCE SHEET ARRANGEMENTS

Refer to Note 3 in the notes to the consolidated financial statements included in this report for a discussion of the nature and extent of the Corporation’s off-balance sheet arrangements.

CONTRACUAL OBLIGATIONS

There have been no material changes outside of the ordinary course of the Corporation’s business to the contractual obligations set forth in Note 12 to the Corporation’s financial statements contained in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005.

FORWARD LOOKING STATEMENTS

In addition to historical information, this report contains statements which constitute forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are based on management’s beliefs, plans, expectations and 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, “Notes to Consolidated Financial Statements” and in Item 2, “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 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 through increased operating expenses; (c) increased competition from other financial institutions; (d) the impact of technological advances; (e) expectations about the movement of interest rates, including actions that may be taken by the Federal Reserve Board in response to changing economic conditions; (f) changes in asset quality and loan demand; (g) expectations about overall economic strength and the performance of the 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.

CITIZENS HOLDING COMPANY AND SUBSIDIARY

ITEM 3. 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 Corporation has taken steps to assess the amount of risk that is associated with its asset and liability structure. The Corporation measures the potential risk on a regular basis and makes changes to its strategies to manage these risks. The Corporation 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 Corporation 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.

Static gap analysis is also used in measuring interest rate risk. An analysis of the Corporation’s repricing opportunities indicates a negative gap position over the next three- and twelve–month periods. This indicates that the Corporation would see a decline in its net interest income from an increase in market interest rates. Interest rates rose at a measured pace during the three months ended June 30, 2006. Certain products that make up the Corporation’s interest bearing deposit liabilities have been repriced to reflect the current interest rate environment.

There has been no material change in the Corporation’s market risk since December 31, 2005.

CITIZENS HOLDING COMPANY AND SUBSIDIARY

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to allow them to make timely decisions regarding the disclosure of information required to be included in our periodic reports filed with the Securities and Exchange Commission. There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Corporation carried out its evaluation.

There were no changes to the Corporation’s internal control over financial reporting that occurred in the three months ended June 30, 2006 that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II. - OTHER INFORMATION

ITEM 1A. RISK FACTORS

Information regarding risk factors appears in Part I, Item 1A, “Risk Factors,” of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2005. There have been no material changes in the risk factors previously disclosed in our Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Capital Standards

Please refer to the material under the caption “Capital Resources” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this report, which is incorporated by reference herein, for a discussion of capital standards applicable to the Corporation.

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.

Citizens Holding Company’s ability to pay dividends depends in large part on the ability of the Bank to pay dividends to it. The approval of the Mississippi Department of Banking and Consumer Finance is required prior to the Bank paying such dividends; dividends are limited to earned surplus in excess of three times the Bank’s capital stock.

In addition, Federal Reserve Board regulations limit the amount the Bank may loan to Citizens Holding Company unless those loans are collateralized by specific obligations.

At June 30, 2006, the maximum amount available for transfer from the Bank to Citizens Holding Company in the form of cash dividends was $60,342,000 and in the form of loans was $60,858,116, totaling $121,200,116, (which represents 20% of the Bank’s consolidated net assets).

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Corporation held its Annual Meeting of Shareholders on April 25, 2006. There were 4,027,908 shares, or 80.4%, of the Corporation’s issued and outstanding shares of common stock represented either in person or by proxy at the Annual Meeting. The

Corporation solicited proxies pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, and there were no solicitations in opposition to management’s solicitations.

The shareholders considered and voted upon four proposals at the Annual Meeting. The first proposal was to set the number of directors to serve on the Board of Directors at nine members. The shareholders of the Corporation adopted this proposal by a vote of 4,000,073 for the proposal and 20,395 shares against the proposal, with 7,440 abstentions.

The second proposal concerned the election of three Class I directors to a three-year term expiring in 2009. The votes for each nominee were:


	Shares Voted For	Shares Withheld
Don L. Fulton	3,998,598	29,310
Donald L. Kilgore	4,001,078	26,830
Herbert A. King	4,008,176	19,732

The third proposal concerned the election of one Class III director to a two year term expiring in 2008. The votes for the nominee were:


	Shares Voted For	Shares Withheld
David P. Webb	3,949,078	78,830

Finally, the shareholders considered and voted upon a proposal to ratify HORNE LLP as the Corporation’s independent auditors for the fiscal year ending December 31, 2006. The shareholders of the Corporation adopted this proposal by a vote of 4,008,943 for the proposal to 200 votes against, with 18,551 abstentions.

ITEM 6. EXHIBITS

Exhibits


3(i)	Amended Articles of Incorporation of the Corporation	*

3(ii)	Amended and Restated Bylaws of the Corporation	*

31(a)	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

31(b)	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

32(a)	Certification of the Chief Executive Officer pursuant to 18 U.S.C. § 1350.

32(b)	Certification of the Chief Financial Officer pursuant to 18 U.S.C. § 1350.

*	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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CITIZENS HOLDING COMPANY

EXHIBIT INDEX


Exhibit Number		Description of Exhibit
31(a)		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

31(b)		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

32(a)		Certification of the Chief Executive Officer pursuant to 18 U.S.C. §1350.

32(b)		Certification of the Chief Financial Officer pursuant to 18 U.S.C. §1350.

/s/ Greg L. McKee

/s/ Robert T. Smith

Greg L. McKee

Robert T. Smith

President and Chief Executive Officer

Treasurer and Chief Financial Officer

DATE: August 7, 2006

DATE: August 7, 2006